The opinion of the court was delivered by: Lamberth, District Judge.
Plaintiffs, owners and operators of duty-free shops located
along the United States-Canadian border, seek a preliminary
injunction enjoining the implementation and enforcement of
certain temporary regulations ("Temporary Rules") promulgated by
the Department of the Treasury's ("Treasury") Bureau of Alcohol,
Tobacco and Firearms ("ATF"), which prohibit the
"relanding" into the United States "previously exported" tobacco
products, including the limited amount of cigarettes allowed for
the personal use of returning United States residents.
27 C.F.R. § 275.11; 275.83. Plaintiffs contend that the Temporary Rules
are invalid because they were promulgated without
notice-and-comment as required by the Administrative Procedure
Act, 5 U.S.C. § 553(b), and because they illegally abolish the
so-called "personal use" exemption that shields from duty, as
"incidents of the journey", "article[s] acquired abroad" by U.S.
residents. 19 U.S.C. § 1555(b)(6)(B). Upon consideration of
plaintiffs' motion for a preliminary injunction, the opposition
thereto, the applicable law, oral argument and for the reasons
set forth below, plaintiffs' motion is GRANTED and defendants are
hereby ENJOINED from enforcing the Temporary Rules,
27 C.F.R. § 275.11 and 27 C.F.R. § 275.83, to the extent that they prohibit
the importation of cigarettes purchased in duty-free stores up to
the limit allowed for personal use under
19 U.S.C. § 1555(b)(6)(B).
On December 22, 1999, the ATF promulgated Temporary Rules
27 C.F.R. § 275.11 and § 275.83, without notice to the public, for
the stated purpose of implementing certain provisions of Section
9302 of the Balanced Budget Act of 1997. Pub.L. No. 105-33, 111
Stat. 673 (1997). Section 9302 of the Balanced Budget Act amended
26 U.S.C. § 5761 to provide, in relevant part, that
every person who sells, relands, or receives within
the jurisdiction of the United States any tobacco
products or cigarette papers or tubes which have been
labeled or shipped for exportation under this
chapter. . . .
shall, in addition to the tax and other penalty
provided in this title, be liable for a penalty equal
to the greater of $1,000 or 5 times the amount of the
tax imports imposed by this chapter.
To that end, the Temporary Rules prohibit the "relanding" into
the United States of previously exported U.S. manufactured
cigarettes, except under limited circumstances.
27 C.F.R. § 275.11. The Temporary Rules define the term "relanding" as
Any tobacco products . . . which have been labeled
or shipped for exportation . . . as prescribed in
this chapter, previously exported and returned within
the jurisdiction of the United States. This term does
not apply to any tobacco products that are placed in
appropriately marked receptacles by travelers or
passengers prior to making their declaration to a
U.S. Customs officer upon arrival in the United
27 C.F.R. § 275.11. By its terms, this definition indicates that
cigarettes brought back into the United States by a returning
U.S. resident under the personal use exemption,
19 U.S.C. § 1555(b)(6)(B), would be considered "relanded," and thus, their
importation would violate 26 U.S.C. § 5761.
As noted above, prior to the implementation and enforcement of
the Temporary Rules, returning residents of the United States
were eligible for a personal use exemption from the payment of
any Customs duty or tax on articles acquired abroad as incidents
of their journey. 19 U.S.C. § 1555(b)(6)(B). Specifically,
subheadings 9804.00.65, 9804.00.70, and 9804.00.72
("subheadings") of the Harmonized Tariff Schedule of the United
States ("Tariff Schedule") expressly authorize U.S. residents to
bring back into the United States a limited number of cigarettes
upon their return. 19 U.S.C. § 1202. The relevant statutory text
19 U.S.C. § 1555(b)(6)(B) (emphasis added). The relevant Tariff
Schedule subheading exempts for personal use "not more than 200
cigarettes." Tariff Schedule, subheading 9804.00.72.
Plaintiffs operate duty-free stores along the United
States-Canadian border that sell, among other things, tax-free
U.S. manufactured cigarettes. As a result of the implementation
of the Temporary Rules, persons who purchase tax-free U.S.
cigarettes at plaintiffs' stores before departing the United
States are prohibited from bringing any of these cigarettes back
into the United States, even under the so-called "personal use"
exemption. Now, rather than permit travelers to return with the
limited number of cigarettes allowed under for personal use,
Customs requires ...