Uniform Practices and Treatments: Kent International
You may have noticed that I am not doing a particularly good job of blogging these days. I have no good excuse for that other than the fact that I have a job that is not blogging. But, I realize and am gratified to know that people read this blog and expect it to be up to date. I am making an effort to do that. I will have a lot of time in airplanes this week, so I’ll try and knock out some updates.
Kent International, Inc. v. United (Slip Op 17-123) addresses the question of whether Customs and Border Protection had an “established and uniform practice” or a “treatment” applicable to the classification of a product known as the “WeeRide Kangaroo” child bicycle seat. We talk about this product previously here. In the phase of the case we are discussing now, the United States has moved to dismiss the counts of Kent’s complaint alleging an established uniform practice and a treatment.
At this juncture, the question presented is whether Kent has alleged sufficient facts to suggest that it has a right to relieve that is more than speculative. In the current parlance of pleading, the allegation in the complaint must be “plausible on its fact,” assuming all the allegations to be true.
The gist of Kent’s complaint is that from 2005 on, Customs classified its bike seats under heading 8714 (10%) as parts of bicycles. But, according to Kent, from 2007 through 2011, Customs and Border Protection issued binding rulings to other importers classifying similar products in heading 9401 (free). The rulings remained unrevoked until 2014. See 48 Cust. B. & Dec. 29 (Jul. 23, 2014). During that time, CBP also approved Kent’s protests seeking duty-free entry under 9401. After the rulings were revoked, CBP denied a then-pending protest and liquidated Kent’s merchandise under the dutiable provision.
An established and uniform practice (“EUP”) is a statutory recognition that importers should be able to rely Customs’ established practice without risk of rate advances or penalties. The existence of an EUP is not easy to establish. It must be either “declared” or “de facto.” A declared EUP results from a formal administrative declaration and is a pretty rare thing.
Absent a declared EUP, the Court of International Trade can find that Customs has made uniform liquidations over time that the importer can rely on that past practice until it is formally changed. For lawyers, this is kind of like detrimental reliance and estoppel but since estoppel generally does not apply to the federal government, we get it via the EUP.
For there to be a de facto EUP, the plaintiff needs to show evidence of a practice of liquidations that, in the absence of notice of a change, would lead a reasonable importer to expect Customs to follow the practice. What the importer needs to have is evidence of a high number of consistent liquidations, at a high number of ports, over an extended period of time, and no reason to suggest a different classification would apply (i.e., no uncertainty).
Remember, at this stage Kent only needs to allege facts that make a its case plausible. Kent can show its own entries at multiple ports. It also has the approved protests and the rulings issued to other importers. From this, the Court of International Trade concluded the Kent’s allegation of an EUP was sufficiently probable to proceed.
A “treatment” is a little different. It is also statutory. Under 19 USC 1625(c), if CBP proposes an interpretive ruling or decision that has the effect of “modifying the treatment previously accorded by [Customs and Border Protection] to substantially identical transactions, Customs must publish the decision in the Bulletin. The notice must provide at least 30 days for notice and comment. The final decision, changing the practice, shall be effective 60 days after notice of CBP’s final decision is published.
A “treatment” is defined in the regulations as an actual determination by a CBP officer regarding substantially identical transactions and that decision was consistently applied for a two-year period. 19 CFR 177.12(c). The plaintiff also needs to show that the current action is an “interpretive ruling or decision” that would have the effect of modifying the previous treatment.
Kent has alleged that CBP liquidated the entries of three other importers of substantially identical merchandise between 2007 and 2014, when CBP issued a formal revocation. Moving to dismiss, Customs argued that Kent cannot produce sufficient evidence of consistent CBP treatment over a two-year period, nationwide.
That, however, is not the standard Kent must meet at this point. According to the Court, Kent only needs to allege facts that, if true, would make a plausible case for a treatment. Based on the complaint before the Court, Kent has done that. As a result, the Court denied Defendant’s motion to dismiss the two counts.
Kent International, Inc. v. United (Slip Op 17-123) addresses the question of whether Customs and Border Protection had an “established and uniform practice” or a “treatment” applicable to the classification of a product known as the “WeeRide Kangaroo” child bicycle seat. We talk about this product previously here. In the phase of the case we are discussing now, the United States has moved to dismiss the counts of Kent’s complaint alleging an established uniform practice and a treatment.
At this juncture, the question presented is whether Kent has alleged sufficient facts to suggest that it has a right to relieve that is more than speculative. In the current parlance of pleading, the allegation in the complaint must be “plausible on its fact,” assuming all the allegations to be true.
The gist of Kent’s complaint is that from 2005 on, Customs classified its bike seats under heading 8714 (10%) as parts of bicycles. But, according to Kent, from 2007 through 2011, Customs and Border Protection issued binding rulings to other importers classifying similar products in heading 9401 (free). The rulings remained unrevoked until 2014. See 48 Cust. B. & Dec. 29 (Jul. 23, 2014). During that time, CBP also approved Kent’s protests seeking duty-free entry under 9401. After the rulings were revoked, CBP denied a then-pending protest and liquidated Kent’s merchandise under the dutiable provision.
An established and uniform practice (“EUP”) is a statutory recognition that importers should be able to rely Customs’ established practice without risk of rate advances or penalties. The existence of an EUP is not easy to establish. It must be either “declared” or “de facto.” A declared EUP results from a formal administrative declaration and is a pretty rare thing.
Absent a declared EUP, the Court of International Trade can find that Customs has made uniform liquidations over time that the importer can rely on that past practice until it is formally changed. For lawyers, this is kind of like detrimental reliance and estoppel but since estoppel generally does not apply to the federal government, we get it via the EUP.
For there to be a de facto EUP, the plaintiff needs to show evidence of a practice of liquidations that, in the absence of notice of a change, would lead a reasonable importer to expect Customs to follow the practice. What the importer needs to have is evidence of a high number of consistent liquidations, at a high number of ports, over an extended period of time, and no reason to suggest a different classification would apply (i.e., no uncertainty).
Remember, at this stage Kent only needs to allege facts that make a its case plausible. Kent can show its own entries at multiple ports. It also has the approved protests and the rulings issued to other importers. From this, the Court of International Trade concluded the Kent’s allegation of an EUP was sufficiently probable to proceed.
A “treatment” is a little different. It is also statutory. Under 19 USC 1625(c), if CBP proposes an interpretive ruling or decision that has the effect of “modifying the treatment previously accorded by [Customs and Border Protection] to substantially identical transactions, Customs must publish the decision in the Bulletin. The notice must provide at least 30 days for notice and comment. The final decision, changing the practice, shall be effective 60 days after notice of CBP’s final decision is published.
A “treatment” is defined in the regulations as an actual determination by a CBP officer regarding substantially identical transactions and that decision was consistently applied for a two-year period. 19 CFR 177.12(c). The plaintiff also needs to show that the current action is an “interpretive ruling or decision” that would have the effect of modifying the previous treatment.
Kent has alleged that CBP liquidated the entries of three other importers of substantially identical merchandise between 2007 and 2014, when CBP issued a formal revocation. Moving to dismiss, Customs argued that Kent cannot produce sufficient evidence of consistent CBP treatment over a two-year period, nationwide.
That, however, is not the standard Kent must meet at this point. According to the Court, Kent only needs to allege facts that, if true, would make a plausible case for a treatment. Based on the complaint before the Court, Kent has done that. As a result, the Court denied Defendant’s motion to dismiss the two counts.
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