Government Urges Supreme Court Denial of Hitachi Protest Case; Impact of Ruling Not 'Significant'

(In October 2011, the Court of Appeals for the Federal Circuit dismissed Hitachi’s arguments that CBP is required by law in 19 USC 1515(a) to decide protests within two years, and a lack of action constitutes “deemed allowance” of the protest. The statute does not contain a consequence for the government’s failure to act within that time period, CAFC said, so the two-year time period is not mandatory. Hitachi filed a petition for a hearing by the Supreme Court on July 30. The Customs and International Trade Bar Association (CITBA), National Customs Brokers and Forwarders Association of America (NCBFAA), and American Association of Exporters and Importers (AAEI) filed amicus briefs at the end of August in support of a Supreme Court hearing of Hitachi. Hitachi’s reply to the government brief is due Nov. 12, and the paperwork goes to the justices on Nov. 13. The Supreme Court is expected to consider the Hitachi case during its Nov. 30 conference and announce a decision on Dec. 3, an industry lawyer said.

See ITT’s Online Archives 11111428 for summary of CAFC’s ruling. See also 12082404 for summary of Hitachi’s request for Supreme Court hearing and chances for review, and 12090701 for summary of the amicus briefs filed in support of Hitachi.)

John Peterson of Neville Peterson, who wrote the AAEI amicus brief, disagreed with the government’s assertion of the case’s lack of significance. The issues hadn’t yet come up for review because many importers would wait for a decision in the hope that CBP would allow the protest, or would file for accelerated disposition if they were willing to go to court. But Hitachi is arguing that it should not be forced to go to court, and bear the related fees and delays, Peterson said.

Hitachi Decision Not ‘Significant’ Enough to Merit Review, says Government

The government’s reply brief continued to make the similar legal arguments to those it had raised before the Court of International Trade and Court of Appeals for the Federal Circuit, but emphasized that the earlier rulings do not carry enough practical significance to warrant a hearing by the Supreme Court. Although Hitachi contends that the problems raised by CAFC’s ruling that CBP is not required to decide protests within two years occur daily, “the fact that this issue remained undecided by the Federal Circuit for more than four decades suggests otherwise,” the government said, referring to the Customs Courts Act of 1970’s imposition of the two-year period for protest decisions.

According to the government, CBP resolves the overwhelming majority of administrative protests within two years. In 2009, about 91.3 percent of protests were allowed or denied within two years of their filing, leaving about 8.7 percent undecided within the two-year period. Internal policies require that the vast majority of protest cases be decided by CBP within one year, the government said, and procedures are in place to ensure and monitor timely processing of protests. Of the “small subset” of protests that are not decided within two years, some are suspended pending similar protests or court action, it said.

Importers also have a means to prevent CBP delays through accelerated disposition, the government said. Therefore, the CAFC decision in Hitachi “creates no danger that Customs can, through inaction, effectively prevent (or infinitely delay) importers from obtaining a judicial determination of their entitlement to refunds.” Instead, CAFC’s decision only means that CBP protests that are undecided within two years do not result in “deemed allowance” of the protests, as Hitachi argued. “Absent clear statutory language compelling that result, a court cannot properly require the government to pay potentially unjustified refunds as a sanction for agency noncompliance with a statutory deadline,” the government said.

But Accelerated Disposition is ‘Falling on Your Sword,’ says Peterson

Accelerated disposition claims generally result in denial of protests, though, and court battles to challenge those denials are costly, said Peterson. “When you ask for accelerated disposition, you’re essentially falling on your sword,” he said. Those that choose the path of accelerated disposition and court challenge of the protest denial face a number of disadvantages, including the legal presumption that the government’s decision on the protests is correct, and the burden of pretrial discovery, he said. Plaintiffs have to answer so many questions about their product during the discovery phase that “it’s really going to take $50,000 in court costs before you can actually get up in front of a judge,” Peterson said.

Smaller importers in particular don’t have the resources to challenge protest denials in court. “Most small businesses have disappeared from the Court of International Trade,” Peterson said. “They just can’t afford to get in there anymore.” Costs of litigation, and particularly pretrial discovery, are so high that it’s not cost effective to attempt to recover customs duties, he said. CIT can award attorney fees under the Equal Access to Justice Act, but in order for a small company to recover fees, they have to not only win the case but then prove that the government’s position was not substantially justified, Peterson said. “What that means, as a practical matter, is unless the government was being completely reckless or completely arbitrary, it’s very hard for even a small importer to collect.”

The issues in the Hitachi case didn’t come up until now because many importers would wait for CBP’s protest decision in the hopes of allowance of a protest, or would file for accelerated disposition, get their protests denied, and go to court, Peterson said. And the 91.7 percent figure still means that more than 2,500 protestants will have to wait more than two years, on average, to get a Customs response to their protests, he said. Hitachi is taking a stand, and saying it should not be forced to become a plaintiff in court if the government doesn’t do its job within two years. According to Peterson, Hitachi is arguing that if its position has merit, it is entitled to have its protest decided at the administrative level, because that’s what the law intends.

Hitachi Faces Uphill Battle for Supreme Court Hearing

But the lack of consequence for CBP inaction on protests in the statute means that the two-year period is directory rather than mandatory, said another industry lawyer familiar with the case. “This is a pretty well settled point and carried the day at the Court of International Trade and the Federal Circuit,” he said. And the fact that the issues have only come up a handful of times and that the importer has accelerated disposition as an escape valve might resonate with the Court, the lawyer said.

“The Supreme Court is unlikely to take this case unless it want to explore the general question of whether it still believes that the absence of a consequence makes an apparent deadline into a mere guideline,” the industry lawyer said. “If, for some reason, the Court wants to review that proposition, this is an excellent case to do that. I am not aware of any reason why the Court may want to delve into that question.”

Email ITTNews@warren-news.com for a copy of the government's brief.