Flint Hills Res., LP v. United States

• Citation: 333 F.Supp.3d 1362
• Decision Date: 06 September 2018
• Docket Number: Consol. Court No. 06-00065,Slip Op. 18–110
• Parties: FLINT HILLS RESOURCES, LP, formerly known as Koch Petroleum Group, LP, et al., Plaintiffs, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

333 F.Supp.3d 1362

FLINT HILLS RESOURCES, LP, formerly known as Koch Petroleum Group, LP, et al., Plaintiffs,

v.UNITED STATES, Defendant.

Slip Op. 18–110

Consol. Court No. 06-00065

United States Court of International Trade.

Dated: September 6, 2018

Michael F. Mitri, Phelan & Mitri, of Fairfield, CT, argued for plaintiffs. With him on the brief were Jack D. Mlawski, Galvin & Mlawski LLC, of Rockville Centre, NY, and Steven H. Becker, Becker Law Firm PLLC, of New City, NY.

Tara K. Hogan, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for defendant. With her on the brief were Chad A. Readler, Acting Assistant Attorney General, and Jeanne E. Davidson, Director. Of Counsel on the brief was Richard McManus, Office of the Chief Counsel, U.S. Customs & Border Protection, of Washington, DC.

OPINION

Eaton, Judge:

In this consolidated action, plaintiff Flint Hills Resources, LP, formerly Koch Petroleum Group, LP, and consolidated plaintiffs Texaco Refining & Marketing Inc., Texaco Aviation Products, LLC, Shell Oil Company, and Citgo Petroleum Corporation (collectively, "plaintiffs") move for summary judgment, challenging the decisions of the U.S. Customs and Border Protection ("Customs") to deny plaintiffs' administrative protests seeking drawback of (1) Harbor Maintenance Taxes ("HMT")¹ imposed under 26 U.S.C. § 4461, (2) Merchandise Processing Fees ("MPF")² imposed under 19 U.S.C. § 58c, and/or (3) Environmental Taxes ("ET")³ imposed under 26 U.S.C. § 4411, that were paid or imposed upon the entry of their petroleum products into the United States (collectively, "taxes and fees"). Mem. Supp. Pls.' Am. Mot. Summ. J., ECF No. 80 ("Pls.' Br.") 1. Plaintiffs ask the court to order the re-liquidation of their entries, payment of their drawback claims, and interest as provided by law. See Pls.' Br. 1.

By its cross-motion for summary judgment, defendant, the United States ("defendant" or the "Government"), on behalf of Customs, asks the court to deny plaintiffs' summary judgment motion, and dismiss the case because plaintiffs' protests were properly denied and Federal Circuit precedent has answered the questions presented by plaintiffs' motion. See Def.'s Resp. Pls.' Mot. Summ. J. and Cross-Mot. Summ. J., ECF No. 84 ("Def.'s Br.") at 8-9.

The court has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(a) (2006), and, for the reasons below, denies plaintiffs' motion for summary judgment and grants defendant's cross-motion for summary judgment.

LEGAL FRAMEWORK

At the time a majority⁴ of plaintiffs entered their products into the United States, under 19 U.S.C. § 1313(j)⁵ and § 1313(p),⁶ an importer could receive a refund of up to 99 percent of the amount paid on any duty, tax, or fee imposed under federal law "because of its importation" into the United States if (1) the goods are either exported unused or (2) if acceptable substitute merchandise is exported within the statutory and regulatory timeframe. See 19 U.S.C. § 1313(j), (p) (2000) ; see also 19 C.F.R. § 191.176(2)(i) (2000) (requiring the exportation of the substitute merchandise within 180 days of entry of the imported merchandise). This refund is known as a "drawback." See 19 U.S.C. § 1313(j).

Pursuant to the statute, a claimant has three years from the date of exportation or destruction of the entered merchandise (or substitute merchandise) to file a drawback claim, including "all documents necessary to complete a drawback claim," or else it will be "considered abandoned." 19 U.S.C. § 1313(r)(1) (2000). Since the year 1998, Customs' regulations have defined a "complete" drawback claim as

consist[ing] of the drawback entry on Customs Form 7551, applicable certificate(s) of manufacture and delivery, applicable Notice(s) of Intent to Export, Destroy, or Return Merchandise for Purposes of Drawback, applicable import entry number(s), coding sheet unless the data is filed electronically, and evidence of exportation or destruction under subpart G of this part.

19 C.F.R. § 191.51(a)(1) (1998).

Beginning in the mid-1990s, the issue of whether certain taxes or fees were eligible to drawback became the subject of litigation. In Texport Oil Co. v. United States , the Federal Circuit considered whether HMT and MPF were eligible for drawback under 19 U.S.C. § 1313(j)(2). As to HMT, the Court found that

the dispositive question is whether the HMT is assessed "because of ... importation." 19 U.S.C. § 1313(j)(2). This language, we think, is best read as limiting the scope of the charges eligible for drawback to only those with a substantial nexus to the importation of merchandise. We thus read the "because of ... importation" clause to require a nexus between the assessed charges and the act of importation, and therefore preclude the grant of drawback to a duty, tax, or fee that is assessed in a nondiscriminatory fashion against all shipments utilizing ports.

