Saturday, May 04, 2013

Post-Entry NAFTA Claims: Is Reconciliation a Waiver?

As you likely know, Ford Motor Company has been battling with Customs over whether it is entitled to duty refunds pursuant to post-entry NAFTA claims it made without submitting a completed NAFTA Certificate of Origin from the exporter within the required one-year period. This issue has been the subject of a number of prior posts. To catch up on it, read here, here, and here.

This case follows the remand to the Court of International Trade, in which that Court considered the specific NAFTA-based requirements that an importer provide a copy of the certificate of origin with a post-entry claim made under 19 USC 1520(d). Ford had argued that is can make the claim without the certificate of origin and provide it subsequently because 19 CFR 10.112 provides:
Whenever a free entry or a reduced duty document, form, or statement required to be filed in connection with the entry is not filed at the time of the entry or within the period for which a bond was filed for its production, but failure to file it was not due to willful negligence or fraudulent intent, such document, form, or statement may be filed at any time prior to liquidation of the entry or, if the entry was liquidated, before the liquidation becomes final.
The Court of International Trade held that this regulation does not help Ford because the more specific and subsequently passed NAFTA regulations require that the CO be filed with the claim. The Court of Appeals for the Federal Circuit has now had the opportunity to review that decision. The CAFC opinion is here.

On the first point regarding 19 CFR 10.112, the Federal Circuit agreed with the Court of International Trade that the NAFTA rules creating specific requirements for the filing of post-entry claims trump the more general regulation on duty-free documentation. There is nothing really new there.

It is worth noting that Judge Newman wrote a very persuasive dissent on this point. According to Judge Newman:
In entering into the NAFTA, and as ratified and codified, neither the executive nor the legislative bodies nor any historical documentation we have found reflected an intent to remove the benefit of the pre-existing general regulatory provision of § 10.112. I have unearthed no hint of an intent to add this burden and rigor to trade with Canada and Mexico. The entirety of this history shows a contrary intent, to facilitate such trade.
As a result, she would have found that by failing to amend 10.112 when implementing NAFTA, the government effectively stated that it is applicable to the NAFTA claims. This is, in my opinion, a wise and well-justified opinion. Alas, it did not carry the day.

But, Ford did not lose the appeal. Instead, the majority of the Federal Circuit addressed the question of whether the ACS Reconciliation Program has a legal impact on this case. Under Customs and Border Protection's ACS Reconciliation Program, an importer can electronically flag an entry to notify Customs that some aspects of the information initially reported is subject to later correction. While "Recon" us most often used for value, it can also be used to make a post-entry NAFTA claim. An important point is that for Recon claims, the importer need not submit a paper CO at the time of the post-entry claim.

This raises an important question. If both manual claims and Recon claims are Customs and Border Protection's effort to implement the section 520(d) process, how come only manual claims require a paper CO? Is it possible that by implementing the post-entry process via Recon, Customs also effectively waived the requirement for a NAFTA CO in the post-entry environment?

That is a good question. Unfortunately, we do not have an answer. Neither Customs nor the Court of International Trade explained why the same statutory provision has two different implementations and two different requirements with respect to the paper CO. As a result, the Federal Circuit remanded the case (again!) to the CIT for further proceedings.

That means we will likely be writing about this case again in a few months.

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