CIT Says Finality for Duty Drawback Claims Defined by End of Protest Window

The Court of International Trade on May 31 said that a duty drawback claim becomes deemed liquidated after one year if the underlying import entries are also liquidated and final, with finality defined as the end of the 180-day window in which to file a protest with CBP.

As a result, Judge Jane Restani said that one of importer Performance Additives' drawback claims was deemed liquidated but another of its claims wasn't, since its entries weren't liquidated and final within one year of the claim being made.

John Peterson, counsel for Performance, said in an email that he's sure it "will come as a pleasant surprise to a lot of claimants" that their drawback claims will be granted if their underlying import entries were liquidated and final within one year of the claim being filed. The decision "will cause a lot of dust to fly in drawback-land," he said.

Performance filed two drawback claims seeking a 99% refund of duties and fees paid on polymer and plastic chemical imports classified under Harmonized Tariff Schedule Chapter 39. One claim concerned 48 entries and was filed in March 2020, while the other covered 31 entries and was filed in March 2016. CBP initially approved both claims, then reversed itself and liquidated the claims "at an amount of zero" in July 2020.

The importer protested, claiming that its drawback claims were deemed liquidated prior to the agency's rejection of the claims. CBP denied the protests.

Restani spent the first half of the opinion breaking down the statutory framework for the dispute, within which 19 U.S.C. 1504(a)(2) is central, since it is the "deemed liquidation provision governing drawback claims." Under this statute, 19 U.S.C. 1504(a)(2)(A) lays out the general path for deemed liquidation of drawback claims, and it said deemed liquidation shall occur for claims that haven't been liquidated within one year.

19 U.S.C. § 1504(a)(2)(B) is an exception to this framework, which allows an importer to "force liquidation of a drawback claim" if certain other conditions are met, including that the underlying import entries haven't been liquidated and become final within one year of the claim being filed.

Restani said CBP "generally has one year" to liquidate drawback claims, after which deemed liquidation occurs, unless there are any exceptions set in the statute. Before the year is up, however, "CBP can extend the time in which it may liquidate a drawback claim." CBP can only extend this period by up to three years.

Performance's first drawback claim, filed in 2020, saw its import entries liquidated within one year of the claim being filed but not become final before that time, precluding deemed liquidation. Restani said that while "Final" isn't defined in the deemed liquidation statute, the answer lies in 19 U.S.C. § 1514, which generally says that liquidation "is final and conclusive upon all persons unless a protest is filed." Since the 180-day protest period hadn't lapsed within one year of Performance's claim, § 1504(a)(2)(A) was inapplicable, the judge said. This just leaves the question of whether the importer followed the procedures under § 1504(a)(2)(B), which the company conceded that it didn't do.

Peterson said that, based on this ruling, if not all of a claimant's import entries were final and liquidated after the claim, § 1504(a)(2)(B) "not only lets you get drawback based on estimated duties -- it deems your claim granted!" And while this was the case prior to the opinion, Peterson said there are "a lot of folks out there with approved claims who don't know it yet."

The court noted that "Congress could have made the statute clearer by limiting subparagraph (A) to those drawback claims with finally liquidated consumption entries, but by expressly making the exception to subparagraph (A) found in subparagraph (B) specific to non-final claims, Congress made clear the import of subparagraph (A)." Drawback claims under (A) are either deemed liquidated on their first anniversary or they aren't, the judge said.

The question of whether the claim was deemed liquidated "must be ascertainable at that time" and "not some time in the future." Restani said this "makes sense because Customs knows what drawback is owed on the consumption entries only when they are final."

Performance's second drawback claim, filed in 2016, was extended twice by CBP, setting up the final deadline to avoid deemed liquidation March 8, 2019. The court said that adding 180 days to the "last date of liquidation of the designated import entries, it is clear that all of the import entries underlying Drawback Claim 2 had become final well before the last extended date for liquidation."

This new deadline "came to pass without any further action by Customs, and as a result, Drawback Claim 2 was deemed liquidated on this date at the drawback amount asserted by Performance."

(Performance Additives v. United States, Slip Op. 24-65, CIT # 22-00044, dated 05/31/24; Judge: Jane Restani; Attorneys: John Peterson of Neville Peterson for plaintiff Performance Additives; Alexander Vanderweide for defendant U.S. government)