Spirit AeroSystems, Inc. v. United States , 2024 CIT 10 ( 2024 )

Slip Op. 24-10
UNITED STATES COURT OF INTERNATIONAL TRADE
SPIRIT AEROSYSTEMS, INC.,
Plaintiff,
Before: Claire R. Kelly, Judge
v.
Court No. 20-00094
UNITED STATES ET AL.,
Defendants.
OPINION AND ORDER
[Granting the U.S. Customs and Border Protection’s motion for summary judgment
on Spirit AeroSystems, Inc.’s claim for denial of substituted unused merchandise
drawback claim.]
Dated: January 30, 2024
William Randolph Rucker, Faegre Drinker Biddle & Reath, LLP of Chicago, IL, for
plaintiff Spirit AeroSystems, Inc.
Alexander Vanderweide, Senior Trial Counsel, and Patricia M. McCarthy, Director,
Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New
York, NY for defendant United States. Also on the brief was Brian M. Boynton,
Principal Deputy Assistant Attorney General. Of counsel on the brief was Matt
Rabinovitch, Attorney, Office of the Assistant Chief Counsel for International Trade
Litigation, U.S. Customs and Border Protection, and Justin R. Miller, Attorney-In-
Charge for the International Trade Field Office, U.S. Department of Justice.
Kelly, Judge: Before the Court are cross-motions for summary judgment.
Plaintiff Spirit AeroSystems, Inc. (“Spirit”) seeks summary judgment on its claim
contesting the United States Customs and Border Protection’s (“CBP”) denial of
Spirit’s protest for substituted unused merchandise drawback on imported civil
aircraft parts under 19 U.S.C. § 1313(j). See Pl. Mot. Summ. J. at 1, Mar. 24, 2023,
Court No. 20-00094 Page 2
ECF No. 39 (“Pl. Mot.”). Defendant opposes Spirit’s motion and cross-moves for
summary judgment in its favor. See Def. Cross-Mot. Summ. J., June 2, 2023, ECF
No. 42 (“Def. Mot.”). For the following reasons, Defendant’s motion is granted, and
Spirit’s motion is denied.
BACKGROUND
The Harmonized Tariff Schedule of the United States (“HTSUS”) 1 is an
authoritative classification system that lays out the tariff rates and statistical
categories for all merchandise imported into the United States. 2 See U.S. Int’l Trade
Comm., Preface to the 30th Edition – Revision 1.1: Guide to the HTSUS and
Statistical Reporting, 1 (Feb. 8, 2018) (“Preface to the HTSUS”). Under each edition
of the HTSUS, the schedule’s tabular format categorizes tariff rates on all commercial
goods according to their internationally agreed upon “structured product
nomenclature”—commonly referred to as the “Harmonized System” (“HS”)—as set
forth by the World Customs Organization. See id. at 2. The HS organizes tariff rates
1 All references to the HTSUS and Code of Federal Regulations refer to the 2020
edition, the most recent version of the HTSUS in effect at the time of Spirit’s entries
of subject merchandise. See Def. Statement of Material Facts Not In Issue at ¶ 1,
June 2, 2023, ECF 42-1 (“Def. Stmt. Facts”); Pl. Resp. to Def.’s Statement of Material
Facts Not In Issue at ¶ 1, Aug. 18, 2023, ECF No. 48-2 (“Pl. Resp. Def. Stmt.”); Pl.
Statement of Material Facts Not In Issue at ¶ 1, Mar. 24, 2023, ECF No. 39 (“Pl. Stmt.
Facts”); Def’s Resp. to Pl.’s Statement of Material Facts Not In Issue at ¶ 1, June 2,
2023, ECF No. 42-2 (“Def. Resp. Pl. Stmt.”).
2 The HTSUS is published by the U.S. International Trade Commission and subject
to frequent revisions that reflect the global system of nomenclature applied to most
world trade in goods. See U.S. Int’l Trade Comm., HTSUS Revision 11 (2023). The
schedule was established at Congress’ direction in accordance with section 1207 of
the Omnibus Trade and Competitiveness Act of 1988. See 19 U.S.C. § 3007.
Court No. 20-00094 Page 3
through a series of reporting numbers consisting of 4-digit “headings” and 6-digit
subordinate “subheadings,” 3 depending upon the type of imported merchandise as
classified in HTSUS chapters one through ninety-seven. See id. These category codes
are often further broken down into 8-digit subheadings, comprising the narrowest
legal category of the good that controls its rate of duty. 4 See id. An 8-digit subheading
may contain a subordinate statistical provision appearing as a 10-digit statistical
reporting number (“SRN”); however, such 10-digit numbers do not affect the legal
classification of the good for purposes of its tariff rate. See id.The United States implements the HS by statute through 19 U.S.C. § 1202.
