Amicus Curiae Brief — Kalan Inc. v. United States

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Supreme Court, U.S.

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No. 91-918 :

FFR 7 1992

IN THE “EOF THE CLERK

Supreme Court of the United States —

OCTOBER TERM, 1991

KALAN INC. and

HOSPITAL CORPORATION OF AMERICA,

. Petitioners,

THE UNITED STATES,

h Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Federal Circuit

BRIEF OF

BAXTER HEALTHCARE CORPORATION,

BULOVA CORPORATION, G.D. SEARLE & CO.,

GENERALE MOTORS CORPORATION, NATIONAL

MEDICAL CARE, INC. (A WHOLLY-OWNED

SUBSIDIARY OF W.R. GRACE & CO.),

SEARS, ROEBUCK AND CO., SUNDSTRAND

CORPORATION, VOLVO/GM HEAVY TRUCK

CORPORATION, AND ZENITH ELECTRONICS

CORPORATION AS AMICI CURIAE

aN SUPPORT OF PETITIONERS

MICHAEL Cook *

MARK S. ZOLNO

JAMES M. LYONS

KATHLEEN M. MURPHY

KATTEN MUCHIN ZAVIS & DOMBROFF

1025 Thomas Jefferson St., N.W.

Suite 700 East Lobby

February 7, 1992 Washington, D.C. 20007-5201

(202) 625-3500

* Counsel of Record Counsel for Amici Curiae

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

QUESTION PRESENTED

Whether, under 19 U.S.C. $ 1520(d), U.S. importers

are entitled to interest on excess duties required to be

deposited at the time of entry of merchandise into the

United States, when the U.S. Customs Service refunds

such excess duties pursuant to an administrative protest

or court order?

(i)

-— en

TABLE OF CONTENTS

Page

Soil fg 4 Rg ly |) ee i

TABLE OF AUTHORITIES ....002200.000...02.2.eeeeeeeeeeeeeeeeees iv

INTEREST OF THE AMICI CURIAE ........................ 1

is TN yee chi 1, y ec 3

ARGUMENT:

THE WRIT SHOULD BE GRANTED TO COR-

RECT THE FAR-REACHING, ERRONEOUS

AND UNFAIR CUSTOMS SERVICE POLICY

AFFECTING INTEREST ON DUTY REFUNDS. 6

I. CONGRESS SPECIFICALLY PROVIDED

FOR THE PAYMENT OF INTEREST TO

IMPORTERS WHEN EXCESSIVE DUTIES

og GEIS eR aeneapens 6

A. The Customs Courts Act Of 1980 First Pro-

vided For The Payment Of Interest To

ERASE ne ORC aR eee 7

B. The Trade And Tariff Act Of 1984 Extended

The Scope Of The Interest Payment Period

To The Date Of Liquidation ...........00000000000002.. 9

Il. THE COURT OF APPEALS DECISION MIS-

INTERPRETS THE LEGISLATIVE HIS-

TORY OF SECTION 1520(d) AND MISCON-

STRUES THE LANGUAGE ADOPTED BY

asi cane coamrmseenabttoniaoaiandarncenvs 12

da ciao acrcsicopapaeacistemepenbancibautetubenes 19

(iii)

TABLE OF AUTHORITIES

CASES Page

Hospital Corporation of America v. United States,

752 F. Supp. 459 (CIT 1990), rev’d, Court No.

89-08-00462 (Fed. Cir. Nov. 238, 1990) —......0000.... 6, 7,18

Kalan Inc. v. United States, 944 F.2d 847 (Fed.

RR Siieelaal a ar shelsas ns eae ncn aint Senn RC 6, 7, 8,13

Perry v. Commerce Loan Co., 383 U.S. 392

IIE ise eicickesscchitanesslcans tend cusacchelldectaionionbeislaiitatics ibe tats bin teacaaae 18

