HMT refunds payable for 10 years . . . maybe

By Staff -- Logistics Management, 4/1/2000

It's too soon for shippers to celebrate, but a recent ruling by the U.S. Court of Appeals for the Federal Circuit may open the way for U.S. exporters to receive refunds on their harbor maintenance tax (HMT) payments back to 1986, when the tax was first imposed.

In Swisher International v. United States, the federal appeals court overturned a 1998 decision by the Court of International Trade. In that decision, the trade court had ruled that exporters were entitled to refunds under a section of law that had a two-year statute of limitations on refunds. In Swisher, the appeals court said that the plaintiff could claim refunds under a different statute, which had no such time limitation.

The plaintiff in the case had filed an Amended Quarterly Summary Report (Customs Form 350) for each of its past HMT payments, changing the amount paid to zero and asking for a full refund because the Supreme Court declared the tax unconstitutional on exports in 1998. U.S. Customs denied that request, and Swisher filed a protest challenging that denial. Once the Customs Service rejected the protest, the plaintiff was free to take its case to the Federal Circuit Court, explains international trade lawyer and Logistics columnist Matthew T. McGrath. McGrath represents several clients that are challenging federal policies regarding HMT refunds.

The appeals court ruled that the procedure Swisher International used to apply for a refund fell under Section 28 U.S.C. 1581(a), which has no statute of limitations. This differs from earlier cases in which plaintiffs had filed suit to obtain refunds, but placed their requests under the jurisdiction of a statute that has a two-year time limit.

McGrath says it's unclear whether the approach used in Swisher will hold up in court. "It's kind of a back-door way of getting there, but it is possible that it will work," he suggests.

If Swisher's strategy should succeed, exporters face an additional hurdle, McGrath says. Customs Form 350 requires the exporter to attach copies of Customs Form 349, the quarterly HMT payment form. But many exporters no longer have them, either because their freight forwarders kept them or because the documents were so old that they have long since been thrown away. As a result, he predicts, U.S. Customs will be flooded with Freedom of Information Act requests for copies of those forms.

At this point, exporters just have to wait and see how the case turns out. "In practical reality," McGrath says, "the case will be appealed and U.S. Customs isn't about to start processing any refunds against this decision."

Meanwhile, exporters continue to fight an appeals court ruling that they are not entitled to interest on their HMT refunds. (See "Court ruling: Exporters won't get interest on HMT refunds," Logistics March 2000, Page 24.) IBM, designated as the lead case, has requested a rehearing by the court of appeals on the grounds that the original ruling focused entirely on statutory prohibitions but ignored a long history of Supreme Court decisions on unconstitutional takings of property. Those earlier decisions, McGrath notes, always awarded interest to the plaintiffs. If the appeals court reverses itself and agrees with IBM, he says, the federal government could well take this issue to the Supreme Court, too