Richard L. Jones Calexico, Inc. v. United States , 30 Ct. Int'l Trade 1030 ( 2006 )

Slip Op. 06- 111
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
________________________________________
:
RICHARD L. JONES CALEXICO, INC., :
d/b/a R.L. JONES CUSTOMS HOUSE BROKERS, :
:
Plaintiff, :
: Court No.
v. : 04-00315
:
UNITED STATES, :
:
Defendant. :
________________________________________:
[Held: Plaintiff’s Motion for Summary Judgment granted.
Judgment for the Plaintiff entered.]
Betts, Patterson & Mines, P.S. (Steven W. Block) for Richard
L. Jones Calexico, Inc., d/b/a R.L. Jones Customs House Brokers,
Plaintiff.
Peter D. Keisler, Assistant Attorney General; Barbara S.
Williams, Attorney-in-Charge; International Trade Field Office,
Commercial Litigation Branch, Civil Division, United States
Department of Justice (Mikki Graves Walser); of counsel: Sheryl A.
French, Office of the Assistant Chief Counsel for International
Trade Litigation, Bureau of Customs and Border Protection, for
United States, Defendant.
Dated: July 25, 2006
OPINION
Tsoucalas, Senior Judge: Plaintiff, Richard L. Jones Calexico,
Inc., d/b/a R.L. Jones Customs House Brokers (“Calexico”) moves
pursuant to USCIT R. 56 for summary judgment on the ground that
there is no genuine issue as to any material facts. Calexico
argues that its claims for direct identification unused merchandise
Court No. 04-00315 Page 2
drawback with respect to certain asparagus from various origins
should be granted. The Bureau of Customs and Border Protection
(“Customs”) argues that Calexico’s drawback claims were properly
denied and seeks an order dismissing the case.
JURISDICTION
The Court has jurisdiction over this matter pursuant to 28
U.S.C. § 1581 (2000) and 19 U.S.C. § 1514(a)(6) (2000).
STANDARD OF REVIEW
On a motion for summary judgment, the Court must determine
whether there are any genuine issues of fact that are material to
the resolution of the action. See Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). A factual dispute is genuine if it might
affect the outcome of the suit under the governing law. See id.Accordingly, the Court may not decide or try factual issues upon a
motion for summary judgment. See Phone-Mate, Inc. v. United
States, 12 CIT 575, 577, 690 F. Supp. 1048, 1050 (1988). When
genuine issues of material fact are not in dispute, summary
judgment is appropriate if a moving party is entitled to judgment
as a matter of law. See USCIT R. 56; see also Celotex Corp. v.
Catrett, 477 U.S. 317, 322-23 (1986).
Court No. 04-00315 Page 3
DISCUSSION
I. Factual Background
Calexico is a licensed customs broker for Spencer Fruit
Company (“Spencer Fruit”), an importer-exporter of asparagus. See
Pl.’s Statement Material Facts Supp. Pl.’s Mot. Summ. J.
(“Calexico’s Facts”) ¶ 1. In late 1995, Customs approved Spencer
Fruit’s application for use of summary procedure and accelerated
payment for unused drawback. See Decl. Earl Roberts Supp. Pl.’s
Mot. Summ. J. (“Roberts Decl.”), Ex. 1 at 6-7. Customs’ approval
included both substitution and direct identification drawback. See
Roberts Decl., Ex. 1 at 6-8. Accelerated payment allows for the
payment of estimated drawback before liquidation of the drawback
entry. See 19 C.F.R. § 191.92(a) (1998). The use of summary
procedure waives the “prior notice of intent to export” requirement
to claim drawback. See 19 C.F.R. § 191.91(a); Roberts Decl., Ex.
1 at 8 (“It is the opinion of [Customs] that ‘prior notice of
intent to export’ is not necessary with the approval of Exporter
Summary Procedure.”).