United States v. Heraeus-Amersil, Inc., 671 F.2d

REE WRT GHEL: SUED | worechavencninarscacepticsunanercavedoanion 10

STATUTES

Customs Courts Act of 1980, Pub. L. No. 96-417,

ee a cevteneseuneies 6, 7, 10

Trade and Tariff Act of 1984, Pub. L. No. 98-573

eR | | eee eee ce 3, 6,9, 10

er casenneandadaenmnidicabebenmnas 15

DE ss ianoamodinmammannadasidaateaens 15

er I et Os oeaeatebepeomieacunetanne 16

Oooo cicero csdcioacisenteaeomnceerensene 15,17

pg NS | ESE ae ae Ne LS: Ree 15

19 U.S.C. 1886 ................ See EL ANP eT Pe VETS 15

Se I 5 sac caharuieebiainsaalgevseusuaionioncansapean a 15

a csorenabsecetaaameaisatiatensasnaiaie 16

BO Tie BO OD cvccececccesessene: cthe neh eee ere eee 15

TP re TIED wicccasencesstvcsencceceerreeeeess senemuaenieaiodenes 10, 14

ea teteeneeemcnaens 3

19 U.S.C. 1520 (d) LIS HE ECR AIRE 7,9, 10, 11, 12, 18, 14, 18

Be ee ED priecechcssoueceniceacceceosmendens SaaS RE 16

Att Fay: 0) Te ae Ree Ne Beane 15, 17

ee 15, 17

19 U.S.C. 1821 ......... CARs Sake Pe eee ee EE aCe eee 15

19 U.S.C. 1981 (a) (1) and (c) (1) deans met 15

TE Sa ace ee Ee 15

po DR FRY | | ne a ner 15

ne a saciveuasupacaneeeesies 15

I i ihaceuesceeuieomaen 15

|_| sana on cen preniea a EN e eas 15

ne eee Pareeur ne 1b

28 U.S.C. 2632 ' — 11

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MAIR I pea ee ea mS Ae

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TABLE OF AUTHORITIES—Continued

MISCELLANEOUS AUTHORITIES Page

H.R. Rep. No. 1015, 98th Cong., 2d Sess., re-

printed in 1984 U.S. Code Cong. & Ad. News

ISTE AC NOE rac PAID SOME Pe BAER A 3, 7,10, 11, 14

H.R. Rep. No. 1235, 96th Cong., 2d Sess., re-

printed in 1980 U.S. Code Cong. & Ad. News

eae er ee AERA Ns ERD SEP MEL PR ee ACH OREN . 8,9

Hearings on the Customs Courts Act of 1980,

Subcomm. on Monopolies and Commercial Law

of the House Comm. on the Judiciary, 96th

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Subcomm. on Trade of the House Committee on

Ways & Means, 98th Cong., lst and 2d Sess.,

November 15, 1983 and June 21, 1984, Serial

House Committee on Ways & Means, 101st

Cong., 2d Sess., Serial 101-93 (1990) 5

Hearings on Commercial Operations of the U.S.

Customs Service, Subcomm. on Trade of The

House Committee on Ways & Means, 101st

Cong., 2d Sess., Serial 101-99 (1990) eaten, 5

50 Fed. Reg. 21832 (May 29, 1985) piecaedeaaesions 17

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

No. 91-918

KALAN INC. and

HOSPITAL CORPORATION OF AMERICA,

Petitioners,

V. , S

THE UNITED STATES,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Federal Circuit

BRIEF OF

BAXTER HEALTHCARE CORPORATION,

BULOVA CORPORATION, G.D. SEARLE & CO.,

GENERAL MOTORS CORPORATION, NATIONAL

MEDICAL CARE, INC. (A WHOLLY-OWNED

SUBSIDIARY OF W.R. GRACE & CO.),

SEARS, ROEBUCK AND CO., SUNDSTRAND

CORPORATION, VOLVO/GM HEAVY TRUCK

CORPORATION, AND ZENITH ELECTRONICS

CORPORATION AS AMICI CURIAE

IN SUPPORT OF PETITIONERS

INTEREST OF THE AMICI CURIAE

Baxter Healtheare Corporation (hereinafter “Baxter’’)

is incorporated in Delaware and has facilities in forty

states, as well as the District of Columbia, and twenty-

eight foreign countries. It is the leading international

manufacturer and marketer of healthcare products, sys-

tems and services. Revenue generated from its worldwide

operations was $8.9 billion in calendar year 1991.

Joining Baxter as amici curiae are Bulova Corpora-

tion, G.D. Searle & Co., General Motors Corporation,

National Medical Care, Inc., Sears, Roebuck and Co.,

Sundstrand Corporation, Volvo/G.M. Heavy Truck Cor-

poration and Zenith. Electronics Corporation. These com-

panies are major manufacturers or distributors in the

United States and represent important segments of their

respective industries.

Although the amici manufacture or purchase many of

their products in the United States, they also operate

foreign production plants and import significant quanti-

ties of manufactured products and raw materials. By

virtue of such foreign sourcing, the amici are involved

on a continuing basis with the U.S. Customs Service

which has both the authority and responsibility for as-

sessing duties on goods entering the United States.’

