CIT Prods CBP to Issue Drawback Proposal or Face Court-Ordered Deadline

The court recognized that the Treasury Department is working "as expeditiously as is now possible" to issue the rules. "If, however, the government fails to promulgate the regulation within a reasonable timeframe, for example, if it is unable to produce the proposed regulation for notice-and-comment on or about July 5, 2018, approximately 90 days after April 6, 2018, the court will consider imposing its own deadline so that the Congressional requirement is not abrogated through excessive delay," it said. If necessary, "the government should consider whether parts of the package which satisfy the mandate of TFTEA Section 906 [(i.e., drawback)] can be promulgated in advance of any unresolved portions of the regulatory package," Restani said.

Restani agreed with the plaintiffs that CBP's interim guidance on drawback is equivalent to final regulations and thus open to judicial review. "Although labeled an 'interim' measure, the Guidance Document consummates the agency’s decision-making process," she said. Tobacos de Wilson, Tobacco Rag Processors, Brown-USA, Nippon America, Skate One Corporation, Alliance International, C.J. Holt and Customs Advisory Services filed the suit in late March.

The court didn't issue an injunction because there is "little evidence" presented to support claims that the procedures spelled out in the guidance document procedures would reduce "cash flow and profitability," for the companies, it said. CBP also isn't stopping all accelerated payments, just the accelerated payments on claims filed under TFTEA drawback, it said. The argument that CBP's adoption of "first-filed" and "mixed use" rules in the guidance document violates notice and comment requirements didn't persuade the court. An updated guidance document (see 1803270031) "indicates" CBP won't process TFTEA drawback claims until new rules are in place. CBP also "explained through a signed declaration that it will not apply the challenged rules to bar any claims filed under the TFTEA until the new regulations for implementing TFTEA are in effect."

Although Restani ruled that the government has "exceeded a legislative deadline" by "failing to promulgate the implementing regulations by February 24," the court found that the suggested remedy of requiring immediate processing of TFTEA drawback accelerated payments didn't fit. There's "no right to accelerated payment under the new statute." There are some possible workarounds, such as CBP allowing for a "protective claim" to be filed under TFTEA drawback "without forfeiting the right to accelerated payment" under the old drawback regime. "The parties shall consider what remedies are administratively feasible and shall meet to discuss possible remedies," Restani said. The companies are, on July 27, to "advise the court if the relief they seek has been obtained or if further order of the court is necessary."

The lawyer for the companies, John Peterson of Neville Peterson, said a drawback proposal is unlikely to come by July 5. "I'd be shocked if the entire drawback regulatory package is in proposed form by July 5. (Shocked is putting it mildly)," he said in an email. "While the CIT didn't give our plaintiffs everything they wanted -- at least not yet -- the decision is significant in that it removes control over the rollout of TFTEA drawback from Customs and indicates the Court is going to take supervision of the matter." Peterson said he will "be pressing for an interim final calculation rule as soon as CBP can publish it, and will look to restore accelerated drawback payments ASAP as well." CBP didn't comment.