The Harbor Maintenance Tax Refund for Exporters: An Appellate Court Sweetens the Pot by Steven W. Block April 2000
Reprinted with permission from Marine Digest and Transportation News
Taxing exports has always been a touchy issue in America. You see, way back in the 18 Century, southern cotton producers didn’t like the idea of any economic restriction on the foreign marketing of their most important resource. To keep those politically powerful plantationers happy, we disallowed any taxation on exports, right there in Article One of the Constitution.
Fast forward two centuries to 1986 and we see Uncle Sam trying to figure out ways to pay the increasingly expensive costs of harbor maintenance. That year, the government decided to make shippers pay a harbor use tax when their shipping activities involved certain port services. The only problem was that this tax was imposed on both inbound and outbound traffic. In 1998, at shipper United States Shoe Corporation’s urging, the U.S. Supreme Court took a look at the issue. The Big Nine ruled the harbor maintenance tax was tantamount to a Constitutionally-forbidden duty on exports, because despite the tax’ moniker, shippers still were paying the government to let their cargo out of the country. Wagging its finger at Uncle Sam, the Supreme Court struck down the tax as to outbound traffic. It also ordered a refund to shippers for previously collected harbor maintenance taxes on export cargo. United States Shoe’s action originally was brought in the U.S. Court of International Trade (CIT), which generally has jurisdiction over customs and trade issues. But the CIT’s enabling statute contains a two-year statute of limitations. After the Supreme Court’s decision, the general understanding was that refund claims would be limited to payments made over two years. Statutes of limitation are designed to make claimants pursue their remedies timely, so that evidence and testimony are more reliable when analyzed, and parties don’t have to keep records for indefinite periods of time. Time bars keep stale claims out of litigation by specifying exactly how long a plaintiff has to file suit, lest the claim be lost forever. In other words, statutes of limitation are the law’s way of saying, “You snooze, you lose.” The harbor maintenance tax was (and still is, as to non-export activity) levied as a customs duty, and the customs duty statute has no statute of limitations for claims to refunds. Shipper Swisher International didn’t like the idea of being limited to recovering only two year’s worth of unconstitutional taxes. Before the CIT last year, Swisher argued that the customs statute - sans statute of limitations - controlled as to its claim for a refund. The CIT disagreed, limiting Swisher’s recovery to two years. -1/052307 1515/
But in a surprise decision late last month, the United State Court of Appeals for the Federal Circuit reversed the CIT. The question centered around which statute gave the CIT its jurisdiction over the matter. Since the U.S. Shoe decision, numerous shippers have presented refund claims right to the CIT or federal district courts. But in this instance, Swisher had sought a refund under the customs statute. That was enough, held the appeals court, to change the CIT’s basis of jurisdiction, and render the twoyear statute of limitations inapplicable. Essentially, Swisher circumnavigated the CIT’s statute of limitations by filing for a customs refund. What’s all this mean? For one thing, Uncle Sam will be writing more and bigger refund checks. The Swisher decision also allows for interest, and refunds can go back to the first day harbor maintenance taxes were collected from exporters. Many shippers will be able to follow Swisher’s lead, by filing refund claims with Customs and working the matter through the system, instead of going the usual route through the CIT or a federal district court. A simple enough maneuver considering the stakes, and one all shippers qualified for harbor maintenance tax refunds should explore undertaking. Ref: Swisher International, Inc. v. United States, 2000 US APP LEXIS 2905 (Fed. Cir. 2000)