Wednesday, February 25, 2015

The Rolls Royce of Protests

What makes for a valid protest is one of those ever green questions that generates litigation before the U.S. Court of International Trade. The most recent entry in the parade of cases on this topic is Ovan International Ltd. v. United States.

The background here is simple. Carriage House Motor Cars came into ownership in the U.S. of a 1958 Royce Silver Cloud. As will happen when one owns a classic car, Carriage House planned to sell it at auction in the UK. The car did not sell and was returned to Carriage House in the U.S. with Ovan acting as the customs broker and the Importer of Record.

At the time of entry, Ovan claimed the entry should be duty free under HTSUS item 9801.00.25. Customs issued a Notice of Action stating its intent to liquidate the vehicle as a dutiable passenger car at 2.5% There was some back and forth between counsel for Ovan and Carriage House on the one hand and Customs on the other hand. On February 22, 2013, Customs liquidated the entry as dutiable and Ovan, the IOR, paid the duties. Forty six days later, counsel e-mailed an affidavit attempting to satisfy Customs that the vehicle qualified for duty-free entry. Subsequently, 189 days after liquidation, plaintiffs' counsel filed a formal protest on CBP Form 19. The protest was filed in the name of Carriage House, the owner of the Rolls Royce. Customs denied the protest as untimely.

In case you are wondering, Ovan paid $23,641 in duties, meaning the value of the car was about $945,000. Ovan was the importer of record. It is very likely that the agreement between Ovan and Carriage House makes Carriage House responsible for reimbursing Ovan, which is why Carriage House filed the protest.

Standing is the legal requirement that a plaintiff have an appropriate interest in the subject matter of a case to bring that case to court. Without a standing requirement, I could go ahead and sue Bruno Mars for impersonating the Police (the band, not the law enforcement agency). The Police can (and should) do that, not me.

Standing in the U.S. Court of International Trade is controlled by 28 USC 2631(a), which says that:
A civil action contesting the denial of a protest, in whole or in part, under section 515 of the Tariff Act of 1930 may be commenced in the Court of International Trade by the person who filed the protest pursuant to section 514 of such Act, or by a surety on the transaction which is the subject of the protest.
That is a problem for Ovan, which is not the party that filed the protest and not the surety. End of story. Ovan lacks standing and is not an appropriate plaintiff. The Court dismissed Ovan from the case. But, the case continued with Carriage House as the remaining plaintiff. First lesson, as a general matter, a protest should be filed by the IOR. After all, the IOR pays the duties and is seeking the refund.

That leads to the second issue, did Carriage House file a valid protest? If not, there is nothing for the CIT to review.

As to the formal protest, there is no real debate that it was late. A protest must be filed within 180 days of the date of liquidation. This protest was filed nine days too late.

But, did the affidavit count as a protest? It was filed within the acceptable time and the law is clear that a protest need not be on Form 19. Carriage House argued that the affidavit was sufficient to satisfy the requirement for a timely protest.

Historically, the courts have said that protests are to be liberally construed in favor of the protesting party. As a result, informal or unofficial documents have been found to be valid protests so long as they are sufficiently detailed to alert Customs to the challenged decision. On the other hand, there are minimum requirements that must be satisfied. Most important for this case are the requirements set out in the customs regulations at 19 CFR 174.13(a). The Court of International Trade relied on an 1999 Federal Circuit decision called Koike Aronson, Inc. v. United States for this proposition. That pre-dates this blog, so I have no post on Koike.

Following Koike, the CIT held that the protest, in whatever form, must contain all of the information required by the customs regulations to qualify as a protest. For your reference, those requirements are:

(1) The name and address of the protestant, i.e., the importer of record or consignee, and the name and address of his agent or attorney if signed by one of these;

(2) The importer number of the protestant. If the protestant is represented by an agent having power of attorney, the importer number of the agent shall also be shown;

(3) The number and date of the entry;

(4) The date of liquidation of the entry, or the date of a decision not involving a liquidation or reliquidation;

(5) A specific description of the merchandise affected by the decision as to which protest is made;

(6) The nature of, and justification for the objection set forth distinctly and specifically with respect to each category, payment, claim, decision, or refusal;

(7) The date of receipt and protest number of any protest previously filed that is the subject of a pending application for further review pursuant to subpart C of this part and that is alleged to involve the same merchandise and the same issues, if the protesting party requests disposition in accordance with the action taken on such previously filed protest;

(8) If another party has not filed a timely protest, the surety's protest shall certify that the protest is not being filed collusively to extend another authorized person's time to protest; and

(9) A declaration, to the best of the protestant's knowledge, as to whether the entry is the subject of drawback, or whether the entry has been referenced on a certificate of delivery or certificate of manufacture and delivery so as to enable a party to make such entry the subject of drawback (see §§ 181.50(b) and 191.81(b) of this chapter).

Among other things, the affidavit was not labeled as a protest and did not list the liquidation date of the entry. The Court was not swayed by evidence of a course of dealing making it clear that Carriage House was complaining about the liquidation of the one entry covering this one Rolls Royce. Given the lack of required information, the Court dismissed the case in its entirety.

This seems like a harsh result, and it is. Except that it is hard to see how either plaintiff would have won on the merits. 9801.00.25 has very specific requirements for duty-free entry. One of which is that the goods be returned to the U.S. because they do not conform to sample or specification. I have no idea what facts the plaintiffs' might have been able to present. But, it appears the car was returned to the U.S. because it did not sell at auction. We'll have to wait and see if there is a successful appeal of this decision to know whether we will learn the true facts.

One side point, reading this decision, you might come away with the notion that a valid protest must be filed via CBP's electronic systems. That is not the case. The relevant statute is 19 USC 1514(c)(1). As the Court correctly quotes, a protest may be filed in writing or via the electronic system.

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