Thomson Multimedia Inc. v. U.S.

• Citation: 219 F.Supp.2d 1322
• Decision Date: 21 August 2002
• Docket Number: Slip Op. 02-91.,Court No. 95-03-00277-S.
• Parties: THOMSON MULTIMEDIA INC. Plaintiff, v. UNITED STATES, Defendant,
• Court: U.S. Court of International Trade

Page 1322

219 F.Supp.2d 1322

THOMSON MULTIMEDIA INC. Plaintiff, v. UNITED STATES, Defendant,

Slip Op. 02-91.

Court No. 95-03-00277-S.

United States Court of International Trade.

August 21, 2002.

deKieffer & Horgan, Washington, DC (J. Kevin Horgan), Professor Kevin C. Kennedy, Detroit College of Law at Michigan State University, of counsel, Grunfeld, Desiderio, Lebowitz, Silverman, & Klestadt, LLP, New York City (Robert B. Silverman and Michael T. Cone), for plaintiff, of counsel.

Robert D. McCallum, Jr., Assistant Attorney General, David M. Cohen, Director, Commercial Litigation Branch, Civil Division, United States Department of Justice (Jeanne E. Davidson, Todd M. Hughes, and Jeffrey A. Belkin), Richard McManus Office of General Counsel, United States Customs Service, for defendant, of counsel.

OPINION

RESTANI, Judge.

This matter is before the court on Plaintiff's motion and Defendant's cross-motion for judgment on the agency record pursuant to USCIT Rule 56.2. Plaintiff Thomson Multimedia Inc. ("Thomson") brought action against Defendant, the United States Customs Service ("Customs" or the "government"), to recover the Harbor Maintenance Tax ("HMT") collected on its electronics imports since 1992. Thomson argues that the HMT on imports is unconstitutional because: (1) the HMT on imports is not severable from the HMT on exports found to be unconstitutional in United States v. United States Shoe Corp., 523 U.S. 360, 118 S.Ct. 1290, 140 L.Ed.2d 453 (1998); (2) the HMT on imports violates the Uniformity Clause, U.S. Const. art. I, § 8, cl. 1; and (3) the HMT on imports violates the Port Preference Clause, U.S. Const. art. I, § 9, cl. 6.

JURISDICTION & STANDARD OF REVIEW

The court has jurisdiction pursuant to 28 U.S.C. § 1581(i), the court's residual jurisdiction provision. See Thomson Consumer Electronics, Inc. v. United States, 247 F.3d 1210 (Fed.Cir.2001). Summary judgment is appropriate when the record, viewed in the light most favorable to the nonmoving party, shows no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. USCIT R. 56(c).

BACKGROUND

The HMT was enacted as part of the comprehensive Water Resources Development Act of 1986, Pub.L. 99-662, 100 Stat. 4082 ("WRDA"), and is specifically contained in the Harbor Maintenance Revenue Act of 1986, Pub.L. 99-662, 100 Stat. 4266. 26 U.S.C. §§ 4461-62 (1994). The HMT imposes an ad valorem charge of 0.125 percent of the value of the commercial cargo involved in any port use of federally maintained navigable waterways, 26 U.S.C. § 4461(b). The term "port" is defined as "any channel or harbor (or component thereof) in the United States, which ... (i) is not an inland waterway, and (ii) is open to public navigation." 26 U.S.C. § 4462(a)(2)(A). The Harbor Maintenance Trust Fund ("HMT Fund") was established for revenue raised by the HMT to be expended on the operation and maintenance of channels and harbors. 26 U.S.C. § 9505.

The Inland Waterway Fuel Tax ("IWFT") is also a component of the WRDA and is contained in the Inland Waterways Revenue Act of 1978, Pub.L. 95-502, 92 Stat. 1696. The tax is imposed "on any liquid used during any calendar quarter by any person as fuel in a vessel in commercial waterway transportation." 26 U.S.C. § 4042(a) (1994). For the purpose of the IWFT, commercial waterway transportation only occurs on inland or intracoastal waterways, as defined in 33 U.S.C. § 1804 (1994).¹ See 26 U.S.C. § 4042(d)(1). The Inland Waterway Trust Fund ("IW Fund") was established for revenue raised by the IWFT to be expended on the inland and coastal waterways of the United States. 26 U.S.C. § 9506.

DISCUSSION

A. Severability

Thomson argues that the HMT on imports should be declared invalid because it is not severable from the unconstitutional HMT on exports. Thomson's claim fails because the Federal Circuit has "specifically held that the unconstitutional export provision in the HMT is severable from the remainder of the statute." Amoco Oil Co. v. United States, 234 F.3d 1374, 1377 (Fed.Cir.2000) aff'ing 23 CIT 613, 63 F.Supp.2d 1332 (1999) (citing Princess Cruises, Inc. v. United States, 201 F.3d 1352, 1358 (Fed.Cir.2000); Carnival Cruise Lines, Inc. v. United States, 200 F.3d 1361 (Fed.Cir.2000)).

B. Uniformity Clause

The Uniformity Clause provides that, "[t]he Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the Common Defense and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States." U.S. Const. art. I § 8, cl. 1. Thomson argues that, because the HMT provides exemptions for certain ports, Customs does not apply the tax uniformly and, therefore, the HMT is unconstitutional.

1. Tax v. User Fee

As an initial matter, the government argues that the HMT on imports is a user fee, not a tax, and therefore the Uniformity Clause cannot apply. A user fee is a charge designed as compensation for government-supplied services, facilities, or benefits. See Pace v. Burgess, 92 U.S. 372, 375, 2 Otto 372, 23 L.Ed. 657 (1875). In U.S. Shoe, the Court rejected the argument the HMT on exports is a user fee finding that "the connection between a service the Government renders and the compensation it receives for that service must be closer than is present here." U.S. Shoe, 523 U.S. at 369, 118 S.Ct. 1290 (holding that the HMT on exports is a tax). Defendant argues that the Supreme Court's user fee analysis was limited to the export provision and, therefore, is not binding.

Assuming arguendo that the Court's holding in U.S. Shoe applies only to the export provision, this court has already determined that the HMT on the whole is a tax. United States Shoe Corp. v. United States, 19 CIT 1284, 907 F.Supp. 408 (1995) (analyzing the HMT under Massachusetts v. United States, 435 U.S. 444, 98 S.Ct. 1153, 55 L.Ed.2d 403 (1978)), aff'd, 114 F.3d 1564 (Fed.Cir.1997). In Massachusetts, the Court looked at three factors to determine whether a charge is a user fee: (1) the charge must not discriminate against the constitutionally-protected interest; (2) the implementing authority must base the charge upon a fair approximation of the use of some system; and (3) the charge must be structured to produce revenue fairly apportioned to the total cost to the government of the benefits conferred. 435 U.S. at 467-70, 98 S.Ct. 1153.

In U.S. Shoe, this court found that the HMT failed the second and third prong of the Massachusetts Test. 19 CIT at 1292, 907 F.Supp. at 415. "First, the charge is not based upon some fair approximation of the cost of the benefits port users receive from harbor maintenance and development projects." Id. (reasoning that low value bulk cargo importers and exporters use port facilities to a much greater extent than high value non-bulk cargo importers and exporters, yet, the cost to the latter is greater than that to the former). "Second, the charge is excessive in relation to the cost to the government." Id.² (reasoning that the tax is used to fund projects yet to be commenced, rather than to repay the government for services rendered). This analysis applies equally to the HMT on imports and exports and the court finds no reason to reject it. The court finds the HMT is a tax in its entirety, as it is not a fair approximation of the cost of the benefits to importers and the charge is excessive in relation to the cost to the government.

2. Geographic Discrimination

The Supreme Court has never relied upon the Uniformity Clause to invalidate a statute. The clause was first addressed in the Head Money Cases, where a federal statute levied a charge against carriers for each foreign passenger brought into the United States by seaport, though no charge was levied for foreign passengers crossing over inland borders. Edye v. Robertson, 112 U.S. 580, 594, 5 S.Ct. 247 28 L.Ed. 798 (1884). In upholding the tax, the Court found that a "tax is uniform when it operates with the same force and effect in every place where the subject of it is found." Id. In Knowlton v. Moore, the Court again rejected a Uniformity Clause claim on grounds that the clause merely limits "the imposition of a tax by the rule of geographical uniformity, not that in order to levy such a tax objects must be selected which exist uniformly in the several States." 178 U.S. 41, 108, 20 S.Ct. 747, 44 L.Ed. 969 (1900). There have been few subsequent challenges under the Uniformity Clause.

In the Reg'l Rail Reorganization Act Cases, the Supreme Court addressed a similar uniformity provision found in the Bankruptcy Clause, Article I, Section 8, Clause 4 of the Constitution.³ 419 U.S. 102, 159, 95 S.Ct. 335, 42 L.Ed.2d 320 (1974). The Court held, "[t]he uniformity provision does not deny Congress power to take into account differences that exist between different parts of the country, and to fashion legislation to resolve geographically isolated problems." The Court extended this analysis to the Uniformity Clause in U.S. v. Ptasynski, 462 U.S. 74, 83 n. 13, 103 S.Ct. 2239, 76 L.Ed.2d 427 (1983) ("Although the purposes giving rise to the Bankruptcy Clause are not identical to those underlying the Uniformity Clause, we have looked to the interpretation of one Clause in determining the meaning of the other.").

In Ptasynski, the Court first laid out the essential test for determining the constitutionality under this clause. "Where Congress defines the subject of a tax in nongeographic terms, the Uniformity Clause is satisfied." Id. at 84, 103 S.Ct. 2239. The court went on explain that, even if Congress frames a tax in geographic terms, the court may only declare a tax invalid if it results in "actual geographic discrimination." Id. at 85, 103 S.Ct. 2239. This examination is undertaken with the understanding that "[t]he Uniformity Clause gives Congress wide latitude in deciding what to tax and does not prohibit it from...