Merck & Co., Inc. v. U.S., Slip Op. 06-86.

• Decision Date: 06 June 2006
• Docket Number: Court No. 02-00759.,Slip Op. 06-86.
• Citation: 435 F.Supp.2d 1253
• Parties: MERCK & CO., INC., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

435 F.Supp.2d 1253

MERCK & CO., INC., Plaintiff, v. UNITED STATES, Defendant.

Slip Op. 06-86.

Court No. 02-00759.

United States Court of International Trade.

June 6, 2006.

Galvin & Mlawski (John J. Galvin), New York City, for Plaintiff Merck & Co., Inc.

Peter D. Keisler, Assistant Attorney General; (Barbara S. Williams) Attorney in Charge, International Trade Field Office; (Edward F. Kenny) Civil Division, Commercial Litigation Branch, United States Department of Justice; Chi S. Choy, Office of the Assistant Chief Counsel, International Trade Litigation, United States Customs and Border Protection, of counsel, for Defendant United States.

OPINION

BARZILAY, Judge.

Plaintiff Merck & Co., Inc. ("Merck"), has brought this action against the United States to contest Customs' denial of its timely-filed protest claim for "substitution unused merchandise duty drawback" on exports of substitute, fungible non-NAFTA origin goods to Canada and Mexico. See Pl.'s Mot. Summ. J. 1. Plaintiff asserts that pursuant to the relevant statutes, 19 U.S.C. §§ 1313(j)(2) & (4), 3333(a) (2000), its shipments of the merchandise in question to Canada and Mexico constitute "exports" and therefore are not subject to NAFTA drawback restrictions; Defendant contends otherwise. Both parties have filed motions for summary judgment. For the reasons given below, Defendant's motion for summary judgment is granted, and Plaintiff's motion for summary judgment is denied.

I. Procedural History

A. The Statutory Framework for Duty Drawback

Duty drawback provisions traditionally permit importers to obtain duty refunds upon exportation for articles produced with merchandise imported into the United States, see 19 U.S.C. § 1313(a),¹ or produced with substitute merchandise, domestic or imported, of the same kind as the imported merchandise ("substitution drawback"), see § 1313(b).² In 1980, Congress amended the laws to allow drawback on imported merchandise not used in the United States and exported in the same condition as when it was imported ("unused merchandise drawback"). See Court No. 02-00759 Page 3 § 1313(j)(1) (1980).³ In 1984, an additional modification legalized substitution unused merchandise drawback. See § 1313(j)(3) (1984).⁴

Passage of the North American Free Trade Agreement Implementation Act ("NAFTAIA"), Pub.L. No. 103-182, 107 Stat. 2060-2164 (1993), codified at 19 U.S.C. §§ 3301-3473 (2000), substantially amended the duty drawback system. Crucially, the NAFTAIA added subsection 1313(j)(4) to the statute and thereby eliminated "substitution unused merchandise drawback" for exports to Mexico and Canada, except for merchandise delineated in § 3333(a)(1)-(8). See §§ 1313(j)(2) & (4), 3333(a) (2000). These exceptions were included in the statute to preserve certain manufacturing and specialized duty deferral programs. H.R.Rep. No. 103-361(I), at 39 (1993), reprinted in 1993 U.S.C.C.A.N. 2552, 2589.

B. The Present Case

On May 25, 1993, Merck imported 35 kilograms of the chemical compound N-(aminosulfonyl)-3-(((2-((diaminomethy-lene) amino)-4-thiazolyl) methyl) thio) propanimidamide, otherwise known as Famotidine, from its manufacturer Yamanouchi Ireland Co., Ltd., of Dublin, Ireland, at a duty rate of 6.9% ad valorem. During July and August 1995, Merck imported dutyfree⁵ an additional 1,195 kilograms of Famotidine. On July 13 and August 4, 1995, the firm then exported 35 kilograms of Famotidine from the 1995 transactions ("the substitute merchandise") to Mexico and Canada, respectively, hoping to secure a substitution unused merchandise drawback claim based upon the 35 kilograms of Famotidine that it imported in 1993 ("the designated merchandise") pursuant to the NAFTA drawback exception in § 3333(a)(2).⁶ See Pl.'s Mot. Summ. J. 7-8, 13; Def.'s Mot. Summ. J. & Resp. Def.'s Mot. Summ. J. 2-3.

Customs denied Merck's drawback claim, asserting that statute prohibits "substitution unused merchandise drawback" for exports to NAFTA countries and that Merck's claim did not fit into any of the eight exceptions in § 3333(a). Customs liquidated the entries on July 31, 1998. See Def.'s Mot. Summ. J. & Resp. Pl.'s Mot. Summ. J. 3; Def.'s Statement Material Facts 1. Merck subsequently filed a protest, which Customs denied on June 14, 2002. Customs reasoned that

the goods exported to Canada and Mexico [were] not the imported goods upon which the drawback claim [was] based, but [were] the substitute goods. The designated imported merchandise, which [was] not exported, [was] the basis for the drawback claim. As it [was] not exported, it [was] not merchandise described in paragraph (2) of section 3333(a) ... and cannot be the basis for a claim under § 1313(j)(2).

