                                      Slip Op. 18-84

               UNITED STATES COURT OF INTERNATIONAL TRADE



 UNITED STATES,

                      Plaintiff,
 v.                                                 Before: Claire R. Kelly, Judge

 MAVERICK MARKETING, LLC ET AL.,                    Court No. 17-00174

                      Defendants.



                                   OPINION AND ORDER

[The United States Court of International Trade possesses subject-matter jurisdiction over
a suit to recover unpaid Federal Excise Tax brought pursuant to 19 U.S.C. § 1592(d).]

                                                                       Dated: July 3, 2018

Stephen Carl Tosini, Senior Trial Counsel, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice, of Washington, DC, for plaintiff United States. With him on
the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson,
Director, and Claudia Burke, Assistant Director.

Barry Marc Boren, Law Offices of Barry Boren, of Miami, FL, and Gerson M. Joseph,
Gerson M. Joseph, P.A., of Weston, FL, for defendants Maverick Marketing, LLC and
Good Times USA, LLC.

Thomas Randolph Ferguson, Sandler, Travis & Rosenberg, PA, of San Francisco, CA,
for defendant American Alternative Insurance Company.

       Kelly, Judge: The United States (“Plaintiff”), on behalf of United States Customs

and Border Protection (“Customs”), seeks to recover unpaid Federal Excise Tax (“FET”),

in various amounts, and prejudgment interest from Maverick Marketing, LLC (“Maverick”),

Good Times USA, LLC (“Good Times”), and American Alternative Insurance Company

(“AAIC”) (collectively, “Defendants”), pursuant to section 592 of the Tariff Act of 1930, as
Court No. 17-00174                                                                         Page 2


amended 19 U.S.C. § 1592 (2012).1 See Summons, July 10, 2017, ECF No. 1; Compl.

at ¶¶ 1, 26–33, July 10, 2017, ECF No. 2. For the reasons that follow, the Court has

subject-matter jurisdiction over this action.

                                          BACKGROUND

          The court assumes familiarity with the facts of this case as discussed in United

States v. Maverick Marketing, LLC, 42 CIT __, __, Slip Op. 18-16 at 2–3 (Mar. 7, 2018)

(“Maverick I”), and here recounts the facts relevant to the issue of the Court’s subject-

matter jurisdiction over the claims alleged by Plaintiff. In its complaint, Plaintiff alleges

that Maverick and Good Times violated 19 U.S.C. § 1592(a) and are liable for unpaid FET

pursuant to 19 U.S.C. § 1592(d). See Compl. at ¶¶ 12–27. Specifically, Plaintiff alleges

that Maverick and Good Times made material false statements and/or omissions when

entering the subject merchandise into United States commerce, the result of which was

underpayment of FET on the subject merchandise.2 See id. at ¶¶ 15–25. Defendants

Maverick and Good Times sought to dismiss Plaintiff’s complaint pursuant to USCIT Rule

12(b)(6), claiming that Plaintiff failed to state a claim upon which relief could be granted.

See Def., [Maverick]’s Rule 12(b)(6) Mot. Dismiss & Mem. Law, Nov. 13, 2017, ECF No.

29; Def., [Good Times]’s Rule 12(b)(6) Mot. Dismiss & Mem. Law, Nov. 13, 2017, ECF

No. 30; USCIT R. 12(b)(6). Defendants did not challenge the Court’s subject-matter




1
    Further citations to Titles 19 and 26 of the U.S. Code are to the 2012 edition.
2
  Plaintiff also raises claims against AAIC. See Compl. at ¶¶ 29, 31, 33. Plaintiff claims that AAIC
is liable for the allegedly unpaid FET on the subject merchandise because AAIC, as surety on the
bonds Maverick executed as principal, id. at ¶ 6, “agreed with Maverick to jointly and severally
guarantee payment of all duties, taxes, and charges,” id. at ¶ 7, owed in connection with the
importation of the entries at issue. Id. at ¶ 29. Plaintiff also seeks mandatory statutory interest
pursuant to 19 U.S.C. § 580, see id. at ¶ 31, and attorney fees and any further interest, as provided
by law, that the court deems just and appropriate. Id. at 6.
Court No. 17-00174                                                                    Page 3


jurisdiction. On March 7, 2018, the Court issued Maverick I, denying the motions filed by

Maverick and Good Times to dismiss the complaint for failure to state a claim upon which

relief can be granted. Maverick I, 42 CIT at __, Slip Op. 18-16 at 12.

