CIT Upholds Constitutionality of NAFTA Duty-Deferral Program
Article 1, Clause 5, of the Constitution, the so-called "Export Clause," provides that "No Tax or Duty shall be laid on Articles exported from any State". This clause was an issue recently in case upon which the Court of International Trade ruled, Nufarm America's Inc. v .U.S.
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Nufarm imported chemicals, temporarily free of duty, with such duties deferred until exportation. The deferral was based on Customs Regulation 19 CFR 181.53, which permits entry of merchandise under a NAFTA duty-deferral program for further processing into a new product followed by exportation to Canada or Mexico. Nufarm made entry under HTS 9813.00.05, which provides for articles to be repaired, altered, or processed (including processing resulting into a U.S. product). After processing, the merchandise was exported to Canada, and the required consumption entries, accompanied by payment of the full duties, were filed with Customs, albeit under protest.
Nufarm asserted that the regulation covering this NAFTA program was "unconstitutional both on its face and in effect". In support of their assertion, they argued that the regulation permits duties to be assessed on merchandise that is being exported and further, that it requires duty payment as a resultof the exportation of the merchandise.
The Government countered that the cited regulation merely permits the duties to be deferreduntil the goods are exported into another NAFTA country, and that the duty payment resulted from conditions agreed to at the time of importation of the merchandise.
The CIT ruled in favor of the Government and decided the regulation is not unconstitutional on its face as it "specifically provides for duty to be deferred and then later assessed on good on the basis of its condition at the time of importation." The CIT stated that 19 CFR 181.53 "operates as an import duty and not a duty on export" and thus is constitutional.
CIT Slip Op. 07-23 (dated 02/15/07) available at http://www.cit.uscourts.gov/slip_op/Slip_op07/07-23.pdf