CBP Says Surety Can Protest Importer's Denied Accelerated Drawback Claims

The surety company that posts the required bond for accelerated drawback claims has a right to protest a denial of the claims, said CBP in a April 17 ruling. The surety, Washington International Insurance, protested the denial of accelerated drawback claims filed by SFE Citrus Processors in 1998 and 1999 that were eventually liquidated without drawback in 2004. The claims were for imported "concentrated orange juice for manufacturing" that the importer claimed was exported with added "essential oils and essences," creating a new article for drawback purposes. The further review of protest, ruling HQ W231539, also examined whether the regulations allow for a change in the basis of for the drawback claim.

After CBP denied the company's drawback claims due to a lack of processing records, it demanded repayment by the surety for the accelerated payments the agency had already paid out, said CBP. Washington Insurance protested the denied claims. CBP first considered whether the surety has a right to protest. The agency previously found "a surety on a bond stands in the same position as the bond principal vis-a-vis the government and held that a surety should be treated in exactly the same manner as the principal with respect to a petition for relief on a liquidated damages demand," it said. "There is no reason why the surety on a drawback bond would be treated differently." Therefore Washington Insurance has the right to give information to show that no overpayment occurred and may protest the denied claims, said CBP.

CBP also looked whether the protest may include a shift in the regulatory basis for drawback claims. Washington Insurance's protest "abandoned its reliance on 19 USC §1313(b)," which "provides for drawback if imported duty-paid merchandise or substitute merchandise of the same kind and quality is used to manufacture articles that are thereafter exported," said CBP. The surety said the claims were instead eligible for drawback under 19 USC §1313(j), which allows for drawback for commercially interchangeable merchandise that is exported within three years after import. CBP said the change in basis for the claims is allowable as long as long as the claims meet requirements under 19 USC §1313(r)(2), "which allows a claim that is filed under one drawback provision to be considered under another drawback provision."

As to whether the drawback claims were rightfully denied, CBP said it depends on whether the importer was the exporter or can show submit a certificate of delivery to show the transfer of merchandise. "The protest shall be granted on any claim in which the claimant was the exporter to the extent that the protestant shows that the claim is consistent with this decision," said CBP. "On any claim in which the claimant was not the exporter, the protestant shall be given a reasonable opportunity to demonstrate compliance with 19 CFR §§191.34(b) (certificate of delivery) and 191.82 (assignment of right to claim drawback). If the protestant fails to demonstrate compliance with those regulatory requirements, the protest is to be denied as to those claims."