Cigarette Importer Challenges Denied Unused Substitution Drawback Claim at CIT

Importer Scottsdale Tobacco launched a case at the Court of International Trade to contest CBP's denial of its drawback claim on its Canadian-origin paper-wrapped cigarettes. Filing a complaint on Jan. 30, the importer said its drawback claim "met the requirements" for a substitution unused merchandise drawback of the federal excise taxes it paid, since it exported the cigarettes from Florida less than five years after the relevant imports (Scottsdale Tobacco v. United States, CIT # 24-00022).

Scottsdale Tobacco entered the cigarettes in 2018 and paid $50.33 per 1,000 cigarette sticks in federal excise tax. The goods were classified under Harmonized Tariff Schedule subheading 2402.20.8000, which provides for "Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes: Cigaresttes containing tobacco; Other; paper-wrapped."

A few months later, the company exported U.S.-origin paper-wrapped cigarettes, which were designated as "substituted" in the importer's drawback claim, and were shipped by being admitted to a foreign-trade zone in Florida. The exports were classified under subheading 2402.20.8000, and the company filed a substitution unused merchandise drawback claim. CBP rejected the claim.

Scottsdale Tobacco argued that the imported cigarettes are classifiable under the same eight-digit Harmonized Tariff Schedule subheading as the exported goods, thereby meeting the minium requirements for this type of drawback claim.

The importer also claimed that CBP failed to extend the liquidation date for the drawback entry within one year of its filing. The Tariff Act of 1930 makes clear that unless a drawback claim is extended or suspended, any nonliquidated drawback claim within one year from the date it was filed "shall be deemed liquidated at the drawback amount asserted by the claimant or claim." Since CBP didn't extend the liquidation date, the drawback entry was "demeed liquidated, one-year after its filing at the drawback amount asserted in the claim," Scottsdale Tobacco said.