Phibro Energy, Inc. v. Franklin

• Decision Date: 21 May 1993
• Docket Number: Court No. 92-06-00394.
• Citation: 822 F. Supp. 759
• Parties: PHIBRO ENERGY, INC., et al., Plaintiffs, v. Barbara H. FRANKLIN, et al., Defendants.
• Court: U.S. Court of International Trade

822 F. Supp. 759

PHIBRO ENERGY, INC., et al., Plaintiffs, v. Barbara H. FRANKLIN, et al., Defendants.

Court No. 92-06-00394.

United States Court of International Trade.

May 21, 1993.

Williams & Connolly (John G. Kester and David D. Aufhauser), for plaintiffs.

Stuart E. Schiffer, Asst. Atty. Gen. of the U.S., Joseph I. Liebman, Attorney-in-Charge, Intern. Trade Field Office, Commercial Litigation Branch, Civil Div., U.S. Dept. of Justice (Mark S. Sochaczewsky); Robert J. Heilfertz, Atty.-Advisor, Office of Chief Counsel for Import Admin., U.S. Dept. of Commerce, for defendants U.S., et al.

Bracewell & Patterson (Scott H. Segal and Gene E. Godley) and S. Lee Wingate (Counsel to the City of Texas City), of counsel, for Amici Curiae, the City of Texas City, the Texas City Independent School Dist., the County of Galveston, and the College of the Mainland.

OPINION AND JUDGMENT

CARMAN, Judge:

Plaintiffs move for judgment on the agency record pursuant to USCIT R. 56.1. In their motion plaintiffs seek judicial review of an order of the United States Foreign-Trade Zones Board denying as not in the public interest an application filed by the Port of Houston Authority for special purpose subzone status for plaintiffs' petroleum refinery in Texas City, Texas. U.S. Foreign-Trade Zones Board Order No. 552, 56 Fed. Reg. 67,058 (1991). Plaintiffs base jurisdiction upon 28 U.S.C. § 1581(i) (1988). Defendants oppose the motion.

I. BACKGROUND

The Port of Houston Authority submitted to the United States Foreign-Trade Zones Board (FTZ or Board) in December 1989, on behalf of Hill Petroleum (now plaintiff Phibro), an application for special-purpose subzone status under Foreign-Trade Zone No. 84 for two petroleum refinery sites in Houston and Texas City, Texas. The FTZ Board approved the application for plaintiffs' refinery in Houston, but disapproved the application for plaintiffs' refinery in Texas City. FTZ Board Order No. 552, 56 Fed.Reg. 67,058 (1991).

The application filed on plaintiffs' behalf stated that Houston, Texas City and the State of Texas would benefit greatly if the two subzones were approved. The application further explained that if subzone status were granted, it would enable plaintiffs to retain and expand a $30 million per-year payroll in both cities; maintain and expand a total economic export of over $2 billion per-year in the State of Texas; increase exports from 6.3 million barrels of petroleum products to over 12 million barrels of petroleum, valued at $440 million per year; reduce the United States' balance of trade by increased exports; and preserve two United States refining operations, thereby saving 4,488 direct or indirect jobs and stimulating growth in the United States refinery industry with approximately $36 million in capital improvements at its two refineries.

The application received initial favorable public comment from numerous organizations, companies and government officials. R. 3-9, 11-12. Subsequently, an Examiners Committee consisting of representatives of each of the Board members reviewed the application and public comments, and two members of the Committee, in the summer of 1990, recommended approval. R. 110. In March 1991, the Board learned that Texas City, Galveston County, and Texas City Independent School District, three local taxing authorities, had not received any notice of hearings or of the application. All three requested an opportunity to be heard in opposition to the application. R. 21.

At the time the Board received the taxing authorities' request, the Board still considered the review as ongoing. Due to the lack of input from the taxing authorities the Board decided to hear the views of the community and include them in the administrative record. R. 66. The Board later received numerous expressions of opposition to the application from community officials. These objections were based upon the projected loss of ad valorem tax revenues. In 1989, the Texas City refinery paid $606,739 in ad valorem taxes to the three local taxing authorities. This figure apparently amounted to less than one percent of the total tax revenues. The County appraiser noted that "if Foreign-Trade status becomes commonplace in our area the taxable wealth which the new school funding system is supposed to spread around, will not materialize to a significant degree." R. 83.

On December 29, 1991, the Board informed the Port of Houston Authority that it had denied the application for the Texas City site. Plaintiffs then commenced this action.