Spencer Fruit timely filed to renew its existing privileges
for direct identification and substitution drawback by April 5,
1999. See Roberts Decl., Ex. 2 at 10-15; Def.’s Mem. Supp. Its
Opp’n Pl.’s Mot. Summ. J. (“Customs’ Mem.”) at 11. On May 26,
2000, Customs initially denied Spencer Fruit’s application stating
Court No. 04-00315 Page 4
it had not receive evidence of product commercial
interchangeability or sample export documentation. See Roberts
Decl., Ex. 3 at 17; Def.’s Resp. Pl.’s R.56(I) Statement Material
Facts Not Dispute (“Customs’ Facts”) ¶ 5. Customs later approved
Spencer Fruit’s modified application for substitution drawback on
May 15, 2001. See Roberts Decl., Ex. 4 at 19.
On January 10, September 14 and May 30, 2000, Calexico, on
behalf of Spencer Fruit, submitted the three direct identification
unused merchandise drawback claims at issue to Customs.1 See
Roberts Decl., Ex. 6 at 25-27. The drawback claims involved
merchandise exported between January 4, 1999, and March 23, 2000.
See Roberts Decl., Ex. 6. Spencer Fruit’s original drawback
application, filed by Calexico, requested $222,676.79, which
Calexico reduced to $166,713.89 in its complaint. See Calexico’s
Facts ¶ 9. Customs denied all three drawback claims on July 31,
2002. See Roberts Decl., Ex. 9 at 247-49; Customs’ Facts ¶ 23.
Customs stated that the reason for denial of drawback was because
the “[c]laimant does not have privilege approval for direct
identification unused drawback merchandise exported under 19 U.S.C.
1313(j)(1) – (entry type 42).” Roberts Decl., Ex. 9 at 247.
1
Drawback claim entry # 218-2027705-7 was filed on January
10, 2000; claim entry # 218-2038702-1 was filed on May 30, 2000;
and claim entry # 218-2041845-3 was filed on September 14, 2000.
See Roberts Decl., Ex. 6.
Court No. 04-00315 Page 5
Customs’ internal computer records dated July 31, 2002, also
indicates that entry # 218-2038702-1 was denied because the
“claimant does not have privilege approval for direct
identification unused drawback merchandise.” Decl. Steven W. Block
Supp. Pl.’s Mot. Summ. J. (“Block Decl.”), Ex. 1 at 3. In an
informal correspondence by fax thereafter dated August 21, 2002,
Customs further stated that drawback entries 218-2027705-7 and 218-
2041845-3 were denied, among other reasons, because “[n]o Waiver of
Prior Notice provided for exports after 4/6/99, when old privileges
for entry type 42/j(1) expired.” Roberts Decl., Ex. 10 at 252.
Customs liquidated the entries without the benefit of drawback on
August 16, 2002. See Calexico’s Facts ¶ 31; Customs’ Facts ¶ 31.
Calexico filed a protest ninety-one days later, which Customs
denied as untimely. See id. ¶ 32; Customs’ Facts ¶ 32. This
action followed.
II. Statutory Background
Under section 1313(j) of Title 19 of the Unites States Code,
Customs will fully repay, less one percent, the amount of duties
paid upon goods previously imported into the United States and
either 1) was not used within the United States or 2) was
“commercially interchangeable” with the imported merchandise,
before being subsequently exported or destroyed. See 19 U.S.C. §
1313(j) (2000). Known as unused merchandise drawback, or simply
Court No. 04-00315 Page 6
drawback, it can be obtained as “direct identification” drawback
when sought under 19 U.S.C. § 1313(j)(1) because the same imported
merchandise is exported or destroyed or as “substitution” drawback
under 19 U.S.C. § 1313(j)(2) because the exported merchandise is
commercially interchangeable with the imported merchandise. See 19
U.S.C. § 1313(j). The exportation date of the underlying
merchandise governs the drawback claim because it is the operative
date upon which the claim accrues. See, e.g., 19 U.S.C. §
1313(r)(1) (three year window following the date of exportation to
file a drawback claim); 19 C.F.R. § 191.31(b) (drawback allowed if
exportation occurs within three years after importation).
On April 6, 1998, new regulations formalizing waiver of prior
notice to export and accelerated payment of drawback claims
(collectively, “drawback privileges” or “privileges”) came into
effect. See 19 C.F.R. §§ 191.91-191.93 (1998). Under the new 1998
regulations, companies seeking to continue their waiver privileges
had one year to apply for continued privileges. See 19 C.F.R. §§
191.91(a)(2) & 191.92(a)(2). Companies that filed within the one
year deadline “may continue to operate under its existing waiver of
prior notice until Customs approves or denies the application . .
