Slip Op. 01-43
UNITED STATES COURT OF INTERNATIONAL TRADE
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MITCHELL FOOD PRODUCTS, INC. :
formerly
SOUTHERN GOLD CITRUS PRODUCTS, INC.,:
Plaintiff, :
v. : Court No. 94-05-00296
UNITED STATES, :
Defendant. :
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Opinion
[Upon trial of plaintiff's demand
for return of drawback duties,
judgment for the defendant.]
Decided: April 12, 2001
Donald F. Beach, Esq. for the plaintiff.
Stuart E. Schiffer, Acting Assistant Attorney General; David
M. Cohen, Director, and Velta A. Melnbrencis, Assistant Director,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice (Cynthia B. Schultz and Matthew D. Lee); and Assistant
Chief Counsel, International Trade Litigation, U.S. Customs Serv-
ice (Karen P. Binder), of counsel, for the defendant.
AQUILINO, Judge: The drawback of duties on imports has
been an element of federal governance of America since its
inception1, but the grant thereof has long been held to be a pri-
vilege, not a right, with doubt in regard thereto to be resolved in
favor of the government. E.g., Swan & Finch Co. v. United States,
190 U.S. 143, 146 (1903); Nestle's Food Co. v. United States, 16
Ct.Cust.Appls. 451, 455, T.D. 43199 (1929), and cases cited
1
See Act of July 4, 1789, §3, 1 Stat. 24, 26-27.
Court No. 94-05-00296 Page 2
therein. Moreover, the national Constitution, from the beginning,
has required an actual stake in a case or controversy asserted
under Article III, with the Supreme Court noting that it sometimes
remains to be seen whether the factual allegations of a complaint
necessary for standing will be supported adequately by the evidence
adduced at trial. Gladstone, Realtors v. Village of Bellwood, 441
U.S. 91, 115 n. 31 (1979).
I
The trial of plaintiff's complaint herein has left doubt,
both as to standing to actually recover and with regard to the
merits of the claim for recovery.
A
Mitchell Food Products, Inc. is introduced by the
complaint (at pages 2-3) as the putative plaintiff in the following
manner:
Southern Gold Citrus Products, Inc. (SG . . .) was
purchased in 1982 by the Seven-Up Company, a wholly owned
subsidiary of Philip Morris, Inc. Later, when Seven-Up
was sold by Philip Morris in 1986, its stock and assets
were assigned to Packaged Food & Beverage Company, Inc.
(PFB), a wholly owned corporate subsidiary of Philip
Morris, Inc. SG continued operations until an unsea-
sonable and severe frost forced it to cease production.
After cessation of operations, SG filed drawback claims
. . . to cover exportations which occurred prior to the
permanent stoppage of production.
Although ceasing operations, SG retained its cor-
porate charter pending payment of drawback and until the
Customs Service had completed Operation "Orange Squeeze."
SG's affairs were and are being administered by PFB of
Clayton, Missouri 63105.
Court No. 94-05-00296 Page 3
Early in 1993, SG was asked to relinquish its
tradename as another [] Philip Morris corporate sub-
sidiary wished its use. SG through PFB did not object to
its name transfer, and it was assigned the designation of
Mitchell Food Products, Inc. . . .
. . . [P]laintiff will be referred to as Southern Gold
Citrus Products, Inc. or the abbreviated "SG" until this
action is concluded, except for the formal, official case
designation in the heading of papers submitted to this
Court. The name "Mitchell Food Products, Inc." does not
appear on any paper or document relevant to this action,
except for the attached exhibit, to the best knowledge
and belief of the plaintiff and its attorney.
The exhibit referred to, labelled "A" to the complaint, is simply
counsel's notification of Customs of the purported change of name
of Southern Gold Citrus Products, Inc. to Mitchell Food Products,
Inc.
In their answer on behalf of the defendant, government
counsel deny the foregoing material averments "for lack of
information" and thus knowing whether either of the encaptioned
entities is a proper party plaintiff herein. Issue having been so
joined by the pleadings, and not having been resolved before
trial2, the burden was then on the plaintiff to adduce evidence to
substantiate standing to recover on the complaint. No attempt to
do so was made, which failure necessarily invokes the admonition of
the Supreme Court that the
requirements of Art. III are not satisfied merely be-
cause a party requests a court of the United States to
declare its legal rights, and has couched that request
for forms of relief historically associated with courts
of law in terms that have a familiar ring to those
trained in the legal process.
