Armco Steel Corporation v. Stans

• Decision Date: 19 June 1969
• Docket Number: No. 68 Civ. 4416.,68 Civ. 4416.
• Citation: 303 F. Supp. 262
• Parties: ARMCO STEEL CORPORATION, Plaintiff, v. Maurice H. STANS, Secretary of Commerce, as Chairman and Executive Officer of the Foreign-Trade Zones Board, David M. Kennedy, Secretary of the Treasury, and Stanley R. Resor, Secretary of the Army, as members of the Foreign-Trade Zones Board and otherwise, and Richard H. Lake, as Executive Secretary, Foreign-Trade Zones Board, Defendants. Equitable Equipment Company, Inc. and Central Gulf Steamship Corporation, Intervenors.
• Court: U.S. District Court — Southern District of New York

303 F. Supp. 262

ARMCO STEEL CORPORATION, Plaintiff, v. Maurice H. STANS, Secretary of Commerce, as Chairman and Executive Officer of the Foreign-Trade Zones Board, David M. Kennedy, Secretary of the Treasury, and Stanley R. Resor, Secretary of the Army, as members of the Foreign-Trade Zones Board and otherwise, and Richard H. Lake, as Executive Secretary, Foreign-Trade Zones Board, Defendants Equitable Equipment Company, Inc. and Central Gulf Steamship Corporation, Intervenors.

No. 68 Civ. 4416.

United States District Court S. D. New York.

June 19, 1969.

Breed, Abbott & Morgan, New York City, for plaintiff, Edward J. Ross, Miriam C. Feigelson, New York City, of counsel.

Robert M. Morgenthau, U. S. Atty. for the Southern District of New York, Yale L. Rosenberg, Michael D. Hess, Asst. U. S. Attys., for defendants, Karl E. Bakke, Dept. of Commerce, of counsel.

Smathers, Merrigan & O'Keefe, Washington, D. C., Edward L. Merrigan, Washington, D. C., of counsel, Bigham, Englar, Jones & Houston, New York City, J. Joseph Noble, New York City, of counsel, for intervenors.

OPINION

BONSAL, District Judge.

Armco Steel Corporation (Armco) seeks a declaratory judgment holding unlawful and setting aside an order issued on November 19, 1968 (the Order) by the Foreign-Trade Zones Board (the Zones Board) granting the Board of Commissioners of the Port of New Orleans (the New Orleans Board) the right to set up a foreign-trade sub-zone (sub-zone). Jurisdiction is based upon 28 U. S.C. § 2201 and 28 U.S.C. §§ 1331(a), 1337, and 1340.

Congress established the Zones Board in 1934 (Foreign Trade Zones Act, 48 Stat. 998 et seq., 19 U.S.C. §§ 81a et seq.), consisting of the Secretary of Commerce, as Chairman, and the Secretaries of the Treasury and of the Army. The Zones Board is authorized to "grant to corporations the privilege of establishing, operating, and maintaining foreign-trade zones in or adjacent to ports of entry under the jurisdiction of the United States." (19 U.S.C. § 81b(a).) "Corporations" may be public or private (§ 81a(d)).

A foreign-trade zone (zone) is a duty-free area within the United States where foreign and domestic "merchandise" may be, among other things, stored, manipulated, manufactured, and exhibited. 19 U.S.C. § 81c; 15 C.F.R. § 400.101. If merchandise which is brought duty-free into a zone is subsequently imported into the customs territory of the United States from a zone, the applicable duty must be paid. However, no duty need be paid if the merchandise is reshipped from the zone to a foreign country. A sub-zone is an adjunct to a zone and is used for "one or more of the specialized purposes" for which a zone can be used. 15 C.F.R. § 400.304.

At present, ten zones, used for general purposes, and five sub-zones, used for specialized purposes, have been established by the Zones Board in the United States. Foreign-Trade Zone No. 2, located in New Orleans, Louisiana, was established in 1947, and is under the administration of the New Orleans Board. The sub-zone authorized by the Order is a noncontiguous adjunct to Foreign-Trade Zone No. 2.

The saga of the sub-zone commenced in October 1967 when the New Orleans Board was approached by representatives of Equitable-Higgins Shipyard, Inc. (Equitable) to explore the possibility of establishing a sub-zone in the Equitable shipyard¹ for the specialized purpose of manufacturing barges to be used aboard LASH vessels.² After receiving bids from Equitable and other domestic and foreign shipbuilders, Central Gulf Steamship Corporation (Central Gulf) entered into a contract with Equitable on January 17, 1968 under which Equitable was to build 233 barges to be manufactured out of steel plates imported from Japan, Equitable to use its "best efforts" to insure that a sub-zone would be established in New Orleans for the construction of the barges. The contract price assumed that the steel plates from Japan would be brought into the sub-zone without payment of customs duties, and that the completed barges, as "vessels," would enter the customs territory of the United States duty free.

On March 18, 1968, the New Orleans Board applied to the Zones Board for the establishment of the sub-zone in a 3.64 acre area within the Equitable shipyard. In the application, the New Orleans Board stated that the existing zone in New Orleans was operating at near maximum capacity and was not able to accommodate the equipment or facilities needed to manufacture the barges.

