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Differing Treatment of NAFTA Post-Entry Duty Refund Claims Upheld

Monday, January 11, 2016
Sandler, Travis & Rosenberg Trade Report

The Court of Appeals for the Federal Circuit has upheld U.S. Customs and Border Protection’s reasoning for treating post-entry claims of NAFTA preferential duty treatment under 19 USC 1520(d) differently for purposes of waiver depending on whether they were submitted traditionally or through CBP’s reconciliation program.

In the test case Ford Motor Company v. U.S., the Court of International Trade ruled in 2011 that CBP properly denied Ford’s NAFTA post-entry duty refund claims for automotive parts imported from Canada because the associated certificates of origin were not submitted within one year of importation and the port director declined to waive that requirement. The CAFC later agreed but remanded the case to the CIT to determine whether there was a reasonable explanation for the fact that CBP did not extend such a waiver to Ford’s traditionally-filed claims while granting a waiver to claims filed through the reconciliation program.

In a divided opinion, the CAFC agreed with the CIT that this distinction is reasonable. CBP has interpreted the applicable statutes as creating two separate frameworks – one governing its waiver authority with respect to traditionally filed claims and another that prescribes the particular process of waiver with respect to reconciliation-based claims – and the court said this interpretation is entitled to judicial deference because it is not inconsistent with relevant statutes, regulations or administrative practices. The CAFC also pointed out the undisputed fact that the reconciliation program has additional protections against improper tariff refund claims not available in the traditional claims process (e.g., the requirement for importers to post a continuous bond) and that this alone is a reasonable explanation for the difference in treatment.

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