Ammex Inc. v. U.S., SLIP OP. 04-89. Court No. 02-00361.

CourtU.S. Court of International Trade
Writing for the CourtBarzilay
Citation341 F.Supp.2d 1308
PartiesAMMEX, INC., Plaintiff, v. UNITED STATES, Defendant.
Decision Date20 July 2004
Docket NumberSLIP OP. 04-89. Court No. 02-00361.
341 F.Supp.2d 1308
AMMEX, INC., Plaintiff,
v.
UNITED STATES, Defendant.
SLIP OP. 04-89. Court No. 02-00361.
United States Court of International Trade.
July 20, 2004.

Steptoe & Johnson, Washington, DC, Herbert C. Shelley, (J. William Koegel Jr.), Alice A. Kipel, for Plaintiff.

Peter D. Keisler, Assistant Attorney General, United States Department of Justice, (Barbara S. Williams), Attorney-in-Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, (Amy M. Rubin), Trial Attorney; Beth C. Brotman, Attorney, Office of Assistant Chief Counsel, U.S. Bureau of Customs and Border Protection, for Defendant, of counsel.

OPINION

BARZILAY, Judge.


This opinion joins the earlier writings of this Court addressing the issue of whether a duty-free store can sell gasoline to travelers exiting the United States at its northern border.1 Before the court is a USCIT Rule 56.1 Motion for Judgment upon an Agency Record by Plaintiff Ammex, Inc. In this action, Ammex challenges the Headquarters ("HQ") ruling letter 229215 (hereinafter "Revocation Ruling"), dated November 9, 2001, (AR.2 19), in which the United States Customs Service3 revoked its earlier letter ruling, dated September

Page 1309

5, 2000, (AR.6), authorizing Ammex to sell gasoline and diesel fuel as duty-free merchandise at its Ambassador Bridge duty-free store on the U.S.-Canadian border. Ammex also challenges "Revocation of Ruling Letter and Treatment Relating to Gasoline & Diesel Fuel in a Class 9 Customs Bonded Warehouse," dated November 7, 2001, and published on November 21, 2001, in Customs Bulletin & Decisions, vol. 35, no. 47 on page 5 (hereinafter "General Revocation"). (AR.22.) Because the court decides that, before its decision to revoke, Customs should have determined whether Ammex's fuel had in fact been assessed any federal tax, and because the record reflects that no federal tax had been assessed on Ammex's fuel at the time of the Revocation Ruling, Ammex's Motion for Judgment upon an Agency Record is granted.4

I.

The decision in the case is compelled by its unique facts as outlined below. Ammex's Ambassador Bridge facility is situated beyond a United States Customs exit point within two miles of the Canadian border. All entry into and exit from the facility is regulated and controlled by U.S. Customs. The facility is configured so that any vehicle entering the facility must necessarily come from the United States and, when exiting the facility, it must necessarily enter Canada. Ammex's store sells a variety of duty-free items as well as retail gasoline and diesel fuel, the duty-free status of which is now in dispute. The fuel in question came into the country from Canada wholesale and is sold at retail to customers entering Canada.

Partly because of its unique circumstances, the case has so far amassed an interesting and active litigation history. On August 25, 2000, this Court (per Judge Wallach) upheld Plaintiff's challenge to a 1998 Customs ruling (HQ 227385), which extended an earlier Customs decision and held diesel fuel and gasoline eligible for sale from duty-free stores (including Ammex's facility) under 19 U.S.C. §§ 1555(b) and 1557(a)(1). See Ammex, Inc. v. United States, 24 CIT 851, 116 F.Supp.2d 1269, 1273-76 (2000) ("Ammex I"). The Court reasoned as follows: The plain language of section 1557(a)(1)5 of Title 19 shows that

Page 1310

there can be only two exceptions to the types of dutiable merchandise that may be entered into a bonded warehouse: perishables and explosives. Since gasoline and diesel fuel do not fall under these exceptions, and since duty-free stores are a type of bonded warehouse, under section 1557(a)(1) diesel fuel and gasoline are eligible for sale from duty-free stores. The Court held that, by extension, it was error for Customs to exclude the fuel from entry into Ammex's sterile bonded warehouse.

Following the Court's order, by a letter dated September 5, 2000, Customs granted Plaintiff's request to expand its Class 9 duty-free warehouse to encompass gasoline and diesel fuel tanks located on the facility. Seeking greater assurance, on October 23, 2000, Ammex solicited another letter from Customs to certify that fuel sold in Ammex's duty-free store was exempt from future taxes, which request Customs understandably forwarded to the Internal Revenue Service ("IRS").