.”. 19 C.F.R. §§ 191.91(a)(2) & 191.92(a)(2). If the waiver
application is denied, Customs will give the company “written
notice, specifying the grounds” of denial “together with what
Court No. 04-00315 Page 7
corrective action may be taken . . .”. 19 C.F.R. §§ 191.91(c)(3)
& 191.92(e)(4).
If Customs refuses to pay a claim for drawback, a company may
protest the decision within ninety days before the liquidated entry
without the benefit of drawback becomes final and conclusive upon
all parties. See 19 U.S.C. § 1514(a)(6). “Notwithstanding a valid
protest was not filed,” however, Customs may correct a
(1) clerical error, mistake of fact, or other
inadvertence, whether or not resulting from or
contained in electronic transmission, not amounting
to an error in the construction of a law, adverse
to the importer and manifest from the record or
established by documentary evidence, in any entry,
liquidation, or other customs transaction, when the
error, mistake, or inadvertence is brought to the
attention of the Customs Service within one year
after the date of liquidation or exaction . . .
19 U.S.C. § 1520(c)(1).2 Customs’ regulations “essentially [do] no
more than paraphrase 19 U.S.C. § 1520(c)(1),” Chrysler Corp. v.
United States, 24 CIT 75, 80 n.4, 87 F. Supp. 2d 1339, 1345 n.4
(2000), and reiterates that correction pursuant to 19 U.S.C. §
1520(c) may be made in “any entry, liquidation, or other Customs
transaction . . .”. 19 C.F.R. § 173.4(b) (1998).
2
19 U.S.C. § 1520(c) was repealed in 2004, see 108 P.L.
429 § 2105, 118 Stat. 2434, 2598 (Dec. 3, 2004), but is in effect
for all times relevant to this case.
Court No. 04-00315 Page 8
III. Contentions of the Parties
A. Calexico’s Contentions
Calexico argues that summary judgment is proper because the
testimony and record evidence demonstrates that Customs’ denial of
Spencer Fruit’s drawback claims was due to a mistake of fact
regarding Spencer Fruit’s privileges. See Mem. Supp. Pl.’s Mot.
Summ. J. (“Calexico’s Mem.”) at 19. Calexico asserts that Customs
denied Spencer Fruit’s drawback claims solely because Customs
understood that the “claimant does not have privilege approval for
direct identification.” See Calexico’s Mem. at 20. Calexico
argues, however, that Spencer Fruit had an effective waiver of
prior notice for direct identification at the time the underlying
merchandise of the drawback claims were exported. See id. at 20-
21. Furthermore, Spencer Fruit continued to have direct
identification privileges until May 26, 2000, when the renewal
application was denied. See id. Calexico reasons that Customs’
denial “could not have been made based upon complete knowledge of
the facts because the Customs computer record was incorrect” and
the Customs official handling the claims did not have a prior
relationship with Spencer Fruit and was not familiar with Spencer
Fruit’s privilege application file. See id. at 21. Accordingly,
Calexico reasons that Customs’ decision was based on a mistaken
belief of Spencer Fruit’s privileges and thus relief under 19
U.S.C. § 1520(c) is appropriate. See id.Court No. 04-00315 Page 9
Calexico also argues that Customs’ contention that other
issues existed with Spencer Fruit’s denied claims is without merit.
See Calexico’s Mem. at 21. Calexico asserts that during the
relevant period, Customs’ only reason for denying Spencer Fruit’s
claims was the purported lack of privileges for direct
identification drawback. See id. Moreover, the other reasons
Customs cites in support of its denial are not applicable to the
majority of Spencer Fruit’s claims. See id. at 22. At most,
Calexico argues that the other reasons are also mistakes of fact or
clerical errors committed by Customs and thus, also correctable
under 19 U.S.C. § 1520(c). See Customs’ Mem. at 22. Finally,
Calexico asserts that the language in 19 U.S.C. § 1520(c) speaks
broadly, encompassing both drawback claims and non-importers. See
Reply Mem. Further Supp. Pl.’s Mot. Summ. J. (“Calexico’s Reply”)
at 10-12.