As the result of the amici’s status as significant im-

porters, they are unreasonably burdened financially when

the Customs Service collects duties in excess of those war-

ranted by law. The reach of the court of appeals’ deci-

sions allowing Customs to retain such overcharges with-

1 The customs duties that are imposed on imported merchandise

are levied based on the tariff classification of such merchandise into

different tariff provisions. These provisions are established by law

and to an increasing degree are harmonized with similar classifica-

tion schemes used by trading partners of the United States. The

particular classification of many products is well-established and

routine. In many instances, however, tariff provisions are ambigu-

ous and merchandise may not clearly fall into any one specific pro-

vision. This uncertainty may result in disagreements between the

importer and the Customs Service as to the proper classification of

the goods. In such situations, the Customs Service typically will

require an importer to enter the merchandise under a specific tariff

provision with a particular duty applicable to the merchandise so

classified. Estimated customs duties are then deposited by the im-

porter when the merchandise is formally entered into the United

States.

out compensation to importers thus touches virtually all

who import goods into the United States. In one case

alone, the most costly situation with Customs now con-

fronting Baxter, it is seeking duty refunds of approxi-

mately 4.4 million dollars and some of those allegedly

excess duties have been held by the Customs Service for

as long as seven years.”

SUMMARY OF ARGUMENT

Prior to enactment of the 1984 legislation,® the law was

clear that if Customs liquidated‘ an import entry with

either duty increase or a duty refund (from the time of

estimated duty deposit upon importation), no interest

accrued in favor of either party.° Moreover, in the event

of a duty increase, in addition to there being no provi-

sion for interest, there was no fixed date by which pay-

ment had to be made.* Congress sought to correct this

situation by providing for interest due the Customs Serv-

ice on duty increases following liquidation or reliquida-

tion while at the same time providing for the payment of

interest to importers on the amount of the overcharge

*If an importer wishes to dispute the classification determined

by Customs and the applicable duty rate, it often must wait months,

and sometimes years, for the entry of the merchandise to be proc-

essed by the Customs Service and for the completion of the ad-

ministrative protest procedure. During this entire period, the Cus-

toms Service retains the estimated duties paid by the importer.

% Section 210 of the Trade and Tariff Act of 1984, Pub. L. No.

98-573, 98 Stat. 2977, codified at 19 U.S.C. 1505(c) and 1520(d).

4“Liquidation” is Customs’ final determination of all aspects of

the entry including tariff classification and applicable duties asso-

ciated with the imported product. An importer may pursue any

claims for a duty adjustment or refund by filing a protest with

Customs within 90 days after liquidation. 19 U.S.C. § 1514.

5 H.R. Rep. No. 1015, 98th Cong., 2d Sess. 67, reprinted in Ap-

pendix F to the Petition at 35a.

® Pet. App. 35a.

paid by them.’ This latter provision was viewed by the

House Ways and Means Committee as reciprocal and in-

herently fair. Remarkably, the court below viewed the

Committee’s discussion of the prior law as signalling an

intent not to change it and chided the Court of Interna-

tional Trade for having “ignored the House Report.” ”

Under Customs’ present policy, if amici protest the

amount of duty demanded by Customs upon liquidation

and prevail, Customs pays interest only on the refund

of any overcharged duties first assessed upon liquidation.

Thus, if the overcharged duties were first assessed at the

time of liquidation, Customs will pay interest on any

overcharge of duties, from the date of liquidation to the

date of the refund. If, on the other hand, the overcharged

duties were paid at the time of entry, as is most often

the case, and remain unchanged upon liquidation, Cus-

toms will not pay interest on any refunded duties.

This policy has led to absurd and unjust results. Cus-

toms has complete discretion to set the amount of duties,

based solely on its classification of the imported merchan-

dise. In some cases, Customs will direct that excess

duties be deposited at the time of entry. In other in-

stances, Customs demands additional duties upon liqui-

dation, based on its reclassification of the merchandise.

Despite the identical result in both circumstances (7.e.,

duty overcharge), Customs refuses to pay any interest

in the former situation, even though it will have retained

the importer’s money for a longer period of time (ie.,

date of entry versus date of liquidation).

The amici, and thousands of other importers, are se-

verely and adversely affected by this “no interest” policy

because the overpayment of duties can equal millions of

dollars and the use of the monies involved can be denied

to the importer for years pending completion of adminis-

7 Td. at 36a-37a.

8 Td. at 37a.

9 Jd. at 9a.

trative protest procedures and, in many cases, litigation.

The loss of use of such funds translates directly into ad-

ditional costs for the companies in the form of increased

financing expenses, reduced profits, and in the most

egregious cases, where the duty rate is high and the

delay long, cessation of business operations. These costs

detract from the competitiveness of U.S. companies and

thwart Congress’ efforts to alleviate this unwarranted

government burden on their balance sheets.

The magnitude of the loss confronted by U.S. import-

ers can be appreciated by considering the sheer volume of

import transactions. Recently, for example, the U.S. Cus-

toms Service estimated that in fiscal year 1989 it processed

nine million entries and it collected 18.6 billion dollars in

duties.’” Customs estimated that more than $20 billion in

duties would be collected in fiscal year 1991 and that this

level would double in 10 years.'' Even if only a small

percentage of imports are embroiled in controversy re

specting the appropriate duties to be paid, the cost to

importers resulting from the uncompensated imposition

of excessive duties is enormous. Moreover, by the Treas-

ury Department’s own accounting, the average period of

time between liquidation and a court decision resolving

any dispute is approximately 46 months.”

