Government asks Supreme Court to review HMT refunds
Updated 2:43 p.m. ET, Tue Sep 19, 2000

BY JACK LUCENTINI

The government has petitioned for a Supreme Court review of an order under which exporters would get close to full refunds of the unconstitutional Harbor Maintenance Tax.

An appeals court ordered the government last February to issue nearly full refunds to exporters of the tax, which had been earmarked for harbor dredging.

Before the order, the government had planned to refund only about two years' worth of back taxes, citing a statute of limitations. The refunds started coming after the Supreme Court overturned the fee -- which amounted to 12.5 cents per $100 worth of cargo -- as unconstitutional in 1998.

The Federal Circuit U.S. Court of Appeals ruled in February that exporters had successfully outmaneuvered the limitations statute, using a novel legal strategy. The government filed a Supreme Court petition on Friday challenging this.

The petition "was unexpected. We had thought the government would leave well enough alone," said Peter Buck Feller, an attorney with the law firm of McKenna & Cuneo in Washington. He represents cigar maker Swisher International Inc., Darien, Conn., in the case.

A spokesman for Justice Department officials handling the case declined to comment.

The tax is undergoing other legal challenges in separate arenas. Exporters also are fighting to obtain interest on the tax refunds. Meanwhile, importers and foreign trade zone users, who still have to pay the tax, are arguing that it should be eliminated for them, too.

The European Union also has threatened to challenge the tax at the World Trade Organization.

The Supreme Court struck down the export portion of the tax, established in 1986, because the Constitution prohibits taxing exports.

The Clinton administration has proposed to replace the entire levy with a new tax on shipowners that would generate almost $1 billion a year. Maritime interests vehemently oppose the plan.