Did you know that contested customs duties must be paid before a protest denial can be challenged in court? On May 6, 2010, the Court of International Trade (“CIT”) issued a decision that illustrates the importance of properly paying duties in advance of filing suit.
The plaintiff in Great American Insurance Company v. United States, a surety, sought to judicially challenge Custom’s reclassification and duty rate advance on certain tobacco products. First, as was proper, either it or the importer of record filed a protest, which CBP denied two years thereafter. Great American then decided to go to court.
Unlike the procedure in most courts, an action in the Court of International Trade is commenced by filing a summons, not a traditional complaint. A summons provides notice to a defendant as to the nature of a plaintiff’s lawsuit and the filing of a summons triggers the Court’s jurisdiction. By statute, one can challenge a protest in court only when a summons is filed within 180 days of CBP’s protest denial. The court rule concerning the filing of a summons provides that a summons is deemed filed on the date that it is mailed. Great American mailed its summons on May 10, 2006.
On May 10, 2006, Great American also mailed a payment to CBP in the amount of the duties it sought to challenge at the CIT. The regulation concerning the timing of duty payments to CBP provides that duties are considered paid as of the date they are received by CBP. As of May 10, 2006, Great American still had a week before its filing deadline at the CIT would expire, and presumably it could have either hand delivered its duty payment to CBP or waited several days after its duty payment was mailed to mail its summons. However, the legal effect of its mailing a summons and duty payment on the same day was that the CIT action was commenced prior to the time when the contested duties were paid.
The payment of contested duties prior to the filing of a CIT action is a jurisdictional requirement. In other words, unless that condition precedent is fulfilled, the court lacks jurisdiction over the matter, and is powerless to hear a case or do equity to save a party from the consequence of its mistake, as Great American requested. The Court actually noted that Great American failed to exercise due diligence when it mailed its summons and duty payment on the same day, so despite the jurisdictional issue, it does not appear that the judge was particularly sympathetic to Great American’s plight. Of course, by the time the CIT decided the case, some four (!) years after it was filed, it was far too late for Great American to re-file and correct its action, so it was stuck having paid the contested duties to CBP without any means to thereafter obtain judicial review.
The moral of the story? As any comedian will tell you, timing is everything.