ASG Industries, Inc. v. United States

• Decision Date: 21 February 1980
• Docket Number: Appeal No. 79-15.
• Citation: 610 F.2d 770
• Parties: ASG INDUSTRIES, INC., PPG Industries, Inc., Libbey-Owens-Ford Company, and C E Glass, Appellants, v. The UNITED STATES, Appellee.
• Court: U.S. Court of Customs and Patent Appeals (CCPA)

610 F.2d 770

ASG INDUSTRIES, INC., PPG Industries, Inc., Libbey-Owens-Ford Company, and C E Glass, Appellants, v. The UNITED STATES, Appellee.

Appeal No. 79-15.

United States Court of Customs and Patent Appeals.

November 29, 1979.

Rehearing Denied February 21, 1980.

COPYRIGHT MATERIAL OMITTED

Frederick L. Ikenson, Eugene L. Stewart, Washington, D. C., attorneys of record, for appellants.

Barbara Allen Babcock, Asst. Atty. Gen., Washington, D. C., David M. Cohen, Director, Joseph I. Liebman, John J. Mahon, Sidney N. Weiss, New York City, for the U. S.

Before MARKEY, Chief Judge, and RICH, BALDWIN, MILLER and PENN,^* Judges.

MILLER, Judge.

This is an appeal from the judgment of the United States Customs Court, 82 Cust.Ct. ___, C.D. 4782 (1979), which upheld the decision of the Secretary of the Treasury ("Secretary") that float glass manufactured in West Germany did not benefit from the payment or bestowal of a bounty or grant within the meaning of section 303 of the Tariff Act of 1930, as amended (19 U.S.C. § 1303). We reverse and remand.

Background

Appellants, domestic manufacturers and wholesalers of float glass, petitioned the Commissioner of Customs for imposition of a countervailing duty on float glass manufactured in West Germany. They alleged that benefits received by float glass manufacturers in West Germany under various regional development programs, which included low-interest loans and investment subsidies in the form of cash grants and tax credits, were bounties or grants within the countervailing duty law.¹

The Treasury Department ("Treasury") preliminarily determined² that imports of float glass from West Germany benefit from the payment or bestowal of a bounty or grant within the meaning of 19 U.S.C. § 1303 by reason of the payments made under the regional development programs. After further study based on additional information, Treasury changed its position³ giving the following reasons:

The German Government has advised the Treasury Department that these benefits have the effect of offsetting disadvantages which would discourage industry from moving to and expanding in less prosperous regions. Inasmuch as the recipient glass producers sell a preponderance of their production in the West German home market (not less than 80 percent and up to 99%), the level of exports to the United States is a small percentage of the amount exported, and the amount of assistance provided by the regional incentive programs is less than 2 percent of the value of float glass produced, these benefits are not regarded as bounties or grants within the meaning of section 303 of the Tariff Act of 1930, as amended (19 U.S.C. § 1303).

Appellants then brought an action in the Customs Court, under 19 U.S.C. § 1516(d),⁴ contesting this negative countervailing duty determination. Both sides moved for summary judgment. Appellants alleged that the payments are countervailable; the Government contended that appellants failed to establish that the alleged bounties or grants possess the requisite effect upon international trade that is necessary before countervailing duties will be imposed.⁵

The Customs Court

The Customs Court concluded that, although the statutory language is mandatory ("there shall be levied"), Congress did not intend "that all assistance given by foreign governments" be considered bounties or grants within the statute, but gave authority to the Secretary to determine whether a bounty or grant has been bestowed, citing United States v. Hammond Lead Products, Inc., 58 CCPA 129, C.A.D. 1017, 440 F.2d 1024, cert. denied, 404 U.S. 1005, 92 S.Ct. 565, 30 L.Ed.2d 558 (1971). It said that the case law provides two tests to be used in countervailing duty determinations: (1) Whether, as a result of governmental programs, exportation of the involved merchandise is encouraged, citing Downs v. United States, 187 U.S. 496, 23 S.Ct. 222, 47 L.Ed. 275 (1903) (hereinafter "Downs"), and Nicholas & Co. v. United States, 249 U.S. 34, 39 S.Ct. 218, 63 L.Ed. 461 (1919) (hereinafter "Nicholas"); (2) whether the governmental assistance distorts international trade or discriminates against United States sales at home and abroad, citing Zenith Radio Corp. v. United States, 437 U.S. 443, 98 S.Ct. 2441, 57 L.Ed.2d 337 (1978), aff'g United States v. Zenith Radio Corp., 64 CCPA 130, C.A.D. 1195, 562 F.2d 1209 (1977).⁶ Because only up to 20 percent of the float glass manufactured by the participants in the regional development programs was sold outside the West German home market, and because the ad valorem size of the assistance provided by these programs was less than 2 percent of the value of the float glass produced, the Customs court found that, although such assistance was more than de minimis, "the bounties do not appear to have induced the sale of merchandise in such quantities or value as would tend to distort international trade." (Emphasis added.) The Customs Court cited trade statistics showing increases in the United States production and exports (especially to West Germany) of float glass, and decreases in importations of West German float glass, for support of the Secretary's decision to not impose countervailing duties. Having determined that appellants "failed to overcome the presumption of correctness attaching to the action of the Secretary,"⁷ the Customs Court denied appellants' motion and granted the Government's motion for summary judgment.

