Introduction
Several tribunals and courts were established at various periods of America's history to resolve trade-related litigation, both at the trial and appellate levels, and even the Supreme Court has played a significant role in these disputes. The jurisdiction and structure of these courts evolved as the complexities and volume of trade disputes grew. In this article we trace this judicial evolution—with a particular focus on the effect on tariff classification litigation—by examining how Congress has legislatively shaped the trade courts. This examination relies heavily on the commentary found in selected court opinions. Some of the cases we examine have established classification precedents still relied upon by our courts and the government, even though they resolved pre-HTSUS disputes, and we review other cases that are educational for their historical perspectives. It makes little sense to paraphrase an opinion when a court's own words speak far more eloquently, so extensive excerpts from opinions (and a few in their entirety) are provided when they aid in understanding exactly what a judge or justice was thinking.1 And while this article's caselaw review gives particular emphasis to the many tariff-related decisions issued over the years by the federal courts, including the U.S. Supreme Court, we necessarily also look at a handful of cases (such as Skidmore v. Swift2) that did not decide a customs or tariff issue but nonetheless have influence in the customs arena. Reading court cases can often seem intimidating—they can be dense, jargon-filled, and interrupted by midsentence citations that frustrate comprehension (and nineteenth-century syntax can be particularly challenging), but anyone who carefully reads these cases should have no problem making sense of them.3
A reader may wonder what relevance this article offers a trade compliance professional tasked with classifying his or her company's products under the Harmonized Tariff Schedule of the United States (HTSUS).4 Our response, based on four decades of experience and anecdotal observation, is that few classifiers pay proper attention to the courts' classification precedents, even though their classification decisions would be significantly enhanced by not only understanding and applying the principles handed down by the courts, but by also understanding how the federal courts work when a dispute arises.5
Administrative remedies
Importers must use reasonable care to ensure that the goods they import are correctly classified under the HTSUS.6 And yet, even though an importer takes reasonable care when classifying an imported item, disagreement over the classification may arise between the importer and CBP.7 Most of these disagreements are resolved administratively. The lowest rung on the dispute ladder is a rejected entry, which is the most common and least controversial action taken by CBP.8 Rejection can occur for several reasons, ranging from simple clerical errors to fatally unresolvable facts, such as an admissibility restriction. Classification is typically not a reason for rejection unless the classification error is obvious (such as classifying auto parts as tomatoes) or an HTSUS-dependent requirement is implicated (such as a tariff-rate quota). Most rejections are resolved simply by the resubmission of the entry with the appropriate corrections or clarifications. CBP usually accepts the resubmitted entry and that's the end of the story: entry accepted, goods released, duty paid. But sometimes that isn't the end of the story. Post-entry disputes, which often involve classification, occur in several ways. CBP may issue a formal "Request for Information" (CF-28) to obtain more information about any aspect of the entry. The importer's response may satisfy CBP's curiosity, resulting in the entry's liquidation as entered, or the response may cause CBP to issue a "proposed" or "taken" Notice of Action (CF-29) that changes the entry. The importer can dispute a proposed CF-29, but a taken CF-29 will result in liquidation based on CBP's findings on the CF-29. An importer who disagrees with CBP's liquidation of one or more entries can file a protest (CF-19), which is the importer's final administrative option for resolving a disputed entry.9 Most importers who are on the losing end of a protest will resignedly accept CBP's decision and move on.10 But if a denied protest is significantly injurious to an importer—whether the concern is solely about the monies paid against the protested entry or it's about the setting of a precedent for future imports—then the importer may decide to climb to the top rung of the dispute resolution ladder, which is civil litigation at the U.S. Court of International Trade, a federal court created specifically for certain trade disputes.11 The decision to litigate is reached infrequently when compared against the volume of protests denied by CBP.
That's how most import disputes are resolved today, but we now invite you to take a journey in our time machine to an era when judicial resolution in a specialized trade court was not an option. Over the past two and a half centuries our federal and state (yes, state!) courts and tribunals have issued thousands of customs-related decisions. Indeed, customs disputes before 1833 were often heard by state courts, where it was generally easier for an importer to seek a common law remedy against customs collectors. Congress had restricted this practice in 1815 with a "removal" statute that, as explained by the Supreme Court in 1969 in Willingham v. Morgan,12 allowed a case to be transferred to a federal court:
The first such removal provision was included in an 1815 customs statute [as] part of an attempt to enforce an embargo on trade with England over the opposition of the New England States, where the War of 1812 was quite unpopular. It allowed federal officials involved in the enforcement of the customs statute to remove to the federal courts any suit or prosecution commenced because of any act done "under color" of the statute. Obviously, the removal provision was an attempt to protect federal officers from interference by hostile state courts. This provision was not, however, permanent; it was by its terms to expire at the end of the war.