       On March 9, 2018, the court requested supplemental briefing on the Court’s

subject-matter jurisdiction, explaining that it was incumbent upon the Court to

independently assess the jurisdictional basis for each case, regardless of whether any

party challenged the Court’s jurisdiction. See Letter [Requesting Briefing on Jurisdiction],

Mar. 9, 2018, ECF No. 46 (“Letter Requesting Jurisdiction Briefing”); see also Am.

Scheduling Order, Mar. 9, 2018, ECF No. 47. The court explained that, although the

United States can recover unpaid taxes pursuant to 19 U.S.C. § 1592(d) if a party violates

19 U.S.C. § 1592(a), the relevant jurisdictional statute specifically identifies only suits for

penalties, bonds, and customs duties. Letter Requesting Jurisdiction Briefing at 2 (citing

28 U.S.C. § 1582).

       In its supplemental brief on jurisdiction, Plaintiff argues that the Court has

jurisdiction over its claim against Maverick and Good Times. See Pl.’s Suppl. Br. on

Jurisdiction at 3–7, Apr. 13, 2018, ECF No. 51 (“Pl.’s Br.”). Plaintiff argues that the Court

possesses jurisdiction pursuant to 28 U.S.C. § 1582(1), because even though a penalty

is not sought in this case, the relief that Plaintiff seeks “flows from [the court determining

that Maverick and Good Times violated 19 U.S.C. § 1592(a),] separate and apart from

any penalty” that could also be sought for such a violation. See id. at 3. Plaintiff also

argues that there is jurisdiction pursuant to 28 U.S.C. § 1582(3) because FETs collected

on imported tobacco are customs duties for the purposes of jurisdiction. See id. at 4–5.

Finally, Plaintiff argues that its claim against AAIC, the surety, is proper under 28 U.S.C.
Court No. 17-00174                                                                          Page 4


§ 1582(2), that the surety’s claims are within the Court’s “exclusive jurisdiction” under 28

U.S.C. § 1583, and that splitting the claims between this Court and a United States district

court     would    not   be   in   accord    with    Congress’     intent    behind    19    U.S.C.

§ 1592.3 See id. at 5–7. Maverick and Good Times argue that jurisdiction is lacking under

28 U.S.C. § 1582(1) because Plaintiff is not seeking a penalty. Defs. Maverick & Good

Times Resp. Br. on Jurisdiction at 1, May 2, 2018, ECF No. 54 (“Maverick & Good Times’

Resp. Br.”). Maverick and Good Times deny that FETs are a type of customs duty that

would give rise to a claim reviewable under this Court’s 28 U.S.C. § 1582 jurisdiction, see

Defs. Maverick & Good Times Opening Br. on Jurisdiction at 4–8, Apr. 16, 2018, ECF No.

53 (“Maverick & Good Times’ Br.”), and argue that the claims against Maverick and Good

Times should be transferred to a district court.4 Id. at 8. Maverick and Good Times also

argue that if the Court determines that it does not have jurisdiction over the non-surety

defendants, the Court may have ancillary jurisdiction over Maverick,5 but not Good

Times.6 Id. at 10–11. The parties do not contest that the Court has jurisdiction over the



