Performance Additives LLC v. United States , 2024 CIT 65 ( 2024 )

Slip Op. 24-
UNITED STATES COURT OF INTERNATIONAL TRADE
PERFORMANCE ADDITIVES, LLC,
Plaintiff,
v.
UNITED STATES,
Before: Jane A. Restani, Judge
Defendant.
Court No. 22-00044
OPINION AND ORDER
[Granting in part and denying in part Performance Additives, LLC’s and the United States’ cross-
motions for summary judgment regarding denial of drawback claims.]
Dated: May 31, 2024
John M. Peterson and Patrick B. Klein, Neville Peterson, LLP, of New York, NY, argued for
plaintiff Performance Additives, LLC. With them on the brief were John P. Donohue and Richard
F. O’Neill.
Alexander J. Vanderweide, Senior Trial Counsel, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice, of New York, NY, argued for the defendant. With him on the brief
were Brian M. Boynton, Principal Deputy Assistant Attorney General, Patricia M. McCarthy,
Director, and Justin R. Miller, Attorney-In-Charge. Of counsel on the brief was Yelena Slepak,
Attorney, Office of the Assistant Chief Counsel for International Trade Litigation, U.S. Customs
and Border Protection of New York, NY.
Restani, Judge: Plaintiff Performance Additives, LLC (“Performance”) commenced this
action to challenge the United States Customs and Border Protection’s (“Customs”) denial of
Performance’s two claims for duty drawback on entries of polymethyl methacrylate polymer filed
under the substitution of finished petroleum derivatives drawback statute. 19 U.S.C. § 1313(p)
(2018). Now before the court are Performance’s and defendant the United States’ (“Government”)
cross-motions for summary judgment pursuant to USCIT R. 56. Pl.’s Mot. for Summ. J., ECF No.
18 (Aug. 31, 2023) (“Pl.’s Mot.”); Def.’s Mot. for Summ. J., ECF No. 23 (Nov. 21, 2023) (“Def.’s
Court No. 22-00044 Page 2
Mot.”). For the following reasons, Performance’s motion is granted in part and denied in part, and
the Government’s motion is granted in part and denied in part.
BACKGROUND
Plaintiff Performance is an importer of various polymer and plastic chemicals classified
under Chapter 39 of the Harmonized Tariff Schedule of the United States (“HTSUS”) (Plastics
and Articles Thereof). Protest and Entries for 100121101001 at 5–6, ECF No. 7-2 (Mar. 16, 2022)
(“Protest for Drawback Claim 1”); Protest and Entries for 100121100962 at 5–6, ECF No. 7-1
(Mar. 16, 2022) (“Protest for Drawback Claim 2”); Compl. at ¶ 9, ECF No. 8 (July 6, 2022)
(“Compl.”). Performance filed two drawback claims relevant to this case: Entry No. BI00004498-
1 (“Drawback Claim 1”), filed on March 10, 2020, and Entry No. BI00003408-1 (“Drawback
Claim 2”), filed on March 8, 2016. Protest for Drawback Claim 1 at 24, Protest for Drawback
Claim 2 at 20. Performance sought drawback under 19 U.S.C. § 1313(p), whereby Customs will
refund up to 99% of duties and fees paid on goods imported into the United States if the importer
subsequently exports goods of the same kind or quality. Id. at 25, 29. Pl.’s Mot. at 5. 19 U.S.C.
§ 1313 refers to these refunds as “drawback” or “substitution drawback.” See also Nat’l Ass’n of
Manufacturers v. Dep’t of Treasury, 10 F.4th 1279, 1282 (Fed. Cir. 2021). Drawback Claim 1
identified forty-eight consumption entries for the claimed recovery of $1,328,589.84. Protest for
Drawback Claim 1 at 32; Pl.’s Mot. at 7–8. Drawback Claim 2 identified thirty-one consumption
entries of merchandise as the basis for the drawback claim in the amount of $91,291.83. Protests
for Drawback Claim 2 at 25, 32; Pl.’s Mot. at 6–7.
Initially, Customs approved both applications for drawback; on July 28, 2020, however,
Customs advised Performance that its drawback privileges were suspended, and shortly thereafter,
Court No. 22-00044 Page 3
liquidated1 Performance’s drawback claims at an amount of zero. Pl.’s Mot. at 4–5; Def.’s Mot.
at 2. Performance protested, claiming that its drawback entries were “liquidated by operation of
law”2 such that Customs’ liquidations without benefit of drawback were “invalid.” Protest for
Drawback Claim 1 at 1; Protest for Drawback Claim 2 at 1. Customs stated its reason for denying
Plaintiff’s protest as: “Drawback claim[s] did not liquidate by operation of law in accordacne [sic]
with 19 USC 1504(a)(2)(B); all designated import entries were not liquidated and final within one
year of the claim being filed.” Protest for Drawback Claim 1 at 2; Protest for Drawback Claim 2
at 2. Performance then commenced the instant action.
