Court Opinion

ID: 4843814
Source: CourtListenerOpinion
Date Created: 2021-08-23 15:01:53.92659+00
Date Added: 2024-06-11T09:02:28.428303
License: Public Domain

Case: 20-1734    Document: 70     Page: 1   Filed: 08/23/2021

   United States Court of Appeals
       for the Federal Circuit
                  ______________________

        THE NATIONAL ASSOCIATION OF
     MANUFACTURERS, THE BEER INSTITUTE,
               Plaintiffs-Appellees

                             v.

   DEPARTMENT OF THE TREASURY, UNITED
 STATES CUSTOMS AND BORDER PROTECTION,
 JANET YELLEN, IN HER OFFICIAL CAPACITY AS
 SECRETARY OF THE TREASURY, TROY MILLER,
     IN HIS OFFICIAL CAPACITY AS SENIOR
  OFFICIAL PERFORMING THE DUTIES OF THE
    COMMISSIONER FOR U.S. CUSTOMS AND
             BORDER PROTECTION,
               Defendants-Appellants
              ______________________

                        2020-1734
                  ______________________

     Appeal from the United States Court of International
 Trade in No. 1:19-cv-00053-JAR, Senior Judge Jane A. Re-
 stani.
                  ______________________

                 Decided: August 23, 2021
                  ______________________

    PETER D. KEISLER, Sidley Austin LLP, Washington,
 DC, argued for all plaintiffs-appellees. Plaintiff-appellee
 National Association of Manufacturers also represented by
 BARBARA GUY BROUSSARD, TOBIAS SAMUEL LOSS-EATON,
Case: 20-1734    Document: 70    Page: 2   Filed: 08/23/2021

 2                       NATIONAL ASSOCIATION   v. TREASURY

 VIRGINIA ANNE SEITZ; CATHERINE EMILY STETSON, Hogan
 Lovells US LLP, Washington, DC.

     JAMES EDWARD TYSSE, Akin Gump Strauss Hauer &
 Feld LLP, for plaintiff-appellee The Beer Institute. Also
 represented by LARS-ERIK ARTHUR HJELM, LIDE E.
 PATERNO, DEVIN S. SIKES.

     AUGUST FLENTJE, Appellate Staff, Civil Division,
 United States Department of Justice, Washington, DC, ar-
 gued for all defendants-appellants. Also represented by
 CLAUDIA BURKE, JEFFREY B. CLARK, JEANNE DAVIDSON,
 JUSTIN REINHART MILLER, ALEXANDER J. VANDERWEIDE,
 Commercial Litigation Branch, Civil Division, United
 States Department of Justice, New York, NY; DANIEL J.
 PAISLEY, United States Department of the Treasury, Wash-
 ington, DC.

    ALEXANDRA KHREBTUKOVA, Office of the Assistant
 Chief Counsel, Bureau of Customs and Border Protection,
 United States Department of Homeland Security, New
 York, NY, for defendant-appellant United States Customs
 and Border Protection.

     JOHN MICHAEL PETERSON, Neville Peterson LLP, New
 York, NY, for amicus curiae Customs Advisory Services,
 Inc. Also represented by PATRICK KLEIN, RICHARD F.
 O'NEILL.
                 ______________________

     Before LOURIE, PROST ∗, and REYNA, Circuit Judges.
 REYNA, Circuit Judge.

