# Petition for Writ of Certiorari — Ammex, Inc. v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386001_0944%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 2004 - **Citation:** 541 U.S. 1041 ## Text O ' oe cp un 031004 JAN 5 onng Inthe Supreme Court of the United States AMMEX, INC., Petitioner, v. UNITED STATES, Respondent. ’ On Petition for a Writ of Certiorari to the United States Court of Appeals for the Federal Circuit eal — ee | ves PETITION FOR A WRIT OF CERTIORARI er worms Christopher S. Olson Counsel of Record Craig L. John DYKEMA GOSSETT PLLC 39577 Woodward Avenue, Suite 300 i Bloomfield Hills, MI 48304-2820 (248) 203-0700 Attorneys for Petitioner CURRY & TAYLOR @ WASH D.C. @ (202) 223-3160 @ USSCINFO.COM Il. i QUESTIONS PRESENTED Whether the United States Customs Service (“Customs”) has the power to contravene the Court of International Trade's (“CIT’s”) prior construction of Sections 555 and 557 of the Omnibus Trade and Competitiveness Act of 1988 (““OTCA”), 19 U.S.C. §§ 1555 and 1557, which the CIT held permitted the duty-free sale of motor fuel from a duty-free sales enterprise. Whether the federal motor fuel excise tax, 26 U.S.C. § 4081, which was applicable during the prior litigation, is a "new fact" sufficient to avoid res judicata effect in a second litigation to enforce the CIT’s prior determination that the OTCA permitted a duty-free sales enterprise to sell motor fuel on a duty-free basis. il CORPORATE DiSCLOSURE STATEMENT Centra, Inc. is Petitioner’s parent corporation. No publicly held companies own 10 percent or more of the stock of Petitioner. iii TABLE OF CONTENTS pages QUESTIONS PRESENTED........sscscsssssesssersscenssssassessssessssesssees i CORPORATE DISCLOSURE STATEMENT. .........ssessssesseseeeees li FE i i viactocesnsenrsonevenivcncserennsessnonscnsasevsnees Vv OPINIONS BELOW ..........scsssssssssssersssscsssesececssssceesecessensvesssees 1 IE IIIT sidsyancsncsdasbctcrssvarsaneresenscsecosnesessnsvsosoncessonsenconsse 1 AINE FOV ION ccenssnsinarsscrsscensasosesconorscosessoonsesvonsnse 1 IT ba ostiisnneieneeentioncessunenemiovaninansnquaneonsiones 2 REASONS FOR GRANTING THE WRIT ........sssssssssceseeeeees 11 ITI i cahdssineianconepinbinasiesenasanenenceadtvnnnsestanesonsaene 20 APPENDIX CIRCUIT COURT DECISION ...scscssssssessssssssessssesssccssecsssee la COURT OF INTERNATIONAL TRADE SII aise slaniiintmnasbbeninuennniannnsionnseedssoononemnntos 12a ORDER DENYING REHEARING ...........ssccrssssocssscseeeeees 24a COURT OF INTERNATIONAL TRADE a codisepninlectiontinchnndiveninnapansediannsomnnts 26a COURT OF INTERNATIONAL TRADE I CEI Bois usinsssnersevemnonnnssinnmnboconcsoonnconseancesonsl 42a —————— — iv CUSTOMS HEADQUARTERS RULING re Ge Fg BU cacinscaiicsictciceentebsninithcentedabnsstanen 44a CUSTOMS HEADQUARTERS RULING eee Es Bs BD cricinsncdnsdcncicnontaisesisanciilnistinitaeti one OO 19 U.S.C. § 1555. BONDED ae I piiiiiechacetiaditditntcsiatincctsesiniaueeananiidstdacans 66a 19 U.S.C. § 1557. ENTRY FORK Te IEEE cdicunceihsinichtiashanuncaddisepuaeaudadcoceumennceanies 75a 19 U.S.C. § 4081. IMPOSITION IF rte ccs ssiseranicundicichehodaienahneiacnsageacioemnsen aacenanigsenen 79a a cas ie Pe ics Dectnatnneichielauaiedeaodincasemamieniamaonnn 87a ee ei cchcieaskaiscideacatebaetsaadiodesataabecadtanlaaunaasanaiae 9la CUSTOMS BULLETIN AND DECISIONS, VOL, Gb, NO. Zo GIUNE 1, BOOT) sesiscesceasssenseccscsssvceseeness 95a CUSTOMS BULLETIN AND DECISIONS, VOL. 35, NO. 47, & CNOV. TF, BIO) cccccecsssecsccecescosesnasese 10la V TABLE OF AUTHORITIES pages Cases AMMEX, INC. V. UNITED STATES, 116 F. SUPP. 2D 1269 (CT. INT'L TRADE 2000).........s00004 passim AMMEX, INC. V. UNITED STATES, 193 F. Supp. 2D 1325 (CT. INT'L TRADE 2002).........ccc0e0 passim AMMEX, INC. V. UNITED STATES, 334 F.3D 1088 CRED. CIR, FOC) ccicseciseecrsececasssnysessnccnconons 1,4, 16,17 ASTORIA FEDERAL SAVINGS & LOAN Ass'N v. SOLIMINO, 501 U.S. 104 (1991) ...........esseseeeee 15 BANKER'S TRUST NEW YORK CORP. V. UNITED STATES, 225 F.3D 1868 (FED CUD, FI viiccicesevinsesscrsasncianciancsnuehasidaniateonciainaieamas 13, 14 BRAND X INTERNET SERVICES V. F.C.C., 345 FSD 1190 COTH CER, BOOB) eevececeecscsnssnvensotenniunsnnesiies 13 BROWN V. FELSEN, 442 U.S. 127 (1979) ..........000 15, 16, 17 CHICAGO & SOUTHERN AIR LINES, INC. V. WATERMAN S.S. CORP., 333 U.S. 103 OTE dv cinsesisassiecincnenanscnredcnainianasonsaaiesiamnipemniteiatts 13 CHICOT COUNTY DRAINAGE DIST. v. BAXTER STATE BANK, 308 U.S. B71 CIDA) iiikiinisracercinntemmoniiisemiceniniainnainn 15, 16, 17, 19 vi COMMODITIES EXPORT Co. v. UNITED STATES CUSTOMS SERVICE, 957 F.2p 223 UP Falit:, WUEE ssaricientaennnconeatliueie ite eiear tage arg ka 14 CROMWELL V. COUNTY OF SAC, 94 U.S. TPE COMET FD winsintctaniticthitniasmnsnaciapnedne mami 15, 16, 17, 19 FEDERATED DEPT. STORES, INC. V. MOITIE, 452 USS. 394 (1981)........cccccsccsessscssssscesecceseseees 14 GRUBB V. PUBLIC UTILITIES COMM'N, 281 Ao tas Ee A SE hetsiuiiciiuenammmeenae 15, 16, 19, 20 JET, INC. V. SEWAGE AERATION SYS., 223 F.3D 1360 (FED. CIR. 2000) ...........ccssesececososesesececesssessees 16 MARBURY V. MADISON, 5 U.S. (1 CRANCH) BEE ID iisncininrrsemnetntcnnlcsdediamiimen nt ae 13 MCGOLDRICK V. GULF OIL Co., 309 U.S. BG LT siiknssininscivceaedaaacaea 12 NEAL V. UNITED STATES, 516 U.S. 284 IPED isnicssaniicesintiniasianguunaier ee 13 NEVADA V. UNITED STATES, 463 U.S. 110 (ASD wicwssnimasiisieniinnamesitads eee passim RIVERS V. ROADWAY EXPRESS, INC., 511 170d: SO 4 IME) sisoicdahseseniasdoaicenielaands Uacadaeaeaaneaaeaee 13 UNITED STATES V. CALIFORNIA & OREGON LAND CO., 192 U.S. 355 (1904) ..ccceccccescecee 15, 16 vil UNITED STATES V. MEAD CorP., 533 U.S. BA IID incccesccsimiscstnorstattniemeninninmnninnantaanns 13 UNITED STATES V. MENDOZA, 464 U.S. 154 CI i vcscicnicssnrsendinthnciiennanmbaderusseneséentiemnieessiandeiancatianiats 15 UNITED STATES V. STAUFFER CHEMICAL CO., 464 U.S. 165 (1984).....csscrrccrscoscossecsccsesssensonsesssenonee 15 WERLEIN V. NEW ORLEANS, 177 U.S. 390 ETT Y bs vunccieissssesiedicnbiscininasadanieiachiecamcaunanansannbenionianitets 15, 16 XEROX CorpP. V. CTY. OF HARRIS, TEXAS, BE TF TB Ci ieissnicnesn ch sthteievierntianneiinientindeneinioe 11,12 Statutes 1D Uy Ba A © Ti iiseisccsninssresinensosensirnsuiinioinnnmennnsenveneanh passim FO TT BS. OE wicraciicscsicsisissnstinisinscnieininiiiienaanaanmanionanes passim TT eS © I iisihecdiicitictiscictninshiasetinciabiaieninieenneinads 7, 8,18 UT 0: O Ta iciniticcesicntcctieiediccernercinnsaminsictdonmanaaiens 1 Other Authorities Customs Bulletin and Decisions, Vol. 35, No. 2B Rae 1, DOOD) acccessessricesversrescscsincsocerasssocsoennscindte oor Customs Bulletin and Decisions, Vol. 35, No. 47, 5 CNV. 7, 2001) ..ccoccnrssrecrscensersecaseococssesssnoeonssensses 7 Customs Headquarters Ruling 225287 Catt F, BIG ccsnasvninciveniseversiascenesnntesntctiniinatanascions 5,17 Viil Customs Headquarters Ruling 227385 og 2 ee ED 5,17 FO: Wie S00 a I< Wicennscrniconssonsnissinuiiuitnensninbatacsinaninunniiicinetin 19 Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction 2d § 4406 ............ssssssscsesssseesees 16 1 OPINIONS BELOW The opinion of the Federal Circuit Court of Appeals is reported at Ammezx, Inc. v. United States, 334 F.3d 1052 (Fed. Cir. 2003) (“Opinion”) (App., infra, la). The CIT opinions are reported at Ammez, Inc. v. United States, 116 F. Supp. 2d 1269 (Ct. Int’l Trade 2000) (“Ammex I’) (App., infra, 26a) and Ammex, Inc. v. United States, 193 F. Supp. 2d 1325 (Ct. Int’l Trade 2002) (“Ammesx IT’) (App., infra, 12a). JURISDICTION The judgment of the United States Court of Appeals for the Federal Circuit was entered on July 1, 2003 (App., infra, 1a). A timely petition for rehearing en banc was denied on October 7, 2003 (App., infra, 24a). The jurisdiction of this Court is invoked under 28 U.S.C. § 1254(1). Since the United States is a party in this lawsuit, the Solicitor General of the United States has been served with this Petition for Certiorari via United States Mail, at Room 5614, Department of Justice, 950 Pennsylvania Avenue, N.W., Washington, D.C. 20530- 0001. RELEVANT PROVISIONS The relevant provisions of the OTCA, 19 U.S.C. §§ 1555 and 1557, are reproduced at App., infra, 66a, 75a. The relevant portion of the Internal Revenue Code, 26 U.S.C. § 4081, is reproduced at App., infra, 79a. 2 STATEMENT A. Introduction This case raises important questions relating to the power of a federal agency to contravene an Article III court’s judicial construction of a statute and the finality of such judicial decisions. The case arises from a long running dispute concerning whether the OTCA authorizes Petitioner to sell motor fuel, on a duty and tax free basis, from its duty-free sales enterprise located in Detroit, Michigan. Petitioner’s duty-free facility is situated adjacent to the Ambassador Bridge connecting the United States and Canada, which is one of the busiest international commercial freight crossings in the United States. On December 23, 1993, Customs, which regulates duty-free sales enterprises under the OTCA, tentatively approved Ammex’s sterile tax and duty- free facility, but excluded fuel. In 1994 and 1998 Customs issued Headquarters Rulings (App., infra, 44a, 53a) holding that duty-free motor fuel may not be sold at a duty-free sales enterprise because motor fuel - is an “unidentifiable fungible” not subject to identification or marking as provided for in the OTCA and regulations. Because the case involves res judicata, it is necessary to summarize the earlier and later rulings. Ammex I. In Ammezx I, Petitioner successfully challenged the Headquarters Rulings in the CIT. The CIT held that "Customs acted unlawfully in prohibiting Ammex from selling duty-free gasoline and diesel fuel" and that OTCA §§ 1555 and 1557 permit “the duty-free 3 sale of gasoline and diesel fuel from a duty-free enterprise." Ammex I, at 1275-76. (App., infra, 42a.) Customs then authorized Petitioner’s duty-free motor fuel sales on September 5, 2000. Customs’ Revocation. On November 21, 2001, Customs revoked its authorization for duty-free motor fuel sales. (App., infra, 101a.) Customs’ rationale was that application of federal motor fuel excise tax, I.R.C. § 4081, precluded Ammex’s motor fuel from qualifying as conditionally duty-free merchandise and therefore the OTCA prohibited entry of such fuel into Petitioner's bonded warehouse. Ammex II. In Ammex II, the case here involved, Petitioner sought to enforce the CIT’s judgment in Ammex I. However, the CIT declined to accord res judicata effect to the Ammex I judgment. (App., infra, 12a, 21a-23a.) Petitioner appealed to the Federal Circuit. The Federal Circuit Opinion. This is a petition for review of the United States Court of Appeals for the Federal Circuit Opinion, which held that: [t]he factual premise of the lawsuit in Ammex II, however, differs from the prior one [Ammex I] because the application of federal taxes to gasoline and diesel fuel, preempting such fuel from qualifying as “duty-free merchandise,” is a new fact which was not a part of Ammex I.... Because under the relevant statute, the term ‘duty-free merchandise’ means ‘merchandise sold by a duty-free sales 4 enterprise on which neither Federal duty ‘“nor Federal tax has been assessed pending exportation from the customs territory, 19 U.S.C. § 1555(b)(8)(E), we reject Ammex’s argument that the legal claims in the two suits arise from the same ‘operative nucleus of fact.’ Ammex, 334 F.3d at 1057. (App., infra, 9a.) B. Statement of Facts Under close Customs supervision, Ammex operates a "sterile" U.S. Customs Class 9 bonded warehouse, commonly known as a duty-free store or duty-free sales enterprise, from which it seeks to resume selling gasoline and diesel fuel on a duty and tax-free basis. The designation "sterile" indicates that the physical design and operation of the facility guarantees the exportation of products sold therein. Customers entering Ammex's facility have necessarily proceeded beyond the "point of no return," having exited from the United States. As a duty-free sales enterprise, Ammex sells for export certain goods "duty- free" to customers who transport those goods to Canada immediately after leaving Ammex's facility. 1. Administrative Proceedings In 1993 Ammex applied to Customs for approval to operate as a sterile, tax and duty-free facility. On December 23, 1993, Customs tentatively approved Ammeyx’s sterile tax and duty-free facility, but excluded fuel. On January 24, 1994, Ammex submitted to Customs additional information to persuade Customs 5 not to exclude fuel. Customs denied authorization for duty-free motor fuel sales because, inter alia, such merchandise was an “unidentifiable fungible,” which could not be marked or otherwise identified under 19 U.S.C. § 1555(b)(3)(D) and that therefore Customs would have no practical way of ensuring that the duty- free gasoline was "declared" when vehicles returned to the United States. See Customs Headquarters Ruling 225287 of June 27, 1994 ("HQ 225287"), at 4-5. (App., infra, 49a-5la.) Customs recognized the impact of I.R.C. § 4081 upon duty-free motor fuel sales by stating that “the real savings would be the exemption from federal... excise taxes.” HQ 225287 at 2. (App., infra, 46a.) In Customs’ 1998 Headquarters Ruling 227385 (“HQ 227385”), Customs reconsidered its 1994 ruling at Ammex’s request. (App., infra, 53a.) Analyzing the legislative history of the OTCA, which established legislative guidelines for Customs' administration of duty-free shops, Customs concluded that "the fact that Congress did not specifically reject Customs policy regarding the sale of gasoline by duty-free stores means that Congress did not object to such practice." HQ 227385 at 5. (App., infra, 61a.) Thus, it reasoned, "in holding that gasoline and diesel fuel may not be sold by duty-free stores, it was proper to follow the precedent established by ruling letter 200396." Jd. In Ruling Letter 200396, the Assistant Commissioner of Customs' Office of Regulations and Rulings, Leonard Lehman, held that the activities of duty-free stores could not be extended to unidentifiable fungibles, such as gasoline sold on a retail basis, since Customs would have no practical way of ensuring that the gasoline was declared when it was returned to the United States. 