CIT Nixes Importer's Classification Challenge Over $26 Duty Underpayment

An importer’s lawsuit on CBP’s classification of its purportedly used clothing was dismissed Aug. 21 over its failure to pay just $26 of a total $10,057 duty bill by the time of filing. All duties, taxes and fees must be paid in full before bringing challenges to denied protests, and Dis Vintage’s omission of a small amount of interest charges in its final payment before filing its summons -- it paid the $26 just days later -- means the Court of International Trade has no jurisdiction to hear the case, the court said in its decision.

Dis Vintage had challenged CBP’s classification of its merchandise as knit apparel of man-made fibers in subheading 6110.30.30, dutiable at 32 percent. After initially receiving a duty bill for $9,247.29 in 2013, the importer filed a protest July 18, 2013, seeking classification as duty-free used clothing of subheading 6309.00.00. It sought accelerated disposition on Nov. 16, 2015, and the protest was deemed denied in December 2015 after 30 days passed without a decision from CBP to either grant or deny.

Following the denial of the protest, CBP sent several bills to Dis Vintage, each increasing to reflect the accrual of interest. Around April 4, 2016, CBP mailed Dis Vintage a debt notice, dated April 4, identifying a “Full Amount Due Upon Receipt” of $10,031.01, and an “Amount Due After 4-05-16 (including interest)” of $10,057.08. Dis Vintage received the notice of debt on April 11, 2016, and immediately mailed CBP a check for $10,031.01.

Dis Vintage filed a summons beginning its court challenge on May 12, 2016. Four days later, Dis Vintage said, it received another debt notice from CBP, dated May 9, for the unpaid $26.16 (including 9 cents in further accrued interest) from the first notice. Dis Vintage paid the remaining amount, but did not file another summons. Customs received the payment on June 1, 2016.

By law, CIT may only hear challenges of denied protests if “all liquidated duties, charges, or exactions have been paid at the time the action is commenced.” Because Dis Vintage did not satisfy that basic jurisdictional requirement, the trade court found that it must dismiss the case. Though the debt notices may have been somewhat ambiguous in that they identified a “full amount due upon receipt” at the amount Dis Vintage initially paid before filing its summons, Dis Vintage had the opportunity to correct the mistake by refiling its summons after the second, $26.16 payment, and did not.

The 180-day deadline after protest denial for filing a classification suit expired June 13, 2016, after Dis Vintage made its final payment on June 1, CIT said. “At the time of making its final payment on June 1, 2016, Dis Vintage, therefore, could have obtained judicial review of the protest denial by commencing a new action but did not do so,” CIT said.

Dis Vintage argued that CBP’s own lack of transparency led to the issue. When the importer made the first payment, its lawyer emailed CBP to confirm whether CBP had “applied” the payment “for Dis Vintage’s duty bill,” in light of the importer’s plans to “file a summons as soon as possible.” Dis Vintage said CBP was not “open and honest about the bill’s ‘open’ status” because CBP failed to alert plaintiff that it had an outstanding balance.”

But the CBP accountant communicating with Dis Vintage’s lawyer did not say the bill was closed either, simply that the agency had received the payment and it had had been “applied” for the duty bill. The accountant “did not provide, and reasonably could not have been expected to provide, legal advice on what must be paid prior to the filing of a summons,” CIT said. And in any event, as noted above, Dis Vintage subsequently received notice that it owed more. “Despite having actual notice of these controlling facts, Dis Vintage did not avail itself of the opportunity to commence another action by filing a new summons once the full amount of duties, charges, or exactions had been paid,” CIT said.

(Dis Vintage, LLC, v. U.S., CIT # 16-00085, Slip Op. 18-104, dated 08/21/18, Judge Stanceu)

(Attorneys: Joshua Levy of Marlow Adler for plaintiff Dis Vintage; Amy Rubin for defendant U.S. government)