44 F.Supp.3d 1330 (CIT 2015), 09-00375, Ford Motor Co. v. United States

Docket Nº:09-00375
Citation:44 F.Supp.3d 1330
Opinion Judge:Delissa A. Ridgway, Judge.
Party Name:FORD MOTOR COMPANY, Plaintiff, v. UNITED STATES OF AMERICA and U.S. DEPARTMENT OF HOMELAND SECURITY, U.S. CUSTOMS AND BORDER PROTECTION, Defendants
Attorney:No. 09-00375 Matthew W. Caligur, Baker & Hostetler LLP, of Houston, Texas, argued for Plaintiff. With him on the briefs was C. Thomas Kruse. Of counsel on the briefs was Paulsen K. Vandevert, The Ford Motor Company, of Dearborn, Michigan. Justin R. Miller, Commercial Litigation Branch, Civil Divi...
Case Date:January 13, 2015
Court:Court of International Trade
 
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Page 1330

44 F.Supp.3d 1330 (CIT 2015)

FORD MOTOR COMPANY, Plaintiff,

v.

UNITED STATES OF AMERICA and U.S. DEPARTMENT OF HOMELAND SECURITY, U.S. CUSTOMS AND BORDER PROTECTION, Defendants

No. 09-00375

United States Court of International Trade

January 13, 2015

Page 1331

Matthew W. Caligur, Baker & Hostetler LLP, of Houston, Texas, argued for Plaintiff. With him on the briefs was C. Thomas Kruse. Of counsel on the briefs was Paulsen K. Vandevert, The Ford Motor Company, of Dearborn, Michigan.

Justin R. Miller, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York, New York, argued for Defendants. With him on the briefs were Stuart F. Delery, Assistant Attorney General, Civil Division, and Barbara S. Williams, Attorney-in-Charge, and Amy M. Rubin, Assistant Director, Commercial Litigation Branch. Of counsel on the briefs was Yelena Slepak, Office of the Assistant Chief Counsel, International Trade Litigation, Bureau of Customs and Border Protection, U.S. Department of Homeland Security, of New York, New York.

OPINION

Page 1332

Delissa A. Ridgway, Judge.

In this action, Plaintiff Ford Motor Company challenges, inter alia, the determination of the U.S. Customs Service1 that 17 drawback claims filed by Ford prior to December 3, 2004 (the " Drawback Claims" ) were not deemed liquidated pursuant to 19 U.S.C. § 1504(a)(2), the statutory amendment enacted by Congress in December 2004 to expressly provide for the deemed liquidation of aging drawback claims. See Ford's Motion for Judgment at 1-2, 5-6, 7, 10 (" Pl.'s Brief" ); 19 U.S.C. § 1504(a)(2) (2006); see also Defendants' Response to Plaintiff's Motion for Judgment on the Agency Record at 22 (" Defs.' Response Brief" ) (noting that " the contested determination is [Customs'] determination that Ford's drawback entries [ i.e., claims] did not become deemed liquidated as of December 3, 2005" ).2

Specifically, in its pending Motion for Judgment, Ford argues that the 17 Drawback Claims were deemed liquidated ( i.e., liquidated by operation of law) as of December 3, 2005, pursuant to subparagraph (C) of § 1504(a)(2). See, e.g., Pl.'s Brief at 1-2, 25; Ford's Reply in Support of Motion for Judgment at 1 (" Pl.'s Reply Brief" ); see generally Ford Motor Co. v. United States, 35 CIT, , 806 F.Supp.2d 1328, 1332-33 (2011) (" Ford Motor I" ) (briefly summarizing Ford's claims, in ruling on motion to dismiss). According to subparagraph (C):

An entry or claim for drawback filed before December 3, 2004, the liquidation of which is not final as of December 3, 2004, shall be deemed liquidated on the date that is 1 year after December 3, 2004 [ i.e., on December 3, 2005], at the drawback amount asserted by the claimant at the time of the [drawback] entry or claim.

19 U.S.C. § 1504(a)(2)(C).

It is undisputed that Ford filed all 17 of the Drawback Claims before December 3, 2004; and it is similarly undisputed that all 17 of the Drawback Claims remained unliquidated as of December 3, 2005. See, e.g., Pl.'s Brief at 2, 3, 25; Defs.' Response Brief at 1-2, 3. As discussed in greater detail below, however, Customs has taken the position that, notwithstanding the language of subparagraph (C), drawback claims such as the 17 at issue here -- i.e., drawback claims that were filed before December 3, 2004, and which remained unliquidated one year later -- were not deemed liquidated pursuant to that subparagraph

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if any of the import entries underlying the drawback claims were not yet liquidated and those liquidations final as of December 3, 2005. See, e.g., id. at 2, 3. And Customs maintains that, as to each of the 17 Drawback Claims at issue, there is at least one underlying import entry that was unliquidated and not final on that date. See, e.g., id. at 2, 7.3

