In an opinion dated December 15, 2009, this is precisely what Judge Jane Restani of the U.S. Court of International Trade (USCIT) stated in her decision in the case of Delphi Petroleum, Inc. v. the United States (Slip Op. 09-139).
This case deals with Customs denial of an extension of time for Delphi to file a drawback claim on certain petroleum products it imported, and then exported, as finished petroleum derivatives which qualified as an acceptable substitute. It was undisputed by Customs that Delphi was entitled to drawback of 99% of the duties it paid on these petroleum products under 19 USC 1313(p), which is a specific provision dealing with finished petroleum derivatives.
Drawback, under 19 USC 1313(j), is the repayment of duties on previously imported products that are used in the manufacture or production of “commercially interchangeable” goods that are subsequently exported or destroyed.
Under 19 USC 1313(r)(1), a drawback claimant has three years from the date of exportation or destruction of merchandise to file a drawback claim. The final clause of this statute states that “no extension [of the 3 year filing limit] will be granted unless it is established that Customs was responsible for the untimely filing.
The USCIT found that Customs' failure to extend the time for Delhi to file its claims to that of when it ultimately did so during the post-liquidation protest period, was an abuse of discretion for the following reasons.
First, despite the statute providing for an extension, Customs had yet to create and publish a regulation that indicated the circumstances or protocols that would apply to an extension request where Customs actions caused a claim to be delayed. Therefore, requesting one was an impossibility as no administrative procedure existed for a claimant to do so. Citing Alyeska Pipeline Serv. Co. v. United States, 643 F.Supp. 1128 (CIT 1986) (which, under a non-drawback claim, permitted a Protest where Customs made the filing impossible), the USCIT found that Customs agreed that where Customs makes a filing “impossible,” an extension should be granted.
Secondly, Delphi sought clarification as to how to effectuate the proper procedure for an extension – to no avail. Ultimately, it relied upon the advice of the Port of New York's Supervisory Drawback Liquidator who explained a procedure to follow in light of the regulations not permitting the claims.
Though indicating its willingness to present complete claims, Delphi was instead told not to present the claims until other events occurred, namely, liquidation at which time a Protest could be filed. Specifically at issue was Delphi's exclusion of an application for drawback on harbor maintenance taxes (HMT) and merchandise processing fees (MPF) in its drawback claims, which the supervisor had advised Delphi to exclude from its application pending a resolution under the case of Texport Oil Co. v. United States, 185 F.3d 1291, 1296 (Fed. Cir. 1999).
When further inquiries were made by Delphi regarding the sufficiency of its drawback claims, that correspondence was subsequently routed to the same Supervisor, who agreeing with his own advice, provided no response in return to Delphi.
The USCIT therefore held that “[i]n light of these facts, under 19 USC 1313(r)(1), Customs [wa]s deemed responsible for Delphi's delayed HMT and MPF filings because Delphi had no clear administrative path to follow and a responsible official unknowingly misled Delphi as to the proper course.”
Any noncompliance was therefore Customs responsibility.
As an aside, this case involved five drawback claims which were filed between 1998 and 2002. While the full amount of duty drawback was refunded in May 2003, it's taken more than 8 years for Delphi to recover the HMTs and MPFs for these claims, and I can't help but wonder if the benefits of this decision outweigh the costs of obtaining it – in terms of both manpower and dollars.
Any thoughts? Feel free to write me at clark.deanna@gmail.com or post your comment below.
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