Ammex, Inc. v. United States , 2003 CIT 165 ( 2003 )

Slip Op. 03-165
UNITED STATES COURT OF INTERNATIONAL TRADE
Before: Judge Judith M. Barzilay
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AMMEX, INC., :
Plaintiff, :
v. : Court No. 02-00361
UNITED STATES, :
Defendant. :
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MEMORANDUM DECISION AND ORDER
Before the court is a Motion for Discovery from Plaintiff Ammex, Inc. (“Ammex”) dated
March 7, 2003. Specifically, Ammex asks this court to grant its request for production of a
number of documents relating to the November 21, 2001 Revocation Ruling by the Bureau of
Customs and Border Protection (formerly United States Customs Service) (“Defendant” or
“Customs”). In addition, Ammex asks this court to grant leave for it to depose the Customs
official(s) responsible for the Revocation Ruling. Defendant opposes the motion.
The factual and procedural posture of this case is outlined in this court’s opinion in
Ammex, Inc. v. United States, Slip Op. 03-145 (Oct. 30, 2003). A decision on Ammex’s Motion
for Discovery was postponed pending the disposition of Ammex, wherein the court granted
Defendant’s Motion to Dismiss Plaintiff’s Amended Complaint and thereby declined to allow the
case to go forward under 28 U.S.C. § 1581(a). The court, however, took jurisdiction of the case
under 28 U.S.C. § 1581(i). The court also ordered the parties to submit a scheduling order within
Court No. 02-00361 Page 2
thirty days of the date of the Ammex opinion. Accordingly, parties filed a scheduling order with
the court on December 4, 2003, but made the scheduled dates for submission of documents
conditional upon a ruling on the Motion for Discovery.
The scope of judicial review in a section 1581(i) case is statutorily provided. In
particular, section 2640 of title 28 of the United States Code dictates that in any action not
specified in that section (a category that includes section 1581(i) cases), “the Court of
International Trade shall review the matter as provided in section 706 of title 5.” 28 U.S.C. §
2640(e). Section 706 of title 5 provides that in making its determination “the court shall review
the whole record or those parts of it cited by a party . . . .” This mandate has been interpreted by
the courts to mean that, except in very limited circumstances, the reviewing court shall not
develop its own record of the case, but must instead rely on the record developed before the
agency. See Camp v. Pitts, 411 U.S. 138, 142 (1973); Bar MK Ranches v. Yuetter, 994 F.2d 735,
739 (10th Cir. 1993); Public Power Council v. Johnson, 674 F.2d 791, 793-94 (9th Cir. 1982);
Amfac Resorts v. United States, 143 F. Supp. 2d 7, 11 (D.C. 2001). As can be gathered from the
aforementioned cases, policy reasons behind such a mandate are to prevent the court from
substituting its judgment for that of the agency and also to prevent the agency from advancing
post hoc rationalizations of its initial determination. Because a motion for discovery is
essentially a motion to supplement the administrative record, the granting of such motions is rare
in section 1581(i) cases.
Here, this court must decide whether Plaintiff has made a sufficient showing that its case
fits into one of the narrow exceptions permitting discovery. See Amfac Resorts, 143 F. Supp. 2d
Court No. 02-00361 Page 3
at 12 (requiring a “strong,” “substantial,” or “prima facie” showing). In other words, the issue is
whether Plaintiff has made sufficient showing that the administrative record in the case is
incomplete so as to frustrate judicial review or that explanation or clarification is needed
regarding technical terms in the record. See Pl.’s Mot. for Discovery at 2 (citing Ammex, Inc. v.
United States, 23 CIT 549, 556-57, 62 F. Supp. 2d 1148, 1156-57 (1999)). Here, Plaintiff has
failed to make any showing that the record is incomplete so as to frustrate a meaningful review or
that an explanation or clarification is needed on any technical terms, interpretation of which is
sought by the parties.
The substantive dispute in this case centers on the respective meanings of the terms
“assessment” or “imposition” as they relate to federal taxes, and Customs’ interpretation of these
terms. In particular, Plaintiff alleges that, if there were no federal taxes “assessed” on Plaintiff’s
merchandise, such merchandise would qualify as duty-free under 19 U.S.C. § 1555(b)(8)(E).
Plaintiff further alleges that Customs’ Revocation Ruling is based on faulty reasoning in that
Customs made no determination regarding whether Plaintiff’s merchandise was “assessed” any
federal tax, and instead based its decision to revoke Plaintiff’s duty-free status on an Internal
Revenue Service (“IRS”) letter, which informed Customs that taxes would be “imposed” on
Plaintiff’s merchandise pursuant to section 4081 of the Internal Revenue Code, 26 U.S.C. §
4081. To that end, Plaintiff argues that the court should require further explanation from
Customs about how the agency reached its decision regarding the refusal to allow entry of
Plaintiff’s merchandise into a Class 9 bonded warehouse.
The court disagrees. First, information relating to whether any federal taxes were
Court No. 02-00361 Page 4
assessed on Ammex’s merchandise or whether Ammex “paid” any tax on its merchandise is
presumably within Plaintiff’s knowledge, and discovery is accordingly not necessary to answer
these questions. Plaintiff may simply provide the court in subsequent briefing with any facts
relevant to the case. Second, at this point in the proceeding the court needs no further
explanation from Customs regarding its decision-making process. The record in the case
indicates that Customs based its decision to revoke the duty-free status of the merchandise solely
on the IRS letter and did not seek to ascertain whether Plaintiff’s merchandise was assessed any
taxes. In fact, Customs specifically stated that “[r]evocation of the ruling does not prevent
Ammex from showing that no tax was assessed and therefore, it would not be covered by the
revocation.” Notice of Revocation of Ruling Letter, A.R. Doc. No. 22 at 3. Third, underlying
legal questions in the case are not so complex as to require further clarification of any terms
implicated. “Assessment” and “imposition” are terms, the definition of which are readily
available in any dictionary or other source, as well as the statutes themselves, should the court
require. Fourth, any internal agency memorandum is ordinarily privileged and accordingly falls
outside the scope of discovery. See Amfac Resorts, 143 F. Supp. 2d at 13. Fifth, generally “there
must be a strong showing of bad faith or improper behavior before the court may inquire into the
thought processes of administrative decisionmakers.” Public Power, 674 F.2d at 795 (citing
Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402 (1971)). Here, where bad faith on
the part of government officials is not even alleged, depositions of Customs officials are
accordingly not warranted. Finally, a “court assumes [that] the agency properly designated the
[a]dministrative [r]ecord absent clear evidence to the contrary.” Bar MK Ranches, 994 F.2d at
Court No. 02-00361 Page 5
740 (citation omitted). As Plaintiff here failed to overcome this “presumption of administrative
regularity,” id., the court will not allow the discovery requested by Plaintiff. That is, the agency
need not supplement the record with further memoranda or documents beyond what is contained
in the administrative record, whether such memoranda are internal or relate to the
communications between the IRS and Customs. The court, however, reserves the option to
remand to the agency for further explanation or information after the briefing on substantive
issues is complete and after such issues are thereby fine-tuned and prepared for final review. For
all the foregoing reasons, it is hereby
ORDERED that Plaintiff’s Motion for Discovery is denied; it is further
ORDERED that parties confer and resubmit to this court a scheduling order within ten
(10) days of this order; and it is further
ORDERED that such scheduling order will be in conformance with this Court’s rules and
this chambers’ guidelines outlined on the Court’s webpage.
Dated : _________________ __________________________
New York, New York Judith M. Barzilay