Ammex, Inc. v. U.S.

• Decision Date: 22 February 2002
• Docket Number: Slip. Op. 02-20.,Court No. 99-01-00013.
• Citation: 193 F.Supp.2d 1325
• Parties: AMMEX, INC., Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. Court of International Trade

193 F.Supp.2d 1325

AMMEX, INC., Plaintiff, v. UNITED STATES of America, Defendant.

Slip. Op. 02-20.

Court No. 99-01-00013.

United States Court of International Trade.

February 22, 2002.

Steptoe & Johnson LLP (Herbert C. Shelley, Alice A. Kipel), for Plaintiff.

Robert D. McCallum, Jr., Assistant Attorney General; Joseph I. Liebman, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice (Amy M. Rubin), for Defendant.

OPINION

WALLACH, Judge.

I PRELIMINARY STATEMENT

Plaintiff, Ammex, Inc. ("Ammex"), moves this court for an Order to Show Cause Why Defendant Should Not be Held in Contempt, pursuant to Rules 7(e) and 63 of the Rules of this Court. Specifically, Ammex seeks to require defendant, the United States of America (the "Government"), to explain why Customs' revocation of Ammex's authorization to sell duty-free fuel is not in contempt of this court's order and judgment of August 25, 2000. Ammex, Inc.'s Motion for Order to Show Cause Why Defendant Should Not be Held in Contempt ("Ammex's Motion") at 1. Familiarity with the court's August 25, 2000 order and decision in Ammex, Inc. v. United States, 116 F.Supp.2d 1269 (CIT 2000) ("Ammex I"), is presumed.

II BACKGROUND

Ammex operates a duty-free store at the Ambassador Bridge between Detroit, Michigan and Windsor, Canada. In a letter dated January 24, 1994, Ammex requested approval to sell gasoline and diesel fuel on a duty-free basis. Letter from Barbeau to Morandini of 1/24/94 (Ex. 6 to Ammex's Memorandum of Law in Support of Ammex, Inc.'s Motion for Order to Show Cause Why Defendant Should Not be Held in Contempt ("Ammex's Memo")). On February 12, 1998, the United States Customs Service ("Customs") ruled that gasoline and diesel fuel could not be sold on a duty-free basis from Ammex's facility. U.S. Customs Service Headquarters Ruling ("HQ") 227385, February 12, 1998. This ruling reaffirmed a 1994 headquarters ruling which found that activities of duty-free stores should not be extended to cover "unidentifiable fungibles," such as gasoline and diesel fuel, when sold on a retail basis. HQ 225287, June 7, 1994. "[I]n both HQ 227385 and 225287, Customs accepted the requestor's assertion that the merchandise under consideration was duty-free but, ... determined that such merchandise could not be sold as duty-free merchandise from a class 9 bonded warehouse." Customs Bulletin and Decisions, Vol. 35, No. 25, June 20, 2001, at 296.

In Ammex I, Ammex challenged the above Customs rulings. This court found that "Customs acted unlawfully in prohibiting Ammex from selling duty-free gasoline and diesel fuel." Ammex I, 116 F.Supp.2d at 1275-76. This court accordingly entered a judgment setting aside HQ 227385 and "ORDERED ADJUDGED AND DECREED that 19 U.S.C. §§ 1555 and 1557 allow the duty-free sale of gasoline and diesel fuel from a duty-free enterprise." Id. at 1276.

On September 5, 2000, in accordance with the court's decision, Customs issued a letter to Ammex granting its request to expand its "Class 9 duty free warehouse operation to include the gasoline and diesel fuel tanks located at [Ammex's] facility." Letter from Ryan to Levesque of 9/5/00 (Ex. 2 to Ammex's Memo) ("September 5 letter").

On October 23, 2002, Ammex wrote to Customs seeking a letter to certify that the fuel sold at Ammex's duty-free store was exempt from taxes. Letter from Levesque to Ryan of 10/23/00 (Ex. 1 to "Durant Declaration" of Defendant's Opposition to Plaintiff's Motion to Show Cause Why Defendant Should Not be Held in Contempt) ("October 23 letter"). Customs forwarded Ammex's request to the Internal Revenue Service ("IRS"). On January 8, 2001, the IRS issued an informational letter stating that section 4081 of the Internal Revenue Code (the "Tax Code") (26 U.S.C. § 4081) imposes a tax on the entry into the United States of any taxable fuel, including gasoline and diesel fuel for consumption, use, or warehousing. Durant Declaration ¶ 8.

Based on the IRS letter, Customs determined that it could not lawfully permit Ammex to sell gasoline and diesel fuel duty-free. On June 20, 2001, Customs issued a notice proposing to revoke the September 5 letter. Customs Bulletin and Decisions, Vol. 35, No. 25, June 20, 2001. On November 21, 2001, after a notice and comment period, Customs advised that it was "revoking a ruling letter pertaining to gasoline and diesel fuel from a[sic] class 9 bonded warehouses and revoking any treatment previously accorded by the Customs Service to substantially identical transactions." Id., Vol. 35, No. 47 (November 21, 2001) at 5 ("Revocation Decision"). Customs announced that the revocation would become effective on January 21, 2002. Id. Ammex thereafter filed its Motion to Show Cause Why Defendant Should Not be Held in Contempt.