JURISDICTION AND STANDARD OF REVIEW
The court has protest denial jurisdiction under 28 U.S.C. § 1581(a) (2018). Denied protests
are subject to de novo review “upon the basis of the record made before the court.” See 28 U.S.C.
§ 2640(a)(1). Summary judgment is appropriate if “there is no genuine dispute as to any material
fact,” and “the movant is entitled to judgment as a matter of law.” USCIT R. 56(a).
DISCUSSION
I. Statutory Framework
Drawback, designed to encourage domestic manufacturing, is the reimbursement of duties
paid on goods imported into the United States and then used in the manufacture or production of
articles which are subsequently exported. 19 U.S.C. § 1313; 19 C.F.R. § 191.2(i)–(k) (2016);
Hartog Foods Int’l, Inc. v. United States, 291 F.3d 789, 793 (Fed. Cir. 2002) (citation omitted). A
1
“Liquidation” means the final computation or ascertainment of duties on entries for
consumption or drawback entries. 19 C.F.R. § 159.1 (2016). “Liquidation,” as used with respect
to drawback claims specifically, is the term which describes Customs’ final determination
concerning whether drawback should be paid, and in what amount.
2
For purposes of “deemed liquidation,” or liquidation by operation of law, an entry is deemed
liquidated at the rate asserted by the claimant. 19 U.S.C. § 1504; Detroit Zoological Soc. v.
United States, 10 CIT 654, 658, 647 F. Supp. 147, 150 (1986).
Court No. 22-00044 Page 4
drawback claimant who exports said goods is entitled to a refund of up to 99% of the duties paid
on the merchandise upon its importation. 19 U.S.C. § 1313. Detailed and specific provisions for
different types of drawback are made by statute and regulation, as here under 19 U.S.C. § 1313(p)
for substitution of finished petroleum derivatives.3 There are two relevant sets of entries making
up a drawback claim: (1) the underlying import or consumption entries filed with Customs at the
time of importation; and (2) the drawback entry or claim, filed after importation, which covers one
or more underlying import entries.4 Drawback is a privilege, not a right, and a claimant seeking
drawback must comply with all regulations the Secretary of the Treasury provides. Aurea Jewelry
Creations, Inc. v. United States, 13 CIT 712, 713, 720 F. Supp. 189, 190 (1989), aff’d, 932 F.2d
943 (Fed. Cir. 1991); Hartog, 291 F.3d at 793. Customs finalizes the payment of drawback through
3
As Performance explains,
19 U.S.C. § 1313(p), allows payment of drawback with respect to imported
petroleum substitutes which are “qualifying products” based upon the exportation,
within a stated time, of substituted petroleum derivatives. Thus, if X. Corp. imports
and pays duty on certain “qualifying” petroleum derivatives, and sells or exchanges
them with Y Corp., and Y Corp. then acquires a good made with the use of a
qualifying article, or substitutes of such articles, and either exports, or sells the
goods to a third party for export, the exporter may claim drawback in respect of the
imported “qualifying articles.” See 19 C.F.R. §§ 191.173(c), 174(c)).
Pl.’s Mot. at 11.
4
“Drawback claim” means the drawback entry and related documents required by regulation
which together constitute the request for drawback payment, whereas “drawback entry” means
the document containing a description of, and other required information concerning, the
exported or destroyed article on which drawback is claimed. 19 C.F.R. § 191.2(j)–(k). Thus, a
drawback entry is one part of a complete drawback claim, although the terms are often used
interchangeably. Where the drawback claim has been completed by filing the entry and other
documents and exportation has been established, Customs’ drawback offices determine the
drawback due. For this reason, this opinion will refer to “drawback claims” generally throughout
and will refer to import entries underlying drawback claims as either import or consumption
entries.
Court No. 22-00044 Page 5
the process of the “liquidation” of a drawback claim. 19 C.F.R. §§ 159.1, 191.81 (2016). Customs’
practice is
generally to defer the liquidation of drawback claims until either all import entries
underlying the drawback claim have been liquidated and those liquidations are
“final” (i.e., the period for filing of any protest or claim against the liquidation of
the import entries has expired), or the drawback claimant has filed a waiver with a
deposit of any additional duties owed on the imported merchandise.