According to Customs, Ford's Drawback Claims therefore fall within a different subparagraph of the statute -- specifically, subparagraph (B) of 19 U.S.C. § 1504(a)(2). See, e.g., Defs.' Response Brief at 3, 7. However, a drawback claim that is covered by subparagraph (B) is deemed liquidated only if the drawback claimant first " deposit[s] . . . estimated duties on the unliquidated imported merchandise" and " fil[es] with the Customs Service . . . a written request for . . . liquidation" of the drawback claim, which " must include a waiver of any right to payment or refund under other provisions of law." 19 U.S.C. § 1504(a)(2)(B); see also, e.g., Defs.' Response Brief at 7. Because there is no dispute that Ford has not taken all of these actions, Customs concluded that the 17 Drawback Claims have never been deemed liquidated. See id. at 3-4, 7, 12-13, 15.4

In its opening brief, Ford states that it seeks both declaratory and injunctive relief -- that is, " a declaratory judgment that Customs' interpretation of 19 U.S.C. § 1504(a)(2)(C) as meaning that a drawback claim remains open and not subject to deemed liquidation as long as any underlying consumption [i.e., import] entry remains unliquidated is . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law," as well as " [a] declaratory judgment that Customs has no legal authority to review, liquidate, or take any action with respect to the Drawback Claims, other than to recognize their proper status as finally liquidated at

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the amounts claimed by Ford," in addition to " permanent injunctive relief consistent with such declaratory relief." Pl.'s Brief at 2, 9-10; see also Ford's Supplemental Brief in Support of Motion for Judgment at 11 (" Pl.'s Supp. Brief" ) (stating that Ford seeks a determination that " Ford's Drawback Claims have been deemed liquidated by operation of law, . . . because the Drawback Claims liquidated as aging claims subject to 19 U.S.C. § 1504(a)(2)" ).5

Jurisdiction lies under 28 U.S.C. § 1581(i). See Ford Motor I, 35 CIT, 806 F.Supp.2d 1328 (denying motion to dismiss for lack of subject matter jurisdiction, holding that action presents case or controversy that is both ripe and within Court's (i) jurisdiction). For the reasons detailed below, Customs' interpretation of 19 U.S.C. § 1504(a)(2) cannot stand. Plaintiff's Motion for Judgment therefore must be granted.

I. Background

For purposes of this case, " drawback" refers to Customs' refund of duties that were paid upon the importation of an article or materials which were later exported. 19 U.S.C. § 1313; 19 C.F.R. § 191.2(i)-(k) (2006).6 As the Court of Appeals has explained, the purpose of such drawback is not to " compensate for duty overpayments, but instead [to] help enforce the United States' policy of 'encourag[ing] domestic manufacture of articles for export and . . . allow[ing] those articles to compete fairly in the world marketplace.'" Shell Oil Co. v. United States, 688 F.3d 1376, 1382 (Fed. Cir. 2012) (citing Hartog Foods Int'l, Inc. v. United States, 291 F.3d 789, 793 (Fed. Cir. 2002)). The Government notes that, generally, under circumstances such as those here, " if imported merchandise is either exported or manufactured into an article that is exported, the exporter (or [the] person to whom [has been] transferred the right) [ i.e., the drawback claimant] is entitled to a refund of up to 99 percent of the duties that were paid on the merchandise upon its importation." Defs.' Response Brief at 10.7

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Given the nature of a drawback claim, there are two relevant sets of entries: (1) the underlying " import entry" or entries (also known as the " consumption entry" or entries) filed with Customs at the time of importation; and (2) the drawback entry (or " drawback claim" ), filed some time after importation, which covers one or more underlying import entries.8 Customs finalizes the payment of drawback through the process of the " liquidation" of a drawback claim. 19 C.F.R. § § 159.1, 191.81.9 Customs' practice, memorialized in its regulations, is generally to defer the liquidation of drawback claims until either all import entries underlying the drawback claim have been liquidated and those liquidations are " final" ( i.e., the period for filing of any protest or claim against the liquidation of the import entries has expired), or the drawback claimant has filed a waiver with a deposit of any additional duties owed on the imported merchandise. 19 C.F.R. § 191.81(a)(1)& (2) (providing that " [d]rawback entries may be liquidated after: (1) [l]iquidation of the [underlying] import entry becomes final; or (2) [d]eposit of estimated duties on the imported merchandise . . . before liquidation of the import entry" ); see generally Defs.' Response Brief at 10; Defendants' Supplemental Briefing Pursuant to the Court's June 17, 2013 Order at 2 n.2, 3 (" Defs.' Supp. Brief" ).

In agency parlance, Customs considers a drawback claim to be " workable" ( i.e., ready for liquidation) when all of the import entries that underlie that drawback claim have been liquidated and those liquidations have become final. See Defs.' Response Brief at 10-11. The Government argues that Customs' practice of deferring liquidation of drawback claims until after the underlying import entries have been liquidated and become final (or until the drawback claimant has filed a waiver and deposited any additional duties) is necessitated by Customs' concern about the potential for improper double refunds of import duties, as well as by considerations of Customs' administrative convenience (or " feasibility" ) -- i.e., the administrative burden that would be imposed on the agency in coordinating the liquidation of import entries at 300-plus ports of entry with the liquidation of drawback claims at the four offices that Customs has designated to process drawback claims. See Defs.' Supp. Brief at 3-5 (summarizing Customs' rationale for deferring liquidation of drawback

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