United States Court of Appeals for the Federal Circuit

2020-1734

Before United States Court of Appeals for the Federal Circuit, in National Association of Manufacturers v. Department of the Treasury, No. 2020-1734 (August 23, 2021), was an appeal by the Government from a judgment by the United States Court of International Trade (CIT) holding that a set of regulations, promulgated in 2018 by the Department of Treasury and the United States Customs and Border Protection, are invalid as an unlawful interpretation of 19 U.S.C. § 1313(v). Id. at 3. Section 313 of the Tariff Act of 1930, as amended by the Trade Facilitation and Trade Enforcement Act of 2015, provides that excise tax drawbacks are to be paid in respect of eligible exports as though they had been imported. Id. at 4-5. But the Treasury Department, in crafting its Modernized Drawback Regulations, 19 C.F.R. Part 190, sought to limit excise tax drawback in two ways: first, the regulations limited excise tax drawback to the amount of excise tax that had been paid on the exported good, a clear deviation from the statutory directive. Id. at 6. Second, Treasury expanded the regulatory definition of “drawback claim” to include any exemption or forgiveness of tax, rather than a claim for a refund of a duty or tax already paid. Id. The CIT struck down the regulations, holding that they did not pass Step 1 of the two-part test for evaluation of regulations set out in Chevron USA Inc. v. Natural Resources Defense Council, 467 U.S.837 (1984). Id. at 7. For the following reasons, the CACF affirmed the decision of the CIT, which invalidated certain Treasury Department regulations that sought to limit drawback of federal excise taxes. Id. at 3.

Courts review agencies’ interpretations of statutes by applying the two-step Chevron framework. Id. at 8. In applying Chevron, the Court first uses “traditional tools of statutory construction” to determine whether Congress has “directly spoken to the precise question at issue”; if so, “that is the end of the matter.” Id. If not, the Court asks whether the regulation reflects “a permissible construction.” Id. To prevail, the Government must succeed in both its redefinition of “drawback,” particularly for the purposes of the “double drawback” prohibition of 19 U.S.C. § 1313(v), and in its interpretation of numerous subsections of 19 U.S.C. § 1313. Id. Here, the CAFC rejected the Government’s arguments that its proposed limitations on excise tax drawback were consistent with legislative intent and sound policy considerations, noting that Congress directed that substitution drawback be paid under 19 U.S.C. §1313(j)(2) requiring substitution unused merchandise drawback to be paid when conditions are satisfied “notwithstanding any other provision of law.” Id. at 13-14. The CAFC also noted that the Treasury regulations would effectively cancel the refund calculation provisions set out in the statute at 19 U.S.C. §1313(l), specifically that excise tax drawback was to be paid based on the tax “that would apply to the [substituted] exported article if the exported article were imported.” Id. at 14. The Court also rejected Treasury’s claim that the legislative history of the drawback statute supported its interpretation, stating that “Here, the legislative history of the drawback regime demonstrates that Congress chose to expand access to drawbacks at the expense of excise taxes”. Id. at 15. In this case, the CAFC found that Congress had spoken plainly to the issue at hand, favoring duty drawback over excise tax collections, and that Treasury’s regulations were inconsistent with Congressional intent. Id. at 16. As such, the Court affirmed the judgment of the CIT. Id. Neville Peterson LLP represented Amicus Curiae Customs Advisory Services, Inc., supporting NAM and the Beer Institute at the CIT and CAFC during this litigation.

United States Court of International Trade

Slip Op. 21-112

Before the Court in Hyundai Steel Co. v. United States, et. al., Court No. 20-03799, Slip Op. 21-112 (August 27, 2021) was Plaintiff Hyundai Steel’s challenge to “the final results in the 2017 administrative review of the countervailing duty order on certain hot-rolled steel flat products” from Korea. See Id. at 2. Before the Court was Plaintiff’s Rule 56.2 motion for judgment on the agency record and the Defendant U.S. Government’s motion for voluntary remand. Id. Plaintiff argued that “Commerce’s application of facts available was not in accordance with the law because Commerce did not identify deficiencies in Plaintiff’s submissions as required by 19 U.S.C. §§ 1677m(d) and 1677e(a) before applying facts available in determining that the financial contribution provided to Plaintiff under the North Incheon Harbor program conferred a benefit.” Id. at 5. Defendant asked the Court to “remand the Final Results for Commerce to reconsider its application of facts available, and, if appropriate, the rate assigned to Plaintiff. Id. Plaintiff consented to Defendant’s Motion and Defendant-Intervenor United States Steel Corporation took no position. Id. Nucor opposed Defendant’s Motion, asserting that “Defendant did not demonstrate that Commerce’s request for a remand was based on a substantial and legitimate concern and that the Final Results are supported by substantial evidence and otherwise in accordance with the law.” Id. For the following reasons, the Court remanded the Final Results. Id. at 3.

“The court has jurisdiction pursuant to 19 U.S.C. § 1516a(a)(2)(B)(iii) and 28U.S.C. § 1581(c), which grant the court authority to review actions contesting the final results of an administrative review of a countervailing duty order.” Id. at 5. “The court will uphold Commerce’s determinations unless they are unsupported by substantial record evidence, or are otherwise not in accordance with the law. 19 U.S.C. § 1516a(b)(1)(B)(i).” Id. “The U.S. Court of Appeals for the Federal Circuit has recognized that the decision to remand is in the court’s discretion when an agency seeks a remand without confessing error in order to reconsider its previous position.” Id. at 6. If the court grants a remand, Commerce will review the procedures that were applied in this administrative review relative to the requirements of 19 U.S.C. §§1677m(d) and 1677e(a) and will reconsider application of facts available, which may affect Commerce’s determination that the port usage rights constitute a countervailable benefit. Id. The Court explained that it is “prefer[able] to allow agencies to cure their own mistakes rather than wasting the court’s and the parties’ resources,” especially when the agency seeks to “cure the very legal defects asserted by plaintiffs.” Id. Thus, “[b]ecause a remand will allow Commerce to cure its own mistakes and reconsider the substantive issues raised by Plaintiff, as well as preserve court resources, the court grants Defendant’s Motion.” Id. As such, the Court remanded the Final Results for reconsideration. Id. at 6-7.