Ford Motor Company v. United States, 44 F. Supp. 3d 1330, 1335 (CIT 2015) (citing 19 C.F.R. §
191.81(a)(1), (2)). There are, then, two ways drawback claims are paid out: either based on the
final liquidation of the designated import entries; or, based on a deposit of estimated duties before
liquidation of the designated import entries. 19 C.F.R. § 190.81(a)–(d) (“Drawback will be based
on the final liquidated duties paid that have been made final by operation of law (except in the case
of the written request for payment of drawback on the basis of estimated duties, voluntary tender
of duties, and other payments of duty, and waiver, provided for in paragraphs (b) and (c) of this
section).”).
Drawback may be based on estimated duties if the import entry has not been liquidated, or
the liquidation has not become final (for various reasons, including a protest being filed, statutory
suspension, or court order), and the drawback claimant and any other party responsible for the
payment of duties each files a written request for payment of drawback, waiving any right to
payment or refund under other provisions of law. 19 U.S.C. 1504(a)(2)(B); 19 C.F.R. § 190.81(b).
The regulation provides that the drawback claim may not be adjusted thereafter by reason of a
subsequent liquidation of any import entry. Id. But, it also provides that if final liquidation of the
import entry discloses that the total amount of duty is different from the estimated duties, the party
responsible for the payment of liquidated duties shall be liable for one percent of all increased
duties or shall be entitled to a refund of one percent of all excess duties. Id.Court No. 22-00044 Page 6
There are, however, limitations on the liquidation of drawback claims and their underlying
import entries. See 19 U.S.C. § 1504 (establishing a statutory time frame for the liquidation of
consumption entries and drawback claims). The intent of these limitations is to relieve importers
of prolonged uncertainty by requiring that duty liabilities be ascertained and fixed generally within
one year. See Ambassador Div. of Florsheim Shoe v. United States, 748 F.2d 1560, 1565 (Fed.
Cir. 1984). To this end, 19 U.S.C. § 1504 provides for “deemed liquidation” by operation of law
where Customs fails to liquidate in a timely fashion. See Ford, 44 F. Supp. 3d at 1353; Koyo Corp.
v. United States, 497 F.3d 1231, 1239–40 (Fed. Cir. 2007) (noting that “Congress enacted the
deemed liquidation statute to prevent Customs from belatedly assessing additional duties and from
indefinitely retaining duties deposited in excess”); S. Rep. No. 95-778, at 4 (1978). As the
legislative history explains specifically as to the later inclusion of drawback claims,
[i]f drawback claims are never liquidated, for an open-ended time period the
drawback claimant’s claim unfairly remains subject to challenge by [] Customs.
This creates an unwarranted liability and the possibility that the claimant will have
to reimburse the U.S. Treasury any drawback monies paid to the claimant–even
several years from when the claim was actually made and money was paid to the
drawback claimant.
S. Rep. No. 108-28, at 172–73 (2003). The limitations on drawback liquidation pertinent to this
case are cited in full:
§ 1504. Limitation on liquidation
(a) Liquidation
....
(2) Entries or claims for drawback
(A) In general
Except as provided in subparagraph (B) or (C), unless an entry or
claim for drawback is extended under subsection (b) or suspended
as required by statute or court order, an entry or claim for drawback
Court No. 22-00044 Page 7
not liquidated within 1 year from the date of entry or claim shall be
deemed liquidated at the drawback amount asserted by the claimant
or claim. Notwithstanding section 1500(e) of this title, notice of
liquidation need not be given of an entry deemed liquidated.
(B) Unliquidated imports
An entry or claim for drawback whose designated or identified
import entries have not been liquidated and become final within the
1-year period described in subparagraph (A), or within the 1-year
period described in subparagraph (C), shall be deemed liquidated
upon the deposit of estimated duties on the unliquidated imported
merchandise, and upon the filing with the Customs Service of a
written request for the liquidation of the drawback entry or claim.
Such a request must include a waiver of any right to payment or
refund under other provisions of law. The Secretary of the Treasury
shall prescribe any necessary regulations for the purpose of
administering this subparagraph.
....
(b) Extension
The Secretary of the Treasury may extend the period in which to liquidate
an entry if--
(1) the information needed for the proper appraisement or
classification of the imported or withdrawn merchandise, or for
determining the correct drawback amount, or for ensuring
compliance with applicable law, is not available to the Customs
Service; or
(2) the importer of record or drawback claimant, as the case may be,
requests such extension and shows good cause therefor.
The Secretary shall give notice of an extension under this subsection to the
importer of record or drawback claimant, as the case may be, and the surety
of such importer of record or drawback claimant. Notice shall be in such
form and manner (which may include electronic transmittal) as the
Secretary shall by regulation prescribe. Any entry the liquidation of which
is extended under this subsection shall be treated as having been liquidated
at the rate of duty, value, quantity, and amount of duty asserted by the
importer of record, or the drawback amount asserted by the drawback
claimant, at the expiration of 4 years from the applicable date specified in
subsection (a).
