Central Soya Co., Inc. v. US
| Decision Date | 20 March 1991 |
| Docket Number | Court No. 88-07-00575. |
| Parties | CENTRAL SOYA CO., INC., Plaintiff, v. The UNITED STATES, Defendant. |
| Court | U.S. Court of International Trade |
Soller, Shayne & Horn, Carl R. Soller and Margaret H. Sachter, New York City, for plaintiff.
Stuart M. Gerson, Asst. Atty. Gen., Washington D.C., Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office, Commercial Litigation Branch, Al J. Daniel, Jr. (Chi Choy, U.S. Customs Service, New York City, of counsel), for defendant.
Thompson, Hine and Flory, Lewe B. Martin, Peter A. Greene and Frank P. Cihlar, Washington, D.C., for amicus curiae B.F. Goodrich Co.
Paul, Weiss, Rifkind, Wharton & Garrison, Robert E. Montgomery, Jr., George Kleinfeld and Richard S. Taylor, Washington, D.C., for amicus curiae Congressman Bill Frenzel.
Neville, Peterson & Williams, John M. Peterson, New York City, and Peter J. Allen, Hoboken, N.J., for amicus curiae Uniroyal Chemical Co.
ON CROSS MOTIONS FOR SUMMARY JUDGMENT
The question presented in this case pertains to the plaintiff-importer's entitlement to a drawback, or refund, pursuant to 19 U.S.C. § 1313(j)(2), on customs duties paid on imported merchandise when, within three years of the importation, substitute fungible goods are exported in the same condition as the imported goods. The drawback, or refund, authorized pursuant to this statute and the customs regulations promulgated thereunder, is referred to in customs law as a "substitution same condition drawback."
Plaintiff, Central Soya Company, Inc., the importer of certain crude degummed soybean oil, entered into a contract with the Bunge Corporation for an amount of similar crude oil. Since the imported crude oil had already undergone processing, plaintiff performed its contract with Bunge by sending domestic crude degummed soybean oil. The domestic crude oil was delivered to Bunge, and, pursuant to a contract between Bunge and a foreign corporation, was then exported. Plaintiff then sought substitution same condition drawback for the exported crude oil. Plaintiff's request was denied by Customs on the ground that plaintiff was not the exporter of the crude oil.
In this action, the plaintiff contends that the Customs Service acted illegally in denying drawback. The defendant contends that 19 U.S.C. § 1313(j)(2), read in the light of its legislative history, requires that the drawback claimant must be the exporter of the substituted merchandise.
The question presented is whether the Customs Service acted illegally in denying the plaintiff substitution same condition drawback, pursuant to 19 U.S.C. § 1313(j)(2), on the ground that the plaintiff was not the exporter of the substituted merchandise.
Since, in enacting 19 U.S.C. § 1313(j)(2), Congress did not intend to require that the claimant of substitution same condition drawback be the exporter of the substituted merchandise, it is the conclusion of the court that Customs acted illegally in denying the plaintiff the requested drawback. Since it is not disputed that the plaintiff has satisfied the other requirements for drawback, the plaintiff is entitled to drawback. Accordingly, the plaintiff's motion for summary judgment is granted, and the defendant's cross-motion is denied.
Both parties submitted statements of material facts as to which there is no genuine dispute. The plaintiff, Central Soya Company, Inc., imported 5,988,540 lbs. of crude degummed soybean oil, between May 11 and May 29, 1985. Upon entry, the crude oil was processed by the plaintiff to produce refined soybean oil.
On June 25, 1985, the plaintiff entered into a contract with the Bunge Corporation, agreeing to supply Bunge with 2,817,621 lbs. of crude degummed soybean oil. Since plaintiff had already processed the imported crude oil, it performed its contract with Bunge by delivering to Bunge 2,817,621 lbs. of domestic crude degummed soybean oil. Pursuant to a contract between it and a foreign corporation, Bunge then exported the domestic crude oil.
