Court Opinion

ID: 3066229
Source: CourtListenerOpinion
Date Created: 2015-10-14 23:48:11.201406+00
Date Added: 2024-06-11T07:38:22.100398
License: Public Domain

United States Court of Appeals

                     FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 7, 1997                                 Decided February 24, 1998 

                                 No. 96-5150

                           Interport Incorporated, 

                                  Appellant

                                      v.

                               John W. Magaw, 

           Director, Bureau of Alcohol, Tobacco, and Firearms, and 

              George Weise, Commissioner, U.S. Customs Service, 

                                  Appellees

                Appeal from the United States District Court 

                        for the District of Columbia 

                               (No. 95cv01175)

     Richard E. Gardiner argued the cause and filed the briefs 
for appellant.

     Rudolph Contreras, Assistant U.S. Attorney, argued the 
cause for appellees, with whom Mary Lou Leary, U.S. Attor-

ney, and R. Craig Lawrence, Assistant U.S. Attorney, were 
on the brief.

     Before:  Wald, Ginsburg, and Henderson, Circuit Judges.

     Opinion for the Court filed by Circuit Judge Ginsburg.

     Ginsburg, Circuit Judge:  Interport, Inc. challenges a rule 
of the Bureau of Alcohol, Tobacco, and Firearms prohibiting 
the importation of machine guns without a government pur-
chase order.  Interport also challenges as unlawful, and 
alternatively as a denial of due process, the seizure of its 
firearms by the Customs Service.  The district court upheld 
the BATF rule as a valid interpretive rule but failed to 
address the validity of the seizure.  We affirm the district 
court's holding with regard to the rule but hold that the 
Customs Service acted unlawfully by seizing Interport's guns 
without adhering to the procedure provided by statute.

                                I. Background

     The importation of a firearm into the United States is 
generally illegal unless the firearm is intended for govern-
ment use (generally for law enforcement), is a sales sample, 
or meets other requirements not relevant here.  See 26 
U.S.C. s 5844;  27 C.F.R. s 179.111.  A would-be importer 
must file an application, including BATF "Form 6," which 
requires "a detailed explanation of why the importation of the 
firearm falls within" one of the permitted categories.  27 
C.F.R. s 179.111.  The BATF has a long-standing practice 
that an application based upon government use of the firearm 
will not be approved unless the applicant submits a govern-
ment purchase order along with Form 6.

     An importer may bring a firearm (or any other good) into 
the territory of the United States without being deemed to 
have "imported" it if the importer stores the firearm in a 
Foreign Trade Zone (FTZ).  See 19 U.S.C. ss 81b-81c.  Cus-
toms requires that any firearm in an FTZ be kept in a high-
security area.

     The Customs Service itself may take and store "unentered 
merchandise" at the request of the carrier or consignee.  See 
id. s 1490(b);  19 C.F.R. s 127.1(c).  Any such merchandise 
that remains in storage "for 6 months from the date of 
importation thereof, without all estimated taxes, duties, fees, 
interest, storage, or other charges thereon having been paid, 
[is] considered unclaimed and abandoned."  19 U.S.C. 
s 1491(a).  The Customs Service may sell or destroy un-
claimed or abandoned merchandise.

     Customs may also take possession of any goods that do not 
have a proper import license;  the agency must then call upon 
the U.S. Attorney "for the institution of the proper proceed-
ings for the condemnation of such property."  19 U.S.C. 
s 1610;  see also 19 U.S.C. s 1595a.  If after those proceed-
ings the Government is awarded title to the unlicensed goods, 
then it may dispose of the goods;  firearms may be destroyed 
or given to a government unit.  See 26 U.S.C. s 5872(b).

     In June 1994 Interport stored several hundred machine 
guns in the high-security storage area of FTZ No. 3 in San 
Francisco.  That same month the Customs Service told the 
operator of FTZ No. 3 that its high-security area did not 
meet standards.  Rather than upgrade the facility, the opera-
tor decided to close the high-security area.