Court No. 22-00044 Page 8
19 U.S.C. § 1504.5 For brevity’s sake, the relevant subsections may be categorized as follows: 19
U.S.C. § 1504(a)(2) is the deemed liquidation provision governing drawback claims, within which
19 U.S.C. § 1504(a)(2)(A) governs the liquidation of drawback claims in general unless an
exception overrides, and 19 U.S.C. § 1504(a)(2)(B) governs the liquidation of drawback claims
whose import entries have not “been liquidated and become final” within the one-year period
described in subparagraph (A).6 Put another way, Congress designated subparagraph (B) as an
exception to the general one-year deemed liquidation rule of subparagraph (A). See Ford, 44 F.
Supp. 3d at 1351. Subparagraph (B) allows a claimant to force liquidation of a drawback claim if
its enumerated conditions are met. 19 U.S.C. § 1504(b) governs extensions of liquidation.
Under 19 U.S.C. § 1504(a)(2), Customs generally has one year within which to liquidate
drawback claims. If Customs fails to liquidate the drawback claims during that one-year period,
and no specified exception applies, the drawback claims liquidate by force of law, that is, they are
deemed liquidated. Drawback claims that are deemed liquidated are assessed at the duty rate
asserted by the drawback claimant. 19 C.F.R. § 190.81(e)(2).7 Before the one-year time period
elapses, however, Customs may extend the time in which it may liquidate a drawback claim.
Customs may extend the time period for liquidating a drawback claim up to three years, resulting
5
Subparagraph 19 U.S.C. § 1504(a)(2)(C) is an inapplicable transition provision. 19 U.S.C. §
1504(a)(1) is the deemed liquidation provision governing consumption entries and provides
generally that an entry of merchandise for consumption not liquidated within one year from the
date of entry shall be deemed liquidated at the rate of duty, value, quantity, and amount of duties
asserted by the importer of record.
6
Unless extended under subsection (b), the one-year period described in subparagraph (A) is one
year from the date the drawback claim was filed. See 19 U.S.C. § 1504(a)(2)(A).
7
Customs will authorize the amount of the refund due as drawback to the claimant and issue
payment no later than 90 days after liquidation. 19 U.S.C. § 1504(a)(3); 19 C.F.R. §
190.81(e)(2).
Court No. 22-00044 Page 9
in a total of four potential years before the claim will liquidate by operation of law. 19 U.S.C. §
1504(b); 19 C.F.R. § 159.12 (2016).
The question before the court here is which subparagraph, or subparagraphs, of 19 U.S.C.
§ 1504 governs Performance’s two drawback claims. Depending upon which subparagraph
applies, Performance’s drawback claims were either liquidated by operation of law, or not—
ultimately deciding whether Performance receives the drawback amount it asserted as the
drawback claimant.
II. Discussion
Performance argues that its drawback claims were deemed liquidated. Per the plain
language of subparagraph (A), Performance argues, Customs failed to liquidate Drawback Claim
1 within one year of its filing. Pl.’s Mot. at 8–9. Thus, Drawback Claim 1 was deemed liquidated
on the one-year anniversary of its filing at the amount asserted by Performance. Id. Similar to
Drawback Claim 1, Performance asserts Drawback Claim 2 was also deemed liquidated per
subparagraph (A), the only difference being that Drawback Claim 2 was extended by Customs.
Compl. at ¶¶ 23, 26, 31. Customs’ extension of Drawback Claim 2, under subsection (b), created
a new deadline by which Customs must liquidate the drawback claim under subparagraph (A). Id.When Customs failed to liquidate, Performance argues, Drawback Claim 2 was also deemed
liquidated. Id. Performance argues that because both of its drawback claims were already deemed
liquidated at the amounts it asserted, Customs’ purported liquidations of its drawback claims after
the deemed liquidation dates at an amount of zero were void. Pl.’s Mot. at 3.
Further, Performance argues that because all of the designated entries underlying its
drawback claims had liquidated before the one-year anniversary of the filing, the exception under
subparagraph (B) does not apply to either Drawback Claim 1 or Drawback Claim 2. See Pl.’s Mot.
Court No. 22-00044 Page 10
at 16–17. Performance states it “did not avail itself of the procedure set out in 19 U.S.C. §
1504(a)(2)(B), and indeed was ineligible to do so, as all of the import entries designated in its
claims had liquidated within one year of the filing of the claim.” Resp. of Pl. Performance
Additives LLC to Ct.’s Questions for Oral Arg. at 13, ECF No. 36 (Apr. 16, 2024) (“Pl.’s OA
Resp.”). Because the subparagraph (B) exception, along with any other exception, does not apply
to its drawback claims, Performance argues, the “conditions for ‘deemed liquidation’ of Plaintiff’s
drawback claim[s] are met in this case.” Pl.’s Mot. at 17–18, 21.
The Government argues that Performance’s drawback claims were not deemed liquidated
and that Customs’ liquidations of Drawback Claims 1 and 2 were therefore valid. According to
the Government, “a deemed liquidation of a drawback claim under subparagraph (A) only occurs
when all of the designated import entries are liquidated and final by the end of the statutory one-
year period, as measured from the date that the drawback claim is filed.” Def.’s Mot. at 3. The
Government argues liquidation of a drawback claim becomes final 180 days after liquidation
unless a protest is filed. Id. at 8 (citing 19 U.S.C. § 1514(a), (c)). Because all of the designated
import entries underlying Performance’s drawback claims were not liquidated and final (i.e., 180
days after the liquidations), the Government claims, Performance’s drawback claims were not
deemed liquidated. Id. at 3, 8–9.
Additionally, the Government contends, and Plaintiff concedes, Performance did not
follow the procedure under the subparagraph (B) exception to force Customs to liquidate its
drawback claims. Therefore, the time limits imposed by the drawback statute do not apply to
Drawback Claims 1 and 2. Id. at 3. The Government claims that because Customs was under no
time restraint to liquidate Performance’s drawback claims, its liquidation of Drawback Claims 1
and 2 outside of the alleged deemed liquidation dates was valid. Id. at 17.
Court No. 22-00044 Page 11
Performance’s respective claims are addressed separately.
a. Drawback Claim 1 (Entry No. BI00004498-1)8
Drawback Claim 1 was filed on March 10, 2020. Protest for Drawback Claim 1 at 1.
Drawback Claim 1 designated forty-eight import entries, the last of which was liquidated on
November 27, 2020. See Pl.’s Rule 56.3 Statement of Material Facts Not in Dispute at ¶ 13, ECF
No. 18-1 (Aug. 31, 2023) (“Pl.’s Statement”); Def.’s Resp. to Pl.’s Rule 56.3 Statement of Material
Facts Not in Dispute at ¶ 13, ECF No. 23-2 (Nov. 21, 2023) (“Def.’s Statement”). Customs did
not reliquidate any of the consumption entries or extend liquidation, and no protests were filed.
Pl.’s Statement at ¶¶ 15–17; Def.’s Statement at ¶¶ 15–17.
Performance argues, because all of the underlying consumption entries were liquidated
within one year of the claim, Drawback Claim 1 was deemed liquidated at the one-year anniversary
of the filing of the drawback claim, with allowance of drawback in the amount of $1,328,589.84.
Compl. at ¶¶ 34–37; Pl.’s Mot. at 8. According to Performance, because all underlying
consumption entries were liquidated by that time, and no exceptions in 19 U.S.C. § 1504 apply, its
drawback claim was deemed liquidated by operation of 19 U.S.C. § 1504(a)(2)(A). Pl.’s Mot. at
8, 18–21. Customs’ purported liquidation of Drawback Claim 1 approximately one month after
the alleged deemed liquidation date, Performance argues, was therefore untimely and void. See
Compl. at ¶¶ 37–38.
The Government disagrees, asserting that because all of the designated import entries
underlying Drawback Claim 1 were not liquidated and final, Drawback Claim 1 was not deemed
liquidated under 19 U.S.C. § 1504(a)(2)(A). Def.’s Mot. at 3. Instead, Drawback Claim 1 “was
8
Unlike the briefing in this case, the court refers to the later in time but significantly larger claim
as Drawback Claim 1.
Court No. 22-00044 Page 12
only ever potentially subject to subsection (B),” a clear exception to subparagraph (A). Def.’s
Resp. to the Ct.’s Questions at 3, ECF No. 35 (Apr. 16, 2024) (“Def.’s OA Resp.”); Def.’s Reply
to Pl.’s Resp. to Def.’s Cross-Mot. For Summ. J. at 2, ECF No. 27 (Jan. 19, 2024) (“Def.’s Reply”).
Because Performance did not follow the steps outlined in 19 U.S.C. § 1504(a)(2)(B) to force
liquidation of its drawback claim, including depositing estimated duties and filing a written request
for liquidation with Customs, Drawback Claim 1 was not deemed liquidated. Id. As a result, the
Government concludes, Customs’ liquidation of Drawback Claim 1 on April 30, 2021, at the
drawback amount of zero was valid. Def.’s Mot. at 17.
As cited above, 19 U.S.C. § 1504(a)(2)(A) deems liquidated drawback claims that have not
been liquidated within one year of their filing. This is the general provision for the liquidation of
drawback claims that applies save the following exceptions: where the underlying import entries
have not been liquidated and become final within the one-year period described in subparagraph
(A); or, where a drawback claim has been extended under subsection (b). 9 19 U.S.C. §
1504(a)(2)(A)–(B), (b).
Parties agree that Drawback Claim 1 was not extended by Customs and therefore
subsection (b) does not apply.10 Def.’s Mot. at 2 n.1; Pl.’s Mot. at 7. Thus, the only exception
under the liquidation statute that could possibly apply to Drawback Claim 1 is subparagraph (B).
Otherwise, subparagraph (A) applies.
By its terms subparagraph (B) is available where a drawback claim’s designated import
entries have not been liquidated and become final within one year of the filing of the drawback
9
As mentioned above, 19 U.S.C. § 1504(a)(2)(C) lists another exception that does not apply
here. See supra note 5. A drawback claim may also be suspended as required by statute or court
order, a scenario that also does not apply.
10
As Drawback Claim 1 was not extended, the one-year period described in subparagraph (A)
was one year from the filing of the drawback claim, i.e., March 10, 2021.
Court No. 22-00044 Page 13
claim. In this scenario, subparagraph (B) provides a mechanism by which a claimant may prompt
(or “force”) Customs to liquidate its drawback claim before its designated import entries, if a
claimant places a deposit and files a written request. 19 C.F.R. § 190.81(b); see supra pp. 4–5. As
indicated, Plaintiff concedes it does not qualify under this provision. Pl.’s OA Resp. at 13. But
that is not the only import of subparagraph (B). It is true that Drawback Claim 1’s underlying
consumption entries had liquidated within one year of the filing of the drawback claim. Yet, as
the Government argues, subparagraph (B) makes clear that drawback claims whose import entries
have not been liquidated and become final within one year of the filing of the drawback claim are
excepted from the general deemed liquidated drawback provision. “Final” is not defined anywhere
in the deemed liquidation statute. See 19 U.S.C. § 1504. 19 U.S.C. § 1514, however, provides the
answer.
Generally, liquidation of an entry, including a drawback entry, is final and conclusive upon
all persons unless a protest is filed. 19 U.S.C. § 1514(a), (c). It is the liquidation which is final
and subject to protest, not the preliminary findings or decisions of Customs officers. See
Commonwealth Oil Ref. Co. v. United States, 332 F. Supp. 203 (Cust. Ct. 1971). A protest
challenging liquidation may be filed with Customs within 180 days after but not before the date of
liquidation. 19 U.S.C. § 1514(c)(3)(A); Ford, 44 F. Supp. 3d at 1335 (characterizing finality as
when the period for filing any protest or claim against the liquidation of an entry has expired). The
Government argues that Drawback Claim 1’s import entries had not become final because the
protest period had not yet ended. That is, with the 180-day protest period accounted for, Drawback
Claim 1’s import entries may have been liquidated but had not yet become final within one year
of the filing of the drawback claim. Def.’s Reply at 2. Thus, according to the Government,
subparagraph (B) is the only avenue that was open to Plaintiff to obtain a deemed liquidation in
Court No. 22-00044 Page 14
advance of finality of the underlying consumption entries. Id. at 6. Because it is undisputed that
Performance did not follow the procedure outlined in subparagraph (B) to force liquidation of its
drawback claim, Government argues, Plaintiff is not entitled to drawback. Id.
The court agrees with the Government. Subparagraph (B), as an exception to subparagraph
(A), clearly outlines the procedure a claimant must follow to liquidate its drawback claim when its
designated import entries have not been liquidated and become final within one year. The import
entries underlying Drawback Claim 1 had been liquidated but had not yet become final within one
year of the filing of the drawback claim because the protest period had not yet ended. 19 U.S.C.
§ 1514 dictates that liquidations of import and drawback entries are final unless a protest is filed.
All concerned parties may only know and rely on the fact that a liquidation is final once the period
to protest has ended.11
Congress could have made the statute clearer by limiting subparagraph (A) to those
drawback claims with finally liquidated consumption entries, but by expressly making the
exception to subparagraph (A) found in subparagraph (B) specific to non-final claims, Congress
made clear the import of subparagraph (A). Under subparagraph (A), interpreted in the context of
the whole statute, “an entry or claim for drawback” (absent an extension or suspension, not
applicable here) either deems liquidated on the first anniversary of the filing of the claim, or it
doesn’t. The question of whether the drawback claim was deemed liquidated or was not deemed
liquidated must be ascertainable at that time, i.e., on the one-year anniversary, not some time in
the future. Drawback claims are deemed liquidated automatically if all underlying consumption
11
Otherwise, parties are presented with a Schrodinger’s cat situation—it would be impossible to
know whether a liquidation is final or not during the protest period. Indeed, the very purpose of
limitations on liquidation is to “increase certainty in the customs process for importers, surety
companies, and other third parties with a potential liability relating to a customs transaction.” S.
Rep. No. 95-778, at 32 (1978), reprinted in 1978 U.S.C.C.A.N. 2211, 2243.
Court No. 22-00044 Page 15
entries are liquidated and final within one year of the drawback claim and liquidation of the
drawback claim does not occur by that time.12 This makes sense because Customs knows what
drawback is owed on the consumption entries only when they are final, and further, if Customs is
running out of time to liquidate the drawback claim because the liquidation of the underlying
consumption entries is not final, it can extend the deadline under subsection (b).
Any application of subparagraph (A) that ignores the status of the underlying consumption
entries renders the safeguards of subparagraph (B) a nullity. Even Plaintiff seems to acknowledge
this by asserting the underlying consumption entries were liquidated, if not final.
Because the import entries underlying Drawback Claim 1 had not been liquidated and
become final within one year of the filing of the drawback claim, subparagraph (A) did not apply.
As Performance failed to comply with the statutory requirements of subparagraph (B), it is not
entitled to the deemed liquidation rate it asserted as the drawback claimant under Drawback Claim
1.
b. Drawback Claim 2 (Entry No. BI00003408-1)
In its briefing, Performance argues that Drawback Claim 2 liquidated by operation of law
per 19 U.S.C. § 1504(a)(2)(A) and its extension subsection, 19 U.S.C. § 1504(b). Pl.’s Mot. at
17–18; Pl.’s Resp. to Def.’s Cross-Mot. for Summ. J. at 12–13, ECF No. 24 (Dec. 26, 2023) (“Pl.’s
Resp.”). Performance asserts Drawback Claim 2 was filed on March 8, 2016, and liquidation was
extended once by Customs. Pl.’s Resp. at 12. Absent any further extensions, Performance argues,
12
That is, the availability of the elective subparagraph (B) procedure cannot arise until after the
close of the one-year period following filing of the claim: the statute makes it available only if
there is an underlying consumption entry with a liquidation that did not “become final within the
1-year period described in subparagraph (A) . . . .” 19 U.S.C. § 1504(a)(2)(B). And if that
procedure is still available on the one-year anniversary of the filing of the drawback claim, the
deemed liquidation described in subparagraph (A) does not occur.
Court No. 22-00044 Page 16
Drawback Claim 2 liquidated by operation of law on March 8, 2018, the extended deemed
liquidation date, according to Plaintiff. Pl.’s Mot. at 17–18. Further, even if Customs extended
Drawback Claim 2 to the fullest extent of four years allowed under 19 U.S.C. § 1504(b), Customs’
purported liquidation five years later, on May 14, 2021, is asserted to still be “untimely and void.”
Id.; Pl.’s Resp. at 12–13.
The Government disagrees with Performance’s categorization of Drawback Claim 2 as
deemed liquidated under 19 U.S.C. § 1504(a)(2)(A). According to the Government, similar to its
arguments as to Drawback Claim 1, subparagraph (A) governs potential deemed liquidations only
if subparagraph (B) is not available to Plaintiff. Def.’s Mot. at 11–12. Here, because all of the
import entries underlying Drawback Claim 2 had not been liquidated and become final within one
year of the filing of the drawback claim, any subsequent extension after the one-year period was a
nullity, and early liquidation of Drawback Claim 2 could only be preserved under subparagraph
(B). Def.’s Mot. at 11, 18; Def.’s Reply at 2–6 (citing 19 U.S.C. § 1504(a)(2)(B) (“An entry or
claim for drawback whose designated or identified import entries have not been liquidated and
become final within the 1-year period described in subparagraph (A) . . . shall be deemed liquidated
[according to the procedures set forth therein]. . . .”)). Because Performance did not follow the
procedures outlined in subparagraph (B) to liquidate its drawback claim, the Government argues,
Customs was under no time limit to liquidate Drawback Claim 2, regardless of any extensions of
the time to liquidate. Def.’s Reply at 6; see also Def.’s OA Resp. at 3. As a result, the Government
claims, Customs’ May 14, 2021, liquidation was valid. The problem is the Government’s
interpretation of the statute, which the court has upheld, yields a different result under the actual
facts of Drawback Claim 2.
