United States v. Zenith Radio Corp.

• Decision Date: 28 July 1977
• Docket Number: Customs Appeal No. 77-19.
• Citation: 562 F.2d 1209
• Parties: The UNITED STATES v. ZENITH RADIO CORPORATION.
• Court: U.S. Court of Customs and Patent Appeals (CCPA)

562 F.2d 1209

The UNITED STATES v. ZENITH RADIO CORPORATION.

Customs Appeal No. 77-19.

United States Court of Customs and Patent Appeals.

July 28, 1977.

Barbara Allen Babcock, Asst. Atty. Gen., Washington, D. C., David M. Cohen, Chief, Customs Section, Velta A. Melnbrencis, New York City, for the United States.

Eugene L. Stewart, Frederick L. Ikenson, Stewart & Ikenson, Washington, D. C., Philip J. Curtis, Chicago, Ill., attys. of record, for appellee.

Rivkin, Sherman & Levy, New York City, attys. of record, for amicus curiae; Saul L. Sherman, Joseph S. Kaplan, Donald H. Rivkin, New York City, of counsel.

Before MARKEY, Chief Judge, and RICH, BALDWIN, LANE and MILLER, Judges.

MARKEY, Chief Judge.

Appeal by the United States from a judgment of the United States Customs Court, 78 Cust.Ct. ___, C.D. 4691, 430 F.Supp. 242 (1977), holding that remission of a Japanese commodity tax, on electronic products exported from Japan, constitutes a bounty or grant under ž 303, Tariff Act of 1930, as amended, 19 U.S.C. ž 1303 (Supp. V 1975), and granting summary judgment to Zenith Radio Corporation (Zenith). We reverse.

Background

In 1970, Zenith petitioned the Commissioner of Customs,¹ alleging that bounties or grants were being bestowed upon the manufacture and export of certain products² from Japan. The Commissioner investigated and, on January 7, 1976, published a "Final Negative Countervailing Duty Determination," announcing that "no bounty or grant is being paid or bestowed, directly or indirectly, within the meaning of section 303." 41 Fed.Reg. 1298 (1976). Zenith, pursuant to ž 516(d), 19 U.S.C. ž 1516(d) (Supp. V 1975), contested the determination in the United States Customs Court.

The Japanese Tax

The Japanese Commodity Tax Law, Law No. 48 of 1962, as revised and insofar as it appears in the record, imposes a single-stage "commodity tax" upon a manufacturer's shipment of specified electronic products for consumption in Japan. The same products are exempt from the tax when shipped for export.³ A tax paid on a shipment for home consumption is refunded if that shipment is later exported.⁴ It is undisputed that the tax is internal, and that the application of the tax to internal shipments, while refusing to apply it to exports,⁵ is the sole governmental action which was adjudged below to have created a countervailable bounty or grant.

The Customs Court

Upon application by the United States, a three-judge panel was convened pursuant to ž 108, Customs Court Act of 1970. 28 U.S.C. ž 255 (1970). Both parties moved for summary judgment. Relying heavily upon Downs v. United States, 187 U.S. 496, 23 S.Ct. 222, 47 L.Ed. 275 (1903), the court held that remission of the Japanese Commodity Tax constituted a bounty or grant under ž 303, as a matter of law.⁶

Accordingly, the court granted Zenith's motion for summary judgment and ordered the Secretary of the Treasury to determine the net amounts of the bounties or grants and to assess countervailing duties equalling those amounts "on the subject electronic products exported from Japan, entered or withdrawn from warehouse for consumption on or after the day following the date of entry of this Order."

The Issue

The dispositive issue is whether the mere remission of an excise⁷ tax must, as a matter of law, be deemed a bounty or grant under 19 U.S.C. ž 1303 (Supp. V 1975):⁸

ž 1303. Countervailing duties.

(a) Levy of countervailing duties.

(1) Whenever any country, dependency, colony, province, or other political subdivision of government, person, partnership, association, cartel, or corporation, shall pay or bestow, directly or indirectly, any bounty or grant upon the manufacture or production or export of any article or merchandise manufactured or produced in such country, dependency, colony, province, or other political subdivision of government, then upon the importation of such article or merchandise into the United States, whether the same shall be imported directly from the country of production or otherwise, and whether such article or merchandise is imported in the same condition as when exported from the country of production or has been changed in condition by remanufacture or otherwise, there shall be levied and paid, in all such cases, in addition to any duties otherwise imposed, a duty equal to the net amount of such bounty or grant, however the same be paid or bestowed.