2
Cf. defendant's first proposed pretrial order, Schedules
B, F-2.
Court No. 94-05-00296 Page 4
Valley Forge Christian College v. Americans United for Separation
of Church and State, Inc., 454 U.S. 464, 471 (1982).
B
Of course, this court was not at liberty to guide counsel
in the prosecution of plaintiff's action. Hence, corporate standing
was still an open question when the parties determined to rest at
the trial, which focused on the demand for return of $828,186.97 in
drawback duties and $90,324.19 in interest. Those amounts had been
repaid to Customs following an audit by the Service of a contract
with Southern Gold Citrus Products, Inc., which the court will
refer to hereinafter as "SGCP", for accelerated payment by the
government of substitution manufacturing drawback based upon 19
U.S.C. §1313(b) and (i) and 19 C.F.R. Part 22 (1983). That part of
the Tariff Act of 1930, as amended, provided:
(b) Substitution for drawback purposes
If imported duty-paid merchandise and duty-free or
domestic merchandise of the same kind and quality are
used in the manufacture or production of articles within
a period not to exceed three years from the receipt of
such imported merchandise by the manufacturer or producer
of such articles, there shall be allowed upon the
exportation of any such articles, notwithstanding the
fact that none of the imported merchandise may actually
have been used in the manufacture or production of the
exported articles, an amount of drawback equal to that
which would have been allowable had the merchandise used
therein been imported; but the total amount of drawback
allowed upon the exportation of such articles, together
with the total amount of drawback allowed in respect of
such imported merchandise under any other provision of
law, shall not exceed 99 per centum of the duty paid on
such imported merchandise.
Court No. 94-05-00296 Page 5
* * *
(i) Time limitation on exportation
No drawback shall be allowed under the provisions of
this section unless the completed article is exported
within five years after importation of the imported
merchandise.
The contract, a synopsis of which was duly reported at T.D. 84-2(V)
(1983), 18 Cust.Bull. & Dec. 7, 123, was based upon a lengthy
written undertaking by SGCP, copies of which were introduced at
trial. The exported products for which drawback was authorized by
Customs were specified to be (1) orange juice from concentrate
(reconstituted juice), (2) frozen concentrated orange juice, (3)
bulk concentrated orange juice, and (4) drink base containing
orange solids, all derived from concentrated orange juice for
manufacturing. That basic substance, either imported, or duty-
paid, duty-free or domestic, was specified to be as defined in the
U.S. Food & Drug Administration standard of identity, 21 C.F.R.
§146.153, of not less than 55o Brix4, and to meet the Grade A
standard of the U.S. Department of Agriculture, 7 C.F.R.
§2852.2221-2231. See Plaintiff's Exhibit 1 and Defendant's Exhibit
E, Attach. 2, third page. Among other things, the SGCP undertaking
3
Cf. T.D. 85-110, 19 Cust.Bull. & Dec. 255 (1985), super-
seding T.D. 80-227(A), 14 Cust.Bull. & Dec. 533, 534-36 (1980).
4
According to Webster's Third New International Dictionary
of the English Language Unabridged 279 (1981), this is "a hydro-
meter scale for sugar solutions so graduated that its readings in
degrees Brix at a specified temperature represent percentages by
weight of sugar in the solution". The proper noun is that of its
inventor, Adolf F. Brix.
Court No. 94-05-00296 Page 6
described its contemplated production of the four articles. It
also made the following commitments:
PROCEDURES AND RECORDS MAINTAINED
We will maintain records to establish:
1. The identity and specifications of the merchandise we designate;
2. The quantity of merchandise of the same kind and quality as the
designated merchandise we used to produce the exported article;
3. That, within 3 years after receiving it at our factory, we used
the designated merchandise to produce articles. During the same
3 year period, we produced the exported articles.
We realize that to obtain drawback the claimant must establish that
the completed articles were exported within 5 years after
importation of the imported merchandise.
