CBP's TFTEA Drawback Regulations Held Up by Size, Sprawling Reach, Importers Say

CBP is unjustifiably holding up regulatory changes for drawback required by the Trade Facilitation and Trade Enforcement Act of 2015 by including them in a 450-page regulatory package that may take years to wind through the rulemaking process, said several companies challenging CBP’s interim drawback procedures at the Court of International Trade in a recent legal brief. Responding to the government’s motion to dismiss their case, the plaintiffs said part of the reason CBP hasn’t yet issued its new drawback calculation rules is likely because its upcoming Part 190 proposal includes non-urgent, optional conforming regulations that go beyond Congress’ mandate.

The proposed TFTEA drawback regulations are in the final step of regulatory review, having been sent for Office of Management and Budget approval in early April (see 1804100041). Leaving 90 days for OMB review, that puts the proposed rule sometime in mid- to late 2018, said the companies, a mix of importers and drawback filers. But “history indicates that, for major regulatory changes, the time between publication” of the proposed rule “and issuance of a final regulation can take from two to six years,” they said. That delay is “particularly unreasonable when, as CBP suggests, failure to enact the rule requires CBP to shut down large portions of the drawback program now (and will result in a complete cessation of drawback claims processing after February 23, 2019),” the companies said.

The drawback filers were responding to a motion to dismiss their lawsuit filed by the government on April 13. CBP Deputy Executive Assistant Commissioner for Trade Cynthia Whittenburg defended CBP’s miss of the Feb. 24, 2018, statutory deadline, in a declaration included with the motion. "After TFTEA was enacted, CBP promptly began work on developing the necessary implementing regulations. After extensive analysis, internal deliberation, and significant outreach to various trade stakeholders, CBP created a draft regulatory package, in the form of a detailed” proposed rule that was “over 400 pages long,” she said. That regulatory package includes “a vast scope of changes necessary to implement the full scope of TFTEA’s amendments, including conforming amendments to other affected areas of the law,” the government said in its motion.

According to the drawback filers, those conforming changes could be holding up the relatively concise rules detailing the actual new calculation methodologies for TFTEA. “Failing to make this critical distinction, Defendants seem willing to largely shut down the entire drawback program until a large package of conforming regulations can be finalized -- a process which took nearly five years after the last major revision of drawback standards following passage of the 1993 Mod Act,” their brief said.

In their lawsuit, filed in late March (see 1803260048), Tobacos de Wilson, Tobacco Rag Processors, Brown-USA, Nippon America, Skate One Corporation, Alliance International, C.J. Holt and Customs Advisory Services said the government is improperly not processing their requests for accelerated payment on TFTEA drawback claims. Part 191 of the customs regulations, which provides for accelerated payment, continues to apply to all drawback claims in the absence of a new final regulation on drawback. They also say several policies CBP detailed in a draft guidance on TFTEA ACE drawback procedures amount to regulations that should have been issued via notice and comment under the Administrative Procedure Act.

According to the government’s motion to dismiss, the draft guidance is simply “a way for claimants to file their claims electronically under the new law,” and is “nothing more than policy statements or interpretive rules.” They aren’t a final agency action reviewable in court, the government said. Providing accelerated payment is impossible in the interim because there is not yet a basis to calculate the payments, the motion said. “CBP is holding all TFTEA drawback claims until the implementing regulations are in place, and allowing claimants to perfect their claims after the legal framework is settled. Therefore, plaintiffs have no standing to bring these claims,” the government said.

Email ITTNews@warren-news.com for copies of the motion to dismiss and response.