Jurisdiction Argument Goes Up In Smoke

U.S. Customs and Border Protection is the agency responsible for the collection of federal excise taxes. Recently, a question has come up regarding which court is the proper venue for an action to collect these taxes. Turns out, that is not as clear as you might have thought. United States v. Maverick Marketing, LLC Et Al., tries to sort that out.

Maverick Marketing and Good Time USA were involved in an agreement to import tobacco. Under 26 USC 5701, importers of tobacco are liable for federal excise taxes. The United States has alleged that Maverick and Good Times made material false statements and/or omissions when entering tobacco products into the United States and, as a result, deprived the government of excise taxes. A previous decision (Slip Op. 18-16) of the Court of International Trade denied defendants' motion to dismiss for failure to state a claim.

The jurisdiction problem arises from the language Congress used in the statute defining the jurisdiction of the Court of International Trade.  Keep in mind that the Court of International Trade, like all federal courts, can only act within the jurisdiction granted to it by Congress. For cases the United States brings to collect a penalty assessed by Customs, the relevant statute is 28 USC 1582, which says:

The Court of International Trade shall have exclusive jurisdiction of any civil action which arises out of an import transaction and which is commenced by the United States—
(1) to recover a civil penalty under section 592, 593A, 641(b)(6), 641(d)(2)(A), 704(i)(2), or 734(i)(2) of the Tariff Act of 1930; 
(2) to recover upon a bond relating to the importation of merchandise required by the laws of the United States or by the Secretary of the Treasury; or 
(3) to recover customs duties.
What's missing from that?

This case is about about recovering federal excise taxes, not customs duties. Federal excise taxes are not mentioned in the statute. Furthermore, this part of the case is not about recovering a penalty; it is only about the taxes. To the extent that the surety was also a defendant, the Court does have jurisdiction under subsection (2) to recover on the bond.

The Court of International Trade was able to see its way through this and find it has jurisdiction. The key is that Section 1582 gives the Court "exclusive jurisdiction of any civil action which arises out of an import transaction and which is commenced by the United State . . . to recover a civil penalty under" section 1592. Section 1592(d) permits the United States to seek the recovery of any duties, taxes, or fees it was deprived of as a result of the false statement or omission. Furthermore, 1592(d) states that Customs may recover lost duties, taxes, and fees even if no penalty is assessed. Consequently, when subsection (1) gives the CIT jurisdiction over a claim to recover a civil penalty under section 1592, that necessarily includes the recover of unpaid taxes and fees, despite subsection (3) being silent as to taxes and fees.

The Court also held that the federal excise taxes are legally equivalent to customs duties for purposes of jurisdiction. Boiling it down: The taxes on tobacco products are imposed on imported merchandise, become due at the time of entry, and are collected and administered by Customs. The taxes are also based on the value of the imported merchandise and reported on the entry documents. All in all, they are handled as if they are duties. This finding is consistent with a federal appeals court case from 1951 that was referenced in the relevant legislative history to 28 USC 1582. It also comports with the ancient legal principal "Si is vultus amo a anatis, natat ut anates, et quacks quasi anas est anatem tum verisimile."



On those two grounds, the Court found it had jurisdiction over is action brought by the government to recover federal excise taxes.


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