We recently noted the dismay of duty drawback filers when Customs and Border Protection failed to publish regulations needed to process refunds under the new duty drawback rules of the Trade Facilitation and Trade Enforcement Act (TFTEA), which entered into force on February 24, 2018.  Dismay turned to anger when, in lieu of the regulations, Customs posted a “Guidance Document” to its website, announcing interim rules that would be in place until some unspecified date – possibly years in the future – when CBP issues final new drawback regulations.

Under the agency’s Guidance Document, CBP announced that it would not make accelerated payments of drawback for TFTEA drawback claims, even if the claimant had been issued accelerated payment privileges and posted bonds to secure the revenue. In addition, the Guidance Document contained controversial “First Filed” and “Mixed Use” rules, which declared some duty-paid imports ineligible for TFTEA drawback if merchandise from the same import entry line item had previously been designated as the basis for a drawback claim.

If Treasury does not issue final regulations by February 23, 2019, the end of the TFTEA “transition year”, drawback payments and claim liquidations will completely cease.

Stung by the prospect of being denied hundreds of millions of dollars a year in drawback revenues they rely upon, a group of drawback claimants and brokers on March 23, 2018 filed a lawsuit in the United States Court of International Trade, seeking to enjoin application of the new restrictions in the Guidance Document and have them declared unlawful. The suit also asks the Court to order the Treasury Department to issue the Congressionally-prescribed refund calculation regulation within a “reasonable time”.

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.

The lawsuit, titled Tabacos de Wilson, Inc. et al. , v. United States, seeks a preliminary injunction which would (1) require CBP to continue making “accelerated payments” of drawback on TFTEA claims and (2) prohibit CBP from enforcing its “First Filed” and “Mixed Use” restrictions on TFTEA claims, pending the publication of properly issued final regulations.

The plaintiffs are represented by John Peterson, and Russ Semmel of Neville Peterson’s New York City office and Richard O’Neill of Neville Peterson LLP’s Seattle office.