Nuts! to NAFTA
Here is one I missed. Sorry, I'll be catching up.
In Rogelio Salazar Cavazos v. United States, the issue was whether the Court of International Trade had jurisdiction to review a denied claim for NAFTA preferential treatment for candied peanuts imported from Mexico. Customs classified them in a tariff provision carrying a 131.8% rate of duty, which did not make the importer happy. The importer protested the classification. After liquidation but before the protests were denied, the importer filed NAFTA post-entry claims. These claims were timely, within one year from the date of importation. Customs and Border Protection subsequently denied the NAFTA claims as well. Plaintiff did not protest the denial of the NAFTA claim. The importer then filed a summons in the Court of International Trade seeking review of the denial of the NAFTA claim. The United States moved to dismiss on the grounds that there was no denied protest relating to the NAFTA claims.
The importer raised three arguments in support of the notion that it did not need to file a separate protest covering the denied NAFTA claim. The first was that the NAFTA claim constitutes "new grounds" in support of the action commenced to challenge the denied protest. This follows from 28 U.S.C. sec. 2638. However, the statute requires that the new grounds relate to the same merchandise [peanuts from Mexico: check] and relate to the same administrative determination challenged in the protest [classification: no check]. In this case, the Court of International trade considered the Xerox decision that a NAFTA claim cannot be asserted in a protest as leading to the conclusion that the NAFTA status of the goods is not the same administrative determination as the classification challenged in the denied protest.
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 third argument is that because the Port Director failed to properly check the box notifying the importer that the denied post-entry NAFTA claim can be protested, the requirement for a protest should not be enforced. This does not get anywhere. Because we are talking about suing the United States government, the law puts the onus on the plaintiff to get it right. As a general principal, the U.S. government can only sued if it expressly agrees to it and then the applicable law must be followed exactly. The lack of a checked box on a Customs form, even though wrong, does not change the legal requirement that the Court of International Trade needs a denied protest to review this decision. What lawyers refer to as waiver and estoppel will not give the CIT jurisdiction.
Consequently, the Court dismissed the part of the case dealing with the NAFTA claims.
What really surprised me about this case was the underlying NAFTA rule in play. These are candy coated peanuts from Mexico, what I take to be garanpinados. Image via Examiner.com.
These are an awesome snack food, which should be entitled to duty free entry to the United States regardless of origin. Last year, I bought a week's supply from a guy selling from a card table in Huatulco. I believe I finished them that afternoon, which says a lot about me.
The peanuts here originated in the United States and were finished in Mexico. Assuming the other ingredients were either also from North America or de minimis in value, a back of the napkin analysis might lead you to believe that the peanuts were clearly NAFTA originating. Not so. Instead, there is complicated fine print. Under 19 U.S.C. sec. 3332(o), peanut products of 2008.11 from Mexico only qualify as originating for NAFTA purposes if the peanuts are wholly obtained in Mexico. Nice lobbying Mr. Peanut! If , however, as plaintiff argued, the coated peanuts were classified in 1704.90 as "candied nuts," then this restriction would not apply and the goods might have been originating.
That underlying legal conclusion, unfortunately, does not matter because under Xerox you can't first raise a NAFTA claim in a protest and the importer failed to protest the denied NAFTA claim. That set of facts left the Court of International Trade with nothing to review.
One other side point: this result give more credence to what I call the Canadian position regarding NAFTA claims for duty-free merchandise. In the U.S., it is common to dispense with NAFTA claims when goods are unconditionally duty free. In Canada, many importers like to make the claim anyway. The reason is that if the classification is later determined to be incorrect and the goods are found to be dutiable, there will be no valid NAFTA claim on the goods. By making the claim on the duty-free merchandise, Canadian importers believe they preserve their right to make a claim under a different classification applied to the same entry.
Applying that to this case, what if the Court ultimately determines that the peanuts were misclassified? If they belong in 1704.90, and there is a valid post-entry NAFTA claims (although it was denied), it seems that Customs should have to reliquidate and reconsider the NAFTA claim based on the applicable rule of origin for 1704.90. That might well be round three in this litigation (round two being the classification).
