Petition for Writ of Certiorari — CF Industries, Inc. v. United States

Supremes Cowt

FiLebe

03,867 DEC 15 2003

IN THE

Supreme Court of the Gnited States

CF INDUSTRIES, INC.,

Petitioner,

v.

UNITED STATES OF AMERICA,

Respondent.

On Petition For A Writ Of Certiorari

To the U.S. Court of Appeals For The Federal Circuit

PETITION FOR A WRIT OF CERTIORARI

DANIEL G. JARCHO

Counsel of Record

PETER BUCK FELLER

MCKENNA LONG &

ALDRIDGE LLP

1900 K Street, N.W.

Washington, D.C. 20006

(202) 496-7500

Counsel for Petitioner

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QUESTIONS PRESENTED

1. Whether this Court’s decision in United States v.

United States Shoe Corp., 523 U.S. 360 (1998) — which held

that that the Harbor Maintenance Tax (HMT) is a tax and not

a user fee — forecloses the court of appeals’ decision that the

HMT is a user fee and not a tax, and therefore not governed

by the Uniformity Clause of Article I.

2. Whether the HMT statute violates the Uniformity

Clause requirement that “all Duties, Imposts and Excises

shall be uniform throughout the United States,” by imposing

a tax on certain types of port use in all of the coastal states

except Alaska and Hawaii, where such port use is tax

exempt.

3. Whether the HMT statute’s tax exemption for port

use in Alaska and Hawaii violates the Port Preference Clause

of Article I, which forbids Congress from granting express

preferences in revenue laws for all of the ports of any state.

11

RULE 29.6 DISCLOSURE

Petitioner CF Industries, Inc. has no parent corporation,

and no publicly held company owns ten percent or more of

its stock.

ill

TABLE OF CONTENTS

Page

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PETITION FOR A WRIT OF CERTIORARI..................008 l

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STATUTORY AND CONSTITUTIONAL

Fee ET BOOT IES VED epevcnsvsssessecnncsvesasovessensnsenoseses 2

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A. The Harbor Maintenance Tax .................::seceeees 3

B. The Harbor Maintenance Tax on Cargo

Loadings and the United States Shoe

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om hc chss cnn en dab acid paieivianeaninbeensmnownnih 4

1. The Ruling of the U.S. Court of

Intemnational THE ........:0..ssesssseccsesvossoseees 4

2. The Ruling of the U.S. Court of

Appeals for the Federal Circuit................. 7

REASONS FOR GRANTING THE PETITION .................. 8

I. THE COURT OF APPEALS’ DECISION

UNDER THE UNIFORMITY CLAUSE

CONFLICTS WITH THE PREMISE OF THIS

COURT’S DECISION IN UNITED STATES

A. The Court’s Ruling in United States

BOG COMMOIS THIS COS ....0ccveccescesccncccssccccssccces 9

iv

TABLE OF CONTENTS continued

B. United States Shoe is Not

Distinguishable From This Case.................00+ 11

1. | The Court of Appeals’ Effort to

Distinguish United States Shoe

Does Not Withstand Scrutiny ............... 11

2. The Terms “Tax” and “Duty”

Have the Same Meaning in

Different Provisions of Article 1........... 13

.. The Court Should Grant Review to

Prevent the Court of Appeals’ Decision

From Creating a Broad and Disruptive

Impact on Federal Taxation ................:cceseeeees 18

1. The Federal Budget Process

Would be Substantially Disrupted

if Taxes Could be Characterized as

SE ee canchaietaiaseincicinneneinindessiiaineiicinnicn 18

2. The Legislative Process Would be

Disrupted if the Same Assessment

Could be Characterized Both as a

TOK OAM O UGE FO a. cnsccssessrsrercevcosenness ai

D. The Court’s Review Should Address the

Substantive Scope of the Uniformity

Il. THE COURT SHOULD GRANT THE

PETITION TO ADDRESS THE QUESTION

WHETHER THE PORT PREFERENCE

CLAUSE REMAINS A MEANINGFUL LIMIT

ON CONGRESSIONAL POWER .............sccccscseseseees 26

a IR i isciepisoninissninccainnnacistsnnsienaeadpuneneiabsbninpnontigganinins 30

v

TABLE OF AUTHORITIES

Page

CASES

Ala. Great S. Ry. Co. v. United States, 340

Tac PP PIPED Diinicsiciareininstinibailguddibeieaasoiunualiicsalameeaaane 26

Armour Packing Co. v. United States, 209

Rides Oe Ge ED ancsiccereennsenssnennniekeencbean oan 26

Edye v. Robertson, 112 U-S. 580 (1884)..........cccscccsssseeseee 24

Fairbank v. United States, 181 U.S. 283

CPi ED scyrovintenstatemnancndnaseiainadunaiaasabaaaleca nae 15, 16

Fernandez v. Weiner, 326 U.S. 340 (1945)........cccccccsssereeees 13

Harmelin v. Michigan, 501 U.S. 957 (1991)..........:ccccsceeeeee 15

Hughes v. Oklahoma, 441 U.S. 322 (1979) .........:ccccsseeeeeees 27

Knowlton v. Moore, 178 U.S. 41 (1900).............::cc0ee0 16, 24

La. Pub. Serv. Comm’n v. Tex. & New

Orleans R.R., 284 U.S. 125 (1931) ........ccccsccsesesccoseccceee 26

Michelin Tire Corp. v. Wages, 423 U.S. 276

EO Pa oveinsslisreatsicnesciesiainaiesteaniaiiannil dacsciantaahaniaaaameananel 13, 16

Nat’! Cable Television Ass’n v. United States,

SES Tis FEET Fi iinikcnnecatseibanicchaibcaaindaedann 22

Pace Vv. Devgess, FZ SG. STB CARTS) secnciansecessnsocccsnsnctusgonven 11

Pennsylvania v. Wheeling & Belmont Bridge

CR, SP Bes SE CE icieteeeedenienae 26

Steward Mach. Co. v. Davis, 301 U.S. 548

CLIENT F ss:itdivinscidienisintiintcecaiabeniadena nema passim

Thomson Consumer Elecs., Inc. v. United

States, 247 F.3d 1210 (Fed. Cir. 2001) .............c ee eeeeeees 4

Thomson multimedia Inc. v. United States,

219 F. Supp. 2d 1322 (Ct. Int’] Trade

fener wonsasonsesnsnsesesosasassnssnsenansessorenacasonsens passim

vi

TABLE OF AUTHORITIES continued

Page

Twin City Nat'l Bank of New Brighton v.

Mabectiar, UG67 UB. 196 CRIB) vxcsccssvcaseseseserseseresssssonere 22

United States v. IBM Corp. 517 U.S. 843

EEE <seinnstnvnedtenenecbstalteteapmummcegeniagsiiesaadae 15, 16, 17

United States v. Munoz-Flores, 495 U.S. 385

ER DPIUEE scsvsepinssiosusinitintssisvedanconccsasusmiguaeaiensadamadianee 22

United States v. Ptasynski, 462 U.S. 74 (1983) ........... passim

United States v. United States Shoe Corp.,

FEF I: FOE OF ivtisiinninmimniomnamnial passim

United States v. Verdugo-Urquidez, 494 U.S.

