South Puerto Rico Sugar Co. Trad. Corp. v. United States

• Decision Date: 17 July 1964
• Docket Number: No. 378-61.,378-61.
• Citation: 334 F.2d 622
• Parties: SOUTH PUERTO RICO SUGAR COMPANY TRADING CORPORATION v. The UNITED STATES.
• Court: U.S. Claims Court

334 F.2d 622 (1964)

SOUTH PUERTO RICO SUGAR COMPANY TRADING CORPORATION v. The UNITED STATES.

No. 378-61.

United States Court of Claims.

July 17, 1964.

Philip C. Scott, New York City, for plaintiff; Dewey, Ballantine, Bushby, Palmer & Wood, New York City, and Surrey, Karasik, Gould & Efron, Washington, D. C., of counsel.

Carl Eardley, Washington, D. C., with whom was Asst. Atty. Gen. John W. Douglas, for defendant. John G. Roberts, Washington, D. C., Raymond R. Robrecht, Jr., Atlanta, Ga., and David C. Katz, Pittsfield, Mass., were on the brief.

Before JONES, Senior Judge, and WHITAKER, LARAMORE, DURFEE and DAVIS, Judges.

DAVIS, Judge.

In 1960 and 1961, plaintiff, a New York corporation, was required by the Government to pay some $6,900,000 as a precondition to the importation into this country of sugar from the Dominican Republic. These "entry fees" were imposed by an executive regulation issued under the Act of July 6, 1960 (Public Law 86-592), 74 Stat. 330. Claiming that the Executive Branch had no authority to impose such "fees," plaintiff sues to recover its payments.¹

The general terrain over which the parties strive was molded long before 1960. The Supreme Court sketched the ground in Secretary of Agriculture v. Central Roig Ref. Co., 338 U.S. 604, 70 S.Ct. 403, 94 L.Ed. 381 (1950): "The sugar problem of the country is an old and obstinate one. For fourteen years Congress grappled with it through the mechanism of quotas. Three enactments, culminating in the Sugar Act of 1948, represented an effort to deal with what were deemed to be the harmful effects on interstate and foreign commerce of progressively depressed sugar prices of earlier years created by world surpluses, or, if one prefers it, by the conditions that reflected the imbalance between production and consumption." Id. at 615, 70 S.Ct. at 408-409. "The central aim of this legislation was to rationalize the mischievous fluctuations of a free sugar market by the familiar device of a quota system. The Jones-Costigan Act of 1934, 48 Stat. 670, 7 U.S.C.A. §§ 608, 608a, 609-611, 613, 615-617, 620, the Sugar Act of 1937, 50 Stat. 903, and the Sugar Act of 1948, 61 Stat. 922, 7 U.S.C. (Supp. II, 1949), §§ 1100-1160, 7 U.S.C.A. §§ 1100-1160. The volume of sugar moving to the continental United States market was controlled to secure a harmonious relation between supply and demand. To adapt means to the purpose of the sugar legislation, the Act of 1948 defines five domestic sugar-producing areas: two in the continental United States, and one each in Hawaii, Puerto Rico and the Virgin Islands. To each area is allotted an annual quota of sugar, specifying the maximum number of tons which may be marketed on the mainland from that area. § 202(a). A quota is likewise assigned to the Philippines. § 202(b). The balance of the needs of consumers in the continental United States, to be determined each year by the Secretary of Agriculture, § 201, is met by importation from foreign countries, predominantly from Cuba, of the requisite amount of sugar. § 202(c). The quotas thus established apply to sugar in any form, raw or refined. In addition, § 207 of the Act establishes fixed limits on the tonnage of `direct-consumption' or refined sugar which may be marketed annually on the mainland from the offshore areas as part of their total sugar quotas. But mainland refiners are not subject to quota limitations upon the marketing of refined sugar." Id. at 606-607, 70 S.Ct. at 404-405.²

Under the 1948 Act the Secretary of Agriculture determined for each year the total consumer sugar requirement of the United States. This total was then allocated to the domestic and foreign areas pursuant to the formula prescribed in the statute (as amended in 1951 and 1956). In 1959 the nation imported about $500,000,000 worth of sugar, of which approximately 70% was from Cuba, 22% from the Philippines, and 8% from the Dominican Republic, Peru, Mexico, and other Latin American countries; about one-third of the total American sugar supply came from Cuba. As a rule, the limitation on the supply of domestic and imported sugar in the United States has put the domestic price above the level of the world free market; the difference is known as the "quota premium." This favorable price has been, of course, an advantage to foreign producers able to export to the United States.

