CIT Properly Construed Statutory Scheme for Deemed Liquidation of Drawback Claims, US Says

The government said that the two procedures by which a drawback claim can be deemed liquidated, which take place under 19 U.S.C. Sections 1504(a)(2)(A) and (a)(2)(B), should be read in concert so as to give effect to both provisions. As a result, the Court of International Trade properly said that certain drawback claims from importer Performance Additives were barred from deemed liquidation under (a)(2)(A), since the underlying import entries had not all liquidated and become final within one year of the claim, the U.S. said.

Performance filed two drawback claims seeking a 99% refund of duties and fees paid on polymer and plastic chemical imports. One claim concerned 48 entries and was filed in March 2020, while the other covered 31 entries and was filed in March 2016. CBP initially approved both claims, then reversed itself and denied the drawback bids.

The importer said both drawback claims were deemed liquidated prior to the agency's rejection of the claims. CIT agreed as to one of the claims, finding the March 2016 claim was deemed liquidated since the underlying entries were liquidated and became final within one year of the drawback claim being filed. However, it said the other 48 entries didn't become final within one year of the March 2020 filing date, leaving (a)(2)(B) as the only avenue for deemed liquidation. Since the importer didn't take the proactive steps to secure deemed liquidation under this provision, the claim failed (see 2409100055).

At the center of the dispute are the two statutory provisions (a)(2)(A) and (a)(2)(B). The first says that unless a drawback claim is suspended or extended, it will be deemed liquidated at the claimed amount if it's not liquidated within one year from the date of entry or filed claim. The second concerns drawback claims on unliquidated imports and says that drawback claims whose import entries haven't been liquidated and become final within the one-year period described in (a)(2)(A) shall be deemed liquidated upon the deposit of estimated duties on the unliquidated imports and filing with CBP of a written request for liquidation of the drawback claim.

Appealing CIT's decision, Performance argued that the trade court impermissibly lifted the limiting language of (B) into (A) (see 2409100055). The importer argued that (B) is irrelevant to the suit since all of its entries liquidated prior to the one-year anniversary of the drawback claim, making (A) the operative statute. Only (B) requires the liquidation to be "final," which the trade court said requires the protest window for appeal to have run.

In response, the U.S. argued that CIT merely read the provisions in concert to give effect to (B). Reading these two sections together, deemed liquidation under (A) occurs "only when all of the designated import entries are liquidated and final by the end of the one-year period." This is "made evident" by (A) only applying to a potential deemed liquidation of claims that aren't covered by (B) or (C), and (B) specifically covers claims with "unliquidated and nonfinal import entries" within the one-year period in (A), the brief said.

If (A) were to apply even when the liquidation of the underlying entries were nonfinal, then the phrase "and become final" in (B) would be read out of the law, "rendering it toothless and advisory," the government argued. "This is not a tenable construction of the statutory provisions, as the trial court recognized."

The U.S. said there's "good reason" for (A) only to apply when the underlying entries have liquidated and become final. First, "CBP need not delay deciding drawback claims when all issues on the import entries have been settled," the brief said. But if an event, such as a protest of the underlying entries, prevents the liquidation from becoming final, then drawback claims on those entries "are not ripe for liquidation under subparagraph (A) given the significant risk of double-dipping."

For instance, if a protest on an underlying entry leads to a full duty refund but the drawback claim is already deemed liquidated, the result is "two payments" for the importer "for the same duties." Under Performance's interpretation, refunding duties on the same entries twice "is a necessary (though absurd) consequence of the deemed liquidation regime of drawback claims." Instead, Congress set up the (A) and (B) structure to avoid this, the government claimed.

Instead, (B) applies to Performance's drawback claims, and it only operates to deem liquidated the claims when proactive steps are taken. Since the importer failed to take these steps, its claims are not deemed liquidated, the brief said.

Congressional intent is not frustrated by this outcome, as Performance suggests, since Congress provided for this framework. The legislature "provided for drawback claims with no outstanding import entry issues to become deemed liquidated automatically a year after the claim is filed" and for "all other claims to become deemed liquidated at the election and compliance of the claimant (and importer)," the brief said.

"Congressional intent of the deemed liquidation statutory framework cannot be said to be 'frustrated,'" the U.S. argued. The statutory provisions for the deemed liquidation of drawback claims "differ from the provision for the deemed liquidation of import entries," the brief said.