Br FE sstinscniacectennihiohemianiinimmntankanlmameindiita 15

CONSTITUTIONAL PROVISIONS

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Sos CET. OE 8, SF GA. D cvcciinvissseermicmnnnnen passim

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STATUTES

Be UB. § SRR sistitisonnsrinimimmmaanaia 3, 9, 10

PE UDC. 6 CG esssisiisciisnimeieeeiaael 10

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BG UDA. 5 SORE OD sieiecssiiapstsnmenicckncietieiniomantinanes 5, 29

26 U.S.C. § 4462(b)(1)(D)..........ccccessrrcossessees -aiindadaaiiiiinantd 5

28 U.S.C. § 1295(a)(5) ..ssseeseeee ibn 28

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Vii

TABLE OF AUTHORITIES continued

Page

Pees ROE arian dataenieeacasanediniinane 4,24, 28

Fe FE iciinstriansasciienicianacianaiacinuniamie 4

MISCELLANEOUS

Congressional Budget Office, Congress of the

United States, The Growth of Federal

Ce Ce Cr cerenntinanctnersiccundsnennerscavcmmenennconsl passim

131 Cong. Rec. H9737 (daily ed. Nov. 6,

FO cities cen acediatabivaa tela iidtadintinipaiacsiaiaaniaal 19, 23

D.L. Terry & Bill J. Kirby, Commercial

Fertilizers 2001 (Ass’n of Am. Plant Food

Control Officials, Inc., Lexington, KY &

Fertilizer Institute, Washington D.C.) June

SINT sissstapiniasipestesceadealsinonabealices enbhpabicaidda esatalasiaaimtiesestiesdl 29

James Madison Notes (Aug. 16, 1787) in 3

THE FOUNDERS’ CONSTITUTION (1987) .........s0seseeseeeeeeee 17

Office of Management & Budget, The

Executive Office of the President,

Analytical Perspectives, Budget of the

United States Government, Fiscal Year

Fe ee cciduiaicciccteaaaaieeanaiianiaaal tec dnaciinteinechanlitigiebence 20

Office of Management & Budget, The

Executive Office of the President,

Analytical Perspectives, Budget of the

United States Government, Fiscal Year

TE CE viseisniniiccigaitesinadiiasathidclncctiinpteniiecabivenerinaiieces 21

Piers U.S. Import Information, J. Com. (Port.

Imp. Exp. Reporting Serv., Newark, NJ)

RA: SURE conccssisicesssbadabucapainsisubbilenacbedliininaspidausdaaaeoaiueatacs 29

United States General Accounting Office,

Federal User Fees: Budgetary Treatment,

Status, and Emerging Management Issues

SUE isvasdeiniecssnnsionien eatin egiaaaianaiaabeaeinpuleaaieiel 20

Viil

TABLE OF AUTHORITIES continued

U.S. Army Corps of Engineers, Annual

Report to Congress on the Status of the

Harbor Maintenance Trust Fund for

FRE FO FI COE Ripietisvintnsennniiarsasninnitiennsistinevian 20

Worldwide NPK Capacity Listing by Plant

FERTILIZER SITUATION REP. (Int’]

Fertilizer Dev. Ctr., Muscle Shoals, Ala)

FE, Fe siicinss tiinscchcisieabibigeddcitniansaieaahaeinmianubipcaatiaios 29

PETITION FOR A WRIT OF CERTIORARI

This case calls on the Court to review the constitutionality

of the provisions of the Harbor Maintenance Tax (HMT) that

remain in effect following the Court’s decision in United

States v. United States Shoe Corp., 523 U.S. 360 (1998). In

United States Shoe, the Court held that the HMT imposed

with respect to export cargo was a tax, and not a user fee,

and therefore subject to the Export Clause prohibition that

“[{njo Tax or Duty shall be laid on articles exported from any

State.” U.S. CONST. art. I, § 9, cl. 5. The provisions of the

HMT statute that do not apply to exports, and therefore were

not reviewed in United States Shoe, still assess

approximately $500 million in HMT each year on cargo

unloaded at the nation’s coastal seaports, following shipment

from other states and foreign countries.

In the U.S. Court of Appeals for the Federal Circuit,

Petitioner CF Industries argued that the HMT on cargo

unloadings violates the Uniformity Clause of Article I, by

imposing a tax on certain types of port use in all of the

coastal states except Alaska and Hawaii, where such port use

is tax exempt. CF Industries maintained that the exemption

for Alaska and Hawaii violates the longstanding Uniformity

Clause requirement that a tax must “apply, at the same rate, |

in all portions of the United States where the subject of the

tax is found.” United States v. Ptasynski, 462 U.S. 74, 84

(1983). The court of appeals never reached the merits of CF

Industries’ argument, however, because it held that the

Uniformity Clause does not apply to the HMT.

Notwithstanding this Court’s decision, in United States Shoe,

that the HMT is a tax and not a user fee, the court of appeals

held that the HMT is a user fee and not a tax for purposes of

the Uniformity Clause, and therefore outside the scope of

Uniformity Clause requirements. The court of appeals also

rejected CF Industries’ claim that the tax exemption for port

use in Alaska and Hawaii violates the Port Preference Clause

Cn any SLs fe

ee |

2

of Article I, which forbids Congress from granting express

preferences in revenue laws for the ports of any state.

CF Industries now respectfully petitions this Court to

review the Federal Circuit’s judgment, which because of that

court’s exclusive jurisdiction now stands as the law of the

land with respect to these constitutional provisions as applied

to the revenue laws administered by the U.S. Bureau of

Customs and Border Protection.

OPINIONS BELOW

The opinion of the Federal Circuit (Pet. App. A2-20) is

reported at 340 F.3d 1355. The opinion of the U.S. Court of

International Trade (Pet. App. A21-23) is not reported.

JURISDICTION

The Federal Circuit’s final judgment was entered on

August 18, 2003. (Pet. App. Al.) On November 10, 2003,

the Chief Justice granted an application for extension of time

to file this petition on or before December 16, 2003. This

Court has jurisdiction under 28 U.S.C. § 1254(1).

STATUTORY AND

CONSTITUTIONAL PROVISIONS INVOLVED

The Appendix (Pet. App. A26-35) sets forth verbatim the

following statutory and constitutional provisions: 26 U.S.C.

§§ 4461-4462; U.S. Const. art. I, § 8, cl. 1; and U.S. CONST.

art. I, § 9, cls. 4, 5 and 6.

STATEMENT OF THE CASE

This case presents the question whether the Harbor

Maintenance Tax (HMT) imposed on unloadings of

commercial cargo is unconstitutional. The HMT statute

exempts certain types of unloadings from the tax if they

occur in the ports of Alaska or Hawaii, but the same types of

unloadings are taxed if they occur in the ports of any of the

other coastal states. 26 U.S.C. § 4462(b). The issue here is

3

whether this exemption for Alaska and Hawaii violates the

Uniformity Clause of Article I (which requires taxes to be

geographically neutral) or the Port Preference Clause of

Article I (which forbids taxes that give an express preference

to the ports of one state over the ports of another state).

A. The Harbor Maintenance Tax

In 1986, Congress enacted the HMT to raise new

revenues to fund the development and maintenance of the

nation’s harbors, which had traditionally been funded

through general tax revenues. The HMT statute imposed the

tax on “port use,” defined as “the loading of commercial

cargo on, or. . . the unloading of commercial cargo from, a

commercial vessel at a port.” 26 U.S.C. § 4462(a)(1). The

HMT statute imposed the tax on loadings only if the

pertinent cargo was “to be exported from the United States.”

Id. § 4461(c)(2)(A). The tax on unloadings was imposed on

any cargo shipments unloaded at a coastal port, regardless of

whether the shipments originated inside or outside of the

United States. Jd. § 4461(c)(2)(B). The amount of tax

owing was a fixed percentage of the value of the cargo

loaded or unloaded. Jd. § 4461(b). The U.S. Customs

Service (now Bureau of Customs and Border Protection) was

charged with the responsibility to administer and enforce the

HMT statute.