     ∗
        Circuit Judge Sharon Prost vacated the position of
 Chief Judge on May 21, 2021.
Case: 20-1734     Document: 70     Page: 3    Filed: 08/23/2021

 NATIONAL ASSOCIATION   v. TREASURY                              3

     This case involves the interaction of federal excise
 taxes and duty drawbacks for wine in the United States.
 The United States Government appeals from a judgment
 by the United States Court of International Trade holding
 that a set of regulations, collectively described herein as
 the Rule, promulgated in 2018 by the Department of Treas-
 ury and the United States Customs and Border Protection,
 are invalid as an unlawful interpretation of 19 U.S.C.
 § 1313(v).
     The question presented on appeal is whether the Court
 of International Trade erred when it invalidated the Rule
 interpreting 19 U.S.C. § 1313(v) finding that the statute
 was unambiguous at step one of Chevron. We conclude
 that the Court of International Trade did not err in finding
 that the Rule, which redefines “drawback” to include excise
 tax liability on exports that have neither been “paid or de-
 termined,” is contrary to the clear intent of Congress as ex-
 pressed in the language and structure of the statute.
 Accordingly, we affirm the judgment of the Court of Inter-
 national Trade.
                        BACKGROUND
     This appeal concerns a set of regulations, promulgated
 in 2018 by the Department of the Treasury (“Treasury”)
 and the United States Customs and Border Protection
 (“CBP” or “Customs”), described herein as the Rule. 1 The
 Rule is an interpretation of 19 U.S.C. § 1313(v), which
 states in relevant part:

     1   The Rule comprises the following regulations:
 19 C.F.R. §§ 190.171(c)(3), 190.22(a)(1)(ii)(C), 190.32(b)(3),
 191.171(d), 191.32(b)(4), the final sentence of 19 C.F.R.
 § 191.22(a), and the final sentence in the definition of
 “drawback” and “drawback claim” in 19 C.F.R. § 190.2.
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 4                         NATIONAL ASSOCIATION   v. TREASURY

     Merchandise that is exported or destroyed to sat-
     isfy any claim for drawback shall not be the basis
     of any other claim for drawback . . . .
 19 U.S.C. § 1313(v).
     Generally, imported goods are subject to a variety of
 payments, such as tariffs, duties, fees, and certain taxes,
 such as an excise tax. A “drawback” is a customs transac-
 tion involving the refund of any payments that were made
 upon the importation of a good. Drawbacks are designed
 to incentivize exports from the United States and allow
 U.S. exporters to compete more fairly with overseas com-
 petitors.
     The most common form of drawback occurs when du-
 ties that are paid when a good is imported are refunded
 when the same good is exported. Another common form of
 drawback, known as a “substitution drawback,” involves
 the refund of duties, taxes, or fees that were paid upon im-
 portation and refunded when similar goods, normally mer-
 chandise classified under the same subheading of the
 Harmonized Tariff Schedule of the United States
 (“USHTS”), are exported.         See 19 U.S.C. § 1313(j)(2),
 19 C.F.R. § 191.22(a). The statute most relevant to substi-
 tution drawbacks is 19 U.S.C. § 1313(j)(2), which states in
 relevant part:
     [W]ith respect to imported merchandise on which
     was paid any duty, tax, or fee imposed under Fed-
     eral law upon entry or importation […] that […]
     notwithstanding any other provision of law, upon
     the exportation or destruction of such other mer-
     chandise an amount calculated pursuant to regula-
     tions prescribed by the Secretary of the Treasury
     under subsection (l) shall be refunded as drawback.
 19 U.S.C. § 1313(j)(2).
    Since 2008, substitution drawback has been allowed for
 wine where the imported wine and exported wine are of the
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 NATIONAL ASSOCIATION   v. TREASURY                          5

 same color and the price variation between the imported
 wine and the exported wine does not exceed fifty percent.
 See Food, Conservation, and Energy Act of 2008, Pub. L.
 No. 110-234, § 15421, 122 Stat. 923, 1547 (May 22, 2008)
 (codified as amended at19 U.S.C. § 1313(j)(2)). Since this
 change, companies that both import and export wine or
 transfer its right to drawback have been claiming draw-
 backs for taxes, fees, and duties paid on the imported wine
 based on their exports of similar wine, i.e., substituted
 wine. As an example, if a company imported 100 bottles of
 red wine and then exported 100 bottles of similarly priced
 red wine, that company could claim drawback for nearly all
 charges assessed on the imported wine. J.A. 4. The sub-
 stitution in the example can also result in a near total re-
 fund of both tariffs and excise taxes 2 paid on the imported
 wine. This can occur in situations where the substituted
 exported wine was either not subject to any excise tax by
 virtue of being exported from a bonded facility 3, or had re-
 ceived a complete refund of any previously paid excise
 taxes. This results in a “double drawback.” J.A. 4. As a
 response to this practice, the Government promulgated the
 Rule to prevent “double recovery” of excise tax. J.A. 18–19.

