Chances 'Slim' of Supreme Court Hearing on Hitachi CBP Protest Case; Momentum Building for Legislative Solution

Chances are slim that the Hitachi case on time limits for CBP protests will be taken up by the Supreme Court, say industry lawyers, and that is feeding a growing push for a legislative solution. In its decision, the Court of Appeals for the Federal Circuit said the statutory two-year period for CBP to decide protests isn’t binding. But the remedy CAFC said is available to importers, accelerated disposition, could hurt smaller importers without the resources to challenge a deemed denial in court, industry lawyers said. Furthermore, CBP itself could face adverse consequences as more importers file for accelerated disposition. As a result, industry groups and customs brokers have begun pushing for amendments to the statute that would hold CBP to a time limit.

In its October 2011 Hitachi opinion, CAFC ruled that the 2-year time limit for CBP protests is not mandatory. In other words, CBP is not required by law to decide a protest within a given period of time, even though the statute at 19 USC 1515(a) says it “shall” allow or deny protests “within two years” from the protest filing date. Hitachi argued that reaching no decision within two years results in a protest being automatically “deemed allowed.” But CAFC, as well as the Court of International Trade, said Section 1515(a) doesn’t impose a consequence for CBP’s failure to act within two years, which means it doesn’t have to, in accordance with prior precedent.

According to a dissent from the Hitachi ruling, CBP went beyond the two-year statutory period in 3,132 out of 32,908 protests in 2009, or about 8.9 percent of all protests.

Chances for Supreme Court Hearing of Hitachi Ruling ‘Slim’

Hitachi filed its appeal to the Supreme Court on July 30. But chances are slim that the Supreme Court will hear the case, said an industry lawyer familiar with the case. The Supreme Court refuses to hear the vast majority of cases that it's asked to review. In this case, because CAFC is the only court with jurisdiction over this type of question, “the Supreme Court could take the position that Hitachi has been decided by CAFC and doesn’t cause a continuing problem in other courts”, he said.

The Hitachi case stands a chance, albeit a small one, for a Supreme Court hearing because it’s a question of interpreting a statute that Congress enacted, said Susan Kohn Ross of Mitchell Siblerberg. But the Supreme Court is only taking about 60 to 80 cases per year, she said, “and that’s down dramatically from even ten years ago.” The Supreme Court says it receives about 10,000 petitions per year. The Justice Department is expected to seek a month-long extension to its Aug. 31 deadline to respond to Hitachi's filing.

Norman G. Jensen Ruling Mirrored Earlier Hitachi Decision

CAFC relied on logic similar to Hitachi in its Aug. 10 dismissal of the Norman G. Jensen v. U.S. appeal. Norman G. Jensen, a customs broker, had requested a writ of mandamus to compel CBP to decide its protest. “Rather than argue that failure to rule within two years is a deemed allowance or a deemed denial, we thought the statute was clear on its face: Customs shall grant or deny in whole or in part within two years,” said Joel Junker of Joel R. Junker and Associates, counsel for Norman G. Jensen. Junker said he wasn’t as confident in Hitachi’s interpretation of the law that no decision results in a deemed approval of the protest. Instead, he said, if there are no consequences for CBP’s failure to act, then there is no choice but to seek to compel a decision. “We hoped they were right, but we thought the more likely successful remedy would be a mandamus,” Junker said.

CAFC found the distinction irrelevant. “We did not hold in Hitachi that the plaintiff’s suit failed because it sought the incorrect remedy for Customs’ failure to render a decision; rather, we held the plaintiff’s suit failed because Congress had not provided a statement of any consequence in the event that Customs does not act,” it said in its Aug. 10 opinion.

The Hitachi and Norman G. Jensen rulings are creating harmful uncertainty for the business community, said Gordon Jensen, president of Norman G. Jensen. “If it’s a gray area, the tie should go to the runner," said Jensen. "If it’s not clear whether the protest should be granted or not, grant it. Do you want to promote business, or do you want to shut it down?”