Petitioner CF Industries is a fertilizer manufacturer that

pays HMT on the phosphate fertilizer that it unloads in

Davant, Louisiana, following shipment from East Tampa,

Florida. CF Industries has paid hundreds of thousands of

dollars in HMT for unloadings of fertilizer at Davant during

the period at issue in this case.

B. The Harbor Maintenance Tax on Cargo

Loadings and the United States Shoe Case

Beginning in the mid-1990’s, thousands of exporters filed

separate civil actions in the United States Court of

4

International Trade (CIT), challenging the constitutionality

of the loadings tax on export cargo under the Export Clause

of the U.S. Constitution, which provides that “[n]o Tax or

Duty shall be laid on articles exported from any State.” U.S.

Const. art. I, § 9, cl. 5. The action filed by United States

Shoe Corp. was selected as a test case to resolve the Export

Clause issue. Following a decision by the CIT and an appeal

to the U.S. Court of Appeals for the-Federal Circuit, this

Court held that the HMT on loadings was an unconstitutional

export tax. United States v. United States Shoe Corp., 523

U.S. 360 (1998). It is critical in the present case that this

Court’s United States Shoe ruling rested on the conclusion

that the HMT is a “tax” subject to Export Clause prohibitions

and not a “user fee.” Jd. at 369.

C. This Litigation

1. The Ruling of the U.S.

Court of International Trade

Although the United States Shoe ruling invalidated the

HMT on cargo loadings for export, the Customs Service

continued to collect the unloadings tax. On April 10, 2002,

CF Industries filed this action in the CIT, seeking a ruling

that the tax on cargo unloadings violates the Uniformity

Clause, U.S. CONST. art. I, § 8, cl. 1, and the Port Preference

Clause, U.S. Const. art. I, § 9, cl. 6. Because there were no

material facts in dispute, the parties filed cross-motions

seeking legal rulings on the constitutional issues presented.’

In its motion for summary judgment, CF Industries

focused on the HMT statute’s “special rule for Alaska,

Hawaii, and possessions” that exempts substantial “port use”

(i.e., unloadings of cargo) in Alaska and Hawaii from the

' Jurisdiction in the CIT arose under 28 U.S.C. § 1581(i). See

Thomson Consumer a, Inc. v. United States, 247 F.3d 1210 (Fed.

Cir. 2001).

5

tax, but does not exempt the same types of “port use” in any

other coastal state. 26 U.S.C. § 4462(b). CF Industries

explained that under this tax exemption, unloadings of cargo

from intrastate shipments in Alaska and Hawaii are not

taxed, even though unloadings from intrastate shipments in

all of the other coastal states are taxed. Id. § 4462(b)(1)(D).

Under this portion of the exemption, for example, shipments

from Juneau unloaded in Anchorage are not taxed, whereas

shipments from San Francisco unloaded in Los Angeles are

taxed. CF Industries also focused on the fact that the HMT

statute exempts unloadings in Alaska and Hawaii from the

tax if the cargo is shipped from any of the other 48 states.

Id. § 4462(b)(1)(A), (C). By contrast, a shipment from any

of those same 48 states is taxed if unloading occurs in a

coastal state other than Alaska or Hawaii. See id. § 4462(b).

Under this portion of the exemption, shipments from San

Francisco unloaded in Juneau are not taxed, whereas

shipments from San Francisco unloaded in Seattle are taxed.

CF Industries argued that the tax exemption for Alaskan

and Hawaiian ports violates the longstanding Uniformity

Clause requirement that a tax must “apply, at the same rate,

in all portions of the United States where the subject of the

tax is found.” Ptasynski, 462 U.S. at 84. CF Industries

maintained that the HMT is unconstitutional, because the

subject of the tax is cargo unloadings, and the tax is not

assessed on certain unloadings in Alaska and Hawaii but is

assessed on the same types of unloadings in the other coastal

states.

CF Industries also argued that the exemption for Alaskan

and Hawaiian ports violates the Port Preference Clause, by

establishing an express preference for the ports of Alaska

and Hawaii over the ports of the other coastal states.

The government opposed CF Industries’ summary

judgment motion and moved to dismiss, asserting that the

HMT did not violate the Uniformity Clause or Port

6

Preference Clause. The CIT ruled for the government. The

CIT explained its ruling in a three-page Memorandum

Opinion that relied almost completely upon its earlier

decision in Zhomson multimedia, Inc. v. United States, 219

F. Supp. 2d 1322 (Ct. Int’l Trade 2002), which was

incorporated by reference. (Pet. App. A21-23.)’

In Thomson, the CIT had held that a tax violates the

Uniformity Clause “only where [the Court] finds that

Congress’ purpose was to promote regional favoritism or

discrimination” (219 F. Supp. 2d at 1326) and also suggested

that a tax does not violate the Uniformity Clause unless

Congress has acted in “bad faith” (id. at 1328), rather than

for a “benign” purpose (id. at 1329). The CIT therefore

decided that as long as Congress has a proper reason for

taxing one geographic region differently than another, the

Uniformity Clause does not require the HMT to apply

uniformly in all geographic areas where its subject is found.

The CIT concluded that the HMT complies with the

Uniformity Clause because Congress enacted the Alaska and

Hawaii exemption for a proper purpose — to relieve tax

burdens in the two states that are most dependent upon ocean

transportation for domestic consumption — rather than for the

improper purpose of promoting regional favoritism. Jd. at

1327. |

The CIT below also denied relief under the Port

Preference Clause by relying on its ruling in Thomson. (Pet.

App. A22.) In Thomson, the CIT conceded that “[b]y

exempting Alaska and Hawaii domestic cargo, Congress

arguably granted an express preference to those two states.”

Thomson, 219 F. Supp. 2d at 1331. However, the CIT also

held that a statute that simply results in a preference does not

_

2

We are informed that Thomson will petition for a writ of certiorari

on issues substantially related to the present case.

a

7

violate the Port Preference Clause, and that the statute must

“explicitly discriminate against the ports of a particular

state” to be unconstitutional. Jd. at 1330. The court then

elaborated upon what it meant by “explicit discrimination,”

holding that a statute only violates the Port Preference

Clause if Congress had the improper purpose of “intend[ing]

to channel commerce toward all of the ports of a favored

state.” Jd. at 1331. The CIT held that the HMT was

constitutional because the purpose of the Alaska and Hawaii

exemption was to relieve an undue tax burden on those states

rather than to channel commerce to them improperly as

“favored” states. Jd. at 1331-32.

2. The Ruling of the U.S. Court

of Appeals for the Federal Circuit

CF Industries appealed to the U.S. Court of Appeals for

the Federal Circuit, which affirmed the judgment of the CIT.

The court of appeals first ruled that the Uniformity Clause

does not apply to the HMT, on the ground that the HMT is a

“user fee” and not a “tax.” (Pet. App. A8-15.) Although this

Court had held, in United States Shoe, that the HMT is a

“tax” and not a “user fee,” the court of appeals attempted to

distinguish United States Shoe because it involved the

Export Clause instead of the Uniformity Clause. The court

of appeals concluded that the Export Clause imposes a

narrower definition of a “tax” than other constitutional

provisions do, so that the HMT is properly characterized as a

“tax” (and not a “user fee”) under the Export Clause and as a

“user fee” (and not a “tax”) under the Uniformity Clause.

(/d.) Having ruled that the Uniformity Clause does not apply

te the HMT, the court of appeals did not address the

substantive scope of the Uniformity Clause.