See 19 U.S.C. § 1202. Pursuant to the Omnibus Trade and Competitiveness Act of
1988, the United States International Trade Commission publishes the HTSUS
containing the legal and non-legal provisions applicable to goods in trade. See 19
U.S.C. § 3007; Preface to the HTSUS at 1. The HTSUS’s provisions include tables
containing the legal 4-, 6-, and 8-digit headings and subheadings and the non-legal
10-digit SRNs. See Preface to the HTSUS at 2, 5. The tables also include a column
titled “Article Description” that corresponds with each 4-, 6-, 8-, and 10-digit sublevel
of the good’s reporting number. U.S. Customs and Border Protection, What Every
3 The HTSUS emphasizes the importance of indentations when distinguishing
between headings and subheadings: “[a] ‘heading’ is a provision whose article
description is not indented, while a ‘subheading’ (6- or 8- digit) has an indented and
subordinate description covering a subset of the heading’s product scope.” Preface to
the HTSUS at 2 n.5.
4 Some goods, as classified in the HTSUS, do not contain subdivisions and instead
end in zeroes, with their respective duty rates attached. See Preface to the HTSUS
at 2.
Court No. 20-00094 Page 4
Member of the Trade Community Should Know About: Tariff Classification, 34 (May
2004), https://www.cbp.gov/sites/default/files/assets/documents/2020-
Feb/icp017r2_3_0.pdf (last visited Jan. 16, 2024) (“CBP Tariff Classification
Compliance Publication”). Article descriptions classify a good based upon its material
composition, intended functions, or product name. U.S. Int’l Trade Comm.,
Harmonized Tariff Schedule System External User Guide, 1, 14 (2015),
https://www.usitc.gov/documents/hts_external_guide.pdf (last visited Jan. 25, 2024)
(“HTSUS User Guide”). Thus, each good falls into only one category at the 4-, 6-, 8-,
or 10-digit level depending on the article description. 5 HTSUS User Guide at 14.
Moreover, to ensure that every good falls into one classification in the schedule, the
HTSUS has catchall article descriptions with corresponding SRNs titled “Other,” also
known as “basket provisions.” EM Indus., Inc. v. United States, 999 F. Supp. 1473,
1480 (Ct. Int'l Trade 1998) ((“‘Basket’ or residual provisions of HTSUS headings . . .
are intended as a broad catch-all to encompass the classification of articles for which
there is no more specifically applicable subheading”); CBP Tariff Classification
Compliance Publication at 11. These basket provisions can appear at the 6-, 8- and
10-digit levels. See id. at 11–12. The article descriptions correspond to each HTSUS
classification number at each heading and subheading and delineate the items
5 For example, the 8-digit classification for “copper cathodes” is subheading
7403.11.00, while the 8-digit classification for “cotton sewing thread put up for retail
sale” is subheading 5204.20.00. See generally Chapter 50, Revision 11, HTSUS
(2023); HTSUS Ch. 70; Harmonized Tariff Schedule System External User Guide at
14.
Court No. 20-00094 Page 5
included in each heading and subheading, creating an organized and uniform system
that contains all relevant information on the tariff rate of duty on any given good.
See Preface to the HTSUS at 1–3; CBP Classification Compliance Publication at 11–
12, 33–34.
Imported merchandise not used within the United States before its exportation
or destruction may be eligible for a refund of duties known as a drawback (“unused
merchandise drawback”). See 19 U.S.C. § 1313(j)(2). Additionally, merchandise may
be substituted for imported merchandise for drawback purposes under 19 U.S.C.
§ 1313(j)(5) (“substituted unused merchandise drawback”) if certain conditions are
met. Section 1313 allows for refund of duties when exported (or destroyed)
merchandise is classifiable under the same 8-digit subheading as the imported
merchandise. 19 U.S.C. § 1313(j)(2)(A). However, merchandise is ineligible if the
article description for the 8-digit subheading begins with the term “other,” unless the
imported merchandise and the exported or destroyed merchandise are classified
under the same 10-digit SRN, and the article description for that 10-digit SRN does
not begin with the term “other.” 19 U.S.C. § 1313(j)(5).
To identify substituted unused merchandise that is eligible for drawback under
Section 1313(j)(5), CBP uses a software program called the “Automated Commercial
Environment” (“ACE”). 6 ACE and Automated Systems, U.S. Customs and Border
6 The parties dispute whether ACE is properly programmed to “enforce the exclusion
(footnote continued)
Court No. 20-00094 Page 6
Protection (Sept. 20, 2023), https://www.cbp.gov/trade/automated (last visited Jan.
12, 2023); Drawback in ACE, U.S. Customs and Border Protection (Oct. 6, 2022),
https://www.cbp.gov/trade/automated/news/drawback (last visited Jan. 12, 2023).
When the SRN of an unused good fails to conform to the statutory eligibility criteria
after an importer files a drawback claim, ACE returns a specific error code and
message signifying the goods ineligibility for substituted unused merchandise
drawback under 19 U.S.C. § 1313(j)(5)(A) that rejects the claim due to its status as a
basket provision. 7 See Ace Drawback Error Dictionary, U.S. Customs and Border
Patrol (June 30, 2023), https://www.cbp.gov/document/guidance/ace-drawback-error-
dictionary (last visited Jan. 12, 2023); see Pl. Stmt. Facts at ¶ 19; Def. Resp. Pl. Stmt.
at ¶ 19.
