CIT Orders Processing of Drawback for Excise Tax Claims After Rejecting 'Double Drawback' Regs

CBP “must process and pay substitution drawback claims” for excise taxes that were previously prohibited under regulations struck down by a Court of International Trade judgment Feb. 18, according to a copy of the order added to the CIT website on Feb. 25. The judgment invalidates portions of CBP’s regulations, as amended following passage of the Trade Facilitation and Trade Enforcement Act of 2015, that sought to prevent “double drawback” for claims involving excise taxes, including amended definitions of “drawback” and “drawback claim” under the 2017 drawback regulations (see 1812170013).

Those now-vacated portions of the regulations deemed exportation without payment of excise taxes to be a form of drawback, and limited the amount of drawback to the amount of taxes paid (and not previously refunded) on the export that forms the basis for the drawback claim. The National Association of Manufacturers and the Beer Institute challenged the new regulations as contrary to congressional intent. CIT in January ruled in their favor (see 2001270020).

“Apparently the Court wants claims processed immediately, and will leave it to Treasury to correct the wording of the regulations later,” said John Peterson of Neville Peterson, who filed an amicus brief in the case on behalf of Customs Advisory Services in the case. “That is probably the reason the court took the unusual step of publishing the judgment as a Slip Opinion -- to provide broader public notice that certain aspects of the rules have been invalidated and can be disregarded,” he said. CBP and the Justice Department did not comment.