Importer's Read on Statute Related to Unused Substitution Drawback Leads to 'Absurd' Results, US Argues
Importer Spirit Aerosystems' reading of the statute pertaining to its drawback claim for unused substitution drawback would lead to "unpredictable and often absurd results," the U.S. said in an Oct. 6 reply brief at the Court of International Trade. Spirit's argument that CBP's implementation of the statute "misconstrues basic tariff terms, renders entire sections" of the law "inoperative, and requires the omission of certain words from the drawback statute," the government claimed (Spirit Aerosystems v. United States, CIT # 20-00094).
The aircraft parts for which Spirit sought drawback were imported in January 2018 and classified under the discontinued 10-digit Harmonized Tariff Schedule subheading 8803.30.0030, which covered "Parts of goods of heading 8801 or 8802: Other parts of airplanes or helicopters: For use in civil aircraft: Other" (see 2303270031). The eight-digit level of the subheading covered "other parts of airplanes or helicopters" and the phrase "for use in civil aircraft" is the superior text to the 10-digit line "other."
Under CBP regulations, goods aren't eligible for substitution drawback when they're both classified in residual "other" categories at both the 8-digit and 10-digit levels. In the case, the U.S. filed a cross-motion for judgment, arguing that CBP correctly rejected Spirit's drawback claim for unused substitution drawback given that the article description for Statistical Reporting Number 8803.30.0030 begins with the term "other." Spirit said CBP's interpretation of the drawback rules means that a 10-digit subheading is ineligible for drawback when the term "other" appears next to its corresponding 8-digit subheading, even if there may be additional descriptive language between the two subheadings.
In reply, Spirit said that since the government's claim rests on the position of the "statistical suffix number," instead of the 10-digit subheadings as listed in the statute, "it cannot be a proper interpretation" based on the law's plain meaning. The government noted that the HTS defines "Statistical Reporting Number" as the 10-digit number formed by combining the 8-digit number with the appropriate 2-digit suffix. "Thus, a 10-digit SRN requires, and always incorporates, a 2-digit statistical suffix," the brief said.
The government also argued that determining drawback eligibility doesn't amount to classifying imported goods under the HTS. "Spirit fails to appreciate that the issue before the Court is not the classification of its goods under a particular SRN or how the HTSUS is 'structured,'" but how the law's subsections are to be given effect, the U.S. said. As a result, drawback eligibility turns on the article descriptions at only the 8- and 10-digit numbered levels. Looked at another way, the HTS is a table with "heading, subheading, and SRN numbers on one side, and descriptive text on the other," the brief said.
The U.S. added that "[s]imply put, classifying merchandise under the HTSUS is an entirely different undertaking than determining the eligibility of unused substitution drawback."
Spirit said that the court should grant summary judgment given that the U.S. admitted that "For use in civil aircraft: Other" is the article description at the 10-digit level for SRN 8803.30.0030, since it begins with "for" and not "other." The U.S. said there "is no basis for this argument," since the government response "in no way abandons our defenses to Spirit's central claim." The U.S. response is simply "an anodyne clarification that" the SRN was transferred to HTS heading 8807.
The importer said that the relevant SRN cannot begin with the first word of HTS heading 8803, given that its first word is "Parts," "because if such were the case, every subheading and SRN under the heading would also begin with 'Parts,' rendering the entirety of the statute unworkable," the brief said.