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Court Affirms Importers’ Right to Challenge CBP Misapplication of AD/CV Duty Order Scope

Wednesday, May 21, 2014
Sandler, Travis & Rosenberg Trade Report

In a May 13 decision, the Court of International Trade upheld the right of importers to challenge in court a decision by U.S. Customs and Border Protection that results in the misapplication of an antidumping or countervailing duty order. Sandler, Travis & Rosenberg attorney Mark Ludwikowski advises that this decision gives importers an alternative to seeking scope rulings from the Department of Commerce when they believe CBP has made a factual error in subjecting their goods to AD/CV duties.

(Click here for information and registration for a May 21ST&R webinar on AD issues, including preparing for potential AD threats and effectively managing the compliance risks resulting from AD duties.)

This case deals with plaintiff LDA Incorporado’s entry of a type of rigid steel conduit that it believed was “finished electrical conduit” and thus specifically excluded from the scope of existing AD/CV duty orders on circular welded carbon quality steel pipe from China. CBP conducted lab inspections of the imported conduit and informed LDA in a Notice of Action that the goods were in fact subject to the orders, though the conduit was not reclassified and no further explanation was provided. CBP headquarters subsequently advised LDA to obtain a scope ruling from DOC, which it did while also filing a timely protest with CBP that was then denied. (The scope ruling upheld LDA’s assertion that its conduit was not covered by the orders, but the CIT ruled that this finding was not germane to the outcome of this case.)

CBP argued that this case should be dismissed because LDA’s protest challenged the agency’s application of DOC’s instructions, which CBP argued was not protestable. Further, CBP claimed that because LDA filed its protest before obtaining a scope ruling it had not exhausted its administrative remedies.

The CIT disagreed, finding that an importer may protest a CBP decision in which the agency mistakenly includes certain goods within the scope of an AD/CV duty order that appears to expressly exclude them. “To find otherwise would relieve Customs from ever applying a specific exclusion in an order unless Commerce had already issued a scope ruling,” the court noted. “Such a finding would transform Customs’ purportedly ministerial role in reading and applying the terms of the scope into a discretionary one immune from judicial review.”

Accordingly, the CIT found that it has jurisdiction under 28 USC 1581(a) to rule on a protest denial in situations in which CBP has mistakenly found a product to be within the scope of an AD/CV duty order. Such is a mistake of fact for which a protest is available, as per the Court of Appeals for the Federal Circuit’s 2002 decision in Xerox Corp. v. U.S. Here, as in Xerox, the outcome should have been clear to CBP without the importer having to go to DOC for a scope ruling.

ST&R’s Ludwikowski pointed out that the CIT distinguished this case from situations in which the scope of the AD/CV duty order itself is in question. Those are not protestable, he noted, and a scope ruling request is the proper recourse. While this is certainly a nuanced difference, Ludwikowski said, it is important to keep in mind because if a scope exclusion appears to apply to an importer’s product and is not recognized by CBP, it may be protestable per the LDA decision.

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