Willingham further explained that Congress granted the federal courts permanent jurisdiction over customs-related litigation under the Force Bill of 1833,13 "which allowed removal of all suits or prosecutions for acts done under the customs laws." The Force Bill was a direct rebuke of South Carolina's attempt in 1832 to nullify as unconstitutional the federal government's right to assert tariff jurisdiction over imports entering South Carolina.14
While the lower federal courts became the primary forums for customs cases from 1833 onward, many of these cases regularly made their way to the Supreme Court over the next seventy-five years. Indeed, the Supreme Court routinely tackled unremarkable appeals, including numerous tariff-related disputes, that would never—could never—be submitted to today's Court for consideration. Lawsuits over import disputes became so plentiful in the late nineteenth and early twentieth centuries that Congress found it necessary to establish trial and appellate courts specifically dedicated to customs-related litigation. Hence Congress changed the structure of the federal courts with the Customs Administrative Act of 1890, which established the Board of General Appraisers (discussed in greater detail later), followed by the Judiciary Act of 1891, which created the circuit courts of appeal that added an additional level of appellate review, resulting in fewer customs cases refereed by the Supreme Court.15
The next major change came with the Payne–Aldrich Tariff Act of 1909, which again significantly transformed the judicial landscape for customs-related litigation—including a controversial but short-lived limit on the Supreme Court's jurisdiction over customs cases (which we discuss infra).16 The subsequent reduction in caseload was further encouraged, in 1925, by the judicial reform efforts of Chief Justice William Howard Taft.17 Shortly after joining the Supreme Court in 1921, Chief Justice Taft sought to reform the process that brought cases of all varieties before the Court. It was clear to him that the Court's caseload was far too heavy, fundamentally because the scope of its jurisdiction was too broad to keep pace with an increasing volume of litigation. Taft, with the tenacious advocacy of Justice Willis Van Devanter, persuaded Congress to tackle the issue of court reform. In his testimony before the House Judiciary Committee in December of 1924, Justice Van Devanter noted that "more than two-thirds of the cases which come under our obligatory jurisdiction ... result in judgments of affirmance by our court, and also a goodly number are ultimately dismissed for want of prosecution."18 He said that the Court's current caseload "illustrates that the present statutes are too liberal—that they permit cases to come to us as of right with no benefit to the litigants or the public."19
As reported in the Harvard Law Review, Congress evidently agreed with Taft and Van Devanter, passing legislation—the Judiciary Act of 1925—that profoundly reduced the scope of the Court's jurisdiction.20 Because of this new law—which broadly eliminated the right of a party to be heard before the Court and which instead expanded the "writ of certiorari" process under which parties had to petition the Court for its attention—the Court could be even more selective about the cases it heard.21 Thus the Supreme Court subsequently has decided many fewer trade-related disputes.
But we're getting ahead of ourselves. Before we review how import-related litigation fits within the current structure of our federal courts, let's paint a little more detail into the historical judicial backdrop against which tariff disputes have been resolved in the courts over the course of our country's existence.
Customs disputes in the nineteenth century
For roughly its first hundred years, CBP employed "collectors" who were responsible for assessing and collecting import duties.22 A collector was entrusted, particularly in the earliest years, with considerable autonomy regarding the safekeeping of the duties he (it was always a "he") collected on behalf of the government. But this autonomy was a double-edged sword because of the ever-present temptation to embezzle and the personal liability that collectors faced in tariff disputes, even if all collected duties and taxes at issue had been dutifully deposited into the federal treasury. Administrative avenues for protest during much of the 1800s were limited.23 Yet while an importer in those years who wished to contest a duty assessment couldn't, unlike today, sue CBP in the Court of International Trade (after exhausting all administrative options), it wasn't without judicial recourse in a tariff dispute: it could sue the collector personally in a federal circuit court (or a state court until 1833) in "the district in which the matter arose."24 As a hedge against this personal risk, a collector often would not turn over any disputed duties to the Treasury until the disagreement with the importer was resolved. This arrangement was good for neither the collector nor the government.
The Supreme Court issued several important decisions regarding collectors' liability, including Elliot v. Swartwout25 in 1836, a case that upheld the importer's right to sue the collector to recover duties. The Court said "that the collector is personally liable to an action to recover back an excess of duties paid to him as collector under the circumstances [presented], although he may have paid over the money into the Treasury."
In 1878 in Davies v. Arthur,26 the Supreme Court examined the rules that a protesting party must follow:
What is required ... is that the importer, if dissatisfied with the decision of the collector, shall give notice in writing to him on each entry, setting forth therein, distinctly and specifically, the grounds of his objection thereto, which certainly is not different from what is required by the antecedent act. Nor is there any substantial difference in the construction given by the courts to the provision which contains that requirement. Instead of that, both acts referred to make it necessary that the protest shall be in writing, and the requirement is that the importer shall set forth, distinctly and specifically, the grounds of his objections to the payment of the liquidated duty.
Unless the protest is made in writing, and is signed by the claimant within ten days after the ascertainment and liquidation of the duties, setting forth distinctly and specifically the grounds of objection to the payment, no action of the kind against the collector can be maintained to recover back the duties as having been illegally exacted. Nor is it sufficient to object to the payment of any particular duty or amount of duty, and to protest in writing against it; but the claimant must do more, as is evident from the words of the Act of Congress. He must set forth in his protest the grounds upon which he objects, distinctly and specifically, the reason being ... that the words of the act requiring the protest are too emphatic to be overlooked in the construction of the provision.
