Federal Circuit Says Protests Needed for Retroactive Section 301 Duty Exclusion

The court further said filing protests wasn't futile since ARP had ample chance to file protests, given that its exclusions were granted before the deadline to file the protests, and that Harrison, whose entries received exclusions after the 180-day deadline to file a protest, could've requested a refund had it filed an extension of the liquidation deadline and filed a Post Summary Correction.

"The track record of the Federal Circuit in affirming the CIT decisions in favor of the government is pretty constant as are its findings in favor of the government overall," Christopher Kane, counsel for ARP and Harrison, told Trade Law Daily. "Still, in this case, the decision did not reflect an awareness of the recent West Virginia v. EPA SCOTUS decision, the inappropriateness of the unilateral decision by CBP to limit the plenary refunds ordered by USTR or the need to have a ripe, articulation of a protestable issue at the time a protest is filed."

The case revolved around four entries ARP made under Harmonized Tariff Schedule of the U.S. subheading 3901.90.1000 in August and September 2018. USTR then in July 2019 granted exclusion requests submitted by other importers that covered these goods, applying the exclusion requests retroactively to ARP's entries. However, the importer's entries were liquidated with the Section 301 duties, prompting ARP to file protests for two of the entries in March 2020, 199 days after liquidation -- beyond the 180-day deadline given to importers to file a protest. The protest was denied, prompting the importer to bring its case to the trade court. ARP timely filed a protest for one entry, which led to refunds of the Section 301 duties paid on that entry, though it did not file protests on the other two entries.

Harrison's case was similar. It made two entries for which retroactive exclusion requests submitted from other importers were granted on March 26, 2020. CBP assessed the Section 301 duties, leading to Harrison filing a protest on March 31, 2020, more than 180 days after the liquidation dates for the two entries. The exclusions for Harrison, unlike ARP's, were granted after the 180-day deadline had lapsed, but CBP denied both protests as untimely.

Both companies went to CIT, claiming jurisdiction under Section 1581(i), the court's residual jurisdiction. The trade court tossed the case for lack of jurisdiction. Judge M. Miller Baker held that Section 1581(i) can only be used where no other jurisdiction provision applies, and since Section 1581(a) applies here if the importers were to have filed protests, the case should be tossed (see 2106110053).

At the Federal Circuit, Judges Todd Hughes, Richard Linn and Kara Stoll upheld this finding. Hughes, the opinion's author, weighed whether the remedy provided under Section 1581(a) was "manifestly inadequate." For starters, the judge addressed ARP's and Harrison's argument that Section 1581(a) would not have been available had a timely protest been filed since the fundamental issue of the case involves USTR's exclusion decisions and not the ministerial involvement of CBP in carrying out the decisions. As such, the importers said they were not required to file protests. The court disagreed.

Hughes pointed out that the importers requested the trade court to provide a refund via reliquidation of the relevant entries. "Thus, as characterized by the importers themselves, the source of their alleged harm is Customs’ classification decisions that 'USTR’s retroactive exclusions rendered erroneous,'" the opinion said. "... These classification decisions are necessarily protestable 'decisions' because '[p]roper classification of goods under the HTSUS' requires the agency to 'first ascertain[] the meaning of specific terms in the tariff provisions and then determin[e] whether the subject merchandise comes within the description of those terms' -- the first question being one of law, the second being one of fact."

The court held that the fact that USTR's exclusions made CBP's classification decisions erroneous was "irrelevant," since the "obligation to protest a Customs classification error does not turn on whether it was erroneous ab initio or became erroneous because of retroactive administrative action," Hughes said. Rather, the obligation to protest turns on whether CBP's classifications were protestable decisions, and the court said that the classifications were indeed "decisions."

Hughes then turned to the question of whether the protest would have been an exercise in futility. The judge said that the protests in this case "were 'far from being exercises in futility.'" Starting with ARP, Hughes ruled that it would have had the chance to protest the assessment of the Section 301 duties if protests had been properly filed. "Indeed, ARP had ample opportunity to file such protests," the opinion said. "Of its five entries at issue, ARP’s earliest protest deadline -- i.e., 180 days after an entry’s liquidation -- was January 22, 2020. Yet ARP did not protest any of Customs’ classification decisions until March 2, 2020, more than seven months after USTR had issued the applicable relevant product exclusion notice. The opportunity to protest is not an inadequate remedy 'simply because [ARP] failed to invoke it within the time frame ... prescribe[d].'"

As for Harrison, whose entries were granted exclusions after the 180-day deadline to protest had lapsed, the court ruled that had it timely filed an extension of the liquidation deadlines, it would have had the chance to request a refund via a Post Summary Correction filed "'no later than 15 days before the extended date of liquidation.' ... Thus, Harrison likewise could have had the opportunity to challenge Customs’ classification decisions had the importer done so promptly," the opinion said.

(ARP Materials v. United States, Fed. Cir. #21-2176, dated 09/06/22, Judges Todd Hughes, Richard Linn and Kara Stoll. Attorneys: Christopher Kane of Simon Gluck for plaintiffs-appellants ARP Materials and Harrison Steel Castings; Sosun Bae for defendant-appellee U.S. government)

(The Harrison Steel Castings Company v. United States, Fed. Cir. #21-2177, dated 09/06/22, Judges Todd Hughes, Richard Linn and Kara Stoll. Attorneys: Christopher Kane of Simon Gluck for plaintiffs-appellants ARP Materials and Harrison Steel Castings; Sosun Bae for defendant-appellee U.S. government)