Errors in 232 Exclusion Can Be Hard to Fix

Exactly how to go about getting refunds of incorrectly collected Section 232 duties on steel and aluminum products is a complicated issue. The result, it seems, turns on what caused the incorrect collection. And it is important to act quickly to preserve the right to collect a refund because it turns out that failing to act can result in the loss of the refund.

This all comes up in the context of Voestalpine USA Corp and Bilstein Cold Rolled Steel LP v. US. The underlying facts in this case are not terribly complicated. In July of 2018, Bilstein submitted to Commerce a Section 232 exclusion request. The request contained a non-existent 10-digit HTSUS code. Despite the error, and the fact that requests are supposed to be reviewed by CBP for “administrability,” Commerce granted the request with the invalid HTSUS code.

VoestAlpine, the importer, entered steel that should have been covered by the exclusion and, noting that the correct HTSUS code on the entry would not match the exclusion, paid the applicable 232 duties. Bilstein then set about trying to get Commerce to correct the exclusion. In November of 2020, after the protest period had expired, Commerce informed Bilstein that it would not approve a “resubmission,” unless outside of the protest period and indicated that no refund could be paid by reliquidating entries that have liquidated and become final. Bilstein also submitted a second exclusion request with the correct HTSUS code.

Plaintiffs then filed this court case seeking refunds of the 232 duties. After that filing, Commerce granted Bilstein’s request for a corrected exclusion.

There are two ways customs cases generally get before the Court of International Trade. The first is following a denied protest, which presupposes a valid protest. A protest can be filed challenging a decision of CBP related to, among other things, the liquidation of the entry. This is called (a) jurisdiction. The second is via judicial review of a final agency action under the Administrative Procedure Act. This is called (i) jurisdiction. The (a) and (i) designation is based on the subsection of 28 USC 1581. Duty collections resulting from actions by agencies other than CBP are often brought under (i). Traditionally, the Court will not entertain a case under (i) if the plaintiff could have (and should have) filed a valid protest and gone to Court under (a).

The question here is whether the plaintiffs could have filed a valid protest. The Plaintiffs pursued this case as a challenge to Commerce for issuing an exclusion with an incorrect HTSUS code, which prevented the importer from making a claim. According to Plaintiffs, because that was not an error by CBP, there is nothing to protest. Moreover, because no claim for an exclusion was made, CBP liquidated the entry properly.

The Government’s position is that when an importer asserts the right to an exclusion, CBP plays an active role in deciding whether 232 duties should be collected. Because CBP “decided” the rate of duty applicable, the importer should have protested the liquidation to preserve its right to a refund. And, according to the Government, the importer could have filed a protest just to prevent the liquidation from becoming final and then used that time to get a corrected exclusion from Commerce. Absent a protest, the Government believes there is no basis on which the case can proceed.

The Court held that the complaint in this case challenges Commerce’s decision to approve an exclusion request with an invalid HTSUS code. That is not a decision by CBP that is subject to protest. Because the importer was aware of the problem with the HTSUS code, it did not ask CBP to apply the exclusion. Customs, therefore, did not even have the opportunity to make a decision regarding the application of the exclusion. Instead, it collected the money in a ministerial capacity following direction from Commerce (and the President). This is, therefore, properly an (i) case.

But the government raised an interesting point: Plaintiffs could have filed a protest to delay liquidation they worked with Commerce to get the corrected exclusion. Presumably, the plaintiffs would have asked CBP to delay deciding the protest until Commerce acted. The, the plaintiffs would either have received the refund on liquidation or would have a denied protest to challenge in CIT. The problem with that approach, as noted in what may become known as “famous footnote 12,” is that even if the protest keeps the liquidation from becoming final, it may not be a valid protest that would give the CIT jurisdiction to review it. So, that strategy may work administratively if CBP ultimately grants the protest but may not allow the importer to get into Court if the protest is denied.

So far, this seems good for the plaintiffs. The Court appears to be accepting the premise that it has jurisdiction to review this case via subsection (i).

Then the Court turned to the appropriate remedy. This is where it got dicey.

Given that the Complaint challenges the Commerce Department’s issuance of an exclusion with an incorrect HTSUS number, what relief are the plaintiffs seeking? Plaintiffs say they are asking the Court to order CBP to reliquidate the entries notwithstanding the final liquidation. But that liquidation is not the challenged agency action. The Court could order Commerce to reconsider its erroneous exclusion and to re-issue it with a correct HTSUS number. The problem with that relief is that Commerce already issued a new corrected exclusion. That means the plaintiffs already have the relief they are seeking. That is usually a remedy for dismissal on the grounds that the case has become moot.

Here, that new exclusion did not come with refunds, so plaintiffs are not yet happy. The CIT has “all the powers in law and equity of, or as conferred by statute upon, a district court of the United States.” That means it can, for example, order a money judgment or other form of appropriate relief. Here, plaintiffs did not make an argument that a money judgment is the appropriate remedy. Moreover, plaintiffs chose not to apply the exclusion to the relevant entries, because they new it had an erroneous HTSUS number. According to the Court, plaintiffs failed to take any steps to fix the error for a year after Commerce issued the exclusion. The Court called this a “lack of diligence” that puts “substantial responsibility” on them for the predicament. Given that circumstance, the Court declined to find a money judgment to be an appropriate remedy and rendering the claim moot.