B. Customs’ Contentions
Customs responds that its denial of Calexico’s “section
1520(c) claim was proper.” Customs’ Mem. at 3. Customs argues
that Calexico does not satisfy the statutory requirements to seek
relief under 19 U.S.C. § 1520(c). See id. at 7. Specifically,
Customs asserts that Calexico has not demonstrated how the denied
drawback claims are adverse to the importer, Spencer Fruit. See
id. Furthermore, Customs argues that the “adverse to the importer”
Court No. 04-00315 Page 10
language in 19 U.S.C. § 1520(c) is unambiguous because in drawback
claims, “any error would be adverse to the drawback claimant or
exporter, not an ‘importer.’” Id. Customs contends, however,
that if the Court determines the phrase is ambiguous, then its
interpretation of “adverse to the importer” should be entitled to
deference. See id. at 7. Customs also asserts that the
legislative history indicates that 19 U.S.C. § 1520(c) was only
intended to benefit importers and not apply to drawback entries.
See id. at 8.
Customs argues, alternatively, that even if 19 U.S.C. §
1520(c) applies to drawback claims, Calexico has not demonstrated
here that the drawback claims were denied because of a mistake of
fact. See Customs’ Mem. at 9. Customs also states that Calexico
failed to make any mistake of fact known to Customs within the one
year time frame allotted by the statute. See id. Customs asserts
that Calexico claims that the December, 1995, and April, 1996,
letters from Customs’ Houston office represent a waiver of prior
notice. See id. at 10. Therefore, Customs’ Los Angeles office
handling the drawback claims would have honored the waiver of prior
notice had it been aware of the Houston office’s actions. See id.Customs argues that Calexico’s evidence fails to establish that
Customs’ Los Angeles office “was not aware of the Houston Port’s
extension of privileges at the time it denied the drawback claims
Court No. 04-00315 Page 11
here.” See id. Customs claims that Calexico never directly
confronted it with the Houston privileges letters before the
pending motion. See id. at 10-11. Rather, Customs argues that its
Los Angeles office was aware of and honoring Spencer Fruit’s
Houston privileges to exportations occurring before April 6, 1999.
See id. at 11. Customs agrees that it initially denied Spencer
Fruit’s application for substitution and direct identification
drawback privileges in May, 2000. See id. Customs also agrees
that after resubmissions by Spencer Fruit, it approved the
application for substitution drawback privileges only. See id. at
12. Customs states that when it denied Spencer Fruit’s
reapplication in May 2000, it “considered that the waiver of prior
notice of intent to export privilege expired as of April 6, 1999.”
Id. Thus, Customs argues that whether or not the privileges
expired on April 6 is legally correct, there was no factual mistake
made by Customs in denying Spencer Fruit’s drawback claims.3 Id.Customs asserts that its Los Angeles office did not err regarding
its knowledge of Spencer Fruit’s drawback claim, or that if it did
err, the error was one of law, not fact. See id. Furthermore,
3
Customs acknowledges that of the three drawback claims at
issue, entry claim # 218-2038702-1 did not involve any exportations
after April 6, 1999 and entry claim # 218-2027705-7 involved one
post-April 6, 1999 exportation. See Customs’ Mem. at 12. Thus,
Customs’ rationale that the direct identification privileges does
not apply to exports made after April 6, 1999, only applies to
drawback entry claim # 218-2041845-3 and a small fraction of the #
218-2027705-7 entry. See id.Court No. 04-00315 Page 12
Customs argues that Calexico has failed to demonstrate that
“Spencer would have been allowed drawback but for the failure to
accord the Houston privileges” to the drawback claims filed in Los
Angeles. Id. at 13.
Finally, Customs argues that even if Calexico can demonstrate
a mistake of fact correctable under 19 U.S.C. § 1520(c), it is
still not entitled to drawback. See Customs’ Mem. at 14. Customs
contends that it denied Spencer Fruit’s drawback claims because
multiple errors existed with the claims and not only due to the
lack of waiver of prior notice as Calexico suggests. See id. at
18-20. Among the errors, Customs argues that Calexico failed to
produce the proper documentation to prove exportation, which is
reason enough for denying a drawback claim irregardless of whether
or not Spencer Fruit had a valid waiver of prior notice. See id.
at 17-19. Customs stresses that drawback privileges do not grant
a “carte blanche guaranteeing that a drawback claim will be
allowed. In particular, a claimant must still prove exportation.
