Customs Law Advisory - Appeals Court Affirms Importers’ Right to Collect Some Duty Refunds Up To One Year After Liquidation

Appeals Court Affirms Importers’ Right to Collect Some Duty Refunds Up To One Year After Liquidation
For many years, U.S. law has included a provision under which importers may request a refund to correct overpayment of duties that occurred due to certain errors in fact, even where entries have been liquidated for up to one year.  Generally, U.S. Customs and Border Protection (“Customs”) grants such refunds sparingly, based on a strict interpretation of the legal provision.  However, a recent decision from the U.S. Court of Appeals for the Federal Circuit (“CAFC”), the appellate court responsible for reviewing Customs’ decisions, has affirmed the strength of this provision and has issued an analysis that may assist importers with successful refund claims arising from an error in fact.

Customs generally will close the file, or “liquidate,” import shipments, or “entries,” within 10-12 months of the import date.  Typically, any claims for refund must be filed in a protest made within 90 days after liquidation, or the duty overpayment is final, even if incorrect.  However, after 90 days, a refund requested within one year after liquidation (which may be close to two years after entry), still may be granted in order to correct “a clerical error, mistake of fact, or other inadvertence . . . not amounting to an error in the construction of a law . . .”  19 U.S.C. § 1520(c)(1).  Traditionally, Customs has narrowly interpreted this provision.  Where the issue to be corrected in any way involves an interpretation of the law rather than fact, Customs denies the refund request.

In G&R Produce Co., et al. v. United States , No. 04-1082 ( Aug. 27, 2004), the CAFC granted the request for refund under § 1520(c)(1).  Until 1994, Persian limes were usually classified under the tariff provision specifying “limes (Citrus aurantifolia).”  In June 1994, Customs added a new tariff provision, carrying a lower duty rate, covering “Tahitian limes, Persian limes and other limes of the citrus latifolia variety.”  Realizing that Persian limes should never have been classified under the Citrus aurantifolia provision, many importers sought refunds on entries with liquidations up to one year old, arguing that the error was a “mistake of fact or other inadvertence.”  Customs denied the requests, arguing that misreading of the  U.S. tariff was an error in law.  The CAFC concluded otherwise, finding that the mistake was one of fact because a fact existed, but was unknown (i.e., the botanical designation of Persian limes) and a fact was believed, but was not correct (i.e., Citrusaurantifolia applies to all limes).  The CAFC further noted that accepting Customs’ view of this situation would lead to the “absurd” result that § 1520(c)(1) could never be used because, under that logic, all incorrect liquidations would involve a question of law.

This decision in no way throws open § 1520(c)(1) to correct all errors that may exist in the liquidation of an entry.  The best way to ensure that duty overpayments are corrected is to review entries promptly and file a protest, as necessary, within 90 days after liquidation.  Nonetheless, this CAFC decision affirms that some errors may be more than a clerical error, but still may be less than an error of law.  Depending on the facts, this new CAFC decision may assist importers seeking refund of duty overpayments, even up to one year after liquidation.

If you have any questions regarding U.S. Customs protests or requests for reliquidation, please contact Greg McCue at 202-429-6421.