Industrial Fasteners Group, American Importer Ass'n v. U.S., 82-30

• Decision Date: 30 June 1983
• Docket Number: No. 82-30,82-30
• Citation: 710 F.2d 1576
• Court: U.S. Court of Appeals — Federal Circuit
• Parties: , 1 Fed. Cir. (T) 81 INDUSTRIAL FASTENERS GROUP, AMERICAN IMPORTERS ASSOCIATION, Appellant, v. The UNITED STATES, Appellee. Appeal

Page 1576

710 F.2d 1576

4 ITRD 2153, 1 Fed. Cir. (T) 81

INDUSTRIAL FASTENERS GROUP, AMERICAN IMPORTERS ASSOCIATION, Appellant, v. The UNITED STATES, Appellee.

Appeal No. 82-30.

United States Court of Appeals Federal Circuit.

June 30, 1983.

Andrew P. Vance, of New York City, for appellant. With him on brief was Michael A. Johnson, New York City, of counsel.

Velta A. Melnbrencis, Washington, D.C., for appellee. With her on brief were J. Paul McGrath, Asst. Atty. Gen., and David M. Cohen, Director, Washington, D.C.

Before RICH, DAVIS and NIES, Circuit Judges.

DAVIS, Circuit Judge.

Industrial Fasteners Group, American Importers Association (appellant or Industrial) ¹, appeals the judgment of the United States Court of International Trade (CIT)--together with the denial of appellant's motion for rehearing and vacation of that judgment--in which the CIT affirmed the final, affirmative, countervailing duty determination and order of the International Trade Administration (ITA), United States Department of Commerce, in Certain Fasteners from India, 45 Fed.Reg. 48,607 (1980). See Industrial Fasteners Group v. United States, 525 F.Supp. 885, 2 CIT 181 (1981), 542 F.Supp. 1019, --- CIT --- (1982), slip op. 82-26 (April 19, 1982). Industrial asks review only of that portion of the CIT's decision affirming ITA's holding that the Government of India, via a policy of its Ministry of Commerce (Ministry), provided subsidies to exporters of certain industrial fasteners through the Cash Compensatory Support on Export (CCS) program. We affirm.

I

The events leading to this proceeding began with the filing with ITA of a petition by the Industrial Fasteners Institute of Cleveland, Ohio, on January 30, 1980. ITA then initiated an investigation of certain fasteners from India late in February 1980 by the publication in the Federal Register of a notice of the Initiation of Countervailing Duty Investigation, 45 Fed.Reg. 12,276 (Feb. 25, 1980). At that time, the Embassy of India was notified of the investigation and was requested to respond by March 26, 1980, to a questionnaire which included the following specific questions regarding the CCS program:

"(1) Explain the terms and conditions of the program alleged. How are the amounts of payments determined?

(2) Provide current English language copies of laws, regulations and schedules governing the program;

(3) If the program applies only to designated or approved industries, provide a listing of firms exporting the subject merchandise which have received assistance from the program in 1979, or in the most recent one year period for which information was available, and the amounts received;

(4) If the information in (3) above is not readily available, indicate the total amount paid during the same period to firms exporting the subject merchandise."

India's response to ITA's questionnaire, received on March 26, 1980, stated that exporters of industrial fasteners are eligible to receive CCS of 17.5% of the f.o.b. value of their exported product as a refund of indirect taxes paid but not otherwise refunded. ² In reply to the pivotal question how the 17.5% figure was established, India stated that it "has reasonably calculated and documented the actual tax experience" and explained that following the Alexander Committee's review of the CCS program on October 23, 1978, India's Ministry informed all Export Promotion Councils (EPCs), including the Engineering Export Promotion Council (EEPC) which oversees manufacturers of industrial fasteners, that it was restructuring the program to compensate fully for all types of indirect taxes paid by exporters on inputs which are not otherwise refunded. All EPCs were requested immediately to collect, compile and make available to the Ministry basic data regarding the products with which the EPCs were concerned. They were told that the following "broad criteria ... are likely to be accepted by Government for formulation of the new rates:"

(1)(a) Indirect taxes on inputs domestic or imported.

(b) High interest rates on working capital.

(c) High cost of capital goods.

(2)(a) Labor intensive industries.

(b) Product of SSI [small sector industry] and cottage sector.

(c) New products in new markets.

(d) Selected processed food, horticulture and agricultural products.

(e) Commodities and markets which suffer from high and discriminatory freight rates.