UNDISPUTED FACTS
On January 29, 2018, Spirit, an aerostructure designer and manufacturer,
imported aircraft parts into the United States through the Los Angeles Port of Entry,
Am. Summons, Apr. 27, 2020, ECF No. 18, classifiable under HTSUS SRN
8803.30.0030. Pl. Stmt. Facts at ¶¶ 23–24; Def. Resp. Pl. Stmt. at ¶ 24. The full text
of the corresponding article description to 8803.30.0030 at the time of import read:
of tariff provisions that are not eligible for substituted unused merchandise drawback
under 19 U.S.C. § 1313(j)(5).” Def. Stmt. Facts at ¶1; Pl. Resp. Def. Stmt. at ¶ 1.
However, the parties do not dispute how ACE is currently programmed to work. See
Pl. Stmt. Facts at ¶¶ 19–22; Def. Resp. Pl. Stmt. at ¶¶ 19–22.
7 For example, an SRN inputted into ACE that yields the error code “F519” is
accompanied with the error message “HTS[US] NBR NOT ALLOWED UNDER
BASKET PROVISION.” See Pl. Stmt. Facts at ¶¶ 19-20; Def. Resp. Pl. Stmt. at ¶¶
19–20.
Court No. 20-00094 Page 7
“Parts of goods of heading 8001 or 8002: [. . .] Other parts of airplanes or helicopters:
For use in civil aircraft: [. . .] Other.” Pl. Stmt. Facts at ¶ 24; Def. Resp. Pl. Stmt. at
¶ 24. All applicable duties and fees were paid by Spirit upon importation of the parts.
Pl. Stmt. Facts at ¶ 25; Def. Resp. Pl. Stmt. at ¶ 25.
On January 29, 2020, Spirit used CBP’s ACE drawback module to file a
substituted unused merchandise drawback claim for the imported plane parts under
Claim No. AA6 03265726. Pl. Stmt. Facts at ¶ 26; Def. Resp. Pl. Stmt. at ¶ 26. That
same day, CBP’s ACE drawback module rejected Spirit’s drawback claim, resulting
in error code “F519.” Pl. Stmt. Facts at ¶ 27; Def. Resp. Pl. Stmt. at ¶ 27. Spirit filed
an administrative protest, which was denied by CBP. See Am. Summons. Spirit then
filed a summons under 28 U.S.C. § 1581(a), which was granted by the Court. Spirit
AeroSystems, Inc. v. United States, 468 F. Supp.3d 1349, 1352 (Ct. Int’l Trade 2020).
On April 27, 2020, Spirit filed the instant action against CBP. See generally
Compl., Apr. 27, 2020, ECF No. 6. On March 24, 2023, Spirit filed its motion for
summary judgment, to which Defendant responded to by filing a cross-motion for
summary judgment on June 6, 2023. See generally Pl. Mot.; Def. Mot. On December
7, 2023, the Court heard oral arguments by the parties on the issues presented in the
moving briefs. See Digital Audio File re Courtroom Proceeding 55, Dec. 7, 2023, ECF
No. 56.
Court No. 20-00094 Page 8
The parties do not dispute that the imported and substituted aircraft parts at
issue are classifiable under SRN 8803.30.0030. Pl. Mot. at 2; Def. Mot. at 3–4.
Spirit believes it is entitled to summary judgment because 19 U.S.C. § 1313(j)(5)
renders SRN 8803.30.0030 eligible for substituted unused merchandise drawback as
it mandates that the preceding indented text to any 10-digit SRN be read as part of
the “article description” for that 10-digit number. Pl. Mot. at 11, 18, 24–25. Spirit
supports its argument with canons of statutory construction and legislative intent.
See id. at 2, 25–29. Specifically, Spirit requests the Court to (1) order that
merchandise classifiable under SRN 8803.30.0030 of the HTSUS is eligible for
substituted unused merchandise drawback; (2) require CBP to reprogram ACE to
allow for substituted unused merchandise drawback claims classifiable for SRN
8803.30.0030; and (3) order CBP to approve Claim No. AA6 03265726 and refund
Court No. 20-00094 Page 9
excess duties paid with interest. Id. at 1–2. Defendant argues it is entitled to
summary judgment and that ACE properly rejected Spirit’s claim because drawback
eligibility under 19 U.S.C. § 1313(j) is determined by reading only the attached
description at the 8- and 10-digit numerical levels, therefore rendering SRN
8803.30.0030 an “other” category and thus ineligible for substituted unused
merchandise drawback. Def. Mot. at 4–5, 6–35. To support its position, Defendant
argues that Section 1313(j)(5) does not implicate the numerically unaligned text
between the 8- and 10-digit levels to determine substituted unused merchandise
drawback eligibility, and that Spirit’s interpretation collapses distinct 10-digit SRNs
into broad categories and leads to inconsistent and absurd results. Id. at 4–5. For
the following reasons, Defendant’s motion is granted, and Spirit’s motion is denied.
