Importer Identity Theft

The Court of International Trade decision in Kairali Decan, Inc. v. United States has been kicking around for a couple weeks and I have struggled with whether comment on it. I have recently decided that purely procedural decisions are of interest to only a small segment of readers of this blog. Also, procedural cases generally do not turn on broadly applicable principles of law (which make for good posts).

But, this case has an interesting fact pattern and I have seen it covered elsewhere (I’m looking at you Adonica Wada). Also, someone recently thanked me for reading these cases so he doesn’t have to. So here are my two cents.

The underlying facts are that someone imported food from Sri Lanka. I say “someone,” because it seems pretty well established that the importer was not the plaintiff in this case. Rather, someone who is regularly in the business of importing food from Sri Lanka stole the identity of the plaintiff and made entry using its information. As a result, when the FDA decided that it wanted the merchandise redelivered to Customs and Border Protection, CBP inquired with the plaintiff and eventually sent the Notice to Redelivery to Kairali, who promptly said “It’s not our stuff.” When Customs did not receive the merchandise, it eventually made a claim for liquidated damages from Kairali, the importer shown on the entry papers.

At some point, the plaintiff paid the liquidated damages to avoid administrative sanctions and filed a suit in the Court of Federal Claims to secure a refund. What the plaintiff did not do was file a protest with Customs and Border Protection challenging the redelivery notice (or the liquidated damages for that matter).

The Court of Federal Claims looked at the case and said, “This seems to be a case for the Court of International Trade” and promptly sent the case to New York. Upon arrival at the CIT, the plaintiff claimed that the Court had so-called residual jurisdiction to review the matter (see 28 U.S.C. § 1581(i)) because it relates to the administration of the customs laws. As is typical in most customs cases invoking (i) jurisdiction, the Department of Justice argued that plaintiff should have filed a protest, which would either have resulted in a favorable decision by the agency or would have given the CIT a denied protest to review to review under 28 U.S.C. § 1581(a). According to this argument, if a plaintiff could have protested and a protest would not have been manifestly inadequate as a means of getting the desired relied, a protest is a prerequisite to getting into the CIT. This, by the way, is a well-established rule of law that is not really subject to much debate anymore (unless you are the Supreme Court and Harbor Maintenance Tax is involved).

This left Kairali with having to argue that it could not file a protest and that a protest would have been manifestly inadequate. On the first point, Kairali argued that it could not file a protest because it was not the importer. Rather, it was the victim of identity theft and should not be required to act like the importer to challenge the redelivery demand. Unfortunately, the law involved says that a protest may be filed by the importer “shown on the entry papers.” Kairali was the importer shown on the entry papers. The Court also found that Kairali had notice of the demand within the 180 day period to file a protest. Thus, the CIT found it could have filed a protest.

Which leads to the question of whether a protest would have been manifestly inadequate. This is usually the case where the outcome of the protest is a foregone conclusion and a mere formality. That was not the case here. According to the Court, the plaintiff could have used the protest mechanism to inform Customs and Border Protection that it was not the legitimate importer and did not have possession of the goods. Given that information, CBP may have granted the protest, meaning the process was not a mere formality.

The CIT, therefore, held that because the plaintiff could have filed a protest, it could not seek judicial review on the basis of the Court’s (i) jurisdiction. Consequently, the CIT does not have jurisdiction. Since the Court of Federal Claims has already held that it lacks jurisdiction, the CIT gave the parties some time to report whether the case should be transferred to any other forum.

All of this raises two questions for me and neither of these are advice to Kairali, just thoughts put down on virtual paper while flying from DC to Chicago and being forced to go via St. Louis due to weather. First, since the CIT has now determined that it actually lacks jurisdiction, is there a legitimate argument that it should go back to the Court of Federal Claims? That court only transferred the case based on its understanding that the CIT had jurisdiction. I think this is a reasonable question.

Second, I wonder about the proper construction of the protest statute. The full language is that a protest may be filed by “the importers or consignees shown on the entry papers.” Would someone familiar with English grammar and the next antecedent rule please tell me how we are supposed to know whether the phrase “shown on the entry papers” modifies both “importers” and “consignees” or just “consignees.” Seems like something worth considering. Where are you Grammar Girl, when I need you?

Last thing: Kudos to Judge Carman for breaking out the Robert Frost and proving a citation thereto.