Tuesday, April 15, 2014

The 2400% Solution

If you have not been following the International Custom Products, Inc. v. United States saga, you are missing out on quite the show. Of course, it is only a show if you are watching from a disinterested position. To the parties, this is unusually high-stakes litigation at the Court of International Trade.

There have been a number of ICP cases covered in this blog. The most relevant prior decision for this post is here.

Now, the Court of Appeals for the Federal Circuit has weighed in and affirmed the decision of the Court of International Trade.

Due to my long discourse on conflict minerals, I will keep this short.

Customs and Border Protection is bound by its interpretative rulings. Once a ruling issues, if Customs wants to act inconsistent with that ruling, it needs to follow the correct process. That process includes providing public notice of the change in policy, accepting comments from the public, and providing 60 days after final publication before the decision is implemented. All of that follows from 19 USC § 1625(c)(1).

In this case, Customs issued a ruling to ICP classifying its dairy product as a sauce preparation. Six years later, Customs issued a Notice of Action telling ICP that Customs would liquidate the affected entry as a dairy spread. Due to dairy quota issues, that caused a 2400% increase in duty liability. It is important to note that in the Notice of Action, CBP said this treatment would apply to all unliquidated and future entries.

ICP argued that the Notice of Action amounted to a revocation or modification of the prior ruling. As such, Customs is required to go through the 1625(c) process prior to applying the new policy to ICP's imports. The Court of International Trade agreed.

On appeal, the Federal Circuit also agreed. The short explanation is that the ruling was a binding interpretive decision. By acting inconsistent with that ruling without revoking or modifying it, Customs was acting outside its statutory authority. The Notice of Action, standing alone, therefore, was not a sufficient basis on which to change the classification of the merchandise.

Customs argued that the Notice of Action did not supplant the ruling. According to Customs, if another situation came along in which all the facts were the same as those stated in the ruling, the ruling would apply. The Court rejected this after what appears to be a concession by the government that the merchandise covered by the ruling is identical to that in the relevant entry.

That's about all there is to it. The bottom line is that revocation or modification can happen via a Notice of Action. If so, CBP must go through the formal steps. If it fails to do so, the revocation will be void.

That is a win for ICP. But, there are other issues still out there that may prevent ICP from getting the same treatment for its other entries. That means there may be another verse or two in this long-running saga.

No comments: