Thomson Multimedia Inc. v. U.S.

• Citation: 340 F.3d 1355
• Decision Date: 18 August 2003
• Docket Number: No. 03-1044.,No. 03-1137.,03-1044.,03-1137.
• Parties: THOMSON MULTIMEDIA INC. (now known as Thomson Inc.), Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee. CF Industries, Inc., Plaintiff-Appellant, v. United States, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

340 F.3d 1355

THOMSON MULTIMEDIA INC. (now known as Thomson Inc.), Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

CF Industries, Inc., Plaintiff-Appellant, v. United States, Defendant-Appellee.

No. 03-1044.

No. 03-1137.

United States Court of Appeals, Federal Circuit.

Decided: August 18, 2003.

J. Kevin Horgan, DeKieffer & Horgan, of Washington, DC, argued for plaintiff-appellant in 03-1044. Of counsel on the brief were Robert B. Silverman, Grunfeld, Desiderio, Lebowitz, Silverman and Klestadt LLP, of New York, New York; and Michael T. Cone, Coudert Brothers LLP, of New York, New York. Of counsel on the brief was Richard K. McManus, Senior Attorney, Office of Chief counsel, Bureau of Customs and Border Patrol, of Washington, DC.

Daniel G. Jarcho, McKenna Long & Aldridge LLP, of Washington, DC, argued for plaintiff-appellant in appeal 03-1137. With him on the brief was Peter Buck Feller.

Jonathan S. Lawlor, Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for defendant-appellee in appeals 03-1044 and 03-1137. With him on the briefs were David M. Cohen, Director; Jeanne E. Davidson, Deputy Director; and Todd M. Hughes, Assistant Director. Of counsel on the briefs was Richard K. McManus, Senior Attorney, Office of Chief Counsel, Bureau of Customs and Border Patrol, of Washington, DC.

Before NEWMAN, MICHEL, and RADER, Circuit Judges.

MICHEL, Circuit Judge.

Plaintiff-appellant Thomson Multimedia Inc. ("Thomson") appeals from the United States Court of International Trade's grant of summary judgment in favor of the United States. Thomson Multimedia Inc. v. United States, 219 F.Supp.2d 1322 (Ct Int'l Trade 2002). The court granted summary judgment because it held that the Harbor Maintenance Tax ("HMT"), 26 U.S.C. §§ 4461-4462 (2000), as applied to imports, was constitutional in light of both the Uniformity, Art. I, § 8, cl. 1, and Port Preference, Art. I, § 9, cl. 8, Clauses of the U.S. Constitution. Plaintiff-appellant CF Industries, Inc. ("CF Industries") appeals from a separate grant of summary judgment in favor of the United States by the Court of International Trade. The trial court granted summary judgment in that case because, based upon its interpretation of the Uniformity and Port Preference Clauses in Thomson, the HMT as applied to domestic unloadings was also constitutional. Given their interdependency, we address these two, separate appeals in a single decision. Because we hold that the HMT as applied to imports and domestic unloadings is a user fee rather than a tax and because we hold that the various exemptions in the HMT do not violate the Port Preference Clause of the Constitution, we affirm the Court of International Trade's decisions in both cases.

BACKGROUND

The HMT was enacted as part of the Water Resources Development Act of 1986 ("WRDA"), Pub.L. 99-662, 100 Stat. 4082. Congress intended the HMT to help finance the general maintenance and improvement of ports in the United States. S.Rep. No. 99-126, at 9-10 (1985), reprinted in 1986 U.S.C.C.A.N. 6639, 6640-47. The HMT imposes an ad valorem charge of 0.125 percent of the value of the commercial cargo involved in "any port use." 26 U.S.C. § 4461(b). The statute defines the term "port" 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." Id. § 4462(a)(2)(A); see also id. § 4462(a)(2)(B)-(C). The statute defines "port use" as, in the case of imports and domestic shipments, "the unloading of commercial cargo from, a commercial vessel at a port." Id. § 4462(a)(1)(B); see also id. § 4461(c)(2). The statute sorts commercial cargo into three categories: (1) "cargo entering the United States" (i.e., imports); (2) "cargo to be exported from the United States" (i.e., exports); and (3) "any other case" (i.e., domestic cargo). Id. § 4461(c)(1). A separate statute establishes the Harbor Maintenance Trust Fund ("HMT Fund") for revenue raised by the HMT to be expended on the operation and maintenance of channels and harbors. Id. § 9505.

