CAFC Upholds Denial of Pre-July 1990 HMT Refunds

In Chrysler Corporationv U.S., the Court of Appeals for the Federal Circuit upheld a Court of International Trade ruling that Chrysler was not eligible for a refund of Harbor Maintenance Tax¹ on export payments made prior to July 1, 1990, as it failed to comply with Customs' HMT refund regulation 19 CFR 24.24(e)(4)(iv)(A), by not documenting the amount paid.

(19 CFR 24.24(e)(4)(iv)(A) eliminated the supporting documentation requirement for HMT export payments made on or after July 1, 1990. However, for payments made prior to July 1, 1990, Customs retained the documentation requirement.²)

On February 9, 2001, Chrysler filed an administrative claim with Customs for a refund of its export HMT payments. On October 15, 2002, Customs sent Chrysler an HMT Payment Report and a Report/Certification, which showed Chrysler had paid a total of $14,331,425.67 in unconstitutional export taxes. The Report/Certification, however, excluded $782,407.45 in pre-July 1, 1990 payments for which Chrysler had failed to provide supporting documentation. On February 10, 2003, Chrysler requested the 782,407.45 in pre-July 1, 1990 payments but did not submit any supporting documents as required by Customs' refund regulation. Customs denied the request, and Chrysler filed a protest, again without any supporting documents.

On appeal, Chrysler argued that the CIT had erred in giving deference to Customs' refund regulation 19 C.F.R. 24.24(e)(4)(iv)(A), because it was promulgated after the Supreme Court had held the authorizing statute unconstitutional. Chrysler argued that if there was no valid statute, there could be no rulemaking authority, and thus no deference. Chrysler argued further that the regulation was invalid because it perpetuated a violation of the Export Clause by placing the burden of re-submitting payment documents on Chrysler. Lastly, Chrysler argued that the CIT erred by failing to apply a presumption of correctness to Customs' electronic database and not requiring Customs, as the party challenging the accuracy of its records, to provide evidence that Chrysler's disputed HMT export payments had been incorrectly recorded.

The CAFC affirmed the CIT decision upholding Customs' refund regulation, stating this first argument disregarded the fact that the HMT statute had been upheld in its application to other port uses (e.g., to cruise ship passengers). Accordingly, the CAFC ruled that Customs retained its broad authority under the statute to collect and administer the HMT, and was entitled to deference in HMT refund regulation.

On the second argument, the CAFC ruled that a regulation does not violate the Export Clause by requiring a claimant to follow certain administrative procedures to receive a refund. In its ruling the CAFC noted that neither the Supreme Court in U.S. Shoe nor the CAFC in Swisher ordered the refund of all export taxes without regard for administrative checks to ensure the refund applied only to HMT export payments.

Finally, the CAFC ruled that Chrysler incorrectly applied the presumption of correctness, which is to be distinguished from the deference that the Court had accorded to the regulations. The CAFC stated that Chrysler erroneously relied on an argument that the presumption of correctness applied to Customs' database, despite regulations to the contrary.

¹Also termed the Harbor Maintenance Fee or HMF

²In 1998, the Supreme Court affirmed the decision by the CAFC, United States v. U.S. Shoe Corp., that the HMT was unconstitutional as it applied to exports, as it violated the Export Clause of the U.S. Constitution. After this decision, Customs, in its effort to provide refunds of the export HMT, began to compare and reconcile its electronic database with the original paper documentation still in its possession. In doing so, Customs discovered widespread inaccuracies in its electronic database.

In 2000, the Court expanded the pool of refund claimants by holding, in Swisher Int'l, Inc. v. United States, that Customs' denial of a refund request for export HMT was a protestable decision, actionable under 28 USC 1581(a), and not subject to the two-year statute of limitations. Based on this decision, Customs streamlined its refund regulation process for HMT and in 19 CFR 24.24(e)(4)(iv)(A), eliminated the supporting documentation requirement for export payments made on or after July 1, 1990. However, for payments made prior to July 1, 1990, Customs retained the documentation requirement, because it no longer possessed the original documents and by then realized that it could not rely on its database as the sole source of payment information.

(See ITT's Online Archives or 05/16/02 news, 00205610, for BP summary of Customs final rule that amended the HMF export refund process.)

CAFC decision 09-1267 (dated 01/19/10) available athttp://www.cafc.uscourts.gov/opinions/09-1267.pdf

CIT Slip Op. 09-9 (dated 01/29/09) available athttp://www.cit.uscourts.gov/slip_op/Slip_op09/Slip%20Op%2009-9.pdf