     In late September, after trying without success to find 
another FTZ in which to store the machine guns, Interport 
applied for a permit to import them.  In January 1995 the 
BATF denied Interport's application on the ground that 
"stockpiling" of imported weapons was not permitted except 
in a Customs bonded warehouse or an FTZ.  Interport 
reapplied and the BATF in May again denied the application, 
this time explaining that the BATF "requires that a purchase 
order from the purchaser be submitted with the Form 6 
application."

     Meanwhile, Customs twice by letter notified Interport that 
any guns remaining in the FTZ after October 14, 1994 would 
be taken into the custody of the Government, and that after 
six months they would be transferred to Fort Benning, 
Georgia and destroyed.  The first letter did not cite any 
authority for the proposed action;  the second referred only to 

19 U.S.C. s 1490 and 19 C.F.R. s 127.1, which describe the 
authority of the Customs Service to keep merchandise in 
storage at the request of the carrier or the consignee.

     In October 1994 Customs moved the guns to its own 
storage facility in San Francisco.  In June 1995, after again 
notifying Interport of its intent to do so, Customs sent the 
guns to Fort Benning and informed Interport that it consid-
ered the guns to have been abandoned by operation of law--
presumably, s 1491(a)--as of April 1995.  Interport objected 
and Customs in a second letter confirmed its plan to proceed 
with immediate destruction of the guns.  Interport then sued, 
arguing that (1) the purchase-order requirement of the BATF 
is (a) an invalid legislative rule because it was not promulgat-
ed pursuant to notice-and-comment procedures or, (b) if an 
interpretive rule, invalid because it is (i) unreasonable and (ii) 
violates the Tenth Amendment to the Constitution of the 
United States;  and (2) the procedures by which the Customs 
Service took possession of its guns (a) were without statutory 
authority and (b) denied Interport due process of law in 
violation of the Fifth Amendment to the Constitution of the 
United States.

     On cross motions for summary judgment the district court 
ruled in favor of the Government.  See Interport, Inc. v. 
Magaw, 923 F. Supp. 242 (D.D.C. 1996).  The court held that 
the purchase order requirement is an interpretive rule, valid 
because it is a "reasonable way to implement the statute."  
Id. at 245.  The court also held that the Government's order 
to destroy the guns was "too severe a remedy" because the 
"plaintiff had been put in a difficult position by virtue of the 
fact that Customs' determination that FTZ # 3 did not meet 
standards for secure storage came after plaintiff already had 
shipped its weapons to FTZ # 3."  Consequently, the court 
ordered the Government not to destroy the machine guns and 
helped the parties reach an agreement about storing them 
"pending appropriate disposition."  Interport appealed.

                                 II. Analysis

     We hold that the purchase-order requirement is an inter-
pretive rule and that as such the rule is reasonable and 

therefore entitled to our deference.  We also hold that the 
Customs Service acted unlawfully when it took possession of 
the machine guns under the purported authority of an inap-
plicable statute.  We reject without need of further comment 
Interport's argument that the purchase-order rule violates 
the tenth amendment in that it interferes with the ability of 
the States to purchase imported machine guns;  the tenth 
amendment protects the States from the federal Government 
acting in derogation of their rights as States, not from 
interference with their rights as consumers like any others.  
See Hodel v. Virginia Surface Min. & Reclam. Ass'n, 452
U.S. 264, 287-88 (1981).

A.   Is the purchase-order requirement an interpretive 
     rule?

     The Government argues that the requirement of a govern-
ment purchase order for the importation of a firearm for 
government use is an interpretive rule and hence exempt 
from the notice-and-comment requirements applicable to leg-
islative rules under the Administrative Procedure Act.  See 5 
U.S.C. s 553(b)(A), (d)(2).  The distinction between an inter-
pretive rule and a legislative rule is fuzzy at best.  See 
American Hospital Assoc. v. Bowen, 834 F.2d 1037, 1045-46 
(D.C. Cir. 1987).  In one familiar formulation, the distinction 
is that an interpretive rule "simply states what the adminis-
trative agency thinks the statute means, and only reminds 
affected parties of existing duties," whereas a legislative rule 
"intends to create new law, rights or duties."  General Mo-
tors Corp. v. Ruckelshaus, 742 F.2d 1561, 1565 (D.C. Cir. 
1984) (en banc).  As a moment's reflection will show, this 
formulation of the distinction is much more easily stated than 
applied.  See Robert A. Anthony, "Interpretive" Rules, "Leg-
islative" Rules and "Spurious" Rules:  Lifting the Smog, 8 
Admin.  L.J. Am. U. 1, n.10 & nn.13-14 (1994) (citing cases 
bemoaning difficulty of applying distinction).

     In this case, however, it is fairly clear that the purchase 
order requirement is an interpretive rule under the standards 
of General Motors.  The statute provides in relevant part 
that an importer must

     establish[ ] ... under regulations as may be prescribed 
     by the Secretary [of the Treasury] ... that the firearm 
     to be imported or brought in is (1) being imported ... 
     for the use of [a government].

26 U.S.C. s 5844.  The implementing regulation, which was 
promulgated by the BATF after notice and comment, pro-
vides in turn that the importer has the burden of "estab-
lish[ing] to the satisfaction of the Director" that the firearm 
will be used in accordance with the statute.  27 C.F.R. 
s 179.111(a).  Finally, the challenged rule--stating that a 
government purchase order is the only way to "satisf[y] the 
Director" on that score--interprets the government-use re-
striction as a requirement that the importer have a present 
government purchaser rather than merely an intent to sell 
only to a government user.

     The purchase-order rule neither imposes a new require-
ment upon nor determines the rights and obligations of the 
importer;  rather, it explains more specifically what is meant 
in the general rule which, as we said, was the subject of 
notice-and-comment rulemaking.  The purchase order re-
quirement is therefore an interpretive rule and not invalid for 
want of notice-and-comment pursuant to the APA.

B.   Is the purchase-order rule reasonable?

     We defer to an agency's reasonable interpretation of the 
laws and regulations it administers none the less because that 
interpretation appears in an interpretive rather than a legisla-
tive rule.  See, e.g., Wagner Seed Co. v. Bush, 946 F.2d 918, 
922 (D.C. Cir. 1991).1  Because the purchase-order require-
ment is an eminently reasonable interpretation of the regula-
tion interpreting 26 U.S.C. s 5844, we uphold the rule.

__________
     1  But cf. Health Insurance Ass'n of America v. Shalala, 23
F.3d 412, 424 n.8 (D.C. Cir. 1994), which in a dictum suggests an 
inconsistency between Wagner Seed and National Latino Media 
Coalition v. FCC, 816 F.2d 785, 788 (D.C. Cir. 1987).  NLMC itself 
repeats in a dictum the statement of a pre-Chevron case that courts 
"are always free to choose" not to defer to an interpretive rule.

     The statutory scheme is clearly designed narrowly to re-
strict the importation of machine guns to authorized users, 
including governments.  The purchase-order requirement 
makes clear to the importer that it must be importing for the 
use of a specific government buyer, not merely in the expec-
tation of later being able to find a government buyer.  This 
requirement is certainly consistent with the statute.  Indeed, 
why would the Congress have separately allowed for the 
importation of sales samples if it had believed that the 
statutory scheme would permit an importer to import guns 
without a buyer already lined up and thus to use one or more 
of the guns as samples in its sale effort?  See 26 U.S.C. 
s 5844(3).  In addition, the rule is designed to minimize the 
burden placed upon both importers and buyers;  in particular, 
we are told that a "purchase order" is defined broadly enough 
to cover any written expression of present intent on the part 
of a government to purchase a firearm including, for example, 
a letter.

     Nonetheless, Interport argues that by preventing it from 
importing guns into the United States until it has found a 
government purchaser, the requirement of a purchase order 
increases both the delay and the cost facing a government 
agency that wants to buy machine guns, without providing 
any offsetting increase in safety.  Because the gun may 
lawfully be brought into an FTZ within the territory of the 
United States, Interport argues, it would be no more of a 
danger to the public if Interport could store the gun in its 
own high-security storage facility.  Even if Interport is cor-
rect on that score, however, it matters not for the resolution 
of the present issue.  The measure of an interpretive rule is 
its fidelity to the congressional intent expressed in the statute 
it interprets, not whether the underlying statutory scheme is 
economically efficient.