Accelerated Disposition not an Option for Smaller Importers

CAFC said in both its Hitachi and Norman G. Jensen rulings that importers have a remedy because they can file for accelerated disposition of their protests. An accelerated disposition requires CBP to rule on a protest within 30 days of its filing. If CBP doesn’t act, the result is an automatic “deemed denial,” which can then be challenged at CIT.

But requests for accelerated disposition often result in denial of the protests. “My experience has always been that if you go the accelerated route then the protests are just denied," said Damon Pike of The Pike Law Firm, co-chair of the American Bar Association International Law Section's Customs Law Committee. “Nobody wants that, because then you have to go to court, so everyone’s preference is to try and resolve the issue with the agency,” he said.

Another issue is that accelerated disposition may harm smaller importers. Larger companies might have the resources to go to court and fight the denial, but smaller companies may not, Pike said. So accelerated dispositions only have value for companies that have the money to go to federal court. Smaller companies may be tempted to keep waiting for CBP to decide its protests in the hopes that longer consideration by CBP results in approval, said Neil Mooney of The Mooney Law Firm. “The only recourse after denial is court, so only those who can afford another year of legal expenses can use this option,” he said.

Hitachi Could Reduce CBP Discretion in Protest Cases

The Hitachi ruling could also have unintended consequences for CBP. Because the statute does not compel CBP to decide protests in a given time period, accelerated dispositions are the only way to force CBP decisions. Importers may file accelerated dispositions more frequently, knowing that the action will result in either approval of the protest, or deemed denial and the ability to challenge CBP in court.

But CBP will not be entitled to its normal level of deference in challenges of deemed denials, said Ross. According to the legal concept of Chevron deference, if an agency has issued a reasoned and well thought-out opinion, the court will give the agency a good deal of deference, making it more difficult for a petitioner, such as an importer, to overturn that decision, she said. Because deemed denials do not require agency action, there would be no reasoning upon which CBP can base a Chevron defense. Every lawyer is going to suggest giving CBP six months to decide a protest, then filing for accelerated disposition and going to court after the presumed deemed denial, she said. CBP will not only be unable to use a Chevron defense, “but now they’re going to have to find a legal justification for what they’ve done,” said Ross. “Customs may have just shot themselves in the foot by taking the position they did,” Ross said.

Momentum Building for a Legislative Solution

Various legal associations and customs brokers are now pursuing a legislative solution to the problems posed by the Hitachi rulings, said Joel Junker. “Now that we have no remedy to the courts, and Customs and the courts have said that shall does not mean shall in 1515(a), we’re looking at going back and having an amendment introduced,” he said.

According to Junker, the amendment would create a consequence for failure to CBP to decide protests within the two-year period. Specifically, failure to decide protests would result in deemed allowance. Junker has already submitted a draft amendment to an unnamed member of Congress.

The American Bar Association International Law Section is monitoring the effort as well. Damon Pike, co-chair of the policy working group of the ABA International Law Section's Customs Law Committee, said the group has discussed Hitachi, but is waiting to see what the Supreme Court decides.

Meanwhile, the American Association of Exporters and Importers (AAEI) recently added a proposal to amend 1515(a) to a broader legislative proposal that would include reform of CBP prior disclosure and extension of CIT jurisdiction to include export cases, said Susan Kohn Ross, who serves on AAEI’s Industry Leadership Council. “You’ve got a number of people that are following this closely, and that are working with individual legislators that are thought to be sympathetic or supportive,” she said.

A legislative change would likely be part of a Customs Reauthorization, which, despite a House Ways and Means Committee hearing on the issue and several mentions of moving on such a bill during a Senate Finance Committee markup this summer, has yet to be introduced. Exactly when such legislation would move and whether the House and Senate Committees with jurisdiction are interested in dealing with the problems raised by the Hitachi rulings remains a big question, said an industry lobbyist. The House Ways and Means Committee and the Senate Customs Subcommittee didn't comment on the issue. -- Brian Feito, Tim Warren

(See ITT's Online Archives 12081606 for summary of the Hitachi Supreme Court filing and previous court decisions on the issue.)