     2    An excise tax is imposed on certain domestically
 consumed goods, regardless of origin, such as wine, beer,
 spirits, tobacco, and petroleum products. J.A. 2. Draw-
 backs of excise taxes may occur in multiple ways.
     3    An imported good is subject to tariffs, fees, and
 taxes upon “entry” in the United States. A good is deemed
 not to enter the United States if upon importation it is
 placed in a customs bonded warehouse. If the good is taken
 from a bonded warehouse and sold or consumed in the
 United States, the good has entered the United States and
 may be subject to tariffs and fees. But if the good is ex-
 ported from a warehouse, no import duties are paid.
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 6                         NATIONAL ASSOCIATION   v. TREASURY

     The Rule makes two fundamental changes to the draw-
 back regime. First, it includes within the definition of
 “drawback” and “drawback claim” a “refund or remission of
 other excise taxes pursuant to other provisions of law.”
 19 C.F.R. § 190.2. Under this definition, the export of mer-
 chandise even without payment of an excise tax counts as
 a claim for drawback. See J.A. 5. Second, the Rule limits
 drawbacks to the amount of taxes paid and not previously
 refunded.            See     19 C.F.R.      §§ 190.171(c)(3),
 190.22(a)(1)(ii)(C), 190.32(b)(3), 191.171(d), 191.22(a), and
 191.32(b)(4). This second change prevents a domestically
 produced exported good, which would have been subject to
 the excise tax if made available for domestic use (sold or
 consumed), from qualifying for a claim for substitution
 drawback under the language of 19 U.S.C. § 1313(j)(2).
 J.A. 5.
      The National Association of Manufacturers (“NAM”)
 along with Intervenor, The Beer Institute, 4 brought suit
 against the Treasury and CBP arguing that the Rule is con-
 trary to law, arbitrary and capricious, and impermissibly
 retroactive. J.A. 5. NAM raised three primary arguments:
 (1) the language of the statute dealing with substitution
 drawbacks, § 1313(j)(2), forecloses the agencies’ interpreta-
 tion of § 1313(v) because § 1313(j)(2) states that under cer-
 tain conditions, the drawback shall be refunded
 “notwithstanding any other provision of law”; (2) the Rule’s
 interpretation of § 1313(v) conflicts with § 1313(l)(2), which
 provides for the calculation of substitution drawback; (3)
 the Rule includes a prohibition not contemplated in
 § 1313(v), namely the prohibition of a substitution draw-
 back for excise taxes paid on imported goods where the

     4   The Beer Institute submitted a brief concerning the
 retroactive application of the Rule. Because this court in-
 validates the Rule, those arguments are moot.
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 NATIONAL ASSOCIATION   v. TREASURY                         7

