"Usted declaró que no come arroz."
Translation:You stated that you do not eat rice.
English translation should be "You testified that you did not eat rice" because of the Sequence of Tenses rule.
That's a very fancy way of saying it, but is is incorrect. "no come" in this sentence is present continuous, whereas you have translated in the imperfect. By using the imperfect you incorrectly leave open the possibility that the person does now eat rice, whereas the correct translation (using the present continuous) does not.
Because of the repoted speech it should be "You stated that you did not eat rice" .
Technically it is correct, and probably should be marked so. But maybe DuoLingo wants you to remember that the 3rd person conjugation is also used for Usted, and so is only accepting the Usted option in this case.