On January 8, 2001, the IRS issued an informal letter stating that under section 4081 of the Internal Revenue Code, 26 U.S.C. § 4081, a tax must be "imposed" on any taxable fuel entering the United States, including gasoline and diesel fuel for consumption, use, or warehousing. Upon gathering this new information, on November 21, 2001, after a notice and comment period, Customs issued the Revocation Ruling disallowing Ammex from selling duty-free gasoline and diesel fuel at the Ambassador Bridge facility on the basis that merchandise subject to federal excise taxes cannot be entered into a Class 9 Customs-bonded warehouse (and subsequently sold duty-free).

Upon receiving the revocation decision, Ammex returned to this Court to challenge the Revocation Ruling and seek enforcement of the Court's earlier order in Ammex I. The Court (again per Judge Wallach) declined Ammex's arguments and found that the intervening IRS letter (and new information contained therein) distinguished the issue from that of Ammex I. See Ammex, Inc. v. United States, 26 CIT ___, 193 F.Supp.2d 1325 (2002) ("Ammex II"), aff'd, 334 F.3d 1052 (Fed.Cir.2003), cert. denied, ___ U.S. ___, 124 S.Ct. 2159, 158 L.Ed.2d 729, No. 03-1004 (May 17, 2004). The Court consequently held that Customs was not in contempt of the Court's Ammex I order, nor was the relitigation of the issue barred by res judicata. As "Ammex is entitled to challenge the basis of Customs' decision to revoke its September 5 letter," but must do so "anew in the proper procedural manner," this action ensued. Ammex II at 1330. The new action was assigned to the undersigned.6

The court has so far ruled on a motion to dismiss (jurisdictional challenge from the government) and a motion to compel discovery (attempt to expand the administrative record from Plaintiff) in this case. See Ammex, Inc. v. United States, 27 CIT ___, 288 F.Supp.2d 1375 (2003) (motion to dismiss); No. 02-00361, Slip Op. 03-165 (Dec. 17, 2003) (discovery motion).

II.

The underlying issue here is whether the information contained in the IRS informal letter, that the Internal Revenue Code "imposes" a tax on fuel entering the United States, was sufficient for Customs to revoke the duty-free status of Ammex's fuel on the basis that such fuel was ineligible for entry as "duty-free merchandise"

Page 1311

into a class 9 Customs-bonded warehouse to be sold duty-free.

The provisions for the scope and standard of review controlling this case are found in the Administrative Procedure Act ("APA"), 5 U.S.C. § 706. The scope of the court's review is confined to the record developed before the agency. See Camp v. Pitts, 411 U.S. 138, 142, 93 S.Ct. 1241, 36 L.Ed.2d 106 (1973). The standard of review, on the other hand, is the arbitrary and capricious standard. In particular, the "reviewing court shall ... hold unlawful and set aside agency action, findings, and conclusions found to be ... arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). "To make this finding the court must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Citizens to Pres. Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971) ("Overton Park"), overruled on other grounds by Califano v. Sanders, 430 U.S. 99, 105, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977).

Ammex argues that Customs acted unlawfully in concluding that gasoline and diesel fuel do not qualify as duty-free merchandise under 19 U.S.C. § 1555(b)(8)(E)7 and 19 C.F.R. § 19.35(a)8 because Customs' actions are based on an "unsupported assumption" (rather than any actual information) that Ammex was assessed or paid tax on the fuel at issue. Ammex argues that by not making a finding specific to Ammex's situation, Customs acted arbitrarily, capriciously, and otherwise not in accordance with law. See Ammex Br. at 2 (citing Ross Cosmetics Dist. Ctrs. v. United States, 17 CIT 814, as modified by 17 CIT 966 (1993) (setting aside an agency decision because a specific finding was not made)). Ammex points out that an agency's ruling "would be arbitrary and capricious if the agency ... entirely failed to consider an important aspect of the problem, [or] offered an explanation for its decision that runs counter to the evidence before the agency." Motor Vehicle Mfrs. Ass'n v. State Farm, 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983), quoted in Ammex Br. at 16. In tandem to this argument, Ammex also argues that Customs' interpretation of the terms "impose" and "assess" contravenes the applicable statutes and regulations.9

For merchandise to be ineligible for entry into a bonded warehouse, federal tax or duty must have been "assessed" on such merchandise. Under 19 U.S.C. § 1557(a)(1), "[a]ny merchandise subject to

Page 1312

duty (including international travel merchandise), with the exception of perishable articles and explosive substances 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."10 This provision is qualified by section 1555(b)(8)(E) of the same title, which provides that the "term `duty-free merchandise' means merchandise sold by a duty-free sales enterprise on which neither Federal duty nor Federal tax has been assessed pending exportation from the customs territory." (emphasis added).

