CIT Rules Two-Year Period for Establishing CBP 'Treatment' Runs to Date of Entry
The two-year period during which CBP establishes "treatment" that may only be revoked through a notice in the Customs Bulletin runs up to the date of the entry identified in a protest, said the Court of International Trade in a decision issued Oct. 21 (here). Though CBP argued the two-year period runs to the date of the protest itself, CIT ruled the agency’s interpretation would frustrate the intent of the requirement because the two-year period would mostly cover CBP’s modified treatment.
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At issue in the case is a CBP Notice of Action that American Fiber & Finishing (AFF) says improperly revoked the treatment the agency previously accorded to its imported fabric. AFF said that it had “for some time” imported cotton fabric under the duty-free HTS subheading for cotton gauze, 5803.00.10. However, following laboratory testing on an entry in July 2009, CBP issued a Notice of Action reclassifying that entry and all similar entries “scheduled to liquidate” under HTS provisions for cheesecloth. As a result, AFF began entering its fabric under subheadings 5208.11.40 and 5208.21.40, dutiable at 9 and 10.2 percent, respectively. It filed protests in March 2012 after liquidation of the entries, and filed suit after CBP denied them.
Under 19 USC 1625(c), any “interpretive ruling or decision” that would modify or revoke a previous ruling, or “modify the treatment previously accorded by the Customs Service to substantially identical transactions,” must be published in the Customs Bulletin, with an opportunity for the public to comment. CBP’s regulations at 19 CFR 177.12(c) say that treatment has been established, and is subject to notice and comment procedures, when a responsible CBP officer made an “actual determination” that led to treatment applied consistently over a two-year period “immediately preceding the claim of treatment.”
CBP argued the two-year period in this case ran from March 2010 to March 2012, when AFF’s protests were filed. According to CBP, the “claim of treatment” under Section 177.12 was AFF’s protest. However, given CBP’s policy of liquidating entries within 314 days, and the 180-day requirement for filing a protest, that could mean the protest isn’t filed until 494 days after the treatment has changed. Most of the two-year period would consist of the time after the treatment is modified, said CIT. Interpreting the regulation so that the two-year period runs up to the date of the protest “consistently and inevitably guide the agency or court to consider an evidentiary period that is, because it is after the liquidation, largely irrelevant,” said CIT.
Rather, the two-year period runs up to the “inflection point” when CBP’s treatment allegedly changed without notice or comment, said CIT. In this case, that’s the date of the earliest entry affected by the claimed change in treatment, or July 2009, so the two-year period where CBP may have established treatment subject to notice and comment procedures if revoked ran from July 2007 to July 2009, said the court.
Applying precedent from International Custom Products’ recent case at the Federal Circuit (see 14041501), CIT also ruled that a Notice of Action may be an “interpretive ruling or decision” that requires notice and comment before revocation or modification, but said it did not have enough information to rule on whether the specific Notice of Action that reclassified AFF’s entries qualified. It ordered AFF and the government to propose a schedule by Nov. 20 for further discussion.
(Am. Fiber & Finishing, Inc. v. United States, Slip Op. 15-117, CIT # 12-00138, dated 10/21/15, Judge Pogue)
(Attorneys: Arthur Purcell of Sandler Travis for plaintiff American Fiber & Finishing, Inc.; Jason Kenner for defendant U.S. government)