More fundamentally, and as discussed in the argument

of the amici curiae, the Customs Service policy and the

court of appeals’ decision upholding it disregard the will

10 Hearings before the Subcomm. on Trade of the House Com-

mittee on Ways and Means, 101st Cong., 2d Sess. 44-45 (1990),

Serial 101-93 (Statement of the Commissioner, U.S. Customs

Service).

11 Hearings on Commercial Operations of the U.S. Customs Serv-

ice, Subcomm. on Trade of the House Committee on Ways & Means,

101st Cong., 2d Sess. 15 (1990), Serial 101-99 (Statement of the

Commissioner U.S. Customs Service).

12 Hearings on the Customs Courts Act of 1980, Subcomm. on

Monopolies and Commercial Law of the House Comm. on the Judi-

ciary, 96th Cong., 2d Sess. 88-89 (1980), Serial No. 31.

of Congress as codified in the Trade and Tariff Act of

1984, Pub. L. No. 98-573, 98 Stat. 2948 (1984). The pol-

icy also eliminates al] financial incentive for the Customs

Service to resolve quickly disputes affecting classifications

and applicable duty rates because the entire cost of fund-

ing the excessive amount of duties, prior to their refund

by the Customs Service, is borne by the importer of

record.

It is for the foregoing reasons that Baxter and the

other amici support Kalan Inc. and Hospital Corporation

of America in their joint petition for a writ of cer-

tiorari to the Court of Appeals for the Federal Circuit

respecting its decision in Kalan Inc. v. United States,

944 F.2d 847 (Fed. Cir. 1991) and Hospital Corporation

of America v. United States, (Court No. 89-08-00462)

(November 23, 1990).

ARGUMENT

THE WRIT SHOULD BE GRANTED TO CORRECT

THE FAR-REACHING, ERRONEOUS AND UNFAIR

CUSTOMS SERVICE POLICY AFFECTING INTEREST

ON REFUNDS

I. CONGRESS SPECIFICALLY PROVIDED FOR THE

PAYMENT OF INTEREST TO IMPORTERS WHEN

EXCESSIVE DUTIES ARE REFUNDED

The idea of compensating importers for the financial

cost associated with the Customs Service’s over collection

of customs duties was first addressed by Congress in the

Customs Courts Act of 1980, Pub. L. No. 96-417, 94 Stat.

1727 (1980). Section 301 of that law authorizes the

Court of International Trade to award interest, com-

mencing on the date of the filing of a summons, to a

successful plaintiff when the result of its lawsuit is the

refund of customs duties."

Four years later, Congress passed the Trade and Tariff

Act of 1984, supra, which expanded the scope of relief

13 28 U.S.C. § 2644.

afforded to importers who prevail in obtaining a refund

of customs duties. Section 210 of the Act, 19 U.S.C.

$ 1520(d), directs that interest also be paid on any in-

creased or additional duties when reliquidation of the

entry results in a refund of duties. The date from which

interest is to be computed is extended by this provision

to the date of payment of the liquidated duties.

The above cited provisions evince an unmistakable Con-

gressional intent to make importers whole for any finan-

cial costs that they have suffered by reason of the depri-

vation of such excess duties as are improperly held by the

Customs Service. The court of appeals’ decisions in Kalan

Inc. and Hospital Corporation of America, supra, miscon-

strue the meaning of these statutory provisions and, thus,

erroneously deny to the petitioners, and all similarly

situated importers, the benefit of the interest award that

Congress has mandated be paid.

A. The Customs Courts Act of 1980 First Provided for

the Payment of Interest to Importers

Section 2644 to title 28 of the U.S. Code became law

with the enactment of the 1980 Act.'* This section is im-

portant for two reasons. First, its passage reveals that

the Congressional purpose was to mitigate the loss to

importers caused by the wrongful retention of excess

duties. Second, because the provision is referenced in the

1984 House Committee Report on section 1520(d)," it

affords some insight into the intent of Congress in en-

14 The provision reads as follows:

If, in a civil action in the Court of International Trade under

Section 515 of the Tariff Act of 1930, the plaintiff obtains

monetary relief by a judgment or under a stipulation agree-

ment, interest shall be allowed at an annual rate established

under Section 6621 of the Internal Revenue Code of 1954. Such

interest shall be calculated from the date of filing of the sum-

mons in such action to the date of the refund.

15 H.R. Rep. No. 1015, 98th Cong., 2d Sess. reprinted in 1984

U.S. Code Cong. & Ad. News 4960, 5027.

larging the scope of the provision for the payment of

interest beyond that originally provided for in 1980.

