December 16, 2000
M E M O R A N D U M - URGENT
TO:	Harbor Maintenance Tax Litigation Participants
FROM:	John M. Peterson/Curtis W. Knauss Neville Peterson LLP
RE:	Customs Proposes Regulation to Set Time Limit for Swisher-Type Export HMT Refund Claims

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     Following last week's U.S. Supreme Court decision in Swisher International Inc. v. United States, which paved the way for exporters to recover all payments of the Harbor Maintenance Tax (HMT) paid since 1987, the United States Customs Service has proposed a controversial - and, in our judgment, illegal - regulation which seeks to limit exporters' ability to claim refunds.

     In a Notice of Proposed Rulemaking published in the Federal Register on December 15, 2000. Customs is proposing to amend its HMT regulations [19 C.F.R. Section 24.24(e)(5)] to establish a one-year period, measured from the date of payment, in which a taxpayer must file a claim for refund of any HMT which is paid by means of a quarterly return. This limit would apply to the export HMT, as well as the HMT on Foreign Trade Zone (FTZ) admissions and domestic waterway movements.

     The proposed regulation seeks to limit exporters' ability to recover past payments of the export HMT. Customs' notice of proposed rulemaking says that " . . . requests for refunds of payments made quarterly that are properly filed with Customs prior to this proposed rule becoming final will be processed by Customs regardless of the dates on which payments were made." What this appears to mean is that if "Swisher"-type applications for refunds of the export HMT are not "properly filed" with Customs (presumably with supporting documentation) by the time the new regulation enters into force, the claims will be barred as untimely.

     The exact deadline which would be imposed on export HMT claimants is not certain. Customs is soliciting public comments on its proposed regulation during the next 60 days. A "final" regulation could be imposed at any time thereafter.

     In our judgment, there is a strong legal basis to challenge Customs' proposed regulation. It attempts to establish a statute of limitations which Customs has not authorized. In addition, it may be another unconstitutional attempt to tax exports. However, we will be unable to challenge the regulation in the courts until Customs issues it in final form. We will, of course, submit comments in opposition to the regulation.

     Our firm has already filed export HMT refund claims for many of our clients using the procedures set out in 19 C.F.R. Section 24.24(e)(5). As a prudential matter, we will want to ensure that all of these claims are documented as thoroughly as possible. Accordingly, if your company has copies of Customs Form 349 Quarterly HMT Returns for exports which you have not previously sent to us, you should submit refund applications immediately. If you do not have these returns, or they cannot be located, an application can be made to Customs for copies under the Freedom of Information Act (FOIA).

     Please call if you have any questions concerning this matter, or the status of export HMT refund efforts in general.

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