U.S. Shoe Corp. v. U.S.

• Decision Date: 03 June 1997
• Docket Number: No. 96-1210,96-1210
• Citation: 114 F.3d 1564
• Parties: , 1997 A.M.C. 2551, 79 A.F.T.R.2d 97-2813, 97-1 USTC P 70,078 UNITED STATES SHOE CORPORATION, Plaintiff-Appellee, v. The UNITED STATES, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1564

114 F.3d 1564

19 ITRD 1193, 1997 A.M.C. 2551, 79

A.F.T.R.2d 97-2813,

97-1 USTC P 70,078

UNITED STATES SHOE CORPORATION, Plaintiff-Appellee, v. The UNITED STATES, Defendant-Appellant.

No. 96-1210.

United States Court of Appeals Federal Circuit.

June 3, 1997.

Brian S. Goldstein, Siegel, Mandell & Davidson, P.C., New York City, argued for plaintiff-appellee. With him on the brief were Steven S. Weiser, Laurence M. Friedman, Paul A. Horowitz, and Gregory S. McCue.

David M. Cohen, Director, Commercial Litigation Branch, Civil Division, Department of Justice, Washington, DC, argued for defendant-appellant. With him on the brief were Frank W. Hunger, Assistant Attorney General, Jeanne E. Davidson, Assistant Director, and Todd M. Hughes, Attorney. Of counsel on the brief were Richard McManus, Office of the Chief Counsel, United States Customs Service, and Martin R. Cohen, Office of the General Counsel, Army Corps of Engineers, Washington, DC.

Melvin S. Schwechter, LeBoeuf, Lamb, Greene & MacRae, L.L.P., Washington, DC, for amici curiae Aluminum Company of America, et al. With him on the brief were John C. Cleary and Julie A. Coletti.

Thomas J. Kovarcik, of Irving A. Mandel, Counselor At Law, New York City, for amicus curiae Allied Textile Sales Company. With him on the brief were Irving A. Mandel, Aventura, FL, Steven R. Sosnov, Norristown, PA, and Jeffrey H. Pfeffer, Plainview, NY.

Robert E. Burke, Barnes, Richardson & Colburn, Chicago, Illinois, for amicus curiae Amoco Chemical Company. With him on the brief were Christopher E. Pey and Cindy H. Chan. Of counsel was Lawrence M. Friedman.

John M. Peterson, Neville, Peterson & Williams, New York City, for amici curiae Aris-Isotoner, Inc., et al. Of counsel on the brief were George W. Thompson, James A. Marino, and Arthur K. Purcell.

Mark S. Zolno, Katten, Muchin & Zavis, Chicago, Illinois, for amici curiae Baxter Healthcare Corporation, et al. With him on the brief were Michael E. Roll and Gregory W. Bowman.

William D. Outman, II, Baker & McKenzie, Washington, DC, for amici curiae Brown-Forman Corp., et al. With him on the brief were Kevin M. O'Brien, Lynn S. Baker, and Teresa A. Gleason.

Barry E. Cohen, Crowell & Moring, L.L.P., Washington, DC, for amicus curiae E.I. du Pont de Nemours & Co.

Patrick D. Gill, Rode & Qualey, New York City, for amici curiae General Chemical Corporation, et al. With him on the brief were John S. Rode, Michael S. O'Rourke, and R. Brian Burke.

Steven P. Florsheim, Grunfeld, Desiderio, Lebowitz & Silverman LLP, New York City, for amici curiae Mondial International Corp., et al. With him on the brief were Robert B. Silverman and Erik D. Smithweiss.

Frederic L. Wood, Donelan, Cleary, Wood & Maser, P.C., Washington, DC, for amicus curiae The National Industrial Transportation Munford Page Hall, II, Dorsey & Whitney LLP, Washington, DC, for amicus curiae New Holland North America, Inc. With him on the brief were John B. Rehm, Robert W. Bras, and Karen A. Zughaib.

League. With him on the brief were Nicholas J. DiMichael, and Antoine P. Cobb.

Peter Buck Feller, McKenna & Cuneo, L.L.P., Washington, DC, for amicus curiae Swisher International, Inc. With him on the brief were Lawrence J. Bogard, Joseph F. Dennin, Michael K. Tomenga, and Brian J. O'Shea.

Steven H. Becker, Coudert Brothers, New York City, for amici curiae Texaco Refining and Marketing Inc., et al. With him on the brief were Charles H. Critchlow and Claire R. Kelly.

Before MAYER, MICHEL, RADER, and BRYSON, Circuit Judges, and SMITH, Senior Circuit Judge.

Opinion for the court filed by Circuit Judge MICHEL. Dissenting opinion filed by Circuit Judge MAYER.

MICHEL, Circuit Judge.