JURISDICTION AND STANDARD OF REVIEW
The Court has exclusive jurisdiction over “any civil action commenced to
contest the denial of a protest, in whole or in part, under section 515 of the Tariff Act
of 1930.” 8 28 U.S.C. § 1581(a). Denied protests are subject to de novo review “upon
the basis of the record made before the court.” See 28 U.S.C. § 2640(a)(1).
The Court will grant summary judgment when “the movant shows that there
is no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” USCIT R. 56(a). In order to raise a genuine issue of material
8 Further citations to the Tariff Act of 1930, as amended, are to the relevant
provisions of Title 19 of the U.S. Code, 2018 edition.
Court No. 20-00094 Page 10
fact, it is insufficient for a party to rest upon mere allegations or denials, but rather
that party must point to sufficient supporting evidence for the claimed factual dispute
to require resolution of the differing versions of the truth at trial. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248–49 (1986); Processed Plastic Co. v. United States, 473
F.3d 1164, 1170 (Fed. Cir. 2006); Barmag Barmer Maschinenfabrik AG v. Murata
Machinery, Ltd., 731 F.2d 831, 835–36 (Fed. Cir. 1984).
DISCUSSION
Spirit argues the exception to 19 U.S.C. § 1313(j)(5)(B), stating that substituted
unused merchandise drawback is available if “the article description for [imported
merchandise and the substituted merchandise classifiable under the same 10-digit
SRN] does not begin with the term ‘other,’” renders the SRN 8803.30.0030 of the
HTSUS eligible for substituted unused merchandise drawback because it begins with
the phrase “For use in civil aircraft[.]” Pl. Mot. at 2. Spirit supports its reading with
invocations of statutory interpretation canons and legislative history. Id. at 11–31.
Defendant contends that Spirit’s reading of the statute fails to implement the plain
meaning and purpose of the statute. Def. Mot. at 4–5. More specifically, Defendant
argues that the text of 19 U.S.C. § 1313(j)(5) stating substituted unused merchandise
drawback is “based on the 8-digit [HTSUS] subheading number,” “the article
description for the 8-digit [HTSUS] subheading number,” and the “article description
for that 10-digit [HTSUS] [SRN]” do not implicate unattached HTSUS language. Id.
at 11. Rather, Defendant argues substituted unused merchandise drawback
eligibility under 19 U.S.C. §§ 1313(j)(2) and (5) is determined by looking at the text
Court No. 20-00094 Page 11
directly aligned with the 8- and 10-digit numerical level because “the term ‘for’ refers
to the descriptive text that aligns with ‘the 8-digit HTSUS subheading number’ and
‘10-digit [HTSUS] [SRN].’” Id. Under Defendant’s reading of 19 U.S.C. § 1313(j)(5),
SRN 8803.30.0030 begins with the word “other” in its article description and
therefore is ineligible for substituted unused merchandise drawback. Id. at 4–5.
Unused merchandise drawback eligibility is governed by 19 U.S.C. § 1313(j),
allowing for the refund of duties paid upon importation under certain conditions if
merchandise is unused and subsequently exported or destroyed. 9 19 U.S.C. § 1313(j).
Subsection 1313(j)(2) allows for refund of duties when exported (or destroyed)
merchandise classified under the same 8-digit subheading as the imported
merchandise is exported or destroyed. 10 19 U.S.C. § 1313(j)(2).
9 The unused merchandise drawback portion of 19 U.S.C. § 1313(j) reads in relevant
part:
(1) if imported merchandise, on which was paid any duty, tax, or fee
imposed under Federal law upon entry or importation--
(A) is, before the close of the 5-year period beginning on the date of
importation and before the drawback claim is filed--
(i) exported, or
(ii) destroyed under customs supervision; and
(B) is not used within the United States before such exportation or
destruction;
then upon such exportation or destruction an amount calculated
pursuant to regulations prescribed by the Secretary of the Treasury
under subsection (l) shall be refunded as drawback. The exporter (or
destroyer) has the right to claim drawback under this paragraph, but
may endorse such right to the importer or any intermediate party.
19 U.S.C. § 1313(j)(1).
10 Section § 1313(j)(2) states:
(footnote continued)
Court No. 20-00094 Page 12
Congress limited the availability of substituted unused merchandise
drawback:
(5)(A) For purposes of paragraph (2) and except as provided in
subparagraph (B), merchandise may not be substituted for imported
merchandise for drawback purposes based on the 8-digit [HTSUS]
subheading number if the article description for the 8-digit [HTSUS]
subheading number under which the imported merchandise is classified
begins with the term “other”.
(B) In cases described in subparagraph (A), merchandise may be
substituted for imported merchandise for drawback purposes if--
(i) the other merchandise and such imported merchandise are
classifiable under the same 10-digit [HTSUS] [SRN] and
(ii) the article description for that 10-digit [HTSUS] [SRN] does not
begin with the term “other”.
