CIT Says Protests Must Meet 'Place-of-Filing' Requirements to be Eligible for Court Challenge
Protests must be filed at the port where the contested CBP decision was made in order to be eligible for a subsequent court challenge, ruled the Court of International Trade on Feb. 14 as it dismissed an importer’s tariff classification suit. The regulatory requirement that “protests shall be filed with the port director whose decision is protested” is a requirement for CIT jurisdiction, it said. Just as with the requirements that protests be filed on time and duties be paid before the trade court can take up a challenge, so must the importer meet the requirements of CBP’s “place-of-filing” regulation, it said.
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Government Argued Protests Invalid for Liquidation, Payment and Filing Location
Netchem, Inc. had imported 43 entries of lanthanum oxide into the Ports of New York/New Jersey, Detroit, and Port Huron. It had originally classified the entries as rare-earth oxides, which enter duty free. But CBP subsequently reclassified them as rare-earth metals, dutiable at 3.7%, resulting in an extra duty bill of $1,539,882.97 for Netchem.
In March 2012, Netchem filed a protest at the CBP Port of Buffalo challenging CBP’s classification of the entries. The protest covered all 43 entries at the Ports of New York/New Jersey, Detroit, and Port Huron, as some other entries into the Port of Buffalo. The CBP Buffalo port director refused to rule on the protest because it contained entries at other ports, and returned the protest to Netchem after "number-stamping" the first page. Netchem nonetheless filed suit at CIT in May 2012, arguing the protests had been “deemed denied” when CBP failed to rule on the merits after 30 days.
The 43 entries at issue in the lawsuit raised questions on whether CIT was able to hear the case. The lawsuit was filed under 28 USC 1581(a), which allows the court to decide “any civil action commenced to contest the denial of a protest, in whole or in part, under section 515 of the Tariff Act of 1930” (the law setting out CBP protest requirements). The government argued that all 43 entries had problems that prevented CIT from hearing the challenge:
- 17 of the 43 entries hadn’t been liquidated when Netchem filed its protest in the Port of Buffalo. These entries had subsequently liquidated (and Netchem had paid the additional duties) by the time Netchem filed its CIT lawsuit
- 25 of the 43 entries had liquidated on time, but still had duties owed by Netchem when it filed its lawsuit at CIT. Netchem paid the duties over the next few months.
- 1 of the 43 entries had liquidated at the time of the protest, and Netchem had paid the required duties, but it was entered into the Port of Detroit (and not Buffalo).
The government asked CIT to dismiss the case for lack of jurisdiction.
Court Had No Jurisdiction to Hear Case for Any of 43 Entries
The court made short work of Netchem’s challenge for 42 of the entries. CIT and the Court of Appeals for the Federal Circuit have routinely required payment of duties on a protested entry before an importer can file suit, so Netchem’s challenge of the 25 entries for which it didn’t pay duties until after it brought its case was void, it said. So was Netchem’s challenge of CBP’s classification of the 17 entries that hadn’t been liquidated at the time it filed its protest, said the court. The law on CIT jurisdiction to hear cases says a protest must meet legal requirements, including filing within 180 days after the date of liquidation. Both CIT and CAFC have upheld this requirement repeatedly, said CIT. Although recent Supreme Court cases may be cause for reconsideration, CIT is nonetheless bound by CAFC decisions, it said.
For the one remaining entry that had been properly liquidated and paid, CIT said it didn’t have jurisdiction because the protest was filed at the wrong port. The law on CBP protests requires that protests be filed “in accordance with regulations.” Those regulations at 19 CFR 174.12(d) require that “protests shall be filed with the port director whose decision is protested,” said CIT. Despite changes to customs law over the years, this requirement continues to be the intention of Congress, said the court. The place of filing requirement was originally codified in law by Congress in 1970. Every time it changed the language of the law on customs protests since 1970, Congress said it was making no changes to the actual protest validity requirements themselves, said CIT.
CIT said its 2007 decision in Avecia to hear a protest case even though the entry had been filed in a different port than the protest had no bearing on the case, despite Netchem’s arguments to the contrary. In Avecia, the port director denied the protest, even though it had been filed in the wrong port. This in effect waived the place-of-filing requirement because, in deciding the protest on its merits, the port director declared it valid. In Netchem’s case, however, the port director declined to rule on the protest at all. Ruling Netchem’s protest invalid under the law because it was filed in the wrong place, CIT found that the protest couldn’t serve as the basis for a court challenge, and dismissed the case.
(Netchem, Inc. v. United States, Slip Op. 14-16, dated 12/14/14, Judge Goldberg)
(Attorneys: Charles Zdebski of Eckert Seamans for plaintiff Netchem, Inc.; Saul Davis for defendant U.S. government)