Cigarette Importer Says Date of Importation Was Date Goods Withdrawn From FTZ

Importer King Maker Marketing told the Court of International Trade on Aug. 2 that the date of importation of its paper-wrapped cigarettes was the date on which the goods were withdrawn from a foreign-trade zone and not the date on which they entered the FTZ. As such, the company said in a complaint that its duty drawback claims weren't untimely, since they were filed within five years of the dates on which the goods were withdrawn from the FTZ (King Maker Marketing v. United States, CIT # 24-00134).

King Maker entered the cigarettes into an FTZ at various points in 2013-14, only later withdrawing the goods from the FTZ for domestic consumption. When they were withdrawn, CBP assessed the goods under Harmonized Tariff Schedule subheading 2404.20.80, which covers paper-wrapped tobacco cigarettes.

The importer said it later "came into possession of, and exported, certain other cigarettes," which were classified under HTS subheading 2402.20.80. Since the exports fell under the same subheading, King Maker said they qualified for substitution under the "substitution unused merchandise drawback statute."

King Maker didn't file its drawback claims until 2018 since the "provision of law enacting the 8-digit HTS subheading standard for 'substitutability' did not enter into force" until February 2018, due to "drawback law changes" from the Trade Facilitation and Trade Enforcement Act of 2015. CBP denied the drawback claims, finding that they were untimely given that they came five years after the date of import. The agency set the import date as the date the cigarettes were admitted into the FTZ instead of the date on which the cigarettes were withdrawn from the FTZ for consumption.

Appealing CBP's decision to the Court of International Trade, King Maker said the proper date of import is the date on which the goods left the FTZ. The importer cited the U.S. Court of Appeals for the Federal Circuit's decision in Nissan Motor Mfg. Corp. v. United States, which said that "a foreign trade zone is considered to be outside the Customs territory of the United States."

The importer also invoked the trade court's decision in BMW Mfg. v. United States, which said "admission to an FTZ is not considered ‘importation’ into the Customs Territory of the United States for purposes of the Customs laws, including for purposes of duties and various excise taxes.” As a result, the drawback claims at issue here weren't untimely if date of importation is set as the date the entries were withdrawn from the FTZ, the importer argued.