Sep 13th, 2023

Say Good-bye To Finality Of Liquidation?

“Finality of liquidation” has long been a core principle of American Customs law.  When an importer files an entry of merchandise, Customs and Border Protection “CBP” has up to one year to “liquidate” that entry, making the final determination as to the classification, value, rate of duty and admissibility of the merchandise.  In some circumstances, Customs can extend the liquidation period to as many as four years.

             Once an entry “liquidates” however, there are only two events which can block the liquidation from becoming final as to both the importer and the Government.  The first is if Customs “reliquidates” the entry within ninety (90) days of the original liquidation.  The other is if the importer protests the liquidation within one hundred eighty (180) days after the liquidation date.

It has long been nearly a tenet of faith that once an entry is liquidated and final nobody can provide any relief.  But a recent decision of the United States Court of International Trade shakes that faith.

            AM/NS Calvert LLC v. United States, Slip Opinion 23-129 (September 6, 2023) involves three consolidated cases brought by firms challenging the Commerce Department’s denial of their applications for product-specific exclusions from Section 232 national security tariffs imposed on steel products.  The three plaintiffs invoked the CIT’s “residual” jurisdiction, 28 U.S.C. § 1581(i) to challenge the denials as having been done in contravention of the requirements of the Administrative Procedure Act.  But over time, the import entries for the plaintiffs’ products had been liquidated and made final.  The Commerce Department agreed to remand the cases to the agency for further consideration – but noted that, even if the agency changed its mind and granted the exclusions, the plaintiffs would not receive any relief because their entries were liquidated and final. The Court, per Judge Miller Baker, was not so sure of that.

The Court noted that, since the plaintiffs were challenging decisions of Commerce, rather than Customs, they had no grounds to protest CBP’s ministerial liquidation of their entries.  Nor did they have any way to enjoin Customs from liquidating the entries.  But this did not render the actions moot, the Court found. Judge Baker held that since the court had had broad remedial powers under the Administrative Procedure Act (APA) it could, if it found an APA violation, set aside final liquidation and order a refund of Section 232 tariffs assessed.  The Court held that it could order such equitable relief, so long as no statute prohibited it.

That leads to the question – does any statute prohibit the Court from granting the relief of setting aside “finally liquidated” entries?  Section 514(a) of the Tariff Act, 19 U.S.C. §1514(a), says that liquidation of an entry is final unless the entry is reliquidated or the liquidation is timely protested. In the past two years, the Court has issued several decisions holding that the statutory finality of liquidation prevents Customs from asserting counterclaims in Customs protest actions.  Why would that finality not attach in the AM/NS Calvert case?

The answer probably lies in the fact that the AM/NS Calvert case is not a “Customs” case, even though Customs assesses the duties in a ministerial manner. The plaintiffs might have tried to bring their cases to court by protesting the liquidation of entries, but were not required to, since the decision being challenged was fundamentally not a “Customs” decision.  So they proceeded under the CIT’s residual jurisdiction grant, charging a violation of the Administrative Procedure Act. While the APA does not provide for the award of money damages, it does allow courts to provide the equitable remedy of “restitution” of funds unlawfully taken as the result of any APA violation.

Ultimately, if the AM/NS Calvert court finds an APA violation, it could award the plaintiffs the equitable restitution of funds collected by Customs – even though the legal remedy of protest is foreclosed. Indeed, the Court could conduct a hearing on the amount of restitution, and award relief without requiring reliquidation of the Customs entries at all.

  A similar situation is currently playing out in HMTX Corp. v. United States, the broad-based APA challenge to the legality of the Section 301 duties appearing in Lists 3 and 4A of the Section 301 retaliation lists. The entries on which the challenged duties were assessed are being liquidated, but in most cases not protested – because the CIT has established that it can provide equitable restitution notwithstanding the “liquidated and final” status of the Customs entries.

Thus, finality of liquidation is truly final when Customs is making the decisions entrusted to it by law. But when Customs is acting at the behest of another agency, liquidation status may not matter. The Calvert court indicated that, if Commerce changed its mind on remand and granted the exclusions, they were to be applied to all of the plaintiffs’ unliquidated duties. held that it had the power to order the reliquidation of entries otherwise finally liquidated.  It remanded the case to Commerce with instructions for the Agency to apply any relief it may grant to the plaintiff’s unliquidated entries of merchandise, and suggested that relief might be available in respect of liquidated and final entries.

Another longstanding rule of Customs law was that all decisions merge in the liquidation of an entry. But the Courts have now pivoted in the direction that only decisions made by Customs itself, and not those for which it is taking direction from another agency, are necessarily subject to protest and the rules regarding protests. In the future, a dismayed importer may have to decide whether reaching for that Customs Form 19 protest is the right move.