Lawsuit Possible on Delay of TFTEA Drawback Accelerated Payment Claims
CBP may face a legal challenge of its decision not to allow accelerated payment on drawback claims filed under the Trade Facilitation and Trade Enforcement Act until it issues its TFTEA drawback regulations (see 1801260036), said a customs lawyer and a drawback consultant speaking during the International Trade Update conference on March 9 in Washington.
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As announced in CBP’s February “interim guidance” on TFTEA drawback (see 1802120020), the policy to not allow accelerated payment on TFTEA claims may violate provisions in CBP’s own regulations, Michael Cerny of Sandler Travis said. Accelerated drawback procedures were added to the drawback regulations in 19 CFR 191 by a process of notice and comment, he said at the conference, hosted by Georgetown University. As they currently stand, those regulations cover all drawback claims, TFTEA or “core.”
Disallowing accelerated payment on TFTEA drawback claims by way of an “interim guidance,” even though they’re allowed under the customs regulations, may violate the Administrative Procedure Act stipulations that changes to regulatory requirements must be made via the rulemaking process, not by way of policy fiat, Cerny said. As recently as January the Federal Circuit held that an agency, Commerce in that case, can’t change the meaning of its regulations by way of a guidance document (see 1801260019), Cerny noted.
Decisions on whether to file a lawsuit may depend on the timing of CBP’s TFTEA drawback regulations, Cerny said. The proposal, though drafted by CBP, is currently held up in Treasury Department review, and will go through a comment process before a final rule is issued. If the proposed rule is issued in the next few weeks -- Cerny said he is not holding his breath -- and comments are addressed quickly, a final rule could come out in four to five months, allowing claimants to receive accelerated payment by this summer, he said. But as time goes on, smaller companies and drawback brokers could face a cash crunch and decide on using a court challenge.
The trade community has been in talks on the issue going all the way up to CBP Acting Commissioner Kevin McAleenan, Bobby Waid of Charter Brokerage said. Even if the agency allows accelerated drawback claims, CBP’s revenue would be protected by a requirement that bonds fully cover any excess payments, Waid said. “Unfortunately we’re probably going to have to litigate this issue, because we don’t know when the final regulations will become effective,” he said. If CBP doesn’t resolve the issue by Feb. 24, 2019, there will be “no accelerated payment at all and no liquidation,” he said.
The last time there were major changes to procedures, by way of the Customs Modernization Act, CBP’s implementing regulations didn’t come out until about five years after the underlying law was passed, Waid said. A long delay is something that people in the drawback industry will have to prepare for, he said.