Customs Classification Litigation Hampered by Onerous Discovery, Time Required

The amount of discovery involved in classification litigation is one source of inefficiency, said Larry Friedman, a lawyer at Barnes Richardson. Following a failed protest and the filing of a suit, the government typically makes a number of discovery requests in order to compile the facts involved, he said. “If the parties got together early on, to determine what the actual disputes were as to the interpretation of the tariff classification, the tariff heading, and, most importantly, if there were some mechanism by which we could get a read by the court as to the meaning of the tariff terms,” then discovery could be better tailored and the parties could have a cogent discussion if it’s a meaningful case, said Friedman.

There’s been a major increase to the time involved with such litigation since the 1970’s said Patrick Gill of Rode & Qualey. The biggest change is the discovery process, which now often takes at least a full year, with much of it largely unnecessary, he said. Decisions on classification cases generally take a minimum of 2-3 years, he said.

The discovery in customs cases is similar to any litigation, said Jason Kenner, a trial attorney in the Justice Department’s International Trade Field Office. Kenner noted he was speaking for himself, and not for the DOJ. Kenner said he doesn't see that much inefficiency in the process and the government needs that process to get a full understanding of the facts involved, said Kenner. One possible way to improve the process could be to have a set of discovery responses that are "almost triggered at the same time as initial disclosures," said Kenner. Most classification cases involve very similar interrogatories and if "we could somehow agree that this standard set of interrogatories would be responded to at the same time as the initial disclosures are sent out, then the government would get the information quicker," and would be able to better tailor subsequent discovery requests, he said.

There are many “meritorious” cases that aren’t brought as a result of the time and costs involved in litigating, said Friedman. The filing of a case with the CIT can cost hundreds of thousands of dollars for the likely multi-year process, he said. Supply chains aren’t usually static, so expected changes to a potential litigant’s product line within that period of litigation can affect the decision to move forward, he said. Also, some companies are less willing to be seen as litigants, he said. Gill agreed, saying the lengthy process outside of a administrative decision can sometimes simply make litigation untenable. Some clients seek help through the legislative process, especially through miscellaneous trade bills, though that process is also difficult and lengthy, said Friedman.

Small Claims Court

The long-discussed idea of a small claims docket for customs issues that quickly addresses claims below a certain threshold could help allow for more issues to see the judicial process, said Friedman. Still, there’s several legitimate concerns, such as appealability and the precedential value, he said. Without the precedential value, there’s a risk of serial litigation, he said. Classification cases would fit best in a small claims court, though marking and valuation cases could also be decided in such a court, said Gill.

Such a court could eliminate the discovery process for certain situations and allow for a judgment for the plaintiff or defense without requiring reasoning, said Gill. The idea is imperfect but the question is are “we doing the right thing as lawyers and as jurists” and if “giving an avenue for judicial review of certain government agencies’ actions where the government is arguably wrong” would allow for more good cases to move forward by avoiding the high costs of dealing with the federal court, he said. The court could also include a right of election, allowing the parties to discuss if that’s the best path, said Friedman. For instance, if a certain import is valued below a small claims threshold, an importer may want CIT review if it has plans for high volumes of the product in the future, said Friedman.

‘Not Going to Happen’

A small claims court is “not going to happen,” for several reason, said Gill. It would need to get through congress and “you can’t get anything through congress right now,” he said. Also government has concerns about the questions of precedent and serial litigation, he said. CBP would also be unlikely to support such an effort because “they don’t like judicial review at all” and would resist the possibility of even more reversals, said Gill.