In 1883, the Supreme Court's decision in Arnson v. Murphy27 also discussed the protest process:
The common-law right of action to recover back money illegally exacted by a collector of customs as duties upon imported merchandise, rested upon the implied promise of the collector to refund money which he had received as the agent of the government, but which the law had not authorized him to exact; which had been unwillingly paid, and which, before payment to his principal, he had been notified he would be required to repay; and involved a corresponding right on his part to withhold from the government, as an indemnity, the fund in dispute. The manifest public inconveniences resulting from this situation induced congress, by the Act of March 3, 1839, ... to alter the relation between these officers and the United States by requiring them peremptorily to pay into the treasury all moneys received by them officially, without regard to claims for erroneous and illegal exactions. It was provided, however, therein, that the secretary of the treasury himself, on being satisfied that, in any case of duties paid under protest, more money had been paid to the collector than the law required, should refund the excess out of the treasury. The legal effect of this enactment, as was held in Cary v. Curtis ... was to take from the claimant all right of action against the collector by removing the ground on which the implied promise rested. Congress, being in session at the time that decision was announced, passed the explanatory Act of February 26, 1845, which, by legislative construction of the Act of 1839, restored to the claimant his right of action against the collector, but required the protest to be made in writing at the time of payment of the duties alleged to have been illegally exacted[.] [citations omitted]
In Auffmordt v. Hedden,28 a customs valuation case decided in 1890, the Court referred to its 1875 decision in Cheatham,29 a non-tariff case involving a disputed internal revenue tax payment, in which revenue disputes were addressed:
All governments, in all times, have found it necessary to adopt stringent measures for the collection of taxes, and to be rigid in the enforcement of them.
These measures are not judicial; nor does the government resort, except in extraordinary cases, to the courts for that purpose. The revenue measures of every civilized government constitute a system which provides for its enforcement by officers commissioned for that purpose. In this country, this system for each State, or for the Federal government, provides safeguards of its own against mistake, injustice, or oppression, in the administration of its revenue laws. Such appeals are allowed to specified tribunals as the law-makers deem expedient. Such remedies, also, for recovering back taxes illegally exacted, as may seem wise, are provided. In these respects the United States have ... enacted a system of corrective justice, as well as a system of taxation, in both its customs and internal revenue branches. That system is intended to be complete. In the customs department it permits appeals from appraisers to other appraisers, and in proper cases to the Secretary of the Treasury; and, if dissatisfied with this highest decision of the executive department of the government, the law permits the party on paying the money required, with a protest embodying the grounds of his objection to the tax, to sue the government through its collector, and test in the courts the validity of the tax.
In a similar case from 1895, Barney v. Rickard,30 Chief Justice Melville Weston Fuller said that "actions against collectors ... depended originally on common-law principles. The money was regarded as paid under duress ... to obtain possession of the merchandise detained by the collector; and the protest evidenced ... that the payment was involuntary, and warned the collector not to pay the money into the treasury."
Barney is particularly interesting because of the Chief Justice Fuller's insightful historical commentary:
By the act of March 2, 1799 ... the collector ... was required to make 'a gross estimate of the amount of the duties on the goods, wares, or merchandise to which the entry of any owner or consignee, his or her factor or agent,' related, to be indorsed [sic] upon such entry, and signed by the officer or officers making the same; 'and the amount of the said estimated duties having been first paid, or secured to be paid, pursuant to the provisions of this act, the said collector shall ... grant a permit to land the goods, wares, and merchandise, whereof entry shall have been so made, and then, and not before, it shall be lawful to land the said goods.' By section 4 of the act of May 28, 1830 ..., a 10-day bond, on delivery, to return the goods on call, was provided for; but this was in addition to payment or security therefor, and intended for further security if the duties overran the estimated amount.
In Elliott v. Swartwout ... the principle was affirmed, which had been established by previous authorities, that money paid to a collector for duties illegally demanded, if paid under compulsion, in order to get possession of the goods, or to prevent their seizure for duties, might be recovered in a common-law action against the collector, provided the payment was made under protest, and with full notice of the intent to sue, so that the officer might protect himself by retaining the money in his possession, but that a payment voluntarily made, without such protest, could not be recovered back. Because of the embarrassments which ensued in consequence of the large amount of duties withheld from the public treasury by Swartwout, the defendant in that case, a section was inserted in the civil and diplomatic appropriation bill of March 3, 1839 ..., which read as follows: 'That from and after the passage of this act, all money paid to any collector of the customs, or to any person acting as such, for unascertained duties or for duties paid under protest against the rate or amount of duties charged, shall be placed to the credit of the treasurer of the United States, kept and disposed of as all other money paid for duties is required by law, or by regulation of the treasury department, to be placed to the credit of said treasurer, kept and disposed of; and shall not be held by the said collector, or person acting as such, to await any ascertainment of duties, or the result of any litigation in relation to the rate or amount of duty legally chargeable and collectible in any case where money is so paid; but whenever it shall be shown to the satisfaction of the secretary of the treasury, that in any case of unascertained duties or duties paid under protest more money has been paid to the collector or person acting as such than the law requires should have been paid, it shall be his duty to draw his warrant upon the treasurer in favor of the person or persons entitled to the overpayment, directing the said treasurer to refund the same out of any money in the treasury not otherwise appropriated.' By the act of August 30, 1842 ..., the duties were required to be paid in cash.
