The U.S. Court of International Trade (CIT) had a busy year in 2014. It decided 163 cases, the most since 2007. Based on these cases, importers glean current regulatory trends and several important lessons.
- Nearly all of the CIT’s 2014 cases involved imports from five countries – 69% from China, and 7% each from Mexico, Germany, South Korea, and Vietnam.
- Of the cases that resulted in a final judgment, the majority (73%) were challenges to anti-dumping duties. The U.S. government won 59% of these. Interestingly, it won 74% of these cases when it had the assistance of an intervening party.
- The CIT considered sixteen cases involving the reclassification of imported goods by U.S. Customs and Border Protection (CBP). Of those, CBP won 75%.
- The CIT dismissed two cases in 2014 due to a failure “to exhaust administrative remedies” (see e.g., here). Importers frustrated with agency action must resist the impulse to take action to the CIT before their case is ready. Instead, they must first accept the realities of the often lengthy protest process by dealing directly with CBP.
- When an importer wins a case, the court may not give the party everything that it requested. It is well-settled that “when a respondent challenges an administrative proceeding in which it has prevailed there is no case or controversy, and thus no jurisdiction lies.” As established in the 1980s, and readdressed twice in 2014, (see here and here), a party that challenges an agency action in court cannot appeal the decision if it wins. Unfortunately, an importer must accept the court’s decision and “take what it can get.” Because of this judicial tenet, importers in these situations should not waste any more time or money by appealing a decision they won, even where certain questions were not addressed (or fully addressed) by the court.
- Several closely watched cases were decided in 2014 regarding anti-dumping and countervailing duties on aluminum extrusion products. Since a 2011 U.S. Department of Commerce rule imposed anti-dumping duties on aluminum extrusion products, there has been an ongoing debate on the subject. Expressly excluded from anti-dumping and countervailing duties are items considered “finished goods”, or “finished goods kits”, at the time of importation. While the question of what constitutes a “finished good” has been fiercely debated, the CIT issued several relevant rulings. It held that finished heat sinks (used to cool electronic devices), straight edges, and refrigerator and freezer trim kits (following precedent that excludes products designed to “work with removable/replaceable components” or “display customizable materials”), are “finished products” and not subject to anti-dumping duties. However, it also held that imported curtain wall units do not qualify for the “finished goods” exclusion (because final use of a curtain wall unit as an entire curtain wall requires the installation of numerous other such units together). In 2015, the CIT will likely consider whether curtain wall units qualify for the “finished good kits” exception.
- The U.S. Federal Circuit Court of Appeals also issued possibly the final ruling in the infamous and long-running “white sauce” case. The case originally dates back to 2005 when CBP informed now defunct International Custom Products (ICP) that the HTSUS classification of its imported dairy spread was being changed despite the existence of an applicable Ruling letter that had been in place since 1999, resulting in a tariff increase of 2400% (or $28 million in unexpected duties). CIT had held that the agency’s Notice of Action that resulted in the rate advance was void for failure to comply with the notice and comment procedure requirements of 19 U.S.C. § 1625(c).
- CBP is required to undergo notice and comment procedures before it may issue a proposed ruling or decision which modifies or revokes a prior interpretive ruling which has been in effect for at least 60 days. In particular, CBP must publish the proposed ruling or decision in the Customs Bulletin, provide a comment period of at least 30 days after publication, and publish the final decision in the Customs Bulletin within 30 days after the close of the comment period. The final ruling or decision becomes effective 60 days after the date of its publication.
- While the Government tried to argue that a Notice of Action did not trigger these notice and comment procedures the Court of Appeals agreed with CIT that the Notice was indeed an “interpretive ruling” subject to § 1625(c) in this case. The Government next argued that it would be infeasible to apply § 1625(c)’s notice and comment requirements, because of an “incalculable number of other decisions” that would be overly time consuming and would serve no purpose. The Court of Appeals confirmed CIT’s decision holding that the Notice of Action was void and agreed that the entry should be reliquidated in accordance with the 1999 Ruling Letter. The Court was quick to clarify however, that not all notices of action are subject to notice and comment procedures. Rather, future companies can find comfort in the general holding that when a reclassification of an item (such as through a Notice of Action) effectively revokes a prior ruling given by CBP, the reclassification cannot become effective immediately, since the proper notice and opportunity to comment must be given. This gives the party time to prepare and the ability to comment on the reclassification.
- In 2014, the U.S. Federal Court of Appeals affirmed the CIT’s holding in United States v. Trek Leather, an important case significantly expanding individual liability in trade violation cases. In the case, the President and sole shareholder of Trek Leather failed to ensure that dutiable assists were included in entries. Under the relevant statute for gross negligence (19 U.S.C. § 1592), an individual may be personally liable if he or she “introduces” goods into commerce. Here, the court held that the term “introduces” extends beyond the formal filing of an entry.
- The lessons learned in this case for import professionals are troubling. In its opinion, the court declined to speak on whether the defendant’s role in the company as President and sole shareholder was relevant in determining liability. Instead of only applying this type of individual liability to executives and officials, any employee within the entity, or even service providers, may be subject to liability. Many day-to-day activities by trade compliance professionals may constitute “introducing” goods into commerce under the statute. If you are involved in your company’s import activities, it is imperative that you remain vigilant in the accuracy of the information you both gather and disseminate to your trade partners and service providers. When omissions or incorrect information ends up in the “introduction” of merchandise, the parties involved could potentially be liable for both duties and penalties arising from unintentional violations.
As we enter 2015, importers should be aware of these trends and the lessons to be learned from them.