E.I. Du Pont De Nemours and Co. v. U.S., SLIP OP. 00-122.

• Decision Date: 20 September 2000
• Docket Number: No. 96-12-02657.,SLIP OP. 00-122.,96-12-02657.
• Citation: 116 F.Supp.2d 1343
• Parties: E.I. DU PONT DE NEMOURS AND COMPANY, Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

116 F.Supp.2d 1343

E.I. DU PONT DE NEMOURS AND COMPANY, Plaintiff, v. UNITED STATES, Defendant.

SLIP OP. 00-122.

No. 96-12-02657.

United States Court of International Trade.

September 20, 2000.

Crowell & Moring LLP, Washington, DC (Barry E. Cohen and John I. Blanck, Jr.), for Plaintiff.

David W. Ogden, Assistant Attorney General; Joseph I. Liebman, Attorney in Charge, International Trade Field Office; Amy M. Rubin, Civil Division, Department of Justice, Commercial Litigation Branch, for Defendant.

OPINION

EATON, Judge.

Before the Court are cross-motions for summary judgment filed pursuant to USCIT R. 56 by Defendant United States of America ("Government") on behalf of the United States Customs Service ("Customs") and Plaintiff E.I. du Pont de Nemours and Company ("DuPont") with respect to DuPont's claim for manufacturing substitution drawback under 19 U.S.C. § 1313(b) (1994). The Court grants summary judgment in favor of DuPont.

JURISDICTION

The Court has exclusive jurisdiction over any civil action commenced to contest Customs' denial of a protest under 19 U.S.C. § 1515 (1994). See 28 U.S.C. § 1581(a) (1994); see also Mitsubishi Electronics America, Inc. v. United States, 44 F.3d 973, 976 (Fed.Cir.1994).

BACKGROUND

DuPont is a domestic corporation engaged in various industrial enterprises worldwide. This action concerns DuPont's pigments business and, specifically, its importation of titaniferous raw materials for the manufacture and subsequent export of "Ti-Pure" brand titanium dioxide pigments. At issue is DuPont's entitlement under 19 U.S.C. § 1313(b) to a drawback upon exportation from December 1988 through March 1989 of 60 shipments of "Ti-Pure R-960" titanium dioxide pigment manufactured in the United States.

On December 3, 1991, DuPont submitted a proposed drawback contract¹ under 19 U.S.C. § 1313(b), seeking manufacturing substitution duty drawback² for the titanium appearing in any prospective exports of Ti-Pure titanium dioxide pigments manufactured with the use of four titaniferous ores ("feedstocks"). (Compl. at ¶ 5.) On December 6, 1991, DuPont filed a Manufacturing Drawback Certificate, No. G82-0000542, claiming a $37,540.00 drawback for titanium appearing in exported Ti-Pure R-960. DuPont designated as the basis of this claim the titanium contained in the substituted feedstock synthetic rutile, entry No. 86-247171-2, which was imported on April 3, 1986.

Following correspondence between the parties, Customs denied DuPont's proposed drawback contract, revised on or about March 4, 1994, stating that DuPont failed to comply with the "same kind and quality" requirement of Treasury Decision ("T.D.") 82-36³ because titanium was never isolated as an element during DuPont's manufacturing process. (Compl. at Ex. 5.) Customs emphasized that the titanium actually used in the manufacturing process was always combined with another element, i.e., oxygen, and that DuPont was actually seeking titanium only as part of the compound titanium dioxide, and not as a discrete element. (Compl. at Ex. 5.)

On April 5, 1996, Customs liquidated the drawback entry at issue, refusing to allow the claim for drawback. DuPont protested the liquidation, which was denied by Customs on July 19, 1996. DuPont commenced this action on November 25, 1996.

In its Memorandum in Support of its Motion for Summary Judgment, the Government

asserts that DuPont's drawback proposal fails to satisfy the statutory requirements for manufacturing substitution drawback. (Def.'s Mem. Supp. Summ. J. at 6, 11.) The Government further claims that DuPont's use of various feedstocks, and its failure to isolate the titanium as an element during its manufacturing process, takes its drawback proposal outside the scope of the requirements of T.D. 82-36, which purports to set forth the parameters within which different raw materials may be used as sources of a metallic element to satisfy the "same kind and quality" requirement of 19 U.S.C. § 1313(b). (Def.'s Mem. Supp. Summ. J. at 7, 11.)

In its Opposition to Defendant's Motion for Summary Judgment and Memorandum in Support of Cross Motion for Summary Judgment, DuPont contends that it is entitled to manufacturing substitution duty drawback because its manufacturing process satisfies the criteria found in the applicable statutory and regulatory requirements. (Pl.'s Mem. Supp. Cross-Mot. Summ. J. at 3.) Specifically, DuPont contends its operations comply with the requirements of 19 U.S.C. § 1313(b) and T.D. 82-36. (Pl.'s Mem. Supp. Cross-Mot. Summ. J. at 3.) Oral arguments on the parties' cross-motions for summary judgment were heard by the late Judge Dominick L. DiCarlo on January 7, 1999, and again before this Court on May 9, 2000.