It is instructive to consider how Congress in 1980 char-

acterized its attem to redress the costs inflicted on an

importer by reason of the Custom Service’s collection of

too much duty. In pertinent part, the Report of the

Committee on the Judiciary accompanying the Customs

Courts Act of 1980 reads as follows:

During the hearings, a member of the private bar

urged that the Government pay an importer interest

on a refund of excess customs duties because the

time between payment of customs duties and the date

of the refund pursuant to a court judgment may be

as long as four or five years. The Association of the

Customs Bar felt it would be desirable to have in-

terest awarded since “the importer must have paid

all assessed duties before he can commence an action

in the Court of International Trade.”

The Subcommittee was persuaded by the

concerns of the private bar and adopted an amend-

ment authorizing the Court of International Trade

to award interest on a refund of excess customs

duties to an importer plaintiff... .

H.R. Rep. No. 1235, 96th Cong., 2d Sess., reprinted

in 1980 U.S. Code Cong. & Ad. News 3753. Significantly,

Congress chose not to qualify the scope and type of re-

funded duties made eligible for payment of interest. All

excess customs duties refunded in connection with a court

judgment or stipulation agreement became subject to the

payment of interest with the enactment of this provi-

sion."* The only explicit limitation was that interest

would be computed from the date a summons was filed

commencing an action to recover the excess duties."

16 The Court of Appeals conceded this in its Kalan decision, 944

F.2d 847, 848-849 (1991).

17It is noteworthy that the Court of International Trade has

jurisdiction over contested Customs’ decisions arising from protest

The fact that Congress was not only attempting to

make importers whole by the payment of interest but

also seeking to make the duty determination process more

efficient is demonstrated by an excerpt from hearing testi-

mony that is expressly cited in the Report of the House

Committee on the Judiciary."

I have outlined a little formula in my prepared

statement using the rate of inflation together with

the current rate of interest. It’s not unusual for

cases to drag on for 5 or 6 years and even when

you win your case, how much is left after 5 or 6

years? I just don’t think its simple justice. How

could anybody be made whole if he’s going to get

half his money back after 5 years? ... My opinion

is that if you put something like this in the bill,

you will probably increase the likelihood that they

will act about five times faster than they do now,

which would be a tremendous improvement not only

administratively as far as the customs service is

concerned but also as far as the Attorney General’s

office is concerned... .”

B. The Trade and Tariff Act of 1984 Extended the

Scope of the Interest Payment Period to the Date of

Liquidation

With the enactment of 19 U.S.C. $1520(d) as part

of the 1984 Trade and Tariff Act, Congress reached

procedures only if all liquidated duties have been paid at the time

that the action is commenced. 28 U.S.C. § 2637. Quite significantly,

duties deposited at the time of entry are considered to satisfy this

provision relating to liquidated duties.

18 H.R. Rep. No. 1235, supra, at 3753-54. The same Judiciary

Committee Report states that the Justice Department did not oppose

the awarding of interset. Jd. The Treasury Department was largely

silent on the issue but did provide projections regarding the addi-

tional cost that would be incurred if interest were to be made

payable to a point earlier in time than the summons filing date,

e.g., the date of liquidation or protest approval date. See Hearings,

supra note 12, at 88-89.

19 See Hearings, supra note 12, at 129.

beyond the provisions of the 1980 Customs Courts Act

to extend the payment of interest to a point in time pre-

ceding the filing of a summons. The date chosen was the

date duties are deemed to be paid, which is generally the

date the relevant customs entry is liquidated by Customs.

The reason for this legislative action is clear and does

not appear to be the subject of any dispute. Congress,

confronted by a decision of the Court of Customs and

Patent Appeals which permitted importers to defer for

as long as 180 days the payment of duties determined

to be due at liquidation,*” was convinced that an earlier

due date must be established and that delinquent pay-

ments by importers be made subject to interest. Both the

due date and the requirement that interest be paid on

any payments made more than 15 days after liquida-

tion were incorporated in section 1505(c) .*?

Keenly aware of the need to act in an even handed

manner, Congress in section 1520(d) simultaneously

made provision for the U.S. Treasury to pay interest

to importers in situations in which the U.S. Customs

Service determined that overcharges of duties had been

made.** Thus, Congress directed that in making duty

*° United States v. Heraeus-Amersil, Inc., 671 F.2d 1356 (C.C.P.A.

1982).

