Goodman Mfg., LP v. US

Decision Date30 June 1994
Docket NumberCourt No. 93-01-00029. Slip Op. 94-106.
Citation855 F. Supp. 1301
PartiesGOODMAN MANUFACTURING, L.P., Plaintiff, v. UNITED STATES, Defendant.
CourtU.S. Court of International Trade

Strasburger & Price, L.L.P., William M. Methenitis and Andrew G. Halpern, Dallas, TX, for plaintiff.

Frank W. Hunger, Asst. Atty. Gen. of the U.S., Joseph I. Liebman, Attorney-in-Charge, Intern. Trade Field Office, Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice, Carla Garcia-Benitez, Washington, DC (Karen P. Binder, Office of the Asst. Chief Counsel, U.S. Customs Service, of counsel), for defendant.

Collier, Shannon, Rill & Scott, Lauren R. Howard and Mary T. Staley, Washington, DC, for amicus curiae, American Iron and Steel Institute.

OPINION

CARMAN, Judge:

Plaintiff commenced this action pursuant to 19 U.S.C. § 1515(a) (1988) to contest the denial of its protest against the United States Custom Service's (Customs) appraisement of steel that plaintiff had imported from Korea into its Houston, Texas plant. Goodman's Houston plant is designated as Foreign Trade Subzone (FTZ) number 84G. The Court has jurisdiction under 28 U.S.C. § 1581(a) (1988) and, for the reasons which follow, enters judgment for defendant.

BACKGROUND

The merchandise at issue consists of three coils of cold rolled steel sheets, subject to a duty rate of 5.1%, for which plaintiff paid $25.70 per 100 pounds. Stipulation of Facts in Lieu of Trial (Stip.Facts) at 1. In total, plaintiff paid $4,848.24 for 28,109 pounds of steel, exclusive of international shipment and insurance costs. Id. Goodman entered the steel on May 12, 1992 to its FTZ number 84G in Houston as privileged foreign merchandise. Id. at 2. Plaintiff subsequently used all 28,109 pounds of steel in its production of central heating furnaces. From the 28,109 pounds of steel used in this production, 2,652 pounds resulted in steel scrap which was ultimately "properly entered and appraised based on transaction value at $81.68 upon its transfer from the subzone and entry into domestic commerce." Id.

Goodman entered the central heating furnaces it produced in the subzone at the Port of Houston, Texas on May 15, 1992 (Entry No. 601-0010100-9). Customs classified the privileged foreign steel incorporated into the finished furnaces under HTSUS 7209.23.0000 and assessed a duty rate of 5.1% ad valorem. Id. at 2-3. Goodman valued and entered this steel on the basis of transaction value which amounted to $4,767.00. Customs calculated the value of the steel by subtracting international freight and insurance ($2,151.66) and the sales price received from the scrap dealer who purchased the 2,652 pounds of steel scrap ($81.68) from the full price paid for all 28,109 pounds of steel admitted to the FTZ ($6,999.90). Id. at 3. Goodman paid duties of $243.12. Id.

Plaintiff filed a timely protest under 19 U.S.C. § 1514(a) (1988) to challenge Customs' valuation of the steel. On December 11, 1992, Customs denied the protest under 19 U.S.C. § 1515 and, after having paid all liquidated duties, plaintiff commenced this action pursuant to 28 U.S.C. § 1581(a). Id. at 4.

CONTENTIONS OF THE PARTIES

Goodman argues the plain language of the Foreign Trade Zones Act (FTZA) and its legislative history supports plaintiff's position that "the proper method for valuation of the foreign privileged steel ... is transaction value, based on the actual price per pound paid for the steel multiplied by the amount of steel (by weight) actually entered into domestic commerce as part of a finished furnace." Plaintiff's Complaint at 2-3. In other words, plaintiff maintains it must only pay duty on the physical amount or quantity of steel that actually enters the U.S. According to plaintiff, the Court must not decide whether Customs has reasonably interpreted the statute, but rather must determine the correct interpretation of the statute. Moreover, because Goodman contends Customs' interpretation of the statutory waste provision is unreasonable, plaintiff argues the Court should not defer to Customs.

Defendant maintains it properly interpreted the FTZA when developing its valuation methodology. Customs' methodology is based on subtracting the value of the waste produced from the value of the privileged foreign merchandise used in the manufacturing process. The appropriate duty rate is then applied to this resultant value. According to Customs, 19 U.S.C. § 81c (1988) and its legislative history direct Customs to make an allowance for recoverable and irrecoverable waste, but do not state how Customs should calculate that allowance. Because Congress did not provide Customs specific guidance in making the calculation, Customs contends it was necessary for it to develop a method consistent with the statute. Customs maintains its interpretation of § 81c is reasonable and consistent with its past practice, and that the Court should, therefore, defer to Customs' interpretation.

