In response to the Court of International Trade’s (CIT) decision in Zojirushi America Corp. v. United States, Slip Op. 16-78 (Aug. 4, 2016), U.S. Customs and Border Protection (CBP) issued an Updated Guidance Document on February 15, 2017, clarifying its prior restrictions on post-importation protest claims. With this reversal, CBP has reverted to its prior practice of allowing importers to claim preferential tariff treatment via 19 U.S.C. § 1514 protests for duty preference programs, and Free Trade Agreement (FTA) claims that are not otherwise covered within 19 U.S.C. § 1520(d).
In other words, except for the FTAs specifically listed within Section 1520(d), which statutorily restricts post-importation duty preference claims to 12 months from the date of importation, importers once again have approximately 490 days after importation (314 liquidation cycle plus 180 day protest period) to make valid duty preference claims.
In August 2014, CBP reversed its long-held practice that allowed importers to utilize the protest mechanism to make post-importation duty preference claims. This reversal was done without any change to the statutory or regulatory scheme, and was ultimately held to be incorrect in the CIT’s Zojirushi decision.
In Zojirushi, the CIT determined that Zojirushi was legally authorized to raise duty preference claims under the Generalized System of Preferences (GSP) with a Section 1514 protest, even though the GSP claims were being made for the first time in the protest. The CIT explained that such an interpretation was supported by Congress’ 2004 amendments to Section 1514, which clarified that the protest mechanism may be utilized to correct errors or inadvertences, regardless of whether the protest resulted from an error in the construction of a law or whether the inadvertence was made by CBP or the importer.
In light of the CIT’s decision, CBP has updated its prior guidance and will now allow duty preference claims to be made via protest, unless they are otherwise statutorily prohibited under Section 1520(d), as is the case for post-entry claims made under the North American Free Trade Agreement (NAFTA) and a handful of other FTAs. The following chart summarizes those programs that are once again eligible for duty preference claims prior to or within 180 days after liquidation, as well as those subject to the 12-month restrictions of Section 1520(d):
Click here to view table.
While the right to file a protest to make certain post-importation duty preference claims has been restored, importers may still utilize post summary corrections (PSCs) up to 20 days prior to liquidation to make duty preference programs not asserted at the time of entry. Of course, establishing a robust internal control program to allow for duty preference claims to be made at the time of entry remains the best practice. For post-entry duty preference claims restricted by Section 1520(d), importers should also consider utilizing Customs’ Reconciliation program as a more streamlined mechanism to make post-importation FTA claims, rather than the sometimes cumbersome 1520(d) petition process.
Finally, and importantly, CBP has opened the door to allow importers who previously had protests rejected as “non-protestable” under the prior incorrect policy to resubmit those protests within 180 days of February 15, 2017.
CBP has returned to its prior practice regarding the filing of post-importation preferential duty claims, including via Section 1514 protests. Accordingly, companies should revisit any duty preference opportunities for liquidated entries made since November 1, 2015, to determine if there are savings opportunities available for protest — provided relevant support is available.
Further, importers who had protests rejected as “non-protestable” based on CBP’s mistaken 2014 guidance would be wise to consider resubmitting those protests within the next 170 days (especially because recourse in the CIT may be unavailable for protests that are not resubmitted).