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Novacor Chemicals Inc. v. United States

March 29, 1999

NOVACOR CHEMICALS, INC. (FORMERLY KNOWN AS POLYSAR INC.), PLAINTIFF-CROSS APPELLANT,
v.
UNITED STATES, DEFENDANT-APPELLANT.



Before Mayer, Chief Judge, Michel and Clevenger, Circuit Judges.

The opinion of the court was delivered by: Michel, Circuit Judge.

Appealed from: United States Court of International Trade Judge Jane A. Restani

The United States appeals from the summary judgment of the United States Court of International Trade in Novacor Chemicals, Inc. F/K/A Polystar, Inc. v. United States, Nos. 95-03-00279, 95-05-00630, Slip Op. 97-138 (Sept. 25, 1997), holding cross-appellant, Novacor Chemicals, Inc. ("Novacor"), entitled to interest on four drawback entries liquidated by the United States Customs Service ("Customs") on January 29, 1988. The Court of International Trade held that the withheld drawback payments were "increased or additional duties" under the applicable interest statute, 19 U.S.C. § 1520(d) (1988). Novacor cross-appeals from the judgment of the Court of International Trade holding that the Customs Modernization Act does not entitle Novacor to interest, and further seeks clarification of the Court of International Trade's judgment awarding Novacor interest as to the proper method of calculating the amount of the judgment. The appeal and cross-appeal were submitted for our decision following oral argument on March 3, 1999. As to the government's appeal, because we hold that the court misapplied the relevant statutes, we reverse the summary judgment of interest in favor of Novacor. We hold that "increased or additional duties" are imposed only when the amount of duties at liquidation exceeds the estimated duties on entry and thus, the deposit of duties is insufficient to cover the final liability. In drawbacks, the amount of the import duty assessed does not change; the entire duty, minus a 1% administrative fee, is refunded upon export of the imported goods (or export of a more finished article manufactured from the imported goods).

On the cross-appeal, because Novacor's argument relies on retroactive application of a statute that we hold has no retroactive effect, we affirm the trial court's denial of interest under the 1993 amendments to the trade laws. Furthermore, because we reverse the grant of interest to Novacor, their cross-appeal seeking clarification of the method of interest calculation is now moot, and we, therefore, do not address it.

Therefore, the judgment on the appeal is reversed and affirmed on the cross-appeal.

BACKGROUND

Novacor imported certain shipments of styrene monomer during 1985-87. The styrene, which is a product derived from ethylene and benzene, was classified upon entry under Chapter 402.1600 of the Tariff Schedules of the United States ("TSUS").

Upon subsequent export of certain shipments of styrene, Novacor filed drawback *fn1 entries seeking to recover the import duties paid on these styrene shipments, pursuant to 19 U.S.C. § 1313 (1988). Customs paid Novacor an accelerated drawback of $456,557. On January 29, 1988, Customs liquidated these entries and denied Novacor's claims for drawback of duties on the basis of its decision in C.S.D. 87-6, 21 Cust. B. & Dec. 365 (1987). Customs subsequently billed Novacor (then Polysar Inc.) demanding that it pay "supplemental duties," in the amount of the drawback Novacor had received from Customs. These bills expressly stated that interest would accrue to the government if Novacor did not promptly pay the amounts demanded, as provided in 19 U.S.C. § 1505(c) (1988). Pursuant to the liquidations, Novacor timely repaid the $456,557 it had received as an accelerated drawback, and thus did not pay any interest. Novacor timely filed administrative protests of Customs's 1988 denial of drawback.

Customs's opinion in C.S.D. 87-6, 21 Cust. B. & Dec. 365, 366-67 (1987), denied an importer drawback of duties on products that it did not own at the time of export. Based on this opinion, Customs denied Novacor's claims for drawback of duties. This opinion, however, was invalidated by the Court of International Trade in the test case of Central Soya Co. v. United States, 15 Ct. Int'l Trade 105 (1991), aff'd, 953 F.2d 630 (Fed. Cir. 1992). The Court of International Trade ruled that Customs's interpretation in 21 Cust. B. & Dec. 365 as to who was entitled to drawback of duties for "substitute same-condition goods" was contrary to congressional intent in enacting the statutory scheme. Central Soya, 15 C.I.T. at 111.

Pursuant to the affirmed judgment in Central Soya, on May 14, 1993, about five years after denying drawback, Customs granted Novacor's protests, reliquidated these entries, allowed drawback, and paid Novacor a total of $456,557, the amount Customs had required Novacor to pay at the initial liquidation in 1988. Customs, however, paid no interest on this amount. On August 12, 1994, Novacor timely filed administrative protests against Customs's failure to pay interest on the $456,557, which after a five-year period it refunded to Novacor. Customs denied Novacor's protests on February 3, 1995. Novacor then timely appealed this denial in two lawsuits: Court No. 95-03-00279 in the Court of International Trade on March 17, 1995, seeking review of the denial of Novacor's protests of Customs's failure to pay interest pursuant to 28 U.S.C. § 1581(a) (1988); and Civil Action No. 95-03-00630 in the Court of International Trade on May 4, 1995, seeking such review pursuant to 28 U.S.C. § 1581(i) (1988).

Novacor filed a motion for summary judgment on December 19, 1996. Customs opposed Novacor's motion and filed its own motion for summary judgment on March 24, 1997. On September 26, 1997, the Court of International Trade granted Novacor's motion for summary judgment, denying Customs's cross-motion. That ruling is appealed by the government in the instant case. Novacor cross-appeals the Court of International Trade's judgment that the Customs Modernization Act of 1993 did not require a payment to Novacor of interest on the drawback duties. We have jurisdiction under 28 U.S.C. § 1295(a)(5) (1994).

DISCUSSION

The dispositive issue here is whether Novacor is entitled to interest on duty drawback erroneously reclaimed and held by Customs for almost five years. The Court of International Trade read 19 U.S.C. §§ 1505(c) and 1520(d) (1988) *fn2 to provide unambiguously for interest on any refund upon reliquidation of the increased portion of any regular duties. We agree. The court also determined, however, that duties once drawn back and then reclaimed upon liquidation by Customs constitute an "increase" in regular duties. Because of this, the Court of International Trade held that Novacor was entitled to the interest. We agree with neither its result nor its rationale.

The government appeals this decision, arguing that as section 1520(d) does not expressly provide for payment of interest on a duty drawback, there is no waiver of sovereign immunity for ...


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