Gropper v. Donovan, 81-8-01066.

• Decision Date: 16 August 1983
• Docket Number: No. 81-8-01066.,81-8-01066.
• Citation: 569 F. Supp. 883,6 CIT 103
• Parties: Sanders W. GROPPER, Plaintiff, v. Raymond J. DONOVAN, Secretary of Labor, United States Department of Labor, Defendant.
• Court: U.S. Court of International Trade

569 F. Supp. 883

6 CIT 103

Sanders W. GROPPER, Plaintiff, v. Raymond J. DONOVAN, Secretary of Labor, United States Department of Labor, Defendant.

No. 81-8-01066.

United States Court of International Trade.

August 16, 1983.

Sanders W. Gropper, pro se.

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

On Plaintiff's Motion for Review of Administrative Determination Upon Agency Record

RE, Chief Judge:

Plaintiff, on behalf of the former employees of Foxco Industries Limited, New York, New York, challenges a determination of the Secretary of Labor denying certification of eligibility for benefits under the worker adjustment assistance program of the Trade Act of 1974, 19 U.S.C. §§ 2101-2487 (1976 & Supp. IV 1980). In substance, the Secretary of Labor found that the former employees of Foxco were employed by a firm that did not produce an article "like or directly competitive" with an article adversely affected by increased imports within the meaning of section 222(3) of the Trade Act of 1974, 19 U.S.C. § 2272(3) (1976).

Plaintiff asserts that an increase in the importation of knit fabric garments has had a negative effect upon domestic production of a component, i.e., finished fabric for domestically-manufactured garments. Essentially, plaintiff complains that an end product, knit fabric garments, is "like or directly competitive" with a component, finished fabric. After reviewing the administrative record, and the arguments and briefs of the parties, the court holds that the Secretary's denial of certification is supported by substantial evidence and is in accordance with law.

On February 13, 1981, plaintiff and two other employees of Foxco filed a petition with the Office of Trade Adjustment Assistance (OTAA) for certification of eligibility to apply for trade adjustment assistance on behalf of the workers at Foxco. Pursuant to section 221(a) of the Trade Act of 1974, 19 U.S.C. § 2271(a) (1976), OTAA published a notice of the filing of the petition and the initiation of an investigation. 46 Fed.Reg. 15620 (1981).

OTAA's investigation disclosed that finished fabric is cloth which is ready to be cut into finished products such as apparel goods and home furnishings. Textile finishers buy gray fabric from weaving or knitting mills and treat the fabric to make it more attractive or serviceable. There are three types of fabric finishers, i.e., textile mills, converters and commission printers. Foxco, as a converter, purchased yarn which it sent to commissioned knitters, who, after knitting the yarn into fabric, sent it to commissioned finishers under Foxco's direction. Foxco maintained an inventory of single, double, and sweater knit fabrics which were used to fill orders from its customers in the apparel industry on an as-needed basis. Foxco's production was based on orders received, and it did not import knit fabric. The firm operated as a fabric converter until it ceased operation in December 1980.

In conducting its investigation along product lines, OTAA conceded that knit fabric garments are made from finished fabric. Even so, it found that those garments are not "like or directly competitive" with finished fabric. Hence, OTAA only considered imports of finished fabric in determining the existence of import injury to Foxco's workers.

The investigation further disclosed that all types of finished fabric are "like or directly competitive" with the finished fabric produced by Foxco; that imports of all finished fabric were 32.2 percent lower in 1979 than they were in 1978, and 2.9 percent lower during the first nine months of 1980 than imports for the comparable period in 1979; and that there was a net decrease of 14.7 percent in imports between 1975 and 1979. During this same period, exports of finished fabric from the United States were increasing. Moreover, the ratio of imports to domestic production did not exceed 2.2 percent for the four-year period.

OTAA thus concluded that plaintiff's claim that increased imports of knit fabric garments contributed importantly to the downturn in Foxco's sales and production and the resultant layoff of the firm's employees was without merit.

Based on OTAA's findings, the Secretary issued a negative determination on plaintiff's petition stating that the investigation revealed that "aggregate U.S. imports of finished fabric did not increase as required for certification" under section 222(3). 46 Fed.Reg. 32528, 32529 (1981).