2119 U.S.C. § 1505(c).

*2 The report of the House Ways and Means Committee on section

203 of H.R. 6064, the provision that ultimately became section 210

of P.L. 98-573, states in pertinent part:

This section would also amend section 520 of the Tariff Act

of 1930 (19 U.S.C. 1520) by adding a new paragraph which

would provide for interest to be paid by the government if a

determination is made to reliquidate an entry as a result of a

protest filed under section 514 of the Act or if any application

for relief is made under subsection (c)(1) of Section 520 of

the Tariff Act of 1930 or if reliquidation is ordered by an

appropriate court. Interest would be paid on the amount of

overcharge at a rate to be determined by the Secretary of the

Treasury and determined as of the 15th day after the date of

refunds “interest shall be allowed on any amount paid

as increased or additional duties under section 1505(c)

of this title...”

The Committee Report on this provision particularly

emphasizes the necessity of equalizing the treatment to

be accorded to importers in connection with the pay-

ment of interest both when duties are owed to the gov-

ernment and when the government owes the importers

a refund of duties:

The second part of this legislation recognizes the

inherent fairness of a reciprocity of payment of in-

terest when the importer has been able to sustain his

position in an appropriate forum.**

As a matter of logic, reciprocal treatment, as intended

by Congress, would require an importer who has de-

posited duties in excess of those which it is obligated to

pay to receive interest from the date of liquidation, paral-

leling the interest charges payable to the U.S. Treasury

by any importer that fails to pay any duties owed at the

time of liquidation.

That the Congressional purpose in enacting section

520(d) was consistent with the intent underlying the

1980 changes in the law (when section 2644 was en-

acted) is again evidenced by the language in the Com-

mittee Report describing the reason for the 1984 amend-

ments:

It is similar to but, as regards increased or

additional duties, goes beyond 28 U.S.C. 2644 which

allows interest to be paid to a successful plaintiff

liquidation or reliquidation. Interest would be calculated from

the date of payment to the date of refund or the filing of a

summons under 2632 of title 28, United States Code, whichever

occurs first.

H.R. Rep. No. 1015, supra note 15, at 5026.

23 Td. at 5027.

12 -

in the Court of International Trade but only from

the date of filing of the summons.**

From the foregoing, the evolution in Congressional think-

ing on the importer’s entitlement to interest on excess

duties can be clearly discerned. In 1980, when the first

provision was enacted, Congress was intent upon amelior-

ating the unfair hardship caused to importers who went

without compensation for long periods pending the refund

of excess duties by Customs. At that time, Congress

chose the least expensive alternative and allowed interest

only from the date that a summons was filed rather than

some earlier date.

In 1984, when Congress acted to ensure the prompt

payment of duties by dictating that late payment by

an importer would be subject to interest charges, it

made sure that importers would be treated in an equita-

ble fashion by providing for interest to be paid to im-

porters when it is determined that excess duties have

been held beyond the date of liquidation. The court of

appeals’ finding to the contrary, predicated on erroneous

interpretations of both the legislative history and statu-

tory language of section 1520(d), should not be allowed

to stand.

Il. THE COURT OF APPEALS DECISION MISINTER-

PRETS THE LEGISLATIVE HISTORY OF SEC-

-TION 1520(d) AND MISCONSTRUES THE LAN-

GUAGE ADOPTED BY CONGRESS

The court of appeals’ decision construing section

1520(d) to allow interest only on such duties as are ac-

tually paid at the time of liquidation or reliquidation

imposes a restriction that contravenes the legislative in-

tent of the provision and is not justified by its language.

Moreover, the court of appeals’ interpretation of section

1520(d) is based on its erroneous misinterpretation of

4 Id.

ane erienreecernernernretimeiamee trl

the legislative history, specifically the pertinent House

Report, and its assignment of a specialized meaning

to the statutory words “increased or additional duty”

despite the lack of any consistent usage of those words in

other code provisions or customs practice.

In particular, the court of appeals placed undue re-

liance on a single sentence in the House Report to con-

clude that excess deposits of duty, when refunded at

liquidation, are not entitled to receive interest. Thus, the

court’s decision contains the following language, includ-

ing a quote from the House Report:

In short, the House Report confirms that neither

section 1520(d) nor section 1505(c) changed prior

law: “If any excess duties are being refunded, no

interest is payable thereon.” House Report at 5026.

Curiously, the trial Court ignored the Hovse Report.

Kalan at 851. The passage in question was clearly mis-

interpreted by the court of appeals, however, as the para-

graph to which the court cited is a description of the

way that the law and Customs practice was at the time

that section 1520(d) was under consideration. It was

not a statement of the effect that Congress hoped sec-

tion 1520(d) would have.