6 Customs Ruling Letter 200396 of October 30, 1972. (App., infra, 47a-48a.) 2. Ammex I and Customs’ Authorization of Duty-Free Motor Fuel Sales In Ammex I, Ammex successfully challenged the Headquarters Rulings in the CIT. The CIT held that "Customs acted unlawfully in prohibiting Ammex from selling duty-free gasoline and diesel fuel" because to do so violated 19 U.S.C. § 1557(a)(1), which allowed '[a]ny merchandise subject to duty, with the exception of perishable articles and explosive substances" to be entered and withdrawn for exportation from bonded warehouses such as Ammex's duty-free store. Jd. at 1275-76. [Emphasis added.] (App., infra, 34a-35a.) The CIT entered a judgment setting aside HQ 227385 and holding that "19 U.S.C. §§ 1555 and 1557 allow the duty-free sale of gasoline and diesel fuel from a duty-free enterprise." Jd. (App., infra, 42a.) Thus, on September 5, 2000, after six years of proceedings, in accordance with Ammex I, Customs granted Ammex’s request to expand its Class 9 duty free warehouse operation to include the gasoline and diesel fuel tanks located at [Ammex's] facility. (App., infra, 103a.) On October 23, 2000, Ammex wrote to Customs seeking a letter to certify that the fuel sold at Ammex's duty-free store was exempt from taxes. Customs forwarded Ammex's request to the Internal Revenue Service ("IRS"). On January 8, 2001, the IRS issued an informational letter (“IRS letter”) stating that I.R.C. § 4081 imposes a tax on the entry into the United States of any taxable fuel, including gasoline 7 and diesel fuel for consumption, use, or warehousing. (App., infra, 104a.) 3. Customs’ Subsequent Revocation Of Duty-Free Motor Fuel Sales Authorization Within a year, Customs decided _ that, notwithstanding the ruling in Ammez I, it would not permit Ammex to sell motor fuel on a duty and tax-free basis. (App., infra, 110a-1lla.) On June 1, 2001, Customs issued a notice proposing to revoke the September 5, 2000 authorization letter. Customs Bulletin and Decisions, Vol. 35, No. 25, at 295 ("Proposed Revocation of Letter Relating to Gasoline and Diesel Fuel From a Class 9 Customs Bonded Warehouse Also Known as a Duty-free Shop"). (App., infra, 95a.) On November 21, 2001, after a notice and comment period, Customs revoked its authorization of the sale of gasoline and diesel fuel on a duty and tax- free basis, effective on January 21, 2002. Customs Bulletin and Decisions, Vol. 35, No. 47, 5 (Nov. 7, 2001) ("Revocation"). (App., infra, 101a.) Customs stated: The Internal Revenue Service has informed the Customs Service that 26 USC 4081 imposes a tax upon entry into the United States of any taxable fuel for consumption, use, or warehousing. * * * Consequently, any fuel subject to a tax when entered for warehousing under 26 8 U.S.C. 4081 and the implementing Internal Revenue Service regulations cannot qualify as duty-free fuel and, therefore, cannot be entered into a class 9 warehouse pursuant to 19 U.S.C. 1555(b)(1) and the applicable Customs Regulations. Because only fuel on which neither duty nor tax has been assessed can qualify as duty-free fuel in conformity with 19 U.S.C. 1555(b)(8)(E), the Customs Service — intends to revoke the Port Director's letter of September 5, 2000, to the extent that it would allow the sale under 19 U.S.C. 1555(b)(1) of fuel for which a tax was assessed under 26 U.S.C. 4081. (App., infra, 104a-105a.)! 4. . Ammex II Ammex again filed suit in the CIT. In Ammex IT, Ammex requested an order (i) enjoining Customs' Revocation under the doctrine of res judicata and (ii) holding Customs in contempt for violating Ammezx I. The CIT denied Ammex's motion. Ammewx II, 193 F. Supp. 2d at 1330. (App., infra, 23a.) Specifically, the CIT held that: 1 Although not in issue here, the OTCA expressly permits the entry of merchandise “subject to duty” to be withdrawn for exportation, 19 U.S.C. § 1557(a)(1), and, upon such exportation, for the previous duties thereon to be refunded, 19 U.S.C. § 1557(a)(2). 9 The issue in Ammex I was not simply whether Ammex is entitled ‘to sell gasoline and diesel fuel from its duty-free store in Detroit, Michigan.’ Rather, the court was called upon to consider whether the explanation Customs provided for denying Ammex's request to sell gasoline and diesel fuel duty-free was arbitrary, capricious, or contrary to law. * * * This court [in Ammex I] accordingly reviewed Customs' stated reason for denying Ammex's request to sell duty- free fuel, namely, its rationale that such fuel falls under an_ “unidentifiable fungibles" exception to merchandise that can lawfully be entered and withdrawn for exportation from duty-free stores. (App., infra, 18a-19a.) The CIT then proceeded to its rationale as to why Ammez I differed from Ammez II. Implicit in both parties' briefings in Ammex I and the court's opinion was the presumption that the gasoline and diesel fuel at issue qualified as "duty- free merchandise" within the meaning of 19 U.S.C. § 1555(b)(8)(E). Neither party questioned this assumption, and because neither party raised a challenge, the court did not consider or rule on such an issue. 10 Because of subsequent events, however, the issue has arisen as to whether gasoline and diesel fuel can qualify as "duty-free merchandise" under 19 U.S.C. § 1555(b)(8)(E), in light of information from the IRS that such fuel may be subject to tax and therefore unable to qualify as "duty-free merchandise" under the statutory definition. Id. at 1329-30. (App., infra, 20a.) The CIT concluded that: Having determined that the issue of federal taxes as applied to gasoline and diesel fuel and the — concurrent consideration of whether such application preempts such fuel from qualifying as "duty-free merchandise" was neither part nor parcél of Ammex I, Ammex's Motion cannot be considered by the court under the present procedural __ posture. Ammex's Motion asks the court "to interpret § 1555(b)(8)(E) of Title 19-a Customs statute." Ammex's Reply at 12- 15. This constitutes a new matter, one which was not contemplated in Ammezx I. It therefore cannot be said that the revocation constitutes an attack on the court's prior judgment or order in this case. Id. at 1330. (App., infra, 21a.) 11 The United States Court of Appeals for the Federal Circuit affirmed for the reasons stated above. REASONS FOR GRANTING THE WRIT I. DUTY-FREE SALES ARE OF NATIONAL IMPORTANCE BECAUSE THEY EFFECT A_ SIGNIFICANT NATIONAL POLICY TO ENCOURAGE FOREIGN COMMERCE. In Xerox Corp. v. Cty. of Harris, Texas, 459 U.S. 145, 150-51 (1982), this Court recognized the national importance of duty-free sales enterprises as a stimulant to foreign commerce: Government regulated, bonded warehouses have been a link in the chain of foreign commerce since ‘a very early period in our history.’ Fabbri v. Murphy, 95 U.S. 191, 197, 94 L.Ed. 468 (1877). * * * ... Congress was willing to waive all duty on goods that were reexported from the warehouse, and to defer, for a prescribed period, the duty on goods destined for American consumption. This was no small sacrifice at a time when customs duties made up the greater part of federal revenues, but its objective was to stimulate business for American industry and work for Americans. 12 In short, Congress created secure and duty free-enclaves under federal control in order to encourage merchants here and abroad to make use of American ports. Xerox Corp., 459 U.S. at 150-51; see also McGoldrick v. Gulf Oil Co., 309 U.S. 414, 428-29 (1939). As construed in Ammex I, Congress intended "[aJny merchandise subject to duty, with the exception of perishable articles and explosive substances" may be entered and withdrawn for exportation from bonded warehouses such as Ammex's duty-free store. Ammez I, at 1275-76. (App., infra, 3la-32a.) Contrary to the holding in Ammex I, Customs’ effort to prohibit duty-free sales enterprises from selling another categery of merchandise (i.e., motor fuel) disserves the scheme that Congress legislated. II. CUSTOMS’ REVOCATION OF DUTY- FREE MOTOR FUEL SALES AUTHORIZATION REQUIRED UNDER THE CIT'S CONSTRUCTION OF SECTIONS 555 AND 557 OF THE OTCA, 19 U.S.C. §§ 1555 AND 1557, IMPLICITLY VIOLATES THE SEPARATION OF POWERS. The CIT in Ammez I had plainly decided that "19 U.S.C. §§ 1555 and 1557 allow the duty-free sale of gasoline and diesel fuel from a duty-free enterprise." Ammex I, at 1276. (App., infra, 42a.) Customs’ Revocation simply decided otherwise on a different rationale. (App., infra, 104a-105a.) Administrative agencies may not contravene a judicial statutory construction. Neal v. United States, 516 U.S. 284, 295 13 (1996) (“Once we have determined a statute’s meaning, we adhere to our ruling under the doctrine of stare decisis, and we assess an agency’s later interpretation against that settled law”). The Federal Circuit’s subsequent decision in Ammex II conflicts with Neal and Federal Circuit precedent, Banker’s Trust New York Corp. v. United States, 225 F.3d 1368, 1375 (Fed Cir. 2000) (prior judicial construction is binding on federal agencies because of the “relationship of the Judiciary to Congress and the ability of Congress to change its statutes to correct a misintrerpretation by the Court”), by permitting Customs to re-construe those statutes and to revoke authorization of Ammex’s duty-free motor fuel sales. See also, Marbury v. Madison, 5 U.S. (1 Cranch) 137, 176 (1803) ("It is, emphatically, the province and duty of the judicial department, to say what the law is"); Brand X Internet Services v. F.C.C., 345 F.3d 1120, 11381 (9 Cir. 2003) (Neal applies to Federal Circuit Courts of Appeal); Rivers v. Roadway Express, Inc., 511 U.S. 298, 312-138 (1994) ("[Jjudicial construction of a statute is an authoritative statement of what the statute meant before as well as after the decision of the case giving rise to that construction"); accord United States v. Mead Corp., 533 U.S. 218, 248-49 (2001) (Sealia, J., dissenting) ("I know of no case, in the entire history of the federal courts, in which we have allowed a judicial interpretation of a statute to be set aside by an agency- -or have allowed a lower court to render an interpretation of a statute subject to correction by an agency"); Chicago & Southern Air Lines, Inc. v. Waterman S.S. Corp., 333 U.S. 103, 1138 (1948) (“Judgments within the powers vested in courts by the Judiciary Article of the Constitution may not lawfully be revised, overturned or refused faith and credit by 14 another Department of Government."); Commodities Export Co. v. United States Customs Service, 957 F.2d 223, 225-27 (6 Cir. 1992) (recognizing CIT as an Article III court). The Federal Circuit Opinion, upholding Customs’ re-interpretation of the OTCA to preclude duty-free motor fuel sales, implicates the same compelling and important Separation of Powers considerations underlying Neal. See also Banker’s Trust, 225 F.3d at 1376 (Executive agency regulation could not effectively construe a statute in a manner different from a prior definitive court ruling). Ill. DENYING RES JUDICATA EFFECT TO THE AMMEX I STATUTORY CONSTRUCTION ON THE GROUND THAT THE APPLICATION OF LR.C. § 4081 WAS A NEW FACT, CONFLICTS WITH AND UNDERMINES IMPORTANT RES JUDICATA DECISIONS. The Opinion conflicts with res judicata principles, which this Court has long recognized are “essential to the maintenance of social order; for, the aid of judicial tribunals would not be invoked for the vindication of rights of person and property, if conclusiveness did not attend the judgments of such tribunals.” Nevada v. United States, 463 U.S. 110, 129 (1983); see also Federated Dept. Stores, Inc. v. Moitie, 452 U.S. 394, 401 (1981) (res judicata serves “vital public interests” “that there be an end to litigation—a maxim which comports with common sense as well as public policy”). i | j j { } } 15 Ammex I expressly and unqualifiedly decided that Ammex was entitled to sell motor fuel as “duty- free” merchandise under the OTCA. Ammex I, at 1276 ("19 U.S.C. §§ 1555 and 1557 allow the duty-free sale of gasoline and diesel fuel from a duty-free enterprise."). (App., infra, 42a.) “Res judicata prevents litigation of all grounds for, or defenses to, recovery that were previously available to the parties, regardless of whether they were asserted or determined in the prior proceeding.” Brown v. Felsen, 442 U.S. 127, 131 (1979); Nevada, 463 U.S. at 129-30; Chicot County Drainage Dist. v. Baxter State Bank, 308 U.S. 37 1, 378 (1940). Res judicata bars defenses not brought in the first suit, regardless of the legal theory. Cromwell v. County of Sac, 94 U.S. 351, 352-53 (1877) (“If such defences were not presented in the action ... the subsequent allegation of their existence is of no legal consequence”)? Thus, a party is “not at liberty to prosecute [its] right by piecemeal, as by presenting a part only of the available grounds and reserving others for another suit, if failing in that.” Grubb v. Public Utilities Comm’n, 281 U.S. 470, 478 (1930); Werlein v. New Orleans, 177 U.S. 390, 397 (1900); United States v. California & Oregon Land Co., 192 U.S. 355, 358 (1904). Res judicata applies in a subsequent suit where the parties and subject-matter are the same, not only as to matters actually presented to sustain or defeat the right 2 Res judicata is binding on the United States and federal agencies. Nevada, 463 U.S. at 135; United States v. Mendoza, 464 U.S. 154, 161 (1984); United States v. Stauffer Chemical Co., 464 U.S. 165, 174 (1984); Astoria Federal Savings & Loan Ass’n v. Solimino, 501 U.S. 104, 107-108 (1991). 16 asserted, but also as to any other available matter which might have been presented to that end. Cromwell, 94 U.S. at 352 (1876); and see, Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction 2d § 4406 (under claim/defense preclusion, “[ilf the plaintiff wins . . . the defendant cannot avoid the judgment by offering new defenses”). A. The Opinion Conflicts With Precedent by Concluding That Ammex I And Ammex II Did Not Arise From A Common Nucleus Of Operative Facts. A party asserting res judicata must prove that (1) the parties are identical or in privity; (2) the first suit proceeded to a final judgment on the merits; and (3) the second claim is based on the same set of transactional facts as the first. Jet, Inc. v. Sewage Aeration Sys., 223 F.3d 1360, 1362 (Fed. Cir. 2000). So it was here. ' The Federal Circuit Opinion correctly found that the first two elements of res judicata [were] present because the parties (Ammex and the government) are identical in both actions, and the prior litigation resulted in a valid final judgment on the merits. Thus, the sole issue was whether Ammex I and Ammex IT arose from a common nucleus of operative fact. Opinion, 334 F.3d at 1056. (App., infra, 6a-7a.) In deciding that they did not, the Opinion departed from this Court’s res judicata precedent. Grubb, 281 U.S. at 478; Werlein, 177 U.S. at 397; California & Oregon Land Co., 192 U. S. at 358; Brown, 442 U.S. at 131; Nevada, 463 U.S. at 129-380; Ciicot County Drainage Dist, 308 U.S. at 378; Cromwell, 94 U.S. at 352-53. 