Monday, May 26, 2014

Don't Blink

We have previously considered the narrow slice of time in which an importer can file a protest against the exclusion of merchandise by Customs and Border Protection. That opportunity dissolves if Customs seizes the merchandise before the case is brought before the United States Court of International Trade. See here and here for prior discussions on this topic.

In Blink Design, Inc. v. United States, the Court of International Trade had to decide whether the merchandise had been seized and, if so, whether that seizure occurred before the case was properly before the court.

The background is interesting and hints at possible shenanigans by the importer leading to fairly strong action by CBP. The triggering circumstance for this case is that CBP discovered that containers of imported wearing apparel were found to contain approximately twice the quantity of merchandise as was shown on the invoices and declared to CBP. To Customs, that might look like an attempt to smuggle clothing into the U.S. On the other hand, it might also be a mistake. As the wise person (probably Robert Heinlein) once said: "Never ascribe to malice that which is adequately explained by stupidity."

Attempting to fix the apparent mistake, the importer secured new invoices and tried to correct the entries via the Post Entry Amendment process. Customs returned the PEAs and did not release the merchandise. Dates will become important in what follows.

When Customs failed to release the merchandise within 30 days, it was legally deemed to be "excluded." That happened on various dates in December 2013 and January 2014. An exclusion, even if by operation of law, is a protestable event. Recognizing that state of affairs, the importer protested the exclusions on December 30, 2013. Between December 6, 2013 and January 2, 2014, Customs actually seized the merchandise on the grounds that the entries "were used to facilitate the importation of the wearing apparel . . . that was attempted to be clandestinely introduced" into the U.S. Customs sent notices of those seizures between December 20, 2013 and January 16, 2014. Customs then denied the protest on January 15, 2014 and the importer filed the case in the Court of International Trade on January 28, 2014. Got all that? I'll wait why you re-read it.

The main issue here is when the goods were deemed excluded. That happens when CBP fails to release merchandise within 30 days of presentation to Customs for examination. So, that raises the question of when merchandise is presented to Customs for examination. Blink believes that happens at the time of entry and the filing of the CF 3461. According to Blink, that is when Customs makes the decision whether the goods should be detained or further inspected. This makes some sense because, as Blink argued, "presentment" must happen for all merchandise entering the U.S., not just merchandise Customs decides to inspect. Customs, on the other hand, believes presentment happens when the goods are delivered to the CES for examination.

The Court did not follow Blink's lead. Rather, it found that the meaning of presentation for examination to be ambiguous. Consequently, the Court turned to the ordinary meaning of the words and found them to require that the goods be "laid out or put before" Customs. That does not happen with the filing of the CF 3461. The Court also pointed out that in some cases the 3461 is filed before the merchandise reaches the port, which should not start the clock running for CBP examination.

With that sorted out, the next issue was when a Customs seizure is effective. This is important because if the seizure happens before the Court has jurisdiction, the Court of International Trade will never get jurisdiction. Instead, judicial review will be in the local U.S. district court. On this question, the Court held that an internal CBP decision uncommunicated to the importer cannot be a seizure. Turning the to date on the seizure notices sent to Blink, the Court found that all of the seizures took place after the 30th day following presentment for examination.

Because the seizures were more than 30 days after presentment, what follows is important. It means that during the gap between the 30th day and the seizure, the goods were legally deemed excluded and subject to a valid protest prior to seizure. That's a good thing for the importer in this case.

The importer argued that its protest was directed only at the exclusion and not at the seizures. Further, it noted that the underlying reason for the ultimate seizures was a violation of the customs penalty statute (19 U.S.C. § 1592), which is squarely within the jurisdiction of the Court of International Trade.

But, that Court disagreed. Rather, it found that this case is fundamentally a challenge to the seizures. Because the seizures occurred prior to Blink filing a case in the CIT the reviewing seizures is in the hands of the district court.

But, the court took an additional interesting step. It stated that "It is not clear that the seizures negate the deemed exclusions." That means that the exclusions and the related protest are potentially a different and separate cause of action. That cause of action would be subject to review in the Court of International Trade. Consequently, the Court decided to stay, rather than dismiss, the case pending an election by the importer of how it chooses to challenge the seizures. Presumably, if Customs ultimately succeeds in defending the seizures, the issue will be moot. Similarly, if the importer secures the release of the merchandise, the denial of the protest of the exclusions will be moot. But, if for some reason the seizure is determined to be inappropriate and Customs refuses to release the merchandise, the CIT will have a case before it and will be ready to decide whether the goods were properly excluded. That may seem like an exercise in counting the number of lawyers dancing on the head of a gavel, but it is a good exercise of judicial efficiency.

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