The court of appeals then ruled that the HMT does not

violate the Port Preference Clause. The court rejected CF

Industries’ argument that the special tax exemption for port

use in Alaska and Hawaii meets the test for an

8

unconstitutional port preference. The court of appeals

concluded that the exemption does not violate the Port

Preference Clause, because the special exemption for Alaska

and Hawaii does not involve “deliberate discrimination

against the ports in one or more states and in favor of

others.” (/d. at Al5.) The court of appeals acknowledged

that no previous court had applied that test but found support

for it in the original purpose of the Port Preference Clause,

which the Founders intended to counteract regionalism. (Jd.

at Al5-16.) In the court of appeals’ view, the HMT statute

was constitutional, because the exemption for Alaska and

Hawaii was not intended to favor those states and was

instead enacted for the proper purpose of alleviating the

HMT’s impact in those states, arising from their great

dependency upon ocean-going cargo. (See id. at A19.)

This petition followed.

REASONS FOR GRANTING THE PETITION

I. THE COURT OF

APPEALS’ DECISION UNDER THE

UNIFORMITY CLAUSE CONFLICTS

WITH THE PREMISE OF THIS COURT’S

DECISION IN UNITED STATES SHOE

The petition should be granted because the court of

appeals’ decision under the Uniformity Clause conflicts with

the premise of this Court’s decision in United States Shoe,

523 U.S. 360. In United States Shoe, the Court held that the

HMT is a tax and not a user fee. Jd. at 369. The court of

appeals below reached the diametrically opposite conclusion,

holding that the HMT is a user fee and not a tax. (Pet. App.

A15.) The two rulings cannot be reconciled, as the court of

appeals maintained, simply because United States Shoe

addressed the Export Clause of Article I and this case

addresses the Uniformity Clause of Article I. (See id. at A8-

15.) This Court should grant the petition to resolve this

conflict, which directly controls the entitlement to

9

approximately $1 billion in taxes assessed on cargo

unloadings, as well as the disposition of more than 1,000 tax

refund cases now pending in the CIT.

A. The Court’s Ruling in United

States Shoe Controls This Case

This case is controlled by the Court’s ruling, in United

States Shoe, that the HMT is a tax and not a user fee. That

tuling turned on the relationship between the monetary

assessment, on the one hand, and the government services

that the assessment would fund, on the other. The Court held

that if the relationship was a close one, the assessment would

properly be viewed as a fee for particular government

services (i.e., a user fee). On the other hand, the Court held

that if the relationship was remote, the assessment would

properly be viewed as a tax. The Court ruled that the HMT

was a tax, because there was no direct correlation between

the amount of tax a particular exporter paid and the harbor

maintenance services the exporter received. United States

Shoe, 523 U.S. at 369.

In United States Shoe, the Court explained that the HMT

is an ad valorem tax (assessed as a fixed percentage of

.125% of the value of the cargo loaded for export), and that

cargo value “does not correlate reliably with the federal

harbor services used or usable by the exporter.” Jd. That is

because the extent and manner of port use depend, not upon

cargo value, but upon “factors such as the size and tonnage

of a vessel, the length of time it spends in port, and the

services it requires, for instance, harbor dredging.” Jd. The

Court concluded that the HMT is a tax and not a user fee,

because a user fee “must fairly match the exporters’ use of

port services and facilities.” Jd. at 370.

This ruling in United States Shoe controls this case,

because both cases have an identical relationship between

the monetary assessment and the government services

provided. The HMT statute imposed exactly the same

10

assessment — a fixed percentage of .125% of cargo value — in

this case as in United States Shoe, because the statute uses

the same tax rate regardless of whether a cargo loading or

unloading is involved. 26 U.S.C. § 4461(b). In addition, the

government services at issue -— harbor maintenance

services — are the same in United States Shoe and in the

present case. The only differences between the cases

concern the times that the assessment occurred and the times

that harbor maintenance services were provided. In United

States Shoe, liability for the tax attached at the time cargo

was loaded for export, whereas in the present case, liability

for the tax attached at the time cargo was unloaded following

a domestic shipment. Jd. § 4461(c)(2). In addition, in

United States Shoe, the harbor services were utilized before

cargo was exported, whereas in the present case, the harbor

services were utilized before and after domestic shipments

were made. These trivial differences between this case and

United States Shoe have absolutely no bearing on the

question whether the HMT is a tax, which turns purely on

the relationship between the assessment and the government

service provided.

Because the assessment, the government service, and the

relation between the two are the same in this case as in

United States Shoe, this case is controlled by the Court’s

ruling that the HMT is a tax and not a user fee. The central

question in this case, as in United States Shoe, is whether an

ad valorem method of calculation has any correlation to port

use, which is the subject of the tax. The answer to that

question derives from the nature of the charge and the

characteristics of port use, and is unrelated to the particular

constitutional provision under challenge.

1]

B. United States Shoe is Not

Distinguishable From This Case

1. The Court of Appeals’ Effort to

Distinguish United States Shoe

Does Not Withstand Scrutiny

The Court’s ruling, in United States Shoe, that the HMT is

a tax is not limited to the Export Clause context as the court

of appeals held. (See Pet. App. A9-10.) This Court gave no

indication that its United States Shoe ruling was so limited,

and its reasoning easily extends to the Uniformity Clause,

which addresses the federal taxing power in the same

terminology as the Export Clause.

First, this Court did not, as the court of appeals suggested,

rely upon a “stringent standard specific to the Export Clause”

in determining whether the HMT is a tax. (See id.) While

this Court emphasized that the Constitution places stricter

limitations on export taxes than on other taxes, it did not

hold that the definition of what constitutes a tax is somehow

different under the Export Clause than under other

constitutional provisions that use the same or similar

language. Indeed, as explained infra in Section B.2, this

Court’s other decisions call for a consistent definition of

“tax” in the various Article I provisions governing the taxing

power.

Second, this Court did not limit its ruling to the Export

Clause context, as the court of appeals held, simply because

United States Shoe relied upon an Export Clause precedent

(Pace v. Burgess, 92 U.S. 372 (1875)) and distinguished

three precedents under other constitutional provisions,

holding that they “[did] not govern” the case. United States

Shoe, 523 U.S. at 368. (See Pet. App. A9-10.) This Court

Suggested that these other three precedents did not apply

because they shed no light on the specific textual question

before the Court — whether the HMT fit within the language

of the Export Clause, as a prohibited “tax or duty” laid on

12

exports. U.S. CONST. art. I, § 9, cl. 5.

None of the three precedents that the Court distinguished

analyzed the difference between user fees, on the one hand,

and exactions that meet the constitutional terms “tax” or

“duty,” on the other. For example, one precedent addressed

the difference between a prohibited state restriction on

interstate commerce and a user fee (rather than the difference

between an Article I “tax” or “duty” and a user fee). See

United States Shoe, 523 U.S. at 367-68 (citing Evansville-

Vanderburgh Airport Auth. Dist. v. Delta Airlines, Inc., 405

U.S. 707, 717-21 (1972)). In distinguishing this precedent,

the Court raised the difference between interpreting express

and implied constitutional requirements, noting the stark

contrast between the fluid “‘nontextual negative command’”

of the Commerce Clause and the more restrictive “‘textual

command’” of the Export Clause at issue in United States

Shoe. United States Shoe, 523 U.S. at 368 (quoting United

States v. IBM Corp., 517 U.S. 843, 851 (1996)).