Our records establishing our compliance with these requirements
will be available for audit by Customs during business hours. We
understand that drawback is not payable without proof of com-
pliance.
INVENTORY PROCEDURES
Our inventory procedures described below will provide all of the
information necessary to satisfy the legal requirements included in
the above heading of "Procedures and Records Maintained".
RECEIPT AND STORAGE OF DESIGNATED MERCHANDISE
The containers of imported frozen concentrated orange juice or
concentrated orange juice for manufacturing are stored separate- ly
upon receipt. Our receiving records will show:
1. Date of receipt
2. From whom received
3. Quantity received
4. Quality received (degree Brix)
5. Container numbers
6. Import entry number and date of entry
7. When imported and domestic materials are
comingled [sic] in storage prior to use,
our accounting method will be on a first-
in-first-out basis.
Court No. 94-05-00296 Page 7
PRODUCTION OF EXPORTED ARTICLES
Our production records will reflect the following information:
1. What was produced and date or period of production.
2. What was used to produce the exported article.
Our records will indicate the kind and quality
of the material used to produce the exported
article.
USE OF DESIGNATED ARTICLE
Our records will reflect the date we used the designated merchan-
dise to produce articles.
SHIPPING RECORDS
Our shipping records will indicate the date the exported product
was shipped, to whom, the name of the exporting carrier, and the
quantity and identity of all products shipped.
BASIS OF CLAIM FOR DRAWBACK
Our claim for drawback will be based on the quantity of concen-
trated orange juice for manufacturing used to produce the export-ed
articles.
AGREEMENTS
The corporation specifically agrees that it will:
1. Comply fully with the terms of this statement when
claiming drawback;
2. Open its factory and records for examination at all
reasonable hours by authorized government officers;
3. Keep its drawback-related records and supporting data
for at least 3 years from the date of liquidation of
any drawback claim predicated in whole or in part upon
this statement;
4. Keep this statement current by reporting promptly to
the Regional Commissioner who liquidates its claims
any changes in the number of locations of its offices
or factories, the corporate name, or the corporate or-
ganization by secession or reincorporation;
5. Keep this statement current by reporting promptly to
the Headquarters, U.S. Customs Service all other
changes affecting information contained in this state-
ment;
Court No. 94-05-00296 Page 8
6. Keep a copy of this statement o[n] file for ready re-
ference by employees and require all officials and
employees concerned to familiarize th[e]mselves with
the provisions of this statement; and
7. Issue instructions to insure proper compliance with
Title 19, United States Code, Section 1313 (a) & (b),
Part 22 of the Customs Regulations and this statement.
Id., fifth to seventh pages. Pursuant to this agreement, SGCP
applied for and received drawback on numerous shipments, including
those at issue herein, which are described on Customs Forms 7575-B,
Drawback Entry Nos. 84-410909, 85-509909, 85-521807 and 85-521808.
See Defendant's Exhibits A, B, C, D.
Subsequent to accelerated payments thereon, Customs
undertook to audit those shipments, by which time the Service had
revised its regulations which govern drawback per part 191 of 19
C.F.R. See T.D. 83-212, 17 Cust.Bull. & Dec. 465 (1983). Each of
the resultant audit reports recommended recovery from SGCP of the
drawback paid on the aforenumbered entries. See generally
Defendant's Exhibits E, F, G, H. The recommendation(s) were based
upon the following negative conclusions:
1. The 1984 production records were not available. As
a result, we could not determine the manufacturing
time frame of the designated imports, use in pro-
duction, quantity and quality of the substituted
materials, CR 191.32(a)(1)(2)(4).
2. The records tracing the transfer of the designated
import from the receiving department to the produc-
tion department were not available. Southern Gold
used internally designated drums for the production
of the exported products. The drum numbers indicated
on the production records were different from the
drum numbers identified in the receiving records.
Compliance with Section 191.32(a)(1)(3) of Customs
Regulations was not met.
Court No. 94-05-00296 Page 9
* * *
4. The manufacturing time frame of the designated
import could not be determined because the pro-
duction records were not available. Compliance
with Section 191.32(a)(3) of the Customs Regula-
tions could not be established.
