Print PDF

Practice Areas

Court Again Throws Out Challenge to Reclassification with Favorable Duty Rate Change

Monday, February 16, 2015
Sandler, Travis & Rosenberg Trade Report

The Court of Appeals for the Federal Circuit ruled Feb. 3 that a yarn importer does not have standing to challenge a U.S. Customs and Border Protection reclassification that gives it a favorable duty rate but could negatively impact its sales to garment manufacturers.

This case was filed by Best Key Textile Inc. in an effort to overturn CBP’s revocation of a ruling on the classification of its proprietary “BKMY” yarn. CBP initially classified the yarn as metalized yarn under HTSUS 5605.00.90 (13.2 percent duty), but the revocation ruling concluded that the yarn is properly classified as synthetic filament yarn of polyesters under HTSUS 5402.47.90 (8 percent duty).

The Court of International Trade initially dismissed the case after determining that the revocation ruling resulted in a lower tariff on the yarn and thus posed no threat of irreparable harm to Best Key. The CIT rejected the company’s arguments that it suffered harm because its customers (foreign garment manufacturers) may no longer purchase its yarn unless the garments they make from it can be imported by other “strangers to this action” (garment importers) under the favorable duty rate accorded to garments made of metalized yarn.

The CIT later reversed itself, stating that while it is “highly questionable” whether a CBP ruling that lowers the rate of duty on a product a plaintiff has no expressed intention of importing can result in aggrievement or adverse effect to that plaintiff, it is the plaintiff’s product that is the subject of the ruling at issue in this case and the court has exclusive jurisdiction over the general administration and enforcement of this type of matter pursuant to 28 USC 1581(i)(4).

The CAFC now holds that the CIT’s reversal was in error because the statute does not provide the court jurisdiction over requests to reverse ruling revocations with the effect of increasing the requestor’s own duty rate. “Best Key seeks to undo an administrative decision made in its favor so that its customers might benefit from a lower duty rate,” the court writes, which “contemplates the creation of a new cause of action under [28 USC] 1581(i), but 1581(i) ‘was not intended to create new causes of action nor was it meant to supersede more specific jurisdictional provisions.’”

To get news like this in your inbox daily, subscribe to the Sandler, Travis & Rosenberg Trade Report.

Customs & International Headlines