National Association of Manufacturers v. Department of Treasury
by: Lourie, Prost, Reyna

Section: Federal Circuit and CIT Case Summaries

The Federal Circuit affirmed the CIT’s finding that excise taxes on substitution drawback claims are eligible for refunds. The Federal Circuit rejected CBP’s and Treasury’s 2018 rule (“Rule”) that redefined drawback to exclude goods imported and subsequently exported duty free. The Court held that the Rule “defies logic” because it expanded the definition of drawback to include a drawback of excise tax that was never paid or determined on exported merchandise. As a result, the Court concluded that “the expansive definition in the Rule” conflicted with the unambiguous text of the drawback statute.
The U.S. Government argued that “the CIT erred in invalidating the Rule by erroneously reading the Rule to create irreconcilable statutory conflicts and irrational results.” The U.S. Government alleged that the Rule does not prohibit this result “but merely prohibits double recovery of the same tax.” The U.S. Government also contended “that the legislative history of the drawback regime does not support invalidating the Rule.” In response to the U.S. Government’s arguments, the Court noted that the legislative history of the drawback regime demonstrated that Congress chose to expand access to drawbacks at the expense of excise tax. The Federal Circuit ultimately affirmed the CIT’s judgment that the Rule is unlawful.