Ammex, Inc. v. McDowell

• Citation: 24 F.4th 1072
• Decision Date: 03 February 2022
• Docket Number: No. 20-1250,20-1250
• Parties: AMMEX, INC., Plaintiff-Appellant, v. Gary MCDOWELL, Director for the Michigan Department of Agriculture & Rural Development, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

24 F.4th 1072

AMMEX, INC., Plaintiff-Appellant,

v.Gary MCDOWELL, Director for the Michigan Department of Agriculture & Rural Development, Defendant-Appellee.

No. 20-1250

United States Court of Appeals, Sixth Circuit.

Argued: March 9, 2021

Decided and Filed: February 3, 2022

ARGUED: Leah A. Mintz, DUANE MORRIS LLP, Philadelphia, Pennsylvania, for Appellant. Elizabeth A. Morrisseau, OFFICE OF THE MICHIGAN ATTORNEY GENERAL, Lansing, Michigan, for Appellee. ON BRIEF: Leah A. Mintz, Robert M. Palumbos, DUANE MORRIS LLP, Philadelphia, Pennsylvania, for Appellant. Elizabeth A. Morrisseau, Danielle Allison-Yokom, OFFICE OF THE MICHIGAN ATTORNEY GENERAL, Lansing, Michigan, for Appellee.

Before: GRIFFIN, WHITE, and BUSH, Circuit Judges.

WHITE, J., delivered the opinion of the court in which GRIFFIN and BUSH, JJ., joined. BUSH, J. (pg. 1085), delivered a separate concurring opinion.

OPINION

HELENE N. WHITE, Circuit Judge.

Plaintiff-Appellant Ammex, Inc. (Ammex) appeals the district court's dismissal of its amended complaint. Ammex seeks to prevent Defendant-Appellee Michigan Department of Agriculture and Rural Development (MDARD) from enforcing a federal gasoline-volatility regulation against it, arguing that the regulation is inapplicable to export-only gas stations and conflicts with the customs statute that authorizes Ammex's duty-free status. For the reasons below, we AFFIRM.

I.

Ammex owns and operates a duty-free gas station that is located in Wayne County, Michigan, near the bridge to Canada, but positioned "beyond the exit point" for domestic commerce established by the United States Customs and Border Protection (CBP). This litigation began in 2012, when MDARD sought to enforce an Environmental Protection Agency (EPA) rule requiring gas stations in Wayne County to dispense low-pressure gasoline in the summer. MDARD, in conjunction with the EPA, implemented this rule to bring Southeast Michigan's ozone levels into compliance with the Clean Air Act. Because of its unique location and certain sales privileges granted to it by United States customs law, Ammex has resisted efforts to apply the rule to its gasoline sales.

This is the second time these parties have been to this court to dispute MDARD's enforcement of the rule against Ammex. We first addressed this dispute in 2019, when we determined that MDARD was enforcing federal regulatory law, and accordingly was not in violation of the Supremacy Clause or dormant Foreign Commerce Clause. We now review Ammex's updated challenges: first, that the environmental rule, properly construed, does not apply to Ammex; and second, that the customs statute giving Ammex the right to sell duty-free goods supersedes the environmental regulation and renders it unenforceable against Ammex.

A.

We begin with a review of the environmental laws at issue in this case.¹ In 1970, Congress amended the Clean Air Act (CAA) to direct the EPA to establish National Ambient Air Quality Standards (NAAQS) for certain air pollutants. See 42 U.S.C. § 7409. "Although the [NAAQS] are set federally, the ‘primary responsibility for assuring’ they are met lies with the States." Sierra Club v. Korleski , 681 F.3d 342, 343 (6th Cir. 2012) (quoting 42 U.S.C. § 7407(a) ). The CAA thus directs each state to propose a state implementation plan (SIP) that "specif[ies] the manner in which national ... ambient air quality standards will be achieved and maintained" in that state. 42 U.S.C. § 7407(a). SIPs are subject to EPA approval, and after the appropriate time for notice and public comment, the EPA publishes notice of approved SIPs in the Federal Register. Id. § 7410(h)(1), (k)(1)(B), (k)(3).

In 1990, Congress again amended the CAA to, among other things, set a national Reid Vapor Pressure (RVP)² standard of 9.0 pounds per square inch (psi) for gasoline sales during certain times of the year. See id. § 7545(h). Congress prohibited states from setting a different RVP standard, see id. § 7545(c)(4)(A)(ii), unless the EPA finds the deviation "necessary" to achieve a NAAQS and approves the modified standard in the state's SIP. See id. § 7545(c)(4)(C)(i) (noting that a deviation is "necessary" if "no other measures that would bring about timely attainment exist, or if other measures exist and are technically possible to implement, but are unreasonable or impracticable").