The course of the Castro regime in Cuba, combined with the approaching end of the 1948 Act (which by its terms was to expire at the end of 1960), reopened in 1960 the subject of quota-allocation. The first product of this reconsideration was the Act of July 6, 1960, Public Law 86-592, 74 Stat. 330, which extended the 1948 Act through March 31, 1961, and significantly amended its provisions. One modification authorized (but did not require) the President to reduce the Cuban quota for 1960 and the first quarter of 1961. A second amendment dealt with the "replacement" sugar which was to fill the gap caused by the anticipated decrease in Cuban imports; if the President reduced Cuban sugar below the level of the Sugar Act formula, and then determined that foreign supplies were needed to meet domestic consumption requirements, he was to apportion the "replacement" sugar among the quota countries (including the Dominican Republic) according to a set formula. The statutory preface to this allocation provided (Section 408(b) (2) of the 1948 Act, as amended by the Act of July 6, 1960):

"For the purposes of meeting the requirements of consumers in the United States, the President is thereafter i. e., after reducing the Cuban quota authorized to cause or permit to be brought or imported into or marketed in the United States, at such times and from such sources, including any country whose quota has been so reduced, and subject to such terms and conditions as he deems appropriate under the prevailing circumstances, a quantity of sugar, not in excess of the sum of any reductions in quotas made pursuant to this subsection * * *."

Using this new authority, the President, as of July 8, 1960, drastically lowered the Cuban quota for the rest of 1960, and delegated his authority over "replacement" sugar to the Secretary of Agriculture, acting concurrently with the Secretary of State. Proclamation No. 3355, 25 F.R. 6414.

For "replacement" sugar, the then current problem was the Dominican Republic. In June 1960 an attempt had been made to assassinate President Betancourt of Venezuela. It was widely suspected that the Trujillo regime in the Dominican Republic had been connected with that scheme. In August, the Foreign Ministers of the American Republics, meeting under the auspices of the Organization of American States (OAS), concluded that this attempt was part of a plot to overthrow the Venezuelan Government which had been given moral and military help by high officials of the Trujillo government. The Foreign Ministers, deciding that collective action was justified under Article 19 of the charter of the OAS, condemned the participation of the Government of the Dominican Republic in the acts against Venezuela, and agreed to break diplomatic relations with the Dominican Republic and to interrupt economic relations partially with that country.

Late in August 1960, the United States severed diplomatic relations with the Dominican Republic, and about the same time the President asked Congress to change the sugar legislation to permit him to allocate to the other countries the additional sugar to be purchased from the Dominican Republic under the Act of July 6, 1960. The bill passed by the House of Representatives, in response to this request, would have given this authority to the President only if, prior to October 15, 1960, the OAS had adopted collective economic sanctions against the Republic and the required number of member-states had implemented those sanctions. The Senate amended the bill in effect to provide flatly that the Dominican allocation of "replacement" sugar under the Act of July 6th could be purchased elsewhere. Congress adjourned, in September 1960, without resolving the differences between its two branches.

While the issue of Dominican participation in the plot against Venezuela was before the OAS, and the question of the Dominican "replacement" sugar was before Congress, the Secretary of Agriculture suspended importation of the Dominican "replacement" share under the Act of July 6th. After Congress adjourned without enacting further sugar legislation, the Secretary of Agriculture (with the concurrence of the Secretary of State) amended his Sugar Regulation 818 (effective September 26, 1960) to allocate to the Dominican Republic its proper part of "replacement" or non-quota sugar for 1960 under the Act of July 6th (i. e., 321,857 tons), but also to provide "as a condition for the importation of any quantity" of such Dominican sugar, that "a fee of $0.02 per pound, raw value, shall be paid * * * by the person applying to the Secretary for release of such quantity of sugar." Two cents per pound represented the difference between the then world market price and the higher American price. The fee in this amount was avowedly designed to eliminate that premium for Dominican nonquota sugar, so that the Dominican interests would not gain the special profits available to sugar imported into the American market. The same arrangements were made for the first quarter of 1961. The President reduced the Cuban quota to zero (Proclamation No. 3383, effective December 21, 1960), and the Secretaries fixed 222,723 tons as the Dominican portion of non-quota sugar for that period, with a fee of $.0225 per pound raw value as a condition of importation. Three companies, including plaintiff, imported non-quota Dominican sugar during the last half of 1960 and the first quarter of 1961 — paying the fees. The entire Dominican share of the nonquota sugar for that period was brought into the country by these three firms. (No fee was imposed...