3
   AAIC argues that in addition to the jurisdiction provided by 28 U.S.C. § 1582(1), that AAIC’s
involvement in this action by virtue of 28 U.S.C. § 1583 provides the Court “with the necessary
link to obtain jurisdiction” over all claims at issue and all parties involved. See Def. [AAIC]’s Br.
on Jurisdiction at 2, Apr. 13, 2018, ECF No. 52.
4
 However, Maverick and Good Times recognize that it seems illogical for Congress to split claims
based on the same factual basis and “divest this Court of jurisdiction,” especially because “the
recovery of taxes would normally be inextricably interwoven with the ascertainment of facts
pertaining to the recovery of duties.” Maverick & Good Times’ Br. at 11.
5
 Maverick and Good Times argue that the Court should not exercise ancillary jurisdiction over
Good Times pursuant to 28 U.S.C. § 1367. See Maverick & Good Times’ Br. at 10–11. Section
1367 uses the term supplemental jurisdiction rather than ancillary jurisdiction, as does the court.
28 U.S.C. § 1367. The Court has jurisdiction pursuant to 28 U.S.C. § 1582 and therefore, does
not address Maverick and Good Times’ argument.
6
    Maverick and Good Times further assert that if the Court lacks jurisdiction over Maverick and

                                                                               (footnote continued)
Court No. 17-00174                                                                       Page 5


surety, AAIC, pursuant to 28 U.S.C. § 1582(2). See Pl.’s Br. at 5; Maverick & Good Times’

Br. at 3.

                                         DISCUSSION

       Plaintiff argues that this Court has subject-matter jurisdiction pursuant to 28 U.S.C.

§ 1582(1) because the collection of FET flows from conduct warranting a penalty under

19 U.S.C. § 1592 and pursuant to 28 U.S.C. § 1582(3) because FETs are customs duties

for the purposes of jurisdiction. See Pl.’s Br. at 3–5. Maverick and Good Times argue

that the collection of FET is not a penalty and that Plaintiff has not brought a claim seeking

to recover a civil penalty. See Maverick & Good Times’ Resp. Br. at 1–2. Further, they

argue that FETs are not customs duties, because 19 U.S.C. § 1528 disallows a tax not

explicitly recognized as a customs duty to be a customs duty. See id. at 2–3; Maverick &

Good Times’ Br. at 4–6; see also 19 U.S.C. § 1528. For the reasons that follow, the Court

has subject-matter jurisdiction over Plaintiff’s claim against Maverick and Good Times

pursuant to 28 U.S.C. § 1582(1) and (3).

       “[F]ederal courts . . . are courts of limited jurisdiction marked out by Congress.”

Norcal/Crosetti Foods, Inc. v. United States, 963 F.2d 356, 358 (Fed. Cir. 1992) (quoting

Aldinger v. Howard, 427 U.S. 1, 15 (1976), superseded by statute on other grounds,

Judicial Improvements Act of 1990, Pub. L. No. 101-650, 104 Stat. 5089, as recognized

in Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 557 (2005)). Therefore, the

“court may and should raise the question of its jurisdiction sua sponte at any time it


Good Times, Plaintiff’s claims against AAIC and, in turn, AAIC’s cross-claims against Maverick
and Good Times must be stayed as they are not ripe. See Maverick & Good Times’ Br. at 8–10.
They argue that Plaintiff’s claims under 19 U.S.C. § 1592(d) will become ripe for review only if
and when final judgment is reached in district court holding that Maverick and Good Times violated
19 U.S.C. § 1592(a). Id. The Court has jurisdiction and therefore Maverick and Good Times’
request for a stay is moot.
Court No. 17-00174                                                                   Page 6


appears in doubt.” Arctic Corner, Inc. v. United States, 845 F.2d 999, 1000 (Fed. Cir.

1988) (citations omitted). The Court may dismiss a case for lack of subject-matter

jurisdiction on its own motion because the Court must enforce the limits of its jurisdiction.

See, e.g., Cabral v. United States, 317 Fed. Appx. 979, 980 n.1 (Fed. Cir. 2008); Arctic,

845 F.2d at 1000.

       Under 28 U.S.C. § 1582, the Court has jurisdiction to hear “any civil action which

arises out of an import transaction and which is commenced by the United States—(1) to

recover a civil penalty under[, inter alia, 19 U.S.C. § 1592];” or “(2) to recover upon a bond

relating to the importation of merchandise required by the laws of the United States or by

the Secretary of the Treasury; or (3) to recover customs duties.” Here, Plaintiff seeks to

recover the unpaid FET pursuant to 19 U.S.C. § 1592(d) which Plaintiff alleges result from

Maverick’s and Good Times’ violations of 19 U.S.C. § 1592(a), but does not seek to

recover a penalty pursuant to 19 U.S.C. § 1592(b) for these alleged violations. See

Compl. at ¶¶ 27, 29.