 substitute exported goods were exempt from excise tax.
 J.A. 5–6.
      The Government responded that the Treasury and
 CBP’s interpretation of § 1313(v) is “reasonable, histori-
 cally supported, and necessary to reconcile the purpose of
 federal excise tax with the drawback regime.” J.A. 7. The
 Government further argued that a drawback is not only
 limited to taxes paid, but rather a drawback can extend to
 cover tax exemptions in order to prevent improper “piggy-
 backing” of exception benefits onto drawback benefits. Id.
 (citing H.R. Rep. No. 103–361 at 130 (1993), reprinted in
 1993 U.S.C.C.A.N. 2552, 2680 (stating that 19 U.S.C.
 § 1313 “codifies current Customs practice against ‘piggy-
 backing’ other duty exemption benefits (foreign-trade
 zones, bonded warehouses and duty-free temporary impor-
 tation) onto the drawback benefits.”).
     NAM replied that the Government improperly at-
 tempts to revert the statute back to CPB’s pre-2004 regime,
 which Congress rejected by allowing for the drawback of
 excise taxes. J.A. 7–8.
     The United States Court of International Trade (“CIT”)
 applied the two-part Chevron test to find that the Rule is
 unlawful as to the challenged provisions. Specifically, the
 CIT addressed whether Congress had “directly spoken to
 the precise question at issue.” J.A. 8. If Congress’s intent
 was clear, the CIT explained, then “that is the end of the
 matter,” as the agency and the court must “give effect to
 the unambiguously expressed intent of Congress.” Id. (cit-
 ing See Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837,
 842–43 (1984)). But if the statute is “silent or ambiguous
 with respect to the specific issue” then the court must de-
 termine whether the agency’s interpretation is “based on a
 permissible construction of the statute.” J.A. 9. Applying
 those principles, the CIT determined that the inquiry ends
 at step one because the Rule conflicts with the unambigu-
 ous text of the statute. Id.
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 8                         NATIONAL ASSOCIATION   v. TREASURY

     The CIT also concluded that, while the CBP identified
 the aforementioned “double-drawback” issue and ex-
 pressed its concern on multiple occasions to Congress, Con-
 gress took no steps to curtail the practice. J.A. 4.
 Specifically, referring to certain portions of the legislative
 history, the CIT observed that “it appears that Congress
 has repeatedly chosen to expand access to drawback at the
 expense of lost excise tax revenue. The agencies cannot
 now attempt to alter this policy choice by way of a regula-
 tion that does not comport with the animating statute.”
 J.A. 18; see also J.A. 20.
                         DISCUSSION
     We review the CIT’s interpretation of statutes and reg-
 ulations de novo. Abbott Labs. v. United States, 573 F.3d
 1327, 1330 (Fed. Cir. 2009). Courts review agencies’ inter-
 pretations of statutes by applying the two-step Chevron
 framework. See 467 U.S. at 842–43 & n.9. In applying
 Chevron, the Court first uses “traditional tools of statutory
 construction” to determine whether Congress has “directly
 spoken to the precise question at issue”; if so, “that is the
 end of the matter.” Id. at 843 & n.9. If not, the Court asks
 whether the regulation reflects “a permissible construc-
 tion.” Id. at 843.
     To prevail, the Government must succeed in both its
 redefinition of “drawback,” particularly for the purposes of
 the “double drawback” prohibition of 19 U.S.C. § 1313(v),
 and in its interpretation of numerous subsections of
 19 U.S.C. § 1313.
                               I
     The Government argues that “claim for drawback” in-
 cludes not only refunds of already-paid excise taxes on im-
 ports under the Tariff Act, 19 U.S.C. § 1313(d), but also
 includes cancellation of excise-tax liability for exports that
 have neither been “paid or determined” under the Internal
 Revenue Code (“IRC”), 26 U.S.C. § 5362(c). See Appellant’s
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 NATIONAL ASSOCIATION   v. TREASURY                          9