17 Specifically, the Federal Circuit held that the cases lacked a common nucleus of operative fact on the ground that a prior existing law and legal theory was a “new fact”: the application of federal taxes to gasoline and diesel fuel, preempting such fuel from qualifying as “duty-free merchandise,” is a new fact which was not a part of Ammex ee Opinion, 334 F.3d at 1057. (App., infra, 9a.) This Court’s res judicata jurisprudence does not permit such a transparent creation of new nucleus of facts based on nothing more than a different agency _ rationale. Brown, 442 U.S. at 131; Nevada, 463 U.S. at 129-30; Chicot County Drainage Dist, 308 U.S. at 378; Cromwell, 94 U.S. at 352-53. Ammex I and Ammex II share a common origin. Before Ammezx I, Customs had for years authorized Ammex’s duty-free sales, but excluded motor fuel. In 1998, HQ 227385 affirmed the 1994 HQ 225287 finding that “duty-free gasoline and diesel fuel for automobiles may not be sold... at a duty-free store provided -for in 19 U.S.C. 1555(b).” (App., infra, 5la, 65a.) Ammex I set aside Customs’ rulings and “DECREED that 19 U.S.C. §§ 1555 and 1557 allow the duty-free sale of gasoline and diesel fuel from a duty-free enterprise." Jd. at 1276. (App., infra, 42a.) Ammex I thus construed the same OTCA provisions upon which Customs based its Revocation. Customs did not appeal Ammex I. Instead, on September 5, 2000, Customs authorized Ammex’s duty- free motor fuel sales. (App., infra, 108a.) 18 The entire point of Ammex I was to resolve the question of whether Ammex could sell motor fuel from its duty-free sales enterprise. Ammex I was both a convenient and the expected litigation in which to determine the effect, if any, of any federal law including I.R.C. § 4081, on Ammex’s duty-free motor fuel sales under 19 U.S.C. §§ 1555 and 1557. Indeed, Customs acknowledged that “the real savings would be the exemption from federal and state excise taxes.” HQ225287 at 2. (App., infra, 46a.) The result was the CIT judgment that “19 U.S.C. §§ 1555 and 1557 allow the duty-free sale of gasoline and diesel fuel from a duty-free enterprise.” Ammew I at 1276. (App., infra, 42a.) Ammex II ensued because Customs attempted to avoid Ammex I by Revocation of the letter ruling issued in compliance with Ammex I. Customs’ Revocation cited no factual changes whatever in Ammex’s duty-free motor fuel operation. (App., infra, 101a.) No new record, fact investigation or fact-finding was involved. Rather, Customs simply asserted a new legal theory—“that fuel which is assessed a tax under 26 U.S.C 4081 cannot qualify for entry under 19 U.S.C. 1555(b)(1).’”* (App., infra, 106a) Thus, Ammex I and IT share a common factual origin and also involve the “same claim.” See Nevada, 463 U.S. at 131 (holding that res judicata barred second suit where the Government intended to litigate all the rights at issue in first suit). 3 It should be noted that Ammex has, under the Export Clause, consistently challenged whether § 4081 fuel excise tax was constitutionally imposed on its purchases of motor fuel for export. U.S. Const. art. I § 9, el. 5. 19 B. The Opinion Conflicted with Precedent by Confusing Old Law With New Facts. The Opinion’s holding that the application of I.R.C. § 4081 to 19 U.S.C. § 1555 is a new fact conflicts with res judicata precedent. First, § 4081 and 19 U.S.C. § 1555 are old law. I.R.C. § 4081, although amended from time to time, is a decades-old excise tax law in effect during the entire period in suit in Ammex I. Pub. L. 86-342. 19 U.S.C. § 1555(b)(8)(E) had been in effect since 1988. Pub. L. 100-418. As noted above, Customs was aware that the Ammezx I proceeding was not a mere intellectual exercise, and duty-free status was being pursued to immunize the fuel from the I.R.C. § 4081 motor fuel excise tax. (App., infra, 46a.) Customs’ new rationale that I.R.C. § 4081 applied did not change the operative facts in any respect. In Ammex I, Ammex had successfully litigated its right to sell motor fuel from its duty-free sales enterprise under 19 U.S.C. §§ 1555 and 1557. Customs’ Revocation simply proffered a newly minted argument based on prior law to avoid the Ammesx I holding. (App., infra, 101a.) Res judicata bars the Government from asserting in a second proceeding a different legal argument under § 4081 because § 4081 is law, which the Government could have raised in Ammezx I. Cromwell, 94 U.S. at 352-353; Chicot, 308 U.S. at 378; Grubb, 281 U.S. at 478-79; see also Fed. R. Civ. P. 8(c). Moreover, the I.R.C. § 4081 tax was the primary federal tax that duty-free status would exempt the fuel from. There was no other federal tax. Thus, the Opinion conflicts with years of res judicata jurisprudence by holding that a new legal theory based on a tax statute in effect during the first suit may be considered a new fact in 20 order to avoid res judicata. The Opinion thus threatens finality and improperly permits a federal agency to litigate by piecemeal the meaning of the statute already construed by an Article III court. Grubb, 281 U.S. at 478. CONCLUSION Therefore, Petitioner respectfully requests that this Court grant this petition for writ of certiorari, reverse the decisions of the United States Court of Appeals for the Federal Circuit and the Court of International Trade, and hold that the decision in Ammex I binds Customs and precludes Customs from re-litigating the issue of whether the OTCA authorizes Ammex to sell tax and duty-free motor fuel from its duty-free sales enterprise. Respectfully Submitted, Christopher S. Olson (P58780) Counsel of Record Craig L. John (27146) DYKEMA GOSSETT PLLC 39577 Woodward Avenue, Suite 300 Bloomfield Hills, MI 48304-2820 (248) 203-0700 Attorneys for Plaintiff-Appellant la (Any footnotes trail the end of each document) 02-1498 UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT AMMEX, INC., Plaintiff-Appellant, Vv. UNITED STATES, Defendant-Appellee. July 1, 2003, Decided COUNSEL: Craig L. John, Dykema Gossett PLLC, of Bloomfield Hills, Michigan, argued for plaintiff- appellant. On the brief were Herbert C. Shelley, J. William Koegel, Jr., Alice A. Kipel, and Troy H. Cribb. Amy M. Rubin, Attorney, Civil Division, Commercial Litigation Branch, International Trade Field Office, Department of Justice, of New York, New York, argued for defendant-appellee. With her on the brief were Robert D. McCallum, Jr., Assistant Attorney General; David M. Cohen, Director, Civil Division, Commercial Litigation Branch, Department of Justice, of Washington, DC; and John J. Mahon, Acting Attorney in Charge, International Trade Field Office. Of counsel was Beth C. Brotman, Attorney, Office of Assistant Chief Counsel, United States Customs Service, New York, New York. 2a JUDGES: Before MAYER, Chief Judge, NEWMAN, and GAJARSA, Circuit Judges. OPINIONBY: GAJARSA OPINION: GAJARSA, Circuit Judge. Ammex, Inc. ("Ammex") appeals the final decision of the United States Court of International Trade denying its Motion for an Order to Show Cause Why the United States Customs Service Should Not be Held in Contempt. Ammex v. United States, 193 F. Supp. 2d 1325 (Ct. Int'l Trade 2002) ("Ammex II"). Because res judicata does not preclude the United States Customs Service ("Customs") from revoking its approval of the sale of gasoline and diesel fuel on a duty- and tax-free basis, we affirm. I. BACKGROUND Ammex operates a "sterile" U.S. Customs Class 9 bonded warehouse, commonly known as a duty-free store or duty-free sales enterprise, from which it seeks to sell gasoline and diesel fuel on a duty- and tax-free basis. The designation "sterile" indicates that the physical design and operation of the facility guarantees the exportation of products sold therein. The store is located on West Lafayette Street in Detroit, Michigan, adjacent to the Ambassador Bridge connecting the United States and Canada. Customers entering Ammex's facility have necessarily proceeded beyond the "point of no return," having exited from the United States. As a duty- and tax-free sales enterprise, Ammex is permitted to sell for export certain goods 3a "duty-free" to customers who transport those goods directly to Canada after leaving Ammex's store. In a letter dated January 24, 1994, Ammex requested approval to sell gasoline and diesel fuel on a duty- and tax-free basis. On February 12, 1998, Customs denied Ammex's request because gasoline and diesel fuel are "unidentifiable fungibles.". U.S. Customs Service Headquarters Ruling ("HQ") 227385 (Feb. 12, 1998). HQ 227385 reaffirmed a 1994 HQ ruling which found that activities of duty-free stores should not be extended to cover "unidentifiable fungibles," such as gasoline and diesel fuel, when sold on a retail basis. HQ 225287, 1994 WL 830665 (June 7, 1994). "In both HQ 227385 and 225287, Customs accepted the requestor's assertion that the merchandise under consideration was duty- free but . . . determined that such merchandise could not be sold as duty-free merchandise from a class 9 bonded warehouse." Customs Bulletin and Decisions, Vol. 35, No. 25, 295, 296 (June 1, 2001). In Ammex, Inc. v. United States, 116 F. Supp. 2d 1269 (Ct. Int'l Trade 2000) ("Ammex I"), Ammex challenged the above HQ rulings. The Court of International Trade found that "Customs acted unlawfully in prohibiting Ammex from selling duty-free gasoline and diesel fuel." Id. at 1275-76. The Court of International Trade held that Customs's decision to prohibit Ammex from selling duty-free gasoline and diesel fuel violated 19 U.S.C. § 1557(a)(1), which allows "any merchandise subject to duty, with the exception of perishable articles and explosive substances" to be entered and withdrawn for exportation from bonded warehouses such as Ammex's duty-free store. Id. The Court of International Trade accordingly entered a judgment setting aside HQ 4a 227385 and "ORDERED ADJUDGED AND DECREED that 19 U.S.C. §§ 1555 and 1557 allow the duty-free sale of gasoline and diesel fuel from a duty- free enterprise." Id. at 1276. On September 5, 2000, in accordance with the Court of International Trade's decision, Customs issued a letter ("September 5 letter") to Ammex granting its request to expand its "Class 9 duty[-]free warehouse operation to include the gasoline and diesel fuel tanks located at [Ammex's] facility." \ On October 23, 2000, Ammex wrote to Customs seeking a letter to certify that the fuel sold at Ammex's duty- free store was exempt from taxes. Customs forwarded Ammex's request to the Internal Revenue Service ("IRS"). On January 8, 2001, the IRS issued an informational letter stating that 26 U.S.C. § 4081 of the Internal Revenue Code imposes a tax on the entry into the United States of any taxable fuel, including gasoline and diesel fuel for consumption, use, or warehousing. Based on the IRS letter, Customs determined that it could not lawfully permit Ammex to sell gasoline and diesel fuel on a duty- and tax-free basis. On June 1, 2001, Customs issued a notice proposing to revoke the September 5 letter. Customs Bulletin and Decisions, Vol. 35, No. 25, at 295 ("Proposed Revocation of Letter Relating to Gasoline and Diesel Fuel From a Class 9 Customs Bonded Warehouse Also Known as a Duty- free Shop"). On November 21, 2001, after a notice and comment period, Customs revoked its approval of the sale of gasoline and diesel fuel on a duty- and tax-free basis, effective on January 21, 2002. Customs Bulletin and Decisions, Vol. 35, No. 47, 5 (Nov. 7, 2001) 5a ("Revocation of Ruling Letter and Treatment Relating to Gasoline and Diesel Fuel in a Class 9 Customs Bonded Warehouse"). Subsequently, Ammex filed suit in the Court of International Trade to bar Customs's revocation under the doctrine of res judicata and to hold Customs in contempt for violating Ammex I. The Court of International Trade denied Ammex's motion to enjoin Customs from revoking Ammex's permission to sell gasoline and diesel fuel on a duty- and tax-free basis and to hold Customs in contempt for violating the court's judgment in Ammex I. Ammex timely appealed, and we have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5). II. DISCUSSION A. Standard of Review Whether, based on the facts of the case, a claim is barred by res judicata is a question of law that we review de novo. Faust v. United States, 101 F.3d 675, 677 (Fed. Cir. 1996). We review the denial of a motion to hold Customs in contempt for an abuse of discretion. United States v. Hanover Ins. Co., 82 F.3d 1052, 1056 (Fed. Cir. 1996). B. Res Judicata This case presents the question of whether res judicata precludes Customs from revoking its approval of the sale of gasoline and diesel fuel on a duty- and tax-free basis. 6a Under the doctrine of res judicata (or claim preclusion), "(al final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action." Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 398, 69 L. Ed. 2d 103, 101 S. Ct. 2424 (1981); see also Young Eng'rs, Inc. v. United States Int'l Trade Comm'n, 721 F.2d 1805, 1314 (Fed. Cir. 1983) (stating that this court would adopt the transactional approach advocated by the Restatement (Second) of Judgments); Restatement (Second) of Judgments § 18 (1982). Over the years, the doctrine has come to incorporate common law concepts of merger and bar, and will thus also bar a second suit raising claims based on the same set of transactional facts. Migra v. Warren City School Dist. Bd. of Educ., 465 U.S. 75, 77 n.1, 79 Ly Ed. 2d 56, 104 8S. Ct. 892 (1984) ("Claim preclusion refers to the effect of a judgment in foreclosing litigation of a matter that never has been litigated, because of a determination that it should have been advanced in an earlier suit. Claim preclusion therefore encompasses the law of merger and bar."). Accordingly, to prevail on a claim of res judicata, the party asserting the bar must prove that (1) the parties are identical or in privity; (2) the first suit proceeded to a final judgment on the merits; and (3) the second claim is based on the same set of transactional facts as the first. Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n.5, 58 L. Ed. 2d 552, 99 S. Ct. 645 (1979); Jet, Inc. v. Sewage Aeration Sys., 223 F.3d 1360, 1362 (Fed. Cir. 2000). It is undisputed that the first two elements are present: The parties (Ammex and the government) are identical in both actions, and the prior litigation resulted in a valid final judgment on the merits. Thus, the case 4 5 Ta reduces to an analysis of the transactional facts involved in the two causes of action. See Young Eng'rs, 721 F.2d at 1814 (moting that this court is broadly guided by the Restatement (Second) of Judgments); ‘Restatement (Second) of Judgments § 24 (defining "claim" as encompassing rights and remedies arising out of the same set of transactional facts). The Restatement notes that a common set of transactional facts is to be identified "pragmatically." Restatement (Second) of Judgments § 24. Seeking to bring additional clarity to this standard, courts have defined "transaction" in terms of a "core of operative facts," the "same operative facts," or the "same nucleus of operative facts," and "based on the same, or nearly the same factual allegations." Herrmann v. Cencom Cable Assocs., Inc., 999 F.2d 223, 226 (7th Cir. 1993) (citing Parsons Steel, Inc. v. First Ala. Bank, 474 U.S. 518, 521, 88 L. Ed. 2d 877, 106 S. Ct. 768 (1986)); see also Nevada v. United States, 463 U.S. 110, 128-30, 77 L. Ed. 2d 509, 103 S. Ct. 2906 (1983) (requiring courts to first determine whether the "same cause of action" is being sued upon); Lawlor v. Nat'l Screen Serv. Corp., 349 U.S. 322, 326, 99 L. Ed. 1122, 75 S. Ct. 865 (1955) ("[A] prior judgment is res judicata only as to suits involving the same cause of action."); United States v. Haytian Republic, 154 U.S. 118, 125, 38 L. Ed. 930, 14 8. Ct. 992 (1894) ("One of the tests laid down for the purpose of determining whether or not the causes of action should have been joined in one suit is whether the evidence necessary to prove one cause of action would establish the other."). In the instant case, we must determine whether, for purposes of claim preclusion, HQ 227385, which Customs provided for denying Ammex's request to sell gasoline and diesel fuel duty-free and the Court 8a of International Trade held was contrary to law, Ammex I, 116 F. Supp. 2d at 1270, is based on the same set of factual allegations as whether the application of federal taxes to gasoline and diesel fuel preempts such fuel from qualifying as "duty-free merchandise," Ammex II, 193 F. Supp. 2d at 1330. We hold that it is not. The government correctly argues that, although the ultimate effect of both claims was to determine whether Ammex may sell gasoline and diesel fuel duty-free, the claims are sufficiently different because in the prior lawsuit, Ammex claimed, upon the administrative record, that Customs's interpretation of 19 U.S.C. § 1557(a)(1) was not in accordance with law, and the current claim is whether the IRS's determination that Ammex's fuel must be taxed under 26 U.S.C. § 4081 precludes it from qualifying as "duty- free merchandise" under 19 U.S.C. § 1555(b)(8)(D). The Omnibus Trade and Competitiveness Act of 1988 defines "duty-free enterprise" as:A person that sells, for use outside the customs territory, duty-free merchandise that is delivered from a bonded warehouse to an... exit point for exportation by, or on behalf of, individuals departing from the customs territory.19 U.S.C. § 1555(b)(8)(D)(2000). "Duty-free merchandise" is defined as goods on which no federal duty or tax has been charged "pending exportation from the customs territory." Id. § 1555(b)(8)(E). Logie dictates that the term "duty-free" is somewhat of a misnomer and more accurately should be termed "duty- and tax-free." Thus, the unique nature of a duty- and tax-free store is that it sells goods for immediate export from the United States so that its customers need not pay federal duties and taxes on the goods. 9a Ammex concedes that Ammex I did not expressly adjudicate the tax issue. Ammex nevertheless argues that the tax question appeared in the administrative record in Ammex I and could have been litigated in Ammex I. We conclude that the Court of International Trade properly rejected Ammex's argument. Ammex points only to excerpts dealing with forwarding warehouse entry documents to the IRS, and not the question of whether federal tax was due on the gasoline and diesel fuel. Moreover, Ammex raised the specific tax issue with Customs after the conclusion of Ammex I. In response to a request from Ammex, the IRS issued an informational letter stating that 26 U.S.C. § 4081 imposes a tax on the entry into the United States of any taxable fuel, including gasoline and diesel fuel for consumption, use, or warehousing. Ammex argues that a court's statutory interpretation cannot be challenged in a subsequent agency decision. The factual premise of the lawsuit in Ammex Ii, however, differs from the prior one because the application of federal taxes to gasoline and diesel fuel, preempting such fuel from qualifying as "duty-free merchandise," is a new fact which was not a part of Ammex I. Cf. United States v. Stone & Downer Co., 274 U.S. 225, 235-36, 71 L. Ed. 10138, 47 S. Ct. 616, Treas. Dec. 42211 (1927) (holding that in customs classification cases a determination of fact or law with respect to one importation is not res judicata as to another importation of the same merchandise by the same parties). Because under the relevant statute, the term "duty-free merchandise" means "merchandise sold by a duty-free sales enterprise on which neither Federal duty nor Federal tax has been assessed pending exportation from the customs territory," 19 U.S.C. § 1555(b)(8)(E), we reject Ammex's argument that the legal claims in the two 10a suits arise from the same "operative nucleus of fact." See, e.g., Herrmann, 999 F.2d at 226; Restatement (Second) of Judgments § 24 cmt. f ("Material operative facts occurring after the decision of an action with respect to the same subject matter may in themselves, or taken in conjunction with the antecedent facts, comprise a transaction which may be made the basis of a second action not precluded by the first."); see also Lawlor, 349 U.S. at 327-28 (stating prior dismissal of antitrust complaint did not bar new antitrust complaint based on conduct occurring after the first judgment). Next, Ammex correctly argues that the Court of International Trade erred in its initial decisioi. by applying the elements of collateral estoppel (or issue preclusion) instead of those of res judicata. In denying Ammex's contempt motion, the Court of International Trade applied the elements of collateral estoppel and recognized the distinction between the issue raised in Ammex I, 116 F. Supp. 2d at 1270 (stating that the specific decisions and rationale contained in HQ 227385 were arbitrary, capricious, or contrary to law), and the separate and distinct issue on which Ammex challenged Customs's revocation of the September 5 letter in Ammex II, 193 F. Supp. 2d at 1330 (stating that the gasoline and diesel fuel sold at Ammex's duty-free store is subject to federal tax and that such fuel does not satisfy the statutory definition of "duty-free merchandise"). Nevertheless, the government correctly asserts that this was not prejudicial error, because the Court of International Trade addressed Ammex's argument in denying its motion for reconsideration, Ammex, Inc. v. United States, 201 F. Supp. 2d 1874 (Ct. Int'l Trade 2002), and, as discussed above, under this court's de novo review, res judicata does not preclude lla Customs from revoking its approval of the sale of gasoline and diesel fuel on a duty- and tax-free basis. C. Motion for an Order to Show Cause Why the United States Customs Service Should Not be Held in Contempt Finally, Ammex suggests that the Court of International Trade abused its discretion in denying its motion to hold Customs in contempt for revoking Ammex's duty- and tax-free status for gasoline and diesel fuel. We reject this argument because the Court of International Trade may hold a party in contempt if it determines that its actions constitute a _ willful obstruction of justice, and we shall sustain a denial of contempt based upon a reasoned legal position for failure to abide by the court's judgment. Here, the Court of International Trade did not abuse its discretion in denying Ammex's motion to hold Customs in contempt because the position of the IRS on the tax issue provided a reasonable basis for Customs's action. In short, an agency may change its policy position based on a reasonable explanation, and the IRS ruling provided such a basis. IV. CONCLUSION Because res judicata does not preclude Customs from revoking its approval of the sale of gasoline and diesel fuel on a duty- and tax-free basis, the judgment of the Court of International Trade denying Ammex's Motion for an Order to Show Cause Why the United States Customs Service Should Not be Held in Contempt is AFFIRMED. 12a Court No.: 99-01-00013 UNITED STATES COURT OF INTERNATIONAL TRADE AMMEX, INC., Plaintiff, ° V. UNITED STATES OF AMERICA, Defendant. February 22, 2002, Decided COUNSEL: Steptoe & Johnson LLP (Herbert C. Shelley, Alice A. Kipel), for Plaintiff. Robert D. McCallum, Jr., Assistant Attorney General; Joseph I. Liebman, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice (Amy M. Rubin), for Defendant. JUDGES: Evan J. Wallach, Judge. OPINIONBY: Evan J. Wallach OPINION: I PRELIMINARY STATEMENT 13a Plaintiff, Ammex, Inc. ("Ammex"), moves this court for an Order to Show Cause Why Defendant Should Not be Held in Contempt, pursuant to Rules 7(e) and 63 of the Rules of this Court. Specifically, Ammex seeks to require defendant, the United States of America (the "Government"), to explain why Customs' revocation of Ammex's authorization to sell duty-free fuel is not in contempt of this court's order and judgment of August 25, 2000. Ammex, Inc.'s Motion for Order to Show Cause Why Defendant Should Not be Held in Contempt ("Ammex's Motion") at 1. Familiarity with the court's August 25, 2000 order and decision in Ammex, Inc. v. United States, 116 F. Supp. 2d 1269 (CIT 2000) ("Ammex I"), is presumed._ II BACKGROUND Ammex operates a duty-free store at the Ambassador Bridge between Detroit, Michigan and Windsor, Canada. In a letter dated January 24, 1994, Ammex requested approval to sell gasoline and diesel fuel on a duty-free basis. Letter from Barbeau to Morandini of 1/24/94 (Ex. 6 to Ammex's Memorandum of Law in Support of Ammex, Inc.'s Motion for Order to Show Cause Why Defendant Should Not be Held in Contempt ("Ammex's Memo")). On February 12, 1998, the United States Customs Service ("Customs") ruled that gasoline and diesel fuel could not be sold on a duty- free basis from Ammex's facility. U.S. Customs Service Headquarters Ruling ("HQ") 227385, February 12, 1998. This ruling reaffirmed a 1994 headquarters ruling which found that activities of duty-free stores should not be extended to cover "unidentifiable fungibles," _ 14a such as gasoline and diesel fuel, when sold on a retail basis. HQ 225287, June 7, 1994. "In both HQ 227385 and 225287, Customs accepted the requestor's assertion that the merchandise under consideration was duty- free but, . . . determined that such merchandise could not be sold as duty-free merchandise from a class 9 bonded warehouse." Customs Bulletin and Decisions, Vol. 35, No. 25, June 20, 2001, at 296. In Ammex I, Ammex challenged the above Customs rulings. This court found that "Customs acted unlawfully in prohibiting Ammex from selling duty-free gasoline and diesel fuel." Ammex I, 116 F. Supp. 2d at 1275-76. This court accordingly entered a judgment setting aside HQ 227385 and "ORDERED ADJUDGED AND DECREED that 19 U.S.C. § § 1555 and 1557 allow the duty-free sale of gasoline and diesel fuel from a duty-free enterprise." Id. at 1276. On September 5, 2000, in accordance with the court's decision, Customs issued a letter to Ammex granting its request to expand its "Class 9 duty free warehouse operation to include the gasoline and diesel fuel tanks located at [Ammex's] facility." Letter from Ryan to Levesque of 9/5/00 (Ex. 2 to Ammex's Memo) ("September 5 letter"). On October 23, 2002, Ammex wrote to Customs seeking a letter to certify that the fuel sold at Ammex's duty- free store was exempt from taxes. Letter from Levesque to Ryan of 10/23/00 (Ex. 1 to "Durant Declaration" of Defendant's Opposition to Plaintiff's Motion to Show Cause Why Defendant Should Not be Held in Contempt) ("October 23 letter"). Customs forwarded Ammex's request to the Internal Revenue 15a Service ("IRS"). On January 8, 2001, the IRS issued an informational letter stating that section 4081 of the Internal Revenue Code (the "Tax Code") (26 U.S.C. § 4081) imposes a tax on the entry into the United States of any taxable fuel, including gasoline and diesel fuel for consumption, use, or warehousing. Durant Declaration P8. Based on the IRS letter, Customs determined that it could not lawfully permit Ammex to sell gasoline and diesel fuel duty-free. On June 20, 2001, Customs issued a notice proposing to revoke the September 5 letter. Customs Bulletin and Decisions, Vol. 35, No. 25, June 20, 2001. On November 21, 2001, after a notice and comment period, Customs advised that it was "revoking a ruling letter pertaining to gasoline and diesel fuel from a [sic] class 9 bonded warehouses and revoking any treatment previously accorded by the Customs Service to substantially identical transactions." Id., Vol. 35, No. 47 (November 21, 2001) at 5 ("Revocation Decision"). Customs announced that the revocation would become effective on January Zi, 2002. Id. Ammex thereafter filed its Motion to Show Cause Why Defendant Should Not be Held in Contempt. Il STANDARD To establish that a party is liable for civil contempt a plaintiff must prove three elements: "(1) that a valid order of the court existed; (2) that the defendants had knowledge of the order; and (3) that the defendants disobeyed the order." Roe v. Operation Rescue, 54 F.3d 133, 137 (8d Cir. 1995). Civil contempt must be proven a 16a by clear and convincing evidence, Glaxo, Inc. Vv. Novopharm, Ltd., 110 F.3d 1562, 1572 (Fed. Cir. 1997), and a court cannot hold a party in contempt if there is a "fair ground of doubt as to the wrongfulness of the [party's] actions," Preemption Devices, Inc. v. Minn. Mining & Mfg. Co., 803 F.2d 1170, 1173 (Fed. Cir. 1986). IV ARGUMENTS Ammex argues that Customs' revocation is "plainly inconsistent with this Court's Order permitting the sale of duty-free gasoline and diesel fuel from a duty-free sales enterprise." Ammex's Memo at 3. Ammex requests, among other things, that this court issue an order to show cause why Customs' revocation is not in contempt of this court's judgment of August 25, 2000 and determine that section 4081 of the Tax Code, as it applies to entries into Class 9 bonded warehouses, is unconstitutional. "The agency decision challenged in Ammex I was based exclusively on a perceived ‘unidentifiable fungibles' exception to the statute relating to bonded warehouses, particularly Class 9 bonded warehouses, and the holding in Ammex I was simply that that decision, as memorialized in HQ 225287 and affirmed in HQ 227385, was contrary to law." Defendant's Opposition to Plaintiffs Motion for an Order to Show Cause Why Defendant Should not be Held in Contempt ("Defendant's Opposition") at 8. The Government argues, "Neither the challenged ruling letters nor this Court's holding addressed or involved any other potential basis for prohibiting the duty-free sale of 17a gasoline and diesel fuel, including whether the fuel which Ammex intended to sell is encompassed by the statutory definition of ‘duty-free merchandise." Id. Because the issues presently raised by Ammex's motion "are not relevant to a determination of whether Customs' revocation decision violates the Ammex I decision," id. at 17, the Government argues that this court should decline to consider them. V ANALYSIS A Jurisdiction to Entertain Present Challenge The United States Court of International Trade, like all Federal courts established under Article III of the Constitution, is a court of limited jurisdiction. United States v. Gold Mountain Coffee, Ltd., 8 C.I.T. 247, 248, 597 F. Supp. 510, 513 (1984). The party asserting jurisdiction "has the burden of proving that jurisdiction in this court is proper." Id. at 249. Jurisdiction for this court to entertain the challenge in Ammex I fell under 28 U.S.C. § 15814), which provides the court with jurisdiction over "any civil action commenced against the United States ... that arises out of any law of the United States providing for revenue from imports or tonnage, tariffs, duties, fees, or other taxes on the importation of merchandise for reasons other than the raising of revenue or administration and enforcement with respect to these matters." 