19 U.S.C. § 1313(j)(5). Thus, if the “article description for the 8-digit [HTSUS]
subheading number under which the imported merchandise is classified begins with
Subject to paragraphs (4), (5), and (6), if there is, with respect to
imported merchandise on which was paid any duty, tax, or fee imposed
under Federal law upon entry or importation, any other merchandise
(whether imported or domestic), that--
(A) is classifiable under the same 8-digit [HTSUS] subheading number
as such imported merchandise;
(B) is, before the close of the 5-year period beginning on the date of
importation of the imported merchandise and before the drawback claim
is filed, either exported or destroyed under customs supervision; and
(C) before such exportation or destruction--
(i) is not used within the United States, and
(ii) is in the possession of . . . the party claiming drawback under
this paragraph, if that party--
(I) is the importer of the imported merchandise, or
(II) received the imported merchandise, other merchandise
classifiable under the same 8-digit [HTSUS] subheading
number as such imported merchandise . . .
then, notwithstanding any other provision of law, upon the exportation
or destruction of such other merchandise . . . shall be refunded as
drawback.
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the term ‘other’”, substituted unused merchandise drawback is inapplicable unless
the imported merchandise and the exported or destroyed merchandise are classified
in the same 10-digit HTSUS SRN, and the article description for that 10-digit HTSUS
SRN does not begin with the term “other.” Id.The plain meaning of the phrase “article description for that 10-digit [HTSUS]
[SRN]” refers to the words describing the article adjacent to the 10-digit number. 19
U.S.C. § 1313(j)(5)(B)(ii). The words “for that 10-digit SRN” necessarily limit the
description to the words adjacent to the numbers. 11 The preposition “for” operates as
a functional word to indicate purpose. For, Merriam-Webster’s Dictionary,
https://www.merriam-webster.com/dictionary/for (last visited Jan. 8, 2024) (“1 a :
used as a function word to indicate purpose”). The pronoun “that” refers to the kind
or thing specified as follows in the preceding clause. That, Merriam-Webster’s
Dictionary, https://www.merriam-webster.com/dictionary/that (last visited Jan. 8,
2024) (“1 c : the kind or thing specified as follows | the purest water is that produced
by distillation”). The pronoun “that” is singular, meaning it refers to only one item.
See id. (identifying the plural of “that” is “those”). Unattached unifying language in
the HTSUS, as prefatory language, necessarily refers to more than one 10-digit SRN
11 When referring to the article description at the 8-digit level, Congress spoke of the
article description for “the” 8-digit HTSUS subheading. 19 U.S.C. § 1313(j)(5)(A).
However, when referring to the article description at the 10-digit level, Congress
referenced the article description for “that” 10-digit HTSUS number. 19 U.S.C.
§ 1313(j)(5)(B)(ii).
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where there are multiple preceding 10-digit SRNs. See, e.g., HTSUS 4418.50.00.12
Thus, the plain language of the statute indicates the term “for that article
description” can refer only to the description attached to one “10-digit [HTSUS]
[SRN].” 19 U.S.C. § 1313(j)(5)(B)(ii). Accordingly, the HTSUS article descriptions
attached to the 10-digit SRN, meaning the descriptions on the same line and level of
the statutory suffices, control substituted unused merchandise drawback eligibility
under 19 U.S.C. § 1313(j)(5)(B). So long as the article description adjacent to the 10-
digit SRN does not begin with the term “other,” drawback for substituted unused
merchandise is available.
The plain reading of Section 1313(j)(5) is consistent with its legislative history.
In February of 2016, Congress enacted the Trade Facilitation and Trade Enforcement
Act of 2015 (“TFTEA”). See P.L. 114-125. In drafting and implementing the TFTEA,
Congress intended to simplify laborious and time-consuming drawback procedures
under the “commercially interchangeable” standard that previously governed
12 For example, the article description for the 8-digit HTSUS subheading 4418.50.00
is “Shingles and shakes.” In between the 8- and 10-digit levels, there is the indented
unifying heading “Shingles:”—unattached from any 8-digit subheading number and
10-digit SRN. Directly underneath this unifying heading, there are two further
indented subheadings at the 10-digit level, which read “Of western red cedar” and
“Other.” Therefore, the two 10-digit SRNs and their article descriptions under the 8-
digit HTSUS subheading 4418.50.00 “Shingles and shakes” are: (1) 4418.50.0010 “Of
western red cedar;” and (2) “Other.” The two 10-digit SRNs are unified under the
prefatory, unattached subheading “Shingles” to distinguish between shingles that
might fall into the HTSUS heading and shakes that might fall into the HTSUS
heading.
