Tuesday, January 05, 2016

Protest Problems

To close out 2015, the Court of International Trade revisited a perennial question: When is a protest the necessary prerequisite to challenging a Customs' decision in Court? This time, the case was The Jankovich Company v. United States.

Jankovich is a distributor of bunker fuel between the ports of Los Angeles and San Diego. The company made several requests to Customs to determine that its shipments were exempt from Harbor Maintenance Fees, which are assessed at 0.125% of the value of the cargo. Customs told Jankovich several times that it disagreed (see HQ H086062 and HQ H250175). So, like many reasonable companies unhappy with a decision of the United States, Jankovich filed a suit.

When it filed its summons, Jankovich asserted jurisdiction under 28 U.S.C. § 1581(i). That is the "residual" provision in the statute defining the exclusive jurisdiction of the Court of International Trade. It has to be read in context with the whole section which also gives the Court jurisdiction to review a denied protest. That is in § 1581(a). The United States moved to dismiss on the grounds that Jankovich should have filed a protest and filed a summons under (a) rather than (i). In the absence of a proper protest, the argument goes, the Court lacks jurisdiction.

As a general matter, the United States is right on the law. Many cases from the CIT and the Court of Appeals for the Federal Circuit have found that (i) jurisdiction may not be invoked when jurisdiction under (a) would have been available. This is based on the administrative law concept that requires individuals to exhaust the administrative process before going to Court. If the importer fails to give Customs and Border Protection the opportunity to correct the assessment of duties, taxes, and fees through a protest, it cannot then take that assessment to Court. An exception exists if the protest process would be futile or manifestly inadequate.

Here, the Court found that Jankovich could have requested HMF refunds via a protest and filed a summons seeking judicial review of the denied protest. Consequently, the protest would have been neither futile nor manifestly inadequate. Thus, there is no (i) jurisdiction.

Seeing the jurisdictional writing on the courthouse wall, Jankovich argued that its request for reconsideration of the ruling should be treated as a protest. This did not fly. Jankovich did not comply with the [newly(?)] strict regulatory requirements for filing a successful protest. Among other things, the request for reconsideration of the ruling was not labeled as a protest and did not specifically seek refunds of HMF paid on previous transactions. Thus, it was not a protest. Without a valid protest, there is no (a) jurisdiction.

The end result is that the case was dismissed for lack of jurisdiction.

That may not be the end of the matter, though. The Court helpfully pointed out that Jankovich still has the opportunity to file protests for past entries (within the 180-day statute of limitations) and that the expected denial of those protests will form a proper basis for jurisdiction. Unfortunately, without deciding the issue, the Court also noted that CBP's decisions are "not without some appeal."

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