U.S. Customs and Border Protection is continuing to utilize and expand its CAPE process for refunding tariffs imposed under the International Emergency Economic Powers Act and has recently made a correction that should enable more importers to receive refunds. At the same time, developments in the related litigation are increasing the chances that importers whose entries are not, or not yet, eligible for refunds under CAPE will have to file their own suits to secure refunds.
CAPE Error Messages
CBP has recently removed a validation issue that resulted in CAPE tariff refund claim rejections indicated as “GOODS VALUE AMOUNT MUST BE REPORTED ON THE CH 1-97.” Importers had been receiving this error despite there being no such error in the rejected entries. Eligible entries that received this error can now be refiled in CAPE for processing.
CBP has also replaced the “HTS Sequence” error message with “HTS Relationship Mismatch,” which CBP said means “an HTS code designated as an add/replace/derived HTS code exists on the entry, but the corresponding HTS code has not been provided.” Entries rejected for this reason may require corrections prior to refiling in CAPE, but if no errors are identified, importers may attempt to refile and should notify CBP if the errors persist and do not align with identifiable issues in the entry.
Contact STR for assistance in reviewing and resolving these issues.
CAPE Phase II
CBP recently said that effective June 29 it will deploy the second phase of CAPE by accepting entries flagged or reconciliation (entry types 01, 02, and 06) for which the reconciliation entry (entry type 09) has not been filed. Such entries will be limited to those that are unliquidated or within 80 days of liquidation.
CBP states that once entries flagged for reconciliation are accepted on a CAPE declaration, the reconciliation entry may be filed. The CAPE process removes the IEEPA duties from the flagged entries prior to the filing of the reconciliation entry, separating the IEEPA duty refund from the calculations on the reconciliation entry.
Once the reconciliation entry is filed, CBP will assume that all the CAPE declarations associated with the reconciled entries were filed and accepted, and the underlying entries will not be eligible to be filed on a CAPE declaration in this phase.
CBP adds that entries flagged for reconciliation with the reconciliation entry already on file are not included in CAPE Phase II but will be included in a future phase. If the reconciliation filing deadline is close to expiring (e.g., less than 30 days), the trade will need to prioritize the filing of the reconciliation.
CBP has said that CAPE Phase III, which could be ready as early as late July, will add functionality for additional categories of entries, including those filed by importers that have filed suit at the CIT for which reliquidation is needed.
Litigation
Despite CBP’s preparations for CAPE Phase III, it remains unclear whether refunds will actually be available for entries to be covered by that phase because the Department of Justice continues to assert that once an entry is finally liquidated CBP has no authority to reliquidate or refund money without a valid, importer-specific court order. The DOJ is also contesting a universal injunction ordering refunds to be paid on all entries regardless of whether an importer has filed suit.
Given this position, it appears increasingly likely that CAPE Phase III will only be available to importers who file their own court cases seeking IEEPA tariff refunds. Further, ongoing litigation on related issues is unlikely to be completed prior to the expiration of the applicable two-year statute of limitations for filing suit. It is also unclear whether the DOJ and/or the courts will hold that protests of liquidations will be necessary and/or sufficient to secure refunds.
Accordingly, importers should strongly consider filing their own lawsuits before the Court of International Trade to preserve their rights to IEEPA tariff refunds should the CAPE and protest processes not provide all refunds timely. Court actions should especially be considered for importers with finally liquidated entries that are not eligible for both CAPE and protests.
STR also continues to recommend that importers monitor the dates of liquidation of affected entries, including those that have been accepted into CAPE, and file timely protests of any such liquidations with CBP as necessary, even though whether and how CBP will handle protests remains uncertain. In particular, importers should timely file protests on entries that have not been filed into CAPE or are not currently eligible for that process.
STR can file suit on your behalf and assist with other processes to preserve your right to tariff refunds. Contact us for more information.
You can also click here to access a June 24 webinar given by Luke Mathers, head of STR’s Litigation Group, providing an update on these issues.
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