1 Slip Op. 02-20 UNITED STATES COURT OF INTERNATIONAL TRADE

: AMMEX, INC., : : Plaintiff, : : Before: WALLACH, Judge v. : Court No.: 99-01-00013 : : UNITED STATES OF AMERICA, : : Defend ant. :

: : [Order to Show Cause; Denied.] Decided: February 22, 2002

St ept oe & Jo hns on LLP ( Herbert C. Shelley , Alice A. Kipel ) , for Plaintiff. Robert D. McCallum, Jr. , Assistan t Attorne y G eneral ; Joseph I. Liebman , Attorney in Charg e, International Trade

Field Office, Commercial L itigation Branch, Civil Division, United States Department of Justice ( Amy M. Rubin), for Def

endant. WALLACH, Judge.

OPINION I PRELIMINARY STATEMENT Plaintiff, Ammex, Inc. (“Ammex”), moves this court for an Orde r to Show Cause Why Defend ant Should N ot be Held

in Contempt , pursuan

t to Rules 7( e) and 63 of the Rule s of this2

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 Aug ust 25, 2000. Ammex, Inc.’s Motion for Order to Show Cause Why De fendant Should Not be Held in Contempt (“Ammex’s Motion”) at 1. Familiarity with the c ourt’s August 25, 2000 order and decision in Ammex, Inc. v. United States , 116 F. Supp. 2d 1269 (CIT 2000) (“ Amme x I ”), is presumed.

II BACKGROUND Ammex operates a duty-f ree store at the Ambassador Bridg e between Detroit, Michigan and Windsor, Canada . In a letter da ted Januar

y 24 , 1994, Ammex reques ted appr oval to se ll gasoline and diesel fuel on a duty -free basis. Le

tter 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 Defenda

nt Should Not be Held in Contempt (“Ammex’s Memo”)). On February 12, 1998, the United Sta

tes Customs

Service (“Customs ”) rule d that ga soline an d diesel f uel could not be sold on a duty-fre e basis from Ammex’s facility. U.S. Customs Service Hea dquarters Ruling (“HQ”) 227385, February 12, 1998. This ruling reaffirmed a 1994 headqua rters ruling which fo und that a ctivities of duty -free stores should not be

extended t

o cover “ unidentif iable fungibles,” such as gasoline and diesel fuel, when sold on a re tail basis. HQ 225287, June 7, 1994. “[I]n both HQ 227385 and 225287, Customs accepted the requestor’ s assertion that the mercha ndise unde

r conside ration wa s duty-free

but, . . . de

termined that such

mercha ndise cou ld3

not be sold as duty-fre e merchandise from a class 9 bonded war ehouse.” Customs Bulletin and Decisions , Vol. 35, No. 25, June 20, 2001, at 296. In Amme x I , Ammex challenged the above Customs rulings. This court found that “Customs acted unlawfully in prohibiting A mmex from selling duty-fre e gasoline and diesel fuel.” Amme x 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-fre e sale of gasoline and diesel fuel fr om a duty-fre e enterprise.” Id. at 1276. On Septem

ber 5, 20 00, in acc ordance with the c ourt’s de cision, Cus toms issued a letter to Ammex granting its request to expand its “Class 9 duty fr ee warehouse operation to include the gasoline and diesel fuel tanks located at [Ammex’s] facility .” Letter from Ry an 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 L evesque to Ryan of 10/23/00 (Ex. 1 to “Dur

ant Dec laration

” of Def endant’ s Opposition to Plaintif f’s Motion

to Show Cause

Why D efenda

nt Should No t be Held i

n Contempt)

(“Octob er 23 let

ter”). Customs forwarded Ammex’s request to the I nternal Revenue Service (“I RS”). On January 8, 2001, the IRS issued an informational letter stating that sec tion 4081 of the Internal Revenue Code ( the “Tax Code” ) (26 U.S. C. § 4081) i mposes a t

ax on the en

try into the Un

ited State s of any

taxable fuel, including gasoline and diesel fuel for consumption, use, or warehousing. Durant Declaration ¶8. Based on the I

RS letter, Customs det

ermined that it cou

ld not lawf

ully permit Ammex to sell ga soline an

d diesel f uel duty -free . On June 20, 2001, Customs issued a notice pr oposing to4

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 pe riod, Customs advised that it was “revoking a ruling letter per taining to gasoline and diesel fuel from a [sic] class 9 bonded wareho uses and r

evoking any treatme nt previo usly accord ed 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 eff ective on January 21, 2002. Id. Ammex ther

eafter filed its M otion to Show Cause Why

Defend ant Should N ot be Held

in Contempt.

