U.S. Customs and Border Protection (“Customs”) is responsible for administering a long list of statutes under which, if a violation occurs, seizure of the imported merchandise is possible. In some situations, such as merchandise that is stolen, clandestinely imported into the U.S., a controlled substance or contraband, seizure is mandatory. However, there are many situations in which Customs may, but does not have to, elect to pursue seizure. This includes such scenarios as FDA (Food and Drug Administration), EPA (Environmental Protection Agency), or CPSC (Consumer Product Safety Commission) violations, failure to obtain a required license or permit, some intellectual property violations, origin marking violations, or merchandise imported in violation of a quantitative restriction, i.e., quota. However, Customs has other remedies that it may instead elect to pursue, including excluding the goods from entering the commerce of the United States, whereby it may be exported to other countries.
When merchandise first arrives in the U.S., Customs has five days in which to release it, after which it is considered to be “detained.” Customs typically will detain the goods while it decides what course it wishes to pursue. If Customs does not make a decision as to admissibility within 30 days of the detention, the law assumes that Customs has decided to exclude the merchandise from entry. This is known as a “deemed exclusion” (19 U.S.C. §1499(c)) and the importer then has the right to file an administrative protest with Customs. If the protest is denied, the Court of International Trade (CIT) has jurisdiction to decide whether the exclusion was proper. The CIT has exclusive jurisdiction over the denial of such protests pursuant to statute (28 U.S.C. §1581(a)). The law also provides that an importer’s protest against exclusion will be deemed (assumed) denied 30 days after submission to Customs, whereupon the importer can immediately proceed to Court.
Thus, the timeline might be as follows:
Up to 5
Release of merchandise
Up to 30
Deemed Exclusion (Protestable Event)
30 from protest
Protest Deemed Denied
CIT Summons if no intervening CBP Seizure
If merchandise is seized before CIT summons, federal district court has jurisdiction
However, an added wrinkle is that this timeline does not apply to all exclusions. The Customs regulations at 19 C.F.R. §151.16 specifically enumerate that this section, which is the regulation intended to implement the statutory language on deemed exclusion of detained merchandise and deemed denial in 19 U.S.C. §1499(c), does not apply to detentions affected by Customs on behalf of other government agencies “in whom the determination of admissibility is vested” nor to detentions arising from possibly piratical copies, imports of articles bearing counterfeit marks or suspected counterfeit marks, goods bearing marks that are confusingly similar to recorded trademarks, or restricted gray market merchandise. This language differs from the statute itself, which only appears to exclude merchandise for which admissibility determinations are vested in another agency.
While the impact of this regulation is less than crystal clear, Customs provided some helpful commentary when it enacted the regulation in 1999. Customs said that if another agency agreed to give Customs the authority to make admissibility decisions, then the detention rules would apply to it, but if the agency kept that authority to determine admissibility decisions, such as with the FDA, the detention regulation would not apply as the other agency had would have its own procedures. The FDA, for example, is described as having a well-established detention and hearing program.
For trademark violations, Customs said that these were excluded from the detention rules by 19 C.F.R. §151.16, as they fall under specific rules provided for in 19 C.F.R. Part 133 Subpart C. Those rules provide for seizure of counterfeit merchandise, and detention and denial of entry of articles with a copying or similar trademark and gray market articles “for 30 days from the date on which such merchandise is presented for Customs examination.” If not released within the 30 day period, the regulations provide that the merchandise “shall be seized”. For copyright violations, Customs noted that this is controlled by 19 C.F.R. Part 133 Subpart E. The regulation provides that the Port Director “shall seize” infringing copies, with a notice being given to the importer, who must deny within 30 days that the merchandise is an infringing copy or it is subject to seizure and forfeiture. 19 C.F.R. §133.42.
As you will see from the below-discussed cases, when Customs fails to make such seizure of infringing merchandise by the end of the 30 day period, the courts have allowed use of the deemed exclusion and protest procedure, notwithstanding the exclusionary language of 19 C.F.R. §151.16. In April 2012, Customs enacted an interim regulation providing for a 30 day detention period for articles with counterfeit marks, which may be extended for up to 30 days for good cause shown by the importer. If goods are not released within this period, there is a deemed exclusion for the purposes of allowing a protest. Thus, for counterfeit goods at least, the deemed exclusion is now explicit in the regulations.
CIT Jurisdiction Issues
Seizure Before Summons
Confusion may arise in certain situations whereby Customs fails to make a decision within the 30 day period of detention (and thus a “deemed exclusion” has taken place) but then Customs decides to move ahead and seize the goods. Such seizures are normally subject to judicial review not in the Court of International Trade, but in the district courts. What if an importer has already filed a protest and is anticipating having its day in Court, but then gets a seizure notice from Customs? The answer to this question is not obvious. However, there have been a number of court decisions discussing this and related issues, from which some general guidelines may be gleaned.