Hearings on the application were conducted by the Examiners' Committee of the Zones Board in New Orleans on May 22 and 23, 1968. Testimony was taken from representatives of the New Orleans Board, Equitable, and Central Gulf, and others in favor of the application, and from representatives of Armco, Bethlehem Steel Corporation, and the Shipbuilders Council of America in opposition. On June 5, 1968, the Examiners' Committee issued its report recommending that the Zones Board grant the sub-zone application.

On November 19, 1968, the Zones Board issued the Order authorizing the establishment of the sub-zone in New Orleans, and made Findings of Fact in support of its Order.

Thereafter, Armco instituted this action and moved for summary judgment. Intervenors Equitable Equipment Company, Inc.³ and Central Gulf move for summary judgment, dismissing the complaint, and the defendants, Maurice Stans, Secretary of Commerce, David Kennedy, Secretary of the Treasury, Stanley Resor, Secretary of the Army, and Richard Lake, Executive Secretary of the Zones Board (the defendants), join in the intervenors' motion for summary judgment dismissing the complaint.

There is no dispute as to the facts, and the parties agree that summary judgment may be granted.

STANDING

Intervenors and defendants urge that they are entitled to summary judgment on the ground that Armco lacks standing to bring this action.

"The fundamental aspect of standing is that it focuses on the party seeking to get his complaint before a federal court and not on the issues he wishes to have adjudicated. * * * The question is whether the person whose standing is challenged is a proper party to request an adjudication of a particular issue and not whether the issue itself is justiciable.

* * * * * *

However, it is both appropriate and necessary to look to the substantive issues for another purpose, namely, to determine whether there is a logical nexus between the status asserted and the claim sought to be adjudicated." Flast v. Cohen, 392 U.S. 83, 99, 100, 102, 88 S.Ct. 1942, 1952, 20 L.Ed.2d 947 (1968).

Armco's position is that, as a domestic steel manufacturer, it will be economically injured by the Zones Board's Order in that Equitable, a shipbuilder to whom Armco formerly sold steel, will be able to import Japanese steel into the sub-zone for the manufacture of barges without the payment of the 7½% customs duty on foreign steel, 19 U.S.C. § 1202, and will thereafter be able to import barges into the customs territory of the United States, again without the payment of customs duties, in violation of the Act and tariff laws of the United States. Thus, Armco complains that the Zones Board's Order will have the effect of illegally fostering competition between itself and Japanese steel manufacturers; that other domestic shipbuilders will be placed at a competitive disadvantage by Equitable's ability to import Japanese steel at a cost below that of domestic steel or foreign steel on which duty is paid; and that other domestic manufacturers may be forced to compete with foreign manufacturers whose goods can be shipped into zones duty-free.

While "economic injury which results from lawful competition cannot, in and of itself, confer standing on the injured business to question the legality of any aspect of its competitor's operations". Hardin v. Kentucky Utilities Co., 390 U. S. 1, 5-6, 88 S.Ct. 651, 654, 19 L.Ed.2d 787 (1968); Perkins v. Lukens Steel Co., 310 U.S. 113, 60 S.Ct. 869, 84 L.Ed. 1108 (1940); Tennessee Electric Power Co. v. T.V.A., 306 U.S. 118, 59 S.Ct. 366, 83 L.Ed. 543 (1939); Alabama Power Co. v. Ickes, 302 U.S. 464, 58 S.Ct. 300, 82 L.Ed. 374 (1938), judicial review is available for "economic injury" where the plaintiff "can show the existence of a `statutory aid to standing' for a class of persons which includes himself." Arnold Tours, Inc. v. Camp, 408 F.2d 1147, 1150 (1st Cir., March 27, 1969).

While the Foreign-Trade Zones Act (the Act) does not specifically provide for judicial review of orders of the Zones Board, judicial review may be had "unless there is persuasive reason to believe that no judicial review was the purpose of Congress." Abbott Laboratories v. Gardner, 387 U.S. 136, 140, 87 S.Ct. 1507, 1511, 18 L.Ed.2d 681 (1967); Norwalk CORE v. Norwalk Redevelopment Agency, 395 F.2d 920, 932 n. 25 (2d Cir. 1968).

There is a "basic presumption" embodied in the Administrative Procedure Act in favor of "judicial review to one `suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute,' 5 U.S.C. § 702," unless such review is precluded by statute or the action is committed to agency discretion, 5 U.S.C. § 701(a). Abbott Laboratories v. Gardner, supra 387 U.S. at 140, 87 S.Ct. at 1511.

Nothing in the legislative history of the Act indicates that Congress intended to preclude judicial review of Zones Board orders; and while the action of the Zones Board, in establishing the sub-zone, involved some degree of discretion, it is not the type of agency action which a court is precluded from reviewing. See Long Island R.R. v. United States, 140 F.Supp. 823 (E.D.N. Y. 1956) (three-judge court); see also Knight Newspapers, Inc. v. United States, 395 F.2d 353 (6th Cir. 1968).

The meaning of "legal wrong * * * or adversely affected or aggrieved * * * within the meaning of a relevant statute," 5 U.S.C. § 702, has been considered in a number of cases, see, e....