CIT Added Impermissibly Added Conditions to Deemed Liquidation Statute, Importer Argues

Importer Performance Additives filed its opening brief on Sept. 9 at the U.S. Court of Appeals for the Federal Circuit, claiming that the Court of International Trade erred in finding that various of the company's duty drawback claims weren't "deemed liquidated." The company argued that the trade court imposed conditions on the deemed liquidation rule of 19 U.S.C. Section 1504(a)(2)(A) that don't exist in the statute and imposed the rules of Section 1504(a)(2)(B) despite this law not applying to the company's entries at issue (Performance Additives v. United States, Fed. Cir. # 24-2059).

Performance filed two drawback claims seeking a 99% refund of duties and fees paid on polymer and plastic chemical imports. 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 argued botih drawback claims were deemed liquidated prior to the agency's rejection of the claims. CIT agreed on one of the claims, finding the drawback claim for the 31 entries filed in March 2016 was deemed liquidated since the underlying import entries were liquidated and became final within one year of the drawback claim being filed. However, it said the 48 other entries weren't deemed liquidated since the underlying entries didn't become final within one year of the March 2020 filing date (see 2405310073).

At issue are two statutory provisions -- Section 1504(a)(2)(A) and (a)(2)(B). The first says that unless a drawback claim is suspended or extended, it will be deemed liquidated at the claimed amount if it's not liquidated within one year from the date of entry or filed claim. The second concerns drawback claims on unliquidated imports and says that drawback claims whose import entries haven't been liquidated and become final within the one-year period described in (a)(2)(A) shall be deemed liquidated upon the deposit of estimated duties on the unliquidated imports and filing with CBP of a written request for liquidation of the drawback claim.

CIT said that for the 48 entries at issue, the underlying import entries weren't liquidated and "final" on the claim's one-year anniversary and so (a)(2)(A) is inapplicable. The court defined finality as the passing of the 180-day protest window during which an importer can contest CBP's liquidation of an entry.

In its opening brief at the Federal Circuit, Performance Additives argued that the court's holding impermissibly found that (a)(2)(B) was a "general exception to the one-year rule of 'deemed liquidation' set out in § 1504(a)(2)(A)" and improperly added the conditions of (a)(2)(B) into (a)(2)(A). The importer said (a)(2)(B) has "no relevance to the instant case," given that all import entries designated in the company's claim had been liquidated prior to the one-year anniversary of the drawback claim.

Section 1504(a)(2)(A) provides a "clear one-year limitation on the liquidation of drawback claims, without any reference to the liquidation status of import entries designated in those claims," the brief said. This section "makes no mention of the status of import entries designated in the claim," but the trade court still imposed a condition that the underlying import entries be "final."

The "better, consistent, and correct construction" is that (a)(2)(A) "means what it says: if Customs fails to extend liquidation of a drawback claim, the claim liquidates by operation of law on the one-year anniversary of its filing," Performance Additives argued. The only things that can prevent the deemed liquidation of a drawback claim are CBP's liquidation of the claim before the one-year filing anniversary or the extension of liquidation. "Neither occurred in this case," the brief said.