Shell Oil Co. v. United States

United States Court of Appeals
for the Federal Circuit
__________________________
SHELL OIL COMPANY (C/O GULF COAST
DRAWBACK SERVICES, INC.),
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee,
__________________________
2011-1531
__________________________
Appeal from the United States Court of International
Trade in Case No. 08-CV-0109, Judge Delissa A. Ridgway.
___________________________
Decided: August 14, 2012
___________________________
GEORGE M. CLARKE, III, Miller & Chevalier Char-
tered, of Washington, DC, argued for plaintiff-appellant.
With him on the brief were DANIEL P. WENDT and MARY
W. PROSSER. Of counsel on the brief was PETER A. LOWY,
Shell Oil Company, of Houston, Texas.
TARA K. HOGAN, Trial Attorney, Commercial Litiga-
tion Branch, Civil Division, United States Department of
Justice, of Washington, DC, argued for defendant-
appellee. With her on the brief were TONY WEST, Assis-
tant Attorney General, JEANNE E. DAVIDSON, Director,
SHELL OIL COMPANY v. US 2
and TODD M. HUGHES, Deputy Director. Of counsel on the
brief was RICHARD MCMANUS, Office of the Chief Counsel,
Customs and Border Protection, United States Depart-
ment of Homeland Security, of Washington, DC.
__________________________
Before PROST, MOORE, and WALLACH, Circuit Judges.
WALLACH, Circuit Judge.
Plaintiff-Appellant Shell Oil Company (“Shell”) ap-
peals the decision of the Court of International Trade
(“CIT”) holding that Shell’s drawback claims for Harbor
Maintenance Tax (“HMT”) and Environmental Tax (“ET”)
were time barred because the requests for drawback were
not made within three years of exporting substitute
finished petroleum derivatives as required by 19 U.S.C. §
1313(r)(1) (the “drawback statute”). See Shell Oil Co. v.
United States, 781 F. Supp. 2d 1313, 1339-40 (Ct. Int’l
Trade 2011). Because we find that Shell failed to file
timely the HMT and ET drawback claims at issue, we
affirm.
I. BACKGROUND
A. Shell’s Imports and the Drawback Statute
Between 1993 and 1994, Shell imported certain petro-
leum products (“imports at issue”) upon which custom
duties, taxes, and other fees were paid. 1 During the same
1
The taxes and other fees paid included HMT
and ET. HMT is a tax on port use imposed pursuant to
the Water Resources Development Act of 1986, and ET is
a tax imposed on crude oil received at a United States
refinery and on petroleum products that enter into the
United States for consumption, use, or warehousing.
Shell Oil Co., 781 F. Supp. 2d at 1316 n.3. Notably, in
1998, after a decade of enforcement, the Supreme Court
held HMT unconstitutional as applied to exports because
3 SHELL OIL COMPANY v. US
period, Shell exported drawback 2 -eligible substitute
finished petroleum derivatives. Subsequently, between
January 1995 and August 1996, Gulf Coast Drawback
Services, Inc., a customs broker to which Shell outsourced
its drawback claim services, filed numerous substitution
drawback claims with the U.S. Customs and Border
Protection (“Customs”) on Shell’s behalf. 3
In general, under the current statute, 4 Customs is re-
quired to provide a drawback of 99% of “any duty, tax, or
fee imposed under Federal law upon entry or importation”
of imported merchandise if that merchandise (or a “com-
mercially interchangeable” substitute) is subsequently
“exported, or . . . destroyed under customs supervision;
and . . . is not used within the United States before such
exportation or destruction . . . .” 19 U.S.C. §§ 1313(j),(p).
The statute requires all drawback claims to be filed
within three years of the date of exportation of the substi-
tute merchandise, and claims that are not completed
the tax violated the Export Clause of the U.S. Constitu-
tion. United States v. U.S. Shoe Corp., 523 U.S. 360, 363
(1998).
2
A drawback is defined as “the refund or re-
mission, in whole or in part, of a customs duty, fee or
internal revenue tax which was imposed on imported
merchandise under Federal law because of its importation
. . . .” 19 C.F.R. § 191.2(i).