 Br. 6–7. The Rule was created to reconcile the two separate
 provisions to address the non-collection of taxes on certain
 exported merchandise. See J.A. 7. 19 U.S.C. § 1313(d)
 reads in relevant part:
     Upon the exportation of bottled distilled spirits and
     wines manufactured or produced in the United
     States on which an internal-revenue tax has been
     paid or determined, there shall be allowed, under
     regulations to be prescribed by the Commissioner
     of Internal Revenue, with the approval of the Sec-
     retary of the Treasury, a drawback equal in
     amount to the tax found to have been paid or deter-
     mined on such bottled distilled spirits and wines.
 19 U.S.C. § 1313(d) (emphasis added). 26 U.S.C. §5362(c)
 of the IRC states, in relevant part, that wine, “on which tax
 has not been paid or determined” may be withdrawn from
 a bonded facility 5 “without payment of tax for export.”
     Prior to the Government’s promulgation of the Rule,
 the applicable regulation defining drawback was the fol-
 lowing:
     Drawback means the refund or remission, in whole
     or in part, of a customs duty, fee or internal reve-
     nue tax which was imposed on imported merchan-
     dise under Federal law because of its importation,
     and the refund of internal revenue taxes paid on
     domestic alcohol as prescribed in 19 U.S.C. 1313(d).

     5     According to 19 U.S.C. § 1555(b)(1), “[d]uty-free
 sales enterprises may sell and deliver for export from the
 customs territory duty-free merchandise in accordance
 with this subsection and such regulations as the Secretary
 may prescribe to carry out this subsection” from a bonded
 facility.
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 10                         NATIONAL ASSOCIATION   v. TREASURY

 19 C.F.R. § 191.2(i) (2015); see also id. § 191.3. The new
 regulation, as part of the Rule, reads:
      Drawback, as authorized for payment by CBP,
      means the refund, in whole or in part, of the duties,
      taxes, and/or fees paid on imported merchandise,
      which were imposed under Federal law upon entry
      or importation, and the refund of internal revenue
      taxes paid on domestic alcohol as prescribed in 19
      U.S.C. 1313(d). More broadly, drawback also in-
      cludes the refund or remission of other excise taxes
      pursuant to other provisions of law.
 19 C.F.R. § 190.2 (emphasis added). The final sentence of
 the new regulation within the Rule expands the definition
 of drawback to encompass the “refund or remission” of ex-
 cise taxes on exports.
     In support of its broadened definition of drawback, the
 Government asserts that § 1313(v)’s reference to any
 “claim for drawback” includes the cancellation of any ex-
 cise-tax liability that has been paid or determined on ex-
 ports. 19 U.S.C. § 1313(v). The Government relies on the
 language in 19 U.S.C. § 1313(d), which states that “a draw-
 back [is] equal in amount to the tax found to have been paid
 or determined on such bottled distilled spirits and wines.”
 19 U.S.C. § 1313(d) (emphasis added). The Government
 adds that the IRC uses the term “drawback” similarly. See
 26 U.S.C. § 5062(b) (“there shall be allowed . . . a drawback
 equal in amount to the tax found to have been paid or de-
 termined . . . .” (emphasis added)). NAM does not contest
 this point as to taxes that are paid. See Appellant’s Br. 15.
 However, the Government goes further and argues that
 “drawback” encompasses the cancellation of excise taxes
 imposed on domestic products that are exported without
 the payment of tax.
     Herein lies the crux of the dispute. The Government
 contends that the term “drawback” should also be used to
 describe transactions in which excise-tax liability is
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 NATIONAL ASSOCIATION   v. TREASURY                          11

