Mast Industries, Inc. v. Regan

• Decision Date: 04 October 1984
• Docket Number: No. 84-8-01129.,84-8-01129.
• Citation: 596 F. Supp. 1567,8 CIT 214
• Parties: MAST INDUSTRIES, INC. and Country Miss, Inc., Plaintiffs, v. Donald T. REGAN, Secretary of the Treasury, William Von Raab, Commissioner of Customs, the United States Treasury Department, the United States Customs Service and the United States, Defendants, and American Fiber/Textile/Apparel Coalition, Defendant-Intervenor. RETAIL INDUSTRY TRADE ACTION COALITION, et al., Plaintiffs, v. UNITED STATES CUSTOMS SERVICE, et al., Defendants, and American Fiber/Textile/Apparel Coalition, Defendant-Intervenor. LAURA ASHLEY, INC., Liz Claiborne, Inc., Marisa Christina Holdings, Inc., U.S. Shoe Corp., Plaintiffs, v. Donald T. REGAN, Secretary of the Treasury, William Von Raab, Commissioner of Customs, the United States Treasury Department, the United States Customs Service and the United States, Defendants, and American Fiber/Textile/Apparel Coalition, Defendant-Intervenor.
• Court: U.S. Court of International Trade

596 F. Supp. 1567

8 CIT 214

MAST INDUSTRIES, INC. and Country Miss, Inc., Plaintiffs, v. Donald T. REGAN, Secretary of the Treasury, William Von Raab, Commissioner of Customs, the United States Treasury Department, the United States Customs Service and the United States, Defendants, and American Fiber/Textile/Apparel Coalition, Defendant-Intervenor.

RETAIL INDUSTRY TRADE ACTION COALITION, et al., Plaintiffs, v. UNITED STATES CUSTOMS SERVICE, et al., Defendants, and American Fiber/Textile/Apparel Coalition, Defendant-Intervenor.

LAURA ASHLEY, INC., Liz Claiborne, Inc., Marisa Christina Holdings, Inc., U.S. Shoe Corp., Plaintiffs, v. Donald T. REGAN, Secretary of the Treasury, William Von Raab, Commissioner of Customs, the United States Treasury Department, the United States Customs Service and the United States, Defendants, and American Fiber/Textile/Apparel Coalition, Defendant-Intervenor.

No. 84-8-01129.

United States Court of International Trade.

October 4, 1984.

COPYRIGHT MATERIAL OMITTED

Mandel & Grunfeld, New York City (James Resti and Robert B. Silverman), New York City, for plaintiffs in Mast Industries, Inc. et al. v. Regan, et al.

Weil, Gotshal & Manges, New York City (Stuart M. Rosen, Richard Davis, and Jeffrey Bialos), Washington, D.C., for the plaintiffs in Retail Industry Trade Action Coalition, et al. v. United States Customs Service, et al.

Siegel, Mandell & Davidson, P.C., New York City (Allan H. Kamnitz and Anthony Y. Cheh), New York City, for plaintiffs in Laura Ashley, Inc. et al. v. Regan, et al.

Richard K. Willard, Acting Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Washington, D.C., (Kevin C. Kennedy) Washington, D.C., for defendants in Mast, Retail Industry Trade Action Coalition and Laura Ashley N/A.

Miller & Chevalier, Washington, D.C. (Donald Harrison, James P. Tuite, and Kenneth B. Reisenfeld) Washington, D.C., for defendant-intervenors in Mast, Retail Industry Trade Action Coalition and N/A Laura Ashley.

DiCARLO, Judge:

Plaintiffs, importers and retailers of textile products, are challenging interim regulations amending requirements for importing textiles and textile products that are subject to quantitative limitations under bilateral trade agreements or pursuant to unilaterally imposed restraints. These actions, consolidated September 28, 1984, raise questions about the authority delegated to the President under Section 204 of the Agricultural Act of 1956, as amended, 7 U.S.C. § 1854 (1982), (Section 204) and the application of the rulemaking procedures set forth in the Administrative Procedure Act, 5 U.S.C. §§ 551-706 (1982) (APA), to the President's exercise of this authority.

The complaint in Mast Industries, Inc. v. Regan, et al., No. 84-8-01129 (Mast) was filed August 9, 1984. Mast filed their motion for summary judgment August 20, 1984. Defendants answered and cross-moved for summary judgment August 24, 1984.

Retail Industry Trade Action Coalition, et al. v. United States Customs Service, et al. (RITAC) was filed August 29, 1984. On August 30, 1984, the Court granted RITAC's motion for an order to show cause why a preliminary injunction should not issue to enjoin implementation of the interim regulations. On September 11, 1984, the defendants moved for an order treating RITAC's motion for a preliminary injunction as a motion for summary judgment, and the defendants' opposition as a cross-motion for summary judgment or to dismiss. RITAC moved for summary judgment September 21, 1984. On September 21, 1984, defendants cross-moved for summary judgment or dismissal.

Oral argument was heard September 6, 1984, on the Mast motion for summary judgment and the RITAC motion for a preliminary injunction.

