CIT Advisory Committee Begins Preliminary Look at Customs Small Claims Procedure

“A lot of importers that have reasonable cases to make, particularly on customs classification, are choosing not to proceed to court because it’s just too expensive and too time-consuming given what the potential benefit is,” said Larry Friedman of Barnes Richardson, who spoke about the idea at a legal conference in New York last March (see 13032222). Many classification disputes involve duty rate differences of only 2 or 3 percent. But customs cases usually take two or three years, and can cost upwards of $500,000. “The value of this is the importers who currently choose not to seek judicial review at all would have the opportunity to get judicial review on an expedited and less expensive basis,” said Friedman.

Any movement toward a small claims procedure is still in its infancy, said the industry lawyers. The subcommittee of the Rules Committee would first look into whether a small claims procedure is feasible and what it would look like. If the subcommittee thinks it has found a way to make a small claims process work, it would take its recommendation to the full CIT Advisory Committee on Rules. Then, if the full committee endorses the recommendation, it would submit a report to the CIT’s judges, who would have the final say. The full committee and the subcommittee include lawyers from both private practice and the government, said industry lawyers.

Interest in Small Claims Process Dates Back to Late 1970s

The small claims idea itself claims a long history, according to a 1983 article by Philip Schuchman published in the Pace Law Review (here). In the run-up to the creation of CIT by the Customs Courts Act of 1980, several trade groups floated the idea of a small claims procedure to Congress. Supported by the American Importers Association -- now the American Association of Exporters and Importers -- and the National Customs Brokers & Forwarders Association, the plan would have amended the law to give importers the ability to use small claims procedures if the amount of duty in dispute was less than $5,000. The decision would have been unappealable, and would not have been able to be used as precedent to weigh in other cases. Customs brokers would have been able to represent importers before CIT in small claims cases. The American Bar Association also supported a small claims procedure, but it instead wanted Congress to direct CIT by law to establish the process through a change to court rules.

The small claims process wasn’t adopted by Congress in 1980 and the idea faced opposition from the judges of the predecessor courts to CIT and the Court of Appeals for the Federal Circuit (the Customs Court and the Court of Customs and Patent Appeals, respectively), said Schuchman in the article. Several bar associations, including the Association of the Customs Bar (as the Customs and International Trade Bar Association was known until 1981) and the Customs Law Committee of the Los Angeles County Bar Association also opposed the move, Schuchman said. Some witnesses said the small claims idea merited future attention and study, but that the Customs Courts Act shouldn’t be held up so that the idea could be fully discussed.

Legislative Avenues Likely Closed; Rules Changes May Be Possible

Now, with Congress deadlocked, any addition of a small claims process would probably have to be accomplished without statutory changes, said industry lawyers. One issue the subcommittee will face is whether that is even possible. Another issue to be confronted by the subcommittee is how to address the precedential effect of any rulings issued using the small claims procedure.

According to Friedman, who does not sit on the subcommittee, one way that a small claims process could come about is through changes to CIT rules. “The court has a fair amount of flexibility in the way it proceeds, as long as everybody’s constitutional rights are protected,” he said. Changes to rules could possibly be made that, in cases with small duty amounts at stake, limit the time and scope of discovery and reduce the size of legal briefs and the time to file them.

Doubts would remain about the “perennial” problem of whether small claims rulings could act as precedent in other cases, said Friedman. Using small claims cases as precedent would be problematic because the record the judges rely on to decide such cases would be threadbare if discovery and legal arguments are limited. On the other hand, if small claims decisions can’t act as precedent, then they wouldn’t be able to be applied by an importer to entries that have similar issues. At worst, CBP would be able to ignore the ruling when it classifies identical entries, forcing the importer to fight each decision one at a time.

But that issue may be overblown, said Friedman. District courts already allow for nonprecedential decisions, he pointed out. Although small claims rulings wouldn’t be applicable to similar entries, neither are CBP ruling letters applicable to other importers. Nonetheless, ruling letters “have value in informing you what Customs is thinking,” said Friedman. A small claims decision “wouldn’t necessarily be enforceable going forward on other imports,” said Friedman, but he has a “high degree of faith that the Justice Department and Customs would choose to follow these decisions in the vast majority of cases,” he said. “A federal government agency is unlikely to ignore a ruling from a court, even if it’s not precedential in a technical sense.”