U.S. importers filing protests with U.S. Customs and Border Protection ("Customs") should take note of a recent decision in the U.S. Court of International Trade that could represent a significant change in the way protests need to be dealt with by U.S. importers and Customs.1 The decision, which involves a protest filed by Hitachi Home Electronics (America), Inc. ("Hitachi"), proffers a new interpretation of the word "shall" and the statutory timeframe by which Customs must make a decision on protests.
Background
Under U.S. law, when a U.S. importer disagrees with a Customs decision on an entry, it can file a protest challenging the decision. There are two paths to take when filing a protest – a normal protest and one requesting accelerated disposition. Under the first path,2 Customs has two years from the date of filing to rule on the protest and "shall allow or deny such protest in whole or in part" within that timeframe. Under the second path,3 if Customs does not make a decision within 90 days of the filing of a protest, a request for accelerated disposition can be made. If still no decision is made within 30 days of the request, the protest is deemed denied and the U.S. importer can then try to seek its desired remedy in the U.S. Court of International Trade. Under either path, it is a final decision by Customs that allows the U.S. importer to get into court; without a final decision, the U.S. importer remains in legal limbo.
With regard to Hitachi, the company imported plasma flat panel televisions through the port of Otay Mesa and claimed that the televisions qualified for duty-free treatment under NAFTA. Customs disagreed and Hitachi filed a protest with the agency challenging its initial decision. Two years passed and Customs did not rule on Hitachi's protest.
Hitachi then commenced an action in court, claiming that because the two years had passed, Customs had failed to meets its statutory deadline and the protest should be deemed denied by operation of law. If true, that would give the court jurisdiction to rule on the substantive issues raised. The U.S. government disagreed and argued that the court did not have jurisdiction to decide on Hitachi's claim because a final decision was still pending from the agency.
The court agreed with the government. Specifically, the court stated that even though the statute uses the word "shall," it is more directory than mandatory because the statute fails to also provide for adverse consequences when action is not taken within a specified timeframe.4 In other words, in the court's view, without a request for accelerated disposition, Customs can sit on a protest for eternity and still be considered to be abiding by its statutory obligations. In support of its position, the court cites to the legislative history of the statute and the specific removal of a "deemed denied" provision by the Senate Committee on the Judiciary. According to the court, the Senate specifically addressed any concern of administrative delay beyond the two year period by also including section 1515(b) and the option of requesting accelerated disposition. However, this begs the question that if the legislative intent is clear, then what is the purpose of including "shall" language in section 1515(a) or even section 1515(a) at all? In the court's view, Hitachi should have just waited for a decision by Customs or, alternatively, requested accelerated disposition on its protest. Meanwhile, Hitachi must continue to do business, despite not having any certainty as to how to treat its products. If NAFTA treatment is indeed appropriate (or even believed to be so), Hitachi must continue to protest every entry it makes in order to preserve its legal rights. As one can imagine, given the popularity of plasma televisions in 2010, the amount of entries and protests involved can be quite numerous, with no finality in sight. For those wondering, Hitachi filed its protest in 2005.
The Reality Of What U.S. Importers Need To Do
As a result of the court's decision, U.S. importers are now faced with two options - proceed along the normal route when submitting a protest and wait as long as it takes to get a response from Customs, or request accelerated disposition for every protest to guarantee finality (if not an answer) within a statutory timeframe. What responsible importer would ever consider the first option? Regardless, the practical reality is that U.S. importers are disadvantaged either way as both options result in additional time delays. With the first option, it is no longer certain when Customs will respond as the two-year timeframe can be ignored, and with the second option, most protests now will be "deemed denied" as Customs will be unable to sufficiently rule on all the protests in the system within the 30-day timeframe. As a result, an additional burden will also be placed on the court as these "deemed denied" protests under section 1515(b) will now need to be ultimately decided by the courts, even for those matters where Customs would have ruled in the importer's favor had it been given the two years to do so. One can envision an increase in voluntary remands to Customs when it realizes that mistakes get made and indeed the decision at the port was incorrect, but no one had the time to realize it until the issue went to court. Finally, the U.S. importer is further disadvantaged because it will have to incur additional costs to go through a legal proceeding to get an answer from the court. And there is no statutory deadline by which the court must decide either. All the while, the uncertainty as to the issue continues.
Going Forward
Hitachi filed an appeal to the U.S. Court of Appeals for the Federal Circuit. The court may yet further comment on the meaning of "shall" and provide some guidance as to U.S. importers should do. Stay tuned.
Footnotes
1. Hitachi Home Elec. (America), Inc. v. United States, No. 09-00191 (Ct. Int'l Trade Apr. 30, 2010).
2. 19 U.S.C. § 1515(a) (2006).
3. 19 U.S.C. § 1515(b) (2006).
4. Hitachi, No. 09-00191, slip op. at 8.
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