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drawback eligibility by tying eligibility to HTSUS numbers. 13 See Modernized
Drawback, 83 Fed. Reg. 37886-01, 37889 (Aug. 2, 2018); 14 S. Rep. No. 114-45 at 53
(2015). 15 Consequently, eligibility could be assessed through an automated process
13 The Court of Appeals for the Federal Circuit held that the commercially
interchangeable standard, which CBP used to determine drawback eligibility under
19 U.S.C. § 1313(j) prior to enactment of the TFTEA, was “determined objectively
from the perspective of a hypothetical reasonable competitor; if a reasonable
competitor would accept either the imported or the exported good for its primary
commercial purpose, then the goods are ‘commercially interchangeable’ according to
19 U.S.C. § 1313(j)(2).” See Texport Oil Co. v. United States, 185 F.3d 1291, 1295
(Fed. Cir. 1999); see also 19 C.F.R. § 191.2. Thus, prior drawback determinations
focused on a case-by-case examination of the imported merchandise that was not
susceptible to automation. See S. Rep. 114-45 at 53 (2015) (“Drawback is currently a
paper-based labor intensive process for both the government and private sector. [The
TFTEA] reflects the view . . . that drawback needs to be simplified and automated. .
. .”).
14 The proposed rules by the Department of Homeland Security, CBP, and the
Department of the Treasury for 19 C.F.R. part 113, 181, 190, and 191 reveal
intentions to streamline substituted unused merchandise drawback eligibility
determinations:
[TFTEA § 906(b)] provides a new standard for determining which
merchandise may be substituted for imported merchandise as the basis
for a substitution claim. . . . This standard replaces the “same kind and
quality” and “commercially interchangeable” standards that were
applied, respectively, to substitution manufacturing drawback claims
and substitution unused merchandise drawback claims. . . . The new
standard will reduce much of the [] burdens by generally eliminating
uncertainty as to whether the standard for substitution has been met.
Modernized Drawback, 83 Fed. Reg. 37886-01, 37889 (Aug. 2, 2018).
15 The Senate Report for the TFTEA identifies Congress’ desire to simplify drawback
determinations through an automation by ACE:
Drawback is currently a paper-based labor intensive process . . . [t]his
section reflects the view of this Committee that drawback needs to be
simplified and automated by (1) allowing drawback claimants to
generally use the 8-digit [HTSUS]number in lieu of obtaining a ruling
prior to submitting a drawback claim with CBP; (2) allowing claims to
be submitted in the Automated Commercial Environment.
S. Rep. No. 114-45 at 53 (2015).
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in which HTSUS numbers are compared at the 10-digit level.16 Indeed, any given
dutiable good has exactly one specific corresponding 10-digit HTSUS number. See
HTSUS User Guide at 14 (“The [HTSUS] is designed so that each article falls into
only one category”); Harmonized System (HS) Codes, Int’l Trade Admin.,
https://www.trade.gov/harmonized-system-hs-codes (last visited Jan. 9, 2024) (“The
United States uses a 10-digit code to classify products . . . There is a [10-digit code]
for every physical product, from paper clips to airplanes”). Using HTSUS numbers
ensures merchandise is similar enough to warrant substituted unused merchandise
drawback except when the description of the HTSUS number begins with “other.”
“Other” signifies a basket category which may include dissimilar items. See R.T.
Foods, Inc. v. United States, 757 F.3d 1349, 1354 (Fed. Cir. 2014) (“A basket provision
is not a specific provision . . . classification of imported merchandise in a basket
provision is only appropriate if there is no tariff category that covers the merchandise
more specifically”); EM Indus., Inc., 999 F. Supp. at 1480 ; Nat'l Presto Indus., Inc. v.
United States, 783 F. Supp. 2d 1287, 1292 (Ct. Int'l Trade 2011) (explaining that
merchandise falls within a basket provision if it is “not specific or included elsewhere
[in the HTSUS]”); CBP Tariff Classification Compliance Publication at 11. Excluding
article descriptions that begin with the word “other” from substituted unused
16 As of February 24, 2019, all drawback claimants must file drawback claims
through ACE. See Drawback in ACE, U.S. Customs and Border Protection (Oct. 6,
2022), https://www.cbp.gov/trade/automated/news/drawback (last visited Jan. 12,
2023); 19 C.F.R. § 190.32. Thus, the ACE system is intended to implement the
purposes of the TFTEA to automate drawback eligibility under 19 U.S.C. § 1313(j)
based on the 8-digit subheading numbers and 10-digit SRNs of the HTSUS.
Court No. 20-00094 Page 17
merchandise drawback eliminates the need for CBP to investigate on a case-by-case
basis whether merchandise is sufficiently similar to be eligible for drawback. Thus,
a plain reading of the statute which disallows merchandise that may contain
dissimilar items is consistent with the legislative history of the TFTEA. Here, in light
of the plain reading of the statute and congressional intent, Defendant’s
interpretation must prevail.