II. CONTENTIONS OF THE PARTIES

Plaintiffs contend the Court of International Trade (CIT) has subject matter jurisdiction under 28 U.S.C. § 1581(i)(1)-(2), (4) to review a decision by the FTZ Board denying a subzone application. Transcript of Oral Argument (Tr.) at 8. According to plaintiffs, because the FTZ Act determines whether and when imports brought into FTZs will be subject to customs liability, the Act directly relates to tariffs and duties within the meaning of § 1581(i)(1)-(2), (4). Tr. at 9.

As to the merits of the Board's decision, plaintiffs argue the Board acted arbitrarily, capriciously and abused its discretion when it ignored the applicable statutory criteria for granting or denying subzone status set forth in 19 U.S.C. §§ 81f(b), 81g (1988). Plaintiffs claim the Board wrongfully added a public interest test to its regulations just before the issuance of the Resolution and Order of the Board, which disapproved subzone status for plaintiffs' Texas City refinery as not in the public interest. Plaintiffs urge further that even if Congress had not passed an amendment to the FTZ Act which specifies that property held in a FTZ for export or imported and held for processing is not subject to state and local ad valorem taxes, Article 1, §§ 8 and 10 of the Constitution require that result.¹

Defendants contend the FTZ Act does not provide for judicial review of a denial of a subzone application and only permits judicial review in the limited instance of revocation of FTZ grants, citing 19 U.S.C. § 81r(c). According to defendants, the limited grant of reviewability for revocation (to the Court of Appeals for the Circuit in which the zone is located) would be superfluous if all Board actions were judicially reviewable. Furthermore, defendants assert that if the Court determines it has jurisdiction, the Board's denial of the application as not in the public interest was proper and was not arbitrary, capricious or an abuse of discretion.

Amici curiae argue the Port Authority of Houston rather than plaintiff Phibro is the real party in interest in this action because the Port Authority submitted the subzone application at issue. Amici urge, therefore, that plaintiff Phibro lacks standing to bring this suit. Amici further contend that because the Port Authority has not joined this action, the action is not properly before the Court under USCIT R. 17(a). With respect to the decision made by the Board, amici curiae maintain the Board properly considered the lost tax revenue that a grant of subzone status would occasion and that the potential lost revenues required the Board to deny the subzone application.

III. DISCUSSION

The threshold issue presented by this case is whether the CIT has subject matter jurisdiction to review a decision by the FTZ Board denying an application for special subzone status. For the reasons which follow, the Court concludes that it lacks subject matter jurisdiction to review such decisions.

The primary jurisdictional authority for the CIT resides in 28 U.S.C. § 1581(a)-(i) (1988). Congress added § 1581 to the Customs Court Act of 1980 to delineate when parties may bring suit in the Court. See Customs Court Act of 1980, Pub.L. No. 96-417, 94 Stat. 1727 (1980). In enacting § 1581, Congress intended to clarify jurisdictional disputes that had previously arisen between this Court and the district courts, indicating "that the expertise and national jurisdiction of the Court of International Trade ... be exclusively utilized in the resolution of conflicts and disputes arising out of the tariff and international trade laws...." H.R.REP. No. 1235, 96th Cong., 2d Sess. 27-28 (1980), reprinted in 1980 U.S.C.C.A.N. 3729, 3739.

Congress enacted § 1581(i) to resolve these jurisdictional disputes. This subsection reads as follows:

(i) In addition to the jurisdiction conferred upon the Court of International Trade by subsections (a)-(h) of this section and subject to the exception set forth in subsection (j) of this section, the Court of International Trade shall have exclusive jurisdiction of any civil action commenced against the United States, its agencies, or its officers, that arises out of any law of the United States providing for —

(1) revenue from imports or tonnage;

(2) tariffs, duties, fees, or other taxes on the importation of merchandise for reasons other than the raising of revenue;

(3) embargoes or other quantitative restrictions on the importation of merchandise for reasons other than the protection of the public health or safety; or

(4) administration and enforcement with respect to the matters referred to in paragraphs (1)-(3) of this subsection and subsections (a)-(h) of this section.

This subsection shall not confer jurisdiction over an antidumping or countervailing duty determination which is reviewable either by the Court of International Trade under section 516A(a) of the Tariff Act of 1930 or by a binational panel under article 1904 of the United States-Canada Free-Trade Agreement and section 516A(g) of the Tariff Act of 1930.

Customs Court Act of 1980, Pub.L. No. 96-417, 94 Stat. 1728, as amended, 28 U.S.C. § 1581(i) (1988).

The courts have reached different conclusions with respect to the scope of this Court's jurisdiction under § 1581(i). Whereas the CIT has tended to view the jurisdictional grant under § 1581(i) broadly,² the Court of Appeals for the Federal Circuit and the Supreme Court have...