In 2004, the EPA designated eight counties in southeast Michigan, including Wayne County, as "nonattainment" areas for the ozone national ambient air quality standards. Approval and Promulgation of Air Quality Implementation Plans; Michigan; Control of Gasoline Volatility, 71 Fed. Reg. 46879 (Aug. 15, 2006). In response, Michigan enacted House Bill 5508, which amended Mich. Comp. Laws (MCL) § 290.650d (hereinafter the "Summer Fuel Law") to limit the RVP for gasoline sold within those eight counties during the summer months. The Summer Fuel Law states:

Beginning June 1 through September 15 of 2007 and for that period of time each subsequent year, the vapor pressure standard shall be 7.0 psi for dispensing facilities in Wayne, Oakland, Macomb, Washtenaw, Livingston, Monroe, St. Clair, and Lenawee counties.

MCL § 290.650d. The law defines "dispensing facility" as "a site used for gasoline refueling." Id. § 290.642(m). MDARD is responsible for enforcing this law. Id. § 290.647. The EPA Administrator, concluding that Michigan's proposed seasonal 7.0 RVP standard for the designated counties was "necessary" to achieve the national air quality standard for ozone, approved the Summer Fuel Law and incorporated it by reference into the Code of Federal Regulations at 40 C.F.R. § 52.1170. See 72 Fed. Reg. 4432, 4434–35 (Jan. 31, 2007) (announcing plan approval and amendment of § 52.1170 ).

B.

Ammex operates a duty-free store and gas station at the foot of the Ambassador Bridge, which connects Detroit, Michigan to Windsor, Ontario. Although physically located in Wayne County, Michigan, Ammex is strategically placed at the base of the bridge, beyond a United States Customs "exit point" so that after filling up their gas tanks, consumers have "no practical alternative" but to merge onto the Bridge and exit the United States. See 19 C.F.R. § 19.35(d). This location makes Ammex a "border store" within the meaning of United States customs regulations and gives Ammex its unique competitive advantage: because Ammex exclusively sources its gasoline from foreign trade zones, under United States federal customs law, the gasoline it sells never enters domestic commerce. See 19 U.S.C. § 1555. Accordingly, Ammex can sell its gasoline duty and tax free. See 19 U.S.C. § 1555(b)(1) ("Duty-free sales enterprises may sell and deliver for export from the customs territory duty-free merchandise in accordance with this subsection and such regulations as the Secretary may prescribe to carry out this subsection."). Within the comprehensive statutory scheme governing duty-free stores, known as the Warehousing Act, is the following statute describing warehousing procedures for dutiable merchandise:

Any merchandise subject to duty (including international travel merchandise), with the exception of perishable articles and explosive substantives other than firecrackers, may be entered for warehousing and be deposited in a bonded warehouse at the expense and risk of the owner[,] purchaser, importer, or consignee. Such merchandise may be withdrawn ... for exportation to a foreign country ... without the payment of duties thereon, or for transportation and rewarehousing at another port or elsewhere, or for transfer to another bonded warehouse at the same port[.]

Id. § 1557(a)(1) (entitled "Entry for Warehouse," subtitled "Withdrawal of merchandise; time, payment of charges," and referred to hereinafter as "the Withdrawal Statute"). Congress defines "merchandise" as "goods, wares, and chattels of every description." Id. § 1401(c). Merchandise is "subject to duty" if Congress has designated it as dutiable in the Harmonized Tariff Schedule of the United States ("Harmonized Tariff Schedule"). Id. § 1500(b) (providing that CBP "shall, under rules and regulations prescribed by the Secretary [of the Treasury,] ... fix the final classification and rate of duty applicable to ... merchandise"); see also id. § 1202 (noting that a "current version of the Harmonized Tariff Schedule is maintained and published periodically by the United States International Trade Commission and is available on their website").

Ammex began selling gasoline in the late 1990s and sells about 400,000 gallons of gasoline each month. In 2000, Ammex successfully sued CBP for the right to sell its gasoline and diesel fuel duty-free. Ammex, Inc. v. United States , 24 C.I.T. 851, 857, 116 F.Supp.2d 1269 (2000) ( Ammex I ). Ammex represents that it is the only store in the United States that sells duty-free gasoline.

C.

In the summer of 2012, MDARD tested Ammex's gasoline and found that it had an RVP that exceeded the Summer Fuel Law's 7.0 psi requirement. MDARD issued a stop-sale order preventing Ammex from selling the non-compliant gasoline. MDARD filed an action against Ammex in state court, and the parties eventually reached a settlement that (1) required Ammex to sell gasoline that complied with the 7.0 RVP standard between June 1 and September 15 of each year; and (2) provided that the state court retained jurisdiction to enforce the settlement agreement for three years. Ammex sold gasoline that complied with the Summer Fuel Law during the summers of 2013 through 2017.

In 2018, Ammex began having trouble sourcing conforming gasoline from a foreign source. Facing the prospect of either losing its duty-free status or paying significant daily fines to MDARD, Ammex petitioned the federal district court for an order enjoining MDARD from enforcing the Summer Fuel Law against it. Ammex alleged that MDARD's attempts to enforce the Summer Fuel Law, which it conceptualized as state law, violated both the dormant Foreign Commerce Clause and the...