870 F.2d 627 (Fed. Cir. 1989), 88-1559, Madison Galleries, Ltd. v. United States

Docket Nº88-1559.
Citation870 F.2d 627
Party NameMADISON GALLERIES, LTD., Plaintiff-Appellee, v. The UNITED STATES, Defendant-Appellant.
Case DateMarch 08, 1989
CourtUnited States Courts of Appeals, Court of Appeals for the Federal Circuit

Page 627

870 F.2d 627 (Fed. Cir. 1989)

MADISON GALLERIES, LTD., Plaintiff-Appellee,

v.

The UNITED STATES, Defendant-Appellant.

No. 88-1559.

United States Court of Appeals, Federal Circuit

March 8, 1989

Page 628

Richard C. King, Fitch, King and Caffentzis, New York City, argued for plaintiff-appellee. With him on the brief was James Caffentzis.

Al J. Daniel, Jr., Dept. of Justice, New York City, argued for defendant-appellant. With him on the brief were John R. Bolton, Asst. Atty. Gen., David M. Cohen, Director and Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office.

Before FRIEDMAN and SMITH, Circuit Judges, and NICHOLS, Senior Circuit Judge.

NICHOLS, Senior Circuit Judge.

This is an appeal from the judgment of the United States Court of International Trade, Madison Galleries, Ltd. v. United States, 688 F.Supp. 1544 (Ct.Int'l Trade 1988) (Aquilino, J.). The trial court held that articles imported directly from a beneficiary developing country ("BDC") are eligible for the statutory duty-free treatment if the direct cost of processing operations performed in the BDC is not less than 35 percent of the appraised value of the imported article, notwithstanding the fact that the imported article is the "growth, product, or manufacture" of a non-BDC country. We affirm.

Background

The facts of the present case are set forth in the able opinion of the trial court, id. at 1545, and familiarity with those facts is presumed. Briefly, Madison Galleries,

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Ltd. ("Madison") is an importer of various porcelainware articles. The porcelainware items here at issue were formed into undecorated "blanks" in the Republic of China (Taiwan), a non-BDC country. The blank porcelain pieces were then sent to Hong Kong, a BDC as defined in Title V of the Trade Act of 1974, 19 U.S.C. Sec. 2462, where they were attractively decorated. There is no dispute that the cost of the decoration process undertaken in Hong Kong contributed well over 35 percent of the articles' appraised values at the time they were imported into the United States. The Customs Service classified the porcelainware under TSUS item 534.94 and assessed duties according to that classification. Madison filed protests, claiming that the goods were entitled to duty-free treatment under the General System of Preferences ("GSP"), specifically TSUS item A 94. The protests were denied and this suit followed.

The Court of International Trade held that the imported articles were eligible for duty-free treatment under 19 U.S.C. Sec. 2463(b), and alternatively that some of the goods were substantially transformed in Hong Kong into new and different articles and were therefore eligible for duty-free treatment as "growth, product, or manufacture" of a BDC. The United States ("government" or "Customs") does not appeal the trial court's finding of substantial transformation as made. Thus, as to the goods found by the trial court to be substantially transformed in Hong Kong, there is no dispute that these goods are eligible for duty-free treatment, but others remain, as to which we are to decide.

Regarding the goods which were not found to be substantially transformed in Hong Kong, these originated from Taiwan, a non-BDC country, and are assumed, for purposes of this opinion, to have been the "growth, product, or manufacture" of that country, not having lost that identity by the added work on them in Hong Kong. The government argues that goods must be "growth, product, or manufacture" of a BDC country in order to be eligible for duty-free treatment. Therefore, notwithstanding the fact that the decoration process undertaken in Hong Kong exceeds 35 percent of the goods' appraised values, the government suggests that these goods are ineligible for duty-free treatment because of their Taiwanese origin.

Issue

The issue before us on appeal is whether goods imported directly from a BDC country, where over 35 percent of value was added, are eligible for duty-free treatment under 19 U.S.C. Sec. 2463(b) where the goods are assumed the "growth, product, or manufacture" of a non-BDC country. The relevant facts are undisputed and the issue is therefore purely one of statutory interpretation over which we exercise our own independent judgment without deference to the trial court. Chula Vista City School District v. Bennett, 824 F.2d 1573, 1579 (Fed.Cir.1987), cert. denied, --- U.S. ----, 108 S.Ct. 774, 98 L.Ed.2d 861 (1988); Institut Pasteur v. United States, 814 F.2d 624, 626, 2 USPQ2d 1048, 1049 (Fed.Cir.1987).

