A. Zerkowitz & Co. v. United States

• Decision Date: 30 December 1970
• Docket Number: Customs Appeal No. 5348.
• Citation: 435 F.2d 576,58 CCPA 60
• Parties: A. ZERKOWITZ & CO., Inc., Appellant, v. The UNITED STATES, Appellee.
• Court: U.S. Court of Customs and Patent Appeals (CCPA)

58 CCPA 60, 435 F.2d 576 (1970)

A. ZERKOWITZ & CO., Inc., Appellant, v. The UNITED STATES, Appellee.

Customs Appeal No. 5348.

United States Court of Customs and Patent Appeals.

December 30, 1970.

Sharretts, Paley, Carter & Blauvelt, New York City, attorneys of record, for appellant. Eugene F. Blauvelt, Gail T. Cumins, New York City, of counsel.

William D. Ruckelshaus, Asst. Atty. Gen., Andrew P. Vance, Chief, Customs Section, Frederick L. Ikenson, New York City, for the United States.

Lamb & Lerch, New York City, amici curiae; David A. Golden, New York City, of counsel.

Before RICH, ALMOND, BALDWIN, and LANE, Judges, and McMANUS, Judge, Northern District of Iowa, sitting by designation.

RICH, Judge.

This appeal is from the judgment of the United States Customs Court, Second Division, Appellate Term (one judge dissenting in part), 62 Cust.Ct. 986 and 297 F.Supp. 350 (A.R.D. 250), affirming the judgment of a single judge sitting in reappraisement, 55 Cust.Ct. 643 (R.D. 11095). The imported goods are tennis shoes imported from Japan during the years 1958, 1959, and 1960. Both at trial and on appeal they were held properly appraised on the basis of the American selling price, as defined in 19 U.S. C. § 1402(g), of tennis shoes manufactured by the United States Rubber Company and sold as the U. S. Keds "Rover". We remand.

There are three issues. The first is whether inclusion of the imported merchandise in concessions to the Japanese in our 1955 trade agreement with Japan made improper its appraisement on the basis of the American selling price of like or similar domestic articles. The second issue, which we reach because we agree with the conclusion below on the first issue, is whether the use of the U. S. Keds "Rover" tennis shoes as the basis for the American selling price appraisement made below was proper. The third issue, which we reach because we find that not all the domestic tennis shoes used as the basis for the appraisement below were legally "similar" to the imported tennis shoes, is whether any other domestic tennis shoes could have been used as the basis for an American selling price appraisement.

I. Propriety of the Basis of Appraisement

The imported footwear is admittedly classifiable under paragraph 1530(e) of the Tariff Act of 1930, as amended, at a rate of 20% ad valorem. The question is valuation. Zerkowitz concedes that prior to the effective date of the 1955 trade agreement with Japan these goods were properly appraised on the basis of the American selling price of like or similar domestic articles by virtue of Presidential Proclamation No. 2027 (T.D. 46158; 63 Treas.Dec. 232), duly promulgated under the provisions of 19 U.S.C. § 1336. Subsection (a) of section 1336, headed "Equalization of Costs of Production — Change of Classification or Duties," authorized the Tariff Commission to "investigate the differences in the costs of production of any domestic article and of any like or similar foreign article," and if it found "that the duties expressly fixed by statute * * * did not equalize the differences in the costs of production of the domestic article and the like or similar foreign article when produced in the principal competing country", the commission was to report to the President "such increases or decreases in rates of duty expressly fixed by statute * * * as it * * * found * * * to be necessary to equalize such differences," with the added constraint that in no case should the total increase or decrease of such rates of duty exceed 50 per centum of the rates expressly fixed by statute. However, if it found that the differences in the foreign and domestic costs of production could not be equalized by the mechanism provided in subsection (a), subsection (b) authorized the commission to so state in its report to the President and to "specify therein such ad valorem rates of duty based upon the American selling price of the domestic article, as it * * * found * * * to be necessary to equalize such differences," with the added constraints, first, that in no case should the total decrease of rates of duty exceed 50 per centum of the rates fixed by statute, and, second, that no such rate should be increased. The President was then authorized by subsection (c) to "approve" the rates of duty and changes in the basis of value specified by the commission "if in his judgment such rates of duty and changes are shown by such investigation of the commission to be necessary to equalize such differences in costs of production." Proclamation No. 2027, supra, was so made.