At January term, 1845, it was held by this court, in Cary v. Curtis, ... that the second section of the act of 1839 took away the importer's right of action. The argument was that as thereby the collector was required to pay moneys collected into the treasury, without regard to protests filed, or without awaiting the result of suits brought, he was converted 'into the mere bearer of those sums to the treasury of the United States, through the presiding officer of which department they were to be disposed of in conformity to the law.' ...
Thereupon the act of February 26, 1845 ..., was passed, which provided: 'That nothing contained in [said section] shall take away, or be construed to take away or impair, the right of any person or persons who have paid or shall hereafter pay money, as and for duties, under protest, to any collector of the customs, or other person acting as such, in order to obtain goods, wares, or merchandise, imported by him or them, or on his or their account, which duties are not authorized or payable in part or in whole by law, to maintain any action at law against such collector, or other person acting as such, to ascertain and try the legality and validity of such demand and payment of duties, and to have a right to a trial by jury, touching the same, according to the due course of law. Nor shall anything contained in the second section of the act aforesaid be construed to authorize the secretary of the treasury to refund any duties paid under protest; nor shall any action be maintained against any collector, to recover the amount of duties so paid under protest, unless the said protest was made in writing, and signed by the claimant, at or before the payment of said duties, setting forth distinctly and specifically the grounds of objection to the payment thereof.'
Thus the common-law right of action was restored, but the protest was required to be in writing, and not oral, as before allowed. ...
The act of March 3, 1857, provided for notice of dissatisfaction within 10 days after entry, but that act only applied to cases where the question was whether the goods were or were not subject to duty at all. The act of June 30, 1864, gave 10 days after liquidation for such notice.
By the act of August 6, 1846 ... the right to secure the duties was restored, in case of entries for warehousing, by giving bond in double the amount of the duties as estimated; and in Tremlett v. Adams ... Mr. Chief Justice Taney made these observations in respect of that act: 'Previous to the passage of this act, no goods chargeable with cash duties could be landed at the port of delivery until the duties were paid at the port of entry: ... The permit could not be granted unless the duties had been paid. ... The importer himself had no right to land them, even at port of entry, before the duties were paid. But when the entry at the customhouse was imperfect, for want of the proper documents, or where the goods were damaged in the voyage, and the duties could not be immediately ascertained, or the cash duties were not paid after the forms of entry had been complied with—in all of these cases the collector was directed, by existing laws, to take possession of such goods, and place them in public stores, and retain them until the duties were paid.'
As we have said, the act of 1799 provided that on entry the duties should be 'first paid, or secured to be paid.' The act of August 30, 1842, required, however, that 'the duties on all imported goods, wares, or merchandise, shall be paid in cash,' or otherwise the goods should be stored and sold. The act of August 6, 1846, amended the act of 1842, and while preserving the provision that the duties should be paid in cash, and that goods upon which the duties were not paid should be deposited in public store, and sold by the collector, established also the system of entries for warehousing, by which the duties, instead of being paid, could be secured by bond, with sureties in double their amount, in such form as the secretary of the treasury should prescribe. None of the statutes provided for a deposit. Either the estimated duty must be paid in cash, or a warehouse bond must be given. Otherwise, the goods could not be entered, but would be put in the public store by the collector, as unclaimed. [citations omitted]
As the Arnson and Barney decisions tell us, legislation in 1839 abolished common-law suits by importers against collectors. It effectively transferred from individual collectors to the Department of Treasury all custodial responsibilities for collected monies, and it obligated the collector to seek a refund from Treasury on behalf of an importer who had executed a valid written protest.31 Hence a collector was no longer the immediate target of tariff litigation. But this reform was short-lived, as the pre-1839 system was restored by Congress in 1845,32 and was subsequently reinforced at mid-century with the Supreme Court's decision in Greely v. Thompson.33 Holding a collector personally liable became a statutory rather than a common-law practice, and this practice continued (as we'll see in several of the cases discussed infra) almost until the end of the nineteenth century when collector liability was permanently repealed by the Customs Administrative Act of 1890.34 This law gave an unhappy importer who had submitted a written, but unsuccessful, protest the option to appeal first to a Treasury Department tribunal, then to an appropriate federal district court, then to a circuit court of appeals (after March 3, 1891), and ultimately to the Supreme Court.35
The Board of General Appraisers (1890–1926)
The Customs Administrative Act of 1890 also addressed a problem that went hand-in-hand with a growing industrial economy: increased litigation. Customs disputes became more plentiful and complex toward the end of the 1800s, an inevitable consequence of America's advances in manufacturing sophistication during the Industrial Revolution. Disputes were inherently more likely over the nature, origin, and valuation of newfangled manufactured goods (and the myriad raw materials, intermediate goods, and equipment that supported manufacturing) than over the characteristics of agricultural products. And with each successive tariff act, the regulatory bureaucracy that administered imports—including, of course, tariff classification—became incrementally more complex, which inevitably created more disagreements between the government and importers. So to alleviate the judicial bottlenecks caused by the increase in customs-related litigation (most pressingly in New York, which was by far the largest port of entry) and to fix the growing problem of inconsistent and often contradictory decisions made by federal judges (and juries) scattered around the country who lacked specialized expertise in customs-related matters, Congress removed customs cases from the original jurisdiction of federal district courts by creating a nonjury administrative tribunal within the Treasury Department called the Board of General Appraisers (BGA).36 With a jurisdictional mandate limited solely to customs-related disputes, the nine-member BGA is a direct forerunner of today's Court of International Trade (which we discuss infra).