Opinion

I

This is a case of statutory construction. The starting point in every case involving construction of a statute is the language itself. See, e.g., Bethesda Hosp. Ass'n v. Bowen, 485 U.S. 399, 108 S.Ct. 1255, 1258, 99 L.Ed.2d 460 (1988); United States v. Turkette, 452 U.S. 576, 580, 101 S.Ct. 2524, 2527, 69 L.Ed.2d 246 (1981); Watt v. Alaska, 451 U.S. 259, 265, 101 S.Ct. 1673, 1677, 68 L.Ed.2d 80 (1981). Where the plain language of the statute would settle the question before the court, the legislative history is examined with hesitation to determine whether there is a clearly expressed legislative intention contrary to the statutory language. Immigration and Naturalization Service v. Cardoza Fonseca, 480 U.S. 421, 432 n. 12, 107 S.Ct. 1207, 1213 n. 12, 94 L.Ed.2d 434 (1987). Sometimes the literal language of some part of a statute may seemingly contradict the intent of the statute taken as a whole. Ambassador Division of Florsheim Shoes Co. v. United States, 748 F.2d

Page 630

1560, 3 Fed.Cir. (T) 28 (1984). Absent a clear cut contrary legislative intent, the statutory language is ordinarily regarded as conclusive. Burlington Northern R.R. v. Oklahoma Tax Commission, 481 U.S. 454, 461, 107 S.Ct. 1855, 1860, 95 L.Ed.2d 404 (1987); United States v. James, 478 U.S. 597, 606, 106 S.Ct. 3116, 3122, 92 L.Ed.2d 483 (1986); Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980).

The statute here in controversy is the Trade Act of 1974 and specifically section 2463(b) which provides, in pertinent part:

(b) Eligible articles qualifying for duty-free treatment

The duty-free treatment provided under section 2461 of this title with respect to any eligible article shall apply only--

(1) to an article which is imported directly from a beneficiary developing country into the customs territory of the United States; and

(2) If the sum of (A) the cost or value of the materials produced in the beneficiary developing country * * * plus (B) the direct costs of processing operations performed in such beneficiary developing country * * * is not less than 35 percent of the appraised value of such article at the time of its entry into the customs territory of the United States.

The Secretary of the Treasury * * * shall prescribe such regulations as may be necessary to carry out this subsection.

19 U.S.C. Sec. 2463(b).

The government urges us to interpret this statute as conditioning eligibility for duty-free treatment upon satisfaction of the following criteria:

First, the article must be "imported directly" from the BDC, 19 U.S.C. Sec. 2463(b)(1), 19 C.F.R. Sec. 10.175 * * * [and] [s]econd, the article must be "merchandise which is the growth, product, manufacture, or assembly of a beneficiary developing country * * *," 19 U.S.C. Sec. 2463; 19 U.S.C. [sic, C.F.R.] Sec. 10.176(a).

Government's Brief at 26. With regard to the first stated criterion, this language very closely tracks the language of the statute and both parties agree, as do we, that this criterion was required and was satisfied in this case. The controversy therefore centers upon the second stated criterion, namely that the articles must be merchandise which is the "growth, product, manufacture" or assembly of a BDC.

The first regulation to which the government refers states:

"Produced in the beneficiary developing country" defined. * * * [T]he words "produced in the beneficiary developing country" refer to the constituent materials of which the eligible article is composed which are either:

(1) Wholly the growth, product, or manufacture of the beneficiary developing country; or

(2) Substantially transformed in the beneficiary developing country into a new and different article of commerce.

19 C.F.R. Sec. 10.177(a).

Judge Aquilino correctly observed in the trial court opinion that the cited regulation "gives meaning to factor (A) of that [sic] section 2463(b)(2), and not to factor (B), which is the one relied on by plaintiff." Madison Galleries, 688 F.Supp. at 1546. We agree and hold that this regulation is not controlling, or even persuasive, as to the interpretation of factor (B).