OPINION

Prior Cases

The rationale supporting the judgment below begins with the view that the applicable law is to be found in a paragraph from the 1903 Supreme Court opinion in Downs, supra.⁹ Though the Customs Court remarked the presence of an elaborate certificates-plus-tax remission scheme, it found primary support for its judgment in this paragraph (from which the court quoted the first and last sentences) in the lengthy Downs opinion:

The details of this elaborate procedure for the production, sale, taxation and exportation of Russian sugar are of much less importance than the two facts which appear clearly through this maze of regulations, viz.: that no sugar is permitted to be sold in Russia that does not pay an excise tax of R. 1.75 per pood, and that sugar exported pays no tax at all. The mere imposition of an import duty of three rubles per pood, paid upon foreign sugar, is, like all protective duties, a bounty, but is a bounty upon production and not upon exportation. When a tax is imposed upon all sugar produced, but is remitted upon all sugar exported, then, by whatever process, or in whatever manner, or under whatever name it is disguised, it is a bounty upon exportation. 187 U.S. at 515, 23 S.Ct. at 228.

Opinions must be read in their entireties and in the light of the facts of the case. Armour & Co. v. Wantock, 323 U.S. 126, 133, 65 S.Ct. 165, 89 L.Ed. 118 (1944). Though the first and last sentences of the quoted paragraph, considered in vacuo, would support the judgment below, their effect as binding precedent depends upon their relationship to the underlying facts and the remainder of the opinion in Downs. "It is a maxim, not to be disregarded, that general expressions, in every opinion, are to be taken in connection with the case in which those expressions are used." Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 398, 5 L.Ed. 257 (1821).

The clearest complete explanation of the complex Russian sugar scheme in Downs appears in the Board of General Appraisers' opinion, Downs v. United States, 4 Treas.Dec. 405, 409-413, T.D. 22984 (1901). The excise tax and certificate elements of the scheme were there described as:

VI. That, upon the exportation of said sugar * * *, the Russian Government, * * * released said sugar from said tax of 1.75 rubles * * * by a refund * * * a cancellation of indebtedness, or otherwise.

VII. That, in addition to remitting said excise tax, the Government issued to the exporter a certificate certifying that he had exported * * * free sugar. That * * * such certificates * * * have a substantial market value * * *.

VIII. That said certificates are sold to and used by sugar manufacturers or refiners, who are thereby enabled to transfer from their "free reserve or free surplus" to their "free sugar" an amount of sugar equal to the amount shown by said certificates to have been exported, which amount may then be sold for domestic consumption on paying the ordinary tax of 1.75 rubles per pood (to which free sugar is regularly subject). 4 Treas.Dec. at 411.

The board recognized that the combination of (1) regular and additional tax rebates, and (2) export certificates, operated to confer a bounty on sugar exports:

It is manifest * * * that the exporter * * * receives a valuable bonus * * * and that this bonus accrues * * * upon the exportation * * *. The export certificates or vouchers * * are only the legal evidence of this valuable privilege or grant conferred by the Government, without whose authority such transfers of sugar would be valueless and of no effect.

Our conclusion, therefore, is that a bounty or grant * * * has been paid or bestowed * * * so as to work a benefit or advantage * * * as follows:

First. * * * the Government remitted or refunded the excise tax * * * or otherwise canceled the indebtedness of the sugar manufacturer, so that he was enabled to place his product upon the market free from the burden of either the regular or additional excise tax.

Second. The certificate * * * had a substantial market value, and was transferable, and operated as a premium, grant, bonus, or reward. Id. at 413.

The whole Russian scheme, involving import duties, remission of regular and additional excise taxes, export certificates, and sugar transfers, was before the board, which did not decide the matter piecemeal. Hence, the appellate courts were faced with a board decision resting not on either of two independent grounds, but on a single ground having at least two important elements, and there was no call in Downs for the board, the Fourth Circuit, or the Supreme Court to decide whether a nonexcessive remission of an excise tax constitutes a per se bounty or grant.

On appeal, the Fourth Circuit affirmed, Downs v. United States, 113 F. 144 (4th Cir. 1902), adopting the board opinion and focusing its own attention on the export certificates:

We reach the conclusion that the collector of the port of Baltimore, under the provisions of the fifth section of the tariff act of July 25, 1897, properly imposed the duty now complained of by the appellant. We find that the Russian exporter of sugar obtains from his government a certificate, solely because of such exportation, which is worth in the open markets of that country from 1 ruble and 25 kopecks to 1 ruble and 64 kopecks per pood, or from 1.8 to 2.35 cents per pound. Therefore we hold that the government of Russia does secure to the exporter of that country, as the inevitable result of its action, a money reward or gratuity whenever he exports sugar from Russia, and we think it was from such

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