       This Court has jurisdiction to hear claims to collect unpaid FET under 19 U.S.C.

§ 1592(d) for conduct warranting a penalty under 19 U.S.C. § 1592(a), whether or not a

separate penalty is sought pursuant to 19 U.S.C. § 1592(b). Pursuant to 28 U.S.C.

§ 1582(1), the Court shall have exclusive jurisdiction over “any civil action which arises

out of an import transaction and which is commenced by the United States . . . to recover

a civil penalty under Section 592 . . . of the Tariff Act of 1930.” 28 U.S.C. § 1582(1). As

amended, section 592 of the Tariff Act of 1930 prohibits material false statements in

connection with the entry of goods into the United States. See 19 U.S.C. § 1592(a).

Section 1592(b) allows for penalties to be assessed where an importer makes a material
Court No. 17-00174                                                                       Page 7


false statement. 19 U.S.C. § 1592(b). Furthermore, section 1592(d) provides that the

United States may seek to collect any duties, taxes, or fees it was deprived of as a result

of conduct giving rise to a violation of 19 U.S.C. § 1592(a), regardless of whether any

penalty is sought. 19 U.S.C. § 1592(d). This Court has exclusive jurisdiction over penalty

actions arising under 19 U.S.C. § 1592. See 28 U.S.C. § 1582(1). If the government

sought both penalties and lost taxes under 19 U.S.C. § 1592 together in one civil action,

this Court would have jurisdiction over both the claim for penalties and any claim for lost

duties, fees, or taxes, as the latter would be part of the civil action arising under 28 U.S.C.

§ 1582(1). See 28 U.S.C. § 1582(1) (providing the Court with jurisdiction of any civil

action “which arises out of an import transaction and which is commenced by the United

States . . . to recover a civil penalty under [19 U.S.C. § 1592]”); 19 U.S.C. § 1592(d)

(providing that the United States may recover duties, taxes, or fees it was unlawfully

deprived of, regardless of whether a penalty is sought). Congress intended that the

government could bring an action to collect lost duties, taxes, or fees without seeking a

penalty as well, because section 1592(d) states that “[Customs] shall require that such

lawful duties, taxes, and fees be restored, whether or not a monetary penalty is

assessed.” 19 U.S.C. § 1592(d). Therefore, pursuant to 28 U.S.C. § 1582(1), the Court

has jurisdiction over a civil action to collect lost taxes under 19 U.S.C. § 1592(d), for

conduct in violation of § 1592(a) regardless of whether a penalty is sought.7




7
 Maverick and Good Times argue that the collection of FET is not a penalty as required by 28
U.S.C. § 1582(1). See Maverick & Good Times’ Resp. Br. at 1. Plaintiff, however, does not allege
as much in its complaint nor any of its briefing. The Court does not construe the FET as a penalty,
but as part of an action arising out of an import transaction that the government has brought under
19 U.S.C. § 1592.
Court No. 17-00174                                                                        Page 8


       Jurisdiction exists under 28 U.S.C. § 1582(3) because these FETs are customs

duties for the purposes of jurisdiction.8 Importers are liable for FETs on imported tobacco

products. See 26 U.S.C. § 5703(a)(1) (2012). The amount of the tax is based upon the

price for which the imported merchandise is sold. See 26 U.S.C. § 5701. In the case of

importations, the timing of payment is determined by reference to the date of entry into

the customs territory, see 26 U.S.C. § 5703(2)(b), and is “collected, accounted for, and

deposited as internal revenue collections by the Port Director of Customs in accordance

with customs procedures and regulations.” 27 C.F.R. § 41.62 (2014).9 Pursuant to the

regulatory framework, “[t]he importer’s liability for duties includes a liability for any internal


