Norcal/Crosetti Foods v. US Customs Service

• Decision Date: 27 February 1991
• Docket Number: Court No. 89-09-00495.
• Citation: 758 F. Supp. 729
• Parties: NORCAL/CROSETTI FOODS, INC., Paterson Frozen Foods, Inc. and Richard A. Shaw, Inc., each California corporations, Plaintiffs, v. UNITED STATES CUSTOMS SERVICE, United States Department of the Treasury, Honorable Nicholas Brady, Secretary of the Treasury, John Durant, Director of the Commercial Rulings Division, United States Customs Service, and Harvey B. Fox, Director of the Office of Regulations and Rulings of the United States Customs Service, Defendants, Covemex, S.A. de C.V., Mar Bran, S. de R.L., Expohort, S.A. de C.V., Vegetales Congelados, S. de P.R., and Congelados Don Jose, S.A. de C.V., Amici Curiae.
• Court: U.S. Court of International Trade

758 F. Supp. 729

NORCAL/CROSETTI FOODS, INC., Paterson Frozen Foods, Inc. and Richard A. Shaw, Inc., each California corporations, Plaintiffs, v. UNITED STATES CUSTOMS SERVICE, United States Department of the Treasury, Honorable Nicholas Brady, Secretary of the Treasury, John Durant, Director of the Commercial Rulings Division, United States Customs Service, and Harvey B. Fox, Director of the Office of Regulations and Rulings of the United States Customs Service, Defendants Covemex, S.A. de C.V., Mar Bran, S. de R.L., Expohort, S.A. de C.V., Vegetales Congelados, S. de P.R., and Congelados Don Jose, S.A. de C.V., Amici Curiae.

Court No. 89-09-00495.

United States Court of International Trade.

February 27, 1991.

Titchell, Maltzman, Mark, Bass, Ohleyer & Mishel, Richard D. Maltzman, Robert Ted Parker, San Francisco, Cal., for plaintiffs.

Stuart M. Gerson, Asst. Atty. Gen., Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office, Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice, Susan Burnett Mansfield, U.S. Customs Service, (Ruth Hansell, of counsel), for defendants.

Brownstein, Zeidman, and Schomer, Irwin Altschuler, Donald S. Stein, Washington, D.C., for amici curiae.

OPINION

MUSGRAVE, Judge.

Plaintiffs move for summary judgment to compel defendant United States Customs Service to withdraw a Ruling Letter endorsing the present practice of marking imported frozen produce with country of origin on the rear panel of packages, and to require that such marking be placed on the front panel of packages in type size comparable to the product description and/or in a contrasting color. Plaintiffs also request that Customs be ordered to enact new regulations "to amend 19 C.F.R. § 134.41(b) to enforce the plain Congressional intent of 19 U.S.C. § 1304." Defendant United States Customs Service moves for summary judgment on the ground that the agency action at issue should be set aside only if the Court finds that Customs action was arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law.

Held: Customs Ruling Letter No. HQ 731830 does not comply with the clear language of 19 U.S.C. § 1304, and does not reflect the Congressional intent in enacting the statute. Frozen vegetables must be marked clearly and conspicuously with their country of origin as required by statute and as defined below.

I. INTRODUCTION

This case presents questions concerning the interpretation of the country of origin marking requirement of 19 U.S.C. § 1304 (1990) ("§ 1304"), the jurisdiction of this Court under 28 U.S.C. § 1581(i)(4) (1990), the standard of review of administrative rulings, the discretion of the United States Customs Service ("Customs") to interpret its own regulations and the extent to which an administrative determination made by Customs may be overruled when that determination does not comply with law. The Court finds that the present practice of marking country of origin on frozen vegetable packages on the rear panel is not conspicuous, and that the Customs Ruling Letter No. HQ 731830 deviates from the clear language of, and does not follow the Congressional purpose behind, § 1304. Further, the markings are neither conspicuous nor "as legible as ... as the nature of the packages ... will permit."¹ The markings are neither easily found nor read without strain, as required by Customs Regulation 19 C.F.R. § 134.41(b) (1990).

