Thursday, November 12, 2015

One Protest Per Customer

I'm going to do this one quickly because I am busy and the case is straightforward, but still an important lesson.

In Design International Group v. United States, the Court of International Trade reaffirmed the rule that an importer may only file one protest contesting the liquidation of an entry. In the case, the importer made two entries of pencils. When Customs liquidated the entries, it allegedly miscalculated the quantity and, as a result, incorrectly assessed duty. The broker for the importer filed protests for each entry. That right there is one protest per entry. Customs denied both entries.

Subsequently, counsel for the importer filed a third protest challenging the denial of both prior protests. That is a second protest challenging the liquidation of each of the entries. When Customs and Border Protection denied that third protest, the importer filed suit in the Court of International Trade, using the third denied protest as the basis for jurisdiction.

What do you think? Discuss.

The issue here arises because of 19 USC 1514(c)(1)(d), which says:

Only one protest may be filed for each entry of merchandise, except that where the entry covers merchandise of different categories, a separate protest may be filed for each category. In addition, separate protests filed by different authorized persons with respect to any one category of merchandise . . . .

Under this law, a second protest is invalid unless an exception applies. An invalid protest does not give the Court of International Trade anything to review.

Here, the plaintiff argued that the exception applies. According to counsel, the first protest on each entry was filed by the customhouse broker, who is an authorized party. The third protest (which is really the second on each of the two prior entries) was filed by the lawyer, a different authorized party. Thus, the third protest was valid and its denial provides the Court with jurisdiction.

The Court rejected this argument. In doing so, it referenced a number of cases invoking the "one protest rule." All these cases repeat that only the first protest received is valid. The Court also noted that allowing a protest of the denial of a protest could lead to the absurd result of a never-ending series of protests of the denial of protests. Consequently, the Court dismissed the action for lack of subject matter jurisdiction.

There Court is, I think, correct. But, I think I can help explain the result by articulating what I perceive to be the unstated premise in the opinion. That premise is that a protest filed by a broker for the importer and a second protest filed by a lawyer for the importer ARE BOTH FOR THE IMPORTER. See that? Brokers and lawyers are agents for the importers, not separate "authorized persons."

The exception in the statute is there to permit, for example, the surety, who has a financial interest in the liquidation, to protest the liquidation. Other authorized parties include the person paying the duties and any person seeking delivery.

Separate and apart from the importer, the statute permits "any authorized agent of" the importer to file a protest. Does that mean that each agent is a separate authorized person? Maybe. The statute can be read that way. But, that reading permits an importer to file a series of protests through a series of different authorized agents. That also seems like an absurd result. The more likely reading, based on zero research and five minutes of thought, is that each agent stands in the shoes of the importer for this purpose and the importer is limited to a single protest either on its own or through agents.

Do you agree with that analysis?


Anonymous said...

Good Morning:

As it applies to goods not entered under the NAFTA agreement, your 5 minute review is in line with most accepted protests (i.e. one per entry).

However, take yourself you recall your July 21, 2012 blog? The conclusion you reached was quite different :) Just sayin'

Have a most enjoyable weekend.

Larry said...

Thanks for the comment, which I appreciate. It is good that you want to keep me on my toes. But, I don't see any inconsistency. The prior post includes a paragraph explaining why the "one Protest Rule" has an exception for NAFTA claims. That paragraph says:

The second argument has to do with what we customs lawyers call the "One Protest" rule. As you might guess, the rule is that an entry can only be subject to a single protest. In most cases, that rule still holds. Unfortunately, not in this case. Under the post-entry NAFTA process, it is possible for there to be two protests on a single entry. The timing of post-entry claims, within 12 months of the date of importation, means that NAFTA claims may be made and denied before the due date for other protests. As a result, the statute actually states that the protest relating to the origin determination and any other protest relating to classification, for example, are "deemed to be part of a single protest." And that is how Congress creates a hole in a rule. So, the "One Protest" rule did not prevent the filing of a NAFTA-specific protest in this case.

The current case did not involve a NAFTA claim, it was about the quantity of pencils in the box. Given that fact, I think the results in the two cases (and my posts) are easily reconciled.

Anonymous said...


I'm certainly in the "you forgot more about Customs Law than I ever know" portion of the readership so please excuse if this is an elementary question.

If the broker had marked the Protest with Application for Further Review would this have provided the importer a second opportunity for someone else at CBP to review and perhaps
notice the math error regarding quantities and duties ?


Faithful lunchtime reader

Anonymous said...

An exception to the one entry one protest rule is when CBP reliquidates an entry and the importer files a protest to specifically contest the new action by CBP. The importer can protest each reliquiation of an entry, but each protest must be limited to the issue raised by the most recent reliquidation. Years ago when I was working in brokerage (pre Mod Act) I regularly filed protests on reliquidations (often re-re-re-re-reliquidations).

Larry said...

To Faithful,

An Application for Further Review does get the protest before CBP Headquarters and likely provides a greater opportunity for interaction with the decision maker (at least in my experience). But, it does not allow for a second protest on the same entry unless an exception applies.