CAFC Affirms Award of Fees and Costs to Importer of White Sauce in Case on Improperly Revoked Ruling

The U.S. Court of Appeals for the Federal Circuit on Dec. 15 affirmed a lower court ruling ordering the government to cover attorney’s fees and costs paid by International Custom Products in one of several contentious cases involving a CBP ruling letter improperly revoked without notice and comment (here). The decision likely brings to a close a series of cases dating back to 2005 on a CBP notice of action reclassifying ICP’s white sauce (see 06030725), which led to a 2,400% duty increase and put the company out of business (see 12121239).

The Federal Circuit agreed with a Court of International Trade decision issued in June 2015 that the notice of action was not “substantially justified,” which is the legal standard courts must follow when deciding whether to award fees and costs (see 1506250021). The Federal Circuit had ruled in 2014 that the notice of action improperly revoked the ruling letter (see 14041501), and CBP subsequently reliquidated most of the 99 entries effected at the lower rate. CAFC denied ICP’s bid on the remaining 13 entries, finding the duty payment requirement for court challenges to denied protests is constitutional (see 1506300073).

The government had argued it was unsettled whether a notice of action is an “interpretive ruling or decision” that requires notice and comment. But as noted by CIT, CBP officials had themselves questioned whether notice and comment was required to contradict the earlier ruling letter. “Customs was aware that notice and comment was required but, despite the legal ramifications, deliberately decided to forego it,” CAFC said. “Therefore, the CIT was well within its discretion to make this finding.”

ICP will receive $774,774.92 to cover its fees and costs in the case. Absent an appeal to the Supreme Court, the decision ends the last of a series of cases challenging the notice of action. ICP’s lawyer, Greg Teufel of OGC Law, doesn’t expect an appeal. The Justice Department didn’t comment. One remaining case on white sauce remains on the docket, Teufel said. ICP is challenging the formal revocation of the ruling and seeking reinstatement of the ruling. If it wins the case, which is currently in the discovery phase, “ICP would then be free to resume importation of its white sauce under the sauces heading,” Teufel said.

(International Custom Products, Inc. v. U.S., CAFC # 2016-1024, dated 12/15/16, Judges Reyna, Linn, Wallach)

(Attorneys: Greg Teufel of OGC Law for plaintiff-appellee International Custom Products, Inc.; Claudia Burke for defendant-appellant U.S. government)