CBP Can't Consider 'Bypass' Liquidations in Questions of 'Treatment, ' Importer Argues

The Court of International Trade erred in relying on "bypass" liquidations when evaluating the established classification treatment of bicycle seat imports, Kent International argued in a May 21 reply brief in the U.S. Court of Appeals for the Federal Circuit. When determining whether an established classification treatment exists, CBP can only consider liquidations in which a Customs officer has made a determination, it said. In this case, CBP incorrectly looked at bypass liquidations, which are processed automatically without review by a CBP officer, it said. The bike seat importer said in its appeal that the imported goods should be classified according to CBP's established treatment in subheading 9401, which would allow them to enter duty-free (Kent International, Inc., v. United States, Federal Circuit #21-1065).

Kent’s appeal follows a 2020 case it lost at the CIT (see 2008260036). In the original case, Kent claimed that CBP didn't give the importer the same treatment as competitors when it classified its child bike seat entries in Harmonized Tariff Schedule heading 8714, dutiable at 10 percent, rather than the relevant subheading in 9401. At the CIT, the government argued that Kent's entries at the Port of Long Beach between 2008 and 2014 were liquidated under the heading 8714 classification, which showed CBP didn't consistently apply Kent's preferred classification during any two-year period "on a national basis." Now, on appeal, Kent is arguing that these liquidations should not be considered since they were bypass liquidations.

The Department of Justice argument that there is a difference between the requirement that a "treatment occurred" by CBP and the requirement that the determination creating the treatment was "consistently applied" is “an invalid, myopic distinction,” the company said. “A holistic reading leads to the conclusion that finding whether the Customs determination creating the treatment was 'consistently applied' is one of the elements of concluding whether the 'treatment occurred' and ultimately 'was previously accorded.' As a result, the regulation prohibits consideration of bypass liquidations anywhere in the 'treatment' analysis," Kent said

Kent also said CIT was wrong to deny an established treatment existed because it considered Kent’s entries alongside its competitors'. "The fatal flaw in the lower court’s and government’s approach is that it takes Kent’s entries into consideration in evaluating whether Customs had a consistent treatment of third parties," the company said. "Under this flawed approach, few if any Section 1625(c) claims based on treatment of third parties’ entries could ever win. If any importer ever claims that Customs violated Section 1625(c) by failing to treat the importer’s entries consistently with third parties’ entries, the importer automatically loses -- because Customs did not treat the claimant importer’s entries consistently with the third parties’ entries." CIT precedent states that CBP can assess third parties' entries, and only third parties' entries when deciding consistent treatment, Kent said.