Shortly after its creation, the BGA ruled against an importer of textiles in a case that reached beyond a mere tariff dispute. The importer claimed that the duties assessed against its worsted fabric were improper because the law in which the duty rate was enumerated had been illegally enacted by Congress. Under the rules of the House of Representatives, the passage of legislation required a quorum of at least half of the House members. The importer claimed that fewer than half of the members voted on the worsted legislation, although it was determined that more than half of the members were physically present in the House chamber at the time of the vote. The BGA's decision that the quorum rule was satisfied was reversed on appeal by the Circuit Court for the Southern District of New York. The government appealed to the Supreme Court, which, in its 1892 opinion in United States v. Ballin,37 reinstated the BGA's decision and established a precedent for the constitutional right of Congress to establish its own procedural rules:
Summing up this matter, this law is found in the Secretary of State's office, properly authenticated. If we appeal to the journal of the house, we find that a majority of its members were present when the bill passed, a majority creating by the Constitution a quorum, with authority to act upon any measure; that the presence of that quorum was determined in accordance with a valid rule theretofore adopted by the house; and that of that quorum a majority voted in favor of the bill. It therefore legally passed the house, and the law as found in the office of the Secretary of State is beyond challenge.
With reference to the other question: The opinion of the Circuit Court seemed to be, that the Act cast upon the Secretary of the Treasury a special duty of classification in all cases of the importation of worsted cloths, and that unless he so acted in any particular case the duty remained as it was prior to the passage of the act. We quote its language: "This act, however, proceeds upon an entirely novel theory. It provides expressly for a classification in direct non-conformity to the facts. It authorizes an officer of the government who may find an import to be in fact an article which under the tariff laws pays one rate of duty to call it something else, which it is not, in order to enable the revenue officers to levy upon it a rate of duty which that other article, which it is not, pays.... I do not mean by that to suggest for one moment that under the phraseology of this act it is the duty of the Secretary of the Treasury to himself examine the packages of goods, to handle or see their contents; but, having been informed and advised as to the facts in the same way in which he is informed and advised upon any facts upon which he is required to pass, by the examination and report of such trustworthy subordinates as he may select, the final classification of the particular articles is one to be made by him."
We do not so construe the Act. We understand it rather as a declaration by Congress as to the construction to be placed upon that portion of the act of 1883 which refers to imported woollen cloths. It was an act suggested by the contest then pending in the courts, and which was finally decided adversely to the government in the case of Seeberger v. Cahn, ... in which it was held by this court that "cloths popularly known as 'diagonals,' and known in trade as 'worsteds,' and composed mainly of worsted, but with a small proportion of shoddy and of cotton, are subject to duty as a manufacture of worsted, and not as a manufacture of wool ...." The form of expression used in the Act may be novel, but the intent of Congress is quite clear. Recognizing the fact that the Secretary of the Treasury is the head of the financial department of the government, that to him, as its chief administrative official, is given the supervision of the tariff and all the collections thereunder, it directs him to classify all worsted cloths as woollen cloths, and it gives to him no discretion. He may not classify some worsteds as woollens and others as not. There is given no choice or selection, but it is the imperative direction of Congress to him, as the chief administrative officer in the collection of duties, to place all worsted cloths, by whatever name properly known or known to the trade, within the category of woollen cloths, and, of course, if placed within that category, or using the familiar language of the tariff, if "classified as woollen cloths," subject to the duty imposed on such cloths. If action were necessary by the Secretary of the Treasury to put this Act into force, which was not as we think, such action was taken by the circular letter of May 13, 1890, from the Treasury Department to all customs officers, publishing the act for the information and guidance of the public.
Our conclusion, therefore, is that the act was legally passed; and that by its own terms, and irrespective of any action by the Secretary of the Treasury, the duties on worsted cloths were to be such as were placed by the act of 1883 on woollen cloths.
The judgment of the Circuit Court will be reversed, and the case remanded for further proceedings, in accordance with this opinion. [citation omitted]
For many years the BGA was criticized for alleged bias because of the control exercised over it by its parent agency, the Treasury Department. The New York Times reported in 1911 on the BGA's predicament:38
Although the Board of General Appraisers was established by the Customs Administrative act of 1890 for the express purpose of adjudicating tariff disputes between the Government and importers, the Treasury Department for many years up to the advent of George B. Cortelyou, as Secretary of the Treasury, regarded the board as a branch of the department. This view of the status of the board was well described by Leslie M. Shaw when he was at the head of the Treasury. The then Secretary termed the board a "bureau" of the Treasury Department.
Mr. Shaw held that, although the Government appears, together with importers, as a litigant before the board, the Secretary had a right to "supervise" the conduct of the tribunal. This claim was denied by the members of the board, as well as importers who desired the board to be wholly untrammeled in the settlement of customs disputes, it being maintained that one of the parties to litigation should not be permitted to dominate or "control" in any way the determination of issues arising under the tariff. As a result of the interference of Secretaries of the Treasury with the work and administration of the board, the customs law has been so amended from time to time in recent years that the board gradually has had added to it practically all of the powers enjoyed by the Circuit Courts of the United States.
