The recent decision in the Hitachi Home Electronics case illustrates how far Congress and Customs can veer from factoring common sense into their legislative and regulatory pronouncements. The case was decided at the Court of International Trade (CIT) on April 30, 2010 and affirmed by the Court of Appeals for the Federal Circuit on October 31, 2011. It deals with a problem common to many importers: the seemingly interminable amount of time it takes Customs to issue decisions, especially those coming out of the Office of Regulations and Rulings (OR+R). The typical situation arises because the importer is in a dispute with Customs about the correct rate of duty applied to his goods. The importer pays the higher duty rate for reasonable care reasons (or for other goods reasons, e.g. he did not have the required free trade agreement documents in his hands at time of entry) and once the entries liquidate, the importer files protests. It often takes the port(s) several weeks — or months — to get the paperwork to Headquarters and then an equally long time to find out which attorney was assigned to handle the issue (and even longer if the issue gets reassigned). After that, it really is a black hole, with even the most routine cases taking over a year to get decided. That’s bad enough, but there are all too many cases where there is no decision issued after two years, and that is where the Hitachi case comes in.
Hitachi found itself the subject of the sort of routine delays described above, but then a second cause for delay arose. After Hitachi had filed its protests, a competitor – Samsung – filed protests on the same issue. Hitachi had filed an Application for Further Review which caused the classification issue to be referred to Headquarters for determination in the first place. When OR+R realized it had arguments from two sources on the same issue, it understandably wanted to consider input from both sides before making a final decision. In addition, a third and common cause for delay arose when some rulings needed to be revoked and that process had to be completed before any final determination would be issued to Hitachi.
Whereas Hitachi had Samsung providing input on the same issue and presumably reaching the same conclusion, often an importer finds himself stuck waiting for a court case filed by an unrelated company on an altogether different product. In those cases, Customs is unwilling to decide Company A’s protest out of concern the judge in the unrelated case filed by Company B might somehow decide something that might have an impact on the outcome of Company A’s protest. Admittedly such caution makes some sense from a legal perspective, but in the meantime, Company A is paying out money in duty it should not have to pay and has lost the use of that money, which typically is substantial for any company considering such challenges.
In the Hitachi matter, lawyers had generally accepted the premise that two years was the maximum amount of time CBP had to decide and after that, the protest was deemed denied and the importer could go to court. Hitachi serves as a reminder that sometimes common sense may have nothing to do with how a law is drafted.
The relevant regulation can be found at 19 C.F.R. 174.21 and reads:
Except as [relates to goods which are excluded], the port director shall review and act on a protest filed in accordance with section 514, Tariff Act of 1930, as amended (19 U.S.C. 1514), within 2 years from the date the protest was filed.
The related statute is 19 U.S.C. 1515 dealing with protest reviews. It states:
Unless a request for an accelerated disposition of a protest is filed [regarding goods which have been excluded], the appropriate customs officer, within two years from the date a protest was filed in accordance with section 1514 of this title, shall review the protest and shall allow or deny such protest in whole or in part. Thereafter, any duties, charge, or exaction found to have been assessed or collected in excess shall be remitted or refunded and any drawback found due shall be paid.
Congress directed that Customs “shall” process protests such that they are to be denied or allowed within two years, and Customs wrote its regulations in accordance. However, the CIT and CAFC both held that since Congress imposed no consequence on CBP for not meeting the two year time limit, the fact CBP did not act does not mean the protest is decided. Rather, both courts held that if the importer is tired of waiting for CBP to act, his only option is to file a request for accelerated disposition and wait out its thirty (30) day time limit. The accelerated disposition statutes is 19 U.S.C. 1515(b):
A request for accelerated disposition of a protest filed in accordance with section 1514 of this title may be mailed by certified or registered mail to the appropriate customs officer any time concurrent with or following the filing of such protest. For purposes of [the jurisdiction of the CIT], a protest which has not been allowed or denied in whole or in part within thirty days following the date of mailing by certified or registered mail of a request for accelerated disposition shall be deemed denied on the thirtieth day following mailing of such request.
There was a lot of discussion in both the CIT (Slip Op. 10-46) and CAFC (Op. 2010-1345) decisions about the legislative history to the Customs Court Act of 1970 which resulted in the current version of the statutes and regulation. In the 1960s, any protest not decided within 90 days of filing was automatically referred to the Customs Court (the CIT’s predecessor) for disposition. When considering revisions regarding the Customs Court, Congress chose to eliminate any language that resulted in a constructive protest denial. At the same time, Congress extended the allotted time frame from 90 days to two years. One motive for the overall changes was the plethora of protests which ended up at the Customs Court before CBP could approve or deny them. Interestingly, CBP stated at the time that it was taking an average of 58 days to decide a protest. If only CBP still kept to that timeframe now!
In the end, Congress in 1970, the CIT in 2010 and the CAFC in 2011 all came to the same conclusion. If an importer is tired of waiting for a decision, he should file for accelerated disposition. Under the system prior to Hitachi, CBP had the benefit of getting variable levels of judicial deference accorded to its decisions, depending on specific circumstances. Post-Hitachi, if Customs fails to take action, there is no well-reasoned decision the agency can present to the court seeking deference. Only time will tell, but you have to wonder how quickly importers will start relying on accelerated disposition to force a decision on their protests and get the issue before the CIT. Did Customs just give up more than it gained? Did CBP even consider this point when it took on Hitachi?