CIT Says Material Dispute Exists on CBP's Role in Section 232 Exclusion Process
The Court of International Trade on Dec. 19 declined to grant victory to G&H Diversified Manufacturing on the importer's claims that CBP previously, as part of its role in granting a Section 232 duty exclusion, already said the company's imports were subject to the exclusion. Judge Timothy Reif said open questions of fact still exist with regard to the extent of CBP's role in the exclusion process.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
G&H received a Section 232 exclusion from the Commerce Department's Bureau of Industry and Security for its steel tube imports classified under Harmonized Tariff Schedule subheading 7304.29.6115. However, upon entry, CBP assessed the duties on the importer's products and classified the goods under subheading 7304.29.6115. The importer unsuccessfully protested the move.
Taking to the trade court, G&H argued that CBP failed to consider that it already found the Section 232 exclusion to apply to the company's products due to its role in the exclusion process. The importer noted three times where CBP supposedly made such a decision: when the exclusion request was posted by BIS, when the request was granted and when CBP posted its notice of liquidation.
Regarding the posting of the exclusion request, Reif said G&H isn't entitled to judgment "as a matter of law as to whether the posting" of the request amounted to a "determination of the correct classification by Customs."
While the importer cited BIS regulations to support its claim that HTS classification is a prerequisite to posting the exclusion request, the judge said the regulations cited by the importer concern the agency's decision to bar trade associations from filing exclusion requests and has "nothing to do with Customs' responsibilities" during exclusion request reviews.
On the approval of the exclusion itself, G&H argued that CBP is again expected to affirm that the correct HTS classification is covered by the exclusion. In response, the U.S. said CBP's limited and automated review of the exclusion request here can't stand as a determination regarding the facts presented. The importer disputed the fact that CBP's review of Section 232 exclusions is automated, citing BIS documents that refer to CBP reviews of the HTS code in the exclusion request.
Reif held that the facts in the case don't provide enough information for the court to determine "the role of Customs in the exclusion approval process." The judge said there's a material dispute about whether CBP's review of exclusion requests is automated.
Addressing whether the notice of liquidation was a determination by CBP on the proper classification of the goods, Reif again said there wasn't enough to find for G&H. The government said that since the entries were automatically liquidated, there was no examination or review by a CBP officer and thus doesn't reflect treatment by CBP that determines classification.
G&H claimed, "without legal support," that the liquidation has "legal significance," regardless of whether it's "brainless" or a "bypass entry." Reif said that the importer isn't entitled to judgment "as a matter of law as to whether the auto-liquidation of" the company's entry amounted to a decision by CBP of the goods' proper HTS classification.
In addition, G&H argued that the denial of its protest was issued without notice or an opportunity to be heard, first claiming that after its entry was liquidated, it found that a protest was the only means available to get a refund of the Section 232 duties. The government said in response that the importer had at least two other options: seek a ruling from CBP to confirm the correct tariff classification of the merchandise before submitting a Section 232 exclusion request or file a post-summary correction to amend the entry after getting the exclusion.
The government also suggested filing an administrative request to extend liquidation while awaiting the BIS decision on the exclusion so as to get more time to file a post summary correction.
Reif found that G&H failed to address these options and thus "failed to demonstrate that it lacked the opportunity to challenge the substance of Customs’ determination.”
Also in regard to its claimed lack of notice, G&H said that being forced to challenge the tariff classification of its goods after CBP affirmed it three times "frustrated and undermined the exclusion process." The company said that since the physical characteristics and use of the goods matched exactly those found in the exclusion, it's "legally and logically" impossible for the classification to differ.
The court found that "plaintiff does not cite anything to demonstrate this purported legal and logical impossibility," nor did the importer cite anything to support its claim that the mere fact CBP changed its mind about the tariff classification, negating the exclusion's effect, is inconsistent with the regulatory framework BIS created.
(G&H Diversified Manufacturing v. United States, Slip Op. 24-145, CIT # 22-00130, dated 12/19/24; Judge: Timothy Reif; Attorneys: Lewis Leibowitz of The Law Office of Lewis E. Leibowitz for plaintiff G&H Diversified Manufacturing LP; Guy Eddon for defendant U.S. government)