Carlisle Tire and Rubber Co. v. United States

• Decision Date: 18 May 1983
• Docket Number: Court No. 79-5-00748.
• Citation: 564 F. Supp. 834
• Parties: CARLISLE TIRE AND RUBBER COMPANY, Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

564 F. Supp. 834

CARLISLE TIRE AND RUBBER COMPANY, Plaintiff, v. UNITED STATES, Defendant.

Court No. 79-5-00748.

United States Court of International Trade.

May 18, 1983.

Eugene L. Stewart and Terence P. Stewart, Washington, D.C., for plaintiff.

J. Paul McGrath, Asst. Atty. Gen., Washington, D.C., David M. Cohen, Director, Commercial Litigation Branch, Washington, D.C. (Sheila N. Ziff, New York City, on the brief), for defendant.

On Plaintiff's Supplementary Motion and Defendant's Supplementary Cross-Motion for Summary Judgment

MALETZ, Senior Judge.

This case is one of first impression, posing the question whether a generally available tax deduction for accelerated depreciation of equipment is a bounty or grant within the meaning of section 303 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1303 (1976).¹ Plaintiff Carlisle Tire and Rubber Company (Carlisle), a domestic manufacturer of bicycle tires and tubes, challenges the countervailing duty redetermination of the International Trade Administration of the Department of Commerce (ITA) involving bicycle tires and tubes imported from the Republic of Korea. That redetermination was made pursuant to the remand of this court in Carlisle Tire & Rubber Co. v. United States, 2 CIT 97 (1981).

In its initial review of this matter this court found that the administrative record did not "contain sufficient information to enable the court to determine or reasonably estimate the amount of benefits received by the Korean importers, ..." Id. at 102. However, in lieu of undertaking de novo judicial review — which was available prior to enactment of the Trade Agreements Act of 1979 — the court instead remanded the matter to the ITA for a redetermination. Id. See Carlisle Tire & Rubber Co. v. United States, 1 CIT 352, 357-58, 517 F.Supp. 704, 708-09 (1981).

On March 3, 1982, the ITA submitted its redetermination in which Carlisle concurred save for three of the ITA's findings: (1) that Hung-A Industrial Co., Ltd. (Hung-A), a Korean manufacturer of bicycle tires and tubes, did not receive countervailable benefits under Article 51-1-1 of the Korean Corporation Tax Law, a provision permitting accelerated depreciation of equipment; (2) that Hung-A did not receive a bounty or grant under Article 51-1-4 of that same Tax Law which gives additional accelerated depreciation to those enterprises which maintain accurate business records; and (3) that the benefits received by Hung-A under two export-related reserve fund programs, while undisputably countervailable, were properly calculated by using Hung-A's opening balance for 1977. It is these programs which are the focus of Carlisle's supplementary motion and the ITA's supplementary cross-motion for summary judgment.

For the reasons that follow, the court concludes that the two accelerated depreciation programs under Articles 51-1-1 and -4 are not a bounty or grant within the meaning of section 303 of the Tariff Act of 1930 inasmuch as the benefits accorded under these programs are not preferential but rather are generally available to the entire business community of Korea. With regard to the export reserve fund programs, the present record before the court lacks a sufficient factual foundation as to Hung-A's tax payment and accounting practices. Thus, the court is unable to ascertain whether the ITA's calculations were properly determined and, hence, neither party is entitled to judgment as a matter of law. See rule 56(d) of the rules of this court.² Accordingly, Carlisle's supplementary motion for summary judgment is denied, and the ITA's cross-motion for summary judgment is granted in part and denied in part.

I

The court turns first to an examination of the accelerated depreciation available under Articles 51-1-1 and -4 of the Korean Corporation Tax Law. Under Article 51-1-1 machinery or equipment used directly for manufacturing may be depreciated by an additional 20% beyond that ordinarily allowed under Korean law, provided the machinery or equipment is used at least 12 hours daily.³ The tax benefit program under Article 51-1-4 likewise permits so-called "green returns" corporations to take an additional 20% depreciation beyond that normally allowed. (Green is the color of the tax return form.) Enterprises may take advantage of the "green return" program if they have had a history of maintaining accurate business records,⁴ including the filing of accurate tax returns.

In its redetermination the ITA found that Hung-A had availed itself of the benefits under Articles 51-1-1 and -4. However, the ITA concluded that "since the programs under Article 51-1-1 and 51-1-4 are available to all manufacturers they are not preferential and are not bounties or grants." Thus, in the view of the ITA, a condition precedent to finding that a domestic program provides a bounty or grant is that the program give an advantage to one or more industries vis-a-vis other industries within the same country.

