CIT Says No Notice-and-Comment Requirement If CBP OR&R Not Involved

The court said the prior protest decision wasn't the result of considered deliberations because CBP's Office of Regulations and Rulings (OR&R) wasn't involved.

Under the Weather imported the pods from 2010 through 2018, receiving duty-free treatment for the goods during that period under Harmonized Tariff Schedule subheading 6306.22.1000, which covers backpacking tents. In September 2018, CBP took issue with this classification, finding that a batch of pod entries should be classified as "other" tents under HTS subheading 6306.22.9030, dutiable at 8.8%.

The importer protested the decision, and CBP granted the protest in 2019, reverting the pods to subheading 6306.22.1000 and duty-free treatment. Throughout this process, the agency requested information from Under the Weather about the goods.

In December 2019, CBP again attempted to liquidate the goods at the 8.8% rate despite the prior protest being granted. In October 2020, CBP issued a HQ ruling declaring that the goods fit under subheading 6306.22.9030. Under the Weather filed suit, claiming, among other things, that the HQ ruling needed to be accompanied by a notice-and-comment period because, per 19 U.S.C. Section 1625(c), the decision revoked or modified a previous interpretive ruling or decision.

The parties first sparred as to the scope of the statute. In particular, the U.S. and Under the Weather disagreed whether the phrase "prior interpretive ruling or decision" included interpretive rulings "(including any ruling letter, or internal advice memorandum) or protest review decision” -- the language found in Section 1625(a), which requires CBP to publish certain rulings and decisions.

Reif found that a "prior interpretive ruling or decision" refers back to the language of Section 1625(a), making the "same universe of decisions" subject to both the requirements of Section 1625(a) and Section 1625(c). There are no decisions "that require notice and comment to be modified or revoked but were not subject to the public inspection requirement upon issuance," the decision said. As a result, only "interpretive rulings, protest review decisions or their 'functional equivalent[s]' are subject" to the notice-and-comment provision, the decision said.

The court then considered three factors in assessing whether the 2019 protest approval amounted to a prior interpretive decision: whether the protest was a product of considered deliberations, whether the decision had prospective effect and whether the decision was interpretive. Reif sided with the U.S. on all three factors.

On the first factor, Reif said that if OR&R isn't involved, it's not an interpretive decision. For Under the Weather's 2019 protest, only the Center of Excellence and Expertise for Apparel, Footwear & Textiles was involved, making the protest approval not the result of high-level deliberations. The court found that the governing law and regulations say an interpreting ruling requires OR&R decision-making, and OR&R is the only body that has the authority to issue the types of decisions listed as examples in the statute -- ruling letters, internal advice memoranda and protest review decisions.

Reif also found that excluding protests from the notice-and-comment requirement is "consistent with the statutory scheme." If the importer won, "every protest on classification would be subject to notice and comment," the judge said. If Congress meant for typical protest decisions to be subject to this requirement, it "knew how to do so, as Congress referred to those precise decisions elsewhere in the Customs Modernization Act," Reif found.

The court added that the "entry-specific" protest approval didn't have a prospective effect here because it didn't directly tell Under the Weather that "future imports of the subject merchandise [must] be classified according to that approval." If the protest approval was "inherently applicable to future entries," as Under the Weather claimed, "then so is every Customs decision to allow or deny a protest based on the classification of merchandise," the opinion said. This clearly cuts against the "language and legislative history of the statute," Reif found.

Lastly, Reif said a protest is "interpretive" when it applies customs and related laws to a specific set of facts -- something that didn't occur here, evidenced by CBP's one-sentence approval of the protest, which was devoid of detail. While Under the Weather said this conclusion would lead to "troubling implications," since no protest approval could ever qualify as a decision under Section 1625(c), Reif said the company's "alarm is unwaranted." Congress addressed these concerns in the statute itself.

(Under the Weather v. United States, Slip Op. 24-99, CIT # 21-00211, dated 09/05/24; Judge: Timothy Reif; Attorneys: Alena Eckhardt of Nakachi Eckhardt for plaintiff Under the Weather; Luke Mathers for defendant U.S. government)