R.J.F. Fabrics, Inc. v. U.S., 10 CIT 735 (1986) was a case in which the entry papers for the goods stated they originated in Japan, but Customs suspected that they originated in Korea and that the importer was attempting to skirt the quota/visa requirements. Customs first excluded the goods, then a month later seized them. The importer then protested and brought an action seeking the release of the goods. The case was decided before the law allowed for deemed exclusion. The CIT decided that the mere possibility of future proceedings in other courts did not deprive the Court of jurisdiction, that the matter had been properly protested, and noted that even if it had not been, there was jurisdiction in the CIT as the matter arose out of a quantitative restriction on imported goods. Thus, early on, the CIT appeared to be making a strong statement that it would take jurisdiction over cases involving goods not allowed into the U.S. because of a violation of the customs laws. However, later cases somewhat undermined this development.
In International Maven, Inc. v. United States, 12 CIT 55 (1988), the imported goods were alleged to be counterfeit. Customs seized the goods and the importer filed a protest challenging the seizure (rather than the exclusion). The protest was denied and the importer then filed suit in the CIT. The Court applied four factors to decide that there had not been a protestable exclusion: that the protest challenged an exclusion rather than a seizure; that the plaintiff received notice of seizure, that the government had control over the merchandise; and that upon notice, the plaintiff was required to choose between forfeiture or petition relief. Thus, there was nothing that could be characterized as an exclusion, as the goods were seized at the time of attempted entry. The Court held that while it had jurisdiction over actions related to the exclusion of merchandise subject to trademark protection, because the matter was a seizure and not an exclusion and the protest expressly challenged the seizure, the district courts, rather than the CIT, had jurisdiction.
Milin Industries, Inc. v. U.S., 12 CIT 658 (1988) involved a possible quota violation. Customs held the articles and refused to issue a permit. Customs then seized the articles, claiming that the merchandise was misdescribed on the invoice and was classifiable under a provision for which it did not have the required visas. The government argued that this was a seizure over which the CIT had no jurisdiction. The law did not yet provide for deemed exclusion. However, the CIT construed the delay as an exclusion, which was subject to protest, and further held that the subject matter, i.e. the classification of goods, was something over which the CIT was intended to have jurisdiction. Thus, the case remained with the CIT.
In a pair of cases decided the same day, Genii Trading Co. v. U.S., 21 CIT 195 (1997) and Tempco Marketing v. U.S., 21 CIT 191 (1997), the CIT was dealing with trademark violations (counterfeit labels). In Genii, Customs detained the goods, 30 days passed and they were deemed excluded. Customs then sent the importer a notice of detention followed by a notice of seizure. The CIT said that just because the protest was filed after a seizure did not mean that the importer was protesting the seizure as opposed to the exclusion. The Court weighed a number of different factors, finding it decisive that, like in International Maven a trademark issue was involved, and found the seizure trumped the exclusion. In Tempco, for one entry, the goods were deemed excluded, then seized, and then the importer protested. For a second entry, the goods were seized before exclusion, and then the importer protested. For the third entry, the goods were seized before there was a deemed exclusion, but there was no protest. The Court said because there was no exclusion for the second and third entries, because trademark law was involved, and because there was no protest for the third entry, it did not have jurisdiction and the case had to be heard in the district courts.
In H & H Wholesale Services, Inc. v. United States, 30 CIT 689 (2006), there was a hold for intensive examination by Customs, which then seized the merchandise for counterfeit trademark violation within the 30 days. However Customs failed to provide the required detention notice. The CIT held that it did not have jurisdiction, as the importer could not transform the seizure into an exclusion simply by filing a protest. The Court said the failure to provide a detention notice related to the seizure and was a matter that should be heard by the district courts. The Court in applying the four International Maven factors noted that while the protest had indeed challenged an “exclusion”, that fact standing alone was not enough as it is the actions taken by Customs rather than the importer that are the subject of the inquiry. More important here was the fact that Customs did not deny the protest by rejected it as non-protestable, that the importer received notices of seizure which required it to choose between forfeiture or a petition for relief, and that the importer had not shown it had regained control over the merchandise. The Court noted that when the Milin case was heard, there was no deemed exclusion period provided for by statute, so a delay between entry and seizure could at that time be considered a protestable exclusion; once the 30 day period was the law, that period had to run out before there was such a deemed exclusion. The Court also rejected the idea that the fact the seizure notices had later been amended meant that the original seizure notices were void from inception.
