US Says Equity Demands Return of Customs Inspection Fees on Canceled Tickets From Southwest

The U.S. said it has a "better right than" Southwest Airlines does to Customs Passenger Processing Fees paid by individual passengers that cancel their tickets and never receive a refund or fail to use a travel credit. Filing a reply brief at the Court of International Trade on Oct. 24, the government argued that this specific situation "results in an unfair enrichment rather than the return of the customs inspection fee to the customer" (Southwest Airlines Co. v. United States, CIT # 22-00141).

The government faulted Southwest for keeping the fees on canceled tickets, claiming CBP is entitled to have the fee paid whenever a fee is collected from an individual, even if the person never enters the U.S. or receives any customs services (see 2408130036). Southwest said this claim "fails to address the overall statute," which says CBP is entitled to the fee only when a person arrives in the U.S. aboard a commercial aircraft (see 2409030024).

In response, the U.S. said Southwest is required by law to collect and remit the fees, adding that the law and applicable regulations support the government's position that there's "no requirement that a passenger must travel for such a fee to be remitted once collected by the carrier." The government said the case isn't on whether the fee is owed but whether Southwest refunded the fees "it insists those customers do not owe."

The government argued that Southwest shouldn't deprive CBP of the fee it collected on CBP's behalf when a ticket is canceled. Nothing in the statute "can remotely be read to support Southwest’s position that the 'person' who collects the customs inspection fee may keep and profit from it if the customer cancels the ticket," the brief said. The airline "appears to adopt the legal cliché that possession is nine-tenths of the law," the U.S. quipped. This view "simply neglects its statutory obligation not only to collect, but to remit what it collects."

There's no statutory or equitable argument that allows Southwest to keep the fee, the brief said.

The government also said the one-year travel credit isn't a refund of the fee. Southwest centered its claim on an Illinois district court case in which the court said a time-limited travel voucher is "still worth more than $0." The U.S. said the court in this case still refused to dismiss the breach of contract claim since the value of the voucher was less than the actual cash value of the flight at issue.