The U.S. Customs Court (1926–1980)
To establish an unambiguously independent judicial function, and prompted to a great extent by the failure "to reduce [BGA] litigation by the elimination ... of frivolous and unworthy cases,"39 Congress transformed the BGA in 1926 into a "tribunal" under Article I of the Constitution40 called the U.S. Customs Court (USCC).41 But this didn't change the personnel, as the now-former BGA appraisers simply assumed their new "justice" titles.42 At first the elevation of the BGA to the USCC was little more than a distinction without a difference, as the USCC's authority as a relatively weak Article I tribunal essentially remained consistent with that of the BGA (as it was then defined), and the court continued to reside under Treasury's roof (and presumed influence)—until the difference kicked in when the court was transferred to the Justice Department by a provision in the Smoot–Hawley Tariff Act of 1930.43 The structure and jurisdiction of the USCC was further defined by Congress in 1948.44
It wasn't until 1956 that Congress formally elevated the USCC to the status of an Article III federal court.45 Although this was a significant constitutional upgrade, particularly for the status of the court's judges, it did not functionally change how the court conducted its business. Two laws with similar names—the Customs Court Act of 197046 and the Customs Court Act of 198047 —brought about the most recent substantive changes in the structure and function of the USCC, including sweeping caseload reform under the former act and the latter act's decree of a new (and still current) name for the USCC: the U.S. Court of International Trade (CIT).48 Regarding caseload reform, before the 1970 act "there was no statutory provision for the commencement of an independent action in [the Customs Court]. Instead, the court was simply the automatic recipient of the papers in a dispute commenced on the administrative level."49 As a consequence, the court "had been receiving around 100,000 cases a year on an automatic referral basis from [CBP]", resulting in a docket backlog of 460,777 cases when the 1970 act became law.50
To read this article in full, please click here.
Footnotes
1. For easier reading of case excerpts, we've omitted most internal case citations.
2. Infra note 156.
3. In his concurring opinion in a 2016 appellate case, Judge Richard Posner bemoaned poorly written decisions: "Judicial opinions are littered with stale, opaque, confusing jargon. There is no need for jargon, stale or fresh. Everything judges do can be explained in straightforward language—and should be." United States v. Shontay Dessart, 823 F.3d 395 (7th Cir. 2016).
4. The HTSUS is based upon the international nomenclature called the Harmonized System (HS) administered by the World Customs Organization (WCO). The United States replaced the previous nomenclature (Tariff Schedules of the United States (TSUS)) with the HTSUS on January 1, 1989, almost twenty-six years after the TSUS was introduced. The HTSUS, which is administered by the U.S. International Trade Commission (USITC) and enforced by U.S. Customs and Border Protection (CBP), is statutory law enacted by Congress pursuant to Section 1204 of the Omnibus Trade and Competitiveness Act of 1988, Pub. L. 100–418, Title I, Subtitle B, §§ 1201–1217, 102 Stat. 1147–1163 (August 23, 1988); 19 U.S.C. §§ 3001–3012. Enactment was codified in 19 U.S.C. § 3004. Transition from the TSUS to the HTSUS was authorized by Section 1211, codified in 19 U.S.C. § 3011. Note that "schedule" is singular under the HTSUS but was plural under the TSUS (19 U.S.C. § 3012).
5. In addition to reading court opinions, one can learn from listening to the oral argument recordings of the Court of Appeals for the Federal Circuit (CAFC), found at https://cafc.uscourts.gov/home/oral-argument/listen-to-oral-arguments. The CIT also posts selected recordings of its oral argument sessions, at https://www.cit.uscourts.gov/audio-recordings-select-public-court-proceedings.
6. Infra notes 119 and 120 for reasonable care.
7. For ease of reference, we use the term "CBP" throughout this article to refer to any version of the agency, regardless of chronology or historical context. The U.S. Customs Service was created in 1789 as an agency of the U.S. Treasury Department. In 2003 the agency was moved from Treasury to the newly formed Department of Homeland Security (DHS), and its name was changed to the "Bureau of Customs and Border Protection" (CBP) (Homeland Security Act of 2002, Pub. L. 107–296, 116 Stat. 2135 (November 25, 2002), 6 U.S.C. §§ 101–613). The transfer from Treasury to DHS was a direct result of the terrorist attacks of September 11, 2001, marking a major shift in CBP's mission from a primarily revenue-oriented focus to a blended emphasis on port and border security as well as revenue protection (and front-line enforcement of all import-related laws). The agency's name was further tweaked by DHS on March 31, 2007, when its official moniker became "U.S. Customs and Border Protection" (and still known by the same acronym, CBP) (72 Fed. Reg. 20131 (April 23, 2007)). But it wasn't until the Trade Facilitation and Trade Enforcement Act of 2015, Pub. L. 114–125, 130 Stat. 122, § 802(a), (Feb. 24, 2016), that the agency's name was statutorily established as "U.S. Customs and Border Protection" (6 U.S.C. § 211).
