It has long been speculated that duties collected by U.S. Customs and Border Protection ("CBP") upon export of qualifying goods to Canada and Mexico under 19 C.F.R. § 181.53, which is a duty deferral program instituted under NAFTA, were collected in violation of the Export Clause of the U.S. Constitution, which states that "No Tax or Duty Shall be Laid on Articles exported from any State" (Article I, Section 9, Clause 5). A case has now been brought before the U.S. Court of International Trade for adjudication of these Constitutional issues, and certain significant developments have occurred during litigation which may affect qualifying importers who export and tender duty under section 181.53.

The aforementioned 19 C.F.R. § 181.53(b)(1) through (5) impose duty on goods exported to Canada or Mexico when those goods that are withdrawn from a bonded warehouse after manipulation, manufacture, smelting or refining; that are exported after being manufactured or otherwise changed in a foreign trade zone; or are exported after being temporarily imported under bond. In every instance, the duty is imposed when qualifying goods are exported to Canada or Mexico, and the basic argument in the ongoing court case is that duty is imposed because of exportation to Canada or Mexico.

It is important to note that the legal arguments in the case are not specifically limited to the precise goods at issue in the case (chemicals) nor solely to the HTSUS provision the subject goods in the case were imported under (HTSUS 9813). Any good that has been imported into the United States under a qualifying duty deferral provision of the HTSUS, which is subsequently burdened with duty imposition under 19 C.F.R. § 181, could qualify for a similar suit in the CIT, which potential new cases would presumably be stayed pending outcome of the current case, which has, as mentioned above, undergone several developments in the past weeks.

Because of the nature of the claims, the challengers in the current case sought certification from the CIT of class action status. While the court struck that effort down, the court did not strike down the underlying merits of the case, which merits must still be adjudicated. However, because class action status was not conferred, importers who upon exportation are burdened with duty under 19 C.F.R. § 181 must now take affirmative steps if they wish to protect their rights to duty refunds should the test case ultimately be decided in favor of the importer.