## Facts

- Merck imported 35 kilograms of famotidine from Ireland in 1993, paid a 6.9% ad valorem duty, and did not export that specific duty-paid shipment.
- In 1995, Merck imported 1,195 kilograms of famotidine duty-free.
- Later in 1995, Merck exported 35 kilograms of famotidine to Mexico and Canada, drawn from the duty-free inventory.
- Merck sought unused merchandise drawback of the duties paid on the 1993 import based on fungibility/commercial interchangeability, asserting substitution unused merchandise drawback under 19 U.S.C. § 1313(j)(2).
- Customs denied the claim, applying the NAFTA limitation in 19 U.S.C. § 1313(j)(4)(A) and rejecting Merck’s reliance on NAFTA exceptions in 19 U.S.C. § 3333(a).
- The Court of International Trade sustained Customs’ denial, and Merck appealed.

## Issues

1. Whether exports of substituted, fungible merchandise to NAFTA countries can qualify for drawback under 19 U.S.C. § 3333(a), despite the NAFTA limitation on substitution drawback in 19 U.S.C. § 1313(j)(4)(A).
2. Whether § 3333(a) applies only when the actual duty-paid imported merchandise is exported, rather than commercially interchangeable substituted merchandise.

## Decision

- The Federal Circuit affirmed the judgment sustaining Customs’ denial of Merck’s drawback claim.
- The court held that § 3333(a) does not authorize drawback for exports of substituted, fungible merchandise; it applies only to exportation of the actual imported merchandise on which duty was paid.
- Because Merck exported duty-free substituted famotidine to NAFTA countries, § 1313(j)(4)(A) barred drawback under § 1313(j)(2), and § 3333(a) did not supply an alternative basis for recovery.

## Legal Principles

- For exports to NAFTA countries, 19 U.S.C. § 1313(j)(4)(A) largely eliminates substitution unused merchandise drawback otherwise available under § 1313(j)(2).
- The NAFTA drawback exceptions in 19 U.S.C. § 3333(a) are limited to specified circumstances involving the duty-paid imported merchandise itself; they do not extend to substituted, commercially interchangeable merchandise.
- Statutory interpretation should preserve Congress’s distinction between drawback for export of the same imported merchandise (§ 1313(j)(1)) and drawback for substituted merchandise (§ 1313(j)(2)), particularly where Congress expressly curtailed substitution drawback for NAFTA exports.

## Conclusion

The Federal Circuit held that Merck could not obtain drawback by exporting duty-free, fungible famotidine to Canada and Mexico while claiming duties paid on an earlier import; § 3333(a) did not permit substitution drawback, and § 1313(j)(4)(A) barred recovery for NAFTA-bound substitution exports.


Merck & Co. v. United States, 499 F.3d 1348 (Fed. Cir. 2007)