 extinguished under provisions where products are with-
 drawn for export without payment of tax. See 26 U.S.C.
 § 5362(c) (stating that wine exported without tax having
 been “paid or determined” does so without payment of tax);
 J.A. 12–13; Appellant’s Br. 19. The Government’s ra-
 tionale is that, when products are withdrawn “without pay-
 ment of tax” for export, they are not withdrawn “free of tax”
 because tax liability attaches at the time of production and
 is covered by bond and cancelled only upon proof of expor-
 tation. Appellant’s Br. 28; compare 26 U.S.C. § 5362(c)(1)
 (“without payment of tax for export”) with § 5362(c)(7)–(9)
 (“free of tax” for various uses including experimental and
 research purposes). We disagree.
     The Rule’s broadened definition of “drawback” includes
 a drawback of excise tax that was never “paid or deter-
 mined” on exported merchandise. See 26 U.S.C. §§ 5704(b),
 5214(a), 5362(c). This defies logic. A tax that has never
 been paid or determined cannot be said to have been
 “drawn back,” and goods that have been exported without
 payment of tax cannot give rise to a “claim” for drawback,
 because there would be no refund to be paid out or cancel-
 lation of liability to be made.
      The Government’s argument that taxes on bonded
 wine products have been “determined” at the point of pro-
 duction and “cancelled” upon exportation cannot be recon-
 ciled with 26 U.S.C. § 5362(c). “Determined” within the
 IRC refers to situations where tax is both determined and
 paid at the time the goods are withdrawn from bond, or
 where “the amount of the tax to be paid is computed and
 fixed” upon withdrawal, “with payment to be made by re-
 turn” later for either prepayment or deferred payment. S.
 Rep. No. 85-2090, at 100 (1958), reprinted in
 1958 U.S.C.C.A.N. 4395, 4492; see also Appellee’s Br. 52.
 If bonded goods are withdrawn for export, however, tax li-
 ability is not computed and fixed for prepayment or de-
 ferred payment because a tax will never be paid at all. See,
 e.g., 26 U.S.C. § 5041(a) (stating that wine tax is
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 12                         NATIONAL ASSOCIATION   v. TREASURY

 “determined as of removal for consumption or sale” (em-
 phasis added)). Thus, tax in that scenario would not be
 “determined.” The Government’s assertion that the tax is
 determined at the time of production is unpersuasive and
 does not explain the statutory distinction appearing in
 other IRC provisions between a tax that has been “paid or
 determined” and one that “has not been paid or deter-
 mined.” Compare 26 U.S.C. § 5062(b) with 26 U.S.C.
 § 5214(a)(4). Moreover, had Congress intended “drawback”
 to describe all the instances in § 1313 and the IRC to which
 the agencies attempt to apply the term, it would not have
 selectively used the term in some sections, but not others.
 See Russello v. United States, 464 U.S. 16, 23 (1983) (“It is
 generally presumed that Congress acts intentionally and
 purposely in the disparate inclusion or exclusion” of lan-
 guage.); see also BP P.L.C. v. Mayor & City Council of Bal-
 timore, 141 S. Ct. 1532, 1539, 209 L. Ed. 2d 631 (2021) (“In
 the end, all of the parties’ fencing about language Congress
 didn't use persuades us of only one thing—that we are best
 served by focusing on the language it did employ.”). Nota-
 bly, both § 1313 and the IRC do not use the term “draw-
 back” to refer to exportation without payment or
 determination of tax. Therefore, we conclude that the ex-
 pansive definition in the Rule, which extends drawback to
 situations in which tax is never paid or determined, con-
 flicts with the unambiguous text of the statute.
                               II
     The Government also argues on appeal that the CIT
 erred in invalidating the Rule by erroneously reading the
 Rule to create irreconcilable statutory conflicts and irra-
 tional results. Appellant’s Br. 38 (citing J.A. 13).
     With respect to statutory conflicts, the Government ar-
 gues that Congress’s addition of the “notwithstanding”
 clause in § 1313(j)(2), which requires a drawback of “any”
 tax imposed on importation “notwithstanding another pro-
 vision of law,” is not indicative of Congress’s intent to allow
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 NATIONAL ASSOCIATION   v. TREASURY                            13

 for a substitution drawback even if excise tax has not been
 paid on the export because the Supreme Court has ex-
 plained that a “notwithstanding” clause should not be “un-
 reasonably expanded” to “narrow so dramatically an
 important provision that [Congress] inserted in the same
 statute.” Appellant’s Br. 39 (quoting Ministry of Def.&
 Support for the Armed Forces of the Islamic Republic of
 Iran v. Elahi, 556 U.S. 366, 386 (2009)). Next, the Govern-
 ment argues that the CIT erred in finding that the calcula-
 tion methodology set forth in § 1313(l) is nullified by the
 Rule. With respect to the CIT’s finding that the Rule pro-
 duces irrational results by preventing “an untaxed export
 from serving as substituted merchandise in a drawback
 claim on a corresponding import in any capacity,” the Gov-
 ernment argues that the Rule does not prohibit this result
 but merely prohibits double recovery of the same tax. Ap-
 pellant’s Br. 44 (citing J.A. 17). Additionally, the Govern-
 ment argues that the legislative history of the drawback
 regime does not support invalidating the Rule. We disa-
 gree and address each of the Government’s arguments be-
 low.
     In 2004, Congress amended 19 U.S.C. § 1313(j)(2) to re-
 quire drawback of “any” tax imposed on importation, “not-
 withstanding any other provision of law.” 19 U.S.C.
 § 1313(j)(2). Section 1313(j)(2) provides the criteria for sub-
 stitution drawback, which, as the CIT points out, does not
 include a requirement that a company must have already
 paid tax on its exports to receive a drawback. See J.A. 14–
 15. When the criteria are met, the CBP must pay a substi-
 tution drawback “notwithstanding any other provision of
 law.” 19 U.S.C. § 1313(j)(2). Congress added this “notwith-
 standing” clause in 2004 specifically to overrule a series of
 Customs rulings holding excise taxes ineligible for substi-
 tution drawback and to make excise taxes eligible for sub-
 stitution drawback, like other federal charges imposed
 “upon entry or [importation].” Pub. L. No. 108-429,
 § 1557(a), 118 Stat. 2434 at 2579 (Dec. 3, 2004); NLRB v.
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 14                         NATIONAL ASSOCIATION   v. TREASURY

 SW Gen., Inc., 137 S. Ct. 929, 940 (2017) (explaining that a
 “notwithstanding” clause can be used to “show[] which of
 two or more provisions prevails in the event of a conflict”).
 By relying on an “other provision of law”—specifically, sub-
 section (v)—the Rule would trump paragraph (j)(2) and
 render the “notwithstanding” clause meaningless. See
 J.A. 14. Accordingly, the interpretation of § 1313(v) as set
 forth in the Rule creates a conflict with the amended lan-
 guage of §1313(j)(2) and thus cannot support the Govern-
 ment’s interpretation.
      Next, with respect to the Government’s argument that
 the CIT erred in finding that the calculation methodology
 set forth in § 1313(l) is nullified by the Rule,
 § 1313(l)(2)(B)–(C) provides that the amount of drawback
 available based on substituted merchandise shall be “equal
 to 99 percent of the lesser of (i) the amount of duties, taxes,
 and fees paid with respect to the imported merchandise; or
 (ii) the amount of duties, taxes, and fees that would apply
 to the [substituted] exported article if the exported article
 were imported.” 19 U.S.C § 1313(l)(2)(B)–(C). Essentially,
 § 1313(l)(2) provides the amount of drawback that the CBP
 must pay if the substitution statute, § 1313(j)(2), is satis-
 fied. As the CIT properly stated, § 1313(l)(2) requires that
 a refund be paid on imported goods upon the timely expor-
 tation of other goods with the same USHTS code regardless
 of whether taxes were paid on those other goods. See J.A.
 3. This is another example of how the Rule’s interpretation
 of § 1313(v) creates a conflict with § 1313(l) and cannot
 support the Government’s interpretation.
      Third, we address the Government’s contention that
 the CIT erred when it recognized that the Rule would cre-
 ate an irrational or absurd result by “prevent[ing] an un-
 taxed export from serving as substituted merchandise in a
 drawback claim on a corresponding import in any capacity”
 or, in other words, would bar recovery of any duties, taxes
 and fees on the import, including the excise tax. J.A. 17.
 In response, the Government simply contends that the
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 NATIONAL ASSOCIATION   v. TREASURY                         15

 Rule does not prohibit this result but merely prohibits dou-
 ble recovery of the same tax. Appellant’s Br. 44. However,
 once exported merchandise has been used “to satisfy [one]
 claim for drawback,” § 1313(v), it cannot be used for that
 purpose again under the Rule. Thus, every untaxed expor-
 tation of domestic goods creates a “claim for drawback” that
 triggers this restriction under the Rule. Consequently,
 such goods can never “be the basis of any other claim for
 drawback.” 19 U.S.C. § 1313(v); see also Ark. Dairy Coop.
 Ass’n v. U.S. Dep’t of Agric., 573 F.3d 815, 829 (D.C. Cir.
 2009) (finding that an interpretation producing “absurd”
 results “fails at Chevron step one”). Thus, under the Gov-
 ernment’s interpretation, the Rule reads into § 1313(v) a
 restriction that does not exist. The CIT was correct in its
 finding that this produces an absurd result that fails at
 Chevron step one.
     As to the Government’s final argument, that the legis-
 lative history does not support invalidating the Rule, the
 Government argues that Congress was clear in guarding
 against abuse of the substitution-drawback privilege by
 prohibiting an importer or exporter from counting a draw-
 back twice. The Government concedes that if the CIT’s
 analysis were credited, it suggests, at most, that Congress
 was aware of, but failed to correct, this issue as to wine.
 Appellant’s Br. 49. The Government further contends that
 the agencies’ estimated revenue loss supports its position
 more so than the CIT’s review of congressional inaction
 through the legislative history. We disagree.
     Here, the legislative history of the drawback regime
 demonstrates that Congress chose to expand access to
 drawbacks at the expense of excise taxes. For example, af-
 ter § 1313(v) was added in 1993, in 2004, Congress
 amended 19 U.S.C. § 1313(j)(2) to require that drawbacks
 be paid “notwithstanding any other provision of law,” as
 discussed above. Then, in 2008, Congress liberalized sub-
 stitution drawback for wine by allowing substitution based
 on any wine that is the same color and within 50 percent of
Case: 20-1734    Document: 70     Page: 16    Filed: 08/23/2021

 16                        NATIONAL ASSOCIATION   v. TREASURY

 the same price. See Pub. L. No. 110-234 § 15421, 122 Stat.
 at 1547 (codified as amended at 19 U.S.C.
 § 1313(j)(2)(2008)). Thereafter, the Treasury and the CBP
 proposed a regulation to limit drawback granted on exports
 to only the amount of taxes actually paid. Drawback of In-
 ternal Revenue Excise Tax, 74 Fed. Reg. 52,928, 52,931
 (Oct. 15, 2009); J.A. 267. In response to opposition from
 legislators, the agencies eventually withdrew the proposed
 regulation. See Drawback of Internal Revenue Excise Tax,
 75 Fed. Reg. 9,359–60 (Mar. 2, 2010); J.A. 273–74. No fur-
 ther action was taken by Congress.
      As the CIT noted, “Congress is presumed to know that
 the wine industry was filing substitution-drawback claims
 in situations where no excise tax had been paid and . . . ap-
 pears to have at least indirectly sanctioned the practice.”
 J.A. 20. “This history demonstrates that Congress made a
 policy choice to encourage exports by expanding the ability
 to claim drawback, even with the knowledge that indus-
 tries may then avoid some payment of excise tax.” Id. We
 agree.
                        CONCLUSION
      We conclude that the challenged provisions of the Rule
 contravene the unambiguous text of the statute and, there-
 fore, the inquiry ends at Chevron step one. Accordingly, we
 affirm the judgment of the CIT that the Rule is unlawful
 as to the challenged provisions. We have considered the
 parties’ remaining arguments and determine that we need
 not address them in light of our decision.
                        AFFIRMED