CAFC Affirms Constitutionality of NAFTA Duty-Deferral Program
In Nufarm America's Inc., v. U.S., the Court of Appeals for the Federal Circuit affirmed the Court of International Trade's determination that 19 CFR 181.53 does not violate the "Export Clause" of the Constitution.
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(Among other things, the "Export Clause" provides that no tax or duty shall be assessed on exports.)
Nufarm imported chemical products into the U.S. from Australia and the Netherlands. The products were entered under Harmonized Tariff Schedule 9813.00.05, which defers the import duty on goods imported for repair, alteration, or processing until the goods are exported. Nufarm processed the imported chemicals into herbicides and then exported that product to Canada.
At the time of export, Customs assessed a deferred import duty on the goods based upon 19 CFR 181.53, the implementing regulations for the North American Free Trade Agreement's (NAFTA) duty-deferral program.
Nufarm protested that 19 CFR 181.53 violated the "Export Clause" of the Constitution, which Customs denied, stating that this regulation simply defers payment of the duty until a later export, without transforming the import duty into an export duty.
The CIT upheld Customs' position, and the CAFC affirmed the ruling of the CIT, stating that there was no merit to Nufarm's constitutional challenge.
(Nufarm had based its argument on a broad interpretation of two decisions by the Supreme Court - that the Export Clause (1) barred the application of the Harbor Maintenance Tax (HMT) to exports and (2) barred the application of federal taxes to goods in export transit.)
(See ITT's Online Archives or 03/06/07 news, 07030625, for BP summary of Slip Op. 07-23, which details the CIT's ruling.)
CAFC decision 07-1220 (dated 04/07/08) available at: http://www.cafc.uscourts.gov/opinions/07-1220.pdf