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Deemed Liquidations Preempted CBP Liquidations in $1.4 Million Drawback Case, Importer Argues

Two claims of substitution drawback for imports of petroleum derivatives already had been deemed liquidated when CBP later "attempted" liquidation,importer Performance Additives, LLC said in an Aug. 31 motion for judgment at the Court of International Trade. Performance Additives is seeking repayment of over $1.4 million in Section 301 duties it argues were improperly levied (Performance Additives v. U.S., CIT # 22-00044).

The company imports chemical polymers for resale in the U.S. to a variety of customers. Many of the imports, including those at issue, are products of China subject to Section 301 duties. Section 301 duties are considered regular duties eligible for drawback, Performance Additives argued.

The case concerns a pair of claims for petroleum derivative substitution drawback made in 2016 and 2020. In 2015, CBP approved applications for drawback privileges and accelerated payment of drawback for Performance Additives. The agency then made accelerated drawback payments between 2016 and 2020 but never affirmatively liquidated the underlying claims. In July 2020, CBP told Performance Additives that its payment of drawback was suspended and then liquidated all claims without benefit of drawback, including those on which accelerated payment had been paid.

Performance Additives protested the liquidations, which CBP denied, stating that a "drawback claim did not liquidate by operation of law in accordance within 19 USC 1504(a)(2)(B); all designated entries were not liquidated and final within one year of the claim having been filed."

For the 2016 claim, Performance Additive argued that CBP's position is "obviously wrong on its face." More than five years after the date of the claim, and over four years after it had made accelerated payment, CBP liquidated the claim “no drawback” and claimed $91,291 previously paid out by the government, which Performance Additives then repaid.

Even if CBP had provided valid notices of extension, that claim would have been deemed liquidated on March 8, 2020, the fourth anniversary of the date of the claim, the importer argued. CBP "had to have known" that the claim was liquidated by operation of law when it asserted liquidation over a year later. "Their own records told them that this basis for denial is wholly without merit," Performance Additives said.

The 2020 claim concerned entries liquidated on various dates between May and October 2020 and claimed recovery of $1,328,589.84. Performance Additives filed the claim on March 10, 2020,and argued that all of the import entries were liquidated within one year of that filing.

CBP never extended the liquidation of that claim and so it liquidated by operation of law one year later on March 10, 2021, two months before CBP claimed it liquidated the claim on May 14, the importer argued. Performance Additives cited 19 U.S.C. § 1504(a)(2)(A), saying that “an entry or claim for drawback not liquidated within 1 year from the date of entry or claim shall be deemed liquidated at the drawback amount asserted ... ."

Deemed liquidation is subject to only three exceptions, none of which were met by CBP, the importer argued. First, CBP can extend the period for liquidating the drawback claim, but didn't do so. The other two exceptions allow a claimant to force liquidation of its drawback claim, which didn't happen here, or existed only as a "transitional rule" no longer in effect, Performance Additives said.