Norcal/Crosetti Foods, Inc., Patterson Foods, Inc., and Richard A. Shaw, Inc. ("Norcal") are California-based packagers of frozen produce, and are supported in this action by local food packaging worker's unions. Based on their perception that imports of foreign frozen produce were seriously eroding their market, Norcal requested a ruling that imported frozen vegetables were not marked in accordance with § 1304 and Customs regulations and that they should be marked in a contrasting color on the front panel of the packages ("Ruling Request"). Norcal submitted photocopies of frozen vegetable packaging and several scientific reports on the levels of pesticides in imported produce. On November 21, 1988, John Durant, Director of the Commercial Rulings Division, denied Norcal's request in Ruling Letter No. HQ 731830 ("Ruling Letter"). The Ruling Letter interpreted the country of origin marking requirement contained in § 1304 and Customs Regulation 19 C.F.R. § 134.41(b).² Director Durant stated that the markings were legible and that

consumers are familiar with the industry practice of displaying nutritional information and an expiration date on food products such as packages of frozen produce. As these dates and nutritional information are conspicuous on packages, country of origin marking displayed in close proximity to such dates or data is conspicuous as well, i.e., it is easily found and read without strain, and satisfies marking requirements.³

Following the denial of the Ruling Request, Norcal brought this action in the U.S. District Court for the Northern District of California, from which the case was transferred by stipulation to this Court on August 30, 1989.⁴ Following the Court's decision on jurisdiction⁵ both parties moved for summary judgment and the issues were argued before the Court on December 5, 1990.

II. FACTS

Imported frozen vegetables have been sold in this country for some time, but their market share has increased exponentially in the past few years. The foreign produce appears to have blended seamlessly into the stream of commerce and is sold under well-known U.S. labels such as Green Giant and Bird's Eye. Norcal made the Ruling Request after its share of the frozen vegetable packaging market declined significantly due to increased imports of foreign produce. The Ruling Letter impacts the domestic industry at a particularly sensitive time; over 300 frozen food packaging jobs have been lost recently in plaintiffs' production area. See Exported Jobs Drive Home Grim Lesson in Economics, Los Angeles Times, January 13, 1991, at 1, col. 1; Green Giant Layoffs Sock Watsonville, San Francisco Examiner, January 20, 1991, at B-1, col. 5.

Norcal alleges that because of the lower labor costs and comparatively lax regulatory requirements, Mexican producers in particular are able to export frozen vegetables into the United States at a fraction of the domestic production cost.⁶ Norcal's unrebutted evidence shows that the final cost to the consumer of domestic frozen vegetables is comparable to that of imported frozen vegetables. However, the consumer may face—but may not perceive—an increased health risk in choosing frozen vegetables from other countries.⁷ Food and Drug Administration ("F.D.A.") inspectors at various border crossings have found levels of pesticides in imported vegetables that would be unacceptable in domestic produce. Consumers might or might not choose to eat domestically-produced frozen vegetables if informed of the country of origin by conspicuous marking. Section 1304 mandates that they should be given a realistic choice.

The government did not support its argument that the packages submitted were not representative of packages from the entire country. The Court's own research in eight states⁸ revealed that they were in fact representative of frozen food packaging from across the country. However, certain packages submitted to the Court were not part of the administrative record and should properly be disregarded. P.P.G. Indus., Inc. v. United States, 13 CIT ___, ___, 708 F.Supp. 1327, 1329 (1989). The Court's decision is based solely on those packages submitted to Customs with the Ruling Request.

On the sample packages supplied to Customs, the country of origin marking appeared almost exclusively on the rear panel. Manufacturers place the country of origin marking where it is not easily found by the consumer. Most often, it is lost among the various small typeface information contained on the back or side panel of the package. The producers are reluctant to display conspicuously the source of the food, suggesting that there must be a valid reason for requiring stricter compliance than required in the Ruling Letter.⁹

The product type, brand name and weight, and occasionally other descriptive data¹⁰ are all conspicuously displayed on the front panel. The packaging typically uses contrasting colors for the product type and brand name; the weight of the package is often simply in black-on-white lettering. This is the data the manufacturer apparently wants the customer to see — except for the weight, which is required to be displayed according to 15 U.S.C. § 1453 (1988). Other less important data is in fine print on the rear of the package. Nutritional information is uniformly displayed on the rear or side panel under F.D.A. regulation 21 C.F.R. § 101.9 (1990). The only consistency in the country of origin marking was the inconsistency of where the manufacturer chooses to place the mark. Therefore, the customer cannot be assured of easily finding the mark, even if he or she gives the package a reasonable inspection. The manufacturers do not place the country of origin mark conspicuously, perhaps for fear of losing sales. This is at cross-purposes with Congress' attempt to ensure that consumers have the country of origin of foreign goods in mind when selecting products, i.e. before purchase.

The Court takes judicial notice of the common method of displaying the merchandise in shelved freezers or frozen food bins with the front panel in view and the rear panel obscured. Frozen vegetables are commonly marketed in long, low freezers with open tops, or wall-mounted freezers with glass doors. Access is limited and sometimes awkward, given that the produce must not defrost. The packages are usually placed so that only the front panel is clearly visible. Customers are unable to scan the labels as easily as they can those on dry goods or other produce that is not frozen, because the package is frozen and cold to the touch and...