CIT Rules that Bad Drawback Advice by Customs did not Justify Fee Award

In Delphi Petroleum, Inc., v. U.S., the Court of International Trade ruled that Customs had not acted in bad faith by failing to extend the statutory time limit for filing Delphi’s drawback claims under 19 USC 1313(r)(1) and denied Delphi’s motion for attorneys’ fees¹ pursuant to the Equal Access to Justice Act, 28 USC 2412.

Between 1998 and 2002, Delphi filed drawback entries covering certain petroleum products it imported and subsequently exported. In the ensuing dispute over these entries, the court found that Customs was responsible for Delphi’s delayed filings, because Delphi was advised by Customs personnel to delay filing the claims until other events, i.e., liquidation, had transpired, so that a protest could be filed. Several of Delphi’s HMT and MPF drawback claims on which they had requested an extension were then denied by Customs, based on the statutory three-year limitation for filing². Delphi eventually prevailed in its argument that the three-year time limit for filing its drawback claims should have been extended by Customs under 19 USC 1313(r)(1).

In the current case, Delphi sought attorney’s fees alleging that Customs acted in bad faith (1) by failing to extend the statutory time limit for filing its drawback claims, (2) by its refusal to settle the claim, and (3) by giving conflicting answers to Delphi’s interrogatories as to why it delayed liquidation of Delphi’s drawback claims.

According to Delphi, Customs’ actions caused Delphi’s untimely filing, forced Delphi to incur the legal expenses, and that had it not been for Customs’ bad faith and wanton disregard of its responsibilities, Delphi claims would have been paid in full without litigation.

The CIT addressed Delphi’s first claim stating that under 19 U.S.C. 1313(r) (1) Delphi was not clearly entitled to an extension of the statutory time limit. Customs had not promulgated any regulations to implement the extension provision, nor were there any established standards or any evidence that Customs had previously granted an extension under this statutory provision.

On the second claim, the CIT noted that Delphi had not provided any evidence demonstrating that Customs had acted in bad faith when it did not process Delphi’s claims promptly and delayed liquidation.

On Delphi’s last claim, the CIT stated that Customs’ answers to the interrogatory as to whether or not it had suspended liquidation were not material, and its responses, while somewhat inconsistent, did not warrant awarding attorney’s fees.

Thus, the CIT found that Delphi had not demonstrated bad faith on the part of Customs in connection with either the processing of the administrative claims or Customs’ defense of the action, and the Court denied the motion to pay Delphi’s legal fees.

¹Delphi sought to recover attorney fees in the amount of $34,276.51.

²Under 19 U.S.C. 1313(r) (1) a drawback claim and all necessary documents to complete the claim must be filed within 3 years after the date of exportation and no extension can be granted unless it is established that Customs was responsible for the untimely filing.

(See ITT’s Online Archives or 09/23/04 news, [Ref 04092320], for BP summary of CIT Delphi Petroleum, Inc. v. U.S. Slip Op. 09-139 allowing drawback claims that were delayed.

(Slip Op 10-77, dated 07/09/10)