Court Opinion

ID: 818958
Source: CourtListenerOpinion
Date Created: 2013-02-04 06:00:50.383594+00
Date Added: 2024-06-11T15:26:22.887297
License: Public Domain

Slip Op. 03-39

     UNITED STATES COURT OF INTERNATIONAL TRADE
__________________________________________
                                          :
EASTMAN CHEMICAL COMPANY,                 :
CHEVRON USA, INC., AMERICAN               :
SYNTHETIC RUBBER CORPORATION,             :
MICHELIN NORTH AMERICA, INC., and         :
MICHELIN TIRE CORPORATION,                :
                                          :
                        Plaintiffs,       :                 Court No. 02-00667
                                          :
                  v.                      :
                                          :
UNITED STATES,                            :
                                          :
                        Defendant.        :
__________________________________________:

[Motion for mandamus denied.]

                                                            Dated: April 3, 2003

      Neville Peterson LLP (John M. Peterson, Curtis W. Knauss, George W. Thompson and
Molly R. Coyne) for plaintiffs.

      Robert D. McCallum, Jr., Assistant Attorney General, David M. Cohen, Director,
Commercial Litigation Branch, Civil Division, United States Department of Justice (Jeanne E.
Davidson, Todd M. Hughes and Stefan Shaibani), Richard McManus, Office of the Chief
Counsel, United States Customs Service, of counsel, for defendant.

                                            OPINION

RESTANI, Judge: This matter is before the court on plaintiffs’ motion for mandamus.

Plaintiffs seek an order requiring the United States Customs Service (“Customs”) to hire more

personnel or devote more presently employed personnel to the processing of Harbor Maintenance

Tax (“HMT”)1 administrative refund requests so as to achieve a rate of disposition of at least 500

       1
           See 26 U.S.C. § 4461 et seq.
COURT NO. 02-00667                                                                   PAGE 2

claims per month.

       The HMT was declared unconstitutional as applied to exports in United States v. United

States Shoe Corp., 523 U.S. 360 (1998). Initially, most HMT refund claims were asserted by

means of court action under 28 U.S.C. § 1581(i), the court’s residual jurisdiction provision. In

Swisher Int’l, Inc. v. United States, 205 F.3d 1358, 1369 (Fed. Cir.), cert. denied, 531 U.S. 1036

(2000), however, the right to file administrative refund claims was recognized, with the

concomitant right to protest a denial thereof and to appeal such denial to the Court of

International Trade. See 28 U.S.C. § 1581(a) (protest denial jurisdiction).

       It is undisputed that Customs took no action to process pending administrative refund

claims for payment until certiorari was denied in Swisher on December 4, 2000.2 531 U.S. at

1036. It is undisputed that after that date, Customs did not complete its first disposition of an

administrative claim until September 2001. It is also undisputed that Customs published an

interim procedure for filing such claims on March 28, 2001, 66 Fed. Reg. 16,854, and a final

regulation on July 2, 2001.3 See 66 Fed. Reg. 34,813.

       In May 2001, plaintiffs herein, pursuant to this procedure, commenced filing of their

administrative claims, and filed their last claim on November 14, 2001. The claim of plaintiffs

Eastman Chemical Company and Chevron USA, Inc. have been initially processed, but final

       2
           Up to the time of issuance of Swisher, Customs denied any administrative HMT claims,
first on substantive grounds and post-U.S. Shoe on procedural grounds.
       3
          The regulation established a one year time limit to file refund requests for HMT
payments that were paid on a quarterly basis and set December 31, 2001, as the last day for filing
refund requests for HMT payments more than one year old. 66 Fed. Reg. at 34,817; see 19
C.F.R. § 24.24(e)(4). The regulation has since been upheld. See M.G. Maher & Co. v. United
States, Slip. Op. 02-102 (Ct. Int’l Trade Aug. 30, 2002).
COURT NO. 02-00667                                                                    PAGE 3

settlement has not been achieved by the parties with respect to such claims. Plaintiff Michelin’s

later filed claims are in the queue for processing. Customs avers that it cannot locate any claim

by plaintiff American Synthetic Rubber Corporation. Plaintiffs have not responded to this

statement.

       On May 13, 2002, Customs published a regulation clarifying the procedure for verifying

the claims. 67 Fed. Reg. 31,948. Customs has no records for payments prior to mid-1990.4

Under the procedures as to those claims, claimants must submit supporting documentation. For

later claims, Customs searches its records for proof of payment and advises claimants if the

support exists, so that claimants are not initially required to search their records for supporting

documentation. Id.

