Nufarm America's, Inc. v. U.S.

• Citation: 477 F.Supp.2d 1290
• Decision Date: 15 February 2007
• Docket Number: Court No. 02-00162.,Slip Op. 07-23.
• Parties: NUFARM AMERICA'S, INC., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

Page 1290

477 F.Supp.2d 1290

NUFARM AMERICA'S, INC., Plaintiff, v. UNITED STATES, Defendant.

Slip Op. 07-23.

Court No. 02-00162.

United States Court of International Trade.

February 15, 2007.

Joel R. Junker & Associates (Joel R. Junker), Seattle, WA, for Plaintiff NuFarm America's, Inc.

Robert D. McCallum, Jr., Assistant Attorney General, Barbara S. Williams, Acting Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, U.S. Department of Justice; Beth C. Brotman, Office of Assistant Chief Counsel, International Trade

Litigation, U.S. Customs and Border Protection, for Defendant United States.

OPINION

WALLACH, Judge.

I INTRODUCTION

Plaintiff Nufarm America's, Inc. ("Nufarm") argues that the requirement to file a consumption entry and to pay duty and related fees upon export to Canada on merchandise imported temporarily under bond, pursuant to 9813.00.05, Harmonized Tariff Schedule of the United States ("HTSUS") (2000), under 19 C.F.R. § 181.53, promulgated pursuant to the North American Free Trade Agreement ("NAFTA") Implementation Act in accordance with NAFTA Article 303, violates Article I, Section 9, Clause 5 of the United States Constitution ("the Export Clause"). This court has jurisdiction pursuant to 28 U.S.C. § 1581(a). Because the duties in question are related to the merchandise's importation and not its export, the statute remains within constitutional limitations and Plaintiff's Motion for Summary Judgment is denied. For these same reasons, Defendant's Cross-Motion for Summary Judgment is granted.

II BACKGROUND

Nufarm imported chemical products into the United States under HTSUS subheading 9813.00.05 as articles to be processed into articles manufactured or produced in the United States; as a result the products were entered temporarily free of duty, and duties were deferred until the time of export.¹ Consolidated Complaint ("Complaint") ¶ 13; Answer to Consolidated Complaint ("Answer") ¶ 1, 13. The imported chemicals were subject to duty at the general ad valorem rates for chemicals falling under subheading 2918.90.20,² HTSUS, but payment of those duties were deferred because the merchandise was entered under subheading 9813.00.05.³ Defendant's Statement of Undisputed Facts ¶ 1. Once processed, the new product was then exported to Canada.⁴ Complaint ¶ 15; Answer ¶ 15. Following the export to Canada, Plaintiff filed the required consumption entries and paid the full duty rate, applicable merchandise processing fees, and made an offer in compromise to the United States Customs Service ("Customs")⁵ that resulted in the cancellation of liquidated damages. Defendant's Response to Plaintiffs Statement of Material Facts at 2; Plaintiffs Response to Defendant's Cross-Motion for Summary Judgment ("Plaintiffs Response") at 15; letter from. Joel R. Junker to the court, dated January 25, 2007, Docket No. 90. Plaintiff s consumption entries were liquidated, and it timely filed related protests based on the claim that assessment of duties under 19 C.F.R. § 181.53 violates the Export Clause.⁶ Complaint ¶ 20; Answer ¶ 20.

Nufarm's protests on its entries at the Port of Seattle were denied on August 28, 2001, and its protests on the entries at the Port of Chicago were denied on March 27, 2002, after Customs' Further Review. Complaint ¶ 22; Answer ¶ 22. Customs concluded in its determination that the "[a]ssessment of duty per 19 C.F.R. § 181.53 was in accordance with law and regulations," was therefore constitutional, and denied Plaintiffs protest in full. Complaint ¶ 22 (quoting HQ 228931).

On March 13, 2003, the court consolidated. Nufarm America's, Inc. v. United States, Court No. 02-00571 under Nufarm America's, Inc. v. United States, Court No. 02-00162. Motions under review in this opinion are Plaintiff's Motion for Summary Judgment and Defendant's Cross-Motion for Summary Judgment. Oral Argument was held on January 17, 2007.

III STANDARD OF REVIEW

The standard of review when determining whether an agency's regulation violates the Constitution involves a presumption of constitutionality on behalf of the regulation. See Motor Vehicle Mfrs. Assn. of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983) (finding that regulations enjoy a presumption of validity, albeit one not as strong as that accorded to statutes promulgated by Congress). When looking at an agency's interpretation of a statute by Congress,⁷ a court is to give deference to the agency after determining:

whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter .... If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute .... Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute.