In this regard, [Calexico’s] proof continues to be deficient.” Id.
at 20. Finally, Customs asserts that 19 U.S.C. § 1313(r)(2) does
not apply here because the claims were insufficient to satisfy the
requirements for substitution. See id. at 17.
Court No. 04-00315 Page 13
IV. Customs Improperly Denied Spencer Fruit’s Direct
Identification Unused Merchandise Drawback Claims
The Court finds that Spencer Fruit’s direct identification
unused merchandise drawback claims filed by Calexico were
improperly denied by Customs.
A. Drawback Claims Are Entries Within the Scope of 19 U.S.C.
§ 1520(c)
Customs raises the initial argument that 19 U.S.C. § 1520(c)
does not apply to drawback. See Customs’ Mem. at 4. The Court
finds that Customs has misinterpreted the statute and that 19
U.S.C. § 1520(c) does apply to drawback claims.
19 U.S.C. § 1520(c) clearly states that Customs may
reliquidate “any entry, liquidation, or other customs transaction”
to correct “a clerical error, mistake of fact, or other
inadvertence.” 19 U.S.C. § 1520(c)(1) (emphasis added); see also
Computime, Inc. v. United States, 9 CIT 553, 555, 622 F. Supp.
1083, 1084 (1985) (The statute “is designed to permit Customs to
correct mistakes of fact or inadvertence which have caused an error
in liquidation.”). When the “language of a statute is clear, its
plain meaning governs interpretation of the statute.” United
States v. Hanover Ins. Co., 18 CIT 991, 993, 869 F. Supp. 950, 952
(1994). The plain language of 19 U.S.C. § 1520(c) does not exclude
drawback claims from the entries, liquidations or other customs
Court No. 04-00315 Page 14
transactions able to be corrected. Rather, the plain language is
very expansive in its scope with the use of the word “any” as a
modifier. Furthermore, the purpose of 19 U.S.C. § 1520(c) is to be
a means “for refunding money erroneously collected suggest[ing]
that it should be interpreted liberally.” G & R Produce Co., v.
United States, 381 F.3d 1328, 1332 (Fed. Cir. 2004) (emphasis
added). Therefore, drawback claims are included within the scope
of 19 U.S.C. § 1520(c)(1) because it is “any entry, liquidation, or
other customs transaction.” 19 U.S.C. § 1520(c)(1); see also C.
Itoh & Co. (America), Inc. v. United States, 5 CIT 45 (1983)
(holding importer untimely sought reliquidation under 19 U.S.C. §
1520(c) in a drawback action).
Furthermore, 19 U.S.C. § 1520(c)(1) does not specify by whom
reliquidation may be sought. The statute merely states that the
clerical error, mistake of fact or other inadvertence, among other
things, must be “adverse to the importer.” 19 U.S.C. § 1520(c)(1).
Customs argues that Calexico cannot seek remedy under 19 U.S.C. §
1520(c) because Calexico is a customs broker and not the importer,
Spencer Fruit. See Customs’ Mem. at 7. Customs also argues that
Calexico has not demonstrated how the denied drawback claims are
adverse to Spencer Fruit. See id. Again, the plain language of
the statute does not state that only importers can seek remedy
under 19 U.S.C. § 1520(c)(1), but that the error must be adverse to
Court No. 04-00315 Page 15
the importer. See 19 U.S.C. § 1520(c)(1). Licensed customs
brokers are agents of their importer-exporter customer. See United
States v. Fed. Ins. Co., 805 F.2d 1012, 1013 (Fed. Cir. 1986). As
such, customs brokers are permitted to file an action involving the
refusal to pay a claim for drawback on behalf of their customer and
be properly heard before the Court. See 28 U.S.C. §§ 1581 &
2631(a). Therefore, Calexico need not be the actual importer when
it is acting as an agent of the importer in the present action.
Moreover, here, Spencer Fruit is the importer for all and the
exporter for much of the underlying merchandise. See Calexico’s
Facts ¶¶ 1 & 12; Customs’ Facts ¶ 1; Roberts Decl., Ex. 6.
