Footwear Distributors and Retailers v. US, Court No. 85-04-00581. Slip Op. No. 94-77.

• Decision Date: 10 May 1994
• Docket Number: Court No. 85-04-00581. Slip Op. No. 94-77.
• Citation: 852 F. Supp. 1078
• Parties: FOOTWEAR DISTRIBUTORS AND RETAILERS OF AMERICA, f/k/a Footwear Retailers of America, et al., Plaintiffs, v. The UNITED STATES, Defendant, and Footwear Industries of America, Inc., Intervenor-Defendant.
• Court: U.S. Court of International Trade

852 F. Supp. 1078

FOOTWEAR DISTRIBUTORS AND RETAILERS OF AMERICA, f/k/a Footwear Retailers of America, et al., Plaintiffs, v. The UNITED STATES, Defendant, and Footwear Industries of America, Inc., Intervenor-Defendant.

Court No. 85-04-00581. Slip Op. No. 94-77.

United States Court of International Trade.

May 10, 1994.

Mudge Rose Guthrie Alexander & Ferdon, Washington, DC (Michael P. Daniels, N. David Palmeter and Gregory J. Spak), for plaintiff Footwear Distributors and Retailers of America.

Howrey & Simon, Washington, DC (Herbert C. Shelley and Joel D. Kaufman), for plaintiff Special Commodity Group of Non-Rubber Footwear from Brazil, American Ass'n of Exporters and Importers.

Frank W. Hunger, Asst. Atty. Gen.; David M. Cohen, Director, Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice (Velta A. Melnbrencis); and Office of the Chief Counsel for Import Admin., U.S. Dept. of Commerce, Washington, DC (Lisa Koteen and Joan L. MacKenzie), of counsel, for defendant.

Collier, Shannon, Rill & Scott, Washington, DC (Lauren R. Howard), for intervenor-defendant.

OPINION

AQUILINO, Judge:

Given the decision of an international panel that the United States acted inconsistently with Article I:1 of the General Agreement on Tariffs and Trade and U.S. acquiesence in that decision in favor of Brazil, the parties return to this action to finally dispose of issues arising from the time of creation of this Court of International Trade, which is an extension of the great American experiment in judicial review of prerogatives of the sovereign that began with Chief Justice John Marshall's nascent pronouncements that it is "emphatically the province and duty of the judicial department to say what the law is", Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177, 2 L.Ed. 60 (1803), and "an act of Congress ought never to be construed to violate the law of nations if any other possible construction remains", Murray v. Schooner Charming Betsy, 6 U.S. (2 Cranch) 64, 118, 2 L.Ed. 208 (1804). These principles remain of the essence in this action on the advent of the new World Trade Organization in furtherance of the Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations to which the United States claims commitment.

I

Jurisdiction of the court has been invoked by the plaintiffs pursuant to 19 U.S.C. § 1516a(a)(2) and 28 U.S.C. § 1581(c) for review of Non-Rubber Footwear From Brazil; Final Results of Administrative Review of Countervailing Duty Order, 50 Fed.Reg. 15,597 (April 19, 1985), which was conducted by the International Trade Administration, U.S. Department of Commerce ("ITA"). Among other things, those results

determine the aggregate net subsidy to be 11.03 percent for the period December 7, 1979, through December 31, 1979, and 8.84 percent for the period January 1, 1980, through December 31, 1980. Accordingly, the Department will instruct the Customs Service to assess countervailing duties of 11.03 percent of the f.o.b. invoice price on all shipments of Brazilian non-rubber footwear exported on or after December 7, 1979, and on or before December 31, 1979. The Department will instruct the Customs Service to assess countervailing duties of 8.84 percent of the f.o.b. invoice price on all shipments exported on or after January 1, 1980, and on or before December 31, 1980.

50 Fed.Reg. at 15,599.

After joinder of issue, the plaintiffs interposed motions for judgment on the record compiled by the ITA in rendering this determination. Plaintiff Footwear's proposed order in conjunction therewith, for example, would declare it null and void and decree that the covered merchandise from Brazil entered on or after January 4, 1980 and exported from that country before December 31, 1980 be liquidated with no assessment of countervailing duties and refund of any such duties previously deposited.