Chevron U.S.A. Inc. v. Natural Resources Defense Council, 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Customs regulations interpreting the tariff statute are entitled to the heightened degree of Chevron deference. U.S. v. Haggar Apparel Co., 526 U.S. 380, 392, 119 S.Ct. 1392, 143 L.Ed.2d 480 (1999).

In determining the outcome of a motion for summary judgment, a court must look to whether there remain any "genuine issues as to any material fact" in dispute on the matter. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509, 91 L.Ed.2d 202, 211 (1986). The inquiry therefore is not into factual matters, but whether either party is entitled to a judgment as a matter of law. Id. Under USCIT R. 56(c), summary judgment may be granted when "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(c).

IV DISCUSSION

Plaintiff argues that 19 C.F.R. § 181.53⁸ is unconstitutional both on its face and in effect because it violates the Export Clause's prohibition on placing a tax or duty on items in the course of their export. Plaintiff's Motion for Summary Judgment ("Plaintiff's Motion") at 5. According to Nufarm, the regulation always operates unconstitutionally by its own terms because it provides for the assessment of duties at the time of export on merchandise that was previously imported. Id. at 5-6. Nufarm further argues that the regulation is unconstitutional in its operation, stating that the charge or exaction at issue is a duty that applies directly to exports. Id. at 8. Because Plaintiff interprets the policy and structure of 19 C.F.R. § 181.53 as requiring the assessment of duty as a result of the product's export to Canada or Mexico, Plaintiff concludes that the Constitution's prohibition on taxes and duties on exports from the United States is violated by the operation of the regulation. Id.

Defendant counters that 19 C.F.R. § 181.53 does not violate the Export Clause because the liability for the duty was imposed at the time of the product's importation into the United States; the payment of the duty was simply deferred until the goods were exported to another NAFTA country. Memorandum in Support of Defendant's Cross-Motion for Summary Judgment and in Opposition to Plaintiff's Motion for Summary Judgment ("Defendant's Memo") at 2. The Government points to duty deferral provisions in U.S. Note 1(c), chapter 98, subchapter XIII, HTSUS, and in the subheading under which Nufarm's goods were entered (9813.00.05, HTSUS), as well as to NAFTA Article 303; which detail how duty deferral works and how previously imposed duties are calculated once deferral is no longer applicable.⁹ Id. at 5-6. Defendant concludes that because the duties in question are to be imposed based on an event prior to exportation and are merely assessed at the time of exportation, the regulation is constitutional both on its face and in operation. Id. at 15.

A Plaintiff Bears the Burden of Overcoming the Presumption of Validity

The Export Clause of the United States Constitution reads, "No Tax or Duty shall be laid on Articles exported from any State." U.S. Const. art. 1, § 9, cl. 5. This prohibition has been construed by the Supreme Court to "categorically bar[] Congress from imposing any tax on exports." United States v. U.S. Shoe Corp., 523 U.S. 360, 363, 118 S.Ct. 1290, 140 L.Ed.2d 453 (1998) (citing United States v. Inn Bus. Machines Corp. (IBM), 517 U.S. 843, 852, 116 S.Ct. 1793, 135 L.Ed.2d 124 (1996)). Further, the Court has held that "a general tax, laid on all property alike, and not levied on goods in course of exportation, nor because of their intended exportation, is not within the constitutional prohibition." Turpin v. Burgess, 117 U.S. 504, 507, 6 S.Ct. 835, 29 L.Ed. 988 (1886).

In order for a regulation to be deemed unconstitutional, Plaintiff must overcome the basic presumption of validity. Thus, "the elementary rule is that every reasonable construction must be resorted to, in order to save a [statute] from unconstitutionality." Edward J. DeBartolo Corp. v. Fla. Gulf Coast Bldg. & Constr. Trades Council, 485 U.S. 568, 575, 108 S.Ct. 1392, 99 L.Ed.2d 645 (1988) (quoting Hooper v. California, 155 U.S. 648, 657, 15 S.Ct. 207, 39 L.Ed. 297 (1895)). Though the presumption of validity for an agency's regulation is somewhat less than that afforded to an act of Congress, Motor Vehicle Manufacturers Ass'n of U.S., Inc., 463 U.S. 29, 103 S.Ct. 2856, 77 L.Ed.2d 443, Nufarm still has the burden of overcoming a presumption that the regulation follows Congressional intent and is therefore constitutional. See Moon v. Freeman, 379 F.2d 382, 391 (9th Cir.1967) (finding that the burden of demonstrating that a law is unconstitutional...