Texport Oil Co. v. United States , 185 F.3d 1291, 1296 (Fed. Cir. 1999).

Thus, the Court found that because "[t]he HMT is a generalized Federal charge for the use of certain harbors," and is "intended to be assessed independently of whether the ‘port use’ is for imports, exports, or other shipments," the HMT "does not have the necessary nexus to the importation of goods to qualify it for drawback under section 1313(j)(2)." Id. at 1297 (first citing 26 U.S.C. § 4461 and then citing 19 C.F.R. § 24.24(b)(1) ). The Court did find, however, that the MPF was eligible for drawback. Id. at 1296.

The Federal Circuit reaffirmed its decision with respect to HMT, and extended its holding to ET, in George E. Warren Corp. v. United States , 341 F.3d 1348 (Fed. Cir. 2003). There, the Court found that

Warren has shown no question that is precedent-setting or of exceptional importance or any question not correctly resolved by Texport and thus no justification for en banc hearing of this appeal. Under Texport , Warren's claim for HMT is absolutely foreclosed. Nor has Warren shown any error in the trial court's application of the Texport rule to the protest claim for drawback of ETs. We hold simply: like the HMT, the ET is not imposed on cargo "because of ... importation."

Warren , 341 F.3d at 1356. Read together, the Texport and Warren decisions made it clear that neither HMT nor ET qualified for drawback under 19 U.S.C. § 1313(j)(2).

In December 2004, following the issuance of the Federal Circuit's opinions in Texport and Warren , Congress amended 19 U.S.C. § 1313(j) to allow importers to receive drawback of duties, taxes, or fees imposed under federal law "upon entry or importation " (rather than only allowing drawback of those duties, taxes, or fees imposed "because of ... importation "). See Miscellaneous Trade and Technical Corrections Act of 2004, Pub. L. No. 108–429, Title I, § 1557(a), (b), 118 Stat. 2579 (2004) ("2004 Trade Act") (emphasis added). The amendment applied to "any drawback claim filed on or after [December 3, 2004, the date of the Act's enactment,] and to any drawback entry filed before that date if the liquidation of the entry is not final on that date ." See id. (emphasis added). Thus, assuming an importer's unliquidated drawback claim complied with all other drawback statutes and regulations, HMT and ET were eligible for drawback under the 2004 Trade Act.⁷

After the amendment of the statute, the Federal Circuit addressed the new statutory provision in Aectra Refining and Marketing, Inc. v. United States , 565 F.3d 1364 (Fed. Cir. 2009) (" Aectra II "). There, plaintiff Aectra⁸ had timely filed ten drawback claims between 1997 and 1998, following its export of substitute petroleum derivatives, but only sought drawback of import duties, and not HMT, MPF, or ET. Customs liquidated Aectra's drawback entries on or about November 28, 2003, and refunded the import duties Aectra had requested in its drawback claim, but not the unrequested HMT, MPF, or ET. Subsequently, on or about February 2, 2004, Aectra filed protests that sought, for the first time, drawback of HMT and MPF.⁹ The protests, however, were filed more than three years after the date of exportation of Aectra's substitute petroleum derivatives, and therefore, Customs denied Aectra's protests as time-barred under 19 U.S.C. § 1313(r)(1). Aectra sought review in this Court, which sustained Customs' protest denials, and the Court of Appeals affirmed. Aectra Refining and Marketing Inc. v. United States , 31 CIT 2086, 533 F.Supp.2d 1318 (2007), aff'd , 565 F.3d 1364 (Fed. Cir. 2009) (" Aectra I ").

In reaching its decision in Aectra II , the Federal Circuit concluded that (1) the 2004 Trade Act did not suspend the time limit for completing a drawback claim for HMT, MPF, and ET (i.e. , that a claimant must file a drawback claim for HMT, MPF, and ET within three years from exportation of the substitute merchandise); (2) a "complete claim" included the 19 C.F.R. § 191.51(b)'s¹⁰ requirement that a claimant "include an accurate calculation of the entire amount that it seeks to be refunded under the drawback statute," including any HMT, MPF, and ET sought; and (3) "futility [of filing drawback claims for HMT and ET¹¹ ] does not excuse the failure to file a proper claim for limitations purposes." Aectra II , 565 F.3d at 1372-73 (first citing 19 U.S.C. § 1313(r)(1) and then citing 19 C.F.R. § 191.51(b) (1998) ). In short, the Federal Circuit held that a "complete" drawback claim must include a correct calculation of any taxes and fees for which refund is sought and the claim must be made no later than three years following export of the substitute merchandise. Id.

Following the Court of Appeals' decision, importers with claims that were suspended under Aectra I moved to designate another test case in this Court: Shell Oil Company v. United States , Court No. 08-00109. Shell was designated the test case for the purpose of determining whether drawback claimants that filed drawback claims prior to April 6, 1998 (the...