Epilogue: The Wrath of Kahrs
We are in the final stretch. I hope this is the last post on this case.
Kahrs's (grammar note: that looks awful) final argument has to do with 19 USC 1625 and the rule that once Customs has issued an interpretive ruling or settled on a uniform treatment of merchandise, it has to respect that practice. To change practice, Customs is required to go through a public notice and comment process. Kahrs takes the position that prior denied rulings, multiple intensive reviews, and hundreds of liquidations count as interpretive rulings, which cannot be undone via a simple CF-29 Notice of Action.
Initially, the Court held that denied protests are not interpretive decisions within the meaning of the statute. The law does provide that "protest review decisions" are interpretive rulings. Simple denied protests, however, are outside the scope of 1625. Ditto the liquidation and intensive examinations. To make things worse for Kahrs, the Court noted that is 2001, Customs did go through the 1625 process and properly revoked the prior rulings on this merchandise.
Regarding prior treatment, as opposed to prior rulings, Kahrs must first prove a consistent prior treatment by Customs applying Kahrs's favored classification. This requires proof of an actual determination by a Customs officer and consistent treatment over a two-year period. Liquidations that occur without examination or review do not count. That leaves 12 entries on which Kahrs tried to build a treatment.
Of the 12, seven were subject to review by an import specialist. But the Court found no evidence that Customs sampled the merchandise to ascertain the correct classification. According to the Court, "[m]ere perusal of entry summary data is hardly the type of entry-specific classification analysis that a Customs import specialist undertakes, nor is it the type of act contemplated by the plain language of § 177.12(c)(1)(i)."
Regarding the five cargo examinations, the opinion provides fine background on what happens during a cargo examination. In this case, the exams were the result of random stratified selections. In some cases, these exams may not have involved an import specialists and it is not always clear what was examined. The notation "OK COMPLIANT" in the data does not, according to the Court, necessarily indicate review by an import specialist specifically for classification. Based on this and a similar analysis of other comments in the data, the Court concluded that Kahrs had not established a treatments for purposes of section 1625(c)(2).
The next (and last!) argument is similar in that it posits that an established and uniform practice existed regarding the classification of this merchandise. If there is an EUP, no administrative ruling can increase the rate of duty without publication in the Federal Register. The regs on this are at 19 CFR 177.10(c), (e). Plaintiff's argument is that the CF-29 Notice of Action cannot replace publication in the Federal Register.
The Court had several problems with this argument. First, an EUP is generally affirmatively declared by the Secretary of Treasury, and that did not happen. Second, there was a ruling revoking prior classifications back in 2001 that was published in the Customs Bulletin (although not the Federal Register). This gave Kahrs notice of the change. That Bulletin notice stated that there was no EUP. Furthermore, Kahrs was unable to show the existance of an undeclared, de facto EUP. This was for much the same reasons that it could not show a legally binding "treatment." Thus, Customs's (seriously, I don't like that s's) failure to publish a notice in the Federal Register was not an administrative error.
Which leaves us with with Kahrs in the reactor core, light saber in hand, staring down at a young but powerful Import Jedi. The Jedi is hurt, but knows the Force (of the law) is with him. Kahrs, extends a hand to the Import Jedi and says, "Join me. Together, we can rule galactic customs compliance."
"I won't," the Jedi responds through a clenched jaw.
"Your master has lied to you."
Crouching on a narrow catwalk over the deep chasm of the reactor core, the Jedi shouts. "No, Master Harmon has taught me well. You are wrong. I follow the way of the Explanatory Notes."
Kahrs, his voice deep and his black helmet amplifying his labored breathing, responds, "I am an IMPORTER! Join the Import Side. Embrace the Import Side."
The Jedi looks down. He is buffeted by winds that make no sense what so ever deep inside the cloud city. He looks back at the Kahrs the Importer, smiles slightly, and leans over. He topples into the reactor core shaft.
Cue the music. Fade to black.
Please join us in a few months for Kahrs V: The Federal Circuit Speaks.
Thanks again for the recap.