Ammex, Inc. v. Wenk, Case No. 2:18-cv-10751

CourtUnited States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
Writing for the CourtLAURIE J. MICHELSON, U.S. DISTRICT JUDGE
Citation326 F.Supp.3d 472
Parties AMMEX, INC., Plaintiff, v. Gordon WENK, in his capacity as Director, Michigan Department of Agriculture & Rural Development, Defendant.
Docket NumberCase No. 2:18-cv-10751
Decision Date01 June 2018

326 F.Supp.3d 472

AMMEX, INC., Plaintiff,
v.
Gordon WENK, in his capacity as Director, Michigan Department of Agriculture & Rural Development, Defendant.

Case No. 2:18-cv-10751

United States District Court, E.D. Michigan, Southern Division.

Signed June 1, 2018


326 F.Supp.3d 475

Amy E. McCracken, Duane Morris LLP, Chicago, IL, J. Manly Parks, Duane, Morris, Philadelphia, PA, for Plaintiff.

Danielle Allison-Yokom, Elizabeth A. Morrisseau, Michigan Department of the Attorney General, Lansing, MI, for Defendant.

OPINION AND ORDER DENYING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION [8]

LAURIE J. MICHELSON, U.S. DISTRICT JUDGE

After the United States Environmental Protection Agency designated southeast Michigan as not in attainment of national air-quality standards, Michigan came up with a plan to improve air quality in the region. This included enacting Michigan Compiled Laws § 290.650d. That statutory provision requires dispensing facilities in southeast Michigan to sell gasoline with a Reid Vapor Pressure of no more than 7.0 pounds per square inch during the summer. As Ammex, Inc.'s gas station is located in southeast Michigan, the Michigan Department of Agriculture & Rural Development intends to enforce § 290.650d against Ammex this summer.

While Ammex's gas station is located in southeast Michigan, the station is more precisely located right before the Ambassador Bridge connecting the United States and Canada. In fact, the station is located beyond what United States Customs and Border Protection considers the "exit point" from the United States. Moreover, the station is part of a duty-free store and for a duty-free store to sell gasoline tax free, the gasoline must come from a foreign country (or foreign trade zone), stay beyond the exit point, and be sold to people leaving the United States. Indeed, the physical design of Ammex's gas station ensures that those who refuel there must immediately head into Canada. For these and related reasons, Ammex believes that MDARD would violate the Federal Constitution if it enforced Michigan Compiled Laws § 290.650d against it.

The parties' disagreement, coupled with Ammex's present inability to find a foreign source of 7.0 RVP gasoline, led to this lawsuit. Ammex asks this Court to enjoin MDARD from enforcing § 290.650d (and associated laws) against it and to declare that § 290.650d cannot be lawfully applied to it. Moreover, with summer imminent, Ammex has sought a preliminary injunction. (R. 8.)

As will be explained in detail below, the Court finds that Ammex is not likely to show that either the Supremacy Clause or the Foreign Commerce Clause bars MDARD from enforcing a 7.0 RVP standard against Ammex. As such, the Court will deny Ammex's motion for preliminary relief.

I.

A.

Customs bonded warehouses have existed in America for over 170 years. See Xerox Corp. v. Harris Cty., Tex. , 459 U.S. 145, 150–51 & n.7, 103 S.Ct. 523, 74 L.Ed.2d 323 (1982) (discussing Warehousing Act of 1846). They come in different varieties, but, speaking generally, they help ease the burden of federal import

326 F.Supp.3d 476

duties. In particular, a merchant engaged in international trade can store his goods in a customs bonded warehouse and either defer the import duty until he puts the goods into the stream of United States commerce or avoid the import duty entirely by taking his goods from the warehouse to another country. See 19 U.S.C. § 1557(a)(1) ; Xerox , 459 U.S. at 150–51 & n.7, 103 S.Ct. 523. And, depending on the type of customs bonded warehouse, the merchant may organize, repackage, and even transform his goods into new ones while they are warehoused. See 19 C.F.R. § 19.1. Thus, the purpose of customs bonded warehouses, or a key one at least, is "to encourage merchants here and abroad to make use of American ports." Xerox , 459 U.S. at 151, 103 S.Ct. 523.

A duty-free store, while still considered a customs bonded warehouse, see 19 U.S.C. § 1555(b) ; 19 C.F.R. § 19.1(a)(9), operates somewhat differently: the store's owner sells merchandise to those leaving the United States, see 19 C.F.R. § 19.35(a). Like proprietors of other customs bonded warehouses, the owner of a duty-free store does not pay an import duty on the goods he brings into his store from a foreign country (or foreign trade zone). Moreover, he can sell his goods free of federal, and at least in some instances, state taxes. See 19 U.S.C. § 1555(b)(8)(D), (E) ; Ammex, Inc. v. Dep't of Treasury , 272 Mich.App. 486, 726 N.W.2d 755, 766–69 (2006). That makes items that are heavily taxed, such as liquor and cigarettes, popular at duty-free stores. And, in Congress' view, lower-cost goods not only "play a significant role in attracting international passengers to the United States," Pub. Law 100-418 (1988), they "induce foreign visitors to increase their expenditures for goods in the United States," S. Rep. 100-71 (1987).

