Are You Filing a Valid Protest with CBP?

Last month the U.S. Court of International Trade sided with the importer in Estee Lauder v. United States, Slip Op. 11-23 (CIT March 1, 2011), in a decision that should remind a company fighting with U.S. Customs and Border Protection (CBP) how important it is to sufficiently describe products at issue in a protest.

Estee Lauder protested how CBP liquidated entries of its cosmetic kits. CBP classified the kits according to their individual components, rather than as the single component that gives the kit its essential character under GRI 3(b). In its protest, the company asserted that under GRI 3(b), the kits should be classified under HTSUS heading 3304, a duty-free provision for beauty or make-up preparations. Although the protest identified the contents of only one type of cosmetic kit, Estee Lauder also named entries containing a second type of kit. The second type of kit, which was not described in the protest, included a container for holding make-up brushes and was classified under HTSUS heading 4202, dutiable at 20%.

Pursuant to CBP’s request, Estee Lauder provided samples of both types of kits. CBP denied the protest by non-response under the accelerated disposition procedure. Upon denial, the company filed suit with the CIT, challenging the classification of the kits. CBP moved the court to dismiss the case for lack of subject matter jurisdiction, arguing that Estee Lauder failed to file a valid protest because the second type of kit was not specifically described in the protest.

By statute and regulation, a protest is valid when it “set[s] forth distinctly and specifically . . . each category of merchandise affected” and contains “a specific description of the merchandise affected.” 19 U.S.C. § 1514(c)(1) and 19 C.F.R. § 174.13(a). The U.S. Supreme Court has explained that this requirement exists to “compel the importer to disclose the grounds of the objection at the time when he makes his protest.” Davies v. Arthur, 96 U.S. 148 (1877). A protest must show the importer’s intent and adequately notify Customs of the protest’s “true nature and character.” Id. A century later, the Customs Court also explained that “[h]owever cryptic, inartistic, or poorly drawn a communication may be, it is sufficient as a protest . . . if it conveys enough information to apprise knowledgeable officials of the importer’s intent and the relief sought.” Mattel v. United States, 72 Cust. Ct. 257, 262 (1974).

The CIT denied CBP’s motion to dismiss, holding that Estee Lauder sufficiently described the kits in the protest and filed valid protests. Although the court agreed with CBP that it was unclear which items were included in the protested kits when comparing the protest description with the entry documents, the court found that this discrepancy was not “an insurmountable obstacle” to CBP deciding the protest. The CIT held that “[p]rotest sufficiency does not turn on whether Customs can decide the entire claims based solely on information contained in the papers submitted.” Slip-Op 11-23. Rather, “the protest is the tool whereby the collector seeks the precise facts.” Id. (citation omitted).

What can we take away from this case? Although Estee Lauder successfully defended the government’s attempt to kick the case out of court for lack of jurisdiction, it may have avoided a jurisdictional argument all together had there been no question about the merchandise included in the protests. Estee Lauder now must begin the fight on the substance on its argument: what is the correct classification? The company basically added an additional layer of litigation because it filed an unclear protest.

A good protest thoroughly explains why the classification it seeks is correct as a matter of law and fact, and why the classification CBP applied at entry was incorrect. One should not simply ask for reliquidation under the tariff provision you think is right without providing arguments why you are right. It is important to:
• Describe the product
• Set forth the specific issue
• Provide and analyze the law
• Apply the law to your facts
• Explain why your classification is correct
• Explain why CBP is wrong
• Conclude

Following these simple rules will lead to a better and more successful protest.

Trade Terms Tuesday

Welcome to Trade Terms Tuesday! Each Tuesday, we will share three trade-related terms. In order to reach out to our diverse readership, we will try to provide one for exports, one for imports, and one for logistics/transportation. This week, we continue by combining the J’s and K’s.

Jib
The jib is the projecting arm of a crane. One end contains a hook used for lifting goods.

Judicial Review
Judicial Review is a feature of U.S. Constitutional Law that allows a court to review the actions of another court of law, government official or some other legally appointed person or body. For example, affected parties may file petitions for review with the Court of International Trade for things such as denial of protests (19 CFR 174.31) and broker’s licenses (19 CFR 111.17).

Kyoto Convention
The International Convention on the Simplification and Harmonization of Customs Procedures (Kyoto Convention) entered into force in 1974 and was revised and updated to ensure that it meets the current demands of governments and international trade.

