CAFC Hears Oral Argument on Interpretation of Statute Governing Automatic Drawback Claim Liquidation
In oral argument held Jan. 8, the U.S. Court of Appeals for the Federal Circuit indicated that it preferred the government’s stricter interpretation of the statute governing automatic liquidation of drawback claims over an importer’s more expansive one (Performance Additives v. United States, Fed. Cir. # 24-2059).
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CAFC Judge Sharon Prost observed to DOJ attorney Alexander Vanderweide that “some of us, or all of us, may think that the statute on its face is clear enough” that 19 U.S.C. 1504(a)(2)(B) restricts what drawback claims might be eligible for automatic liquidation under 19 U.S.C.1504(a)(2)(A).
Importer Performance Additives brought its case in 2022 arguing that two drawback claims for petroleum derivative substitution it filed, one in 2016 and one in 2020, automatically liquidated under 19 U.S.C. 1504(a)(2)(A) between one and four years later. The U.S., in turn, claimed that they weren’t eligible for automatic liquidation under that provision, so CBP’s liquidation and denial of both claims in May 2021 stood.
Under 19 U.S.C.1504(a)(2)(A), a drawback claim that hasn’t been liquidated within a year is deemed liquidated at the amount claimed.
But the provision says that this occurs “except as provided in subparagraph (B) or (C).” Subparagraph (B) then explains that a drawback claim whose underlying entries haven’t “been liquidated and become final within a year” automatically liquidates once those underlying entries’ duties have been deposited and the importer has made a request in writing.
In 2024, Court of International Trade Judge Jane Restani held that automatic liquidation of a drawback claim after a year under 19 U.S.C. 1504(a)(2)(A) requires that the claim’s underlying entries had liquidated at least 180 days prior, as that would mark the end of the protest period, meaning the entries had “become final” (see 2405310073). She found that Performance Additives’ 2016 claim had automatically liquidated, but its 2020 claim hadn’t.
The importer appealed (see 2409100055). In oral arguments, its counsel, John Peterson, claimed that 1504(a)(2)(B) doesn’t impose any restrictions on 1504(a)(2)(A), which doesn’t mention underlying entries.
He called subparagraph (B) a “standalone provision.”
“It’s not standalone,” Judge Sharon Prost said. “It’s so mushed up with the others that (A) references (B) right up front -- ‘Except as provided in (B) . . . .’”
The phrase “except as provided in (B)” in 1504(a)(2)(A) was meant to give importers a way to seek liquidation of a drawback claim before the one-year anniversary of its filing, Peterson argued. In that way, the phrase expanded, not restricted, the provision, he said.
“We never triggered (B),” he said. “We never did that. We simply let our claim get to the one-year anniversary. And at that point, it should have been deemed liquidated.” He added that, otherwise, (C) would also have to be read as entangled with (A), but (C) is clearly unrelated.
Vanderweide disagreed with the interpretation. "Except as provided in (B)" means that “(A) applies if (B) or (C) doesn’t,” he said. In other words, he said, subparagraph (A) directs the reader to check (B) and determine that it doesn’t apply before returning to (A).
“There’s no elective preference of the claimant here,” he said. “It doesn’t say ‘You can choose (A) or you can choose (B) or you can choose (C).’”
He acknowledged that the law could have been clearer.
Peterson also said that to read 19 U.S.C. 1504(a)(2)(A) as restricted by (B) would be to frustrate the purpose of the provision itself, as Congress intended it to impose stricter deadlines on CBP’s drawback decisions.
The judges asked Peterson about the possibility of “double-dipping,” whereby an importer could maintain a protest on import entries to prevent them from becoming final, wait a year for a drawback claim to finalize, then recover both ways. Peterson said a CBP regulation prevents it, though he acknowledged nothing in the statute itself would.
Vanderweide said that (B) was intended to let importers seek liquidation of their drawback claim even if their claim’s underlying entries hadn’t been finalized by its one-year anniversary. Importantly, he said, the importer must waive any other refunds or payments under any other part of the liquidation law when making a written deemed liquidation request under (B).