28 U.S.C. § 1581(i). Ammex now argues that this court "possesses jurisdiction to hear this motion by virtue of the Court's 18a jurisdiction over the underlying proceeding in this ease." Plaintiffs Memo at 3 (citing United States v. Hanover Ins. Co., 82 F.3d 1052, 1054 (Fed. Cir. 1996) ("The Court of International Trade has the inherent power to determine the effect of its judgments and issue injunctions to protect against attempts to attack or evade those judgments.")). Were Customs' revocation an attempt to attack or evade Ammex I and the court's August 25, 2000 judgment, then no doubt this court could readily exercise jurisdiction over such behavior under its inherent enforcement powers and as an extension of its jurisdiction to hear Ammex's original complaint in Ammex I. However, the issue underlying Ammex's Complaint in the present motion is distinct from the issue raised in Ammex I. While both issues call upon the court to determine the validity of Customs' refusal to allow Ammex to sell fuel from its duty-free store, the stated bases for Customs' refusal to allow Ammex's sales differ in each case. Ammex's contention that "there can be no dispute that the transaction and matter at issue in this second action are the same as the first--the matter now, as before, is Ammex's right to sell gasoline and diesel fuel duty-free from its duty-free store in Detroit, Michigan," Plaintiff's Memo at 16, is specious. Ammex states the issue too broadly. The issue in Ammex I was not simply whether Ammex is entitled "to sell gasoline and diesel fuel from its duty-free store in Detroit, Michigan." Id. Rather, the court was called upon to consider whether the explanation Customs provided for denying Ammex's request to sell gasoline and diesel fuel duty-free was arbitrary, capricious, or contrary to law. 19a The Government more accurately states the case thus: The only issue that the Court had to decide in [Ammex I] was whether the denial of Ammex's proposal to sell gasoline and diesel fuel free of duty at its duty-free store in Detroit, Michigan, for the reasons provided in HQ 225287 and then affirmed in HQ 227385, was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Based on the nature of the complaint, the Court was constrained to consider only that stated basis for the challenged decision and review only the agency's record underlying its decision." Defendant's Opposition at 4 (emphasis added). This court accordingly reviewed Customs' stated reason for denying Ammex's request to sell duty-free fuel, namely, its rationale that such fuel falls under an "unidentifiable fungibles" exception to merchandise that can lawfully be entered and withdrawn for exportation from duty-free stores. Customs reasoned that, because duty-free merchandise purchased in the United States, if reimported, had to be declared and the duties and taxes paid, the lack of any practical means of enforcing this requirement with respect to unidentifiable fuel in gas tanks rendered the sale of duty-free fuel contrary to law. In resolving the issue raised in Ammex I, the court stated, "§ 1557(a)(1) is dispositive of Plaintiff's claim." Ammex I, 116 F. Supp. 2d at 1275. "On its face, the plain language of § 1557(a)(1) shows Congresgs' intent that there be only two restrictions on the type of dutiable merchandise that may be stored or withdrawn from a 20a bonded warehouse: (1) perishable articles and (2) explosive substances other than firecrackers." Id. at 1273. This court determined that diesel fuel and gasoline did not fall within either of these exceptions, and thus it was error for the government to read into the governing statute "an exception beyond those specifically stated in § 1557(a)(1)." Id. at 1275. "In view of 1557(a)(1)'s instruction that 'any merchandise subject to duty' may be entered and withdrawn from a bonded warehouse, the court finds that Customs violated this provision in promulgating HQ 227385." Id. Implicit in both parties' briefings in Ammex I and the court's opinion was the presumption that the gasoline and diesel fuel at issue qualified as "duty-free merchandise" within the meaning of 19 U.S.C. § 1555(b)(8)(E). Neither party questioned _ this assumption, and because neither party raised a challenge, the court did not consider or rule on such an issue. Because of subsequent events, however, the issue has arisen as to whether gasoline and diesel fuel can qualify as "duty-free merchandise" under 19 U.S.C. § 1555(b)(8)(E), in light of information from the IRS that such fuel may be subject to tax and therefore unable to qualify as "duty-free merchandise" under the statutory definition. "For the Court to consider Ammex's Motion, it must also consider whether the federal excise tax issue now framed by Customs was directly or indirectly part and parcel of Ammex I." Reply of Ammex, Inc. In Support of its Motion for Order to Show Cause ("Ammex's Reply") at 12. Revelations by Ammex at oral argument confirm that the issue now raised was neither part and parcel, nor conclusively determined in Ammex I. 2la Ammex previously maintained that this court's decision in Ammex I foreclosed all issues relevant to Customs' denial of Ammex's right to sell gasoline and diesel fuel duty-free, yet Ammex's October 23, 2000 letter to Customs states the following: Subsequent to the decision by the U.S. Court of International Trade, Ammex has commenced the sale of tax and duty free gasoline and diesel fuel, following U.S. Customs requirements and procedures. In conjunction with this operation, Ammex requires a letter from U.S. Customs stating that there are no taxes due at the time of bonded entry into the U.S. of gasoline and diesel fuel. October 23 letter. Ammex explained at oral argument that the October 23 letter was an attempt by Ammex to obtain, and use in unrelated litigation, a certification from Customs that excise taxes were not applicable to certain fuel sold by Ammex. However, in addition, because it shows that Ammex itself would not rely on Ammex I on the excise tax question, the letter now serves to foreclose Ammex's res judicata and contempt arguments. Having determined that the issue of federal taxes as applied to gasoline and diesel fuel and the concurrent consideration of. whether such application preempts such fuel from qualifying as "duty-free merchandise" was neither part nor parcel of Ammex I, Ammex's Motion cannot be considered by the court under the present procedural posture. Ammex's Motion asks the court "to interpret § 1555(b)(8)(E) of Title 19--a Customs statute." Ammex's Reply at 12-13. This constitutes a new matter, one which was not 22a contemplated in Ammex I. It therefore cannot be said that the revocation constitutes an attack on the court's prior judgment or order in this case. While the court does possess inherent power to determine the effect of its judgments and protect against attempts to attack or evade those judgments, in this case, the issue before the court is not encompassed by the prior order. Customs did not violate this court's order in Ammex I by either determining, based on newly acquired information, that the fuel Ammex desires to sell can not qualify as "duty-free merchandise," and its subsequent revocation of Ammex's entitlement to sell gasoline and diesel fuel from its duty-free store, does not violate the decision in Ammex I. Ammex is entitled to challenge the basis for Customs' decision to revoke its September 5 letter. If, however, Ammex wishes to challenge this new, distinct basis for Customs' disallowance of Ammex's sale of gasoline and diesel fuel from its duty- free store, Ammex must raise this issue anew in the proper procedural manner. It cannot, as the Government contends, "thwart proper procedure and bootstrap a new grievance onto a dispute that has already been resolved." Defendant's Opposition at 20. B Res Judicata Argument Ammex also argues that Customs' "attempt to | relitigate the matter of Ammex's duty-free fuel sales with a previously-available argument is precluded under the long-standing doctrine of res judicata," a term "used broadly to refer to concepts of merger, bar, and direct and collateral estoppel lie., issue 23a preclusion]." Plaintiff's Memo at 15. Two "major limitations" to such preclusion, however, are (1) "a requirement that at the time of the first litigation the parties be able to foresee the later litigation that came to present the same issue" and "a requirement that the issue have played an important role in the abstract hierarchy of legal rules controlling the first or the second litigation." 18 Wright, Miller & Cooper, Federal Practice and Procedure § 4424 at 226-227 (1981); see also Hyman v. Regenstein, 258 F.2d 502, 510-11, cert. denied, 359 U.S. 913, 79 S. Ct. 589, 3 L. Ed. 2d 575 (6th Cir. 1958) ("Collateral estoppel by judgment is applicable only when it is evident from the pleadings and record that determination of the fact in question was necessary to the final judgment and it was foreseeable that the fact would be of importance in possible future litigation."). The court finds that the narrow tax issue now raised was too far outside the ambit of the Ammex I proceedings either to be foreseeable or to play a crucial role in the final judgment of that case. Issue preclusion should thus not operate to bar either party from raising this issue in the correct procedural posture. VI CONCLUSION For the foregoing reasons, Ammex's Motion for Order to Show Cause Why Defendant Should Not be Held in Contempt is denied. Evan J. Wallach, Judge Dated: February 22, 2002, New York, New York 24a 02-1498 UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT AMMEX, INC., Plaintiff-Appellant, V. UNITED STATES, Defendant-Appellee. October 7, 2003 A petition for rehearing en banc having been file by the APPELLANT, and a response thereto having been invited by the court and filed by the APPELLEE, and the matter having first been referred as a petition for rehearing to the panel that heard the appeal, and thereafter the petition for rehearing en bane and response having been referred to the circuit judges who are in regular active service, UPON CONSIDERATION THEREOF, it is ORDERED that the petition for rehearing be, and the same hereby is, DENIED and it is further ORDERED that the petition for rehearing en banc be, and the same hereby is, DENIED. The mandate of the court will issue on October 14, 2003. 25a FOR THE COURT, Jan Horbaly Clerk Dated: October 7, 2003 ec: Craig L. John Amy M. Rubin 26a Court No.: 99-01-00013 UNITED STATES COURT OF INTERNATIONAL TRADE AMMEX, INC., Plaintiff, V. UNITED STATES, Defendant. August 25, 2000, Decided COUNSEL: Steptoe & Johnson LLP (Herbert C. Shelley, Alice A. Kipel, Gregory S. McCue and David N. Tanenbaum), for Plaintiff. David W. Ogden, Assistant Attorney General; Joseph I. Liebman, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice (Amy M. Rubin); Beth C. Brotman, Office of Assistant Chief Counsel, United States Customs Service, of counsel, for Defendant. JUDGES: Evan J. Wallach, Judge. OPINIONBY: Evan J. Wallach OPINION: 27a I INTRODUCTION This case is before the court upon the Motion Of Plaintiff Ammex, Inc. For Judgment Upon The Agency Record. Plaintiff challenges the decision of the U.S. Customs Service ("Customs") not to allow it to sell duty-free gasoline and diesel fuel from its duty-free store in Detroit, Michigan. For the reasons stated below, the court finds Custom's decision not to be in accordance with law. II BACKGROUND At issue in this case is Plaintiff's challenge of Customs Headquarters Ruling 227385 of February 12, 1998 ("HQ 227385"). In HQ 227385, Customs reaffirmed a 1994 headquarters ruling which found that the activities of duty-free stores should not be extended to cover "unidentifiable fungible" goods, such as gasoline and diesel fuel, when sold on a retail basis. In the 1994 ruling, Customs found, inter alia, that because such merchandise could not be subject to marking or other identification under 19 U.S.C. § 1555(b)(3)(D), nl Customs would have no practical way of ensuring that the duty-free gasoline was "declared" when vehicles returned to the United States. See Customs Headquarters Ruling 225287 of June 27, 1994 ("HQ 225287"), at 4-5. In HQ 227385, Customs revisited the issue of duty-free gasoline and diesel sales in light of Plaintiff's request 28a that Customs reconsider its 1994 ruling. Analyzing the legislative history of the Omnibus Trade and Competitiveness Act of 1988, which established legislative guidelines for Customs’ administration of duty-free shops, Customs concluded that "the fact that Congress did not specifically reject Customs policy regarding the sale of gasoline by duty-free stores means that Congress did not object to such practice." HQ 227385 at 5. Thus, it reasoned, "in holding that gasoin. and diesel fuel may not be sold by duty-free stores, it was proper to follow the precedent established by ruling letter 200396." Id. In Ruling Letter 200396, the Assistant Commissioner of Customs' Office of Regulations and Rulings, Leonard Lehman, held that the activities of duty-free stores could not be extended to unidentifiable fungibles, such as gasoline sold on a retail basis, since Customs would have no practical way of ensuring that the gasoline was declared when it was returned to the United States. Customs Ruling Letter 200396 of October 30, 1972. n2 In its 1998 ruling, Customs also rejected Plaintiff's argument that, in allowing U.S. residents to apply merchandise purchased from a US. duty-free store against their $ 400 personal duty exemption allowance, the Miscellaneous Trade and Technical Corrections Act of 1996 rendered Ruling Letter 200396 and HQ 225287 obsolete. Besides pointing to the lack of any explicit Congressional intent to overturn these determinations, Customs observed that the eligibility for a duty exemption does not exempt the imported merchandise from being subject to other customs laws. The exemption from duty depends on the status of the individual and the ee 29a circumstances regarding the exportation of the goods, the time spent out of the United States, and the frequency of the claims for eligibility. In order to administer those requirements, the need for simple effective controls has not been lessened by the 1996 statutory change. HQ 227385 at 7. By letter dated May 12, 1998, Ammex, Inc. ("Ammex") attempted to protest HQ 227385 under 19 U.S.C. § 1514(a) (1994). On July 9, 1998, Customs ruled that HQ 227385 was not protestable under this provision, since HQ 227385 did not require Ammex to make any payment or cause an assessment on any kind. See Customs Headquarters Ruling 228021 of July 9, 1998. Thereafter, Plaintiff filed its Complaint in this matter on January 12, 1999, timely putting its challenge to HQ 227385 before this court. After considering various motions by Plaintiff to either supplement the administrative record in this case and/or conduct limited discovery, n3 the court heard oral argument on August 16, 2000. The court has jurisdiction under 28 U.S.C. § 1581() (1994). See Duty Free Int'l. Inc. v. United States, 17 C.1.T. 1425, 1425 (1993), aff'd 88 F.3d 1046 (Fed. Cir. 1996). n4 iil THE COURT SHALL HOLD UNLAWFUL AGENCY ACTION THAT IS ARBITRARY, CAPRICIOUS, AN ABUSE OF DISCRETION, OR NOT IN ACCORDANCE WITH LAW. 3f4 28 U.S.C. § 2640(e) (1994) provides that "in any civil action not specified in this section, the [court] shall review the matter as provided in [ 5 U.S.C. § 706]." In turn, 5 U.S.C. § 706(2)(A) (1994) provides, in relevant part, that "the reviewing court shall... hold unlawful and set aside agency action, findings, and conclusions of law found to be .. . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." The scope of the court's review is limited to the "whole record or those parts of it cited by a party." 5 U.S.C. § 706 (1994) (emphasis added); see also Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 420, 28 L. Ed. 2d 136, 91 S. Ct. 814 (1971) (stating that a review of the "whole record" under § 706 "is to be based on the full administrative record that was before the Secretary at the time he made his decision"). IV CUSTOMS' DECISION TO PROHIBIT AMMEX FROM SELLING DUTY-FREE GASOLINE AND DIESEL FUEL IS NOT IN ACCORDANCE WITH LAW. Plaintiff first argues that Customs' decision to prohibit Ammex from selling duty-free gasoline and diesel fuel violates 19 U.S.C. § 1557(a)(1) (1994), which allows "any merchandise subject to duty, with the exception of perishable articles and explosive substances" to be entered and withdrawn (for exportation) from bonded warehouses, such as duty-free stores. According to Plaintiff, Customs' prohibition on the _ sale of "unidentifiable fungibles," such as gasoline and diesel fuel, creates an additional exception to the general authorization set forth in § 1557(a)(1) that enjoys no support in either the statute or its implementing 3la regulations. See Brief In Support Of Ammex's Rule 56.1 Motion For Judgment Upon The Agency Record ("Plaintiff's Brief") at 9-13. The first question to consider in reviewing an agency's construction of a statute it administers is "whether Congress has directly spoken to the precise question at issue." Chevron, U.S.A., Inc. v. United States, 467 U.S. 837, 42, 81 L. Ed. 2d 694, 104 S. Ct. 2778 (1984). "If the inter®, of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Id. at 842-43; see also Timex V.I., Inc. v. United States, 157 F.3d 879, 882 (Fed. Cir. 1998) ("To ascertain whether Congress had an intention on the precise question at issue, we employ the traditional tools of statutory construction. The first and foremost tool to be used is the statute's text, giving it its plain meaning.") (internal quotes and citation omitted). In this case, 19 U.S.C. § 1557(a)(1) (1994), as well as the other provisions covering duty-free stores and bonded warehouses, make clear the scope of merchandise that may be entered and withdrawn from duty-free enterprises. In relevant part, § 1557(a)(1) provides that Any merchandise subject to duty, with the exception of perishable articles and explosive substances other than firecrackers, may be entered for warehousing and be deposited in a bonded warehouse at the expense and risk of the owner [,] purchaser, importer, or consignee. Such merchandise may be withdrawn, at any time within 5 years from the date of importation, for consumption upon payment of the duties and charges accruing thereon at the rate of duty imposed by law ee 32a upon such merchandise at the date of withdrawal; or may be withdrawn for exportation or for transportation and exportation to a foreign country ... . (emphasis added). On its face, the plain language of § 1557(a)(1) shows Congress' intent that there be only two restrictions on the type of dutiable merchandise that may be stored or withdrawn from a bonded warehouse: (1) perishable articles and (2) explosive substances other than firecrackers. Customs did not find that diesel fuel and gasoline fall within either of these exceptions. nd Accordingly, since duty-free stores are a type of bonded warehouse, n6 the plain language of § 1557(a)(1) makes both items eligible for sale from duty-free stores. n7 In its brief, the government asserts that § 1557(a)(1) is not dispositive of Plaintiffs claim, arguing the more specific provisions for duty-free stores set out in 19 U.S.C. § 1555(b)(8)(D) and (E) provide additional limitations on the type of merchandise that may be sold duty-free. See Defendant's Response To Plaintiff's Motion For Judgment Upon The Agency Record ("Defendant's Response") at 13-15: see also HQ 225287 at 4 ("Clearly, inclusion of this caveat [§ 1555(b)(3)] indicates an intent that the merchandise which could be sold in a duty-free store would be ‘individual items of merchandise! which could be market or otherwise identified."). In relevant part, 19 U.S.C. § 1555(b)(3) (1994) provides that "each duty-free sales enterprise": (D) shall not be required to mark or otherwise place a distinguishing identifier on individual items of merchandise to indicate that the items were sold by a duty-free sales enterprise, unless the Secretary finds a \ 33a pattern in which such items are being brought back into the customs territory without declaration; (E) may unpack merchandise into saleable units after it has been entered from warehouse and placed in a duty- free sales enterprise, without requirement of further permits. According to Defendant, by providing that duty-free stores will not be required to mark "individual items of merchandise" unless a pattern of reimportation exists, and that merchandise may be unpacked into saleable units, "Congress was plainly indicating the existence of four factors with respect to the type of merchandise that may be sold in a duty-free store: (1) the goods sold in duty-free stores constitute ‘individual items of merchandise,’ (2) the goods actually sold in duty-free stores consist of pre-designated 'saleable units,' (3) the goods sold in duty-free stores must be capable of being marked, and (4) if a pattern of reimportation exists with respect to particular goods, the Secretary must have some means of detecting such a pattern." Defendant's Response at 15-16. Because gasoline and diesel fuel possess none of these features, Defendant asserts, Customs correctly prohibited their sale from duty-free stores. See id. at 15-16. Essentially, the government reads § 1555(b)(8)(D) as authorizing Customs to require duty-free enterprises to sell only individual items of merchandise that are capable of being individually marked. On its face, § 1555(b)(3)(D) supports no such interpretation. Section 1555(b)(3)(D) simply gives Customs the power to identify merchandise that is being reimported without declaration; nothing in the language or history of this 34a provision authorizes Customs to prohibit the sale of certain merchandise outright, or encumber the sale of merchandise before a pattern of illegal reimportation is discovered. In fact, Defendant's interpretation is directly contrary to Congress' intent, as evidenced in the relevant conference report, that Customs impose the least restrictions possible on the sale of duty-free merchandise. n8 . Defendant's characterization of 19 USC. 8 1555(b)(3)(E) (1994) is similarly strained. This provision provides simply that a duty-free enterprise "may unpack merchandise into saleable units." Defendant's interpretation, however, essentially substitutes the phrase "shall sell" for the language "may unpack," and imposes the limiting adjective "pre-designated" before "saleable units." See Defendant's Response at 15 (arguing that "Congress was plainly indicating . . . [that] ... the goods actually sold in duty-free stores consist of pre-designated ‘saleable units.) (emphasis added). In doing so, Defendant significantly distorts the meaning of this statute, converting a general congressional authorization concerning the unpacking of merchandise into a specific congressional delineation of what merchandise may be sold duty-free. No reasonable interpretation of § 1555(b)(8)(E) supports such a fundamental change. Accordingly, because there is no conflict between 19 U.S.C. § 1557(a)(1) (1994) and the specific provisions under 19 U.S.C. § 1555(b) (1994) for duty-free enterprises, n9 § 1557(a)(1) is dispositive of Plaintiff's claim. In view of § 1557(a)(1)'s instruction that "any merchandise subject to duty" may be entered and withdrawn from a bonded warehouse, the court finds 35a that Customs violated this provision in promulgating HQ 227385. Section 1557(a)(1) provides that all types of dutiable merchandise may be sold from bonded warehouses, including duty-free stores, and it was error for the government to read into 19 USC. § 1555(b)(3)(D) and (E) an exception beyond those specifically stated in § 1557(a)(1). See A. H. Phillips, Inc. v. Walling, 324 U.S. 490, 493, 89 L. Ed. 1095, 65 S. Ct. 807 ("To extend an exemption to other than those plainly and unmistakably within [a statute's] terms and spirit is to abuse the interpretative process and to frustrate the announced will of the people."). nl0 Had Congress intended Customs to restrict the sale of gasoline, diesel fuel, or other such fungible merchandise through duty-free stores, as the government claims, it could have included language to this effect in the statute. That Congress failed to identify such an intention in either the language or legislative history of § 1555(b), however, persuades this court that the statute contains no such restriction. nll See Ciba-Geigy Corp. v. United States, 223 F.3d 1367, 2000 U.S. App. LEXIS 19843, 2000 WL 1141256 at *6 (Fed. Cir. 2000) ("When confronted with unambiguous _ statutory language, we will not discount the statute's plain language by assuming ignorance on the part of Congress. ... If... the [statute] no longer reflects the intent of Congress, it is Congress's task to change the words of the statute."); Ishida v. United States, 59 F.3d 1224, 1231 (Fed. Cir. 1995) (noting that, had Congress intended to limit the coverage of the Civil Liberties Act of 1988 in the manner asserted by the government, Congress could have expressed its intent in the statutory language). n12 36a V CONCLUSION For the foregoing reasons, the court finds that Customs acted unlawfully in prohibiting Ammex from selling duty-free gasoline and diesel fuel, and therefore grants the Motion Of Plaintiff Ammex, Inc. For Judgment Upon The Agency Record. Judgment to this effect shall be entered accordingly. Evan J. Wallach, Judge Date: August 25, 2000, New York, New York FOOTNOTES nl In relevant part, 19 U.S.C. § 1555(b) (1994), which governs "duty-free sales enterprises," provides as follows: (3) Each duty-free sales enterprise . . . (D) shall not be required to mark or otherwise place a distinguishing identifier on individual items of merchandise to indicate that the items were sold by a duty-free sales enterprise, unless the Secretary finds a pattern in which such items are being brought back into the customs territory without declaration. n2 Ruling Letter 200396 was also cited approvingly and quoted in HR 225287. See HQ 225287 at 3 and 5. n3 See Ammex, Inc. v. United States, 62 F. Supp. 2d 1148 (CIT 1999) (granting in part and denying in part Plaintiff's motion for discovery); the court's Order 37a dated December 6, 1999 (granting Plaintiff's unopposed motion for additional discovery); and Ammex, Inc. v. United States, 86 F. Supp. 2d 1278 (CIT 1999) (denying Plaintiff's motion to supplement the administrative record and seek additional discovery). - n4 Both parties agree that jurisdiction rests under § 1581(i), which provides this court with jurisdiction over "any civil action .. . that arises out of any law... providing for- (1) revenue from imports or tonnage; (2) tariffs . . . on the importation of merchandise for reasons other than the raising of revenue; (3) embargoes or other quantitative restrictions . . . for reasons other than the protection of the public health or safety; or (4) administration and enforcement with respect to [such] matters ... ." In its brief, however, Plaintiff also alleges jurisdiction under § 1581(h), which allows for certain pre-importation rulings where, inter alia, an importer "demonstrates . . . that he would be irreparably harmed unless given an opportunity to obtain judicial review prior to . . . importation." Although Defendant argued, and Plaintiff conceded at oral argument, that § 1581(h) did not lie in this case, the court is constrained to independently determine whether any other basis for jurisdiction supersedes § 1581(i). See NEC Corp. v. United States, 151 F.3d 1361, 1368 (Fed. Cir. 1998) (finding jurisdiction under 8 1581(i) "available only when jurisdiction under another subsection of 1581 is either unavailable or, if available, ‘manifestly inadequate"). To show irreparable harm for purposes of § 1581(h), Plaintiff submitted the affidavit of Mr. Francois Levesque, President of Ammex, Inc., which states that Ammex has "sustained significant financial losses... . 