CIT Upholds Denial of Nearly $300K in Drawback Claims Under Pre-TFTEA Regs

The Court of International Trade upheld on June 17 the denial by CBP of more than $276,275.12 in drawback claims from a video technology importer and exporter as untimely. The trade court found that, under CBP’s now-defunct 1993 drawback regulations, the date of filing is when a complete paper claim has been submitted, not when the electronic summary is transmitted. It also held CBP guidance documents did not give the wrong impression that no paper documentation was necessary for drawback claims.

EchoStar had filed the claims at issue in 2014 and early 2015, before new drawback procedures under the Trade Facilitation and Trade Enforcement Act, including fully electronic filing, took effect. EchoStar’s drawback entries had been transmitted via the Automated Broker Interface (ABI) within the three-year deadline, but its paper claim, including CBP Form 7551 and supporting documentation, had been filed too late, causing CBP to reject the claims.

EchoStar had apparently been unaware of the paper filing requirement, and understood the applicable regulations to not require paper. Even though its forwarder, FAK Distribution and Logistics, had advised it to file a paper claim as “back up” and to contact CBP to check whether a paper claim was required, EchoStar did no such thing. It interpreted a guidance document from CBP San Francisco to say drawback claims should be filed electronically, and the office should not be contacted for a status report unless a claim is outside the standard time frames.

CBP would eventually reach out to warn EchoStar’s drawback broker, Laredo Becnel, to say that the claims would be denied unless “the drawback claims associated with the ABI transmission” was submitted within 15 days. Laredo Becnel submitted the claims within that 15-day time frame, but by the time CBP had sent its letter the three-year deadline had passed. CBP denied the claims, as well as EchoStar’s subsequent protests. EchoStar then filed suit at CIT.

EchoStar told the trade court that its claims should be accepted because the “date of filing” for deadline purposes is the date of the electronic transmission in ABI. CIT rejected that argument. Under CBP’s 1993 drawback regulations, a complete drawback claim, including CBP Form 7551, must be filed within three years of export. A drawback claim cannot be complete without a 7551, and, at the time the entries were filed, there was no way to file a 7551 via ABI. As such, the claims were not complete by the deadline, so EchoStar “was not entitled to the drawback privilege,” CIT said.

Nor was the late filing CBP’s fault, as EchoStar contended. CBP San Francisco’s guidance did not say its drawback office shouldn’t be contacted under any circumstances, but only that it shouldn’t be contacted for status updates. EchoStar’s own forwarder told it to contact CBP. EchoStar was also in possession of the applicable Customs and Trade Automated Interface Requirements, which says filers must submit paper claims. And though CBP denied the claims despite compliance with its letter requesting paper claims within 15 days, the claims were already late when CBP sent the letter, so the letter could not have caused EchoStar to file its claims late, CIT said.

“In sum, the court’s determination, confined as it is to the record, is necessarily a narrow one,” CIT said. “While the Guidance was not a model of clarity, on review of the entire record and consideration of the governing statute, regulations, and clear precedent, the court concludes that CBP is ultimately not responsible for EchoStar’s failure to timely file complete drawback claims because of either the Guidance or CBP’s ‘late’ notice to EchoStar to provide additional documents.”

(EchoStar Techs., L.L.C. v. U.S., Slip Op. 19-74, CIT # 16-00074, dated 06/17/19, Judge Katzmann)