3
This action involves seven claims and one par-
tial claim for non-manufacturing substitution drawback
associated with the imports at issue. Shell Oil Co., 781 F.
Supp. 2d at 1316.
4
The relevant language in the current draw-
back statute and its 1994 version, which applies in this
case, are substantially the same unless otherwise indi-
cated.
SHELL OIL COMPANY v. US 4
within the three-year period are “considered abandoned.”
Id. § 1313(r)(1). A complete drawback claim consists of
“[a] drawback entry and all documents necessary . . . .”
Id. During the time of Shell’s imports, drawback eligibil-
ity of HMT and ET payments, which Shell now seeks,
were heavily disputed. See Aectra Refining & Mktg., Inc.
v. U.S., 565 F.3d 1364, 1367 (Fed. Cir. 2009) (“Aectra”)
(“[Importer] admits that it was aware that Customs’s
position regarding the recoverability of . . . [Merchandise
Processing Fee (“MPF”)] and HMT was being actively
challenged in 1997 and 1998.”) (citations omitted).
B. The 1999 Amendments
In 1999, Congress amended the relevant language of
the drawback statute (the “1999 amendments”) clarifying
the scope of drawback available to include “any duty, tax,
or fee imposed under Federal law because of . . . importa-
tion” in addition to customs duties. 19 U.S.C. §§
1313(j),(p) (2000). To effectuate its newly clarified scope,
the 1999 amendments suspended the statutory three-year
period for the filing of drawback claims, but only as to
“drawback claim[s] filed within 6 months after the date of
enactment of [the 1999 amendments]” for which the
statutory three-year period had expired. 1999 Trade Act,
Pub. L. No. 106–36, § 2420(e), 113 Stat. 127, 179 (1999)
(emphasis added). The effect of that language was to
“creat[e] a six-month grace period in which otherwise
untimely [drawback] claims could be filed or re-filed to
obtain relief under the amended statute.” Aectra, 565
F.3d at 1370-71 (emphasis added). As a result, importers
were authorized to file stale drawback claims of “any
duty, tax, or fee imposed under Federal law” paid on
imported merchandise “because of its importation” be-
tween June 25, 1999 and December 25, 1999. See 19
U.S.C. § 1313(j) (2000).
5 SHELL OIL COMPANY v. US
C. The 2004 Amendments
Congress further amended the drawback statute after
this court’s decision in Texport Oil Co. v. United States,
185 F.3d 1291 (Fed. Cir. 1999) (“Texport”). In Texport, we
interpreted the drawback statute’s “because of . . . impor-
tation” language to preclude the payment of drawback on
any “duty, tax, or fee that is assessed in a nondiscrimina-
tory fashion against all shipments . . . .” Id. at 1295-97.
Accordingly, we held MPF to be eligible for drawback
because MPF “is explicitly linked to import activities.” Id.
at 1296. In addition, reasoning that HMT is “assessed in
a nondiscriminatory fashion against all shipments utiliz-
ing ports,” we held HMT to be ineligible for drawback. Id.In a separate decision, we also held ET to be ineligible for
drawback for similar reasons. George E. Warren Corp. v.
United States, 341 F.3d 1348, 1356 (Fed. Cir. 2003)
(“Warren”).
Responding to these decisions, in December 2004,
Congress amended the drawback statute (the “2004
amendments”). Miscellaneous Trade and Technical
Corrections Act of 2004, Pub. L. No. 108–429, § 1557(b),
118 Stat. 2434, 2579 (2004). Congress made clear its
intent to overturn Texport and eliminate the distinction
between taxes and fees that discriminate against imports
and those that do not. See S. Rep. No. 108-28, at 173
(2003). The 2004 amendments thus clarified eligibility of
certain drawback claims, and thereafter, allowed draw-
back for any duty, tax, and fee imposed upon entry. Id. §
1557(b), 118 Stat. at 2579. In particular, the 2004
amendments applied only to any “drawback claim filed on
or after [the date of the 2004 amendments’ enactment]
and to any drawback entry filed before that date if the
liquidation of the entry [was] not final on that date.” Id.
As such, unlike the 1999 amendments’ six-month grace
SHELL OIL COMPANY v. US 6
period, the three-year limit on filing drawback claims was
left undisturbed. Aectra, 565 F.3d at 1370.