38a through the loss of duty-free gasoline and diesel fuel sales." Mr. Levesque's affidavit, however, lacks any foundational basis for this conclusion, as there is no indication that he conducted a review of admissible evidence and was qualified to reach conclusions about it. See USCIT R. 56(e) ("Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein."). As Plaintiff has not provided any other relevant evidence, it has not demonstrated irreparable harm for purposes of § 1581(h). Compare Holford USA Ltd. Inc. v. United States, 19 C.L.T. 1486, 1492, 912 F. Supp. 555, 560 (1995) (holding that affidavits, plus other supporting materials, adequately demonstrated irreparable harm). Accordingly, because the other provisions of § 1581 & 1581(a)-(c)) are inapposite to Plaintiff's claim, the court finds jurisdiction proper under § 1581(). n5 Nor does it appear that Customs could have made such a finding. See 18 U.S.C. § § 841(c) ("Explosive materials! means explosives, blasting agents, and detonators."), 841(d) (""Explosives' means any chemical compound mixture, or device, the primary or common purpose of which is to function by explosion; [including] dynamite and other high explosives, black powder, pellet powder, initiating explosives, detonators, safety fuses, squibs, detonating cord, igniter eord, and igniters.") and 841(e) (1994) ("Blasting agent’ means any material or mixture, consisting of fuel or oxidizer, intended for blasting . . . ."); "List of Explosive Materials," ATF Pub. P 5400.8 (listing explosives, blasting agents and detonators subject to regulation under 18 U.S.C. Chapter 40); see also 18 U.S.C. § 844()) 39a (1994) (defining "explosive" for various criminal provisions). Customs, in its regulations, distinguishes between "explosive substances" and other "dangerous and highly flammable merchandise." See 19 C.F.R. § 144.1 (2000) ("Dangerous and highly flammable merchandise, though not classified as explosive, shall not be entered for warehouse without the written consent of the insurance company insuring the warehouse ...."). n6 The relevant statutory provisions make clear that duty-free stores are a type, or subsection, of bonded warehouses. Not only is the specific provision for duty- free sales enterprises (19 U.S.C. § 1555(b) (1994)) a subsection of the general statute (§ 1555) for bonded warehouses, but 19 U.S.C. § 1555(b)(7) (1994) provides that "the Secretary shail by regulation establish a separate class of bonded warehouses for duty-free sales enterprises." See also 19 C.F.R. $ 19.35(a) (1997) (designating duty-free stores as "Class 9 warehouses" and providing that "except insofar as the provisions of this section and § § 19.36-19.39 are more specific, the procedures for bonded warehouses apply to duty-free stores (Class 9 warehouses)."); S. Rep. 100-71, at 230 (1988) ("Duty-free sales enterprises are a special category of ‘bonded warehouses' and it is under the bonded warehouse provisions of section 559 (and related sections) of the Tariff Act that they have been regulated."). n7 In response to the court's Order of July 27, 2000, that the parties be prepared to discuss the history of this statute, at oral argument both counsel presented sophisticated and useful analyses. As the court noted at the time, Plaintiff's counsel did a particularly extensive 40a and thorough job in tracing the origin of this statute, and is commended for that effort. n& See House Conf. Rep. No. 100-576, at 769-70 (1988), reprinted in 1988 U.S.C.C.A.N. at 1802-03 ("This amendment creates a limited exception to the general prohibition on any requirement that duty-free stores mark their merchandise to indicate that it was sold in a duty-free store. It authorizes the Secretary, in particular circumstances, to require a duty-free store to apply an inconspicuous mark or distinguishing identifier on certain of its merchandise. Before imposing such a requirement, the Secretary must find that a pattern or practice exists involving the reimportation of duty-free merchandise without declaration, occurring over a significant period of time. It is not intended that episodic or occasional instances would constitute a pattern or practice."). n9 Nor is there any conflict between § 1557(a)(1) and any regulation promulgated by Customs. 19 C.F.R. § 19.36(e) (1997), governing "merchandise eligible for warehousing,” states simply that "only conditionally duty-free merchandise may be placed in a bonded storage area of a Class 9 warehouse." "Conditionally duty free merchandise," in turn, is defined as "merchandise sold by a duty-free store on which duties and/or internal revenue taxes (where applicable) have not been paid." 19 C.F.R. § 19.35(a) (1997). nl0 See also Sutherland Statutes And Statutory Construction (6th ed. 2000), § 47:11 ("Where a general provision in a statute has certain limited exceptions, all doubts should be resolved in favor of the general provision rather than the exceptions.") 4la nll This is particularly true since, in promulgating specific provisions to govern duty-free enterprises, Congress sought to establish a comprehensive statutory framework that would provide for greater uniformity and consistency in the regulation of duty free sales enterprises. See Duty Free Int'l v. United States, 16 C.I.T. 163, 164-65 (1992) (quoting and discussing § 1908(a) of The Omnibus Trade and Competitiveness Act of 1988, Pub.L. No. 100-418, and S.Rep. No. 100-71 (1987) at 229-30). n12 In addition to arguing that HQ 227385 violates 19 U.S.C. § 1557(a)(1) (1994), Plaintiff argues, inter alia, that Customs’ determination was unreasonable because it ignored Customs' modern ability to monitor duty-free fuel sales through dyes and license plate monitoring. See Plaintiff's Brief at 17-19. Plaintiff also claims that Customs’ ban on "unidentifiable fungibles" is at odds with its own regulation governing the accounting for fungible merchandise. See id. at 11-12 (discussing 19 CFR. § 19.12(f)(2), which provides that "FIFO inventory procedures may be used only for fungible merchandise. For purposes of this section, 'fungible merchandise’ means merchandise which is identical and interchangeable for all commercial purposes."). While these arguments have substantial merit, further discussion is unnecessary, given the court's holding that Customs' ruling violated § 1557(a)(1). 42a Court No.: 99-01-00013 UNITED STATES COURT OF INTERNATIONAL TRADE AMMEX, INC., Plaintiff, V. UNITED STATES, Defendant. JUDGMENT ORDER This case having come before the court upon the Motion Of Plaintiff Ammex, Inc. For Judgment Upon The Agency Record ("Plaintiff's Motion"); the court having reviewed the papers and pleadings on file herein, having heard oral argument by each party, and after due deliberation, having reached a decision herein; now, in conformity with said decision, it is hereby ORDERED ADJUDGED AND DECREED that Plaintiffs' Motion is GRANTED; and it is further ORDERED ADJUDGED AND DECREED that US. Customs Service Headquarters Ruling 227385 of February 12, 1998, is contrary to law, and hereby set aside; and it is further ORDERED ADJUDGED AND DECREED that 19 U.S.C. § § 1555 and -1557 allow the duty-free sale of gasoline and diesel fuel from a duty-free enterprise. 43a Evan J. Wallach, Judge Dated: August 25, 2000, New York, New York HQ 225287 June 7, 1994 WAR-5-CO:R:C:E 225287 PH d CATEGORY: Warehouse District Director U.S. Customs Service Detroit, Michigan 48226 RE: Internal Advice; Duty-Free Stores; Sale of Gasoline and Diesel Fuel; 19 U.S.C. 1555(b); 19 CFR 19.35 through 19.39 Dear Sir: In your memorandum of March 23, 1994 (File: WAR-1- IC:WJR AMMEX5/TXTMONIC), you requested internal advice concerning a proposal to sell "duty-free" gasoline and diesel fuel at a duty- free store in your District. Our ruling follows: FACTS: You state that a duty-free store operator (the "operator") in your District has proposed to sell duty- free gasoline and diesel fuel at its duty-free store. You state that the operator has modified the store under consideration by "adding fencing, electronic gates, and constructing a private road leading directly from their sterile compound to the toll booths on the bridge plaza." The operator formally requested permission to operate this facility as a sterile shop with "live" products. During your physical inspection of the facility, you noted a gasoline/diesel station within the sterile area. 45a You state that in your December 23, 1994, letter tentatively approving the request, you excluded any bonded fuel operations. On the same date, the operator requested that you reconsider your position on the bonded petroleum operation. In a follow-up letter dated January 24, 1994, the operator formally requested that you approve a bonded petroleum product operation at its duty-free store. In this letter, a copy of which you enclosed, it is stated (in part): The petroleum would be sold for export, and would indeed be exported as all other bonded merchandise from this facility. The product would be imported ... by bona fide importation procedures including the use of licensed customs brokers, bonded bulk carriers/cartman, and would be subject to inventory control and monitoring verification, just like other bonded merchandise from this facility. The dispensing of petroleum preducts from the duty free plaza would be similar to the exi[s]ting programs for air carriers at various international airports. In your memorandum you request advice on the issues in the ISSUES portion of this ruling. ISSUES: (1) Does gasoline and diesel fuel of foreign origin qualify for "duty free" control by Customs under the Warehouse Entry/Withdrawal for Export procedures? (2) If a facility is considered an "exit" point for bonded 46a merchandise, would it also qualify as an "exit" point for bonded fuel? 3. Since the duty on foreign sourced fuel is only .0125 cents per gallon, the real savings would be the exemption from federal and state excise taxes. Can copies of fuel warehouse entries be given to the U.S. Internal Revenue Service for enforcement purposes? What would be the restrictions if a similar request is made by the State of Michigan? (4) Are their any legal determinations or directives covering the dispensing of bonded fuel at a border location? Does fuel qualify as "personal use quantities for consumption outside the United States?" Should sales be subject to other restrictions? LAW AND ANALYSIS: Duty-free sales enterprises are provided for in 19 US.C. 1555(b). This provision was enacted by section 1908, title I, Omnibus Trade and Competitiveness Act of 1988 (Public Law 100- 418; 102 Stat. 1315). Under this provision: (1) Duty-free sales enterprises may sell and deliver for export from the customs territory duty-free merchandise in accordance with this subsection and such regulations as the Secretary may prescribe to carry out this subsection. 47a (3) Each duty-free sales enterprise— (A) shall establish procedures to provide reasonable assurance that duty-free merchandise sold by the enterprise will be exported from the customs territory; (D) shall not be required to mark or otherwise place a distinguishing identifier on individual items of merchandise to indicate that the items were sold by a duty-free sales enterprise, unless the Secretary finds a pattern in which such items are being brought back into the customs. tterritory without declaration; (7) The Secretary shall by regulation establish a separate class of bonded warehouses for duty-free sales enterprises. Regulations issued to carry out this paragraph shall take into account the unique characteristics of the different types of duty-free sales enterprises. Before enactment of this provision in 1988, duty-free stores were administered by Customs directives, rather than through any specific legislation or regulations (see Treasury Decision 92-81, published in the Federal Register on August 20, 1992 (57 F.R. 37692), and Duty Free International, Inc., Ammex Warehouse Co., Inc., and Ammex Tax & Duty Free Shops, Inc., v. United States, CIT Slip Op. 93-246, printed at 28 Cust. Bull. & Dec. 3, January 19, 1994, p. 36). In its administration of duty-free stores before enactment of the 1988 legislation, Customs addressed the issue under consideration. In a ruling letter dated 48a October 30, 1972 (File: DB 711.2 LO 200396), the then Assistant Commissioner of Customs, Office of Regulations, held in regard to the proposed handling of gasoline and diesel products in duty-free stores that: We do not believe that the activities of "duty-free stores" can be extended to unidentifiable fungibles sold on a retail basis without seriously impairing our control over the operations of these stores and the merchandise sold by them. In this respect it should be noted that merchandise purchased from a duty-free store when returned to the United States, must be declared for the purpose of collecting the duty and internal-revenue taxes. Customs would have no practical means of enforcing this requirement against any of the automobiles returning to the United States from Canada with "unidentifiable" gasoline in their tanks. The 1988 legislation does not directly address the issue under consideration. We have researched the legislative history to the legislation. The only such history we have found which may indicate an intent in this regard is found in the Congressional Record (July 15, 1987, p. S 9952, remarks of Senator Bentsen), where it was stated: Section 921 [of a predecessor to the enacted legislation] is not intended to change the way duty-free stores currently operate, but rather to codify current practice by providing a regulatory framework for continued operation of duty-free stores in the future. As noted above, at the time this statement was made and at the time of passage of the 1988 legislation, the current practice was not to allow unidentifiable 49a fungibles, such as gasoline and diesel products for use in automobiles, to be sold on a retail basis by duty-free stores. Thus, the only legislative history we have been able to find which may be applicable to this issue in- dicates that there was no intent, at least by the Senator making these remarks, to change the then current practice. Current practice, as shown by the quoted ruling, was not to allow uniden- tifiable fungibles, such as gasoline and diesel products for use in automobiles, to be sold on a retail basis by duty-free stores. Although the 1988 legislation does not directly address the issue under consideration, the statute does contain a provision indicating that "unidentifiable fungibles' were not intended to be allowed to be-sold in duty-free stores. Under 19 U.S.C. 1555(b)(3)(D), a duty-free enterprise shall not be required to "mark or otherwise place a distinguishing identifier on individual items of merchandise" to indicate that the items were sold by a duty-free sales enterprise, unless the Secretary finds a pattern in which such items are being brought back into the Customs territory without declaration. This caveat (i.e., permitting the placement of a mark or other distinguishing identifier on individual items of merchandise in the stated circumstance) was added in Conference (see H. Conf. Rep. No. 100- 576, p. 769 (100th Cong., 2d Sess., 1988), printed at 1988 U.S.C.C.A.N. 1547, 1801-1803). Clearly, inclusion of this caveat indicates an intent that the merchandise which could be sold in a duty-free store would be "individual items of