Esso Standard Oil Co. (Pr) v. U.S.

• Decision Date: 16 March 2009
• Docket Number: No. 2008-1234.,No. 2008-1212.,2008-1212.,2008-1234.
• Citation: 559 F.3d 1297
• Parties: ESSO STANDARD OIL CO. (PR), Plaintiff-Appellant, v. UNITED STATES, Defendant-Cross Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

559 F.3d 1297

ESSO STANDARD OIL CO. (PR), Plaintiff-Appellant, v. UNITED STATES, Defendant-Cross Appellant.

No. 2008-1212.

No. 2008-1234.

United States Court of Appeals, Federal Circuit.

March 16, 2009.

Curtis W. Knauss, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of New York, NY, argued for plaintiff-appellant. With him on the brief were Robert B. Silverman, and Robert F. Seely.

Tara K. Hogan, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-cross appellant. With her on the brief were Jeanne E. Davidson, Director, Todd M. Hughes, Deputy Director.

Before LOURIE, RADER, and LINN, Circuit Judges.

LINN, Circuit Judge.

Esso Standard Oil Co. (PR) ("Esso") appeals from the grant of summary judgment by the U.S. Court of International Trade affirming the refusal by the U.S. Customs Service, now the U.S. Bureau of Customs and Border Protection ("Customs"), to refund Esso for its overpayment of Harbor Maintenance Tax ("HMT") on entries covered by protest number 4909-97-100059 ("the '59 protest"). Esso Standard Oil Co. (PR) v. United States, No. 98-09-02318, 2007 WL 4570816 (Ct. Int'l Trade Dec. 28, 2007) ("Judgment"). Customs cross-appeals from the portion of the judgment ordering Customs to refund Esso for its overpayment of HMT on entries covered by protest numbers 4909-97-100057 and 4909-97-100058 (collectively "the '57 and '58 protests"). We conclude that the trial court correctly determined that Esso's refund request with respect to the '59 protest is time-barred, but that it incorrectly determined that Esso's overpayments covered by the '57 and '58 protests are correctable errors under 19 U.S.C. § 1520(c).¹ Thus, we affirm-in-part and reverse-in-part.

BACKGROUND

I

HMT is a user fee imposed on "port use" by commercial vessels, 26 U.S.C. § 4461(a) (2000), and is assessed as an ad valorem charge equal to 0.125 percent of the value of the vessels' commercial cargo, id. § 4461(b). See generally Water Resources Development Act of 1986, 26 U.S.C. §§ 4461-62, Pub.L. 99-662, 100 Stat. 4082 (effective April 1, 1987).² Congress intended the HMT to help finance the general maintenance and improvement of ports in the United States. S.Rep. No. 99-126, at 9-10 (1985), as reprinted in 1986 U.S.C.C.A.N. 6639, 6640-47. As originally enacted, the statute imposed no HMT on domestic cargo (excluding crude oil with respect to Alaska) shipped between the United States mainland and Alaska, Hawaii, or any U.S. possession. 26 U.S.C. § 4462(b) (1987). By its terms, however, the original statute did not exempt domestic cargo shipped between Alaska, Hawaii, and the U.S. possessions themselves.

To alleviate the tax burden on domestic shipping between these ports, Congress amended the statute on November 10, 1988, adding the phrase "Alaska, Hawaii, or such a possession" to § 4462(b)(1)(B), and thus exempting from HMT the following:

(A) cargo loaded on a vessel in a port in the United States mainland for transportation to Alaska, Hawaii, or any possession of the United States for ultimate use or consumption in Alaska, Hawaii, or any possession of the United States,

(B) cargo loaded on a vessel in Alaska, Hawaii, or any possession of the United States for transportation to the United States mainland, Alaska, Hawaii, or such a possession for ultimate use or consumption in the United States mainland, Alaska, Hawaii, or such a possession,

(C) the unloading of cargo described in subparagraph (A) or (B) in Alaska, Hawaii, or any possession of the United States, or in the United States mainland, respectively. . . .

26 U.S.C. § 4462(b)(1), Pub.L. No. 100-647, § 2002(b), 102 Stat. 3342, 3597 (1988) (amendment emphasized). The amendment was made retroactive to April 1, 1987, the effective date of the original statute.

Although the statute is largely self-executing, Customs is charged with administering the HMT statute and is authorized to promulgate regulations for carrying out the purposes of the statute. Id. § 4462(i). When the statute was originally enacted in 1987, Customs quickly promulgated regulations that same year. But Customs has never updated its regulations to reflect the statutory exemption for shipments between Alaska, Hawaii, and U.S. possessions enacted by Congress with the 1988 amendment to § 4462(b). To this day, the relevant Customs regulation embodies the 1987 version of § 4462(b)(1)(B). Compare 19 C.F.R. § 24.24(c)(4)(i)(B) (1987) (exempting "[c]argo loaded on a vessel in Alaska, Hawaii, or any possession of the U.S. for transportation to the U.S. mainland for ultimate use or consumption in the U.S. mainland") (emphases added), with 19 C.F.R. § 24.24(c)(4)(i)(B) (2008) (same).