C.   Did Customs act pursuant to lawful authority in 
     seizing the machine guns?

     Interport argues that Customs acted unlawfully when it 
seized Interport's machine guns.  We agree.  The statute 
upon which Customs relied, 19 U.S.C. s 1490, does not in fact 

provide it with the authority claimed.  That section permits 
Customs to take possession of merchandise only at the re-
quest of the carrier or the consignee thereof.  See s 1490(b).  
Customs acknowledges that no such request was made in this 
case.  The statute also provides a process under which mer-
chandise that cannot enter the United States is to be trans-
ferred to a bonded warehouse, after notification of the ware-
house by the carrier.  See s 1490(a).  But here there is no 
evidence that the facility at which the machine guns were 
stored, if it was a bonded warehouse, received notification of 
any kind.  Customs argues nonetheless that either s 1490(a) 
or s 1490(b) somehow permitted it to take custody of the 
guns because "the machineguns could not remain where they 
were without endangering the public" and the prior version of 
the statute had authorized Customs to "take custody" of 
items without prior notification by the carrier.  Under s 1490 
as amended, however, Customs clearly does not have the 
authority to take custody of the guns.2  It follows that 
Customs did not succeed to ownership of the goods under 
s 1491.

     Another provision of title 19, section 1595a, does provide 
Customs with the authority to seize merchandise "attempted 
to be introduced into the United States" without a required 
import license.  As Interport points out, however, a seizure 
under s 1595a must be accomplished pursuant to the proce-
dures set forth in ss 1600-1619, including notice to the U.S. 
Attorney to initiate condemnation proceedings.  In taking 
possession of Interport's machine guns, Customs neither in-

__________
     2  Under the former version of s 1490 if merchandise could not 
enter the United States a Customs official could "take [it] into his 
custody and send it to a bonded warehouse or public store."  When 
the Congress amended s 1490 in 1993 the requirement that Cus-
toms officials take merchandise into "custody" had become a "legal 
fiction" inasmuch as third parties generally effected the transfer 
without the intervention of the Customs Service.  H.R. Rep. No. 
103-361(I), at 148 (1993), reprinted in 1993 U.S.C.C.A.N. 2552, 
2698.  In the course of eliminating the fiction, the Congress also 
eliminated whatever authority the Customs Service had under 
s 1490 to move goods on its own initiative.

voked this provision nor complied with its requirements.  
Indeed, Customs continues to assert that s 1595a does not 
even apply to the current situation because Interport did not 
attempt to introduce the guns without the required permit;  
rather, it was Customs that initiated the controversy by 
removing them from the FTZ and thereby subjecting them to 
the import laws.

     We do not decide now whether the Customs Service would 
have had authority to seize the machine guns under s 1595a 
(or indeed whether some other statute would have permitted 
Customs to take custody of the weapons).  The Service has 
relied solely upon s 1490 as authority for taking custody of 
the guns, and we hold that statute inapplicable in this case.  
Customs must now either move immediately to perfect its 
present possession of the guns by some other means or do its 
best to restore the status quo ante by returning the guns to 
Interport in an appropriately secure FTZ or bonded ware-
house.

     Because we conclude that Customs did not have statutory 
authority for its actions, we need not reach Interport's due 
process claim.

                               III. Conclusion

     The requirement that an importer of firearms have a 
government purchase order is a valid and reasonable inter-
pretive rule.  Therefore the BATF properly denied Interport 
permission to import its machine guns.  The Customs Service 
overstepped its authority, however, when it purported to take 
possession of the machine guns pursuant to 19 U.S.C. s 1490.  
The Customs Service must therefore either initiate at once 
lawful proceedings to perfect its custody of the machine guns 
or return them forthwith to the custody of Interport.

									So ordered.