The Ministry requested the EPCs to select a representative number of manufacturing and exporting units spread throughout the country and to work out the average incidence of the various nonrefundable taxes, duties and levies imposed on inputs entering into the exported products. After receipt of the Ministry's instructions, the EEPC instructed a random number of its approximately 300 members to prepare indirect tax calculations. Replies received were analyzed and sent to the Ministry, including tax calculations from six industrial fastener manufacturers provided by the EEPC. The Ministry then "carefully scrutinized" the tax data and announced on January 15, 1979 a CCS of 12.5% for industrial fasteners to be provided effective April 1, 1979. After objections by the manufacturers to that figure as too low, the Ministry announced on March 31, 1979, a rate of 17.5% for industrial fasteners exported to the American continent.

Included with the Indian Government's initial response to ITA's questionnaire on the CCS program was an undated "Statement Showing Incidence of Indirect Taxes on F.O.B. Export Value/Anchor Bolts." Claiming that this statement contained errors, India requested (by subsequent letter of April 7, 1980) the substitution of the "complete study relating to taxes on anchor bolts" which had been prepared by a Calcutta firm of cost accountants. That study, dated March 11, 1980, was said by the accountants to be a "study of indirect taxes payable/paid and its incidence on Cost Structure of Anchor Bolts exported to the U.S.A." It included consideration of (1) sales tax and excise duty on new materials, sulphuric acid and anti-rust oil, and packing material; (2) entry tax on raw materials and hoop iron, leval (sic) and nails; (3) Joint Plant Committee CESS (not otherwise explained); (4) engineering goods export assistance fund levy; (5) steel development surcharge/levy; (6) steel import pooling fund levy; (7) port commissioners levy; (8) port congestion surcharges; (9) compulsory government inspection levy, and; (10) interest on duty drawback for a three-month period.

Because ITA determined that India was not a "country under the Agreement" on Subsidies and Countervailing Measures, the countervailing duty investigation was governed by section 303 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979, 19 U.S.C. Sec. 1303 (Supp. V 1981). ³ Section 1303(b) of the 1979 Act provides that countervailing duty "shall be imposed, under regulations prescribed by the administrative authority (as defined in section 1677(1) of this title), in accordance with subtitle IV of this chapter (relating to the imposition of countervailing duties) [19 U.S.C. Secs. 1671-1677g (Supp. V 1981), as added by the Trade Agreements Act]." ⁴ Countervailing duties are imposed according to 19 U.S.C. Sec. 1671(a), which provides in pertinent part:

(a) General Rule. - If-

(1) the administering authority determines that--[the challenged country]

* * *

* * *

is providing, directly or indirectly, a subsidy with respect to the manufacture, production, or exportation of a class or kind of merchandise imported into the United States, ... then there shall be imposed upon such merchandise a countervailing duty ... equal to the amount of the net subsidy.

It has been held that "the non-excessive remission of an indirect tax is not a bounty or grant ⁵ within the meaning of the statute." Zenith Radio Corp. v. United States, 437 U.S. 443, 448, 98 S.Ct. 2441, 2444, 57 L.Ed.2d 337 (1978) (footnote omitted).

Pursuant to its countervailing duty regulations (promulgated on January 20, 1980, 45 Fed.Reg. 4932 et seq.), the ITA used the following three-prong test to determine whether the export payments under the CCS program are subsidies or are non-excessive rebates of indirect taxes paid but not otherwise rebated:

(1) whether the CCS program operates for the purpose of rebating indirect taxes, (2) whether there is a clear link between eligibility for CCS payments and payment of indirect taxes, and (3) whether the government has reasonably calculated and documented the actual indirect tax incidence borne by exported fasteners and has demonstrated a clear link between such tax incidence and the amount of CCS payments.

In concluding that the payments were subsidies, the ITA found the third prong of the test not to have been met, stating that "[o]ur determination in this case turns ... on specific analysis of the relationship between the CCS payments and the incidence of indirect taxes borne by fastener exports. The link between indirect tax incidence and the CCS payments has not been satisfactorily demonstrated." ITA noted specifically that (1) a review of the data on actual indirect taxes paid by the producers which provided information to the Indian Government shows all but one paying total indirect taxes less than 17.5% of the value of the merchandise, (2) even these tax calculations included some payments that the ITA would not consider indirect taxes, and (3) the Indian Government had not provided evidence to demonstrate the precise determination of the tax incidence of any given product sector. In its final determination ITA concluded that "the Government of India provides bounties or grants (subsidies) within the meaning of section 303 of the Act ..." through three programs, and directed customs officers to assess countervailing duty on imports covered by that determination. As we have noted, Industrial now appeals only the finding by ITA (and affirmance by the CIT) that India provided subsidies--rather than...