Surety Group Urges CIT to Include Sureties in CAPE's Phase One for IEEPA Refund Payments
The International Trade Surety Association penned an amicus brief to the Court of International Trade on April 17, urging Judge Richard Eaton to include International Emergency Economic Powers Act tariff refund payments to sureties as part of its "Phase One" payments under the Consolidated Administration and Processing of Entries (CAPE) tool. The sureties trade group said CBP's decision to limit CAPE to importers and brokers "will inevitably lead to IEEPA tariff refunds being issued to importers, instead of to the sureties who actually paid the IEEPA tariffs directly to Customs," in violation of CBP's own regulations (Euro-Notions Florida v. United States, CIT # 25-00595).
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The association filed its brief in Euro-Notions Florida v. U.S., the lead and sole case in which the court is addressing the issue of IEEPA tariff refunds (see 2604070011). The CAPE system for refunds began operation on April 20 (see 2604100062).
CAPE's phase one is limited to certain unliquidated entries and entries that have liquidated in the past 80 days. Refund payments are direct to importers of record and authorized brokers that have established ACE portal accounts.
The International Trade Surety Association said that under this system, one key constituency is missing: sureties. While CBP has acknowledged the sureties' concerns that they are cut out of the refund process, the trade group said the court should be "fully informed about the need to include sureties in Phase One of the CAPE refund program should it (or any other refund program) be approved by the Court."
The association said that under CBP's regulations, specifically 19 C.F.R. 24.36(a), when it's found that a refund is due, upon or prior to liquidation or reliquidation, the refund "shall be prepared in the name of the person to whom the refund is due." Paragraph (b) of this section in turn says that refunds shall be certified to the importer of record, unless “a surety submits evidence of payment to Customs, upon default of the principal, of amounts previously determined to be due on the same entry or transaction.”
The amicus brief said this "requirement highlights a significant flaw in the current design of CAPE as described in Customs’ status reports: CAPE Phase One limits refund submissions to importers and customs brokers, and allows refunds to be directed to parties designated in a Form 4811."
The association clarified in its brief that CBP did reach out to members of the trade group to "identify the entries for which they paid IEEPA tariffs, so that those entries could be removed from Phase One." But CBP hasn't seemingly developed programming in CAPE to "identify, remove or refund surety payments; has provided no confirmation that surety-identified entries will in fact be removed from Phase One’ and more importantly, still appears to be excluding sureties from Phase One," the brief said.
This design of CAPE would let defaulting importers, and even "insolvent or fraudulent" importers, receive refunds of estimated and supplemental IEEPA tariffs paid to CBP by a surety, "thereby depriving the sureties of timely and appropriate refunds," the brief said. Thus, including sureties in the refund process is "critical," the association said.
The association said it shouldn't be hard for CBP to include sureties in phase one. While sureties don't have "visibility into entry line-item data even for transactions involving bond claims, Customs can readily identify and verify surety payments using its internal data." In fact, CBP has "advised in the past that its internal systems retain information identifying the party that originally paid the duties," the brief said.
The trade group added that payments to sureties can't be addressed in later phases of CAPE development, since the next phases are meant to address "various other entry types of situations." Also, letting sureties take part in phase one is "in Customs' interest," since issuing refunds to the wrong party creates compliance risks and "increases administrative burdens and financial exposure," the brief said.