California Indus. Products, Inc. v. U.S., Court No. 98-04-01087.

• Decision Date: 22 September 2004
• Docket Number: Court No. 98-04-01087.,SLIP OP. 04-122.
• Citation: 350 F.Supp.2d 1135
• Parties: CALIFORNIA INDUSTRIAL PRODUCTS, INC., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

350 F.Supp.2d 1135

CALIFORNIA INDUSTRIAL PRODUCTS, INC., Plaintiff, v. UNITED STATES, Defendant.

Court No. 98-04-01087.

SLIP OP. 04-122.

United States Court of International Trade.

September 22, 2004.

Collier Shannon Scott, Washington, DC (Mark L. Austrian, Robin H. Gilbert and John M. Herrmann) for Plaintiff.

Peter D. Keisler, Assistant Attorney General; Barbara S. Williams, Acting Attorney in Charge; Harry A. Valetk, Trial Attorney, Civil Division, Commercial Litigation Branch, U.S. Department of Justice; Chi S. Choy, Office of Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection, for Defendant, of counsel.

OPINION

WALLACH, Judge.

I Introduction

This matter is before the court on cross-motions for summary judgment, pursuant to USCIT R. 56, by Plaintiff, California Industrial Products, Inc., ("CIP") and Defendant, United States. At issue, is the United States Customs Service's¹ ("Customs") decision that certain of CIP's substitution manufacturing drawback claims were not eligible for drawback pursuant to 19 U.S.C. § 1313(b) (1999).² The court has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(a) (1999). For the following reasons, Plaintiff's Motion for Summary Judgment is granted and Defendant's Cross-Motion for Summary Judgment is denied.

II Background

At issue in this case are two claims for substitution manufacturing drawback made by the Plaintiff pursuant to 19 U.S.C. § 1313(b) and Treasury Decision ("T.D.") 81-74.³ On February 16, 1994, CIP submitted to Customs a notice of intention to claim drawback, pursuant to 19 U.S.C. § 1313(b), for substitution manufacturing drawback involving articles manufactured using steel and stated that it intended to comply with T.D. 81-74. CIP did not reference scrap or synonyms for scrap in its original February 16, 1994, letter. Customs approved Plaintiff's request that it be permitted to claim drawback on exports of steel, based on the terms of a general drawback contract, T.D. 81-74. The terms of the contract were set forth in a letter issued by Customs in 1981 and those terms were accepted by CIP's February 16, 1994, letter, subject to providing certain additional information that was required by the Regional Commissioner of Customs in Chicago. On or about April 7, 1994, Customs sent Plaintiff an acknowledgment of Plaintiff's acceptance of the general contract.

In a letter dated October 25, 1995, Plaintiff contacted Customs to revise its original letter of intent.⁴ The letter expressed CIP's "revised intention to adhere to and comply with the conditions of drawback contract 81-74 under 19 U.S.C. § 1313(b), articles manufactured using steel;" it did not mention scrap or synonymous terms for scrap.⁵ Letter from Richard M. Kilbane, Vice President, Finance, California Industrial Products, Inc., to Ms. Sylvia Pfeffer, U.S. Customs Service (Oct. 25, 1995). Customs acknowledged the receipt of CIP's October 25, 1995, letter in a letter dated January 12, 1996, and indicated that CIP's October 25, 1995, letter superseded CIP's prior letter of intent, dated February 16, 1994, and Customs' acknowledgment letter dated April 7, 1994, without prejudice to any existing claims before the Port of Chicago.

Plaintiff retained Appel-Revoir, Inc. ("Appel-Revoir"), a drawback consulting firm, to assist it in preparing, filing and processing its drawback claims. Between December 2, 1995, and March 7, 2002, CIP made 26 drawback entries.⁶ The first entry at issue, entry number RM5-0000052-9, was entered on December 2, 1995. The description that appeared on its bill of lading, which was filed with Customs, stated: Carbon Steel, AISI 1050; AISI 1070, Iron and Steel Scrap. Agreed Statement of Facts at 2 ¶ 7. The second entry number at issue is RM5-0000053-7, entered on December 6, 1995. The description that appeared on its bill of lading that was filed with Customs, stated: Carbon Steel, AISI 1050; AISI 1070, Iron and Steel Scrap for Remelting only. Id.