However, Zerkowitz contends that subsection 1352(a) of 19 U.S.C. removed the disputed goods from the purview of section 1336 and that section 1402(a) of 19 U.S.C., which sets forth the five possible bases upon which the imported tennis shoes might have been appraised, only authorized appraisement on the basis of the American selling price of a like or similar domestic article when the rate of duty applied to the imported goods was one in effect as the result of a section 1336 proceeding.

The portion of 19 U.S.C. § 1352(a) on which Zerkowitz relies reads:

The provisions of section 1336 of this title shall not apply to any article with respect to the importation of which into the United States a foreign-trade agreement has been concluded pursuant to this part * * *.

A foreign-trade agreement with respect to the importation into the United States of the merchandise in suit had been concluded. Therefore, Zerkowitz contends, section 1336 was not applicable to the merchandise in suit, and, since 19 U.S.C. § 1402(a), read in conjunction with 19 U.S.C. § 1402(g), only authorized appraisement on the basis of American selling price "In the case of an article with respect to which there is in effect under section 336 19 U.S.C. § 1336 a rate of duty based upon the American selling price of a domestic article * * *" (emphasis ours), the appraisement of the merchandise in suit on an American selling price basis was not authorized.

The Appellate Term of the Customs Court held that the above-quoted portion of 19 U.S.C. § 1352(a)

addresses itself solely to the use of section 1336 as a procedural device, and that what is intended by the language above noted is the barring of the use of that statutory procedure in derogation of the operation of a trade agreement concluded pursuant to section 1351. To admit of the broad construction of section 1352 for which appellant contends would, in our view, require the addition of language to that above noted so as to make the statute applicable not only to the provisions of section 1336 of this title, but to make it also applicable to the customs treatment of articles pursuant thereto. Emphasis in the original.

With that conclusion we agree. The controverted portion of 19 U.S.C. § 1352(a) is prospective, barring use of the section 1336 procedures to undo what has been done by a foreign-trade agreement; it does not, in itself, nullify changes in rates of duty, classification, or bases of appraisement brought about by previous use of the section 1336 procedures.

However, this conclusion does not settle the issue. Section 1402 only authorized appraisement on the basis of American selling price "In the case of an article with respect to which there is in effect under section 336 19 U.S.C. § 1336 a rate of duty based upon the American selling price of a domestic article" (emphasis ours), and, since in this case the rate of duty originally set by a section 1336 proceeding was no longer being collected, having been superceded by a rate of duty set by the foreign-trade agreement with Japan, Zerkowitz contends that there was no rate of duty based upon the American selling price of a domestic article "in effect under section 336" when the goods here in issue were imported.

The Appellate Term relied on reasoning similar to that which we employed in Barclay & Co. v. United States, 47 CCPA 133, C.A.D. 745 (1960), to meet this argument, holding that

* * * section 1336 was at best only suspended,¹ and this, pro tanto to the extent of the duty rate, leaving intact the basis of valuation of the merchandise affected by section 1336.

Again, we agree with the conclusion reached below. In Barclay the rate of duty levied on certain imported goods had been set, successively, by the Tariff Act of 1930 simpliciter (30%), by a proclamation issued under authority of 19 U.S.C. § 1336(a) (45%), and by a proclamation implementing a foreign-trade agreement issued under authority of 19 U.S.C. § 1351 (22½%). When the second proclamation was terminated by still a third proclamation, we ruled that the rate of duty reverted to that specified in the first proclamation (45%) rather than to that specified in the statute (30%), holding "that the second proclamation did not abrogate the first but merely suspended it, and that repeal of the second operated to restore the first." Id. at 135. The Barclay decision in turn relied on two earlier cases² holding that upon the recission of a second section 1351 proclamation which had superceded a previous section 1351 proclamation, the original section 1351 proclamation controlled tariff treatment of the subject merchandise. Although these cases are all distinguishable on the facts in that different sequences and combinations of section 1336 proclamations and section 1351 proclamations were involved, we think that a common legal principle runs through all of them. The promulgation of successive proclamations under sections 1336 and 1351 of 19 U.S.C. does not, in itself, abrogate previous proclamations, but merely suspends them. Accordingly, at the time the goods here in issue were imported there was "in effect under section 336 19 U.S.C. § 1336 a rate of duty based upon the American selling price of a domestic article," and it was thus proper to appraise them under 19 U.S.C. § 1402(g) on the basis of the American selling price of a like or similar domestic article.

II. Propriety of the...