Therefore, even under the narrowest interpretations of 19 U.S.C. §
1520(c)(1), Spencer Fruit as the importer and drawback claimant
here is adversely affected by Customs’ denial of its three drawback
claims.
While Calexico, as Spencer Fruit’s customs broker, can seek
recourse under 19 U.S.C. § 1520(c) here, Calexico urges the Court
to hold an expansive definition of “importer” as used in 19 U.S.C.
§ 1520(c). See Calexico’s Reply at 10. The Court notes that in
construing an act of Congress, it is “fundamental that a section of
a statute should not be read in isolation from the context of the
whole Act.” NTN Bearing Corp. of Am. v. United States, 26 CIT 53,
102-03, 186 F. Supp. 2d 1257, 1303 (2002) (citations omitted).
Court No. 04-00315 Page 16
Rather, “each part or section of a statute should be construed in
connection with every other part or section so as to produce a
harmonious whole . . ..” Id. (citing In re Nantucket, Inc., 677
F.2d 95, 98 (C.C.P.A. 1982)). The Tariff Act of 1930, read as a
whole, supports the ability of drawback claimants, whether they are
also the importer, exporter, destroyer or any intermediate party,
see 19 U.S.C. § 1313(j), to seek reliquidation under 19 U.S.C. §
1520(c). Under 19 U.S.C. § 1313(j), the exporter has the right to
claim drawback but can assign that right to other parties. See 19
U.S.C. § 1313(j). With that assignment comes all the rights that
were available to the exporter. See, e.g., Sicom Sys. Ltd. v.
Agilent Techs., Inc., 427 F.3d 971, 976 (Fed. Cir. 2005)
(interpreting statutorily permissible assignment in a patent case).
Drawback claimants protesting Customs’ refusal to pay drawback can
file a protest under 19 U.S.C. § 1514. See 19 U.S.C. § 1514(a).
19 U.S.C. § 1520(c), then, clearly states that “[n]otwithstanding
a valid protest was not filed,” indicating that it is a separate
but related recourse to a negative Customs decision. See
generally, Chrysler Corp., 24 CIT at 84-86 87 F. Supp. 2d at 1348-
49. Accordingly, a valid protest recognized under 19 U.S.C. § 1514includes denied drawback claims, also indicating that
notwithstanding whether a valid protest was filed, an error in the
denied claim could be correctable under 19 U.S.C. § 1520(c).
Court No. 04-00315 Page 17
B. Customs Denied Spencer Fruit’s Drawback Claims Relying On
a Mistake of Fact
Again, 19 U.S.C. § 1520(c) allows for reliquidation of an
entry to correct either “a clerical error, mistake of fact, or
other inadvertence.” 19 U.S.C. § 1520(c)(1). “[T]he purpose of
section 1520(c)(1) as a means for refunding money erroneously
collected suggests that it should be interpreted liberally.” G &
R Produce Co., 381 F.3d at 1332-33. To obtain reliquidation under
19 U.S.C. § 1520(c)(1), Calexico is required to prove that the
error is a clerical error, a mistake of fact or an other
inadvertence. See 19 U.S.C. § 1520(c)(1). A mistake of fact
occurs when either “(1) the facts exist, but are unknown, or (2)
the facts do not exist as they are believed to.” G & R Produce
Co., 381 F.3d at 1331 (citing Hambro Auto. Corp. v. United States,
66 C.C.P.A. 113, 119, 603 F.2d 850, 855 (C.C.P.A. 1979)). Also,
Calexico must show that the error does not “amount to a
misconstruction of the law.” Id. at 1332. An error in the
construction of the law occurs when “the facts are known, but the
legal significance of those facts” are not appreciated. Id.Finally, a correctable error can be committed by either the
drawback claimant or Customs. See id.Here, the Court finds that Customs improperly denied Spencer
Fruit’s direct identification unused merchandise drawback claims
under the mistaken belief that Spencer Fruit did not have direct
Court No. 04-00315 Page 18
identification privileges. Customs approved Spencer Fruit for both
direct identification and substitution privileges in late 1995.