Another precedent distinguished in United States Shoe

addressed the difference between a prohibited violation of

state sovereign immunity and a user fee (rather than the

difference between an Article I “tax” or “duty” and a user

fee). See United States Shoe, 523 U.S. at 367-68 (citing

Massachusetts v. United States, 435 U.S. 444, 463-67

(1978)). Although this case involved the states’ immunity

from federal taxation, no construction of the terms “tax” and

“duty” was involved, because that immunity has no express

textual basis and was “judicially implied from the States’

role in the constitutional scheme.” Massachusetts, 435 U.S.

at 455.

The third precedent distinguished in United States Shoe

addressed the difference between a Fifth Amendment Taking

and a user fee, which also obviously did not raise the textual

question before the Court. United States Shoe, 523 U.S. at

367-68 (citing United States v. Sperry Corp., 493 U.S. 52, 62

a

13

(1989).

The court of appeals’ analysis does not undermine the

conclusion that United States Shoe controls this case. As

explained below, the Uniformity Clause at issue here utilizes

the same terminology as the Export Clause at issue in United

States Shoe, unlike the constitutional provisions addressed in

the three precedents that United States Shoe distinguished.

2. The Terms “Tax” and “Duty”

Have the Same Meaning in

Different Provisions of Article I

The ruling in United States Shoe applies to this case,

because the terms “tax and “duty” (which the Court

interpreted in United States Shoe) have the same meaning in

the Export Clause as in the Uniformity Clause and related

provisions of Article I.

Article I provides that “[t]he Congress shall have Power

To lay and collect Taxes, Duties, Imposts and Excises.” U.S.

CONST. art. I, § 8, cl. 1. Under this provision, the Court has

held that there are only two categories of assessments

embraced by the term “tax”: direct taxes and indirect taxes.

See, e.g., Steward Mach. Co. v. Davis, 301 U.S. 548, 581-82

(1937). Direct taxes — which are those “taxes” that are not

“duties, imposts and excises” — are assessed directly upon

people (i.e., capitation taxes) or upon property ownership

without regard to its use or disposition. See U.S. CONST. art.

I, § 9, cl. 4; Fernandez v. Weiner, 326 U.S. 340, 361-62

(1945). By contrast, indirect taxes are “duties, imposts and

excises,” all of which are assessments imposed on the use or

disposition of property. Steward Mach. Co., 301 US. at

581-82; Fernandez, 326 U.S. at 361-62. Relying on

historical evidence from 1787, when Article I was drafted,

the Court has indicated that the term “duty” is the broadest of

the three terms, encompassing both “impost” (which equates

to modern day customs duties) and “excise.” Michelin Tire

Corp. v. Wages, 423 U.S. 276, 290-91 (1976). Taken

14

99 «66s

together, the terms “duty,” “impost” and “excise” cover

every type of indirect tax. Steward Mach. Co., 301 US. at

581-82; see also Ptasynski, 462 U.S. at 80.

This Court’s decision in United States Shoe indicates that

the HMT on exports was a “duty” or other indirect “tax”

within the meaning of Article I. The Court held that the

HMT was a “tax” or “duty” within the meaning of Article I’s

Export Clause. United States Shoe, 523 U.S. at 362, 370.

The Court’s analysis indicates that the particular species of

“tax” at issue was an indirect tax, incurred because of the use

or disposition of property. That is because the HMT was

assessed on the loading of cargo for export transit. See id. at

364 & nl.

By contrast, the court of appeals’ ruling necessarily rests -

on the premise that the HMT is neither a “duty” nor any

other indirect “tax.” Under the court of appeals’ ruling, the

HMT could not have been a “duty,” because the Uniformity

Clause applies to “al/ duties, imposts and excises.” U.S.

ConsT. art. I, § 8, cl. 1 (emphasis added). The HMT also

could not have been an indirect “tax” under the court of

appeals’ ruling, because this Court has interpreted the

Uniformity Clause to apply to all indirect “taxes” that Article

I grants Congress the power to enact. Ptasynski, 462 US. at

80-81 & n.9; Steward Mach. Co., 301 U.S. at 581-82. The

term “tax” does not appear in the Uniformity Clause.

However, in Article I, the Uniformity Clause immediately

. The HMT also bore no indicia of a direct tax, because it was not a

Capitation tax or a tax assessed purely as a result of property ownership.

In addition, if the HMT had been a direct tax, it would have been subject

to the provision of Article I requiring direct taxes to be laid “in

Proportion to the Census or Enumeration herein before directed to be

taken.” U.S. CONST. art. I, § 9, cl. 4; see also Ptasynski, 462 U.S. at 80

n.9. The HMT obviously did not satisfy this requirement, and the Court

did not suggest that it should.

——eee

15

follows, and qualifies, the “Power To lay and collect Taxes,

Duties, Imposts and Excises,” providing that “all Duties,

Imposts and Excises shall be uniform throughout the United

States.” U.S. CONST. art. I, § 8, cl. 1. The Court has long

held that the “duties, imposts and excises” governed by the

Uniformity Clause are a subset of the “taxes” that Congress

has the power to enact under Article I. See, e.g., Ptasynski,

462 U.S. at 80 (“The Uniformity Clause conditions

Congress’ power to impose indirect taxes.”); Fairbank v.

United States, 181 U.S. 283, 296 (1901).

1. The only way to distinguish United States Shoe from

the present case, as the court of appeals attempted to do, is to

conclude that the terms “duty” and indirect “tax” have

different meanings under the Export Clause than under the

Uniformity Clause and related provisions of Article I. Such

a conclusion does not square with this Court’s precedents.

The Court has often ruled that a term that appears more than

once in the Constitution’s text has the same meaning each

time it appears, particularly where, as here, the different

provisions containing the term were _satified

contemporaneously. See, e.g., United States v. Verdugo-

Urquidez, 494 U.S. 259, 265 (1990) (“the people” has the

same meaning in the Fourth Amendment as in the First,

Second, Ninth and Tenth Amendments); cf Harmelin v.

Michigan, 501 U.S. 957, 978 n.9 (1991) (“When two parts of

a provision (the Eighth Amendment) use different language

to address the same or similar subject matter, a difference in

meaning is assumed.”) (Scalia, J., concurring). The Court

has consistently applied that interpretive principle when

construing the terms “tax,” “duty,” “impost,” and “excise”

under Article I.

For example, the Court has held that the “duties, imposts

and excises” that Congress has the power to “lay and collect”

under Article I, section 8 are the same “duties, imposts and

excises” referred to in the Uniformity Clause. Steward

16

Mach. Co., 301 U.S. at 581-82; Knowlton v. Moore, 178 U.S.

41, 87-88 (1900). The Court also has concluded that the

Export Clause limits the same “taxes” and “duties” that

Congress has the Article I power to “lay and collect,” by

providing that a “tax” or “duty” cannot be “laid” on exported

articles. Fairbank, 181 U.S. at 289-90, 295-96. The Court

similarly has interpreted the term “duty” consistently under

the Export Clause and the Import-Export Clause of Article I

(United States v. IBM Corp. 517 U.S. 843, 857 (1996)) and

has construed “imposts” and “duties” the same way under

the Import-Export Clause and Article I, section 8, which

grants Congress the power to assess “imposts” and “duties.”

Michelin Tire Corp., 423 U.S. at 290-93.

As interpreted by this Court, therefore, the provisions of

Article I governing taxation are well integrated with one

another, establishing a coherent regime in which the same

terms share a common meaning. These precedents

demonstrate that United States Shoe is not distinguishable

from this case, because an indirect “tax” or “duty” means the

same thing under the Export Clause as under the Uniformity

Clause.