8. The "entry" process is administered under 19 C.F.R. §§141–142. See also 19 U.S.C. § 1484. The term "post-entry" is used here to indicate administrative activities that occur after the entry/entry summary has been formally accepted by CBP.
9. 19 U.S.C. § 1514 and 19 C.F.R. § 174. Note also that an entry may be corrected prior to liquidation through two administrative processes: (1) the Post Summary Correction (PSC) process (76 FR 37136 (June 24, 2011)), which replaced the Post Entry Amendment (PEA) process; and (2) Reconciliation (62 FR 51181 (Sept. 30, 1997)). But neither process is considered an actual dispute between an importer and CBP until or unless liquidation creates a protestable disagreement. Filing a protest is not dependent on whether a CF-28 or CF-29 was issued.
10. Per 19 U.S.C. § 1515(a), a notice of protest denial must "include a statement of the reasons for the denial, as well as a statement informing the protesting party of his right to file a civil action contesting the denial of a protest". This exact language was adopted in 19 C.F.R. § 174.30(a), except that "the" replaced "his".
11. Infra note 74. For non-classification disputes, litigation at the U.S. Court of International Trade may be inappropriate. For example, seizures and FCA-related disputes are litigated in district courts, and certain USMCA-related disputes are adjudicated by a bi-national panel.
12. Willingham v. Morgan, 395 U.S. 402 (1969).
13. An Act further to provide for the collection of duties on imports, 4 Stat. 632 (March 2, 1833). The Force Bill—the name by which it was informally known—gave President Andrew Jackson the authority to take military action against South Carolina to enforce federal tariff laws.
14. The Ordinance of Nullification, which the state legislature of South Carolina enacted in 1832 to nullify the federal government's right to impose tariffs on goods imported into South Carolina, resulted in the Nullification Crisis. Congress responded by passing two bills early in 1833: the Force Bill, id., which put South Carolina on notice that the federal government would, if necessary, use force to protect federal sovereignty over tariffs; and the Compromise Tariff Act of 1833, which ended the crisis. President Jackson signed both bills into law on March 2, 1833.
15. Judiciary Act of 1891, 26 Stat. 826, (March 3, 1891). Also known as the Circuit Courts of Appeals Act or the Evarts Act (after Senator William Evarts of New York, who had previously served as U.S. Secretary of State and then Attorney General).
16. Payne–Aldrich Tariff Act of 1909, 36 Stat. 11 (August 5, 1909).
17. Taft is the only person to serve as both President (1909–1913) and Chief Justice (1921–1930).
18. Jurisdiction of Circuit Courts of Appeals and of the Supreme Court of the United States: Hearing before the Committee on the Judiciary, House of Representatives, on H.R. 8206—December 18, 1924, (Washington DC: U.S. Government Printing Office, 1925), 13.
19. Id.
20. Felix Frankfurter and James M. Landis, The Supreme Court under the Judiciary Act of 1925, Harvard Law Review, Vol. XLII, No. 1 (Nov. 1928), 1. See Judiciary Act of 1925. 43 Stat. 936, 28 U.S.C. §§ 344–350 (February 13, 1925).
21. However, for example, per 28 U.S.C. § 1253, "except as otherwise provided by law, any party may appeal to the Supreme Court from an order granting or denying, after notice and hearing, an interlocutory or permanent injunction in any civil action, suit or proceeding required by any Act of Congress to be heard and determined by a district court of three judges."
22. Act of March 2, 1799, ch. 22, § 21, 1 Stat. 627, 642.
23. See the history of protest statutes recited in United States v. Cherry Hill Textiles, Inc., 112 F.3d 1550 (Fed. Cir. 1997).
24. Roger Foster, A Treatise on Federal Practice, Civil and Criminal, Vol. 1, Sixth Ed. (Chicago: Callaghan & Co., 1920), 396.
25. Elliot v. Swartwout, 10 Pet. 137 (1836).
26. Davies v. Arthur, 96 U.S. 148 (1878).
27. Arnson v. Murphy, 109 U.S. 238 (1883).
28. Auffmordt v. Hedden, 137 U.S. 310 (1890).
29. Cheatham v. United States, 92 U.S. 85 (1875).
30. Barney v. Rickard, 157 U.S. 352 (1895).
31. Act of March 3, 1839, c. 82, (5 Stat. 348).
32. Act of February 26, 1845, ch. 22, (5 Stat. 727). See also: Cary v. Curtis, 44 U.S. 236 (1845).
33. Greely v. Thompson, 10 How. 225 (1851).
34. Customs Administrative Act of 1890, ch. 407, 26 Stat. 141 (June 10, 1890): "[N]o collector or other officer of the customs shall be in any way liable ... for or on account of any rulings or decisions as to the classification of said merchandise or the duties charged thereon, or the collection of any dues, charges, or duties ..." This law was also noteworthy for eliminating a plaintiff's right to a jury trial, seemingly in violation of the Seventh Amendment; this constitutional conflict was addressed much later by the Supreme Court in Atlas Roofing Co. v. Occupational Safety and Health Review Comm'n, 430 U.S. 442 (1977) and, of greater salience here, by the CIT in Washington International Insurance v. United States, 678 F. Supp. 902 (Ct. Intl. Trade 1988) (reversed by Washington International Insurance Co. v. United States, 863 F.2d 877 (Fed. Cir. 1988)). For additional historical perspective, see: United States v. Cherry Hill Textiles, Inc., 112 F.3d 1550 (Fed. Cir. 1997).