II

Between 1993 and 1997, Esso shipped petroleum products from the U.S. Virgin Islands and unloaded those products in Puerto Rico.³ Esso submitted to Customs a total of eighty-seven entries for liquidation, in which Esso declared and paid certain import duties and fees, including over $339,000 in HMT. Esso submitted those entries electronically using the Automated Broker Interface ("ABI") entry filing system, a software program that is sold and maintained by outside vendors. Esso does not dispute that it knew that it was making the HMT payments at the time of each entry. Indeed, the HMT payments are listed as separate line items on each of Esso's entry summaries (Customs Form 7501), which also specify the amount paid. Customs then liquidated those entries between 1994 and 1997, as entered by Esso, without change and, consequently, without refunding the HMT.

Not until May 16, 1997 did Esso realize that possession-to-possession shipments had been exempted from HMT under the 1988 statutory amendment. Esso then filed three requests for HMT refunds, all more than ninety days after the relevant liquidations. Because these requests would have constituted untimely protests under 19 U.S.C. § 1514,⁴ Customs classified Esso's requests as "requests for reliquidation" under 19 U.S.C. § 1520(c). Esso's first request, corresponding to the '57 protest, was filed on June 9, 1997 and covered two entries submitted on February 28, 1997 and March 19, 1997 and liquidated on June 20, 1997 and July 7, 1997. Esso's second request, corresponding to the '58 protest, was filed on June 13, 1997 and covered sixteen entries submitted between June 28, 1995 and October 5, 1996 and liquidated between June 21, 1996 and February 28, 1997. Esso's third request, corresponding to the '59 protest, was filed on August 25, 1997 and covered sixty-nine entries submitted between October 3, 1993 and February 6, 1996 and liquidated between March 18, 1994 and May 24, 1996. Customs denied all three requests under § 1520(c)(1).

On November 18, 1997, Esso timely protested the denial of its three reliquidation requests pursuant to 19 U.S.C. § 1514(a)(7). The stated basis for Esso's protests was that "on May 16, 1997 . . . it came to our attention for the first time that commercial cargo shipped by vessel from the U.S. Virgin Islands to the port of San Juan, Puerto Rico . . . was no longer subject to the payment of Harbor Maintenance Tax." App. for Defendant-Cross Appellant at 40. Esso further argued that its overpayment was a correctable mistake of fact, not an error in the construction of a law, because Esso had relied on "the erroneous implementation and enforcement of the Harbor Maintenance Tax law as implemented and enforced by Customs via ABI and customs liquidators." Id. at 41. Esso alleged that the ABI software, like Customs's regulations themselves, had not been updated to reflect the 1988 amendment to the HMT statute exempting possession-to-possession shipments.

On March 18, 1998, Customs denied all three protests. Customs ruled that Esso's overpayment of HMT, as well as Customs's subsequent liquidation of the entries without refunding the HMT, was a mistake of law, which cannot be corrected under 19 U.S.C. § 1520(c)(1). The ruling stated that "Customs in San Juan was aware that the entries covered movements between two insular possessions but incorrectly believed that these movements were subject to the HMT. This is a mistake of law which is not correctable under 19 U.S.C. § 1520(c)(1)." App. for Defendant-Cross Appellant at 46. In the alternative, Customs found that the '59 protest should also be denied because Esso failed to notify Customs of the mistake within one year of liquidation, as required under § 1520(c)(1).

III

On September 24, 1998, Esso challenged the denial of its protests in the Court of International Trade. On cross-motions for summary judgment, the trial court held that Esso's payment of HMT was a correctable "inadvertence" under § 1520(c)(1) stemming from Customs's decades-long failure to amend its regulations to reflect the 1988 statutory amendment. Esso Standard Oil Co. (PR) v. United States, No. 98-09-02318, Op. at 1301, 2007 WL 4125999 at *3 (Ct. Int'l Trade Nov. 20, 2007) ("Summary Judgment") ("Customs slipped up by not implementing the statute, and plaintiff did not discover its slipup. This is clearly a case of inadvertence."). The trial court rejected the government's argument that this was a mistake of law, concluding that "[n]o one construed the law. Customs just did not implement the law it clearly knew was applicable and it took no steps which would permit the law to function as it should." Id. at *8. Regarding the '59 protest, however, the trial court agreed with the government that Esso's refund request was time-barred because the error had not been brought to Customs's attention within one year of the last liquidation covered by the '59 protest. Judgment, Op. at 1298. Accordingly, the trial court ordered Customs to refund all HMT erroneously paid on entries covered by the '57 and '58 protests.

Both parties appealed to this court. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5).

DISCUSSION

"We review the Court of International Trade's...