D. This Court’s Decision in Aectra
In 2009, this court issued its opinion in Aectra, which
dealt with issues similar to this case. Like Shell, the
importer in Aectra timely filed drawback claims of its
import duties without any reference to taxes or fees,
within three years of its export of substitute petroleum
derivatives. 565 F.3d at 1367. After Customs liquidated
the importer’s drawback entries and refunded the re-
quested import duties in full, the importer filed protests
and for the first time sought drawback of taxes and fees
more than three years after the date of exportation. Id. at
1368. Customs denied the importer’s protests and the
importer contested the denial at the CIT, where the
importer’s arguments were rejected and Customs’s deni-
als of the protests sustained. Id.This court affirmed, noting that the importer offered
“no explanation for why it did not include protective
claims for [taxes and fees] in its . . . drawback claims
other than its belief that such claims would not be suc-
cessful at the administrative level.” Id. at 1367. We
ultimately held that the importer was not entitled to
relief because it failed to claim drawback of taxes and fees
within the statutory three-year period within which all
drawback claims must be filed. Id. at 1375.
E. Procedural History of This Case
Shell filed drawback claims associated with the im-
ports at issue in 1995 and 1996. These claims sought
drawback only as to the import duties that Shell had paid.
Specifically, as the CIT found, “each ‘Drawback Entry’
form (Customs Form 7539) that Shell filed with Customs
required Shell to state its ‘net claim’ specifying the precise
7 SHELL OIL COMPANY v. US
sum that it sought.” Shell Oil Co., 781 F. Supp. 2d at
1318. Shell was found not to have included an express
request for HMT and ET in the “net claim” figure that
Shell provided on each of the drawback entry forms that it
filed with Customs. Id. Based on these representations
on the forms, Customs refunded 99% of the import duties
as requested. Id.After the statutory three-year period for the filing of
drawback claims had expired, on November 7, 1997, Shell
filed protests with Customs, seeking drawback as to HMT
and ET payments that Shell had made in connection with
the imports at issue. Id. Customs denied Shell’s protests
on December 3, 1997, stating:
Under provisions of 19 U.S.C. § 1313(b) & (p)
drawback is allowed upon Customs duty paid on
imported merchandise. [HMT] . . . is an incidental
expense incurred upon a vessel entering a harbor.
The HMT is not incurred as a result of the impor-
tation of merchandise but simply imposed for the
use of the harbor. The fee is collected by U.S.
Customs for the benefit of the Army Corps of En-
gineers.
Protest No. 5301–97–100421 (Dec. 3, 1997).
On May 20, 1998, Shell filed a summons at the CIT
contesting Customs’s denial of the HMT and ET drawback
claims. The parties filed cross-motions for summary
judgment, and on June 20, 2011, the CIT held that Shell’s
claims for drawback of HMT and ET were time barred.
See Shell Oil Co., 781 F. Supp. 2d at 1339-40. The CIT
found that the amendments to the drawback statute did
not aid Shell and futility did not toll the statutory time
period. Shell appeals the CIT’s decision. We have juris-
diction pursuant to 28 U.S.C. § 1295(a)(5).
SHELL OIL COMPANY v. US 8
II. DISCUSSION
This court reviews a grant of summary judgment by
the CIT “for correctness as a matter of law, deciding de
novo the proper interpretation of the governing statute
and regulations as well as whether genuine issues of
material fact exist.” BMW Mfg. Corp. v. United States,
241 F.3d 1357, 1360 (Fed. Cir. 2001) (quoting Texaco
Marine Servs., Inc. v. United States, 44 F.3d 1539, 1543
(Fed. Cir. 1994) (internal citation omitted)). Where the
facts are undisputed, application of the appropriate legal
standard to those facts is properly a question of law that
we review de novo. Former Emp. of Sonoco Prods. Co. v.
Chao, 372 F.3d 1291, 1295 (Fed. Cir. 2004). When Con-
gress has not directly addressed the precise question of
statutory interpretation at issue, we give deference to
Customs’s regulations interpreting portions of a statute
that are silent or ambiguous as to that issue. United
States v. Haggar Apparel Co., 526 U.S. 380, 392 (1999)
(citing Chevron, U.S.A., Inc. v. Nat’l Res. Def. Council,
Inc., 467 U.S. 837, 842-43 (1984)).
