CBP Cannot Refund Money Given with a Prior Disclosure, Government Argues at Trade Court

CBP has no authority to pay interest when refunding money voluntarily tendered with prior disclosures, DOJ argued in a Dec. 15 motion at the Court of International Trade. The government's motion was in response to phone case importer Otter Products' Sept. 12 motion for judgment, in which the company argued that 19 U.S.C. 1520(a)(3) "unambiguously authorizes" the treasury department to refund duties or other receipts whenever money is deposited in the Treasury (see 2209130029) (Otter Products v. United States, CIT #22-00033).

When Otter had tendered payment with the prior disclosure, it calculated the amounts based on CBP’s determination that the subject merchandise was classifiable under subheading 4202.99.00 with a 20% duty rate. After litigation before CIT and the U.S. Court of Appeals for the Federal Circuit, the classification of the imported merchandise was determined to fall under subheading 3926.90.99, with a 5.3% duty rate.

In November 2016, Otter sent letters to CBP seeking refunds of the overpayments due to the 14.7 percentage point difference, along with applicable interest. CBP subsequently refunded to Otter a portion of the tendered amounts for each of the three prior disclosures reflecting the difference in duties paid, but CBP determined that it had "no statutory authority to pay interest when refunding money voluntarily tendered with a prior disclosure." Otter then sued seeking interest payments.

DOJ argued that CBP's prior disclosure informed compliance publication, upon which Otter bases much of its argument, makes no mention of interest and that "no statutory provision calls for the award of interest on a prior disclosure." Because prior disclosures do not undergo liquidation, interest pursuant to section 1505(b) & (c) is inapplicable.Provisions permitting interest on liquidations and reliquidations "cannot be construed to allow for the award of interest when no statute ... has waived sovereign immunity for such an award."

Interest payments from the government "may only be recovered when an award of interest was affirmatively and separately contemplated by Congress," which is not the case here, DOJ argued. Prior disclosures are statutory mechanisms that exist to allow importers to shield themselves from potential liability in exchange for voluntary disclosure of wrongdoing. "That Otter felt compelled to tender its payments does not convert [that] tender into money deposited on account of a fine, penalty, or forfeiture," DOJ argued.