Defendant's Exhibits G, H, seventh, eighth pages. See Defendant's
Exhibit F, eighth page. In addition to the first two conclusions,
which were the same for entry No. 84-410909, the report of its
audit concluded:
3. The total single strength gallons of orange juice
concentrate for manufacturing used to produce orange
drink base, super succo orange and citrus punch drink
was overstated by 10,614.87 single strength gallons
and overstated the duty refund by $3,715.19. The
overstatement was due to the mixture of orange wash
pulp in the exported products.
Defendant's Exhibit E, eighth page. Thus, with the exception of
this one substantive negative conclusion, the audit
recommendation(s) were based on lack of the proof required by the
SGCP agreement, supra, and the governing Customs regulations.
Some three and a half years later, company counsel un-
dertook to locate the records claimed to support the contested
drawback. See, e.g., Defendant's Exhibits I, J. That effort
proved only minimally successful, with the Service's "follow-up
verification" affirming denial of drawback, save $17,598 on entry
No. 84-410909. Defendant's Exhibit L. According to plaintiff's
Court No. 94-05-00296 Page 10
summons herein, the SGCP entries were finally liquidated in ac-
cordance with the audit recommendation(s), modified as indicated
with regard to that particular entry. The protest thereof duly
filed with Customs was denied "because of certain missing rec-
ords", and this action commenced pursuant to 28 U.S.C. §1581(a).
(1)
The trial herein afforded the plaintiff another
opportunity to establish its entitlement to drawback on the entries
in question. It relies on Aurea Jewelry Creations, Inc. v. United
States, 13 CIT 712, 720 F.Supp. 189 (1989), aff'd, 932 F.2d 943
(Fed.Cir. 1991), to the effect that testimonial evidence can
supplant missing documentation in an action such as this. That
case involved a claim for drawback under 19 U.S.C. §1313(a) on
imported gold chain and bracelets which were melted into gold
ingots by JMS Manufacturing Co., a wholly owned subsidiary of
Aurea, and were then exported. Customs rejected the drawback claim
"on the ground that Aurea failed to maintain records". 13 CIT at
713, 720 F.Supp. at 190. At trial, Aurea explained that the
records were lost when JMS went out of business, whereupon it
called the company's former plant manager and former controller to
testify with regard to the maintenance of those records, as well as
their specific contents. The court accepted their testimony as
Court No. 94-05-00296 Page 11
"dispel[ling] Customs' underlying doubts in denying drawback"5 and
thereby held that the plaintiff had made a valid claim for
drawback. The court of appeals affirmed, noting that a
claimant's testimonial evidence thus could be used to
satisfy a two-pronged inquiry -- 1) whether appropriate
documentation was maintained as required; and 2) whether
the contents of that documentation adequately established
claimant's right to the drawback.
Aurea Jewelry Creations, Inc. v. United States, 932 F.2d 943, 946
(Fed.Cir. 1991).
The plaintiff in the action at bar presents little
conclusive evidence. Customs denied drawback after audit because
the inventory and production records, required to show the transfer
of imports from one department to the other, were unavailable. In
lieu thereof, the plaintiff called one witness to the stand,
Rosaria M. Wills, former controller of SGCP, who was competent to
testify regarding the required recordation6, but who was, at best,
tangentially familiar with the production process7, e.g.:
Q When you were preparing a drawback claim, what
did you first do?
A I would . . . receive a bill of lading from the
warehouse, telling me that [a] shipment was going over-
5
Aurea Jewelry Creations, Inc. v. United States, 13 CIT
712, 715, 720 F.Supp. 189, 192 (1989), aff'd, 932 F.2d 943
(Fed.Cir. 1991).
6
See, e.g., trial transcript ("Tr."), pp. 50, 67-75, 77-88,
90-124, 133-34.
7
See, e.g., id. at 36-39.
Court No. 94-05-00296 Page 12
seas. And then, [I] would receive a seventy-five-eleven,
which is a blue form, notice of exportation. Then, I
would get a copy of the invoice, and . . . the manifest
. . . show[ing] the drums that left with that shipment.
. . .
And, [I] would combine all this information
together, as far as the manifest, the bill of lading,
notice of exportation, and the vessel. []
* * *
Then, I would match up all this information . . .
and make up all the forms. Then, . . . with . . . the
president of the company, [who] had been a production
manager,[] we w[ould] go to the drums from the manifest,
to see -- and he would go to his other score sheet, which
was different. . . .