8
  Maverick and Good Times argue that this Court has, on multiple occasions, held that it did not
have jurisdiction over taxes and charges not specifically demarked as customs duties. See
Maverick & Good Times’ Br. at 5–6. This argument oversimplifies the issue, and the two cases
Maverick and Good Times cite are distinguishable. In United States v. Shabahang Persian
Carpets, Ltd., 22 CIT 1028, 1029–31, 27 F. Supp. 2d 229, 231–33 (1998), the plaintiff sought to
join the Internal Revenue Service as a party in a customs case to ensure that the government
valued merchandise consistently for both customs and internal revenue purposes. Accepting this
request would have required the court to exercise jurisdiction over a separate claim arising from
an internal revenue matter which was not statutorily assigned to the Court of International Trade,
see id. at 1030–33, 27 F. Supp. 2d at 232–34, and otherwise beyond the purview of Customs’
administrative authority. Thus, the court held it did not have jurisdiction because the claims
involving the IRS were plainly within the province of the district courts. See id. at 1032, 27 F.
Supp. 2d at 233. It was not a case where Customs was responsible for assessing and collecting
revenue prior to the release of the subject goods. Similarly, in United States v. Biehl & Co., 3 CIT
158, 539 F. Supp. 1218 (1982), the issue was whether the Court of International Trade had
jurisdiction over suits by the government to collect tonnage duties pursuant to 28 U.S.C. § 1582(2)
providing for suits to recover on a bond. The court pointed out that, although 28 U.S.C. § 1581(i)
provided for suits against the government involving tonnage duties, it failed to provide for suits
brought by the government involving tonnage duties, and the court would not read in that language
where Congress had not provided it. See id. at 161–63, 539 F. Supp. at 1220–22. Here, in 28
U.S.C. § 1582 Congress has specifically provided for suits by the government to collect customs
duties. The question before the court is whether FETs are to be considered customs duties for
the purposes of 28 U.S.C. § 1582(3), a question not confronted in Biehl.
9
  Further citations to Titles 19, 26, and 27 of the Code of Federal Regulations are to the 2014
edition, the most recent version of the Code of Federal Regulations in effect when the last entry
of the subject merchandise at issue here occurred. The entries at issue in this action were
imported between the years 2012 and 2015. See Compl. at ¶ 1; see also Attachs. [to Compl.]:
#1 Ex. A – Entry Worksheet, July 10, 2017, ECF No. 2-1. The 2012 and 2015 editions of the
Code of Federal Regulations are the same in relevant part.
Court No. 17-00174                                                                    Page 9


revenue taxes which attach upon the importation of merchandise, unless otherwise

provided by law or regulation.”10 19 C.F.R. § 141.3. Further, until the amount of internal

revenue taxes due on the imported tobacco products is determined, the subject

merchandise is “not eligible for release from customs custody[.]” 27 C.F.R. § 41.41. As

evidenced here, the FET amount due on the imported cigars was reported on the entry

paperwork. See Ex. A [attached to Pl.’s Resp. to Maverick’s & Good Times’ Mots.

Dismiss] at Entry Summary, Dec. 18, 2017, ECF No. 36-1. The importer continues to be

liable for taxes unlawfully deprived for a violation of 19 U.S.C. § 1592(a) under 19 U.S.C.

§ 1592(d). The FETs on cigars are imposed on imported merchandise, at the time of

entry, collected and administered by Customs and therefore constitute customs duties for

the purposes of jurisdiction.

       Defendants claim that, pursuant to 19 U.S.C. § 1528, a tax or charge will not be

construed as a customs duty “for the purpose of any statute relating to the customs

revenue, unless the law imposing such tax or charge designates it as a customs duty or

contains a provision to the effect that it shall be treated as a duty imposed under the

customs laws.” Maverick & Good Times’ Br. at 4 (quoting 19 U.S.C. § 1528). However,

the same statute also indicates that it will not have the effect of restricting or limiting the

jurisdiction of this Court or that of the Court of Appeals for the Federal Circuit. 19 U.S.C.