Customs revoked its earlier grant of duty-free status to Ammex's merchandise because the Internal Revenue Code "imposed" a...

To continue reading

Request your trial
6 practice notes
  • International Custom Products, Inc. v. U.S., SLIP OP. 05-71.
    • United States
    • U.S. Court of International Trade
    • June 15, 2005
    ...Record The scope of the Court's review in this case is limited to the administrative record before it. Ammex, Inc. v. United States, 341 F.Supp.2d 1308, 1311 (CIT 2004) (citation omitted). For matters within the ambit of 28 U.S.C. § 1581(i), the standard of review is found in 28 U.S.C. § 26......
  • Nufarm America's, Inc. v. U.S., Slip Op. 07-23.
    • United States
    • U.S. Court of International Trade
    • February 15, 2007
    ...on imports, allowing for temporary duty deferral, and then assessing duties at the time of export. See Ammex, Inc. v. United States, 341 F.Supp.2d 1308 (CIT 2004), aff'd, 419 F.3d 1342 (Fed.Cir.2005) (distinguishing "assessment," meaning fixing of specific amounts of liability, from "imposi......
  • Nippon Steel Corp. v. U.S., SLIP OP.04-131.
    • United States
    • U.S. Court of International Trade
    • October 14, 2004
    ...aside agency action, findings, and conclusions found to be ... unsupported by substantial evidence ..."); Ammex Inc. v. United States, 341 F.Supp.2d 1308, 1311 (CIT 2004) (quoting McDonnell Douglas Corp. v. NASA, 895 F.Supp. 316, 319 (D.D.C.1995)) (holding that remand would be inappropriate......
  • Skf Usa Inc. v. U.S., Slip Op. 07-116.
    • United States
    • U.S. Court of International Trade
    • July 26, 2007
    ...case at bar "`is confined to the record developed before the agency[.]'" Id. at 5 (citing to Ammex, Inc. v. United States, ___ CIT ___, 341 F.Supp.2d 1308, 1311 (2004)). Thus, the ITC argues, "the decisions subject to this appeal are only the [ITC's] and Customs' denial of [SKF's] requests ......
  • Request a trial to view additional results
6 cases
  • International Custom Products, Inc. v. U.S., SLIP OP. 05-71.
    • United States
    • U.S. Court of International Trade
    • June 15, 2005
    ...Record The scope of the Court's review in this case is limited to the administrative record before it. Ammex, Inc. v. United States, 341 F.Supp.2d 1308, 1311 (CIT 2004) (citation omitted). For matters within the ambit of 28 U.S.C. § 1581(i), the standard of review is found in 28 U.S.C. § 26......
  • Nufarm America's, Inc. v. U.S., Slip Op. 07-23.
    • United States
    • U.S. Court of International Trade
    • February 15, 2007
    ...on imports, allowing for temporary duty deferral, and then assessing duties at the time of export. See Ammex, Inc. v. United States, 341 F.Supp.2d 1308 (CIT 2004), aff'd, 419 F.3d 1342 (Fed.Cir.2005) (distinguishing "assessment," meaning fixing of specific amounts of liability, from "imposi......
  • Nippon Steel Corp. v. U.S., SLIP OP.04-131.
    • United States
    • U.S. Court of International Trade
    • October 14, 2004
    ...aside agency action, findings, and conclusions found to be ... unsupported by substantial evidence ..."); Ammex Inc. v. United States, 341 F.Supp.2d 1308, 1311 (CIT 2004) (quoting McDonnell Douglas Corp. v. NASA, 895 F.Supp. 316, 319 (D.D.C.1995)) (holding that remand would be inappropriate......
  • Skf Usa Inc. v. U.S., Slip Op. 07-116.
    • United States
    • U.S. Court of International Trade
    • July 26, 2007
    ...case at bar "`is confined to the record developed before the agency[.]'" Id. at 5 (citing to Ammex, Inc. v. United States, ___ CIT ___, 341 F.Supp.2d 1308, 1311 (2004)). Thus, the ITC argues, "the decisions subject to this appeal are only the [ITC's] and Customs' denial of [SKF's] requests ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT