CIT Dismisses Challenge to Tariff Classification of Smokeless Tobacco After Gov't Concedes
Despite objections from importer Shah Brothers, the Court of International Trade on Dec. 27 dismissed a challenge to CBP’s tariff classification of the company’s tobacco product after the government conceded defeat. The decision to reliquidate the “gutkha” as chewing tobacco instead of snuff will result in a refund of excess excise taxes paid on the entries to Shah Bros. The importer wanted to continue its lawsuit on the grounds that CBP would continue to classify the Indian smokeless tobacco as snuff unless the court mandated a change to agency procedure. But the court said no controversy remained to litigate, and told Shah Bros. it could file another lawsuit if it found fault with CBP’s treatment of a future entry.
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Although chewing tobacco and snuff are subject to customs duties at the same rate, the excise tax on imported snuff is $1.51 per pound, while the excise tax on imported chewing tobacco is only $0.5533 per pound. When Shah Bros. imported an entry of gutkha in 2009, CBP classified it as snuff. Shah Brothers protested, and filed suit at CIT when that protest was denied. In 2011, the court dismissed part of the lawsuit that related to the Alcohol and Tobacco Tax and Trade Bureau’s involvement in CBPs classification decision (see 11052711).
Another closely related case was decided by CIT in 2010, when the court dismissed a challenge to CBP’s classification of another entry of gutkha from Shah Brothers (here). Once again, CBP originally classified the gutkha as snuff but the government conceded classification as chewing tobacco when the case went to court.
In the current challenge, Shah Bros. said the government’s concession of classification as chewing tobacco wasn’t enough. It still took issue with the way the government arrived at the classification, and said the government’s decision to change tack on one entry wouldn’t prevent CBP from again classifying gutkha as snuff in the future. In particular, Shah Bros. asked the court to order CBP to implement a Bureau of Alcohol, Tobacco and Firearms (ATF) directive on classification of chewing tobacco and snuff. It also said CBP should have to independently inspect smokeless tobacco. “The government has not demonstrated that its allegedly wrongful behavior cannot reasonably be expected to recur; rather, it continues to cover up its actions by refusing to produce relevant documents that speak to this very issue,” said Shah Bros. in a court filing.
The court, however, found it could not continue the proceeding, because the government’s reversal on classification fully remedied all injury to Shah Bros. by refunding the excess taxes paid, with interest. Dismissal wouldn’t affect Shah Bros.' rights to contest other CBP classification decisions in the future either, said the court. “And if or when another controversy involving the classification of Shah Bros.’ merchandise arises, Shah Bros. is free to litigate the matter and obtain all redress lawfully available to it,” concluded the court as it dismissed the case.
(Shah Bros., Inc. v. U.S., Slip Op. 13-157, dated 12/27/13, Judge Pogue)
(Attorneys: Elon Pollack of Stein Shostak for plaintiff Shah Bros., Inc.; Edward Kenny for defendant U.S. government)