Ford Decision on NAFTA CO Waiver
This is a pretty specific decision, so let's be careful to not read too much into it.
As you may recall, Ford Motor Company has been fighting with Customs and Border Protection over some post-entry NAFTA claims. Ford failed to provide to Customs copies of NAFTA certificates of origin when it made its claims under 19 U.S.C. 1520(d). Customs denied the claims and Ford protested, claiming, in part, that Customs had waived the requirement for the presentation of NAFTA CO's when it began accepting NAFTA claims via ACS Reconciliation without the presentation of CO's. We most recently discussed the issue here. In that decision, the Court of Appeals for the Federal Circuit concluded that Customs had not adequately explained why it was treating the presentment requirement different in the 1520(d) context and the Reconciliation context.
Customs has now explained its position, which (spoiler alert) the Court of International Trade accepted.
Because the issue turned on the application of the statute and regulations, the Court applied the two-step Chevron analysis. Under this standard of review, Customs’ position will be upheld unless its interpretation of the statute is procedurally defective, arbitrary or capricious, or manifestly contrary to law. On remand, Custom explained that the difference in treatment between manual post-entry claims under 19 U.S.C. § 1520(d) and claims made via Reconciliation is based on the application of two different statutes and, therefore, is reasonable.
According to Customs, § 181.22(d)(1) of the customs regulations implements the NAFTA provision that permits CBP to waive the requirement for possession of a NAFTA CO at the time of claim. But, according to Customs, the fact that the presentation of the CO is waived for all a post-entry claims made under Reconciliation is derived from the statute authorizing the electronic filing of customs documents. Under 19 U.S.C. § 1484 and § 1509, Customs may waive the presentation of entry records, including certificates of origin. This waiver authority relates to regular entries and reconciliation entries. By waiving the presentation of entry documents to facilitate Reconciliation, CBP ensured that the process is fully electronic. Customs noted that it has authority to demand presentation of the CO, should it choose to do so. Customs reasonably views this as distinct from waiving an importer’s possession of a CO at the time of a claim.
Did all that underlining make it clear that Customs sees a difference between waiving the requirement to have a CO at the time of the claim and waiving the requirement to present the CO with a post-NAFTA claim. In Customs' view, it waived only the presentation requirement and only in the Reconciliation context.
For its part, Ford disputed this line of reasoning. It argued that the waiver of the CO for any NAFTA claim must stem from Article 503 of the Agreement, which is implemented in the regulations at § 181.22. Further, Ford argued that Customs has all of the same mechanisms to determine the validity of a claim and penalize a false claim whether made with respect to a manual post-entry claim or a Reconciliation claim. According to Ford, this eliminates any reasonable distinction between the waiver authority Customs has for normal 1520(d) claims and Reconciliation claims.
I think it is worth playing out a thought experiment. Assume there was no Article 503(c) of the NAFTA permitting the waiver of NAFTA certificates of origin. If that were the case, there would be no reason to create § 181.22, which permits the Port Director to waive the NAFTA CO when he or she is otherwise satisfied as to the origin of the imported goods. In that world, could CBP waive the requirement for the presentment of the CO at the time of a post-entry claim? Probably not because Article 502(3) specifically requires presentation of the CO to make a post-entry claim and the importer would have had to possess the CO to make the claim. The same waiver authority applies to both claims at the time of entry and post-entry claims. To me, this indicates that CBP's waiver authority under any circumstances stems from Article 503 and § 181.22; not from any law relating to the electronic submission of entry documents. I doubt Mexico and Canada think the U.S. can waive the presentation requirement for post-entry claims under any authority other than Article 503.
Customs has authority to waive the possession and presentation of a CO. That authority comes from Article 503. Customs appears to have exercised that authority to facilitate Reconciliation. The Court of International Trade held that Customs adequately explained why it treats Reconciliation and manual post-entry claims differently. The question for the Court of Appeals will likely be whether that explanation makes sense or whether it sounds like creative lawyering, which is never a bad thing. Of course, it might be both.