2. The conclusion that the Export Clause and Uniformity

Clause must be interpreted consistently draws additional

support from their common function and history. Both

clauses impose express limitations on the power to “lay and

collect” taxes conferred by section 8 of Article I. United

States Shoe, 523 U.S. at 368 (Export Clause limits the

taxing power); Ptasynski, 462 U.S. at 80 (Uniformity Clause

limits the taxing power); Fairbank, 181 U.S. at 295-96

(Export Clause and Uniformity Clause are two of the three

express limitations on the taxing power). Because both

clauses limit the power to tax, both were proposed, during

the Constitutional Convention, as measures that would

immediately follow the delineation of that power in the text

of Article I; the Uniformity Clause ultimately retained that

17

position in the final version of the Constitution, whereas the

Export Clause was placed in a different section of Article I,

even though it remains a restriction on the taxing power. See

U.S. Const. art. I, § 8, cl. 1; James Madison Notes (Aug. 16,

1787) in 3 THE FOUNDERS’ CONSTITUTION 366-67 (Philip B.

Kurland & Ralph Lerner eds., 1987).

In addition, the Founders adopted both clauses to serve

the same general purpose: preventing some states from

imposing unfair exactions on other states. The Export

Clause was proposed by Southern delegates to the Federal

Convention, who “feared that the Northern States would

control Congress and would use taxes and duties on exports

to raise a disproportionate share of federal revenues from the

South.” JBM Corp., 517 U.S. at 859 (citing 2 M. Farrand,

The Records of the Federal Convention of 1787 (rev. ed.

1966)). The Uniformity Clause also was adopted to prohibit

the national government from imposing taxes that favored

some states and disadvantaged others, which could create

“the grossest and most oppressive inequalities’”” and permit

the “‘agriculture, commerce, or manufactures of one State

[to] be built up on the ruins of those of another.’”” Ptasynski,

462 U.S. at 81 (quoting 1 J. Story, Commentaries on the

Constitution of the United States § 957 (T. Cooley ed.

1873)). The common function and history of the Uniformity

Clause and the Export Clause further underscore that the

court of appeals’ decision that the HMT is a user fee and not

a tax conflicts with this Court’s decision, in United States

Shoe, that the HMT is a tax and not a user fee.

If applied in other cases, the premise underlying the court

of appeals’ ruling — that the same terms have different

meanings in different provisions of Article I — would

undermine the coherent and integrated taxation regime that

the Founders designed. The possibility arises, for example,

that under Article I section 8, the Congress would have the

power to enact some “duties, imposts and excises” that are

18

subject to the Uniformity Clause and others that are not. The

Congress also might have the power to imposes “taxes” or

“duties” that are not subject to the Export Clause at all, or

“duties” that are governed by the Export Clause but not by

the Uniformity Clause. The Court should review this case to

address these far-reaching consequences for the integrity of

the constitutional scheme.

C. The Court Should Grant

Review to Prevent the Court of

Appeals’ Decision From Creating a Broad

and Disruptive Impact on Federal Taxation

The court of appeals’ conclusion that the same assessment

can be simultaneously both a “tax” and a “user fee” has

enormously broad and negative practical implications for the

taxation regime established under Article I. This Court

should grant review to prevent the court of appeals’ flawed

conclusion from standing as the law of the land for the

customs taxes subject to the Federal Circuit’s exclusive

nationwide jurisdiction.

1. The Federal Budget Process Would -

Be Substantially Disrupted if Taxes

Could be Characterized as User Fees

The federal budget process would be substantially

disrupted if taxes could be characterized legitimately as user

fees. The question whether an assessment is a tax or a user

fee fundamentally affects the significant and politically

charged questions whether Congress has raised taxes, and

whether the federal budget is in balance, in deficit, or in

surplus. The Congress has excluded user fees from the

budget deficit calculus. See Congressional Budget Office,

Congress of the United States, The Growth of Federal User

Charges 19, 31-32 (1993). If taxes could be characterized

freely as user fees, there would be an obvious tendency for

budget deficit accounting to be skewed, as the Congress

increasingly raised money through assessments called “user

19

fees’ instead of “‘tax increases.”

The legislative history of the HMT illustrates the

congressional practice of omitting user fees from the deficit

calculus. When various proposals for the HMT were under

consideration in 1985, the Chairman of the House Budget

Committee indicated that the HMT would not affect the

budget deficit if structured so that there was a direct

relationship between the exaction and the government

services provided (i.e., as a user fee). In particular, the

Chairman indicated that there would be no budget deficit

effect if the HMT were assessed based upon the volume or

weight of cargo (rather than its value), because there would

be a direct relationship between higher assessments imposed

on shipments of large and bulky cargos and the greater

harbor services that shipment of such cargos required. 131

Cong. Rec. H9737 (daily ed. Nov. 6, 1985) (letter from Hon.

William H. Gray Il, Chairman, House Budget Comm. to

Hon. Walter B. Jones, Chairman, Comm. on Merchant

Marine & Fisheries).

By contrast, the Budget Committee Chairman stated that

there would be an effect on the budget deficit if the HMT

were structured so that there was no direct connection

between the charge and the harbor services provided (i.e., as

a tax). In particular, the Chairman indicated that an

assessment based upon the value of cargo would so affect the

deficit. The premise of the Chairman’s analysis (wholly

consistent with this Court’s later analysis in United States

Shoe) was that there would be “‘ittle relationship” between

an ad valorem assessment and the harbor maintenance

services it funded:

A very valuable cargo, diamonds for example, would

be taxed at a higher rate than a less valuable cargo

which might weigh substantially more. This would be

the result even though the less valuable cargo may

require larger port facilities, deeper harbors, etc.

20

Id. As a result, the ad valorem assessment would be “more

like a tax imposed by the United States pursuant to its

revenue raising power.” Id.

The Congress ultimately enacted the ad valorem version

of the HMT, of course, and therefore included the HMT in

the deficit calculus. See The Growth of Federal User

Charges 22, 31-32 (HMT is a benefit-based tax, which is

“revenue” for budget purposes). However, the court of

appeals’ analysis obviously would have provided the

Congress with a strong rationale for converting the HMT

from a “tax” to a “user fee.” If Congress had done so, the

effect of the HMT on the budget deficit would have been

obscured from public view, and the deficit accounting would

have been materially affected; currently the HMT accounts

for approximately $500 million each year in taxes. See, e.g.,

U.S. Army Corps of Engineers, [WR-Report 00-R07, Annual

Report to Congress on the Status of the Harbor Maintenance

Trust Fund for Fiscal Year 1999 13 (2001).

Furthermore, the potential effect of the court of appeals’

analysis extends well beyond the specific budgetary impact

of the HMT. There already is a well-developed trend for

Congress to structure charges as user fees instead of taxes.

The Congressional Budget Office has indicated that deficit

reduction legislation in the 1980’s and 1990’s encouraged

the Congress and federal agencies to add user fees “both to

reduce recorded agency expenditures and to make it possible

for programs to expand without increasing net outlays or

raising taxes.” The Growth of Federal User Charges 19.

Indeed, in 2000, the Office of Management and Budget

acknowledged an Administration policy “to shift to user fee

funding wherever appropriate.” Office of Management &

Budget, The Executive Office of the President, Analytical

Perspectives, Budget of the United States Government,

Fiscal Year 2001 94 (2000). The result of these dynamics

has been a great proliferation of user fees in recent years.

|

21

See The Growth of Federal User Charges 19; United States

General Accounting Office, Federal User Fees: Budgetary

Treatment, Status, and Emerging Management Issues 1, 7-9

(1997). The Office of Management and Budget recently

reported that user fees will contribute more than $173 billion

to federal government programs in fiscal year 2004. Office

of Management & Budget, The Executive Office of the

President, Analytical Perspectives, Budget of the United

States Government, Fiscal Year 2004 89 (2003).