III STANDARD To establ ish that a p arty

is liable f

or civil c ontempt a

plaintiff must prove

three e lements: “(1) that a valid order of the court existed; (2) that the defe ndants had knowledge of the order; and (3) that the defendants disobey ed the order.” Roe v. Operation Rescue , 54 F.3d 133, 137 (3d Cir. 1995). Civil contempt must be proven by clear and convincing evidence, Glaxo, Inc. v. Novopharm, Ltd. , 110 F.3d 1562, 1572(Fed. Ci

r. 1997), and a co

urt cann ot hold a pa

rty in contempt if there is a “fair ground of doubt a s to the wrongfulness of the [party ’s] actions,” Preemption Devices, Inc. v. Minn. Mining & Mfg. Co. , 803 F.2d 1170, 1173 (Fed. Cir. 1986).5 IV ARGUMENTS Ammex argues that Customs’ revocation is “plainly inconsistent with this Court’s Order permitting the sale of duty-free gasoline and diesel fue l from a duty-fr ee sales enterprise.” Ammex’s Me

mo at 3. Ammex reques ts, among other thin

gs, that this cour t issue an order to show cause why

Customs’ revocation is not in contempt of this court’s judgment of August 25, 2000 and d

etermine that sec tion 4081 of

the Tax Code , as it app lies to ent ries into C lass 9 bonded warehouses, is unconstitutional. “The agency

decision challenged in Amme x Iwas based exclusively on a pe rceived ‘unident ifiable f ungible s’ except

ion to the s tatute re lating to bonded wa

rehouse s, partic

ularly Class 9 bonded warehouses, and the holding in Amme x Iwas simply that that decision, as memorialized in HQ 225287 and affirmed in HQ 227385, was contrary to law.” Defendant’s Opposition

to Plaintif

f’s Motion

for an O rder to Show Cause Wh y D efenda

nt Should no t be Held in Contempt (“Defendant’s Opposition”) at 8. The Government ar gues, “Neither the challeng ed ruling letters nor this Court’s holding addressed or involved any other potential basis for prohibiting the duty-fr

ee sale of gasoline and diesel fue l, including whether the fuel which Ammex intended to sell is encompassed by the statutory definition of ‘duty-fr

ee merchandi se.’” Id. Because the issues presently raised by Ammex’s motion “are not r elevant to a determination of whether Customs’ revocation decision violates the Amme x Idecision,” id. at 17, the Government argues that this court should decline to consider the m.6 V ANALYSIS A Jurisdiction to Entertain Present Challenge The United States Court of International Tra de, like all Federal courts established under Article II I of the Constitution, is a court of limited jurisdiction. United Sta tes 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 Amme x Ifell under 28 U.S.C. § 1581(i), which provides the court with jurisdiction over “any civil action commenced against the United States . . . that arises o ut of any law of the

United Sta

tes provi ding for

revenue from impor

ts or tonna

ge, tar iffs, duties, fees, or other taxes on the importation of merchandise for rea sons other than the raising of revenue or administration and enforcement with re spect 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 jur isdi ction over t he und erlying pr oceedi ng in t his ca se.” P laint iff’s Memo a t 3 (ci ting United States v. Hanover Ins. Co. , 82 F.3d 1052, 1054 (Fed. Cir. 1996) (“[T]he Court of International Trade