The United States ("the government") appeals from the December 4, 1995 decision of the United States Court of International Trade granting summary judgment to United States Shoe Corporation ("US Shoe") and holding that the court possessed jurisdiction over this case pursuant to 28 U.S.C. § 1581(i), not 28 U.S.C. § 1581(a), that the Harbor Maintenance Tax ("HMT") violates the United States Constitution and is therefore void as applied to exports. See United States Shoe Corp. v. United States, 907 F.Supp. 408 (Ct. Int'l Trade 1995). The case was submitted for our decision after oral argument by the parties before a five-judge panel on February 7, 1997, following briefing not only by the parties but also by numerous amici. The Court of International Trade correctly exercised jurisdiction under 28 U.S.C. § 1581(i) and correctly concluded that the HMT violates the Export Clause, U.S. Const., Art. 1, § 9, cl. 5, because it is a tax on exports rather than a user fee. The HMT, as applied to exports, is not a user fee but rather a tax because it is paid by the exporter, not the direct user of the harbor, and is calculated solely based on the value of the cargo loaded for export and bears no reasonable relationship to the cost of the use of the port facilities maintained by the government and therefore cannot be a fair approximation of use. We therefore affirm the judgment invalidating the HMT as applied to exports and ordering a refund to U.S. Shoe.

BACKGROUND

The HMT was imposed by Congress as part of the Comprehensive Water Resources Development Act of 1986 ("the Act"), Pub.L. No. 96-622, 100 Stat. 4082 (codified at 26 U.S.C. § 4461). The Act also established the Harbor Maintenance Trust Fund ("the Trust Fund") to provide for the operation and maintenance of channels and harbors. The details of the HMT, the Act, and the Trust Fund relevant to this lawsuit are set forth in the trial court's opinion and are not repeated here in detail. See United States Shoe, 907 F.Supp. at 411-12.

In short, the Act imposes an ad valorem tax of 0.125 percent of the value of the commercial cargo involved in "any port use" of federally maintained navigable waterways. 26 U.S.C. §§ 4461, 4462(a)(2) (1994). The HMT is imposed on both exports and imports. As it specifically applies to exports, the HMT statute provides:

(a) General rule.--There is hereby imposed a tax on any port use.

(b) Amount of tax.--The amount of tax imposed by subsection (a) on any port use shall be an amount equal to 0.125 percent of the value of the commercial cargo involved.

(c) Liability and time of imposition of tax.--

(1) Liability.--The tax imposed by subsection (a) shall be paid by--

...

(B) in the case of cargo to be exported from the United States, the exporter....

(2) Time of imposition.--Except as provided by regulations, the tax imposed by subsection (a) shall be imposed--

(A) in the case of cargo to be exported from the United States, at the time of loading . ...

26 U.S.C. § 4461 (1994) (emphasis added). The term "port use" is defined as "the loading of commercial cargo on, or ... the unloading of commercial cargo from, a commercial vessel at a port." 26 U.S.C. § 4462(a)(1) (1994). The term "port" is defined as "any channel or harbor (or component thereof) in the United States, which ... (i) is not an inland waterway, and (ii) is open to public navigation." 26 U.S.C. § 4462(a)(2)(A) (1994). The term "commercial cargo" is defined as "any cargo transported on a commercial vessel, including passengers transported for compensation or hire," but does not include "bunker fuel, ship's stores, sea stores, or the legitimate equipment necessary to the operation of a vessel, or ... fish or other aquatic animal life caught and not previously landed on shore." 26 U.S.C. § 4462(a)(3) (1994). Thus, although there are certain exemptions, the tax is generally imposed against all imports, exports, domestic shipments, and passengers. See 26 U.S.C. §§ 4461(c)(1), 4462(a)(3)(A) (1994). ¹ Money collected pursuant to the Act is transferred by Customs to the Trust Fund for disbursal upon further appropriation by Congress. See 26 U.S.C. § 9505(b) (1994). The fees were designed to finance the cost of harbor dredging. See S.Rep. No. 99-126 at 9 (1986), reprinted in 1986 U.S.C.C.A.N. 6639, 6647. By the end of fiscal year 1994, the total amount of fees collected and deposited in the Trust Fund was over 2.7 billion dollars, of which over 700 million dollars was paid by exporters.

Although the HMT was first enacted in 1986, there were no constitutional challenges until recently. US Shoe paid the HMT on articles exported for the period April 1 through June 30, 1994. US Shoe then brought suit in the Court of International Trade for the refund of these payments on the ground that the HMT, as applied to exports, is unconstitutional. In January 1995, given the large number of pending lawsuits challenging the constitutionality of the HMT ², the Court of International Trade established a three-judge panel and heard this case as a test case. See 28 U.S.C. § 255 (1994) (authorizing the chief judge of the Court of International Trade to designate a three-judge panel to hear cases raising the constitutionality of any Act of Congress or which have broad or significant implications in the administration or interpretation of customs laws).

The parties filed cross-motions for summary judgment and, on October 25, 1995, the trial court issued its decision granting U.S. Shoe's motion for summary judgment. United States Shoe, 907 F.Supp. at 408. The trial court first concluded that the HMT was unconstitutional as applied to exports because it constituted a tax, rather than a user fee, as it did not have regulation as its primary purpose and it did not recoup the costs of services provided to the payor. Id. at 413-18. Specifically, the trial court noted that "the Act neither discourages nor regulates use of a harbor; neither does it so intend." Id. at 413. The trial court also found that "the primary purpose of the [HMT] is to raise revenue, as Congress has imposed 'a duty under the pretext of fixing a fee.' " Id. at 414 (citation omitted). The trial court further determined that jurisdiction was not properly based on 28 U.S.C. § 1581(a), because there was no...