The Court of Appeals for the Federal Circuit decision, International Custom Products, Inc. v. United States, 2015 U.S. App. LEXIS 11170 (Fed. Cir. June 30, 2015), was ten years in the making and provides a stern lesson for importers of food products to follow U.S. Customs and Border Protection’s administrative procedures carefully. If not, importers will be out of luck and unable to file a suit against Customs in federal court.
The plaintiff ICP is an importer of products sold to processed food manufacturers, including the “white sauce” at issue. ICP had requested a tariff classification ruling from Customs and Customs issued a ruling classifying the product under 2103.90.9060 HTSUS as “sauces and preparations therefore.” About six years later, Customs changed the classification of the white sauce so that it should be imported under 0405.20.3000 HTSUS as “dairy spreads.” For ICP the reclassification brought with it a duty increase of an exorbitant 2400%. After ICP was assessed a duty bill of $28 million, the company filed a number of lawsuits against Customs.
In 2005 after Customs liquidated ICP’s entries of the white sauce with the increase, ICP decided not to pay the owing duty and neglected to file a Customs protest pursuant to 19 USC §1514. Accordingly, when the company filed its action against the government, the CAFC upheld the Court of International Trade and eventually dismissed the case for lack of jurisdiction since the importer had not paid the owing duty nor had filed the requisite administrative protests. The court noted that the pre-payment requirement of 28 USC §2637(a) is “a condition upon the waiver of sovereign immunity” that “must be strictly construed in favor of the government.” Accordingly, the food importer’s failure to pay the owing duty foreclosed any attempt to invoke subject matter jurisdiction under either 28 USC §1581(a) or §1581(i).
The Court suggested to alleviate the financial burden on an importer, the importer could pay the owing duties on the first entry but then request that liquidation of the remaining entries be suspended pending the final outcome. However, this request must be done on a timely basis.
The lessons of the “white sauce” case include keeping accurate track of owing duties and deadlines for administrative protests. Failure to do will preclude an importer from having its day in court.