A

While those motions were pending, plaintiff Footwear notified this court that the Committee on Subsidies and Countervailing Measures organized under the General Agreement on Tariffs and Trade ("GATT") had agreed to a request by Brazil to convene a three-member panel to consider whether imposition of countervailing duties as determined above violated the obligations of the United States under its Agreement on Interpretation and Application of Articles VI, XVI and XXIII of GATT, the so-called "Subsidies Code", done April 12, 1979, 31 U.S.T. 513, T.I.A.S. No. 9619, and also that the U.S. government had consented to such a panel. The plaintiff¹ moved for a stay of proceedings, arguing, among other things, that an interpretation of that code by the panel would either resolve, or contribute to resolution of, the issues herein. The stay was granted, but plaintiff's prediction did not prove true.

GATT article VI:6(a) provides that no contracting party shall levy any antidumping or countervailing duty on a product from another contracting party unless the former determines that the effect of the dumping or subsidization causes or threatens to cause material injury to an established domestic industry, or retards materially the establishment of a domestic industry. Article 1 of the Subsidies Code governs application in general of this provision, while article 4 addresses actual imposition of countervailing duties, e.g.:

3. When a countervailing duty is imposed in respect of any product, such countervailing duty shall be levied, in the appropriate amounts, on a non-discriminatory basis on imports of such product from all sources found to be subsidized and to be causing injury, except as to imports from those sources which have renounced any subsidies in question or from which undertakings under the terms of this Agreement have been accepted.

* * * * * *

9. A countervailing duty shall remain in force only as long as, and to the extent necessary to counteract the subsidization which is causing injury. The investigating authorities shall review the need for continued imposition of the duty, where warranted, on their own initiative or if any interested party so requests and submits positive information substantiating the need for review.

With such provisions presumably in mind, the Brazilian government prayed in its formal Request for Conciliation under Article 17 of the Agreement

that the United States Government honor its obligations under the General Agreement and the Subsidies Code by abandoning its efforts to collect any countervailing duties on Brazilian non-rubber footwear entering the United States on or after January 1, 1980 ... and recognize that its collection of cash deposits and its attempt to collect countervailing duties in excess of those deposits violate the relevant provisions of the Code.²

However, the three individuals from Germany, Hungary and Malaysia empanelled by the Subsidies Committee were unable to conclude that such relief was required. Rather,

the Panel concluded that the collection of countervailing duties by the United States on entries of non-rubber footwear from Brazil between 4 January 1980 and 28 October 1981 was consistent with the United States' obligations under the Code.³

It delved into the history of the disagreement which is appropriate to recite at length now, to wit:

2.1 On 12 September 1974 the US Department of the Treasury issued a countervailing duty order (T.D. 74-233, 39 FR 32903) regarding non-rubber footwear from Brazil. Pursuant to this order countervailing duties were imposed, as of that date, under Section 303 of the Tariff Act of 1930 which had been covered by the existing legislation clause under the GATT Protocol of Provisional Application, and therefore no injury determination was made. In accordance with the US law and practice then in effect, suspension of liquidation was not ordered and duties in the amounts determined in the countervailing duty order were collected upon entry.

2.2 On 28 December 1979 the US ... Treasury issued a notice (T.D. 80-12) announcing the suspension of liquidation of all entries of footwear exported from Brazil on or after 7 December 1979 and entered or withdrawn from warehouse, for consumption, on or after 4 January 1980.... (45 FR 1013).... This suspension was to remain in force pending receipt of updated information on subsidies remaining after the Industrial Products Tax (IPI) programme had been eliminated. Until such time a deposit of the estimated countervailing duty, the net amount of which had been calculated to be 1.0 per cent, would be required.... The notice specified the reasons for choosing the date of 7 December 1979: "... the Government of Brazil announced that the export payments, which were in the form of IPI credits, would be eliminated immediately instead of over a 4-year period.... Accordingly, this notice adjusts the countervailing duty rates on the subject merchandise to take into account the immediate elimination of the IPI credits."

2.3 On 1 January 1980 the Code entered into force. Brazil and the United States were among the original signatories ... and neither of them had entered any reservation in terms of Article 19:3. On the same date the provisions of Title I of the US Trade Agreements Act of 1979 (TAA) became effective. On 2 January 1980, the authority for administering the countervailing duty law was transferred from the US ... Treasury to the US Department of Commerce (DOC). Section 104(b) of the TAA provided that signatories might request, within a three year period starting 1 January 1980, an injury review for pre-existing countervailing duty orders. According to Section 104(b)(3), whenever the US International Trade Commission (USITC) received such a request, it should promptly notify the DOC, and the DOC should suspend liquidation of entries of the affected merchandise made on or after the date of the receipt of the USITC's notification. According to Section 104(b)(4) if the USITC determined that an industry in the United States would not be materially injured if the countervailing duty

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