has the inherent power to determine the effe ct of its judgments and issue injunctions to protect against attempts to attack or evade those judg ments.”)). Were Customs’ revocation an attempt to attack or evade Amme x Iand the c ourt’s Au gust 25, 2000 judgment, then no doubt this court could readily exercise jurisdiction over such behavior under its inherent enforcement powe rs and as an extension of its jurisdiction to hear Ammex’s original complaint in Amme x I . However, the issue underly ing Ammex’s Complaint7

in the present motion is distinct from the issue raised in Amme x I . While both issues call upon th e c ou rt to de te rm in e t he va li di ty o f C us to ms ’ r ef us al to al lo w A mm ex to se ll fu el fr om it s d ut yfree store, the stated bases for Customs’ refusa l to allow Ammex’s sales differ in each case. Ammex’s contention that “there can be no dispute that the transaction and matter a t issue in this sec ond action are the same as the first–t

he matter now, as be fore, is

Ammex’s rig

ht to sell gasoline and die sel fuel d uty -free from its du

ty- free sto

re in Det roit, Mich

igan,” Plaintiff ’s Memo at 16, is specious. Ammex states the issue too broadly. The issue in Amme x Iwas not sim ply whether Ammex is enti

tled “to se ll gasol ine and di esel fue l from its d uty -free store in D etroit, Michigan.” Id. Rather, the court was called upon to consider whether the explanation Customs pr ov id ed fo r d en yin g A mm ex ’s re qu es t t o s el l g as ol in e a nd di es el fu el du ty- fr ee wa s a rb it ra ry, capricious, or contrary

to law. The Gove rnment mor

e accur ately states the case thu s: The only iss ue thatthe Court had to decide in [ Amme x I ] was whether the denial of Ammex’s proposal

to sell g asoline a

nd diesel fuel fre e of duty

at its duty

-free st ore i n 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 ac cordance with law. Based on the nat

ure of th e compla

int, the Court

was constrained to consider only that stated b asis fo r t he ch al le ng ed de ci si on an d r ev ie w o nl y th e a ge nc y’s re co rd un de rl yi ng it s decision.” Defendant’s Opposition at 4 (emphasis added). Th is co ur t a cc or di ng ly reviewe d Customs’ s tated re ason for deny ing Ammex’s reque st to sell duty -free fuel, na mely , its rationale tha

t such fue l falls und

er an “u nidentifi able fun

gibles”

ex ce pt io n t o m er ch an di se th at ca n l aw fu ll y be en te re d a nd wi th dr aw n f or ex po rt at io n f

ro m d ut yfree stores. Customs reasoned that, because duty -free merchandise purcha sed in the United States, if reimported, had to be declared and the duties and ta xes paid, the lack of any pr actical8

means of enforcing this requirement with re spect to unidentifiable fuel in gas tanks rendere d the sale of duty-f

ree fuel contrary

to law. In resolving the issue ra

ised in Amme x I , the court stated, “§ 1557(a)(1) is dispositive of Plaintiff ’s claim .” Amme x I , 116 F. Supp. 2d at 1275. “On its face, the plain languag e of § 1557(a) (1) show s Congre ss’ intent that ther e be only two restr ictions on the ty pe of duti able merchandise that may

be stored or withdrawn from a bonded ware house: (1) perishable articles and (2) explosive substances other than firecracke rs.” Id. at 1273. This court determined that diesel fuel and gasoline did not fall within either of these exceptions, and thus it was err or for the government to read into the governing statute “an exception beyond those specifically state d in § 1557(a)(1).” Id. at 1275. “ In vie w of 1557( a)(1)’ s instruct ion that ‘a

ny merchan

dise subje ct to duty ’ may be enter ed and wi thdrawn from a bonded war

ehouse, the cour

t finds tha t Customs violated this provision in promulgating HQ 227385.” Id. Implicit in both parties’ briefings in Amme x Iand the court’s opinion was the presumpt ion that the

gasoline and die sel fuel a t issue qua

lified as “duty -free mercha ndise” 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 cour t did not consider or rule on such an issue. Because of subsequent events, howeve r, the issue has arisen as to whether ga soline and diesel fuel can qualify

as “duty-fr

ee 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-fre e merchandise” under the statutory definition. “[F]or 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 par

