Customs Law Advisory - Fujitsu Compound Semiconductor Inc. v. United States

Two U.S. courts have confirmed that the burden for ensuring proper liquidation of entries rests on the importer, rather than the U.S. Bureau of Customs and Border Protection (“Customs”).  In Fujitsu Compound Semiconductor Inc. v. United States, the courts found that Customs was not required to correct recent, past liquidations even though Customs had established a new classification of the same merchandise.  In other words, any importer seeking to ensure the most beneficial duty treatment for its imported merchandise should review and confirm the correct liquidation of its entries and, if necessary, file a timely protest.  We encourage all importers to compare their liquidation notices to the original entry documents as part of their regular Customs compliance activities.  Such regular review is likely to reduce errors and can identify refunds owing to the company in time to file a refund claim.

In the Fujitsu case, Customs issued a binding ruling that products imported by one of Fujitsu’s competitors should be reclassified under a tariff number carrying a lower duty rate than the tariff number that had been typically used.  Fujitsu had numerous entries of similar products that had liquidated at the higher duty rate in the 90 days prior to Customs’ ruling.  Fujitsu filed a request for refund more than 90 days after its entries liquidated, arguing that Customs made a “mistake of fact” by failing to reclassify and reliquidate Fujitsu’s entries at the lower rate.  Customs denied Fujitsu’s request.

Fujitsu appealed to the U.S. Court of International Trade (“CIT”).  The CIT upheld Customs’ denial.  CIT Slip Op. 03-6.  According to the CIT, Customs does not bear any responsibility to review entries already liquidated to determine whether they would be affected by subsequent events.  Instead, the CIT held that the burden is on the importer to watch for important events, such as Customs rulings, during the 90 days after liquidation.  It is up to the importer to file a timely protest to seek reliquidation in order to obtain the benefit of such a ruling.   The U.S. Court of Appeals for the Federal Circuit affirmed the result from the CIT.  Fed. Cir. Case number 03-1293.

The Fujitsu decisions by the CIT and CAFC highlight an importer’s responsibility to monitor the liquidation of its own entries.  Liquidation notices are usually issued by Customs ten months after the entry of the merchandise, with some exceptions for antidumping cases and other extensions.  We recommend that importers have these liquidation notices reviewed by knowledgeable company personnel and periodically compared against import documents.  Such reviews are likely to identify and reduce errors, which can significantly reduce exposure to penalties.  Moreover, such reviews may catch improperly liquidated entries that could be revised to more favorable duty rates.  In most cases, a protest must be filed within 90 days of liquidation or the opportunity to make a refund claim may have expired.  Accordingly, internal liquidation review should be regular and prompt.

Please contact Greg McCue at 202-429-6421 or Meredith Rathbone at 202-429-6437 if you have any questions.