Greenberg Traurig Alert
Court of Appeals Affirms Harbor Maintenance Fee on Exports as Unconstitutional
June 24, 1997
On June 3, 1997, the Court of Appeals for the Federal Circuit affirmed a lower court
decision that the Harbor Maintenance Fee on goods exported from this country is
unconstitutional. This means that more than $700,000,000 collected since the fee was
instituted in 1987 may be recoverable. The Harbor Maintenance Fee (HMF) was established by
Congress under the Water Resources Development Act of 1986 as an ad valorem
"user fee" assessed on goods being laden or unladen at U.S. ports. The fee was
initially set at a rate of 0.04% (0.0004), effective April 1, 1987, and then increased to
0.125% (0.0125), effective January 1, 1991.
Although both amounts may be relatively small, the cumulative effect on frequent
shippers can be significant. In 1994, the United States Shoe Corporation challenged the
fee in the Court of International Trade (CIT). The basis of U.S. Shoe's suit was that the
HMF was not really a "user fee" but a tax, and therefore illegal as applied to
exports because the "Export Clause" of the United States Constitution prohibits
all taxes on exports. The U.S. Shoe suit was soon followed by numerous similar suits by
other exporters, all challenging the constitutionality of the fee. In accordance with its
standard procedures for such situations, the CIT designated one case, United States
Shoe v. The United States, as a "test case" for resolving the issues at hand
and suspended action on all of the other cases.
The United States Customs Service defended the HMF by asserting that the CIT did not
have jurisdiction; that even if it did, U.S. Shoe had not followed the mandatory Customs
protest procedures before filing its suit; and that in any case the HMF was not a tax but
a "user fee."
The CIT ruled in favor of U.S. Shoe on all issues, holding that it did have
jurisdiction over the case, that there was no need for U.S. Shoe to first file protests of
each fee payment before filing suit, that the HMF was an unconstitutional tax as applied
to exports, and that Customs was to immediately cease collecting the fee on all exports
and refund U.S. Shoe's payments, plus costs and interest.
Customs obtained a stay in the execution of the judgement and appealed the decision to
the Court of Appeals for the Federal Circuit (CAFC), which has now affirmed the CIT
decision in every respect, and once again ordered Customs to refund the fees paid by U.S.
Shoe and stop collecting further fees on exports.
Customs has just responded by issuing a press release announcing that it would once
more seek a stay of the judgment pending a decision by the Solicitor General as to whether
to appeal the case to the Supreme Court. During the stay, Customs will continue to collect
the fee and will not process or issue any refunds. Moreover, it is presently Customs'
position that even the appeal is lost, Customs will only refund fees to exporters that
have filed suits with the Court of International Trade, and only for the fees paid in the
two years immediately preceding those suits.
At this point there is no way of knowing if Customs will appeal the decision, or if the
Supreme Court will even hear the case. Moreover, one issue still unresolved by the courts
at any level is the question of how far back Customs would be required to go in refunding
fees. Unfortunately, U.S. Shoe was not an ideal "test case" for all the issues
at hand, because U.S. Shoe sought refunds under a provision limiting its recovery to the
fees paid in the two years immediately preceding its suit. Other exporters, whose cases
have been pending the outcome of the "test case," have sought the return of all
fees paid on export on the basis that their very collection was illegal. Despite the
numerous briefs filed in both court actions arguing that position, neither the CIT nor the
CAFC addressed the issue because the case before them did not require it. Consequently, it
is highly probable that another "test case" will be designated in the future
from those already filed to resolve that single issue.
The one thing that is certain at this point is that the best way for an exporter to
protect its interests is to file a suit in the CIT. Moreover, because the statute of
limitations issue remains unresolved, the sooner such a claim is filed, the greater the
likelihood of recovering monies paid in years past.
Greenberg Traurig has attorneys admitted before the Court of International Trade and
experienced in these matters, and would be pleased to respond to any questions or concerns
your company may have with respect to the Harbor Maintenance Fee.
This GT ALERT is issued for informational purposes only and is not intended
to be construed or used as general legal advice. Greenberg Traurig attorneys provide
practical, result-oriented strategies and solutions tailored to meet our clients’
individual legal needs.