OPINION

Essentially, appellants argue that, since the countervailing duty statute is mandatory, once the Secretary has determined that foreign manufacturers are receiving any benefit from their government, a countervailing duty must be imposed. The Government, agreeing with the Customs Court, argues that the legislative history and case law show that Congress intended countervailing duties to be imposed only against those programs and actions of a foreign government that have been shown to distort international trade and that the following factors involved in international trade distortion must be considered in determining the existence of a bounty or grant: (1) the ad valorem size of the benefits; (2) the level of exports from the foreign country of goods receiving the benefits; and (3) whether the benefit programs had a positive effect on these exports.

With respect to the ad valorem size of the benefits, the Government's concession that the benefits under the regional development programs are not de minimis establishes, prima facie, that this factor is met. The finding by Treasury that up to 20 percent of the goods are exported likewise establishes that the second factor is met.⁸ As to whether the benefit programs had a positive effect on exports, Treasury's finding that "the amount of assistance provided by the regional incentive programs is less than 2 percent of the value of float glass produced" does not, without more, overcome a presumption that such benefits had a positive effect, or would have a potentially positive effect, on exports, particularly when compared to the average ad valorem rate of duty of 8.2 per cent during the year involved (1974), as pointed out by appellant. See 42 Fed.Reg. 23146-47 (1977), where Treasury determined that "bounties or grants were being paid or bestowed, directly or indirectly on exports of certain fasteners nuts, bolts, and cap screws from Japan," the benefits being .20 percent ad valorem. It said that, ordinarily, benefits of this size might be considered de minimis in relation to the value of the merchandise, but that they were "significant" when compared to the regular duty rate (up to .75 percent on an ad valorem basis.) See also 42 Fed.Reg. 28531 (1977) (aggregate benefits of eight tenths of one percent under a preferential loan program were greater than de minimis and it was, therefore, determined that the involved goods received bounties or grants within the meaning of section 303 of the Tariff Act of 1930, as amended).

By section 331(a) of the Trade Act of 1974, Pub.L.No.93-618, 88 Stat. 1978 (1975), Congress amended section 303 of the Tariff Act of 1930. Under new section 303(d) (19 U.S.C. § 1303(d) (Supp. V 1975)),⁹ which was added by this amendment, the Secretary could waive imposition¹⁰ of a countervailing duty if: (1) steps were taken to reduce substantially or eliminate the adverse effect of the bounty or grant; (2) there was reasonable prospect of trade agreements reducing or eliminating barriers to, or other distortions of, international trade; and (3) imposition of a countervailing duty would be likely to seriously jeopardize the negotiation of such agreements. 19 U.S.C. § 1303(d)(2)(A)-(C).

During consideration of the bill (H.R. 10710) that became the Trade Act of 1974, it was made clear that all three conditions must be met before the Secretary could waive application of a countervailing duty, and it was emphasized that "either the bounty or grant or its adverse effect must be eliminated (or substantially reduced) before the Secretary would have authority to waive the imposition of a countervailing duty order during trade negotiations." It was explained that the amendments to the countervailing duty law "are designed to tighten the administration" of that law. S.Rep.No.93-1298, 93d Cong., 2d Sess. 185 and 187, reprinted in 1974 U.S. Code Cong. & Admin.News, pp. 7186, 7320 and 7322. To permit the Secretary to avoid using his waiver authority (and to avoid having to find that a more than de minimis bounty or grant or its adverse effect has been eliminated or substantially reduced) by simply finding that, for purposes of 19 U.S.C. § 1303, there is no bounty or grant through employment of a vague and "undefined" (to use the dissenting opinion's term) international trade distortion test would effectively frustrate the Congressional intent to tighten administration of the countervailing duty law.

Congress also made clear its understanding that "the present countervailing duty statute is mandatory in...