As is frequently the case, the committee report re-

lating to the provision that ultimately became section

1520(d) discussed existing law at the time, addressed

the reasons for the ehanges proposed in the bill, and

specified the effect that the proposed legislation would

have on law and practice. Reference to the specific lan-

guage of the House Report reveals that the sentence on

which the court of appeals placed such great empha-

sis*° is actually contained in the body of a paragraph

~> The court of appeals may have adopted as its own an erroneous

reference to this sentence which appeared in the appellate brief of

the Department of Justice. Kalan Inc. v. United States, supra, Brief

for Defendant/Cross-Appellant, United States, Appeal Nos. 91-1117,

91-1163 at 29.

blatant

that is devoted entirely to what was the status of the law

and agency practice at the time that the bill was under

consideration by the committee:

Currently, a deposit of the estimated duties owed

must be made at the time of entry of merchandise,

other than entry into warehouse, for transporta-

tion, or under bond. If it is determined that addi-

tional or increased duties are due, the appropriate

customs officer must collect them. If any excess

duties are being refunded, no interest is payable

thereon. No time limits are fixed for the payment

of additional or increased duties, and no interest on

such amounts owed can be assessed.

H.R. Rep. No. 1015, supra note 15, at 5026. The sen-

tence that the court of appeals quotes in its opinion is

thus entirely out of context. The positioning of the

language in the Report leaves no doubt but that the sit-

uation being described was that which existed at the

time that the Report was being prepared,** not the re-

sult that Congress hoped to achieve with its passage of

the provision in question. If this were not the case,

then the language in the House Report that immediately

follows the language quoted by the court of appeals also

would have to be deemed to be the effect Congress in-

tended to achieve. But such an interpretation would be

plainly wrong as the lack of a fixed time for the payment

of additional or increased duties was the problem that

Congress sought to rectify with section 1505(c), the com-

panion provision to 1520(d).

The court of appeals’ conclusion that the words ‘“in-

creased or additional duties” possess a uniform meaning

throughout the various provisions of applicable customs

law, regardless of when and why the diverse measures

“6 The reference in the House Report, moreover, relates to the

refund of excess estimated duties at the time of liquidation as op-

posed to the refund of excess liquidated duties after protest as was

in issue in Kalan and Hospital Corporation of America.

were enacted, is also unwarranted. The fact that ‘“‘in-

creased or additional duties” are not terms of art with a

singular, determinate meaning is apparent from an ex-

amination of the diverse ways in which those words have

been used. Thus, although the court of appeals concluded

that “increased or additional duties’’ encompass only those

duties collected pursuant to section 1505(b) at the time

of liquidation or reliquidation, consideration of how those

terms have been used both by Congress and Customs

refutes the result reached by the appellate court in Kalan

and Hospital Corporation of America.

Congress has modified ‘‘duties” by the adjectives “addi-

tional” and “increased” many times in Title 19. These

adjectives when used with “duties” are used as modifiers;

they are never used in the absolute sense or as a defini-

tion, as advocated by the Customs Service and condoned

by the court of appeals.

Indeed, most of the increased or additional duties en-

acted by Congress must be paid at entry, not after liqui-

dation. For example, “discriminating duties,” 19 U.S.C.

128, are referred to as “additional” duties in 19 U.S.C.

129. Countervailing duties are “in addition to” “any duties

otherwise imposed,” 19 U.S.C. 13803(a) (1), 1671(a), as

are antidumping duties, 19 U.S.C. 1673.

If goods are not properly marked with country of

origin, Congress has provided for “Additional duties for

failure to mark” 19 U.S.C. 1804(f) (“in addition to any

other duty”). Likewise, the Congress has authorized the

president to impose “new or additional duties” to counter-

act discrimination by foreign countries. 19 U.S.C. 1338.

And, many other statutes provide similar authority to

the president to proclaim additional or increased duties.

See, eg., 19 U.S.C. 1821, 2111, 2184(a) (2), 2135(c),

2138, 2151, 2154, 198l(a)(1) and (¢)(1), and 1336.*"

*7 There are numerous other examples. In peril point investiga-

tions, the International Trade Commission investigates whether any

“increases in duties” are required, 19 U.S.C. 1360(a), and reports

Thus, “additional or increased’ duties does not have

the meaning which the Customs Service and the court of

appeals attempt to bestow. Given Congress’ consistent

use of the words “additional or increased” as adjectives

when used with duties, it would have specifically defined

what it meant if this term were supposed to mean “duties

which are paid after liquidation’”—as distinct from re-

funded amounts of “overcharged duties” which it said it

meant.** Since the House Report refers to additional or

to the President who may increase them, 19 U.S.C. 1351, and report

to Congress, 19 U.S.C. 1361.

The President must under certain circumstances apply to all

dutiable products of uncooperative major drug producing or drug

transit countries ‘‘an additional duty” not to exceed 50%. 19 U.S.C.

2492(a)(2).

Congress has prohibited the release of merchandise from warehouse

without the posting of a bond for the payment of “all unpaid regular,

increased, and additional duties, all unpaid taxes imposed upon or

by reason of importation, and all unpaid charges and exactions.”