Importantly for these appeals, the HMT contains several implicit and explicit exemptions. First, the statute effectively exempts "inland waterway[s]" from HMT liability by excluding them from the statute's definition of "port." 26 U.S.C. § 4462(a)(2)(A)(ii). Second, the statute effectively exempts from the HMT part of the Columbia River by including channels of that river "only up to the downstream side of Bonneville lock and dam." Id. § 4462(a)(2)(C). Third, the statute explicitly exempts from the HMT domestic cargo (excluding crude oil) either unloaded in Hawaii, Alaska, or U.S. possessions or unloaded in the continental United States and shipped from Alaska, Hawaii, or a U.S. possession. Id. § 4462(b).

In the trial court, the two plaintiff-appellants challenged the HMT as applied to domestic unloadings and imports. Thomson is an importer of consumer electronic products and pays over $1 million per year in HMTs. Thomson argued the HMT is unconstitutional because: (1) the unconstitutional export provision¹ is not severable from the rest of the statute; (2) it violates the Uniformity Clause of the Constitution because it causes a geographical bias by exempting Alaska and Hawaii, a 47.5 mile segment of the Columbia River, and inland waterways; and (3) it violates the Port Preference Clause of the Constitution by exempting Alaska and Hawaii, a 47.5 mile segment of the Columbia River, and inland waterways.

CF Industries is a domestic shipper of phosphate fertilizer that paid a total of $323,416 in HMTs from December 1999 to June 2002. CF Industries argues only that the HMT as applied to domestic unloadings violates both the Uniformity and Port Preference Clauses of the Constitution because it exempts domestic unloadings of cargo in Alaska and Hawaii.

The Court of International Trade dealt with these issues in its Thomson opinion granting summary judgment in favor of the government. 219 F.Supp.2d. at 1322-32. First, it held that the import clause was severable from the HMT on exports "because the Federal Circuit has `specifically held that the unconstitutional export provision in the HMT is severable from the remainder of the statute.'" Id. at 1324 (quoting Amoco Oil Co. v. United States, 234 F.3d 1374, 1377 (Fed.Cir.2000)); see also 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). Second, the trial court held the HMT as applied to imports was a "tax" rather than a "user fee" based upon its decision in United States Shoe Corp. v. United States, 907 F.Supp. 408 (Ct. Int'l Trade 1995) (holding the HMT as applied to exports was a tax because it did not satisfy the second and third prongs of the three-prong test established in Massachusetts v. United States, 435 U.S. 444, 98 S.Ct. 1153, 55 L.Ed.2d 403 (1978)). Third, the trial court interpreted both the Uniformity and Port Preference Clauses of the Constitution as prohibiting only geographic (or port) distinctions effectively designed to promote state versus state or region versus region favoritism or discrimination. Thomson, 219 F.Supp.2d at 1326, 1330-31. As such, the court held the exemptions at issue did not violate either clause because: (1) the Alaska and Hawaii exemptions were narrowly tailored attempts by Congress to address the geographically isolated problem of those two places being heavily dependent on ocean transportation for domestic consumption; (2) the Columbia River "exemption" was more likely an oversight or a simple geographic distinction between "inland waterways" and "ports" and there was no evidence of actual benefit to the "exempted" ports; (3) the exemption of the inland waterway ports did not indicate any state or regional discrimination. Subsequently, the Court of International Trade applied these holdings to CF Industries and granted summary judgment in favor of the government. CF Indus., Inc. v. United States, No. 02-00281, 2002 Ct. Intl. Trade LEXIS 138, at *2 (Ct. Int'l Trade Nov. 26, 2002).

On appeal, Thomson challenges each holding of the trial court (except for the holding that the HMT was a tax) and CF Industries challenges the court's holding that the Alaska and Hawaii domestic exemptions do not violate the Uniformity or Port Preference Clause. The government supports the trial court's rulings and also argues that the HMT is a user fee rather than a tax. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5).

DISCUSSION

We review the Court of International Trade's grant of summary judgment and conclusion of the constitutionality of the HMT de novo. Princess, 201 F.3d at 1357. We also review the interpretation of a statute, including questions of severability, de novo. Id.

I

The trial court held that the import and domestic unloading portions of the HMT were severable from the unconstitutional export provision. Thomson, 219 F.Supp.2d at 1324 (citing Amoco Oil, 234 F.3d at 1377; Princess, 201 F.3d at 1358; Carnival, 200 F.3d at 1361). Thomson argues that the prior decisions holding the HMT severable "should not be treated as binding precedent" because: "The panel[s] in Princess and Carnival relied upon an observation that the World Trade Organization (`WTO') had not taken final action on whether the post-United States Shoe HMT on imports and not exports violated international agreements." Because the executive branch had already conceded in the WTO that there was a violation, Thomson argues, the basis for the panels' decisions was wrong. We disagree with Thomson and hold that our decisions in Princess and Carnival are binding precedent on this panel.

Contrary to Thomson's argument, our prior decisions did not turn on the WTO's position on the HMT as applied to imports. Those decisions relied, instead, on the presence of a severability clause in the WRDA (of...