CIP received accelerated payment⁷ for 13 claims of the 26 claims it had filed seeking drawback.⁸ Customs also granted one claim because it did not involve steel scrap. Customs did not give CIP a decision regarding its eligibility for drawback on the 13 claims of steel scrap at the time of accelerated payment. Two of these claims were subsequently liquidated on January 2, 1998, without drawback. Customs then demanded the return of the accelerated payments on the two claims at issue in this case. The remaining 11 claims were liquidated on April 11, 2003.⁹

Plaintiff received two Notices of Action pursuant to Customs Form 29 dated January 2, 1998, saying that two of its drawback entries were denied based on Customs' determination that CIP impermissibly claimed drawback on scrap. Customs said that its Headquarters Ruling Letter 210988, issued on October 29, 1979, stated Customs' position that drawback is not allowed on valuable waste, including steel scrap. Customs denied duties on an accelerated basis.¹⁰ CIP requested further review of its protests, which was granted by the Customs' Drawback Office at the Port of Chicago, Illinois. However, Customs denied CIP's protest concerning the two entries at issue based on the analysis contained in the Customs Headquarters Ruling Letter 227375, dated October 10, 1997 ("HQ 227375"). Agreed Statement of Facts at 2 ¶ 10.

III Arguments

Plaintiff argues that Customs' interpretation of 19 U.S.C. § 1625(c)(2) and the Customs Modification Act ("Mod Act") is contrary to the law. Defendant claims that "[s]ince CIP's contract did not specify that steel scrap would be exported, steel scrap is not eligible for drawback under 19 U.S.C. § 1313(b)." Defendant's Memorandum in Support of Defendant's Cross-Motion For Summary Judgment and in Opposition to Plaintiff's Motion for Summary Judgment at 1 ("Defendant's Cross-Motion") at 1. Defendant also argues that Plaintiff may not claim that it is eligible for a "treatment" under 19 U.S.C. § 1625(c)(2)¹¹ because of the similar "treatment" Customs' accorded to another importer's transactions. See id. at 5.

IV Applicable Legal Standards

The court reviews Customs' denial of a protest de novo. See Rheem Metalurgica S/A v. United States, 951 F.Supp. 241, 20 CIT 1450, 1456 (1996), aff'd, 160 F.3d 1357 (Fed.Cir.1998). It grants summary judgment where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." USCIT R. 56(c) (2004); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In a motion for summary judgment, the movant bears the burden of producing evidence showing the lack of any genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); see also Precision Specialty Metals, Inc. v. United States, 182 F.Supp.2d 1314, 1318 (CIT 2001) ("Precision II"). In determining if a party has met its burden the court does not "weigh the evidence and determine the truth of the matter," but rather the court determines "whether there is a genuine issue for trial." Anderson, 477 U.S. at 249, 106 S.Ct. 2505. It views the evidence in the light most favorable to the non-moving party and draws all inferences in the nonmovant's favor. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962).

VI

Discussion

A Customs' Interpretation of 19 U.S.C. § 1625 is Not Afforded Deference by the Court

The court does not afford deference to Customs' interpretation of 19 U.S.C. § 1625 on the grounds that (1) HQ 227375 was an inconsistent treatment of Plaintiff's claim for drawback, and (2) Customs' attempts to retroactively apply its statute and regulations is contrary to law.

Customs Ruling Letter 227375 is Not Afforded Deference by the Court

Defendant argues that the court should afford HQ 227375 deference.

When Congress grants authority to an agency to promulgate regulations necessary for the administration of programs it oversees, that authority permits the agency to fill gaps left in the statutory scheme. See Contreras v. United States, 215 F.3d 1267, 1274 (Fed.Cir.2000). The Supreme Court's decision in United States v. Haggar Apparel Co., 526 U.S. 380, 394, 119 S.Ct. 1392, 143 L.Ed.2d 480 (1999) makes clear that the court must give Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), deference to those valid agency regulations interpreting a statute. The Supreme Court held in United States v. Mead Corp., 533 U.S. 218, 234-35, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001), that Customs classification rulings, while not afforded Chevron deference may be entitled to Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944), deference. Under the Skidmore standard, "[a] classification ruling ... may ... at least seek a respect proportional to its `power to persuade.' "Mead, 533 U.S. at 235, 121 S.Ct. 2164 (quoting Skidmore, 323 U.S. at 140, 65 S.Ct. 161). Mead teaches that whether Skidmore deference is applicable to a Customs classification ruling varies depending on "its writer's thoroughness, logic, and expertness, its fit with prior interpretations, and any other sources of weight." Id.; see also Structural Indus. v. United States, 356 F.3d 1366, 1370 (Fed.Cir.2004).

In this case, HQ 227375 will not be granted deference. While Customs may change a view it believes to have been grounded upon a mistaken legal interpretation,¹² the consistency and predictability of an agency's position is a factor in assessing the weight that position is due. See Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 417, 113 S.Ct. 2151, 124 L.Ed.2d 368 (1993) (citing Automobile Club of Mich. v. Commissioner, 353 U.S. 180, 180-83 77 S.Ct. 707, 1 L.Ed.2d 746 (1957)). "An agency interpretation of...