Best Key Asks CAFC to Rethink Denial of Review of Allegedly Illegally Revoked CBP Ruling
Recent court decisions by the U.S. Court of Appeals for the Federal Circuit (CAFC) threaten to close off a crucial avenue for judicial review of CBP ruling revocations and modifications, making it hard for importers to rely on rulings and violating Supreme Court precedent, said a lawyer representing Best Key, a Hong Kong manufacturer of yarn, in a Sept. 29 petition for a rehearing of the hearings by the full Federal Circuit. By directing Best Key to challenge classification via a denied protest, instead of allowing Best Key to challenge it under the Administrative Procedure Act, the Federal Circuit is preventing Best Key from challenging the process under which CBP revoked the ruling, John Peterson of Neville Peterson said in the petition. Best Key claims the ruling revocation process was tainted by the improper participation of its competitors.
The long-running case stems from a 2011 CBP ruling that found Best Key’s polyester yarn with metal nanoparticles was classifiable as metalized yarn. Though metalized yarn carries a higher duty rate than polyester yarn, garments made from it can be imported at a much lower duty rate than their polyester counterparts. As a result, CBP’s 2013 decision to revoke the ruling “caused substantial financial damage to Best Key, causing the company to lose unquestioned tens of millions of dollars in business,” the petition said. Best Key sued under the Administrative Procedures Act, alleging that CBP had relied on a falsified laboratory report and that the agency “had conducted an improper, off-the-record ex parte conference with Best Key’s competitors, and allowed those competitors to dictate the ruling.”
When the matter reached the Federal Circuit on appeal, CAFC ruled Best Key couldn’t bring an Administrative Procedures Act case against the ruling at the Court of International Trade because it could still challenge classification as polyester yarn based on the denial of a protest (see 1502030060). CIT had already ruled a challenge of the ruling under 28 USC 1581(h) was unavailable to Best Key because “no case or controversy” existed seeing that the ruling revocation actually caused the merchandise to be dutiable at a lower rate, even if it had bad overall business consequences for Best Key (see 13121317). Then, in August, CAFC ruled against transferring the case to the D.C. Circuit, leaving a denied protest as the only way for Best Key to challenge classification.
That finding means the Federal Circuit is effectively preventing Best Key from challenging the ruling revocation itself, because the Supreme Court has held denied protest cases don’t affect rulings, the petition said. “If the CIT may not review the issuance or revocation of a CBP ruling under the APA, nor may other court accord such review -- which is the substance of the panel decision -- it follows that CBP rulings, of which more than 192,000 are currently recognized by the agency and which have a significant impact on the importers and others, are immune from such oversight,” the petition said. “The Federal Circuit has quietly eliminated the possibility of meaningful judicial review for most of the 190,000 Customs rulings out there, as well as the process by which Customs revokes or amends them,” Peterson told International Trade Today. The decisions are “a serious matter I think the trade should take an interest in.” The Federal Circuit’s decision on whether to rehear the case should come in the next couple of months, he said.
Email ITTNews@warren-news.com for a copy of the petition.