In Rogelio Salazar Cavazos v. United States, the issue was whether the Court of International Trade had jurisdiction to review a denied claim for NAFTA preferential treatment for candied peanuts imported from Mexico. Customs classified them in a tariff provision carrying a 131.8% rate of duty, which did not make the importer happy. The importer protested the classification. After liquidation but before the protests were denied, the importer filed NAFTA post-entry claims. These claims were timely, within one year from the date of importation. Customs and Border Protection subsequently denied the NAFTA claims as well. Plaintiff did not protest the denial of the NAFTA claim. The importer then filed a summons in the Court of International Trade seeking review of the denial of the NAFTA claim. The United States moved to dismiss on the grounds that there was no denied protest relating to the NAFTA claims.
The importer raised three arguments in support of the notion that it did not need to file a separate protest covering the denied NAFTA claim. The first was that the NAFTA claim constitutes "new grounds" in support of the action commenced to challenge the denied protest. This follows from 28 U.S.C. sec. 2638. However, the statute requires that the new grounds relate to the same merchandise [peanuts from Mexico: check] and relate to the same administrative determination challenged in the protest [classification: no check]. In this case, the Court of International trade considered the Xerox decision that a NAFTA claim cannot be asserted in a protest as leading to the conclusion that the NAFTA status of the goods is not the same administrative determination as the classification challenged in the denied protest.
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 third argument is that because the Port Director failed to properly check the box notifying the importer that the denied post-entry NAFTA claim can be protested, the requirement for a protest should not be enforced. This does not get anywhere. Because we are talking about suing the United States government, the law puts the onus on the plaintiff to get it right. As a general principal, the U.S. government can only sued if it expressly agrees to it and then the applicable law must be followed exactly. The lack of a checked box on a Customs form, even though wrong, does not change the legal requirement that the Court of International Trade needs a denied protest to review this decision. What lawyers refer to as waiver and estoppel will not give the CIT jurisdiction.
Consequently, the Court dismissed the part of the case dealing with the NAFTA claims.
What really surprised me about this case was the underlying NAFTA rule in play. These are candy coated peanuts from Mexico, what I take to be garanpinados. Image via Examiner.com.
These are an awesome snack food, which should be entitled to duty free entry to the United States regardless of origin. Last year, I bought a week's supply from a guy selling from a card table in Huatulco. I believe I finished them that afternoon, which says a lot about me.
The peanuts here originated in the United States and were finished in Mexico. Assuming the other ingredients were either also from North America or de minimis in value, a back of the napkin analysis might lead you to believe that the peanuts were clearly NAFTA originating. Not so. Instead, there is complicated fine print. Under 19 U.S.C. sec. 3332(o), peanut products of 2008.11 from Mexico only qualify as originating for NAFTA purposes if the peanuts are wholly obtained in Mexico. Nice lobbying Mr. Peanut! If , however, as plaintiff argued, the coated peanuts were classified in 1704.90 as "candied nuts," then this restriction would not apply and the goods might have been originating.
That underlying legal conclusion, unfortunately, does not matter because under Xerox you can't first raise a NAFTA claim in a protest and the importer failed to protest the denied NAFTA claim. That set of facts left the Court of International Trade with nothing to review.
One other side point: this result give more credence to what I call the Canadian position regarding NAFTA claims for duty-free merchandise. In the U.S., it is common to dispense with NAFTA claims when goods are unconditionally duty free. In Canada, many importers like to make the claim anyway. The reason is that if the classification is later determined to be incorrect and the goods are found to be dutiable, there will be no valid NAFTA claim on the goods. By making the claim on the duty-free merchandise, Canadian importers believe they preserve their right to make a claim under a different classification applied to the same entry.
Applying that to this case, what if the Court ultimately determines that the peanuts were misclassified? If they belong in 1704.90, and there is a valid post-entry NAFTA claims (although it was denied), it seems that Customs should have to reliquidate and reconsider the NAFTA claim based on the applicable rule of origin for 1704.90. That might well be round three in this litigation (round two being the classification).
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