As you may recall, Ford Motor Company has been fighting with Customs and Border Protection over some post-entry NAFTA claims. Ford failed to provide to Customs copies of NAFTA certificates of origin when it made its claims under 19 U.S.C. 1520(d). Customs denied the claims and Ford protested, claiming, in part, that Customs had waived the requirement for the presentation of NAFTA CO's when it began accepting NAFTA claims via ACS Reconciliation without the presentation of CO's. We most recently discussed the issue here. In that decision, the Court of Appeals for the Federal Circuit concluded that Customs had not adequately explained why it was treating the presentment requirement different in the 1520(d) context and the Reconciliation context.
Customs has now explained its position, which (spoiler alert) the Court of International Trade accepted.
Because the issue turned on the application of the statute and regulations, the Court applied the two-step Chevron analysis. Under this standard of review, Customs’ position will be upheld unless its interpretation of the statute is procedurally defective, arbitrary or capricious, or manifestly contrary to law. On remand, Custom explained that the difference in treatment between manual post-entry claims under 19 U.S.C. § 1520(d) and claims made via Reconciliation is based on the application of two different statutes and, therefore, is reasonable.
According to Customs, § 181.22(d)(1) of the customs regulations implements the NAFTA provision that permits CBP to waive the requirement for possession of a NAFTA CO at the time of claim. But, according to Customs, the fact that the presentation of the CO is waived for all a post-entry claims made under Reconciliation is derived from the statute authorizing the electronic filing of customs documents. Under 19 U.S.C. § 1484 and § 1509, Customs may waive the presentation of entry records, including certificates of origin. This waiver authority relates to regular entries and reconciliation entries. By waiving the presentation of entry documents to facilitate Reconciliation, CBP ensured that the process is fully electronic. Customs noted that it has authority to demand presentation of the CO, should it choose to do so. Customs reasonably views this as distinct from waiving an importer’s possession of a CO at the time of a claim.
Did all that underlining make it clear that Customs sees a difference between waiving the requirement to have a CO at the time of the claim and waiving the requirement to present the CO with a post-NAFTA claim. In Customs' view, it waived only the presentation requirement and only in the Reconciliation context.
For its part, Ford disputed this line of reasoning. It argued that the waiver of the CO for any NAFTA claim must stem from Article 503 of the Agreement, which is implemented in the regulations at § 181.22. Further, Ford argued that Customs has all of the same mechanisms to determine the validity of a claim and penalize a false claim whether made with respect to a manual post-entry claim or a Reconciliation claim. According to Ford, this eliminates any reasonable distinction between the waiver authority Customs has for normal 1520(d) claims and Reconciliation claims.
I think it is worth playing out a thought experiment. Assume there was no Article 503(c) of the NAFTA permitting the waiver of NAFTA certificates of origin. If that were the case, there would be no reason to create § 181.22, which permits the Port Director to waive the NAFTA CO when he or she is otherwise satisfied as to the origin of the imported goods. In that world, could CBP waive the requirement for the presentment of the CO at the time of a post-entry claim? Probably not because Article 502(3) specifically requires presentation of the CO to make a post-entry claim and the importer would have had to possess the CO to make the claim. The same waiver authority applies to both claims at the time of entry and post-entry claims. To me, this indicates that CBP's waiver authority under any circumstances stems from Article 503 and § 181.22; not from any law relating to the electronic submission of entry documents. I doubt Mexico and Canada think the U.S. can waive the presentation requirement for post-entry claims under any authority other than Article 503.
Customs has authority to waive the possession and presentation of a CO. That authority comes from Article 503. Customs appears to have exercised that authority to facilitate Reconciliation. The Court of International Trade held that Customs adequately explained why it treats Reconciliation and manual post-entry claims differently. The question for the Court of Appeals will likely be whether that explanation makes sense or whether it sounds like creative lawyering, which is never a bad thing. Of course, it might be both.
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