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WORLD DUTY FREE AMERICAS, INC. v. SUMMERS

April 18, 2000

WORLD DUTY FREE AMERICAS, INC., AMMEX TAX & DUTY FREE SHOPS, INC., AMMEX TAX & DUTY FREE SHOPS WEST, INC., AND AMMEX WAREHOUSE COMPANY, INC., PLAINTIFFS,
V.
LAWRENCE H. SUMMERS, SECRETARY OF THE TREASURY, AND BRADLEY A. BUCKLES, DIRECTOR, BUREAU OF ALCOHOL, TOBACCO AND FIREARMS, DEFENDANTS.



The opinion of the court was delivered by: Lamberth, District Judge.

MEMORANDUM OPINION

I. BACKGROUND

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 States.

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 provides that

Except in the case of travel involving transit to, from, or through an insular possession of the United States, merchandise described in subparagraph (A) that is purchased by a United States resident shall be eligible for exemption from duty under subheadings 9804.00.65, 9804.00.70, and 9804.00.72 of the Harmonized Tariff Schedule of the United States upon the United States resident's return to the customs territory of the United States, if the resident meets the eligibility requirements for the exemption claimed. Notwithstanding any other provision of law, such merchandise shall be considered to be an article acquired abroad as an incident of the journey from which the resident is returning, for purposes of determining eligibility for any such exemption.

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 ...


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