NEW CIT Decision Eliminates "Liberal Reading" of Protests

Liberal treatment of communications with Customs as constituting a “protest” may be a thing of the past, for in Ovan International Limited v. United States, Slip. Op. 15-17 (February 23, 2015), the CIT held that, in order to be considered a valid protest, a document must be labeled as such, and must contain all the information required by the Customs laws and regulations.

At a Georgetown Law School conference last week, Customs Headquarters officials  gleefully embraced the new decision and indicated that they will begin applying it aggressively.

Historically, the courts have ruled that protests do not require detailed precision, but merely need to advise Customs of the nature of the importer’s objection, such that the Customs officer can undertake an inquiry and correct any errors made in liquidation of an entry.

Importers wishing to protest a Customs decision will need to pay special attention to ensure that protests are complete and valid, and should consider using only the Customs and Border Protection (CBP) Form 19 Protest, or its electronic equivalent.

One Entry, One Article, One Claim – What Wasn’t Clear?

Carriage House Motor Cars, the owner of a 1958 Rolls Royce Silver Sea Cloud automobile, exported the vehicle to Europe for sale at an auction.  When the vehicle failed to sell, the company re-imported the vehicle, claiming duty-free entry under Harmonized Tariff Schedule (HTS) subheading 9801.00.25.  After seeking information from the vehicle importer and its broker, Customs on February 22, 2013 liquidated the entry, classifying the car under HTS Subheading 8703.23.00, and assessing duties at the rate of 2.5% ad valorem.  

On April 9, 2013—46 days after liquidation –  Carriage House submitted to Customs an Affidavit of its owner, together with a number of exhibits, clearly contesting the assessment of duty.  When Customs did not respond to this filing (surprise!), the importer filed a protest on CBP form 19, albeit 189 days after liquidation.  This protest was denied as untimely.

Before the CIT, the importer alleged that its April 9, 2013 Affidavit and exhibits should be treated as a “protest”.  In this regard, the importer noted that the Courts have long employed a rule of liberally construing filings as protests, requiring “only that the protest be distinct and specific enough to show that the objection was taken… was at the time of filing the protest in the mind of the importer and sufficient to notify the collector of its true nature and character to the end that he might then ascertain the precise facts and have adequate opportunity to correct mistakes and cure defects”.  [citing United States v. M. Rice & Co., 257 U.S. 536, 539-40 (1922)]. There was one car, one Customs entry, one issue – how could Customs not understand that the duty assessment was being protested?

But the CIT had other ideas. 

Protesting Parties Will be Held to the Rules

The CIT, per Senior Judge R. Kenton Musgrave, held that compliance with the Customs laws and regulations regarding protests was mandatory for a written submission to be treated as a valid protest.

The Court first noted that the governing statute, §514(c)(1)(2006) of the Tariff Act,  requires that a protest must set forth, distinctly and specifically:

(A).  Each decision described in subsection A of this section as to which protest is made;

(B).  Each category of merchandise effected by each decision set forth under paragraph (1);

(C).  The nature of each objection and the reasons therefore; and

(D).  Any other matter required by the secretary by regulation. [emphasis added]

The Court then went on to note the detailed requirements for protests established by Section 174.13(a) of the Customs Regulations, which require among other things, that a protest be captioned as such, provide the name and address of the protesting party, the importer number, the date of entry and liquidation of the entry, the existence of prior protests, and a declaration as to whether the merchandise has been the subject of a drawback claim [regulation reproduced below].

Holding that the requirements of the regulation are mandatory and binding, the Court noted the various failings of the protestant’s “Affidavit and exhibits” when compared to the requirements of the regulations.  It did not matter, the Court said, that the importer’s various discussions and interactions with Customs made it clear that the Customs officials knew what entry was involved, and the nature of the claim.  Setting out a strict new rule, the CIT concluded:

“In the past, the Court could have readily concluded that the . . . Affidavit constituted a valid protest, but at present, in order for it to be a valid protest the . . . Affidavit must have met all of the “straightforward” and “not difficult to satisfy” mandatory and regulatory requirements governing the validity of a protest, which it did not.”

Thus, despite the fact that only one entry, one article of commerce, one importer and one claim was at stake, and the fact that the Affidavit undoubtedly communicated to Customs the nature of the importer’s contention, the Court held that because this filing did not meet all regulatory requirements for protests, it could not be entertained as such.  The Court dismissed the lawsuit for lack of jurisdiction.

The Bottom Line: Use CBP Form 19

The lesson for importers is that the age of raising protests by means of letters, memos, and other submissions that do not meet the formal requirements of the Customs laws and regulations is over.  To have a submission treated as a valid protest, all of the numerous regulatory requirements must be satisfied.  

Customs Form 19, whether in paper form or electronic, contains fields for all of the required information.  If this form is used,  the only possible issues could be the clarity with which the claim is stated.  Trade practitioners should counsel their clients to set creativity aside when challenging decisions and just “use the form”. 

The Regulatory Requirements

The requirements for filing a valid protest are set out in Section 174.13(a) of the Customs Regulations, which provides:

§ 174.13   Contents of protest.

      (a) Contents, in general. A protest shall contain the following information:

(1) The name and address of the protestant, i.e. , the importer of record or consignee, and the name and address of his agent or attorney if signed by one of these;

(2) The importer number of the protestant. If the protestant is represented by an agent having power of attorney, the importer number of the agent shall also be shown;

(3) The number and date of the entry;

(4) The date of liquidation of the entry, or the date of a decision not involving a liquidation or reliquidation;

(5) A specific description of the merchandise affected by the decision as to which protest is made;

(6) The nature of, and justification for the objection set forth distinctly and specifically with respect to each category, payment, claim, decision, or refusal;

(7) The date of receipt and protest number of any protest previously filed that is the subject of a pending application for further review pursuant to subpart C of this part and that is alleged to involve the same merchandise and the same issues, if the protesting party requests disposition in accordance with the action taken on such previously filed protest;

(8) If another party has not filed a timely protest, the surety's protest shall certify that the protest is not being filed collusively to extend another authorized person's time to protest; and

(9) A declaration, to the best of the protestant's knowledge, as to whether the entry is the subject of drawback, or whether the entry has been referenced on a certificate of delivery or certificate of manufacture and delivery so as to enable a party to make such entry the subject of drawback (see §§181.50(b) and 191.81(b) of this chapter).