* * *
. . . I would check against the score sheet to see if
those drums were the ones produced. But we went another
step further, and went back and check[ed] each drum, to
be sure that it fit the requirement of the U.S. Customs,
as far as [] full drawback . . ..
Tr. at 83-85. In other words per the record, the witness was "not
in production"8 and thus did not have direct knowledge of the
makeup of the product. In fact, all of the drawback claims were
filled out with the assistance of the president and former
production manager of SGCP.9 Hence, the court cannot, and
therefore does not, find that Mrs. Wills was sufficiently familiar
with production or otherwise satisfied the second prong of Aurea
Jewelry, 932 F.2d at 946, supra.
8
Id. at 157.
9
See id. at 157-58, 160-61.
Court No. 94-05-00296 Page 13
(2)
On its part, the defendant adduced evidence at trial
which engenders doubt as to whether the exported goods conformed
with SGCP's drawback contract. That contract committed the
exported bulk concentrated orange juice to "a minimum USDA Grade
A score of 94"10, but that grade apparently was not always achieved.
For example, ungraded navel oranges were used in the manufacture of
product on occasion: On September 14, 1983, 36 drums of such
oranges were sent to the plant. See Defendant’s Exhibit T24, pp.
1, 2; Tr. at 149-51. Drink base produced on that date was shipped
out on the 28th of that same month. See Defendant’s Exhibit A, p.
4; Tr. at 149-51. On December 21, 1983, one bin of navels went to
the plant, additional drums were sent three days later, and on
December 28th 48 drums were delivered. See Defendant’s Exhibit T4,
p. 1; Tr. at 140-43. Product from those dates was included in a
drawback claim in which 23,022 gallons were cleared on December 30,
1983. See Defendant’s Exhibit A, p. 3; Tr. at 140-43. Navel
oranges were delivered to the plant for processing on January 4,
1984. See Defendant’s Exhibit T9, p. 1; Tr. at 145-47. Some
18,590 gallons of product processed on that day cleared Customs
three days later. See Defendant’s Exhibit A, p. 3; Tr. at 145-47.
Twenty four drums of navels were delivered to the plant on February
28, 1984. See Defendant’s Exhibit T21, pp. 1, 4; Tr. at 148-49.
10
Defendant's Exhibit E, Attach. 2, fourth page.
Court No. 94-05-00296 Page 14
The drawback contract also required the use of essential
oils and flavoring components in the manufacture of bulk
concentrated orange juice. See Defendant’s Exhibit E, Attach. 2,
p. 4; Tr. at 164-65. On at least three occasions, the record
reflects that such required additives were left out of the
manufacturing process. On October 27, 1983, neither essence nor
oil was transferred to production, and the natural aroma was
returned to stock. See Defendant’s Exhibit T1, p. 1; Tr. at 167-
68. Product created on that date was shipped on the Great West and
Alliance V-156 on the 28th and 30th of October, respectively. See
Defendant’s Exhibit A, p. 3. On December 26, 1983, again no oils
or essences were transferred to the plant, the product of which was
exported on the Aime Enterprise that same month. See Defendant’s
Exhibit T7, pp. 1, 2 and Exhibit A, p. 3; Tr. at 169-70. No oils
or essences were transferred to the plant for production on
February 24, 1984. See Defendant’s Exhibit T5, p. 1; Tr. at 168-
69. The product manufactured that day was exported on the Pacer V-
84 and the Lindsey Transport on February 27th and on March 5th,
respectively. See Defendant’s Exhibit A, p. 3.
Given such shortcomings, the court finds that Customs was
on sustainable ground after audit in denying SGCP drawback. Cf. 19
C.F.R. §191.23(d) (1987).
Court No. 94-05-00296 Page 15
II
In sum, the burden of proving that either Mitchell Food
Products, Inc. or Southern Gold Citrus Products, Inc. is entitled
to the return of the drawback duties ceded to the U.S. Customs
Service after audit has not been met. Judgment will enter
accordingly.
Decided: New York, New York
April 12, 2001
_____________________________
Judge