All Pre-2004 Drawback Claims Liquidated in 2005, No Exceptions, Says CIT

All drawback entries filed before Dec. 3, 2004 deemed liquidated one year later and can no longer be reviewed by CBP, said the Court of International Trade on Dec. 13 as it ruled in favor of Ford Motor Company in a long-running dispute over a series of decade-old drawback claims (here). A law passed by Congress in 2004 providing for deemed liquidation of drawback entries also had the effect of cleaning out the backlog of claims existing at the time, regardless of whether the underlying import entries had liquidated, said the court.

The law, passed as an amendment to the Miscellaneous Trade and Technical Corrections Act of 2004, added a drawback section to the deemed liquidation statute at 19 USC 1504(a)(2). Under subsection (A), drawback claims are deemed liquidated one year after filing, with two exceptions: subsection (B) says drawback claims with underlying import entries that are still unliquidated can only be deemed liquidated if the claimant waives the right to drawback refund; and subsection (C) says any drawback claims unliquidated as of Dec. 3, 2014 were deemed liquidated on Dec. 3, 2005, as follows:

“An entry or claim for drawback filed before December 3, 2004, the liquidation of which is not final as of December 3, 2004, shall be deemed liquidated on the date that is 1 year after December 3, 2004, at the drawback amount asserted by the claimant at the time of the entry or claim.”

Ford had filed 17 drawback claims between 1996 and 2004 and obtained accelerated payment. After the third day of December passed in 2005, Ford assumed it would hear no more from CBP and could keep the money. But in 2008, CBP began reviewing and liquidating the claims, in some cases finding against Ford and demanding refunds of the accelerated drawback payments. According to CBP, the drawback claims had not deemed liquidated in December of 2005 because the import entries underlying some of the claims were still unliquidated at the time. Under CBP’s interpretation of the new law, the provision in subsection (C) that deemed liquidated all pre-December 2004 claims one year later was subject to the same limitation as post-2004 claims: under subsection (B), the import entry could not be unliquidated.

Called on by Ford to invalidate the refund demands and rule the claims had deemed liquidated in 2005, CIT agreed that CBP’s interpretation of the 2004 law is incorrect. Subsection (C) clearly says that all drawback claims outstanding as of Dec. 3, 2004 must be deemed liquidated on Dec. 3, 2005, it said. No language in the provision points to the exception in subsection (B), unlike subsection (A) for post-2004 claims, which does reference the subsection, said the court.

According to CIT, the uneven application of the exception for unliquidated underling import entries was intentional. Concerned with the lack of finality for drawback claimants, Congress created a system for deemed liquidation of all drawback claims, effective for all claims, with certain exceptions, filed on or after the date the Miscellaneous Trade and Technical Corrections Act became law on Dec. 3, 2004. However, Subsection (C) was inserted to address a different concern, said CIT: the backlog of aging drawback claims CBP was sitting on at the time. The subsection was put in as a “one-time, retrospective, transitional, clean-up provision, designed to eliminate Customs’ backlog of aging drawback claims – one way or the other – no later than Dec. 3, 2005,” said the court.

Congress could have “taken a more surgical approach,” also limiting deemed liquidation of pre-December 2004 claims only to those related to liquidated entries, said CIT. “Instead, however, Congress, in its wisdom, allowed Customs one year from the date of the statute’s enactment to take appropriate action on all existing … drawback claims, providing, at the same time, for finality and repose (i.e., deemed liquidation) as to all such claims that were not affirmatively liquidated by the statute’s one-year anniversary.”

(Ford Motor Company v. U.S., Slip Op. 15-02, CIT # 09.00375, dated 01/13/15, Judge Ridgway)

(Attorneys: Matthew Caligur of Baker & Hostetler for plaintiff Ford Motor Company; Justin Miller for defendant U.S. government)