35. For example, United States v. Austin Nicholls & Co., 186 U.S. 298 (1902).
36. Supra, Administrative Act, note 34. See also: Giles S. Rich, A Brief History of the United States Court of Customs and Patent Appeals, (Washington DC: U.S. Government Printing Office, for The Committee on the Bicentennial of Independence and the Constitution of the Judicial Conference of the United States, 1980), 6.
37. United States v. Ballin, 144 U.S. 1 (1892).
38. Latest Customs Rulings, The New York Times (February 20, 1911), 12.
39. I. Newton Hoffman, Customs Administration Under the 1913 Tariff Act, Journal of Political Economy (Vol. 22, No. 9, Nov. 1914), 856–857.
40. "The Congress shall have Power To constitute Tribunals inferior to the supreme Court ..." Article I, Section 8, of the U.S. Constitution.
41. Customs Court Act, Pub. L. 69–304, ch. 411, 44 Stat. 669 (May 28, 1926). See also the Administrative Office Act of August 7, 1939, Pub. L. 76–299, 53 Stat. 1223, which severed from the executive branch all judicial administrative functions, and the Act of June 25, 1948, Pub. L. 80–773, 62 Stat. 899, which granted the Customs Court exclusive jurisdiction over customs matters in §§ 1581–1583, 62 Stat. 943.
42. It is notable that the Customs Court Act (id.) specifically designated the members of the court as "justices", a title typically reserved only for the Supreme Court, but this was changed to "judges" by Section 518 of the Smoot–Hawley Tariff Act of 1930.
43. Smoot–Hawley Tariff Act of 1930 (or simply the Tariff Act of 1930, so named when it was published on June 16 in The United States Daily (Vol. V., No. 89, Section II), which was the forerunner of the Federal Register), Pub. L. 71–361, 46 Stat. 590 (June 16, 1930).
44. Act of June 25, 1948, Pub. L. 80–773, §§ 251–255, 1581–1583, 62 Stat. 899. Notably § 251 of this law required that "not more than five [of the nine] judges shall be appointed from the same political party." Also, Congress decided in § 254 that the Customs Court would be segregated into three divisions of three judges each.
45. Act of July 14, 1956, Pub. L. 84–703, ch. 589, 70 Stat. 532. Also, see Article III, Section 1, of the Constitution which begins with: "The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish." A court established under this Article is a full-fledged federal court, rather than a quasi-judicial tribunal created under Article I. An Article I court is commonly known as a "legislated" court, while an Article III court is a "constitutional" court.
46. Customs Court Act of 1970, Pub. L. 91–271, 84 Stat. 274 (June 2, 1970). This statute redefined the jurisdictional scope of the Customs Court and the CCPA, and addressed some administrative issues regarding the import process. See also other statutes that tweaked the judicial process, such as the Customs Procedural Reform and Simplification Act of 1978, Pub. L. 95–410, 92 Stat. 888 (October 3, 1978).
47. Customs Court Act of 1980, Pub. L. 96–417, 94 Stat. 1727 (October 10, 1980). As reported by Jane L. Stafford in Customs Court Reform, Maryland Journal of International Law, Vol. 7, No. 1 (1981), 120, "the goal of [this law] was to improve the consistency of judicial review of actions arising under trade legislation and to thereby ensure proper implementation of trade policy. [It] was an attempt to resolve the problem of overlapping jurisdictional grants to the Customs Court and district courts[.]" The jurisdictional scope of the CIT is more robust than the scope enjoyed by the USCC. CIT Judge Paul Rao noted in United States v. Appendagez, Inc., 560 F. Supp. 50 (Ct. Int'l Trade 1983) that before the CIT's creation "judicial proceedings for the recovery of monetary penalties or for the forfeiture of merchandise under 19 U.S.C. § 1592 were brought by the United States Attorney General in the appropriate United States district court".
48. For an insightful recitation of the history of customs-related jurisdiction in our federal courts, see J.C. Penney Co., Inc., v. United States Treasury Department, 439 F.2d 63 (2nd Cir. 1971).
49. Michelin Tire Corp. v. United States, 469 F. Supp. 270 (Customs Ct. 1979). In its extensive historical recitation, the court also noted: "In 1970 Congress did not simply create a civil action where none had existed before. Among other things, it eliminated the single characteristic of this court which most impeded the recognition of its full independent judicial powers. The 1970 law ended the automatic receipt of administrative disputes [i.e., protests], the most glaring vestige of the entanglement of the court's immediate predecessor [i.e., the BGA] with administrative procedures. Since 1970 it is no longer possible to mistake this court for an appendage of the administrative process."
50. Andrew P. Vance and Joseph I. Liebman, "Customs"—Not a Tradition But a New Era for an Important and Rewarding Area of Law, The Business Lawyer (Vol. 27, No. 1, Nov. 1971), 316.
Check out our new Digital Magazine Get the inside scoop on the Braumiller Law Group & Braumiller Consulting Group "peeps." Expertise in International Trade Compliance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
