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Court to Review Differing Treatment of NAFTA Post-Entry Duty Refund Claims

Tuesday, May 07, 2013
Sandler, Travis & Rosenberg Trade Report

In a May 3 decision, the Court of Appeals for the Federal Circuit remanded a court case concerning post-entry claims of NAFTA preferential duty treatment under 19 USC 1520(d).

In the test case Ford Motor Company v. U.S., the Court of International Trade ruled in 2011 that U.S. Customs and Border Protection properly denied Ford’s post-entry duty refund claims for certain shipments of automotive parts from Canada because the associated certificates of origin were not submitted within one year of the date of importation. The CAFC agreed, pointing to “the clear obligation imposed by the NAFTA provisions and statute to file [claims] – including the relevant COs – within one year.” The court therefore asserts that “submission of the relevant COs within one year of importation is a substantive requirement of 1520(d) and that a claim may be denied if the COs have not been filed within that time and the requirement to file them has not been waived.”

The CAFC also upheld the CIT’s determination that Ford’s failure to timely file the COs cannot be excused by 19 CFR 10.112, which provides that whenever a free entry or a reduced duty document, form or statement required to be filed in connection with the entry is not filed at the time of the entry or within the period for which a bond was filed for its production, but failure to file was not due to willful negligence or fraudulent intent, such document, form or statement may be filed at any time prior to liquidation of the entry or, if the entry was liquidated, before the liquidation becomes final. “Section 1520(d) unambiguously requires the COs to be submitted within one year,” the court said, and courts must give effect to the unambiguously expressed intent of Congress. (One of the justices hearing the case disagreed, finding the CO to be a claim supporting document, not a claim notice document, and therefore not required to be filed within one year.)

Nevertheless, the court notes, NAFTA allows CBP to waive the one-year CO filing requirement, which it has done (a) in 19 CFR 181.22(d)(1) for non-commercial imports, commercial imports valued at less than $2,500, and imports for which the port director has indicated in writing that he/she is satisfied of the good’s NAFTA eligibility, and (b) through the reconciliation program. At the time of the entry in question Ford had not obtained a written waiver pursuant to the first provision and the reconciliation program was not yet in effect, leading the CIT to dismiss Ford’s argument that CBP was required to waive the one-year deadline.

However, the CAFC points out that the reconciliation program had been announced at the time of the entry at issue and was modified to waive the CO requirement for post-entry refunds before CBP denied Ford’s claim for a refund on this entry. In addition, while CBP in Detroit was denying Ford’s post-entry refund claims for failure to timely file the COs, CBP officials in Buffalo, Laredo and El Paso were processing and refunding Ford’s claims where Ford did not file the COs within one year of entry. The court is therefore remanding this case to the CIT to determine whether there is a reasonable explanation for the differing treatment of Ford’s claims depending on whether they were filed on paper or electronically and on the port at which port they were filed.

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