merchandise" which could be marked or otherwise identified. "Unidentifiable fungibles", such as 50a gasoline and diesel products for use in automobiles, are not such "individual items". We have also reviewed the Customs Regulations (see 19 CFR 19.35 et seq.) issued under 19 U.S.C. 1555(b) and the regulatory history for those regulations (see Federal Register of May 17, 1991 (56 F.R. 22833), August 20, 1992 (57 F.R. 37692), October 16, 1992 (57 F.R. 47409), and May 20, 1993 (58 F.R. 29349). Nowhere in these materials is there any indication of an intent to permit the sale by duty-free stores of the merchandise under consideration. We note that the caveat discussed above (i.e., relating to marking or otherwise identifying individual items of merchandise in the described circumstance) is specifically provided for in the Customs Regulations (19 CFR 19.36(d)). In its January 24, 1994, letter, the operator contends that the gasoline and diesel fuel could be controlled "just like other bonded merchandise from this facility" and that "dispensing of petroleum products from the duty free plaza would be similar to the exi[s]ting programs for air carriers at various international airports." As demonstrated above, the gasoline and diesel fuel could not be controlled like other bonded merchandise sold at duty-free stores (i.e., because gasoline and diesel fuel are "unidentifiable fungibles" not subject to marking or other identification as provided for in the statute and regulations). Further, the proposal is not similar to existing programs for air carriers. We assume that the program to which the operator refers is that authorized in 19 U.S.C. 1309 and the Customs Regulations issued thereunder (19 CFR 10.59 - 10.65). Note that these regulations specifically provide for fuel to be used as supplies for vessels (and 5la aircraft (19 CFR 10.59(d))) (ie., see 19 CFR 10.62). Note also that the trade in which these vessels and aircraft may be engaged is carefully circumscribed and that there is a statutory and regulatory structure under which Customs controls the movements of vessels and aircraft departing from, arriving at, and moving between points in the United States (see 19 CFR Parts 4 and 122). Based on the foregoing, we conclude that duty-free gasoline and diesel fuel for automobiles may not be sold at a duty-free store, as described in your memorandum and the materials forwarded with your memorandum. In light of this conclusion, the other issues which you raised are made moot and need not be addressed. HOLDING: Duty-free gasoline and diesel fuel for automobiles may not be sold, as described in the FACTS portion of this ruling, at a duty-free store provided for in 19 U.S.C. 1555(b). EFFECT ON OTHER RULINGS: Ruling letter dated October 30, 1972 (File: DB 711.2 L 200396), FOLLOWED. The Office of Regulations and Rulings will take steps to make this decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Lexis, Freedom of Information Act and other public access channels 60 days from the date of this decision. 52a Sincerely, John Durant, Director Commercial Rulings Division 53a HQ 227385 February 12, 1998 WAR-5 RR:CR:DR 227385 CB/WGR CATEGORY: Warehouse David Serko, Esq. Serko & Simon One World Trade Center Suite 3371 New York, NY 10048 RE: Request for Reconsideration of HQ 225287; Duty- Free Stores; Sale of Gasoline and Diesel Fuel; 19 U.S.C. 1555(b); 19 CFR 19.35 - 19.39; Pub. L. 104-295; 29 Miscellaneous Trade and Technical Corrections Act of 1996 Dear Mr. Serko: This is in response to your letters of September 8, 1995, April 19, 1996, and July 22, 1997, wherein you requested our reconsideration of HQ 225287, issued June 27, 1994. This internal advice concerned a proposal to sell "duty- free" gasoline and diesel fuel at a duty-free store in Detroit, Michigan. We concluded that such an operation did not fall within the scope of 19 U.S.C. 1555(b). We have considered the additional arguments you have raised and our decision follows. FACTS: You state that your client in this matter has been 54a granted approval by Customs to operate a "sterile" duty-free store at the Ambassador Bridge in Detroit, Michigan. In HQ 225287, the duty-free store was described as having been modified by "adding fencing, electronic gates, and constructing a private road leading directly from their sterile compound to the toll booths on the bridge plaza." According to the FACTS in HQ 225287, when the District Director of Customs physically inspected the facility, he noted a gasoline/diesel station within the sterile area. The District Director, in a letter of December 23, 1994, tentatively approved the request for permission to operate the facility as a sterile shop with "live' products, but excluded any bonded fuel operations. In response to a request by your client that the District Director reconsider his position on the bonded petroleum operation and a follow-up letter dated January 24, 1994, formally requesting approval of a bonded petroleum product operation at its duty-free store, the District Director requested internal advice from this office. This office issued a ruling on the matter on June 27, 1994 (HQ 225287). In that ruling we reviewed the applicable law and regulations, noting that neither directly addressed the issue under consideration. We noted that before passage of the legislation involved (section 1908, title I, Omnibus Trade and Competitiveness Act of 1988 (Pub. L. No. 100-418; 102 Stat. 1315; codified as 19 U.S.C. 1555(b)), Customs had issued a ruling in regard to the proposed handling of gasoline and diesel products in duty-free stores. We quoted from that ruling (ruling letter 200396, October 30, 1972) as follows: 5ba We do not believe that the activities of "duty-free stores" can be extended to unidentifiable fungibles sold on a retail basis without seriously impairing our control over the operations of these stores and the merchandise sold by them. In this respect it should be noted that merchandise purchased from a duty-free store when returned to the United States, must be declared for the purpose of collecting the duty and internal-revenue taxes. Customs would have no practical means of enforcing this requirement against any of the automobiles returning to the United States from Canada with "unidentifiable" gasoline in their tanks. On the basis of ruling 200396 and the provision in 19 US.C. 1555(b)(3)(D) (under which a duty-free enterprise is not required to “mark or otherwise place a distinguishing identifier on individual items of merchandise" to indicate that the items were sold by a duty-free sales enterprise unless the Secretary finds a pattern in which such items are being brought back into the Customs territory without declaration), we | concluded that "the gasoline and diesel fuel could not be controlled like other bonded merchandise sold at duty- free stores (i.e., because gasoline and diesel fuel are unidentifiable fungibles' not subject to marking or other identification as provided for in the statute and regulations).". We ruled, in HQ 225287, that: Duty-free gasoline and diesel fuel for automobiles may not be sold, as described in the FACTS portion of [the] ruling, at a duty-free store provided for in 19 U.S.C. 1555(b). Ee 56a In your letter of September 8, 1995, you requested that Customs reconsider HQ 225287, arguing that Customs was not "fully versed in the facts and briefed on the law and its legislative history" when the ruling was issued. At your request, you and other representatives of your client met with representatives of this office about this matter. In addition, you and other representatives have submitted additional materials in this regard. In your April 19, 1996, letter, you noted that the District Director's December 23, 1993, letter, in which he found that the facility "has fulfilled the requirements necessary to qualify as an exit point as defined in 19 CFR 19.35(d)." You provide a map of the bridge, duty- free store, and connecting roadways and state that "[iJn fact, patrons of the store have no practical alternative except to cross the bridge into Canada." You refer to security measures (..€., the addition of manned toll booths at the entrances leading to the duty-free store) of which this office was not aware at the time of, and could not consider, in HQ 225287. In that letter, you also described measures which would help ensure that gasoline or diesel fuel sold by the duty- free store for automobiles would be exported and practical means by which Customs could enforce the provisions for the dutiability of such gasoline or diesel fuel which is brought back into the Customs territory. You state that, among other things, cash register receipts signed by customers acknowledge that the sales are "For Export Only." Additionally, you client ". . ~~ has a computer system which can be used in cooperation with Customs for the tracking of fuel sales." You state that "...a single Customs license plate query can automatically determine if the vehicle received 57a gasoline at the . . . facility prior to entering Canada, in addition to Customs' other purposes for the query." ISSUES: 1. May duty-free gasoline and diesel fuel for automobiles be sold, as described in the FACTS portion of this ruling, at a duty-free store provided for in 19 U.S.C. 1555(b)? 2 Does the amendment of the personal exemption provision of the tariff laws demonstrate a Congressional intent to overturn ruling letter HR 925287 with respect to duty-free shops? LAW AND ANALYSIS: Issue 1: Duty-free sales enterprises are provided for in 19 US.C. 1555(p). This provision was enacted by section 1908, title I, Omnibus Trade and Competitiveness Act of 1988 (Pub. L. No. 100-418; 102 Stat. 1315). Under this provision: (1) Duty-free sales enterprises may sell and deliver for export from the customs territory duty-free merchandise in accordance with this subsection and such regulations as the Secretary may prescribe to carry out this subsection. (3) Each duty-free sales enterprise— ———= 58a (A) shall establish procedures to provide reasonable assurance that duty-free merchandise sold by the enterprise will be exported from the customs territory; (D) shall not be required to mark or otherwise place a distinguishing identifier on individual items of merchandise to indicate that the items were sold by a duty-free sales enterprise, unless the Secretary finds a pattern in which such items are being brought back into the customs territory without declaration; (7) The Secretary shall be regulation establish a separate class of bonded warehouses for duty-free sales enterprises. Regulations issued to carry out this paragraph shall take into account the unique characteristics of the different types of duty-free sales enterprises. Before enactment of this provision in 1988, duty-free stores were administered by Customs directives, rather than through any specific legislation or regulations (see Treasury Decision 92-81, published in the Federal Register on August 20, 1992 (97 FR. 37692), and Duty Free International, Inc., Ammex Warehouse Co., Inc. , and Ammex Tax & Duty Free Shops, Inc. v. United States, 17 CIT 1425 (1993)). It is your position that when Congress enacted the Omnibus Trade and Competitiveness Act, supra, it intended to substantially change the manner in which duty-free shops could be operated. Consequently, ruling letter 200396, relied upon in HQ 225287, was overridden by Congress in 1988. You argue that the 1972 ruling and the positions taken therein were never 59a mentioned in any of the legislative history which led up to the passage of the 1988 law which is the basis for the current statutory framework. Moreover, there is no evidence that Congress was aware of this ruling. Thus, you conclude that Congress intended to abandon any practice it did not specificaily adopt. It is also your position that the legislative history relied upon in HQ 225287 was taken out of context. As stated in HQ 225287, the 1988 legislation does not directly address the issue under consideration. Although we agree with you that Congressional intent, in enacting 19 U.S.C. 1555(b), was to legislatively direct Customs in its administration of duty-free shops, it is also true that Congress left it up to the Secretary of the Treasury (which in turn has delegated this authority to Customs) to issue regulations implementing the statutory provision. More importantly, it is provided that the regulations shall take into account the unique characteristics of the different types of duty-free stores. Thus, although Congress provided the broad statutory framework, it was left up to the administering agency to fill-in the details to carry out Congressional intent. Regarding the legislative history relied upon in HQ 225287, we disagree with your interpretation. It is your position that Senator Bentsen's comments is not supportive of Customs position. In your letter you quote certain remarks made by Senator Bentsen (however a cite was not provided) and conclude that the Senator did not see the then proposed legislation as the means of restraining the activity of duty-free shops. However, the quote you have used is not the one referred to in HQ 225287. The statement made by Pa J + 2 ————————————— 60a Senator Bentsen and relied upon by Customs reads as follows: _ Mr. President, section 921 of the bill would introduce for the first time a comprehensive framework for the regulation and operation of duty-free sales stores.... Section 921 is not intended to change the way duty-free stores currently operate, but rather to codify current practice by providing a regulatory framework for continued operation of duty-free stores in the future. Congressional Record, (July 15, 1987, p. S 9952, remarks of Senator Bentsen). Thus, it is clear that, contrary to your assertion that Senator Bentsen was only referring to border stores in the State of Texas, the quoted text provides clear Congressional intent to codify procedures which had been implemented through Customs directives and circulars. Senator Bentsen's remark is the only indication contained in the legislative history which addresses the point raised; that is, whether the purpose of the legislation was to codify or change the existing Customs practice. The statement is consistent with the purpose of providing a statutory basis for a procedure that was created by Customs administrative practice. It is your position that with respect to the applicability of ruling letter 200396 after passage of the 1988 act, that Congress intended to abandon this practice because it was not specifically adopted. We reach the opposite conclusion, i.e., the fact that Congress did not 6la specifically reject Customs policy regarding the sale of gasoline by [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386001_0944%3A1. Public record. Not legal advice.