If the Congress and the Executive Branch could freely

characterize taxes as user fees, as the court of appeals did,

they would have every reason to do so, and the pernicious

effect on the accounting for the federal budget deficit would

be enormous. This Court should grant this petition to review

the significant question whether the same assessment may be

both a tax and a user fee.

2. The Legislative Process

Would be Disrupted

if the Same Assessment

Could be Characterized

Both as a Tax and a User Fee

The legislative process governing taxation also would be

substantially affected if the same assessment could be

characterized both as a tax and a user fee. That process

depends fundamentally upon determinations that particular

assessments are either taxes or user fees. If the court of

appeals were correct, and the same measure could be both a

tax and a user fee at the same time, the legislative process

would be disrupted. The Court should grant review because

of this important collateral implication of the court of

appeals’ decision.

The question whether an assessment is a tax or a user fee

fundamentally affects whether Congress may delegate, to an

administrative agency, the power to impose the assessment.

While Congress has the power to impose both taxes and user

22

fees, it may not constitutionally delegate its power to tax but

may permit the agencies to impose user fees under statutory

authorization. See Nat’l Cable Television Ass'n v. United

States, 415 U.S. 336, 340-41 (1974). Therefore the

characterization of an assessment as either a tax or a user fee

is vitally important to determine whether delegation is

permissible. If the same assessment could be both a tax and

a user fee, as the court of appeals held, this critical

determination would be fraught with difficulty, undermining

the Congress’s ability to evaluate its own constitutional

limits. This Court accordingly should review the court of

appeals’ ruling that an assessment can be both a tax and a

user fee at the same time.

The question whether an assessment is a tax or a user fee

also could affect which house of Congress may originate the

measure. The Origination Clause of Article I requires that

“All Bills for raising Revenue shall originate in the House of

Representatives.” U.S. CONST. art. I, §7, cl. 1. The

Origination Clause only governs bills that “levy taxes, in the

strict sense of the word,” and “bills for other purposes which

may incidentally create revenue” need not originate in the

House. Twin City Nat’l Bank of New Brighton v. Nebecker,

167 U.S. 196, 202 (1897) (citing 1 J. Story, Commentaries

on the Constitution § 880, p. 610-611 (3d ed. 1858)); see

also United States v. Munoz-Flores, 495 U.S. 385, 397

(1990). The characterization of an assessment as a tax or

user fee is integrally related to whether it is imposed by a

“statute that raises revenue to support the Government

generally,” which must originate in the House. Munoz-

Flores, 495 U.S. at 397-98. Because a particular revenue

measure either is, or is not, required to originate within the

House, this Court should review the court of appeals’ ruling

that an assessment can be both a tax and a user fee at the

same time.

Finally, the question whether an assessment is a tax or a

23

user fee fundamentally affects which Committee of the

House of Representatives has jurisdiction to consider it,

because the Ways and Means Committee has exclusive

jurisdiction over taxes, whereas other standing Committees

(as well as Ways and Means) may report out measures

raising user fees. See The Growth of Federal User Charges

23. The legislative history of the HMT reflects this

jurisdictional issue within the House. The House Budget

Committee Chairman indicated that the HMT would be

outside the jurisdiction of the House Merchant Marine and

Fisheries Committee if it were assessed on an ad valorem

basis (because it would be a tax) but within the jurisdiction

of that Committee if it were assessed on the weight or

volume of cargo (because it would be a user fee). 131 Cong.

Rec. H9737 (daily ed. Nov. 6, 1985). Because the House

Ways and Means Committee either does, or does not, have

exclusive jurisdiction over a particular revenue measure, this

Court should review the court of appeals’ ruling that an

assessment can be both a tax and a user fee at the same time.

D. The Court’s Review

Should Address the Substantive

Scope of the Uniformity Clause

If the Court grants the petition to resolve the conflict with

United States Shoe on the tax/user fee question, the Court’s

review also should address the substantive scope of the

Uniformity Clause. The court of appeals did not delineate

the substantive scope of the Uniformity Clause, because it

held that the Clause did not govern the HMT. However, the

CIT did address the issue, proffering an interpretation of the

Uniformity Clause that does not square with this Court’s

precedents. Although this Court does not typically review an

issue decided by the trial court but not by the court of

appeals, it should do so here, because the CIT’s Uniformity

Clause decision has a binding effect nationwide; that broad

effect stems from the CIT’s unique role in the federal

24

judiciary, as the trial court with exclusive jurisdiction over

cases involving customs duties. See 28 U.S.C. § 1581.

Because of that exclusive junsdiction, Congress has

established the CIT nationally as the frontline judicial

guardian of the Uniformity Clause as it applies to customs

duties. The Chief Judge of the CIT explained this significant

responsibility when that court was created in 1980:

These additions to the court’s jurisdiction, particularly,

28 U.S.C. § 1581(i), the residual jurisdiction provision,

were designed to implement the constitutional mandate

that ‘all Duties, Imposts and Excises shall be uniform

throughout the United States.’

19 U.S.C.A. §§ 1-1550, at xxx (West 1999).

In this case, review of the CIT’s nationally binding ruling

is warranted, because that court materially altered the scope

of the Uniformity Clause as construed in this Court’s

precedents. This Court has long held that the Uniformity

Clause requires taxes to be “geographically” uniform. See,

e.g., Knowlton v. Moore, 178 U.S. 41, 106 (1900).

Geographic uniformity means that a tax “operates with the

same force and effect in every place where the subject of it is

found.” Edye v. Robertson, 112 U.S. 580, 594 (1884); see

also Knowlton, 178 U.S. at 106. Thus, if “a subject is taxed

anywhere, the same [subject] must be taxed everywhere

throughout the United States, and at the same rate.”

Knowlton, 178 U.S. at 84. The Court’s most recent

examination of the Uniformity Clause reaffirms that once

Congress has defined the class to be taxed, the tax must

“apply wherever the classification is found.” Ptasynski, 462

US. at 82.

Notwithstanding these precedents, the CIT held that

Congress does have the power to tax the same subject

differently in different geographic areas, as long as it has a

good reason for doing so. The CIT incorporated by

reference its decision in Thomson, in which it held that a tax

25

violates the Uniformity Clause “only where [the Court] finds

that Congress’ purpose was to promote regional favoritism

or discrimination” (219 F. Supp. 2d at 1326) and also

indicated that a tax does not violate the Uniformity Clause

unless Congress has acted in “bad faith” (id. at 1328), rather

than for a “benign” purpose (id. at 1329).

In the present case, the CIT concluded that the HMT’s

benign purpose rendered it constitutional, regardless of

whether the same subject was taxed the same way in all

geographic areas where it exists. In particular, the CIT ruled

that the Uniformity Clause did not prohibit the tax exemption

for Alaskan and Hawaiian ports, even though the subject of

the tax — “port use” defined as cargo unloadings — was taxed

differently in Alaska and Hawaii than in the other coastal

states. The CIT concluded that the HMT was constitutional,

because Congress enacted the exemption for the purpose of

alleviating the disproportionate impact of the tax in the two

States most dependent upon ocean shipping. (Pet. App. A21-

23.)