19 U.S.C. 1557(b).

Finally, certain duties on wood are ‘additional duties’. See 19

U.S.C. 1202, TSUS, schedule 2, part 4, headnote 4. The Harmonized

Tariff Schedules of the United States (HTSUS) refines the entire

process one step further and has additional duties being imposed on

additional duties: Products classified under HTSUS subheadings

4802.51-4802.53 and 4802.60, shall under certain circumstances be

subject to ‘an additional duty of 10 percent ad valorem and in

addition thereto” an amount equal to the highest export duty. U.S.

Note 1. to Section X of the HTSUS, emphasis added. Of course,

other additional or increased duties can be added to that.

‘

“8 Moreover, not only does Congress not use “additional or in-

creased” duties as terms of art, neither does the Customs Service.

As ean be seen from the Customs Service’s presentation of the bill

to the Trade Subcommittee, Customs used a variety of adjectives to

describe what it now claims is defined as additional or increased

duties. The most frequently used term was “supplemental” duties.

Hecrings and Written Comments Before the Subcommittee on Trade

of the House Committee on Ways and Means, 98th Conzg., 1st and

2d Sessions, November 15, 1983 and June 21, 1984, Serial 98-76

(Printed 1985). Customs uses the latter term on its liquidation

notices.

increased duties as “the amount of overcharge[d]” duties,

the court of appeals’ interpretation is incorrect.*°

Indeed, the interpretation proffered by Customs and

adopted by the appellate court, would result in an unjust,

unfair Catch-22 situation for importers. Upon the en-

try of any merchandise, Customs requires an importer to

deposit estimated duties based upon Customs’ classifica-

tion of the merchandise, whether or not erroneous. Thus,

because Customs may demand that excess, i.e., additional,

duties be included in the “estimated duties” that later

are applied to pay the liquidated duties, there never is

a further occasion in such circumstances for Customs to

issue a bill for supplemental duty. Indeed, Customs’ own

actions ensure that no bill for supplemental duty ever

will be issued.

Clearly, importers should not be penalized for de-

positing the “estimated duties” that Customs demands,

for having their estimated duties applied to pay the

“additional duties” assessed upon liquidation, and for

thereafter properly protesting Customs’ actions. It is

equally clear that Customs should not be rewarded for

demanding that importers deposit excess estimated duties,

which can then be applied against the overcharged, addi-

tional duties assessed upon liquidation. That is precisely

“2 The regulation promulgated by the Department of the Treasury

implementing its responsibilities with respect to the collection and

payment of interest immediately after the enactment of the 1984

legislation perhaps also reveals the absence of any consistent usage

involving the words “increased or additional duty”. 50 Fed. Reg.

21832 (May 29, 1985) From that notice, it is evident that the

Treasury Department did not categorize all duties collected or pay-

able at the time of liquidation as increased or additional duties. In

fact, the notice speaks more generally in terms of overpayments and

underpayments of customs duties. Thus, while the Treasury pro-

nouncement identifies antidumping and countervailing duties as

being subject to the interest charge provisions of the 1984 Act, it

never refers to them as additional duties even though they are

categorized as such elsewhere in customs and trade statutes. 19

U.S.C. $§ 1303, 1671(a) and 1673(a).

the effect that the court of appeals’ interpretation would

have—simply because Customs wrongfully assesses and

collects the overcharge sooner (at entry) rather than

later (by means of a bill for supplemental duty upon

liquidation), it would allow Customs to avoid paying in-

terest when it refunds the monies that wrongfully were

assessed, collected and held. Because the appellate court’s

interpretation of the statute would lead to absurd and

unjust results, it must be rejected. See, Perry v. Com-

merce Loan Co., 883 U.S. 392, 400 (1966).

it could not be more clear that this is exactly the type

of situation that Congress had in mind when it enacted

19 U.S.C. $ 152u(d). The legislative history specifically

refers to a “reciprocity of payment of interest.” That

provision was intended to put Customs and importers on

an even footing. In the event that an importer did not

pay duty that properly was due and owing, it would be

assessed interest on the unpaid amount. However, on

the other hand, if Customs overcharged an importer, and

the importer thereafter convinced either the courts

(through litigation) or Customs (pursuant to an ap-

proved protest) that the entry should be reliquidated

and the overcharge refunded, the importer would be paid

interest on the refunded, overcharged amount.

It is the Court of International Trade that perhaps

best summarized the principle here in issue.

Since the government had use of that money to

which it had no rightful claim, 19 U.S.C. 1520(d)

allows the importer to collect interest on the refund.

The [importer] should not be denied interest because

it deposited estimated duties prior to liquidation,

rather than wait until after liquidation to pay.*

30 Hospital Corporation of America v. United States, 752 F. Supp.

459 (CIT 1990).

CONCLUSION

The Petition for a Writ of Certiorari should be granted.

February 7, 1992

* Counsel of Record

Respectfully submitted,