Laura Ashley, Inc., et al., v. Regan, et al., (Laura Ashley) was filed August 29, 1984. Laura Ashley moved for summary judgment September 13. Defendants cross-moved for summary judgment September 20.

Defendant-Intervenor, American Fiber/Textile/Apparel Coalition, an association of domestic textile manufacturers and labor unions, was granted leave to intervene in these cases September 20, 1984, and filed its brief September 24, 1984. Plaintiffs responded September 27, 1984.

In ruling on cross-motions for summary judgment, the Court must first determine whether genuine issues of material fact exist. If there are none, it must then decide whether either party is entitled to judgment as a matter of law. American Motorist Insurance Co. v. United States, 5 CIT ___, Slip Op. 83-8, at 4 (February 1, 1983); Carson M. Simon & Co. v. United States, 3 CIT 4, 5 (1982); see United States v. United States Gypsum Co., 340 U.S. 76, 86-88, 71 S.Ct. 160, 168-169, 95 L.Ed. 89 (1950) (Sherman Act violation ripe for decision on summary judgment in nonjury case).

Pursuant to Rule 56(i) of the Rules of this Court, the parties in Mast and Laura Ashley provided the Court with joint statements of material facts that are not in dispute. The parties agree that the pleadings, briefs, affidavits and all other papers filed in these actions "show that there is no genuine issue as to any material fact" under Rule 56(d), and that the actions are ripe for summary judgment. RITAC maintains that there are unresolved factual issues precluding summary judgment for the defendants on RITAC's third, fourth and sixth causes of action. For reasons stated in relevant parts of its opinion, the Court disagrees.

I. Background

On August 3, 1984, Customs published in the Federal Register, 49 Fed.Reg. 31,248-54 (1984), a notice promulgating interim regulations containing new rules and documentation requirements by which Customs would enforce visa and export license, country of origin, documentation, and other requirements and restrictions applicable exclusively to importations of textile products.¹ The notice stated that the interim regulations were exempt from the rulemaking requirements of the APA as involving "a foreign affairs function of the U.S.," and that written comments received on or before October 2, 1984, would be considered before adoption of final rules. See 5 U.S.C. § 553(a)(1), (b)-(c).

The interim regulations became effective September 7, 1984 for textile products exported from their "country or origin," as therein defined. On August 23, 1984, Customs announced that the interim regulations would not be enforced against textile products contracted before August 3, 1984, and exported to the United States on or before October 31, 1984. For other exports, the interim regulations remained effective as of September 7, 1984. This announcement was published in the Federal Register on August 29, 1984. See 49 Fed. Reg. 34,199 (1984).

Customs in issuing the interim regulations relied on Section 204 which allows the President to make agreements with foreign governments limiting their textile exports to the United States, and to issue regulations implementing these agreements.²

The notice of August 3rd stated that the "future administration of these agreements was severely jeopardized" by the decision in Cardinal Glove Co. v. United States, 4 CIT 41 (1982), which found the U.S.-Hong Kong bilateral agreement applicable only to those textile products having Hong Kong as their "country of exportation." The Court found glove panels manufactured in Hong Kong "substantially transformed" when sewn together into finished gloves in Haiti, and, therefore, "exported" from the latter country for quota and export licensing purposes. See id. at 45 & n. 4

The defendants contend in their briefs and affidavits that the interim regulations are necessary to prevent increasing circumvention of existing quota limitations by importers under the "country of origin" rule stated in Cardinal Glove. The defendants cite

the recurring situation where, for example, country A would export its nearly-completed textile products to country B, where the product would undergo an insubstantial sewing or packaging process. From there, the product would be imported into the United States under country B's quota for that product. In this way, country A, whose quota for that textile product had been filled, would seek to gain entry of its textile products into the United States in circumvention of the MFA and its bilateral textile agreement with the United States.³

As a result of "circumvention" of the MFA and the bilaterals, the defendants state that textile imports increased 25 percent in 1983 and 41 percent in the first half of 1984. Imports of textile products in the 12 months ending in June, 1984, total 8.7 billion square yards equivalent (SYE), up from 3.8 billion SYE in 1975 and 4.9 billion SYE in 1980, with resulting ill effect on the U.S. domestic textile industry.⁴

Plaintiffs do not contest that textile imports into the United States have rapidly increased, but deny circumvention of the MFA or the bilaterals. They assert that the meaning of "substantial transformation" for purposes of "country of origin" determination is well established and that they have arranged their multinational manufacturing and processing operations in reliance on this standard. They contend that the interim regulations will create shortages and financial loss as textile products previously eligible for importation will now be subject to quota restrictions imposed upon their "new" country of origin. Plaintiffs estimate "the adverse affect of the interim regulations could be as high as $1.6 billion or more at retail" and assert that the government of Hong Kong alone has estimated that $700 to $800 million of its annual apparel trade with the United States will be affected.⁵

Under interim regulation § 12.130(a), the visa or export license needed for textiles imported into the United States must be issued by the government of the "country of origin," regardless of whether the goods were exported from that country to the United States. It determines the "country of origin" for textiles which consist, in whole or in part, of materials...