Case Dismissed Over $26

Often, Customs and Border Protection gets a win for legally correct reasons that are not, in the bigger picture, "just." That is the nature of what we do. There are rules and we live in a country where the rule of law is supposed to matter. We cannot avoid the application of those rules to reach the result we think is better on policy or personal grounds. Neither Congress nor the Administration (including the executive agencies like Customs and Border Protection) can impose their wills to reach a desired conclusion that is inconsistent with the law or the constitution. If they do, it is the role of the judiciary to declare the action illegal and ensure it is remedied. At least that is how it is supposed to work. That is why a lifetime appointment to the federal bench in among the most consequential of powers granted the President and the Senate. At the same time, federal judges (particularly in lower courts like the Court of International Trade) have to follow the law as written and as interpreted by higher courts. In the case of the CIT, that means the Court of Appeals for Federal Circuit and the U.S. Supreme Court.

Why am I thinking about this? Mostly because I watch and read the news. Also, because I have given a lot of thought to how importers can have their rights protected when Customs takes an action contrary to their interests. There are many traps in that process, any one of which can end up with the importer not getting his or her day in court. Also, it is often unreasonably expensive meaning that many individuals and small importers with serious claims are priced out of court.

Which brings me to the tragic tale of Dis Vintage LLC v. United States.

Here is the law you need to know: Under 28 U.S.C. 2637(a), "A civil action contesting the denial of a protest under section 515 of the Tariff Act of 1930 may be commenced in the Court of International Trade only if all liquidated duties, charges, or exactions have been paid at the time the action is commenced . . . ."

Here are the facts you need to know: Dis Vintage had a classification beef with Customs over whether its imported apparel should be classified as "worn" clothing and eligible for duty-free treatment. It filed a timely protest and the protest was denied. Customs issued a series of bills to Dis Vintage seeking payment of the duties. The bills came as follows:

• January 25, 2016 - "Full Amount Due Upon Receipt" was $9,981.80, "Amount Due After 02-05-16 (including interest)" was $10,006.38.
• February 29, 2016 - "Full Amount Due Upon Receipt" was $10,006.38, "Amount Due After 03-06-16 (including interest)" was $10,031.01.
• April 4, 2016 - "Full Amount Due Upon Receipt" was $10,031.01, "Amount Due After 04-05-16 (including interest" was $10,057.08.

Upon receipt of the April 4, 2016 bill (on April 11, 2016), Dis Vintage paid CBP $10,031.01. On May 12, 2016, after paying that bill, Dis Vintage filed its summons to commence a case in the Court of International Trade. Then, on May 16, it received a bill for the "remaining amount due" of $26.16.

Has Dis Vantage succeeded in commencing its case? 

[Stop reading and drop a comment answering that question. Then finish reading this post.]

The Court of International Trade found the law to be clear and unambiguous. At the time it filed its summons, Dis Vintage had not paid "all liquidated duties, charges, or exactions."

First, the Court noted that it has no discretion around questions of jurisdiction. Noting a prior Federal Circuit decision, the Court stated that it cannot, "even in the interest of justice, extend [its] jurisdiction where none exists." The Court noted that each bill contained two amount and that each provided the date on which additional interest became due. In the case of the January and February bills, the importer had about a week to make payment before the interest was added to the debt. That was not the case for the April 4 bill, which was presumably the March bill but sent late and gave only one day's notice before the interest was added to the debt. Note that the April bill was received after the additional interest became due.

According to the Court, Customs properly added interest to the debt every 30 days. Thus, the interest became due on April 5 even though the bill was issued late and did not provide adequate time to pay. Dis Vintage paid the bill after April 5 and did not pay the interest owed. As a result, it did not satisfy the statutory requirement to invoke the jurisdiction of the Court of International Trade.

In many cases, the law has an escape value for bad facts like this. That valve is known as "equity" and gives courts some flexibility to do what is right. The Court of International Trade has all the powers in law and equity as are enjoyed by any other federal district court, so can it make this right?

In short, no. There is no equitable exception to jurisdiction. Courts can only act within the scope of authority granted to them by the constitution and Congress. The CIT, therefore, was stuck. Dis Vintage pressed on arguing that the bills were ambiguous and the Customs failed to send the bills on time. Moreover, able counsel for Dis Vintage, apparently aware of the legal requirement, put into the record an email exchange regarding the payment and CBP's confirmation that it had been accepted and applied to the debt. Nevertheless, the Court found it was not authorized to act in part because CBP never said that the debt was paid in full.

I have no idea how much money was at stake in the disputed protest. I do know that this issue of having to pay the debt prior to commencing an action is a trap and a problem for litigants. There have been multiple cases in which the importer did not have the financial ability to pay the bill to challenge the denied protest. This results in meritorious claims going unreviewed. 

I am aware that there are strategies to get around this. For example, CBP may be willing to act on a single test protest, leaving the others suspended while the court action plays out. That can work. But, it depends on the willingness of CBP to proceed on that basis. It does not, however, address the problem of the importer who cannot afford to pay the duties even on a single entry. Think, for example, of the importer who unknowingly entered merchandise subject to an antidumping duty order of 200%. That liquidation may be suspended for years resulting in a totally unexpected and potentially ruinous bill several years later. Why should that person have to pay the duties to challenge the assessment?

Perhaps the "why" no longer matters. This is the law. To change this, Congress will need to act. It could amend the statute to permit the importer to substitute a bond or other security to ensure that CBP will be paid if it prevails. That would permit the Court to get to the merits and provide additional judicial review of CBP's actions. That would be a net good for the trade and the public in general because there should always be adequate checks on the exercise of executive power.