Shell’s drawback claims for HMT and ET are not
timely. The pertinent facts in this case are undisputed.
Shell initially filed timely drawback claims for a refund of
its import duties only. Customs paid Shell’s drawback
claims in full, refunding 99% of the import duties as
requested. More than three years after its export of
substitute petroleum derivatives, Shell filed protests with
Customs, for the first time, seeking drawback on its HMT
and ET payments.
Shell nevertheless avers that the HMT and ET draw-
back claims were timely under the 1999 and 2004
amendments. Appellee, the United States, (“Govern-
ment”) responds, arguing that Shell raises many of the
same defenses we rejected in Aectra. The gravamen of the
9 SHELL OIL COMPANY v. US
Government’s contention is that Shell’s HMT and ET
drawback claims were filed outside the three-year statu-
tory window, and therefore, abandoned. As a result, the
sole inquiry in this case concerns the propriety of Shell’s
seemingly stale drawback claims as to HMT and ET
under 19 U.S.C. § 1313.
As an initial matter, drawbacks are a privilege, not a
right. United States v. Allen, 163 U.S. 499, 504 (1896);
see Swan & Finch Co. v. United States, 190 U.S. 143, 146
(1903) (“Being a governmental grant of a privilege or
benefit it is to be construed in favor of the government
and against the party claiming the grant.”). Drawbacks
“do not compensate for duty overpayments, but instead
help enforce the United States’ policy of ‘encourag[ing]
domestic manufacture of articles for export and . . . al-
low[ing] those articles to compete fairly in the world
marketplace.’” Hartog Foods Int’l, Inc. v. United States,
291 F.3d 789, 793 (Fed. Cir. 2002) (brackets in original)
(citations omitted). As such, the burden is on the party
seeking drawback to show that an amount certain is
eligible for refund. Placing the burden on Customs to
determine the maximum permissible amount for refund
in a drawback claim would “create an untenable adminis-
trative burden for Customs in its processing of drawback
claims.” Aectra, 565 F.3d at 1373 (citation omitted). In
addition, “allowing claimants to submit claims piecemeal
after the three-year completion window has passed would
detract from the ability of Customs to ‘effectively carry
out its duties,’ including preventing circumvention of the
three-year statutory limit of 19 U.S.C. § 1313(r)(1).” Id.(internal citation omitted). With this backdrop, we exam-
ine Shell’s contentions.
Shell first contends that its drawback claims were
timely under the 1999 amendments’ six-month re-opened
period of limitations because Shell was not required to
SHELL OIL COMPANY v. US 10
resubmit a drawback claim during that six-month window
when Customs had already rejected the claims at issue on
the merits. This court in Aectra observed that the effect
of the 1999 amendments was to “creat[e] a six-month
grace period in which otherwise untimely claims could be
filed or re-filed to obtain relief.” Id. at 1370. Like the
CIT, we hold that the plain language of the 1999 amend-
ments requiring “a drawback claim [be] filed within 6
months after the date of the enactment of those amend-
ments[,] refutes any suggestion that Shell’s untimely,
previously-filed and denied protests sufficed to protect
whatever rights to drawback of HMT and ET” that Shell
may have had. Shell Oil Co., 781 F. Supp. 2d at 1331(quotation omitted). The undisputed fact remains that
Shell failed to raise issues of drawback related to HMT
and ET within the three-year statutory window, and
those claims were not filed after the enactment and dur-
ing the grace period of the 1999 amendments. 5
Shell also argues that re-filing its HMT and ET draw-
back claims would have been futile because Customs had
a policy of denying drawback claims for HMT and ET.
Shell’s futility argument and its reliance on Warren are
unpersuasive. To begin, “futility does not excuse the
failure to file a proper claim for limitations purposes”
because a “claimant is generally required to file a com-
plete and specific claim within the limitations period,
even if the government authority to [which] the claim is
5
Shell attempts to distinguish this case from
our decision in Aectra by arguing that, unlike the im-
porter in Aectra, Shell’s claims and protests were filed and
denied on the merits prior to the 1999 amendments.
