CIT Hears Argument on Whether Protest Denials Changing Tariff Treatment Need Notice and Comment

The Court of International Trade earlier this month heard oral argument on whether a CBP protest denial effectively revoked a prior CBP protest decision by applying a different tariff classification to identical merchandise, and should have been subject to a notice-and-comment period (Under the Weather v. U.S., CIT # 21-00211).

Importer Under the Weather brought suit to challenge the classification of its tents designed for backpacking. CBP granted one of the company's protests in 2019, classifying the goods as backpacking tents under Harmonized Tariff Schedule subheading 6306.22.1000, free of duty, only to later reverse course, classifying the goods under subheading 6306.22.9030, dutiable at 8.8%, without addressing the 2019 protest. Another protest followed, which CBP denied, then followed up with an HQ ruling finding that the prior protest was not an interpretive decision.

Under the Weather claims that because the classification decision in the recent protest denial differed from the 2019 decision on identical merchandise, the later decision "effectively revoked" the prior protest without following the notice and comment requirements of 19 U.S.C. Section 1625(c). The government moved to dismiss this claim, arguing that only "interpretive determinations with prospective effect" qualify for the statute's "procedural safeguards," and that the protest denial was no such interpretive decision (see 2309250025).

During oral argument, Judge Timothy Reif asked if there are "predictability" concerns about CBP decisions if the agency says for many years that a good fits in one category, then reverses course. If this isn't an issue, the judge asked, isn't it the purpose of Section 1625 to deal with that scenario.

DOJ attorney Luke Mathers said he "gets the concern," but those years' worth of entries were "bypass" liquidations. CBP isn't making any determination on tariff classification, so "that's not necessarily going to be creating an issue from the importer's perspective." While here there was a protest approval and CBP changed its mind, "that is how the system is supposed to work," he said, where "unfortunately" import specialists will disagree and CBP's Office of Regulations & Rulings will step in to offer a binding decision.

Reif also questioned where the court can address the issue of an importer's "reliance" on prior CBP protest decisions in the statute.

In response, Heather Jacobson, counsel for Under the Weather, said "the whole point of this is to provide certainty that when a decision is issued, the importer has the right to rely on it, and that shouldn't be pulled out from under them without an opportunity to comment."

The litigants also sparred on the lessons gleaned from legislative history. Alena Eckhardt, counsel for Under the Weather, said the history of the statute shows that "Congress wanted the notice and comment requirement of Section 1625(c) to be applied broadly to decisions beyond" CBP ruling letters and other agency decisions that must be published. Eckhardt referenced a quote from a former CBP commissioner, saying the agency had to do a "better job of informing the trade community of how Customs does business."

In response, Mathers cited a House report that said the reason for including Section 1625(c) was to provide "assurances of transparency concerning Customs rulings and policy directives through publication in the customs bulletin or other easily accessible sources." Mathers said this indicated Congress was "concerned about rulings and policy directives, not about entry-specific protest approvals and denials." Congress used the phrase "allowed protest elsewhere" in the broader act the statute it is in, meaning Congress could have included protest denials if it wished.