Plaintiff Ammex, Inc. operates a duty-free store near the Ambassador Bridge that connects Detroit, Michigan to Windsor, Canada. While Ammex's store is in Wayne County, Michigan, it is "beyond the exit point" established by the United States Customs and Border Protection. (R. 20, PID 732). "Exit point," for CBP purposes, is not the "actual exit" from the United States but near the actual exit, see 19 C.F.R. §§ 19.1(a)(9), 19.35(d), 101.1(e) ; it is the point where a departing individual has "no practical alternative" other than to continue to a foreign country or return to this one through a CBP inspection facility, 19 C.F.R. § 19.35(d).

While Ammex sells goods commonly found at duty-free stores, since the late 1990s Ammex has also sold gasoline. (See R. 29, PID 852.) Ammex's gas station is designed to ensure that cars that refuel there continue onto Canada afterwards. (R. 8, PID 94); see also Ammex, Inc. v. United States , 419 F.3d 1342, 1343 (Fed. Cir. 2005). Apparently, tax-free gas is popular: Ammex sells 400,000 gallons a month. (See R. 29, PID 852–53.)

B.

In 1970, dissatisfied "with earlier efforts at air pollution abatement," Congress made major changes to the Clean Air Act. Friends of the Earth v. Carey , 535 F.2d 165, 168–69 (2d Cir. 1976). In particular, Congress directed the United States Environmental Protection Agency to establish National Ambient Air Quality Standards. Train v. Nat. Res. Def. Council, Inc. , 421 U.S. 60, 65, 95 S.Ct. 1470, 43 L.Ed.2d 731 (1975). But Congress did not intend the Environmental Protection Agency to battle air-pollution alone; instead, it directed each state to submit a plan—known as a state implementation plan or SIP—for implementing, maintaining, and enforcing the NAAQS. See id. ; 42 U.S.C. § 7410(a)(1).

326 F.Supp.3d 477

The states' implementation plans were subject to EPA approval, as were any post-approval changes to the plans. See N. Ohio Lung Ass'n v. E.P.A. , 572 F.2d 1143, 1147 (6th Cir. 1978). That is still true today. See 42 U.S.C. § 7410(k), (l ).

In 1990, Congress again made major changes to the Clean Air Act. For one, Congress set a national Reid Vapor Pressure standard for gasoline. See 42 U.S.C. § 7545(h). In particular, Congress ordered the EPA to promulgate regulations prohibiting anyone (in the "48 contiguous States") from selling—or even "dispens[ing]" or "supply[ing]"—gasoline with an RVP higher than 9.0 pounds per square inch. See 42 U.S.C. § 7545(h)(1), (6). Moreover, it appears that Congress prohibited states from holding gasoline to a different RVP standard, see § 7545(c)(4)(A)(ii), unless the EPA both found the state's RVP standard was "necessary" to achieve a NAAQS and approved it as part of the state's implementation plan, see 42 U.S.C. § 7545(c)(4)(C)(i) ; 71 Fed. Reg. 46879, 46880 (Aug. 15, 2006).

In 2004, the EPA designated eight counties in southeast Michigan as in "nonattainment" of the NAAQS for ozone. 71 Fed. Reg. 46879, 46880 (Aug. 15, 2006). This included Wayne County where Ammex is located. (R. 18, PID 562.)

This forced Michigan to come up with a strategy to bring southeast Michigan into attainment. (See R. 18, PID 562.) Part of the strategy was to require gas stations to use lower RVP gasoline in the summer months. (R. 18, PID 562; see also R. 18, PID 537, 542). In particular, Michigan enacted House Bill 5508, which says in part, "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" and seven other counties in southeast Michigan. (R. 18, PID 542.) And the Bill defined "dispensing facilities" as "a site used for gasoline refueling." (R. 18, PID 537.) Those two provisions of House Bill 5508 are now found in Michigan Compiled Laws § 290.650d and § 290.642, respectively. The Court will refer to § 290.650d, § 290.642, and associated state laws and regulations (e.g., Michigan Compiled Laws § 290.645(10) and Michigan Administrative Code Rules 285.561.1 – 3 ) as the "Summer-Fuel Laws."

In 2006, Michigan asked the EPA to approve most of House Bill 5508, including the 7.0 RVP standard and the associated enforcement provisions, as a revision to its state implementation plan. See (R. 18, PID 529); 71 Fed....

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  • Ammex, Inc. v. McDowell, Case No. 2:18-cv-10751
    • United States
    • United States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
    • March 6, 2020
    ...and oral argument, on June 1, 2018, the Court denied Ammex's motion for preliminary relief. See generally Ammex, Inc. v. Wenk , 326 F. Supp. 3d 472, 475 (E.D. Mich. 2018). The Court thought that there was a good chance that the provisions that made up HB 5508, including § 10d, were federal ......
1 cases
  • Ammex, Inc. v. McDowell, Case No. 2:18-cv-10751
    • United States
    • United States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
    • March 6, 2020
    ...and oral argument, on June 1, 2018, the Court denied Ammex's motion for preliminary relief. See generally Ammex, Inc. v. Wenk , 326 F. Supp. 3d 472, 475 (E.D. Mich. 2018). The Court thought that there was a good chance that the provisions that made up HB 5508, including § 10d, were federal ......

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