National Association of Manufacturers v. Department of the Treasury, No. 20-1734 (Fed. Cir. 2021)Annotate this Case
Imported goods are generally subject to tariffs, duties, fees, and taxes, such as an excise tax. A “drawback” is a customs transaction involving the refund of payments made upon the importation of a good. The most common drawback occurs when duties that are paid when a good is imported are refunded when the same good is exported. A “substitution drawback,” involves the refund of duties, taxes, or fees that were paid upon importation and refunded when similar goods, normally merchandise classified under the same tariff schedule subheading, are exported. Since 2008, substitution drawback has been allowed for wine where the imported wine and exported wine are of the same color and the price variation does not exceed 50 percent. Substitution drawbacks could result in a near-total refund of both tariffs and excise taxes paid on imported wine where the substituted exported wine was either not subject to excise tax (having been exported from a bonded facility) or had received a complete refund of previously paid excise taxes, a “double drawback.”
Treasury and Customs promulgated Rule.1, an interpretation of 19 U.S.C. 1313(v), intended to prevent “double recovery,” limits drawbacks to the amount of taxes paid and not previously refunded. The Federal Circuit affirmed the Trade Court in finding the Rule invalid. The Rule is contrary to the clear intent and structure of the statute.