See Roberts Decl., Ex. 1. Spencer Fruit continued to have both
privileges until they ceased on May 26, 2000, when Customs denied
Spencer Fruit’s renewal application. See 19 C.F.R. § 191.91(a)(2)
(A claimant “may continue to operate under its existing
[privileges] until Customs approves or denies the application” for
continued privileges.); Roberts Decl., Ex. 3. Therefore, when the
underlying merchandise of the subject drawback claims was exported,
between January 4, 1999, and March 23, 2000, Spencer Fruit had
privileges for direct identification drawback in place. See
Roberts Decl., Ex. 6.
Customs has stated multiple times that it denied the drawback
claims because “[c]laimant does not have privilege approval for
direct identification unused drawback merchandise exported under 19
U.S.C. 1313(j)(1) – (entry type 42).” Roberts Declaration, Ex. 9
at 247; see also Block Decl., Ex. 1; Roberts Decl., Ex. 10.
Moreover, Customs employee, Ms. Marilyn Sokolow, who handled
Spencer Fruit’s drawback claims, stated that she believed that
Spencer Fruit only had privileges for substitution and not direct
identification drawback. See Sokolow Dep., Block Decl., Ex. 3 at
19-20. The fact that Customs was operating under the belief that
Spencer Fruit did not have direct identification privileges when
Court No. 04-00315 Page 19
the underlying merchandise was exported simply did not exist as
Customs believed. Since this mistaken belief is the singular
reason given for denying Spencer Fruit’s drawback claims, Customs
was operating under a mistake of fact. See G & R Produce Co., 381
F.3d at 1331. Customs argues that the Los Angeles port, where the
drawback claims were filed, “was not aware of the Houston Port’s
extension of privileges at the time it denied the drawback claims
here.” Customs’ Mem. at 10. The Houston Port granted the original
privileges in 1995. See Roberts Decl., Ex. 1. Then under the
facts as Customs has argued, it was operating without knowing all
the facts when it denied the drawback claims, which is also a
mistake of fact. See G & R Produce Co., 381 F.3d at 1331. Customs
also asserts that the absence of direct identification privileges
is not the only reason for denying the drawback claims. See
Customs’ Mem. at 18. Customs’ decision, communicated in a formal
notice of denial letter dated July 31, 2002, however, states as the
singular reason of denial that the claimant does not have
privileges. See Roberts Decl., Ex. 9 at 247. The issue before the
Court is not to determine whether other lapses with Spencer Fruit’s
drawback claims existed that may also have merited denial. Rather,
the Court is to determine whether Customs, based on the evidence
before it at the time, made its decision relying on mistaken facts.
Customs had listed multiple reasons for denying drawback claims in
other previous communications to Calexico, whether minor or not.
Court No. 04-00315 Page 20
See, e.g., Roberts Decl., Ex. 7 at 220. Therefore, the Court is
unpersuaded by attempts to now claim that other reasons were
included when denying the drawback claims at issue when only one
reason was stated. Based on the record evidence, Customs denied
Spencer Fruit’s drawback claims either without complete knowledge
of Spencer Fruit’s privileges or understood Spencer Fruit’s
privileges to be other than what they were, both qualifying as
mistakes of fact correctable under 19 U.S.C. § 1520(c)(1).
Furthermore, Customs’ error is not a mistake of law. A mistake of
law “occurs when the facts are known, but the legal significance of
those facts is not appreciated.” G & R Produce Co., 381 F.3d at
1332. As aforementioned, Customs denied Spencer Fruit’s drawback
claims believing Spencer Fruit’s privileges to be other than what
they were or without complete knowledge of the facts. Therefore,
Customs’ mistake is one of fact, not of law.
CONCLUSION
The Court finds that clerical errors, mistakes of fact or
other inadvertencies in drawback claims are correctable under 19
U.S.C. § 1520(c)(1). The Court also finds that Customs denied
Spencer Fruit’s direct identification unused merchandise drawback
claims under a mistaken belief of Spencer Fruit’s privileges.
Accordingly, the Court concludes that Spencer Fruit’s drawback
Court No. 04-00315 Page 21
claims should have been granted. The Court is unpersuaded by all
other arguments. Calexico’s motion for summary judgment is
granted. Judgement will be entered accordingly.
/s/ Nicholas Tsoucalas
NICHOLAS TSOUCALAS
SENIOR JUDGE
Dated: July 25, 2006
New York, New York