Court No. 22-00044 Page 17
In advance of oral argument, the Government claimed for the first time that Drawback
Claim 2 was extended on December 1, 2017, after the liquidation deadline of March 8, 2017, had
already passed. See Def.’s OA Resp. at 1. The Government argued that the one-year period of
section 1504(a)(2)(A) had elapsed without the designated import entries becoming final and thus
the out of time extension was a nullity. Id. at 1–3. The court held oral argument, and afterwards
ordered the Government to provide evidence to corroborate its assertion that the liquidation
deadline for Drawback Claim 2 was extended only on December 1, 2017, which was crucial to its
theory. Paperless Order, ECF No. 38 (Apr. 19, 2024). In its response, the Government submitted
evidence showing Drawback Claim 2 was extended twice, once on November 26, 2016, and again
on December 1, 2017. Def.’s Resp. to the Ct.’s Order, ECF No. 39 (Apr. 26, 2024).13 In other
words, there was no gap in the time period covered by the extensions. The Government submitted
no new argument addressing the new information on the extensions.
As stated, Drawback Claim 2 was originally filed on March 8, 2016. Protest for Drawback
Claim 2 at 1; Pl.’s Mot. at 17; Def.’s Mot. at 1. The thirty-one import entries underlying Drawback
Claim 2 were liquidated between July 8, 2016, and December 30, 2016. Pl.’s Statement at ¶ 5;
Def.’s Statement at ¶ 5. In the light of the undisputed evidence submitted post-oral argument, the
court finds Drawback Claim 2 was extended by Customs on November 26, 2016, making a new
deadline to avoid deemed liquidation March 8, 2018, and again on December 1, 2017, making the
last deadline to avoid deemed liquidation March 8, 2019. See 19 U.S.C. § 1504(a)(2)(A), (b); 19
13
The discrepancy in extension dates was likely due to Customs’ migration from its former
recordkeeping system, Automated Commercial System (“ACS”), to its current one, Automated
Commercial Environment (“ACE”). Resp. to Court’s Order at 1–2. As of February 24, 2019, all
drawback claimants must file drawback claims through ACE. See Drawback in ACE, U.S.
Customs and Border Protection (Oct. 6, 2022),
https://www.cbp.gov/trade/automated/news/drawback (last visited May 1, 2024).
Court No. 22-00044 Page 18
C.F.R. § 159.12. Adding 180 days to the last date of liquidation of the designated import entries,
it is clear that all of the import entries underlying Drawback Claim 2 had become final well before
the last extended date for liquidation.14 This new deadline of March 8, 2019, for liquidation of the
drawback claim came to pass without any further action by Customs, and as a result, Drawback
Claim 2 was deemed liquidated on this date at the drawback amount asserted by Performance. As
explained previously, under subsection (b) Customs may extend the time in which it may liquidate
a drawback claim. Once Customs does so, it is subject to the new deemed liquidation deadline it
creates and each extended deadline thereafter. No other meaning of subsection (b) is asserted or
would make sense. Here, the deadline for liquidation of Drawback Claim 2 was validly extended
twice before the claim was deemed liquidated under subparagraph (A). In essence, the one-year
period of section 1504(a)(2)(A) became a three-year period by operation of the extension provision
of section 1504(b). Customs had three years to liquidate Drawback Claim 2. When Customs
failed to do so, Drawback Claim 2 was deemed liquidated, and Customs’ purported liquidation on
May 14, 2021, was therefore invalid. Accordingly, Performance is entitled to the deemed
liquidated drawback amount of $91,291.83 it asserts for Drawback Claim 2.
CONCLUSION
For the foregoing reasons, Performance’s cross-motion for summary judgment, ECF No.
18, is granted as to Drawback Claim 2 and denied as to Drawback Claim 1. Correspondingly, the
14
As discussed previously, subparagraph (B) is an exception to subparagraph (A) that is
available when the underlying import entries have not been liquidated and become final within
the one-year period as described in subparagraph (A). 19 U.S.C. § 1504(a)(2)(A)–(B). Here, the
one-year period described in subparagraph (A) had been extended twice, to end on March 8,
2019. As of this date, all underlying import entries were liquidated and final. Accordingly,
subparagraph (B) can not apply to Drawback Claim 2.
Court No. 22-00044 Page 19
Government’s cross-motion for summary judgment, ECF No. 23, is denied as to Drawback Claim
2 and granted as to Drawback Claim 1. Judgment will enter accordingly.
/s/Jane A. Restani
Jane A. Restani, Judge
Dated: May 31, 2024
New York, New York