Plaintiff requested administrative reconsideration of the Secretary's negative determination. In dismissing plaintiff's application for reconsideration, the Secretary explained that plaintiff's contention that imports of foreign-made knit fabric garments adversely impacted domestic production of finished fabric used in the manufacture of domestically-made garments is not disputed. Nevertheless, under the terms of the governing statute, certification can only be had where there is a finding of increased imports of the article "like or directly competitive" with that produced by Foxco. The Secretary reiterated that the article in question is finished fabric and not imported knit fabric garments, which are end products incorporating the component material produced by Foxco. Based on an absolute decrease in imports of finished fabric, the Secretary found no new grounds for reconsideration.

On August 12, 1981, plaintiff commenced this action by filing a letter complaint seeking judicial review of the Secretary's final determination.

Subsequently, pursuant to plaintiff's motion for a review of the administrative determination upon the agency record, the court ordered the parties to brief the relevant issues including:

(1) Whether imported knitted garments are "like or directly competitive," within the meaning of Section 222(3) of the Trade Act of 1974, 19 U.S.C. § 2272(3), with articles produced by plaintiff's employing firm; and

(2) Whether the Secretary of Labor's findings and resulting determination denying plaintiff's certification of eligibility for trade adjustment assistance pursuant to Section 223 of the Trade Act of 1974, 19 U.S.C. § 2273, are supported by substantial evidence as contained in the certified administrative record filed with this court.

Section 222 of the Trade Act of 1974, 19 U.S.C. § 2272 (1976), requires that the Secretary shall certify a group of workers as eligible to apply for adjustment assistance if he determines:

(1) that a significant number or proportion of the workers in such workers' firm or an appropriate subdivision of the firm have become totally or partially separated, or are threatened to become totally or partially separated,

(2) that sales or production, or both, of such firm or subdivision have decreased absolutely, and

(3) that increases of imports of articles like or directly competitive with articles produced by such workers' firm or an appropriate subdivision thereof were a substantial cause of such total or partial separation, or threat thereof, and to such decline in sales or production. (Emphasis added.)

The Secretary denied plaintiff's petition because it failed to satisfy the third eligibility criterion, i.e., plaintiff's employer, Foxco, did not produce an article "like or directly competitive" with an article adversely affected by increased imports.

The Trade Act of 1974 empowers the court to review a decision by the Secretary denying a petition for certification of eligibility for trade adjustment assistance benefits to assure that the determination is supported by substantial evidence contained in the administrative record, and was made in accordance with law. Trade Act of 1974, § 284(b), 19 U.S.C. § 2395(b) (Supp. IV 1980).

Plaintiff contends that the increase in importation of knit fabric garments has contributed importantly to Foxco's decline in sales and production of finished fabric for domestically-manufactured garments and the resultant layoff of the firm's employees. Plaintiff submits that every yard of fabric produced for the apparel industry is produced for the specific purpose of manufacturing a garment. Hence, plaintiff contends that, as a practical matter, "fabric is made to be used in garments and you cannot separate garment manufacturers from fabric manufacturers." Plaintiff asserts that the relationship between the knit fabric and knit apparel industries is so close that the two should be considered a single entity for the purposes of determining eligibility under section 222(3).

Defendant admits that finished fabric is made to be used in knit fabric garments, among other articles. Nevertheless, defendant contends that garments which are made from finished fabric are not "like or directly competitive" with the finished fabric itself within the meaning of the governing statute. More specifically, the Secretary maintains that the phrase "like or directly competitive" in section 222(3) does not embrace finished fabric since finished fabric is only a component of the import-impacted product, knit fabric garments.

The question presented, therefore, is whether, in finding that the article produced, i.e., finished fabric, is not "like or directly competitive" with garments made from finished fabric, the Secretary correctly interpreted and applied section 222(3). It is the determination of the court that a component, such as finished fabric, is not "like or directly competitive" with an end product, such as knit fabric garments, within the meaning of section 222(3).

Prior cases have examined the meaning of the phrase "like or directly competitive." United Shoe Workers of America, AFL-CIO v. Bedell, 506 F.2d 174 (D.C.Cir.1974); Machine Printers and Engravers Association of United States v. Marshall, 595 F.2d 860 (D.C.Cir.1979); Morristown Magnavox Former Employees v. Marshall, 671 F.2d 194 (6th Cir.1982).

While the Bedell case arose under the Trade Expansion...