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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2004
- **Citation:** 541 U.S. 1040

## Text

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
QUESTIONS PRESENTED ...ssscsssscsssssssssssssssesessssssseeeeesen
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PETITION FOR A WRIT OF CERTIORARI..................008 l
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ah anioasarsvinanatialesdinivuinabeddevesnabse 2
STATUTORY AND CONSTITUTIONAL
Fee ET BOOT IES VED epevcnsvsssessecnncsvesasovessensnsenoseses 2
RPI GFE PIR CI vi sccccensnvevnererosenesevecssnevssessoeee 2
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
i GT, GF. 6, 6 7, Gb fF vicccceaieccmtnemannsouen 22
Bre COURT. OE. BO hy GiB sseiesiccnristonenscemeeonnnial passim
a CRT, O06. 6, 6D, OS ccc ements 2,13
Sos CET. OE 8, SF GA. D cvcciinvissseermicmnnnnen passim
Ros CRT, OEE BD, GE: svcciiisstéstieeremnecnemtamaveaiin 2, 4, 26
STATUTES
Be UB. § SRR sistitisonnsrinimimmmaanaia 3, 9, 10
PE UDC. 6 CG esssisiisciisnimeieeeiaael 10
DOU BA... § SOGTIEAAD vriiccisiniininniicimaenemannes 3
BU A.. © GB esivssivsisnsnsnstisscriemecncaipamaioumnianen 3
Be UL BA... 9 BOGE) cesisicrscinreerstiincciodcnmpimalainioamaninlennaana 3
ae A 8 I siisssvinisiiesitintntnidnistemaaanan 4&3
BO UBL... § GAGA acesiicccsinsccoreniecnwanaitancdoonnnintcan 5, 29
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
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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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386001_0814%3A1. Public record. Not legal advice.