Are Excises Taxes Protestable?

When Customs collects a tax for another agency, is it making a protestable decision? That is an important question. If the answer is yes, then the U.S. Court of International Trade has subject matter jurisdiction over the denied protest. If the answer is no, the importer has to look elsewhere for relief.

That is also the question presented in Shah Brothers, Inc. v. United States, which involves entries of "gutkha." Gutkha is a tobacco preparation containing betel nuts and various aromatic agents.Apparently, gutkha is a smokeless tobacco product and is, therefore, subject to excise tax as well as import duties. Smokeless tobacco comes in two varieties: chewing tobacco and snuff. The problem for the plaintiff is that the excise tax on snuff is higher than the excise tax on chaw and the Alcohol and Tobacco Tax and Trade Bureau (the "TTB") concluded that this product is snuff. Customs, on the other hand, eventually agreed with the importer on the classification of the merchandise. That means that the only issue left for the Court of International Trade is the TTB treatment of the product and the tax as collected by Customs and Border Protection.

The Court initially looked at its jurisdictional statute, 28 USC 1581 and found that since this the TTB determination did not involve a decision of Customs and Border protection, it was not direcltly reviewable on the basis of a denied protest. The Catch-22 is that the decision is also not subject to review under the Court's residual jurisdiction because any review of the TTB's decision would necessary require a review of how Customs implemented that decision (since the TTB does not collect taxes at the border, that is Customs' job). In fact, in the process of creating the Department of Homeland Security and moving Customs from Treasury to DHS, Treasury specifically delegated to Customs the function of collecting revenue at the border. Since the real issue is not what TTB asked of Customs, but what Customs did to the imports, the Court finds that the importer had an adequate remedy under the protest review process of 28 USC 1581(a).

Whenever 1581(a) is available as a means of getting into Court, the usual result is that no other means of establishing jurisdiction will work unless the protest process is "manifestly inadequate." The Court did not see any such inadequacy in this case. Finally, the plaintiff's valiant effort at latching on to the Administrative Procedure Act to establish jurisdiction to review a "final agency action," was also unavailing. The APA does not provide aggrieved parties a means of circumventing the established path to judicial review. In light of the non-futile availability of the administrative protest, the APA was no help to the plaintiff. The CIT dismissed for lack of jurisdiction.

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