Amicus recognizes the statute, legislative history and relevant regulations indicate Customs must make an allowance for recoverable waste when calculating the dutiable value of merchandise entering U.S. customs territory. Amicus, however, claims Congress gave Customs the discretion to establish a method for determining the duty to be paid and for calculating the amount of allowance for the waste. Because Amicus argues Customs' methodology is consistent with the statute, regulations, purpose of the FTZA and Customs' longstanding practice, it requests the Court uphold Customs' interpretation of the law. According to amicus, to hold otherwise would allow plaintiff to misuse the FTZA and cause injury to domestic manufacturers.

STANDARD OF REVIEW

As in all "civil actions contesting the denial of a protest under section 515 of the Tariff Act of 1930," the Court reviews the record in this case de novo. See 28 U.S.C. § 2639(a)(1) (1988). Customs' appraisement decisions carry a presumption of correctness and "the burden of proving otherwise ... rests upon the party challenging such decision." Id.; see Moss Mfg. Co. v. United States, 13 CIT 420, 424, 714 F.Supp. 1223, 1227 (1989), aff'd, 8 Fed. Cir. (T) 40, 896 F.2d 535 (1990).

DISCUSSION

This case is before the Court on cross-motions for summary judgment. Summary judgment is appropriate "if 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(d). "The Court will deny summary judgment if the parties present a dispute about a fact such that a reasonable trier of fact could return a verdict against the movant." Ugg Int'l, Inc. v. United States, 17 CIT ___, ___, 813 F.Supp. 848, 852 (1993) (quotation and citation omitted). This case does not present any genuine issue of material fact. The issue that remains only involves the proper construction of 19 U.S.C. § 81c(a). Because this issue pertains solely to matters of statutory interpretation, the Court concludes the parties' conflict raises a question of law which the Court may properly resolve by summary judgment.

The question of law before the Court is how the allowance for waste provision in § 81c should be applied in determining the appropriate dutiable value of privileged foreign merchandise entering U.S. customs territory as part of a finished product. Contrary to defendant's assertions, the issue before the Court is not whether Customs reasonably interpreted the statute. Although Customs' decisions enjoy a presumption of correctness,1 the Court's role in reviewing Customs cases de novo is to find the correct result. See Semperit Indus. Prods., Inc. v. United States, 18 CIT ___, ___, Slip Op. 94-100 at 15-18, ___ F.Supp. ___, ___ (June 14, 1994). The Court determines the correct result in valuation cases, as it does in customs classification cases, in order to achieve fair results and provide "uniform and consistent interpretation and application of the customs laws." Jarvis Clark Co. v. United States, 2 Fed.Cir. (T) 70, 73, 733 F.2d 873, 876, reh'g denied, 2 Fed.Cir. (T) 97, 739 F.2d 628 (Fed.Cir.1984) (quotations and citation omitted). However, because plaintiff has failed to overcome the presumption of correctness, the Court finds for defendant.

Congress authorized the Foreign-Trade Zones Board "to grant to public and private corporations the privilege of establishing, operating, and maintaining FTZs for the purpose of expediting and encouraging foreign commerce." S.REP. No. 1107, 81st Cong., 2d Sess. ___ (1949), reprinted in 1950 U.S.C.C.S. 2533, 2533-34; see also 19 U.S.C. § 81b(a) (1988). A FTZ "is an isolated, fenced off, and policed area within or adjacent to a port of entry." S.REP. No. 1107 at 2533, reprinted in 1950 U.S.C.C.S. at 2533. A FTZ allows foreign merchandise to "be landed, stored, repacked, sorted, mixed or otherwise manipulated with a minimum of customs control and without customs bond." Id. Any such merchandise brought into customs territory, however, "is subject to all customs laws and regulations." Id. A subzone such as plaintiff's, "has all the characteristics of a zone except that it is an area separate from an existing zone" and "can only be created when a company cannot be accommodated within the zone." Conoco, Inc. v. U.S. Foreign-Trade Zones Bd., 12 Fed.Cir. (T), ___, ___, 18 F.3d 1581, 1582 n. 3 (1994) (citation omitted).

The treatment and appraisal of foreign merchandise entered into U.S. customs territory from a FTZ is provided for in § 81c. This statute, in relevant part, reads as follows:

Foreign and domestic merchandise of every description, except such as is prohibited by law, may, without being subject to the customs laws of the United States, except as otherwise provided in this chapter, be brought into a zone and may be stored, sold, exhibited, broken up, repacked, assembled, distributed, sorted,
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  • Goodman Mfg., L.P. v. U.S.
    • United States
    • United States Courts of Appeals. United States Court of Appeals for the Federal Circuit
    • 24 Octubre 1995

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