Moreover, Spirit’s reading would render illogical results. For example,
consider the 4-digit HTSUS heading 8504:
Under Spirit’s reading, 8-digit subheading numbers 8504.90.96 that end at the 10-
digit level with the statutory suffices -34, -38, -42, -46, -50 would all be ineligible for
substituted unused merchandise drawback due to the superior, unattached heading
Court No. 20-00094 Page 18
“Other Parts” directly underneath SRN 8504.90.9630. The article description for
SRN 8504.90.9634 would read “Other Parts: Of transformers: Laminations for
incorporation into stacked cores,” which would be precluded for substituted unused
merchandise drawback because its article description begins with the word “other” in
violation of 19 U.S.C. § 1313(j)(5)(B)(ii). The article description for SRN 8504.90.9638
would be “Other Parts: Of transformers: Stacked cores for incorporation into
transformers,” and would similarly be ineligible for substituted unused merchandise
drawback due to the article description beginning with the word “other.” But such a
reading would appear to violate the 484(f) Committee’s decision to begin the article
descriptions at the 10-digit SRN level with specific and detailed descriptive language
that explicitly do not begin with the word “other.” 17 See 19 U.S.C. § 1484(f)
(establishing the committee to provide for the “enumeration of articles in such detail
as in their judgment may be necessary”); Preface to the HTSUS at 2.
Plaintiff makes a number of arguments to refute this plain meaning
interpretation that fail to persuade. Spirit contends that canons of statutory
construction support its determination that SRN 8803.30.0030 begins with the words
“For use in civil aircraft[.]” Pl. Mot. at 11–12. As a preliminary matter, use of canons
of statutory construction are subordinate to the plain meaning and text of an
authority. See Connecticut Nat. Bank v. Germain, 503 U.S. 249, 253–54 (1992)
17 The interagency committee formulates nonlegal statistical elements of the HTSUS
at the 10-digit level as authorized under 19 U.S.C. § 1484(f). See 19 U.S.C. § 1484(f);
Preface to the HTSUS at 2.
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(“When words of a statute are unambiguous, then, [the plain text of the statute] canon
is also the last: ‘judicial inquiry is complete’”). Because the Court has discerned its
interpretation from the plain text of the drawback statute, Spirit’s use of canons of
constructions is inapposite.
Nonetheless, Spirit’s resort to these canons would be of no avail. First, Spirit
invokes in para materia—meaning statutes dealing with related subjects must be
read together—to argue that Section 1313(j) must be read in conjunction with the
HTSUS because they relate to the same subject matter. Pl. Mot. at 12–13. But the
plain meaning of 1313(j)(5) does not violate this canon. The two statutes at issue are
the HTSUS—19 U.S.C. § 1202—and the substituted unused merchandise drawback
statute—19 U.S.C. § 1313(j)(2) and (5). Within the HTSUS are the General Rules of
Interpretation (“GRIs”), which provide for a set of numerical principles that govern
the reading of the HTSUS. See Victoria’s Secret Direct, LLC v. United States, 769
F.3d 1102, 1106 (Fed. Cir. 2014) (explaining and applying the GRIs); see also CBP
Tariff Classification Compliance Publication at 13–24, 26. CBP classifies imports to
determine the rate of duty applicable to the merchandise. See Preface to the HTSUS
at 2 (“The HTS contains the internationally agreed structured product nomenclature
commonly known as the Harmonized System (HS), whose numbered provisions
appear in the schedule as 4ဨdigit headings and subordinate 6ဨdigit subheadings in
chapters 1 through 97. The narrowest legal categories appear as 8ဨdigit U.S.
subheadings together with their rates of duty”); CBP Tariff Classification Compliance
Publication at 1. By contrast, the purpose of 19 U.S.C. § 1313(j) implements Congress’
Court No. 20-00094 Page 20
intent to identify substituted unused goods that are sufficiently similar to the levied
merchandise so that they are eligible for drawback. See 19 U.S.C. § 1313(j)(5)(B)
(“merchandise may be substituted for imported merchandise drawback purposes if—
(i) the other merchandise and such imported merchandise are classifiable under the
same 10-digit [SRN]; and (ii) the article description for that 10-digit [SRN] does not
begin with the term ‘other’”). The GRIs are just that: interpretive rules to be applied
to classify goods. They do not shed light on the meaning of 19 U.S.C. § 1313(j).
Next, Spirit invokes the scope-of-the-subparts canon, which generally requires
that “[m]aterial within an indented subpart relates only to that subpart; material
contained in unindented text relates to all the following or preceding indented
subparts.” Pl. Mot. at 25–27; see Dong-A Steel Co. v. United States, 475 F.Supp.3d
1317, 1338 n.15 (Ct. Int’l Trade 2020) (quoting Antonin Scalia & Bryan A. Garner,
Reading Law: The Interpretation of Legal Texts xii (2012)). Spirit argues that this
canon requires the article description for SRN 8803.30.0030 to include superior
indented but unattached subheadings, thus beginning SRN 8803.30.0030 with “For
use in civil aircraft.” Pl. Mot. at 26. Spirit’s use of the canon is inapposite because it
is inapplicable to the context of substituted unused merchandise drawback eligibility.
