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Importers and Customs Brokers File Court Challenge of New TFTEA Drawback Requirements

Several drawback filers and importers on March 23 filed a court challenge of CBP’s new policies on drawback procedures under the Trade Facilitation and Trade Enforcement Act. They say CBP violated the Administrative Procedure Act when it changed drawback requirements via a guidance document issued in February without allowing for notice and comment on what amount to regulatory changes.

In particular, policies now in effect that disallow accelerated payment on TFTEA drawback claims, as well as CBP’s new “first filed” and “mixed use” rules, contradict the still-in-effect customs regulations on drawback at 19 CFR 191 and 19 CFR 181. CBP’s February drawback guidance improperly changed those requirements by fiat, the plaintiffs say.

The lawsuit also seeks a court order compelling the Treasury Department to issue its now overdue TFTEA drawback regulations. Treasury was required by TFTEA to issue new drawback regulations by Feb. 24, 2018. “The publication of the required regulation is not likely to happen for months or years,” the complaint said.

Part 191 of the customs regulations says it applies to “all drawback claims.” It mandates that CBP accept accelerated payment from approved filers with a customs bond, says the complaint, filed at the Court of International Trade. It also sets no limitation on what merchandise can be claimed for drawback like CBP’s new “first filed” rule, and has no requirements for additional documentation like CBP now requires for “mixed use” claims.

Nonetheless, CBP is still not processing accelerated payment claims, and rejecting claims that don’t follow the “first filed” and “mixed use” rules, without having formally amended its regulations, the complaint says. The complaint cites a recent court decision in support of its argument that the government can’t make substantive changes to its regulations by way of a guidance document (see 1801260019), as some expected (see 1803090033).

The lawsuit was filed on behalf of several importers, including Tobacos de Wilson, Tobacco Rag Processors, Brown-USA, Nippon America and Skate One Corporation, all of which are approved for accelerated payment and argue their licenses were improperly revoked. They’re joined by Alliance International, C.J. Holt and Customs Advisory Services, all of which file for drawback on behalf of clients. The U.S. government, CBP, Treasury Secretary Steven Mnuchin and CBP Commissioner Kevin McAleenan are named as defendants.

The importers and customs brokers are “stung by the prospect of being denied hundreds of millions of dollars a year in drawback revenues they rely upon,” law firm Neville Peterson, which represents the plaintiffs in the case, said in a blog post. The lawsuit seeks an injunction against the new restrictions in CBP’s February drawback guidance. “The suit is grounded in the Administrative Procedure Act, which requires formal ‘notice and comment’ rulemaking before an agency may issue substantive, ‘legislative’ type rules. CBP did not follow these procedures before publishing the edicts in its Guidance Document,” Neville Peterson said. CBP did not comment.

Email for a copy of the complaint.