HQ 228781 of June 20, 2002, at *2. Merck then filed the present action in this Court, which has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(a).

II. Standard of Review

This Court will grant a party summary judgment when "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." USCIT R. 56(c); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Avia Group Int'l, Inc. v. L.A. Gear Cal., Inc., 853 F.2d 1557, 1560 (Fed.Cir.1988). In its evaluation, "[t]he Court may not resolve or try factual issues." Phone Mate, Inc. v. United States, 12 CIT 575, 577, 690 F.Supp. 1048, 1050 (1988), aff'd, 867 F.2d 1404 (Fed.Cir.1989). To determine whether there exists a genuine issue of material fact, the court must view the proffered evidence "in the light most favorable to the party opposing the motion, with doubts resolved in favor of the opponent." Dow Agroscis. LLC v. Crompton Corp., No.2005-1524, Slip. Op. at *4 (Fed. Cir. May 5, 2006) (not reported in F.Supp.) (quoting Chiuminatta Concrete Concepts, Inc. v. Cardinal Indus., Inc., 145 F.3d 1303, 1307 (Fed.Cir.1998)) (quotations omitted). Absent a finding of "disputes over facts that might affect the outcome of the suit under the governing law," summary judgment will be entered for the moving party. Anderson, 477 U.S. at 248, 106 S.Ct. 2505.

III. Discussion

A. Statutory Interpretation

This case centers on the parties' conflicting interpretations of 19 U.S.C. § 1313(j)(4)(A)⁷ when viewed in conjunction with §§ 1313(j)(2) and 3333(a).⁸ When undertaking an examination of a statute's meaning, a court must first look to "the statutory language itself [as] the best indication of congressional intent." Alaskan Arctic Gas Pipeline Co. v. United States, 831 F.2d 1043, 1046 (Fed.Cir.1987); see United States v. Azeem, 946 F.2d 13, 17 (2d Cir.1991); United States v. Kung Chen Fur Corp., 38 C.C.P.A. 107, 188 F.2d 577, 583-84 (1951). During this initial textual analysis, "the entire context of the statute must be considered and every effort made to give full force and effect to all language contained therein." Dart Exp. Corp. v. United States, 1956 WL 8339, 43 C.C.P.A. 64, 74 (1956) (citations omitted) (not reported in F.2d); see Platt v. Union Pac. R.R. Co., 99 U.S. 48, 58-59, 25 L.Ed. 424 (1878) ("Congress is not to be presumed to have used words for no purpose .... [N]o words are to be treated as surplusage or as repetition."); Faus Group, Inc. v. United States, 28 CIT ___, ___, 358 F.Supp.2d 1244, 1261 (2004).

[I]f the language of a statute is clear and plain, its obvious meaning must be adopted by the court[]; yet, in the presence of ambiguity, the fact that inconsistent or absurd results may flow from one construction and not from another will often lead the court to adopt the latter as the most likely expressing the legislative intent.

Cohn & Rosenberger v. United States, 4 Ct. Cust. 378, 383 (Ct. Cust. App.1913). "However, if the bare language of the statute fails to provide adequate guidance or if a literal interpretation of the statute would lead to an incongruous result," the court must turn to the statute's administrative and legislative history to glean Congress' purpose in enacting the statute. Alaskan Arctic Gas Pipeline Co., 831 F.2d at 1046; see Kung Chen Fur Corp., 188 F.2d at 583-84.

B. The Language of the Statutes in Question

The court notes that the statutory scheme at issue is inartfully drafted, not least because portions of it lie within the laws governing NAFTA, while other parts are embedded within the statutes on duty drawback. Subsection (j)(2) of § 1313 establishes the legal framework for substitution unused merchandise drawback, subject to the limitations set forth in paragraph (4). Paragraph (4)(A) states that "merchandise that is fungible with and substituted for imported merchandise" exported to NAFTA countries — Mexico and Canada — generally does not qualify for duty drawback. § 1313(j)(4)(A). In other words, subsection (j)(4)(A) precludes "substitution unused merchandise drawback" for merchandise exported to NAFTA countries. This prohibition, though, is subject to the exceptions listed in "paragraphs (1) through (8)" of § 3333(a). Id.

However, the parties disagree over whether the dependant clause in paragraph (4)(A) that cross-references the § 3333(a) exceptions ("the dependant clause") modifies the first or second "merchandise" in the sentence. Merck claims that the dependant clause modifies the first "merchandise" in paragraph (A) and therefore exempts "the fungible substitute exports" from the substitution unused merchandise drawback restrictions. Pl.'s Mot. Summ. J. 2. To fall within the substitute unused merchandise drawback exception, then, only the exports — and not the designated merchandise upon which one bases a drawback claim — would need to fall within a § 3333(a) exception. Defendant insists that the dependant clause modifies the second "merchandise," the "imported merchandise" upon which a duty drawback claim is based. Def.'s Mot. Summ. J. & Resp. Pl.'s Mot. Summ. J. 10-11. This construction would necessitate that the designated merchandise fall under one of the exceptions in § 3333(...