Agreements Conceding Classification Cases Not Always Binding on Future Entries, Says CBP

Agreements conceding victory to importers in classification court cases do not necessarily bind CBP when liquidating future entries of the same merchandise, said the agency in a recent ruling. In ruling HQ H236655 (here), CBP told Bioriginal Food & Science Corp. that, despite a stipulated judgment that settled a classification case in Bioriginal’s favor in 2009, the agency is free to continue to classify subsequent entries of the importer’s evening primrose oil capsules in the heading that Bioriginal had originally challenged.

CBP filed the stipulated judgment with the Court of International Trade in 2009, ending four lawsuits by agreeing to classify Bioriginal’s evening primrose oil as food preparations under heading 2106. CBP had originally classified it as vegetable oil under heading 1515, rendering the merchandise ineligible for NAFTA duty free treatment, and had in 2001 issued a ruling to that effect. An email to Bioriginal’s lawyer from the Department of Justice appeared to confirm the CBP’s change in direction, listing 17 products, including primrose oil, that were covered by the settlement.

However, in 2011, CBP headquarters issued ”field guidance” telling the ports to continue to follow the 2001 ruling and classify Bioriginal’s primrose oil capsules under heading 1515. CBP port personnel then liquidated subsequent entries of Bioriginal’s primrose oil under that heading. Bioriginal protested, and upon denial filed an application for further review by CBP headquarters.

CBP held that the stipulated judgment only applied to the entries that were the subject of the four court cases, and did not apply to future entries. First, the stipulated judgment did not refer to primrose oil in general, but rather to the encapsulated products “subject to this action.” According to CBP, the stipulated judgment was like a contract, and contracts are not applicable beyond the express terms of the agreement. Second, although the DOJ email appeared to apply the agreement to all entries of primrose oil, the email was not mentioned in the stipulated judgment signed by CBP and Bioriginal.

Bioriginal argued that CBP should have followed its 19 USC 1625 notice and comment procedures because it was modifying the scope of a court ruling when it decided not to follow its stipulated judgment. But CBP said the notice and comment procedures only apply to court decisions that set precedent, which, as a contract, the stipulated judgment was not.