No Second Look From CIT at Constitutionality of Duty Prepayment Despite 'Absurdity'
The Court of International Trade on July 26 reluctantly declined to reconsider its denial of a constitutional challenge to the requirement that importers pay any duties owed before filing protest denial lawsuits. Despite the “absurdity” of the situation faced by International Custom Products (ICP), the now-defunct importer of white sauce is still required by law to pay $28 million in duties before it can file suit challenging CBP’s reclassification of 13 of its entries, it said.
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CIT had originally ruled on the constitutional challenge in September, finding that the “harshness and unfairness” of the $28 million hurdle doesn’t violate ICP’s constitutional right to due process (see 13090501). The case revolved around a notice of action CBP had sent to ICP in 2005 that invalidated a ruling letter the company had obtained on its white sauce, resulting in a 2,400% increase in the duties ICP owed. In a separate case, the U.S. Court of Appeals for the Federal Circuit ruled that notice of action was invalid because it was in effect an “interpretive ruling or decision” that required notice and comment (see 14041501). But the CAFC decision only applied to the single entry that ICP was able to pay duties on before filing suit.
CIT said ICP didn’t raise any new arguments in its request for reconsideration, so it declined the company’s motion in spite of the fact that the underlying notice of action has been invalidated. The requirement that importers pay duties before filing suit has been established in law since 1845 and in common law since at least 1777, and the Supreme Court affirmed its validity as far back as 1875, it said.
But Judge Gregory Carman did not appear happy with the result. ICP is being prevented from obtained relief because “it cannot prepay the very duties that the courts have declared invalid,” said Carman. ICP’s predicament is partially rooted in a CAFC decision from 2005 that found the case was a classification case subject to prepayment requirements, instead of a challenge of the notice of action itself, said Carman. If CAFC had agreed to hear the case as a challenge of the Notice of Action itself, ICP wouldn’t have had to pay the duties, he said.
“Ultimately, the result here might lead a reasonable mind to question the wisdom of requiring prepayment of all assessments regardless of their size,” said Carman. “That is a matter for the democratic process and the legislature.” Because the Supreme Court has already spoken on the constitutionality of the duty prepayment requirement, CIT has no other choice but to reject ICP’s motion to reconsider, he said.
The next step should ICP continue to pursue the case would be an appeal to CAFC. ICP attorney Gregory Teufel says the company is still weighing the decision.
(Int'l Custom Prods., Inc. v. United States, Slip Op. 14-74, 08-00189, dated 06/26/14, Judge Carman)
(Attorneys: Gregory Teufel of Eckert Seamans for plaintiff International Custom Products; Edward Kenny for defendant U.S. government)