Madison has not focused on a second regulation cited by the government and very much supportive of the government's position. In pertinent part, that regulation states:

Merchandise produced in a beneficiary developing country * * *. Merchandise which is (1) the growth, product, manufacture, or assembly of (i) a beneficiary developing country * * * and (2) imported directly from such beneficiary developing country * * * may qualify for duty-free entry under the Generalized System of Preferences ("GSP").

29 C.F.R. Sec. 10.176(a). The quoted sentence of this regulation inferentially, if not expressly, requires an article to be the "growth, product, or manufacture" of a

Page 631

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61 practice notes
  • 738 F.Supp. 528 (CIT. 1990), 85-08-01032, Clipper Belt Lacer Co., Inc. v. United States
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    ...to the contrary, that language must ordinarily be regarded as conclusive." Id.; see also Madison Galleries, Ltd. v. United States, 870 F.2d 627, 630 (Fed.Cir. 1989). The meaning of a particular tariff term is a question of law, while the determination of whether a particular article fi......
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    ...purposes." "[T]he meaning of words depends on their context," see Madison Galleries, Ltd. v. United States, 870 F.2d 627, 631 (Fed. Cir. 1989), and the language used in the Agency's answer to question 9 can be read as an instruction to insert the listed am......
  • Country of origin marking: Producers' goods and consumers' goods; distinction,
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    ...Midwood. Comment: One supporting commenter states that in Madison Galleries, Ltd. v. United States, 688 F. Supp. 1544 (CIT 1988), aff'd, 870 F.2d 627 (Fed Cir. 1989), the court in dicta stated that the post-Midwood cases may have diminished the significance of a producers' good- consumers' ......
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    • United States
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    • January 24, 1991
    ...to the contrary, that language must ordinarily be regarded as conclusive." Id.; see Madison Galleries, Ltd. v. United States, 870 F.2d 627, 630 (Fed.Cir. 1989). During the drafting of the Tariff Schedules of the United States, the Tariff Commission studied other tariff, commodity, and ......
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60 cases
  • 738 F.Supp. 528 (CIT. 1990), 85-08-01032, Clipper Belt Lacer Co., Inc. v. United States
    • United States
    • Federal Cases Court of International Trade
    • March 13, 1990
    ...to the contrary, that language must ordinarily be regarded as conclusive." Id.; see also Madison Galleries, Ltd. v. United States, 870 F.2d 627, 630 (Fed.Cir. 1989). The meaning of a particular tariff term is a question of law, while the determination of whether a particular article fi......
  • Safeguard Base Operations LLC v. United States, 070219 USFC, 19-61C
    • United States
    • Federal Cases Court of Federal Claims
    • July 2, 2019
    ...purposes." "[T]he meaning of words depends on their context," see Madison Galleries, Ltd. v. United States, 870 F.2d 627, 631 (Fed. Cir. 1989), and the language used in the Agency's answer to question 9 can be read as an instruction to insert the listed am......
  • 757 F.Supp. 1412 (CIT. 1991), 85-11-01575, Rollix Bearing, Inc. v. United States
    • United States
    • Federal Cases Court of International Trade
    • January 24, 1991
    ...to the contrary, that language must ordinarily be regarded as conclusive." Id.; see Madison Galleries, Ltd. v. United States, 870 F.2d 627, 630 (Fed.Cir. 1989). During the drafting of the Tariff Schedules of the United States, the Tariff Commission studied other tariff, commodity, and ......
  • 754 F.Supp. 881 (CIT. 1990), 86-10-01342, Admiral Div. of Magic Chef, Inc. v. United States
    • United States
    • Federal Cases Court of International Trade
    • December 28, 1990
    ...to the contrary, that language must ordinarily be regarded as conclusive." Id.; see also Madison Galleries, Ltd. v. United States, 870 F.2d 627, 630 (Fed.Cir.1989). The meaning of a particular tariff term is a question of law, while the determination of whether a particular article fit......
  • Request a trial to view additional results
1 provisions
  • Country of origin marking: Producers' goods and consumers' goods; distinction,
    • United States
    • Federal Register March 14, 2000
    • March 14, 2000
    ...Midwood. Comment: One supporting commenter states that in Madison Galleries, Ltd. v. United States, 688 F. Supp. 1544 (CIT 1988), aff'd, 870 F.2d 627 (Fed Cir. 1989), the court in dicta stated that the post-Midwood cases may have diminished the significance of a producers' good- consumers' ......