The text of Section 1313(j)(5)(B)(ii) contradicts Spirit’s position, stating substituted
unused merchandise may be eligible for drawback if “the article description for that
10-digit [SRN] does not begin with the term ‘other.’” 19 U.S.C. § 1313(j)(5)(B)(ii).
Spirit next turns to the punctuation canon, which provides that “punctuation
is a permissible indicator of meaning.” Pl. Mot. at 26; see Antonin Scalia & Bryan A.
Court No. 20-00094 Page 21
Garner, Reading Law: The Interpretation of Legal Texts 161 (2012; U.S. Nat. Bank
of Oregon v. Indep. Ins. Agents of Am., Inc., 508 U.S. 439, 454 (1993) (“the meaning
of a statute will typically heed the commands of its punctuation”). Spirit claims the
canon supports its reading because the colon after “For use in civil aircraft” indicates
a continuation of the preceding clause. Pl. Mot. at 26–29. Spirit’s interpretation is
correct that the colon indicates a continuation of the preceding clause, but it does not
mean that the unifying text serves as the language that begins the article description
for the preceding SRNs. As explained above, the text instructs which preceding 10-
digit SRNs fall within that prefatory subheading. Here, “For use in civil aircraft:”
guides correct SRN placement between civil aircraft parts that are used by the
Department of Defense or Coast Guard—thus falling with SRN 8803.30.0015—and
those used by all others, including Spirit—thus falling within SRN 8803.30.0030.
Accordingly, the canon does not support Spirit’s interpretation.
Finally, Spirit alleges Defendant’s interpretation violates the canon against
surplusage, which requires that all provisions in a statute be given effect so that no
provision has no consequence. See Pl. Mot. at 33–34; Nielsen v. Preap, 139 S. Ct. 954,
969 (2019). Spirit argues that reading SRN 8803.30.0030 to begin with the term
“other” rather than “For use in civil aircraft:” would render the latter term
superfluous. Pl. Mot. at 33. However, as described above, “For use in civil aircraft:”
is a unifying, prefatory clause that draws distinction between the 10-digit SRNs that
fall underneath the 8-digit HTSUS subheading 8803.30.00. The unifying clause
instructs where a good falls within the 8-digit subheading number 8803.30.00
Court No. 20-00094 Page 22
relating to “Other parts of airplanes or helicopters” depending upon its use: either (1)
“For use in civil aircraft,” or (2) “Other.” A good used in civil aircraft under 8803.30.00
must then further be distinguished by whether it is used by the Department of
Defense or the United States Coast Guard under SRN 8803.30.0015 or if it is used by
anyone else under SRN 8803.30.0030. Thus, the prefatory language directs
classification where the HTSUS requires categorical breakdown in order to classify
merchandise within the system. That it is not included in a discrete SRN’s article
description does not mean the language is ignored.
Spirit also suggests that Defendant’s reading conflicts with the 1997 and 1998
changes to the HTSUS and prior agency decisions. Pl. Mot. at 37–38. Spirit argues
that changes in 1997 and 1998 narrowed the scope of goods covered by SRNs under
the 8-digit subheading 8803.30.00, and that Defendant’s reading impermissibly
broadens this narrowed scope. Id. at 39. Furthermore, Spirit asserts that
Defendant’s interpretation conflicts with past rulings by CBP, including various
ruling letters. Id. at 40–41. Spirit’s arguments are inapposite. Changes to the
HTSUS that occurred over two decades before the 2020 iteration of the schedule
governing Spirit’s substituted unused merchandise drawback claim are irrelevant.
The HTSUS is updated numerous times each year, with eleven revisions in 2023
alone. See [HTSUS] Download Archive, Int’l Trade Comm’n,
https://hts.usitc.gov/download/archive (last visited Jan. 9, 2024). Spirit’s reference to
the previous versions of the HTSUS and statistical number 8803.30.00 are not helpful
because the 8-digit subheadings and 10-digit SRNs involved separate and distinct
Court No. 20-00094 Page 23
classifications that are not at issue. Indeed, the 1997 version of the HTSUS that
Spirit cites did not make a distinction between parts used by the Department of
Defense or United States Coast Guard and all other users, and therefore was a
distinct subheading with its own 10-digit SRNs and tariff rates. Pl. Mot. at 38–39.
Moreover, Spirit’s reliance on past classification rulings by CBP continues to conflate
HTSUS classification considerations with drawback determinations under 19 U.S.C.
§ 1313(j). Accordingly, Spirit’s arguments are unpersuasive, and its motion for
summary judgment is denied.
CONCLUSION
For the foregoing reasons, Defendant’s interpretation of 19 U.S.C. § 1313(j) is
correct, and it properly rejected Spirit’s substituted unused merchandise drawback
Claim No. AA6 03265726. Therefore, Defendant’s cross-motion for summary
judgment is granted, and Spirit’s motion for summary judgment is denied. Judgment
will enter accordingly.
/s/ Claire R. Kelly
Claire R. Kelly, Judge
Dated: January 30, 2024
New York, New York