There has been some recent developments in the world of post-entry preference program claims that we wanted to make sure you were aware of, as they could provide meaningful refund opportunities. A recent decision by the U.S. Court of International Trade (CIT) raised serious concerns about the legality of U.S. Customs and Border Protection’s 2014 policy limiting the filing of post-importation claims for preferential tariff treatment under a number of programs, including GSP, AGOA, the US FTAs with Australia, Bahrain, Israel, Jordan, Morocco and Singapore, the Pharmaceutical Products Agreement, and others (“the 2014 Policy”). It is now being reported that CBP may have abandoned the 2014 Policy altogether.
There are two key outcomes from this development. First, post-entry claims under certain preferential duty programs may now be raised for the first time in a protest. Second, for companies which have filed protests asserting such claims, there may be an opportunity to revive such protests and obtain the duty savings, regardless of how long ago such protests were filed.
Preferential duty programs (such as free trade agreements, GSP and the like) can be grouped into two buckets when it comes to post-entry preference claims—the programs which explicitly authorize post-entry claims (e.g., NAFTA), and those which do not. When it comes to asserting post-entry preference claims for the second bucket of programs, CBP has, since 2014, taken the view that such claims could only be made prior to liquidation. In other words, for this second group of programs, a preferential duty claim could not be raised for the first time in a protest. Once an entry was liquidated, the window for claiming a duty preference was closed.
In August, the CIT issued an opinion in a case captioned, Zojirushi America Corp. v. United States, which questioned the legality of CBP’s 2014 Policy. The CIT said that the 2014 Policy was based on a misreading of two key Federal Circuit cases. Both of those cases had addressed post-entry claims for NAFTA (which belongs to the first bucket of preferential duty programs), and according to the CIT, it was a mistake for CBP to try and apply the outcome of those cases to post-entry claims made under preferential duty programs falling in the second bucket.
Zojirushi was dismissed by the CIT for lack of jurisdiction, because the Court found that the importer had not followed the appropriate course to get into court. The importer claimed that it could not follow the traditional course for bringing a customs case at the CIT, because CBP would not deny its protests. Instead, its protests had been “rejected as non-protestable”, leaving the protests in a state of limbo— having been neither allowed nor denied.
The Court pointed out that there is a way to get your protest denied, even where CBP merely rejects them. Namely, an importer can file a request for “accelerated disposition”. Any such protest that is not granted within 30 days is deemed to be denied, thereby satisfying one of the prerequisites for getting into court. Interestingly, there is no limit on the time for requesting accelerated disposition on a protest that has not been denied. In other words, any protest that (1) has not been approved or denied, or (2) has been rejected as non-protestable, can be “revived” by filing a request for accelerated disposition. At the very least, the request for accelerated disposition will trigger a deemed denial, which will in turn start the 180-day clock for filing a summons with the CIT.
Just this week, it has been reported that Zojirushi took the Court’s advice. It went back to CBP and requested accelerated disposition for all of its rejected protests. CBP could have denied the protests, or just waited 30 days until they were deemed denied, giving Zojirushi a path back to court. Instead, we understand that CBP has relented with respect to its 2014 Policy, and has decided to allow these protests, rather than denying them. While this change in policy by CBP has not been formally announced, we believe that a similar outcome is likely available to any importer with similar facts.
What To Do Now
(1) Make a note of this change in the law. If you need to make a post-entry preference claim under a preferential program in the second bucket (i.e., a program which does not include an explicit post-entry refund provision), you may now seek to do so by filing a protest, which extends the period available to file the claim.
(2) Review your records to identify any protests that your company may have filed that were “rejected as non-protestable”, particularly protests that were rejected for the reasons set out in CBP’s 2014 Policy.
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We hope this is helpful. If you have any questions on this potential refund opportunity, please let us know.