If the CIT were correct, Congress could freely tax the

same subject differently in different regions of the country as

long as it had a good reason for doing so, and the Uniformity

Clause would be rendered a nullity. Under the CIT’s

decision, the Congress could, for example, impose different

customs duty rates in different ports for the same

merchandise, as long as the congressional purpose was to

address local economic conditions. Because of the CIT’s

exclusive jurisdiction, its decision now states the governing

constitutional standard for customs duties throughout the

nation. If the Court grants review of the Uniformity Clause

issues in this case, that review should extend to the

substantive scope of the Uniformity Clause, so that this

Court may directly address the CIT’s contention that

Congress may enact a tax that treats the same subject

differently in different geographic areas.

26

Il. THE COURT SHOULD GRANT THE

PETITION TO ADDRESS THE QUESTION

WHETHER THE PORT PREFERENCE

CLAUSE REMAINS A MEANINGFUL

LIMIT ON CONGRESSIONAL POWER

The Court also should grant the petition to address the

significant question whether the Port Preference Clause

retains continuing vitality as a meaningful limit on

congressional power. The court of appeals announced a new

test under the Clause that would eviscerate its protections,

consistent with the government’s view that the Port

Preference Clause is “essentially a dead letter.” (Pet. App.

A38.) The Court should review this case to clarify the

requirements of the Port Preference clause.

The Port Preference Clause provides that “[n]o Preference

shall be given by any Regulation of Commerce or Revenue

to the Ports of one State over those of another.” U.S. CONST.

art. I, § 9, cl. 6. This Court has identified two tests for an

unconstitutional port preference. First, the preference must

be a “direct” preference expressly conferred by the statute at

issue; the Clause does not prohibit mere “incidental

advantages” to ports stemming from facially neutral statutes.

Pennsylvania v. Wheeling & Belmont Bridge Co., 59 U.S.

421, 435 (1855); Armour Packing Co. v. United States, 209

U.S. 56, 80 (1908); see also Ala. Great S. Ry. Co. v. United

States, 340 U.S. 216, 229 (1951) (Port Preference Clause not

violated because “whatever preference there is to New

Orleans is the result of geography and not of any action of

the [Interstate Commerce] Commission”). Second, to violate

the Port Preference Clause, a preference must be drawn

along state lines. “[W]hat is forbidden is, not discrimination

between individual ports within the same or different States,

but discrimination between States... .” Wheeling, 59 U.S. at

435 (emphasis added); La. Pub. Serv. Comm’n v. Tex. &

New Orleans R.R., 284 U.S. 125, 131 (1931).

VV

27

However, under the court of appeals’ analysis, the

exemption for Alaska and Hawaii was constitutional, even

though it met the two tests previously established by this

Court. The HMT statute does contain an express tax

exemption for the ports of Alaska and Hawaii, and the statute

treats all of the ports of Alaska and Hawaii more favorably

than all of the ports of the other coastal states. The court of

appeals reached its decision by adding a newly minted third

test for an unconstitutional port preference: it must involve

“deliberate discrimination against the ports in one or more

states and in favor of others.” (Pet. App. A15.)

In one sense, of course, “deliberate discrimination” occurs

every time Congress makes an express distinction in a

statute, for purposes no one could doubt are proper. Cf.

Hughes v. Oklahoma, 441 U.S. 322, 336 (1979) (state statute

may “discriminate” against interstate commerce even if the

statute “serves a legitimate local purpose”). But what the

court of appeals meant by “deliberate discrimination” carries

a more sinister connotation. The court of appeals concluded

that to be unconstitutional, a port preference must derive

from favoritism for one state over another, intended to

channel commerce to certain states simply because they are

more favored than others. (Pet. App. A19.) In the court of

appeals’ view, the HMT statute did not meet this test,

because the exemption for Alaska and Hawaii was not

intended to “favor” those states and was instead enacted for

the purpose of alleviating the HMT’s disproportionate

impact in those states, arising from their high dependency

upon ocean-going cargo. (See id.)

The effect of this third test was to gut the protections of

the Port Preference Clause. It would be rare indeed for

Congress to leave evidence that it distinguished between

states for the nefarious purpose of “favoring” some states at

the expense of others. The government admitted as much in

the CIT, when if proffered the third test to the court in the

28

related Thomson case:

THE COURT: Well, how is Congress going to show

intentional discrimination, other than saying, We favor

Hawaii and Alaska?

[GOVERNMENT COUNSEL]: Well, that’s exactly

the point, Your Honor. That’s why this clause has

never been used to strike down a — a Statute or a

regulation. /t’s essentially a dead letter.

(Pet. App. A38 (emphasis added).)

This Court should grant the petition to delineate the scope

of the protections provided by the Port Preference Clause. If

left unreviewed, the court of appeals’ decision would have a

long and lasting impact on the revenue laws affecting the

nation’s ports. The Federal Circuit has exclusive jurisdiction

at the court of appeals level to review such laws, and

therefore Supreme Court review is the only mechanism for

alleviating the impact of the constitutional ruling here

presented. See 28 U.S.C. § 1295(a)(5) (granting Federal

Circuit exclusive jurisdiction to review CIT decisions); id.

§ 1581 (granting CIT exclusive jurisdiction to review

customs revenue laws). This Court has previously granted

certiorari because it was the only avenue for relief on

significant issues within the Federal Circuit’s exclusive

jurisdiction. And the Court should do so here. The court of

appeals acknowledged that it found no precedent in this

Court’s decisions (or in the decisions of any other court) for

its new third test under the Port Preference Clause. (Pet.

App. 16-17.) This Court should exercise its discretion to

make its views known on such a significant question, which

controls whether a provision of the Constitution does, or

does not, impose meaningful restrictions on congressional

power.

Furthermore, the Court should grant the petition because

of the broad impact it would have on the many thousands of

Ne a

29

shippers who pay the HMT. Although the court of appeals

concluded that the purpose behind the Alaska and Hawaii

exemption was legitimate, the exemption’s effect is

extraordinarily unfair to shippers such as CF Industries. For

example, under the portion of the exemption applicable to

shipments from the “lower 48” states, shippers such as CF

Industries (which unloads cargo in Louisiana that was

shipped from Florida) pay the tax, whereas shippers that

unload identical cargo in Alaska or Hawaii that also was

shipped from the “lower 48” pay no tax. 26 U.S.C.

§§ 4462(b)(1)(A), (C). Accordingly, CF Industries paid

more than $50,000 in HMT last year, based on unloadings of

fertilizer valued at $46 million, while others who ship

fertilizer of exactly the same value pay nothing when they

unload in Alaska and Hawaii.* The Court should review the

court of appeals’ decision to provide a remedy for this

manifestly unequal treatment.

4

In the year 2000 alone, no HMT was required on approximately

33,000 tons of nitrogen and phosphate fertilizer shipped from the

mainland and unloaded in Hawaii. See Worldwide NPK Capacity Listing

by Plant, FERTILIZER SITUATION REP. (Int’] Fertilizer Dev. Ctr., Muscle

Shoals, Ala.), Aug. 2000; D.L. Terry & Bill J. Kirby, Commercial

Fertilizers 200] (Ass’n of Am. Plant Food Control Officials, Inc.,

Lexington, Ky. & Fertilizer Institute, Washington D.C), June 2002; Piers

U.S. Import Information, J. CoM. (Port Imp. Exp. Reporting Serv.,

Newark, NJ), Oct. 2002.

30

CONCLUSION

The Court should grant the petition for certiorari.

December 15, 2003

Respectfully submitted,

DANIEL G. JARCHO

Counsel of Record

PETER BUCK FELLER

MCKENNA LONG &

ALDRIDGE LLP

1900 K Street, N.W.

Washington, D.C. 20006

(202) 496-7500

Counsel for Petitioners