Carlisle is of the diametrically opposite view. It argues that benefits from government programs are countervailable even if they are generally available on a nonpreferential basis. It bases this contention on what it considers to be a plain reading of the words "bounty or grant" contained in section 303, concluding that Congress intended to cast its net broadly in order to catch all subsidies, export as well as domestic, without restriction. According to Carlisle, Congress expressed in unequivocal words its direction that all bounties or grants on manufacture or production be offset by means of countervailing duties in the amount of the net bounty or grant.

For its part the ITA counters that no generally available domestic program has ever been countervailed as a section 303 bounty or grant. Given this situation, the ITA concludes, there exists a longstanding administrative practice which should not be disturbed, citing Zenith Radio Corp. v. United States, 437 U.S. 443, 98 S.Ct. 2441, 57 L.Ed.2d 337 (1978).

II

While it is true that no generally available domestic subsidy has ever been countervailed, this glosses over the fact that this issue has never been directly considered either administratively or judicially.⁵ The lack of opportunity to address the question whether a generally available domestic program is a section 303 bounty or grant is hardly synonymous with a longstanding and consistent administrative practice. Notwithstanding the absence of such a longstanding practice, the court nevertheless agrees that generally available domestic tax benefits are not bounties or grants within the meaning of section 303 for at least three reasons: the deference due an agency's interpretation of the statute it is charged with administering, the absurd consequences which would flow from adoption of Carlisle's interpretation of section 303, and recent congressional pronouncements which show that section 303 was not intended to reach generally available domestic subsidies.

A

First, in connection with the interpretation given a statute by the agency charged with its administration, it is basic that a court should defer to such interpretation, provided it is reasonable. See, e.g., Zenith Radio Corp. v. United States, 437 U.S. at 450, 98 S.Ct. at 2445; Train v. Natural Resources Defense Council, 421 U.S. 60, 75, 95 S.Ct. 1470, 1479, 43 L.Ed.2d 731 (1975); Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965). In addressing the question of reasonableness the court notes that nowhere in the legislative history of section 303 is there a definition of "bounty or grant". From this it has been inferred that Congress consciously refrained from spelling out the precise criteria for determining what constitutes a bounty or grant, but rather intended that the metes and bounds of that term be staked out judicially and through administrative practice. United States v. Zenith Radio Corp., 64 CCPA 130, 140 & n. 14, C.A.D. 1195, 562 F.2d 1209, 1217 & n. 14 (1977), aff'd, 437 U.S. 443, 98 S.Ct. 2441, 57 L.Ed.2d 337 (1978). In the case of domestic subsidies the ITA has here interpreted "bounty or grant" as connoting some special or comparative advantage conferred upon an industry or group of industries and not available to all manufacturers and producers within a given country. Absent an industry-specific or regional preference, the ITA contends, there can be no bounty or grant as that term is used in section 303.

The court agrees with the ITA's interpretation of section 303. Support for this position can be found, first of all, in the case law where a bounty or grant has been defined as a "special advantage," Nicholas & Co. v. United States, 7 Ct.Cust.App. 97, 107 (1916), aff'd, 249 U.S. 34, 39 S.Ct. 218, 63 L.Ed. 461 (1919), "an additional benefit" or "valuable privilege" conferred upon a "class of persons". Downs v. United States, 113 F. 114, 147 (4th Cir.1902), aff'd, 187 U.S. 496, 23 S.Ct. 222, 47 L.Ed. 275 (1903). Secondly, lexicons have defined a "bounty" as "a grant or subsidy to encourage an industry", and "grant" as a "tract of land, a monopoly, or the like, granted by the government" — both suggesting preferential treatment. Webster's New Int'l Dictionary 317, 1089 (2d ed. 1956).

Furthermore, although no decision of this court has directly passed on this specific question, several cases suggest that at a minimum either a regional or industry preference be present in order for a bounty or grant to exist. See, e.g., ASG Industries, Inc. v. United States, 67 CCPA 11, C.A.D. 1237, 610 F.2d 770 (1979); ASG Industries, Inc. v. United States, 67 CCPA 31, C.A.D. 1238, 610 F.2d 785 (1979); ASG Industries, Inc. v. United States, 82 Cust.Ct. 101, C.D. 4794, 467 F.Supp. 1200 (1979); Michelin Tire Corp. v. United States, 2 CIT 143 (1981); Macalloy Corp. v. United States, 1 CIT 199 (1981).⁶ All in all, the court must conclude that the ITA's interpretation here is reasonable.

B

What is more, adoption of Carlisle's literal view that...