§ 1528. These seemingly contradictory sentences are clarified by the statute’s legislative

history, which indicates that Congress implemented 19 U.S.C. § 1528 to clarify that


10
   Maverick and Good Times also argue that Customs, by promulgating 19 C.F.R. § 141.3, which
lists taxes as part of duties for which an importer is liable, attempts to amend 19 U.S.C.
§ 1528. See Maverick & Good Times’ Br. at 7–8; see also 19 C.F.R. § 141.3; 19 U.S.C. § 1528.
Customs’ regulation is consistent with the statute because the statutory framework allows taxes
to be considered as customs duties for the purposes of jurisdiction, and the regulation imposes
liability for payment of taxes that attach at importation.
Court No. 17-00174                                                                          Page 10


preferences and exemptions applicable to customs duties should not be construed as

applying to internal revenue taxes. See Customs Administrative Bill: Hearings on H.R.

6738 Before the H. Comm. on Ways & Means, 75th Cong. 112 (1937) (“H. Legis.

History”); Customs Administrative Act: Hearings on H. R. 8099 Before a S. Subcomm. of

the Comm. on Finance, 75th Cong 44–45 (1938) (revised print) (“Senate Legis. History”).

Specifically, Congress sought to prevent preferential duty rates granted to specific

countries from being applied to internal revenue taxes.11 See H. Legis. History at 112–

13. Further, the legislative history reveals that Congress explicitly sought to have the

Customs Court retain jurisdiction over controversies regarding excise taxes collected at

the time of importation. See H. Legis. History at 112; Senate Legis. History at 44–45;

accord Westco Liquor Products Co. v. United States, 38 CCPA 101, 107, C.A.D. 446

(1951) (affirming the Customs Court’s holding that FETs are customs duties for purposes

of assessment and collection).12 Therefore, FETs are customs duties for the purposes of

jurisdiction.13


11
   The legislative history to 19 U.S.C. § 1528, in particular, makes clear that Congress was
concerned, for example, with preferential rates being granted to imports from Cuba and enacted
the language in section 1528 to prevent such preferences from being applied to excise taxes; not
to divest the customs courts of jurisdiction. See H. Legis. History at 112–13.
12
   Maverick and Good Times challenge Plaintiff’s reliance on legislative history. See Maverick &
Good Times’ Resp. Br. at 3–4. They argue that even though 28 U.S.C. § 1582, the jurisdictional
statute, has been amended several times, at no point did Congress add taxes as a basis for
jurisdiction. See id. at 4. In contrast, they contend that in 28 U.S.C. § 1340 Congress delegated
jurisdiction over internal revenue taxes to district courts. See id. at 3–4; Maverick & Good Times’
Br. at 6. However, 28 U.S.C. § 1340 specifically states that district courts have original jurisdiction
over “any civil actions arising under any Act of Congress providing for internal revenue,” unless
the matter is already within this Court’s jurisdiction. The FETs at issue here are customs duties
for the purposes of jurisdiction, and this Court has jurisdiction under 28 U.S.C. § 1582 to hear civil
actions arising under 19 U.S.C. § 1592 and which seek to recover customs duties. The type of
claim at issue here is a matter already within the jurisdiction of this Court.
13
  The United States Court of Appeals for the Federal Circuit, sitting en banc, adopted the
decisions of the United States Court of Customs and Patent Appeals. See South Corp. v. United
States, 690 F.2d 1368, 1370 (Fed. Cir. 1982).
Court No. 17-00174                                                            Page 11


                                      CONCLUSION

       For the reasons provided above, the Court has subject-matter jurisdiction over a

suit to recover unpaid Federal Excise Taxes brought pursuant to 19 U.S.C. § 1592(d). In

accordance with this opinion, it is

       ORDERED that the parties shall file a joint proposed scheduling order that will

achieve the purposes of USCIT Rule 16(b) on or before 30 days from the publication of

this opinion.




                                                      /s/ Claire R. Kelly
                                                     Claire R. Kelly, Judge

Dated:July 3, 2018
      New York, New York