The WCO Council adopted the revised Kyoto Convention in June 1999 as the blueprint for modern and efficient Customs procedures in the 21st century. Once implemented widely, it will provide international commerce with the predictability and efficiency that modern trade requires. Entered into force in 2006, the Revised Kyoto Convention promotes trade facilitation and effective controls through its legal provisions that detail the application of simple yet efficient procedures. The Revised Convention also contains new and obligatory rules for its application, which all Contracting Parties must accept without reservation.

Trade Terms Tuesday

Welcome to Trade Terms Tuesday! Each Tuesday, we will share three trade-related terms. In order to reach out to our diverse readership, we will try to provide one for exports, one for imports and one for logistics/transportation. This week, we continue with the C’s.

Container Freight Station “CFS”
A CFS is a bonded warehouse facility used by carriers to load LCL cargo into containers or unload imported LCL cargo from containers. This is normally done when the container has more than one delivery location. The cargo is unloaded from the containers and delivered to the final destination.

Court of International Trade “CIT”
The CIT is a Federal court with jurisdiction to hear cases against the United States arising from Federal laws governing import transactions. The court hears antidumping, classification, and countervailing duty matters as well as appeals of unfair trade practice cases from the International Trade Commission. Established in 1890 the court has principal offices located in New York City. The judges are appointed for life by the President, subject to Senate confirmation.

Country Chart

Located in Supplement 1 to Part 738 for the EAR, the country chart contains licensing requirements based on destination and “reason for control. Maintained by BIS, the Commerce Country Chart allows users to determine whether a license is required for items on the CCL.

What Should You Do If Your Exam Appeal is Denied?

Since the Wizard has received several questions about filing appeals for the Customs Broker Exam and the CIT recently decided a case involving an appeal, today's article addresses the options when an appeal is in process or denied.

If you’ve taken the customs broker exam and missed a passing score by a couple of questions, it’s likely that you filed an appeal with CBP. Good for you! It never hurts to appeal several questions if you only missed it by a few. The next dilemma rears its ugly head if the appeal is denied. First, your appeal may not be resolved prior to the next exam date. Do you gamble and not sign up for the exam? If you don’t sign up and the appeal is denied, you won’t be able to take the exam for another 6 months, which means it will have been a year since your first attempt. However, if you sign up for the exam and end up receiving approval and a passing grade on the appeal, then you may have spent $200 that is not refundable unless you are able to notify CBP of your intentions not to take the exam within two business days prior to the exam date. Let’s say you don’t sign up for the exam and your appeal ends up being denied. What next? If you want CBP’s decision reviewed, then you may request the review by submitting a request to the Secretary of Homeland Security within 60 days of the notice of CBP’s decision. Depending on the number of questions you appealed, this might be a good option; however, you are now coming up on the one-year anniversary of your exam. Do you apply to take this exam or do you wait, hoping that the Secretary of DHS will reverse the CBP decision? The gamble gets a little riskier since it has now been almost a full year since you first took the exam, and you might have passed up two opportunities to take and pass it. Consider the options! Pay $200 and take the test or wait on the results from your request for review by DHS?

Now, let’s assume that you were confident that DHS would approve the appeal and didn’t sign up for the exam, but DHS affirmed CBP’s decision. You still have options. You could file an appeal to the Court of International Trade. Understand that it has been a year since you first took the exam, and you have passed up two opportunities to re-take it. While you are filing the lawsuit and waiting to be heard by the CIT, the third exam comes up. Do you take it? While you are still waiting for the CIT to hear your case, a fourth exam comes along. Finally, the CIT hears your case and affirms the review by the DHS and CBP. Game over; you did not pass the exam. If you want a customs broker license, you must take the exam again. The next exam is just a few months away. Because of the length of time it takes to complete this process from the first appeal to CBP to the hearing by the CIT, you have waited almost 2½ years to take the exam since you first took the exam How much has this process cost you in time and money? Click HERE to read the real life example of Depersia v. United States, a case decided on August 11, 2009.

Filing an appeal is a great idea. Make strong arguments supported by as many facts and examples as possible. However, seriously consider the consequences of not taking the exam if you do not receive a favorable appeal and decide to pursue the review. It might cost less in time and money to retake the exam, and you might get your license faster!

To view other decisions decided by the CIT related to CBP’s denial of an appeal, click on the following case name. Only one of the following cases was decided in favor of the individual plaintiff.

Kenny v. United States
Dunn-Heiser v. United States
Harak v. United States
O’Quinn v. United States