FACTS

In the manufacture of its titanium pigments, DuPont uses the following imported and domestic feedstocks: (1) rutile; (2) synthetic rutile; (3) titanium slag; and (4) ilmenite. (Pl.'s Mem. Supp. Cross-Mot. Summ. J. at 5; Def.'s Resp. Pl.'s Material Facts Not In Disp. ¶ 1.) DuPont's production process involves combining feedstocks and various cleansing agents in a "reaction vessel" where the materials are heated, refined, and then combined with oxygen to form titanium dioxide. (Pl.'s Mem. Supp. Cross-Mot. Summ. J. at v; Def.'s Resp. Pl.'s Material Facts Not In Disp. ¶ 2.)

The first step in DuPont's process involves heating a blend of the feedstocks in the reaction vessel with petroleum coke and chlorine. (Pl.'s Mem. Supp. Cross-Mot. Summ. J. at vi; Def.'s Resp. Pl.'s Material Facts Not In Disp. ¶ 4.) During the second phase of the process, additional chemicals are introduced into the reaction vessel to remove all of the excess waste materials, thus yielding pure titanium tetrachloride. (Pl.'s Mem. Supp. Cross-Mot. Summ. J. at vi; Def.'s Resp. Pl.'s Material Facts Not In Disp. ¶ 5.) In the third stage of the process, the pure titanium tetrachloride is combined with oxygen at a high temperature, causing a reaction in which the atomic bonds between the titanium and the chlorine split. The titanium then bonds with oxygen atoms to form pure titanium dioxide. (Pl.'s Mem. Supp. Cross-Mot. Summ. J. at vi; Def.'s Resp. Pl.'s Material Facts Not In Disp. ¶ 6.) At no time is titanium isolated as a discrete element, but rather is generated in the form of titanium dioxide. This titanium dioxide is then used in the manufacture of pigments.

STANDARD OF REVIEW

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); see also Marathon Oil Co. v. United States, 24 CIT ___, ___, 93 F.Supp.2d 1277, 1279 (2000). The Court should deny a motion for summary judgment if there are material facts in dispute that "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). As there are no remaining questions of material fact in dispute, summary judgment is proper in this case. Accordingly, the statutory presumption of factual correctness for Customs decisions under 28 U.S.C. § 2639(a)(1) is not relevant to this case. See Goodman Manufacturing, L.P. v. United States, 69 F.3d 505, 508 (Fed.Cir. 1995); Marathon Oil, 93 F.Supp.2d at 1279.

DISCUSSION

The question of law before the Court concerns the proper interpretation of the phrase "same kind and quality" as contained in 19 U.S.C. § 1313(b). Because much of the briefing in this case was accomplished before the United States Court of Appeals for the Federal Circuit issued its decision in International Light Metals v. United States, 194 F.3d 1355 (Fed.Cir. 1999) ("ILM"), great attention was given by both parties to T.D. 82-36. In ILM, the Federal Circuit found that Customs did not seek "Chevron"⁴ deference for T.D. 82-36 and declined to grant deference sua sponte. See ILM, 194 F.3d at 1361. In the instant case, it is unclear whether Customs is seeking Chevron-style deference.⁵ Because Customs' position is unclear, this Court, like the Federal Circuit, declines to grant Chevron deference to T.D. 82-36 sua sponte.⁶ See ILM, 194 F.3d at 1361.

Thus, this Court finds itself in the same posture as the Federal Circuit in ILM, and is therefore bound by that court's construction of 19 U.S.C. § 1313(b). In ILM, the Federal Circuit found that titanium sponge was eligible for drawback when titanium scrap was used in its place in a manufacturing process which required titanium metal. See ILM, 194 F.3d at 1367. The Federal Circuit held that the scrap satisfied the statutory requirement that the "merchandise" (titanium scrap) be of the "same kind and quality" as the imported "merchandise" (titanium sponge) for which it was substituted. See id. The Federal Circuit reached its conclusion even though the scrap, unlike the sponge, contained other metals which were salvaged as part of the manufacturing process, and even though the welding step of the manufacturing process took longer when scrap was used. See id. at 1366. In its decision, the Federal Circuit found three factors to be compelling:

First ... it is undisputed that the titanium in the scrap was identical to the titanium in the sponge that ILM imported. Accordingly, the titanium in the domestic scrap was `of the same kind and quality' as the titanium in the imported sponge. Second, there is no dispute as to the amount of titanium that was in the scrap. As a result, the amount of a drawback to which ILM would be entitled based upon the titanium in that scrap and the titanium in the imported sponge could be precisely determined.

Third, the government's position results in a "no scrap" rule, one for which we find no support in the statute.

Id.

By applying the three factors that the Federal Circuit found compelling in ILM, this Court concludes that DuPont is...