NAFTA Drawback on Trial

One of my hobbies is trying to explain NAFTA drawback in 50 words or less. It goes something like this:

No drawback for duty paid imports exported to Mexico or Canada in excess of the lesser amount of duties paid the U.S. or the other country. That's amount, not the rate of duty. This prevents non-NAFTA goods from moving among the NAFTA countries duty free. Exceptions apply.

That's 47 words. Not bad.


The recent decision in Merck & Co., Inc. v. United States, is all about that "exceptions apply" caveat. Under the NAFTA, the U.S. eliminated, with certain exceptions, substitution unused merchandise drawback for exports to Canada or Mexico. Merck imported a chemical with a really long name which will hereinafter be called "stuff." It paid duty on the stuff. Later, it imported more stuff. This time, it was duty free. It then exported some of the duty-free stuff to Mexico and Canada and claimed substitution unused merchandise drawback for duties paid on the dutiable stuff. Customs said no because, after all, substitution unused merchandise drawback was eliminated.


But, Merck said an exception applies under sec. 3333(a). According to Merck, the exception applies because the drawback was claimed not on the imported goods but on the substituted exported goods. Is this at all clear? You might need to read the opinion a couple times. The opinion focuses whether a dependent clause modifies the reference to the imported merchandise or the exported merchandise. Customs reads the exception to refer to "imported merchandise." Applying the "last antecedent rule," the Court found that the exception focuses on the "imported merchandise." Thus, the drawback is not allowed.

Could that be more complicated?

The analysis is clearer when it turns to the legislative history, which makes it clear that the intent was to eliminate the right to a refund of duties paid on imported merchandise upon the shipment to a NAFTA country of other merchandise substituted for the imports. Similarly, the implementing regulations make this relatively clear. Thus, no drawback.

Good try, though. Gotta give Merck that much.

Comments

Post a Comment

Popular posts from this blog

CAFC Decision in Double Invoicing Case

The Federal Circuit has issued a decision on the merits in United States v. Inn Foods, Inc.  There had been a previous decision on jurisdiction, which was followed by a trial at the Court of International Trade and then this appeal on the substance. The initial issue is whether Inn Foods' invoicing practice amounts to fraud.  Inn Foods had been receiving an invoice from growers in Mexico that had a relatively low sales prices on it.  Subsequent to entry, Inn Foods created a second invoice at something more similar to market value, retaining the original invoice number, and paid at that higher amount.   Superficially, this looks like a standard-issue double-invoicing scheme.  But, in the age of reconciliation, is it really more like a provisional pricing mechanism?  It might have been possible to make that argument had Inn Foods adjusted its entries accordingly.  It didn't and the loss of revenue was approximately $624,000.  Based on testimony and evidence indicating both knowl
Read more

Target on Finality

Image
In the last post , about the Federal Circuit’s very important decision on due process and allegations of evasion of antidumping duties, I made a snarky, offhand comment that the government believes “liquidation is magic.” That was in the context of the government arguing that Customs’ liquidation of entries mooted an appeal, thereby taking away the importer’s right to further judicial review. I said that knowing full well that I still needed to write this post summarizing Target Corp. v. United States in which Target made what I want to be a valid and righteous argument that Customs’ improper liquidation of entries at a favorable rate of antidumping duty prevents the Court of International Trade from ordering Customs to collect the legally applicable duties. But it turns out that while liquidation is an important legal step, in at least one unusual circumstance it is not sufficiently powerful to overcome the full force of an Article III court. Understanding this case requires a lot
Read more

CAFC: EAPA Process Really Does Violate Due Process

Image
Hot on the heels of my complaining about how the EAPA law and process is stacked against importers, the Court of Appeals for the Federal Circuit has issued an important decision that will have a major impact on how those cases work. If you are unfamiliar with evasion cases under the Enforce and Protect Act and how Customs and Border Protection handles them, go back and look at these two posts: Part 1 , Part 2. Royal Brush Manufacturing, Inc. v. United States , is the decision in an evasion case against Royal Brush involving pencils allegedly transshipped from China through the Philippines. Customs determined that there was evasion of an antidumping duty order based in part on evidence that was not disclosed to Royal. Specifically, Customs sent a representative to the facility in the Philippines to photograph the interior and provide a report. Customs refused to disclose all the photographs to Royal. Moreover, CBP's report concluded that the facility did not have sufficient capacit
Read more