Seizure After Summons
In CBB Group, Inc. v. U.S., 783 F.Supp.2d 1248 (CIT 2011), the merchandise was alleged to be copyright infringing pirated copies. Customs refused to release the merchandise, the 30 day period ran out, and there was a deemed exclusion. CBB filed a protest the day after the deemed exclusion, and brought the matter to Court on an expedited basis. Subsequently, Customs issued a seizure notice to CBB, which purported to have seized the goods on the same date as the summons was filed in the CIT. The government tried to argue that there was no jurisdiction as the merchandise was seized rather than excluded, and further because the underlying dispute related to intellectual property issues. The CIT decided that, as the seizure notice was issued after the close of the periods for deemed exclusion and deemed denial of the protest and the filing of a summons, jurisdiction had already been conferred upon the CIT, and it could not be divested simply by Customs’ act of issuing a seizure notice. In making its determination, the Court cited the language of 19 U.S.C. §1499 which explicitly excludes from the detention rules only merchandise for which admissibility is vested in an agency other than Customs, rather than 19 C.F.R. §151.16, which has the broader exclusionary language. The Court also noted previous appeals court law recognizing the CIT’s implicit authority to decide intellectual property law cases.
A more difficult timeline was presented in PRP Trading Corp. v. United States, 2012 Ct. Intl. Trade LEXIS 128, Slip Op. 12-00103 (Oct. 2, 2012). The case involved entries of aluminum on which Customs believed the origin marking was false. Customs issued notices of detention, the goods were presented to Customs for examination, and the thirty day clock started to run. Customs decided to seize the merchandise, but did not issue notices of seizure for a further six weeks. The government argued that the deemed exclusion was not relevant because the government seized the merchandise before the commencement of the Court action. For three of the entries, the 30 day period for deemed exclusion had not run before the goods were seized. However, the Notice of Seizure was issued several weeks before the Court summons was filed. The Court found CBB not to be relevant because in that case, the importer was already in Court by the time the seizure was made. Thus in PRP Trading, the Court held that the seizure trumped the exclusion, and the case had to be heard in the district courts, not in the CIT. By distinguishing CBB on the basis that the case was already in Court when the seizure notices were filed, the CIT appears to have accepted the government’s argument that until the summons is filed in the CIT, the government can step forward, issue a seizure notice, and thus force the importer into litigating the seizure in the district courts, rather than the protest and subsequent CIT route.
An interesting question arises from PRP Trading. There was a time lag of 6 weeks between when Customs decided to seize the goods and the issuance of a Notice of Seizure to the importer. One might ask, what is the effective date of the seizure---when Customs seizes the goods, when it sends the notice to the importer, or when the notice is received? The Customs regulations are silent on this issue, however the applicable statute providing for notice of civil forfeiture proceedings, 18 U.S.C. § 983(a), does note that in any nonjudicial civil forfeiture with respect to which the government is required to send notice to interested parties, “such notice shall be sent in a manner to achieve proper notice as soon as practicable, and in no case more than 60 days after the date of the seizure. This would seem to imply that the “date of the seizure” is the date when Customs acts to seize the goods, not the date of the notice. In CBB Group, however, the judge seemed to rely on the date of the seizure notice, stating “[t]he court fails to see how an internal agency decision to proceed with seizure, which did not ripen into a notice to the importer until twenty-one days later, could have the effect of precluding a remedy in this case.” In that case, of course, Customs claimed that its decision to seize was made on the same day as the summons was filed (and more than likely a response thereto). However, until a case arises whereby a case was clearly filed after steps were taken towards seizure but before a notice of seizure was received by the importer, we will likely not have a definitive answer as to which date a seizure takes effect for the purpose of trumping an exclusion case.
The conclusion that can be drawn from this handful of cases is that if an importer wishes to have his case heard by the CIT as an exclusion case, then it should immediately file a protest once it receives a notice of detention or the 30 day deemed exclusion period has passed. Once the protest is denied or another 30 days has passed and that protest is deemed denied, the importer can file an immediate summons in the CIT. Once that summons is filed, Customs will not be able to change the game by issuing a seizure notice. The protest should make it explicit that it challenges an exclusion. Further, in certain scenarios, even if the goods were seized before a CIT summons was filed, the CIT may decide to take jurisdiction on the basis that the matter is more properly within the expertise of the CIT. This seems more likely to happen when the reason for the exclusion/seizure involves an import-specific issue like origin marking, rather than an intellectual property issue such as trademarks. However, the best way for an importer to position itself to trump a potential seizure and have the CIT decide admissibility is to file a protest challenging the deemed exclusion, and subsequently a summons, on the earliest possible date. If, however, the detention notice comes from another government agency which makes its own decision on admissibility and Customs is merely acting to enforce that decision, these detention and exclusion rules will not apply and you must look to the rules of the agency in question to determine how you should proceed.