However, this distinction is without consequence. As
discussed, the 1999 amendments required claims to be
filed or re-filed after the enactment of the amendments.
It is undisputed that no such filing was undertaken in
this case.
11 SHELL OIL COMPANY v. US
presented is certain to dispute the validity of the claim.”
Aectra, 565 F.3d at 1373. Indeed, Shell does not deny
that the “issue of the recoverability of drawback on taxes
and fees such as HMT and ET already had been percolat-
ing within the industry and the customs and interna-
tional trade community for some time.” Shell Oil Co., 781
F. Supp. 2d at 1327. As the CIT recognized, “Shell itself
raised the issue of drawback of taxes and fees such as
HMT and ET at least as early as June 1996, and then
again in November 1997, when it filed the protests at
issue” in this case. Id.Warren does not imply otherwise. See 341 F.3d at
1356. In that case, the importer paid duties, HMT, and
ET on imported petroleum, and later exported drawback-
eligible substitute merchandise. Id. at 1349. Like Shell,
the importer timely submitted drawback claims for im-
port duties, and failed to include in those claims an ex-
press request for HMT or ET. Id. at 1349-50. Shortly
thereafter and unlike the facts in this case, the importer
in Warren filed a protest seeking drawback of HMT and
ET within three years of the date of export. Id. at 1349(emphasis added). Customs denied the protest on the
merits. Id. Addressing the specific inquiry of whether the
CIT had jurisdiction over the denial of the importer’s
protest, we held that the CIT properly exercised jurisdic-
tion despite the fact that the HMT and ET requests were
first made by protest. Id. at 1351. In particular, we
found that the importer was not required to engage in the
futile exercise of re-filing new claims for HMT and ET in
light of Customs’s previous denial of recovery of those
taxes because 28 U.S.C. § 1581(a) (2000) required only a
“denial of a protest” for jurisdictional purposes. Id.Accordingly, as we observed in Aectra, Warren “rested
on jurisdictional grounds inapplicable here and conse-
quently it was unnecessary for the Warren court to ad-
SHELL OIL COMPANY v. US 12
dress the effect of § 1313(r)(1) [which imposed the three-
year limitations period] on those refund requests.” Aec-
tra, 565 F.3d at 1374 (brackets in original) (internal
quotation omitted). Moreover, in Warren, the importer
filed its drawback claims as to HMT and ET within the
three-year statute of limitations, and therefore, that case
does not suggest that a party may, by arguing futility, be
excused from the statutory time period. Hence, because
Shell failed to act during the six-month grace period, the
1999 amendments are inapplicable in this case.
Next, Shell argues that given the legal framework
that existed over the course of the underlying dispute,
Shell substantially complied with the steps necessary to
claim timely drawback for the HMT and ET payments.
Specifically, Shell contends that the then-existing regula-
tion did not require “correct calculation” of the amount of
drawback due as part of a complete drawback claim.
Because no such explicit drawback claims were required,
Shell argues that it substantially complied with the then-
existing regulations by raising the underlying circum-
stances to support drawback for HMT and ET. As the
CIT found, however, changes to the applicable regulation
do not negate the fact that Shell failed to make or pre-
serve any claim for HMT or ET within the three-year
statutory window. See Shell Oil Co., 781 F. Supp. 2d. at
1326.
Shell did not indicate that it wished to seek drawback
of HMT and ET until its protests, which were filed outside
the mandatory statutory three-year window. Shell’s
argument seems to be that its timely filed claims for
drawback of import duties somehow implicitly included
claims for drawback of HMT and ET. Such a position is
not viable because Customs was not on notice of any
claims for HMT or ET within the statutory period. Al-
though Shell contends that Customs had notice, merely
13 SHELL OIL COMPANY v. US
setting forth a claim for drawback of import duties does
not sufficiently make or preserve a claim for taxes and
fees like HMT and ET.