III STANDARD

To establish that a party is liable for civil contempt a plaintiff must prove three elements: "(1) that a valid order of the court existed; (2) that the defendants had knowledge of the order; and (3) that the defendants disobeyed the order." Roe v. Operation Rescue, 54 F.3d 133, 137 (3d Cir.1995). Civil contempt must be proven by clear and convincing evidence, Glaxo Inc. v. Novopharm, Ltd., 110 F.3d 1562, 1572 (Fed.Cir.1997), and a court cannot hold a party in contempt if there is a "fair ground of doubt as to the wrongfulness of the [party's] actions," Preemption Devices, Inc. v. Minn. Mining & Mfg. Co., 803 F.2d 1170, 1173 (Fed.Cir.1986).

IV ARGUMENTS

Ammex argues that Customs' revocation is "plainly inconsistent with this Court's Order permitting the sale of duty-free gasoline and diesel fuel from a duty-free sales enterprise." Ammex's Memo at 3. Ammex requests, among other things, that this court issue an order to show cause why Customs' revocation is not in contempt of this court's judgment of August 25, 2000 and determine that section 4081 of the Tax Code, as it applies to entries into Class 9 bonded warehouses, is unconstitutional.

"The agency decision challenged in Ammex I was based exclusively on a perceived `unidentifiable fungibles' exception to the statute relating to bonded warehouses, particularly Class 9 bonded warehouses, and the holding in Ammex I was simply that that decision, as memorialized in HQ 225287 and affirmed in HQ 227385, was contrary to law." Defendant's Opposition to Plaintiff's Motion for an Order to Show Cause Why Defendant Should not be Held in Contempt ("Defendant's Opposition") at 8. The Government argues, "Neither the challenged ruling letters nor this Court's holding addressed or involved any other potential basis for prohibiting the duty-free sale of gasoline and diesel fuel, including whether the fuel which Ammex intended to sell is encompassed by the statutory definition of `duty-free merchandise.'" Id. Because the issues presently raised by Ammex's motion "are not relevant to a determination of whether Customs' revocation decision violates the Ammex I decision," id. at 17, the Government argues that this court should decline to consider them.

V ANALYSIS

A Jurisdiction to Entertain Present Challenge

The United States Court of International Trade, like all Federal courts established under Article III of the Constitution, is a court of limited jurisdiction. United States v. Gold Mountain Coffee, Ltd., 8 C.I.T. 247, 248, 597 F.Supp. 510, 513 (1984). The party asserting jurisdiction "has the burden of proving that jurisdiction in this court is proper." Id. at 249. Jurisdiction for this court to entertain the challenge in Ammex I fell under 28 U.S.C. § 1581(i), which provides the court with jurisdiction over "any civil action commenced against the United States ... that arises out of any law of the United States providing for revenue from imports or tonnage, tariffs, duties, fees, or other taxes on the importation of merchandise for reasons other than the raising of revenue or administration and enforcement with respect to these matters." 28 U.S.C. § 1581(i). Ammex now argues that this court "possesses jurisdiction to hear this motion by virtue of the Court's jurisdiction over the underlying proceeding in this case." Plaintiff's Memo at 3 (citing United States v. Hanover Ins. Co., 82 F.3d 1052, 1054 (Fed.Cir.1996) ("[T]he Court of International Trade has the inherent power to determine the effect of its judgments and issue injunctions to protect against attempts to attack or evade those judgments.")).

Were Customs' revocation an attempt to attack or evade Ammex I and the court's August 25, 2000 judgment, then no doubt this court could readily exercise jurisdiction over such behavior under its inherent enforcement powers and as an extension of its jurisdiction to hear Ammex's original complaint in Ammex I. However, the issue underlying Ammex's Complaint in the present motion is distinct from the issue raised in Ammex I. While both issues call upon the court to determine the validity of Customs' refusal to allow Ammex to sell fuel from its duty-free store, the stated bases for Customs' refusal to allow Ammex's sales differ in each case.

Ammex's contention that "there can be no dispute that the transaction and matter at issue in this second action are the same as the first-the matter now, as before, is Ammex's right to sell gasoline and diesel fuel duty-free from its duty-free store in Detroit, Michigan," Plaintiff's Memo at 16, is specious. Ammex states the issue too broadly. The issue in Ammex I was not simply whether Ammex is entitled "to sell gasoline and diesel fuel from its duty-free store in Detroit, Michigan." Id. Rather, the court was called upon to consider whether the explanation Customs provided for denying Ammex's request to sell gasoline and diesel fuel duty-free was arbitrary, capricious, or contrary to law.

The Government more accurately states the case thus:

The only issue that the Court had to decide in [Ammex I] was whether the denial of Ammex's proposal to sell gasoline and...