       As of February 28, 2003, of the 7,706 claims submitted, 2,666 had been processed.

Declaration of Thomas A. Smith, Director of the National Finance Center, U.S. Customs Service

¶ 25; Second Supplemental Declaration of Thomas A. Smith ¶ 3. Customs does not expect to

initially process Michelin’s claims until November 2003, a few months before the end of the

initial processing phase. See Second Supplemental Declaration ¶ 11. Customs has no set target

for the number of claims it will process per month, but is heading towards 300 claims per month.

Id. ¶ 4. It must also reach agreement or finally deny claims in a secondary phase of processing,

if claimants do not agree with Customs certification in the initial processing.

       Mr. Smith testified at an evidentiary hearing of March 6, 2003, that Customs has sixteen

(16) contract employees and approximately four (4) full-time equivalent Customs employees

       4
           Prior aged records were destroyed in the ordinary course.
COURT NO. 02-00667                                                                  PAGE 4

devoted to this task. See Hr’g Tr. at 4, 44. Customs has let a multiyear contract for this purpose

at an annual cost of $600,000. Id. at 46, 50. Mr. Smith opined that more contract employees

would not appreciably improve the situation and that more Customs on site employees cannot be

devoted to the process without adversely affecting the vital operations at the finance center where

the claims are processed. See id. at 4–5. He estimates that more manpower could speed up the

process by at most a few months. Id. at 54.

       Mr. Smith testified that, as opposed to earlier rounds of processing pursuant to litigated

cases, the current claims involve large aggregations of payments and more freight forwarder

claims, which involve multiple exporting companies. This slows down the process. In addition,

the claims at issue are older and Customs is undertaking the paper search for post-mid 1990

claims. See id. at 53. These facts are alleged to result in a process which cannot meet the 500

claims per month pace of the previous court-ordered processes. See United States Shoe Corp. v.

United States, 22 CIT 1061 (1998) and Swisher Int’l, Inc. v. United States, Slip. Op. 01-29 (Ct.

Int’l Trade Mar. 13, 2001) (claims resolution order). Mr. Smith opined that if the court ordered

processing of 500 claims per month, the likely result is that Customs would abandon its

verification procedures and some improper refunds would be made.5 Hr’g Tr. at 53–54.

       5
          Because the payments were not subject to verification of proper classification, i.e. by
the importer, exporter, domestic shipper, etc., at the time of payment, many errors have been
detected in Customs computer records. Verification with paper documentation is necessary to
avoiding refunding payments which were legally owed. Apparently, the classification errors
were made by the payors and perpetuated by the receiving banks and then Customs.
COURT NO. 02-00667                                                                  PAGE 5

                                  Findings of Facts/Discussion

       The court has no reason to doubt Customs’s depiction of its processing and the reasons

therefor. Plaintiffs’ cross-examination of Mr. Smith revealed no inconsistencies or any other

reason to doubt his credibility. Neither party, however, presented direct evidence of what exactly

Customs was doing between December 2000, when it knew it would have to process the

administrative claims, and September 2001, when the first certifications occurred. Nonetheless,

the court infers from the evidence presented to the court that, during this period, Customs was

following government contracting procedure in order to put its multiyear processing contract in

place. Next, it was preparing and publishing its regulations, including a comment period, which

resulted in changes to the final version. Finally, it was organizing and training the assigned

personnel. Plaintiffs have never made clear what else Customs should do and how it could do it

faster. Thus, the court cannot conclude that Customs has refused to do its duty or violated any

duty it owed plaintiffs in this regard. Under such circumstances, mandamus will not issue. See

Sharp Corp. v. United States, 13 CIT 951, 959, 725 F. Supp. 549, 556 (1989) (citing Kerr v.

United States Dist. Ct., 426 U.S. 394, 403 (1976) for the proposition that “mandamus should

issue only where the clear duty owed to plaintiff has been refused.”).
COURT NO. 02-00667                                                                 PAGE 6

       Accordingly, the court has no reason to interfere in Customs’s administrative decision-

making or to assume supervision of the project. So long as Customs does not relax in its duty to

get these improperly obtained payments, on which interest is not accruing, into the hands of the

payors on a reasonable time schedule, the court will stay its hand.

                                                     ____________________________
                                                            Jane A. Restani
                                                               JUDGE

Dated: New York, New York.
       This 3rd day of April, 2003.