In particular, Shell contends that the regulation in ex-
istence at the time of Shell’s claims did not require an
express request for HMT or ET, as did the 1998 regula-
tions we analyzed in Aectra. See Aectra, 565 F.3d at 1372(interpreting the “correctly calculate” requirement recited
in the 1998 regulation, 19 C.F.R. § 191.51(b) (1998), to
mean that a claimant must include an accurate calcula-
tion of the entire amount that it seeks to be refunded
under the drawback statute). Shell, thus, argues that its
omission of the HMT and ET payments was not fatal and
that Aectra’s discussion as to this issue need not apply.
Nevertheless, the fact that certain regulations were in
flux at the time the claims were filed does not excuse
Shell’s nonfeasance.
Moreover, Shell fails to recognize that it sought accel-
erated payment of its drawback claims. See 19 C.F.R. §
191.72 (1984). A drawback claimant seeking accelerated
payment is required to include “a computation of the
amount due.” See id. As the CIT cogently noted, “to the
extent that the pre-1998 regulations did not expressly
require a correct calculation as part of a ‘complete’ draw-
back claim, the same certainly cannot be said of a request
for accelerated payment of drawback.” Shell Oil Co., 781
F. Supp. 2d at 1325 n.15. Shell therefore had the respon-
sibility of computing the total amount due as part of a
complete drawback claim. There is no dispute that the
total amount due as indicated in Shell’s original drawback
claims did not include HMT and ET payments.
Regardless, Shell’s focus on whether the pre-1998
regulations lacked explicit requirements to list taxes and
fees as part of the total amount is misplaced because, as
SHELL OIL COMPANY v. US 14
discussed above, Customs does not bear the burden to
determine the maximum permissible amount for a draw-
back claim. Rather, it is on the claimant to place Customs
on notice as to the specific amount it is seeking for a
refund. As a result, Shell, at a minimum, was required to
place Customs on notice that it was seeking drawback for
HMT and ET. Because Shell sought accelerated payment,
Shell had the additional responsibility of submitting “a
computation of the amount due,” including payments for
HMT and ET. Shell failed to provide such notice in this
case. Hence, Shell’s contention that it substantially
complied with the statute does not salvage its untimely
claims. 6
Lastly, Shell avers that it qualifies under the 2004
amendments’ effective date provision, which deems timely
any drawback entry filed before the date of enactment if
the liquidation of the entry was not final on that date.
Because the 2004 amendments allow any drawback claim
that is not final to remain open, Shell argues that the
amendment must apply to its drawback claims for HMT
6
To the extent Shell avers that the 1998 regu-
lations created a requirement which did not exist previ-
ously, we agree with the CIT and conclude that the 1998
regulatory amendments merely clarified the requirements
for what was already required for a proper drawback
claim. Shell Oil. Co., 781 F. Supp. 2d at 1326 n.15
(“[E]ven before the 1998 regulatory amendments, one of
the ‘documents necessary to complete a drawback claim’
was a completed drawback entry form—Customs Form
7539 . . . . That ‘drawback entry’ form required that an
importer state its ‘net claim’ (that is, the monetary
amount of drawback sought), and was required to be
signed and certified by an authorized representative.
Accordingly, even before the 1998 ‘clarify[ing]’ amend-
ments to the regulations, an importer filing a ‘complete’
drawback claim was obligated to state for Customs the
‘net claim’ that it sought, as a certain and specific sum.”).
15 SHELL OIL COMPANY v. US
and ET. The 2004 amendments applied only prospec-
tively, and to “not yet finally liquidated [entries]” that
“already included a timely protective request” for taxes
and fees. Aectra, 565 F.3d at 1369-71 (recognizing that
the 2004 amendments were not intended to waive the
normal three-year limit imposed by the drawback stat-
ute). In this case, it is undisputed that Customs liqui-
dated the drawback entry that Shell filed, which did not
include a timely protective request for taxes and fees.
The later protests as to HMT and ET, as discussed above,
were not timely, and as a result, were not protected
requests. Accordingly, the 2004 amendments do not apply
in this case.
III. CONCLUSION
Shell’s drawback claims for HMT and ET are time
barred, and the 1999 and 2004 amendments do not aid
Shell in reviving those claims. Like the importer in
Aectra, Shell’s failure to file protective claims for HMT
and ET is fairly attributed to Shell’s inaction. Accord-
ingly, we affirm the CIT’s decision sustaining Customs’s
denial of Shell’s protests.
AFFIRMED