Friday, May 16, 2014

The "Scope" of Protestable Events

After an antidumping or countervailing duty order, the job of collecting duty deposits and ultimately assessing the correct amount of duty falls to Customs and Border Protection. Like it or not, that requires that Customs exercise some judgment as to what merchandise is and is not within the scope of the order. Every day, at every Port of Entry, CBP Officers do exactly that.

What happens when CBP incorrectly interprets the scope of an order and improperly collects AD or CV duties on goods outside the scope of the order has been the subject of much debate. LDA Incorporado v. United States may help settle that debate.

LDA imports rigid steel conduit from China. There is an ADD and CVD order covering certain welded carbon quality steel pipe and tube from China. The order, however, explicitly exclude "finished electrical conduit." Customs subjected the imported merchandise to laboratory inspection and forwarded the matter to Headquarters for advice. Headquarters decided (see where this is going?) that the pipe products are within the scope of the order. Commerce was not involved in that process. Subsequent to liquidation of the entries, the importer filed a request for a scope clarification with Commerce, which ultimately confirmed that the goods are excluded from the order.

Prior to receiving the scope ruling, the importer filed protests with CBP challenging the liquidations. Customs denied those protests and the importer then filed a summons in the Court of International Trade. Now we get to the issue.

In court, the government moved to dismiss the case for lack of subject-matter jurisdiction. The basis for that argument is that scope determinations are not subject to protest and may only be brought to the CIT as a challenge to a scope determination by Commerce. That is because 19 USC § 1514(b) excludes from protest determinations by Commerce as to whether particular merchandise is within the class or kind of merchandise described in an existing finding of dumping or antidumping or countervailing duty order.

In prior cases, the Court has dismissed challenges to scope determinations that were brought via a customs protest or where the scope of the ruling was ambiguous enough to merit a scope ruling. This arguably implies that protests are not appropriate for scope cases. But, in a case involving Xerox, the Court of Appeals for the Federal Circuit allowed Xerox to challenge the denial of a protest where the goods were clearly outside the scope of the order; meaning that Customs had simply made a mistake of fact on its own, with no input from Commerce.

The Court of International Trade picked up that lead and ran with it. According to the Court, this case is different from the earlier cases and more similar to Xerox because Customs was not acting in a ministerial manner following instructions from Commerce. Rather, Customs engaged in fact finding (remember the lab report) and legal analysis (remember the opinion from Headquarters). Thus, the decision subject to review here was Customs' and is, therefore, properly the subject of a protest. Further, in this case, as in Xerox, the outcome should have been clear to Customs without the importer having to go to Commerce for a scope clarification. Any other result, according to Judge Kelly, would leave importers without any opportunity for judicial review when Customs misapplies an ADD or CVD order.

Here's a question that occurs to me: What if a scope ruling is necessary but it does not happen prior to liquidation? Cases have held that liquidation moots any possibility for relief from dumping duties. It seems an injunction against liquidation or an agreement with CBP to extend liquidation would be the necessary steps.

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