CAFC Should Uphold CBP's Method for Weighing Tobacco Wraps, DOJ Argues
The U.S. Court of Appeals for the Federal Circuit should uphold a lower court decision that found that CBP's "indirect method" for weighing importer New Image Global's tobacco wraps that included the weight of additives was legally and scientifically valid, the Department of Justice said in a Jan. 27 brief. Replying to New Image's arguments to the contrary, DOJ said that CBP properly interpreted the excise tax statute to include anything added to the tobacco wraps in the weight of the wraps (New Image Global v. United States, Fed. Cir. #19-2444).
"The record demonstrates the soundness and reliability of CBP’s procedures," the brief said. "CBP used an accredited, generally accepted, peer-reviewed scientific method to weigh New Image’s wraps. Because this method produced an accurate, steady weight of the wraps with a known rate of error, CBP’s laboratory results satisfy the legal requirements of [Federal Circuit precedent]."
New Image is fighting for a lower excise tax on its tobacco wraps, since the wraps were classified by the government as roll-your-own tobacco, subjecting them to the excise tax following a law change in 2009. The importer's wraps are made with ethanol, which "gasses off" when the package is opened and the wrap is exposed to air. This process will shed around 10%-13% of the wraps' weight by the time they reach the final consumer after packaging and storage. New Image ultimately declared a weight of 0.75 grams per wrap when paying the excise taxes.
To determine the weight of the wraps, CBP originally removed the wraps from the package and allowed them to "gas off" for nearly 24 hours to achieve a stable state for weighing them. This process was known as Test 1. The following year, CBP rejected this test and instead subtracted the weight of the packaging from the total weight of the sealed package to find the weight of the wraps, skipping the gassing off portion. The result of this Test 2 was a 26% increase in weight, resulting in a total of 0.915 grams per wrap.
CIT found Test 1 was illegal since the wraps were not suitable for use after 24 hours of gassing off (see 1907240009). The trade court also found that Test 2 was in fact reliable even though the weights were "always" higher than the weight of the wraps at the time they were made in the factory in Mexico. The importer appealed to the Federal Circuit.
New Image told the appeals court that CIT erred when it found that the wraps were not suitable for use after 24 hours of evaporation (see 2111030057). Rather, genuine disputes of facts exist over whether the wraps were suitable for use after this time period and whether the chemicals that gas off are "integral," the plaintiff-appellant said. DOJ responded by arguing that these positions run "contrary to statute and undisputed record facts." The record evidence clearly shows that New Image's preferred weight -- calculated after allowing the ethanol, water and other liquids to evaporate -- "renders the wrap partially dry and unusuable." Thus, this weight cuts against the plain facts, DOJ said.
DOJ also told the Federal Circuit that its preferred test was in line with the statute. The excise tax law says that "roll-your-own tobacco" must be “suitable for use and likely to be offered to, or purchased by, consumers as tobacco for making cigarettes or cigars, or for use as wrappers thereof" and that any ingredient added to the wrap must be included in the weight. The ethanol and water that are gassed off contribute to the moisture content of the wraps, necessitating their inclusion in the final weight, DOJ argued. "Allowing certain volatile ingredients to evaporate prior to weighing runs counter to the statutory requirement that the wrap be suitable for use for its intended purpose," the brief said.