t and parcel of Amme x I .”9

Reply of Ammex, I

nc. In Support of its Motion for Order to Show Cause (“ Ammex’s Reply”) at 12. Revelations by Ammex at oral arg ument confirm that the issue now raised was neither part and parcel, nor conclusively determined in Amme x I . Ammex pre viously maintaine d that this court’s decision in Amme x Iforeclosed all issues relevant to Customs’ denial of Ammex’s right to sell gasoline and diesel fuel duty -free, y et Ammex’s October 23, 2000 letter to Customs states the fo llow ing: Subsequent

to the decision by the U.S. Court of I nternational Trade, Ammex has commenced the sale of tax and d

uty free g asoline a

nd diesel fuel, following

U.S. Customs

require ments andproce dures. I

n conjunction with th

is opera tion, Ammex require s 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 A mmex to obtai

n, and use

in unrela ted litig ation, a c ertific ation from Customs tha t excise taxes were not applicable to certain fuel sold by Ammex. However, in addition, because it shows that Ammex itself would not rely on Amme x Ion the exci se tax ques tion, the le tter now s erves to forecl ose Ammex’ s res judic ata and contempt arguments. Having determined that the issue of feder al taxes as applied to gasoline and diesel fuel and the concurrent consideration of whether such application preempts such fuel from qualify ing as “duty-fr

ee merchandise” was neither pa rt nor parcel of Amme x I , Ammex’s Motion cannot be consider ed by the cour t under th e prese

nt proce dural pos ture. Ammex’s Motion a sks the co urt “to interpret § 1555(b)(8)(E) of Title 19–a Customs statute.” Ammex’s Rep ly a t 12-13. T

his constitutes a new matter, one which was not contemplated in Amme x I . It therefore c annot be said that the revocation constitutes an attack on the court’s prior judg ment or order in this case. While the court does possess inherent power to determine the effe ct of its judgments and protect10

against attempts to attack or evade those judg ments, in this case, the issue before the court is not encompassed by

the prior order. Customs did not violate this court’s order in Amme x Iby either dete rmining, based on newly ac quired information, that the fuel Ammex desires to sell can not qualify as “duty-fr

ee merchandise,” and its subsequent revocation of Ammex’s entitlement to sell gasoline a nd diesel fuel from its duty-fre e store, does not violate the decision in Amme x I . Ammex is en titled 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. I

t cannot, as the Government contends, “thwart proper procedure and bootstrap a new grievance onto a dispute tha t has already

been resolved.” Defendant’s Opposition at 20.

B Res Judica

ta Argum ent Ammex also argues that Customs’ “attempt to relitigate the matter of Ammex’s duty -free fuel sales with a previously-available argument is precluded unde r the long-standing doctrine of

res judicata ,” a term “used broadly to refer to concepts of merge r, bar, and direct and collateral estoppel [i.e., issue 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 requireme nt that the issue have playe d an important role in the abstract hierarchy of legal rules controlling the first or11

the second litigation.” 18 Wright, Miller & Cooper, Fede ral Practice and Procedure § 4424 at 226-227 ( 1981); see also Hy man v. Reg enstein , 258 F.2d 502, 510-11, cert. denied, 79 S.Ct. 589, 359 U.S. 913, 3 L.Ed.2d 575 (5 th Cir. 1958)(“[C]ollate ral estop pel by judgmen t is applic able only when it is evident from the plea dings and record that determination of the fa ct in question was necessary

to the final judgment and it was foreseeable that the f act would be of importance in possible future litigation.”). The court finds that the narrow tax issue now raised wa s too far outside the ambit of the Amme x Iprocee dings ei ther to be forese eable or

to play a cruci al role in the final judgment of that case. I ssue preclusion should thus not operate to bar either party from raising this issue in the correct procedural posture

.

VI CONCLUSION For the foregoing r

easons, Ammex’s Motion for Order to Show Cause Why De fendant Should Not be Held in Contempt is denied.

__________________________ Evan J . Wal lach, Judge

Dated: February

22, 2002 New York, New York