Importer Tells CAFC to Stop US From Denying Section 301 Exclusions
The government, namely CBP and the Office of the U.S. Trade Representative, should be stopped from denying the application of Section 301 China tariff exclusions to importer Mitsubishi Power Americas' selective catalytic reduction imports, Mitsubishi told the U.S. Court of Appeals for the Federal Circuit. Filing its opening brief on Sept. 12, Mitsubishi said CBP and USTR "misrepresented the original grant of the exclusions to Mitsubishi" when they approved the requests, leading the importer to rely on these "misrepresentations to its detriment" (Mitsubishi Power Americas v. United States, Fed. Cir. # 25-1828).
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The result of this reliance led Mitsubishi to suffer "a loss of tens of millions of dollars that the Government assured it would not have to pay." The loss of this money and the government's misrepresentations "caused an egregiously unfair result and constitute affirmative misconduct," the brief said.
The Court of International Trade "clearly erred" when it said Mitsubishi was "on notice" that its requests were only partially granted, that its goods weren't covered by USTR's drafted exclusions and the government didn't "mislead Mitsubishi," the brief said. Establishing an alternative argument, Mitsubishi said that if the Federal Circuit finds that the exclusion language doesn't cover the supported catalysts in "block form," the appellate court should enforce the trade court's finding that supported catalysts on a "mesh plate may be excluded from 301 duties."
Lastly, Mitsubishi urged the Federal Circuit to find that the supported catalyst imported in block form can't be classified under Harmonized Tariff Schedule heading 8421, since they don't filter or purify flue gas and aren't "parts" of filtering or purifying machinery or apparatus for gases. Instead, the goods fit under heading 3815 as "supported catalysts," the brief said.
In May, the trade court rejected Mitsubishi's claim for equitable estoppel, ultimately finding that the company's goods weren't covered by Section 301 exclusions for goods falling under HTS heading 3815 (see 2504300067).
In September 2019, Mitsubishi applied for two exclusions for two types of its supported catalysts, both of which the company said are classified under HTS subheading 3815.19.0000. In response, USTR issued two letters granting the exclusion requests and updated its website to reflect the granted exclusions. The requests led to the creation of a secondary subheading, 9903.88.46, which covered goods classified under subheading 3815.19.0000.
Mitsubishi then imported the supported catalysts in block form subject to the present appeal from July 2018 through September 2020 under subheading 3815.19.0000. CBP reclassified the goods under subheading 8421.39.4000, applying Section 301 tariffs to the goods and refusing to apply the Section 301 exclusions.
At the Federal Circuit, the importer argued that the government must be "equitably estopped" from denying the application of the exclusions. Mitsubishi said the elements of equitable estoppel are "misrepresentation by the opposing party," "reasonable reliance on that misrepresentation" and "detriment to the party asserting estoppel." In addition, estoppel cases against the government must show the government's actions amounted to "affirmative misconduct," which the U.S. Court of Appeals for the D.C. Circuit recently found requires a "showing of misrepresentation or concealment, or, at least, behavior that will cause an egregiously unfair result."
The trade court only challenged the first element of equitable estoppel, "declining to find that the Government misled Mitsubishi." The importer argued that this finding amounted to clear error in light of USTR's letters to Mitsubishi granting the exclusions. Even though the letters granted Mitsubishi's exclusion requests, "CBP refused to apply granted exclusions," the brief said.
Mitsubishi added that the government's conduct amounts to "affirmative misconduct," since it's "egregiously unfair" when an importer is "told in writing" its imports are excluded from Section 301 duties only for the government to then "reverse its position once the products have already been imported and charge the importer tens of millions of dollars in Section 301 duties, that Mitsubishi had not accounted for." The government also "failed to communicate to Mitsubishi" that its goods didn't qualify for the exclusions "after apparently conducting a thorough review of" the exclusion applications, the importer said.
The company said had it known it was liable for Section 301 tariffs on its goods, "it would have either imported fewer Supported Catalysts or none at all" or "looked for alternative sources outside of China." The company wouldn't have paid the tariffs had the government "decided to honor the exclusions or give Mitsubishi notice, prior to importation, that the Supported Catalysts, imported in block form and described in the exclusion applications, were subject to China Section 301 tariffs."
This "lack of notice underscores the egregiousness and unfairness of this harm," the brief said.