International Custom Products, Inc. v. United States
2015 CIT 68
| Ct. Intl. Trade | 2015Background
- ICP (importer) received a 1999 CBP binding ruling classifying its imported "white sauce" as a sauce/preparation under HTSUS; CBP issued a Notice of Action in April 2005 rate-advancing entries to a dairy-spread tariff (≈2400% higher) without prior revocation of the ruling letter.
- ICP sued; after protracted litigation the Court (bench trial) found the Notice of Action improperly revoked the Ruling Letter and that the subject entry conformed to the Ruling Letter. The Federal Circuit affirmed.
- ICP moved for fees under the Equal Access to Justice Act (EAJA). The government conceded ICP prevailed but argued its position was "substantially justified" and that special circumstances preclude fees.
- The government relied on CBP lab analyses, alleged misrepresentations in ICP's ruling request, and argued a Notice of Action was not an "interpretive ruling" triggering notice-and-comment under 19 U.S.C. § 1625(c).
- The Court examined CBP’s internal deliberations (showing awareness revocation procedures applied), lab reports, and witness testimony, concluding the government’s actions were not substantially justified and that no special circumstances made an award unjust.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the government’s position was substantially justified (overall) | ICP argued CBP unlawfully rate-advanced entries without revoking the binding ruling; thus gov't position lacked reasonable legal/factual basis | Gov't contended its position was reasonable (survived summary judgment, lab evidence supported reclassification, novel legal question about Notices of Action) | Held: Government not substantially justified; CBP knowingly bypassed revocation procedures and advanced post-hoc rationales inconsistent with law |
| Legality of issuing Notice of Action without revoking binding Ruling Letter | ICP: Notice of Action effectively revoked/contradicted binding ruling and violated §1625(c) procedures | Gov't: A CF-29 Notice of Action is entry-specific and not an "interpretive ruling or decision" covered by §1625(c); revocation procedures were not triggered | Held: CBP’s action was improper; OR&R’s view that the ruling didn’t apply was erroneous and government later conceded error on appeal |
| Material misrepresentation / nonconformance of the imported product | ICP: provided accurate description; CBP’s contentions of fraud/misrepresentation and nonconformance were unsupported; lab tests and NIS testimony showed conformance | Gov't: ICP misrepresented principal use, composition, and omitted material facts; product use differed from ruling | Held: Government’s misrepresentation and nonconformance theories were not substantially justified and largely contradicted by CBP lab reports and witness testimony |
| Whether special circumstances or novel legal questions bar EAJA award; and fee amount issues (cost-of-living, special-factor, reductions) | ICP: no special circumstances; sought EAJA fees with COLA and special-factor enhancement for customs specialists | Gov't: novelty of whether a Notice of Action triggers §1625(c) (and other litigation conduct) makes award inappropriate; challenged specific billing entries and sought reductions | Held: No special circumstances; COLA granted; special-factor enhancement granted for specified customs attorneys (except EAJA-app work); certain non-compensable entries denied and a 33% reduction applied to remaining vague/duplicative/expense entries; parties to submit recalculation |
Key Cases Cited
- Comm'r, Immigration & Naturalization Serv. v. Jean, 496 U.S. 154 (discussion of evaluating government's pre-litigation and litigation conduct together for EAJA)
- Pierce v. Underwood, 487 U.S. 552 (standard that government position must be "substantially justified")
- Gavette v. Office of Pers. Mgmt., 808 F.2d 1456 (allocation of burden to government to prove reasonableness)
- Libas, Ltd. v. United States, 314 F.3d 1362 (EAJA burden/standard)
- Chiu v. United States, 948 F.2d 711 (evaluate substantial justification on overall basis)
- Norris v. SEC, 695 F.3d 1261 (consider clarity/novelty of governing law)
- Role Models America, Inc. v. Brownlee, 353 F.3d 962 (permitting fixed percentage reduction for numerous deficient billing entries)