One Port's Protest Decision Can't Establish Treatment for Customs Purposes, DOJ Says

Decisions by a single port of entry cannot act as the basis for claims of an established treatment nationally by CBP for customs purposes, DOJ told the Court of International Trade in a brief filed March 29. In a tariff classification challenge brought by Kent International related to bicycle seats, DOJ said CBP New York/Newark's granting of protests doesn't establish a treatment that required notice and comment before CBP Long Beach classified the bicycle seats in a different subheading (Kent International Inc. v. United States, CIT #15-00135).

CBP initially in a 2005 ruling classified the seats under heading 8714 as bicycle accessories, dutiable at 10%. Between 2008 and 2010, Kent entered its bike seats under that heading through New York/Newark. After CBP liquidated a competitor's similar bike seats under heading 9401 as seats, duty-free, Kent filed protests seeking the 9401 classification for its own entries. CBP New York/Newark granted the protests beginning in 2008, reliquidating the relevant entries under the new heading. CBP also granted post-entry amendments on other entries to reclassify them under heading 9401.

While waiting for the protests of the New York entries to be resolved, Kent imported its bike seats through the Port of Long Beach under the 8714 heading. These entries were deemed liquidated and, beginning in 2011, following a delay requested by Kent while New York/Newark considered its application for further review on the seats, Kent's protests on those Long Beach entries were denied. Kent then filed suit at CIT, where it said that the proper classification of the kids' bike seats was heading 9401 and that CBP Long Beach's protest denials modified "treatment previously accorded." It said any duty classification decision modifying the alleged treatment to identical transactions must be made by notice and comment.

CIT held that the merchandise was properly classified under heading 8714 but denied Kent's argument on treatment, in part because of Long Beach entries that deemed liquidated meant no treatment had been established by CBP for the two-year period required for a treatment to be established. Kent appealed the decision to the U.S. Court of Appeals for the Federal Circuit, arguing that CIT was wrong to include the deemed liquidations at Long Beach in considering the treatment period. Kent argued that when CBP denied its Long Beach protests, it violated the treatment previously afforded its New York entries without the necessary notice and comment period.

CAFC found that CIT should not have considered the Port of Long Beach entries, which were deemed liquidated through CBP’s bypass procedures. CAFC then remanded the case to CIT for a decision (see 2105250053). In its Feb. 23 order, CIT instructed both parties to address whether Kent can establish a claim of treatment without the bypass entries and to identify the “2-year period immediately preceding the claim of treatment.”

In its March 29 brief, the government argued that there was no treatment previously accorded to Kent. It said the requirements for treatment "cannot be met during any two-year period" because decisions by a single port are not enough to establish a national treatment. DOJ argued that CBP did not “consistently apply" any decision to classify the seats in heading 9401 “on a national basis,” saying that the actions of the Port of New York/Newark were simply incorrect classifications made "contrary to a binding [2005] CBP ruling." The "official position of the Customs Service," according to DOJ, was the 2005 CBP ruling letter and actions taken by New York/Newark ran contrary to it and so cannot be consistent on a national level.

In its own March 29 brief, Kent argued that the actions of the port of New York/Newark in classifying its seats under heading 9104 constitutes a "national basis" because the standard "does not require treatment to have been applied at more than one port," only that "different ports may not take inconsistent actions," which Kent argues did not happen in light of CAFC's ruling to exclude the deemed liquidations. "The Newark decisions were made in consultation with the CBP National Import Specialists in New York, who agreed unequivocally with the 'seat' classification," Kent noted. The New York/Newark rulings were consistent with ruling letters issued to Bell Sports in 2007, Todson in 2009, and Britax in 2011 for imports through multiple ports, it said.

DOJ said that the Port of Long Beach intended to apply the binding 2005 Kent Ruling that required classification in heading 8714 as evidenced by the port's denial of Kent's protests only months after Kent's claimed period of "consistent treatment" and that only Kent's requests that the protests be delayed created the two-year window that Kent claims as "treatment previously accorded." DOJ said that those protest suspensions "limited CBP’s actions during the identified time period to the Port of New York/Newark." DOJ said that even though the court cannot consider the Long Beach entries because they occurred through bypass procedures, the fact that there were entries and ongoing protests at a separate port of entry means that there was no consistent treatment during the time period alleged by Kent.

DOJ also said that if a relevant time period exists for determining whether CBP “consistently applied” a particular determination, it is the “2-year period immediately preceding the claim of treatment.” In this case, DOJ argued that arose on the date Kent first entered merchandise that was not afforded the treatment sought, an entry at the Port of Long Beach on Dec. 4, 2008. Because CBP actions in August 2008 resulted in a classification under 9401, DOJ said that Kent cannot satisfy the two-year regulatory requirement.

Kent argued that the two-year period "immediately preceding the claim of treatment" is the period ended in November 2010, when Customs stopped its consistent previous practice of approving Kent's protests. Kent sai that DOJ "erroneously conflates the issue of when a claim of treatment accrues with the separate issue of which entries an accrued treatment applies to." Kent argued that existing treatments apply to all entries made before the revocation takes effect, including entries whose liquidation was not yet final when the claim of treatment accrued, meaning that Kent's entries made before November 2010 should be classified under heading 9401.

Response briefs from both parties are due on April 12, by the scheduling order.