CAFC Rules CBP Not Bound by Portion of Ruling That Erroneously Indicated Pharmaceutical was Duty-Free
In Forest Laboratories, Inc. ("Forest") v. U.S., the United States Court of Appeals ruled that the portion of a ruling issued by Customs (NY D88210), that said "the rate of duty will be free" was outside the scope of Customs' authority, because although it has the authority to classify imported merchandise, Customs must impose duty only at the rate specified in the HTS.
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Forest had requested a ruling from Customs to confirm the classification of a pharmaceutical product, hydrated hydroxypropl methylcellulose ("HPMC"), under 3912.39.00, at the duty rate of 4.2% ad valorem. As requested, the ruling letter confirmed classification in 3912.39.00, but instead of indicating a duty rate of 4.2%, it added that "Pursuant to HTS General Note 13, the rate of duty will be free." General Note 13 states in part, that "any product (by whatever name known).shall be entered free of duty, provided that such product is included in the pharmaceutical appendix" of the HTS.
Forest subsequently imported HPMC, claiming free entry under heading HTS 3912.39.00. Customs, however, assessed a 4.2% duty rate, advising Forest that HPMC was not listed in the Pharmaceutical Appendix. Forest protested this action, claiming the duty free language in the ruling was a "legal determination" which could not be revoked or modified by Customs, unless it complied with the requirements for notice and comment contained in 19 USC 1625 (c). Customs responded that the duty free statement in the ruling letter was a "clerical error", and not subject to the requirements of notice and comment.
In its decision, the CAFC reiterated prior rulings that "Customs has no authority to alter or amend the duty rates of the tariff schedule because the duty rates are part of the tariff statute enacted by Congress". It then found that the Pharmaceutical Appendix is a statutory provision, and that HPMC was not listed as required for duty-free treatment. Accordingly, since "Customs has no authority to change the statutorily mandated tariff rates for merchandise that is properly classified under HTSUS", Customs had properly liquidated the entries at the 4.2% duty rate.
CAFC 06-1227 (dated 01/23/07) available at http://www.fedcir.gov/opinions/06-1227.pdf