On June 25, 1985, pursuant to 19 U.S.C. § 1313(j)(2), the plaintiff filed its request with the Customs Service for substitution same condition drawback of duties, for 2,817,621 lbs. of crude degummed soybean oil. As part of its claim for drawback, the plaintiff submitted a statement by Bunge, in favor of the plaintiff, in which Bunge disclaimed any right to drawback for the exported crude oil.
In 21 Cust.Bull. 365, C.S.D. 87-6 (1987), the Customs Service denied the plaintiff's claim for drawback. The Customs Service first determined that, for purposes of 19 U.S.C. § 1313(j)(2), the exported domestic crude oil was "fungible" with the imported crude oil. See id. at 366.
The Customs Service then considered whether the drawback claimant must be in possession of the substituted merchandise, and quoted language from the legislative history of 19 U.S.C. § 1313(j)(2). Specifically, the Customs Service quoted language from the House of Representatives Report No. 98-1015, which stated that:
"Drawback is provided if the same person requesting drawback, subsequent to importation and within three years of importation of the merchandise, exports from the United States or destroys under Customs supervision fungible merchandise (whether imported or domestic) which is commercially identical to the merchandise imported."
Id. at 366-67 (quoting H.R.Rep. No. 1015, 98th Cong., 2d Sess. 64, reprinted in 1984 U.S.Code Cong. & Admin.News 4910, 4960, 5023) (emphasis in original). The Customs Service reasoned that "to qualify for drawback under this provision of law, the exporter must be in possession of the substituted merchandise at the time of exportation and the exporter is also the legal entity that must satisfy the other possession requirement for the imported duty-paid merchandise designated for payment of drawback." Id. at 366.
The plaintiff then brought this action, contending that the Customs Service exceeded its statutory authority, and had illegally denied the plaintiff substitution same condition drawback. The defendant contends that Customs did not exceed its authority, since 19 U.S.C. § 1313(j)(2), read in the light of its legislative history, requires that the drawback claimant must be the exporter of the substituted merchandise. Plaintiff moved for summary judgment, and defendant cross-moved for summary judgment.
The first customs laws enacted by the United States Congress provided for an importer to obtain a drawback of duties. Section 3 of the Act of July 4, 1789, provided that:
all the duties paid, or secured to be paid upon any of the goods, wares and merchandises as aforesaid, except on distilled spirits, other than brandy and geneva, shall be returned or discharged upon such of the said goods, wares, or merchandises, as shall within twelve months after payment made, or security given, be exported to any country without the limits of the United States, as settled by the late treaty of peace; except one per centum on the amount of the said duties, in consideration of the expense which shall have accrued by the entry and safekeeping thereof.
Act of July 4, 1789, ch. 2, § 3, 1 Stat. 24, 26-27.
In 1874, when the statutes enacted by Congress were codified into the Revised Statutes of the United States, an importer's entitlement to a drawback was provided for in section 3015. The statute, however, limited drawback to duties paid on merchandise that is imported, and subsequently "exported to any foreign port other than the dominions of any foreign state immediately adjoining to the United States...."
A further limitation on an importer's entitlement to drawback was contained in the Tariff Act of 1930. Section 313 of the Act provided for drawback for duties paid on imported merchandise only if the imported merchandise was used in the manufacture of exported merchandise. In pertinent part, section 313(a) provided that "upon the exportation of articles manufactured or produced in the United States with the use of imported merchandise, the full amount of the duties paid upon the merchandise so used shall be refunded as drawback, less 1 per centum of such duties...." Tariff Act of 1930, ch. 497, § 313(a), 46 Stat. 590, 693. Section 313(a) was codified at 19 U.S.C. § 1313(a).
In 1980, Congress expanded the entitlement to drawback by amending the drawback statute to provide for "same condition drawback," or drawback paid on imported merchandise that is subsequently exported without being manufactured. See Act of Dec. 28, 1980, Pub.L. No. 96-609, § 201(a), 94 Stat. 3555, 3560. Section 201(a), which was codified at 19 U.S.C. § 1313(j), provided that:
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