Target Sportswear, Inc. v. US

• Decision Date: 23 January 1995
• Docket Number: Court No. 93-12-00833.,Slip Op. 95-7
• Citation: 875 F. Supp. 835
• Parties: TARGET SPORTSWEAR, INC., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

875 F. Supp. 835

TARGET SPORTSWEAR, INC., Plaintiff, v. UNITED STATES, Defendant.

Slip Op. 95-7, Court No. 93-12-00833.

United States Court of International Trade.

January 23, 1995.

COPYRIGHT MATERIAL OMITTED

Wasserman, Schneider & Babb, New York City (Jack Gumpert Wasserman, Bernard Babb and David M. Steiner), Howard P. Roy, Gen. Counsel, Target Sportswear, Inc., of counsel, for plaintiff.

Frank W. Hunger, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice (Robert J. Krask), David J. Weiler, Office of the Chief Counsel for Int'l Commerce; Laura R. Siegel, Gen. Atty., Office of the Asst. Chief Counsel, Int'l Trade Litigation, U.S. Customs Service, Washington, DC, of counsel, for defendant.

Rosalie Simmonds Ballentine, Atty. Gen. of the Virgin Islands, Charlotte Amalie, St. Thomas, VI (Joseph M. Erwin, Asst. Atty. Gen. (Tax), Virgin Islands Dept. of Justice) and Winston & Strawn, Washington, DC (Peter N. Hiebert), of counsel, amicus curiae in support of plaintiff.

OPINION

NEWMAN, Senior Judge:

Introduction

A rejection by the United States Customs Service ("Customs") of plaintiff's entry of men's suits exported from the U.S. Virgin Islands due to plaintiff's failure to submit an export visa from the Dominican Republic, where the suits were assembled, showing compliance with quota restrictions on Dominican Republic textile products, as required by a 1993 interim regulation, precipitated this litigation.

Section 204 of the Agricultural Act of 1956, as amended, 7 U.S.C. § 1854 ("§ 204"), authorizes the President to negotiate agreements with foreign governments to limit the quantity of imports into the United States of textiles and textile products of such foreign countries and to issue regulations to carry out such agreements. Plaintiff, Target Sportswear, Inc. ("Target"), a United States importer of men's suits from the U.S. Virgin Islands, challenges the validity of 19 C.F.R. § 12.130(c)(2), effective May 14, 1993, T.D. 93-27, an interim regulation promulgated by the Commissioner of Customs concerning rules of country of origin for textiles and textile products imported from insular possessions, including the U.S. Virgin Islands ("interim regulation").¹

At issue is the scope of the President's congressionally-delegated authority in conformance with § 204 to issue country of origin regulations to carry out textile trade agreements negotiated pursuant to the statute.² Specifically in dispute is the President's authority to make a narrow exception to the "substantial transformation" test prescribed in § 12.130(b) under which regulation the country or territory in which merchandise last underwent a "substantial transformation" is regarded as the country of origin.

Under the exception created by the challenged interim regulation, textile products substantially transformed in an insular possession, shipped to a foreign country for assembly or other processing, returned to the insular possession, and then exported to the United States are treated by Customs as a product of the foreign country rather than as a product of the insular possession for purposes of implementing quotas established by the foreign country's textile trade agreement with the United States.

Essentially, then, the primary issue is whether the delegation of authority to the President to administer the United States' textile trade program under § 204 encompasses the authority to issue or to amend rules of origin for textiles and textile products substantially transformed in a United States insular possession and also processed in at least one foreign country or territory.

The resolution of this issue is obviously of critical economic importance to exporters and United States importers of textile and textile products from the United States insular possessions, assemblers and processors of textile products in foreign countries under quota restrictions imposed by textile trade agreements, United States textile manufacturers that compete in the marketplace with textile exports from United States insular possessions, the governments of the insular possessions having economic interests in attracting textile manufacturing and fostering an export trade to the United States, and of course, Customs which is charged with responsibility for monitoring the entry of goods covered by quotas under the textile trade program. The somewhat parallel legal and financial interests in the issues raised in this case by Target and the government of the U.S. Virgin Islands are evident from the fact that the latter, through its Attorney General, appears in this action in conformance with CIT Rule 76 and an order of this court dated April 14, 1994 as amicus curiae in support of Target's challenge to the interim regulation.

Target requests the court to rule: (1) as a matter of law the interim regulation is ultra vires and invalid; and (2) therefore, Customs must allow the entry of plaintiff's merchandise under Entry No. 122-4521169-8, dated December 9, 1993, consisting of men's wool suits, notwithstanding the provisions of § 12.130(c)(2), supra.

Background

Procedurally, this action contests the denial of plaintiff's protest to Customs pursuant to 19 U.S.C. §§ 1514(a)(4) and 1515 against the rejection by Customs on December 10, 1993 of plaintiff's Entry No. 122-4521169-8, dated December 9, 1993, covering twelve men's suits made of 100% worsted wool from India cut into suit components in the U.S. Virgin Islands, sewn in the Dominican Republic, shipped to the Virgin Islands for finishing and then exported to the United States. Customs denied entry to plaintiff's goods because plaintiff failed to present with the entry a textile export visa issued by the Dominican Republic, wherein the fabric was sewn, as required by the interim regulation. This interim regulation requires that importers of textile products processed in a foreign country but exported from insular possessions of the United States submit an export visa from the foreign government. Hence, under the interim regulation, the foreign country where the textiles or textile products were merely assembled and sewn prior to importation from an insular possession is regarded as the "country of origin" for quota purposes, notwithstanding that the goods exported to the United States were "substantially transformed" in the insular possession.

Jurisdiction to review denial of protests is predicated on 28 U.S.C. § 1581(a), and accordingly, this action is before the court for de novo review. 28 U.S.C. § 2636. Currently sub judice are plaintiff's motion for partial summary judgment under CIT Rule 56 on count one of a two count complaint³ and defendant's response and cross-motion for summary judgment or to dismiss this action in its entirety. The court has reviewed the Statements of Material Facts Not in Dispute filed by the parties and finds there is no genuine issue as to any material fact and the cross-motions raise only a question of law.

On the legal issue presented under count one of the complaint of whether the interim regulation is ultra vires, the court holds that the regulation is valid, plaintiff's suits exported from the U.S. Virgin Islands were properly denied entry by Customs because plaintiff failed to submit with its entry an export visa from the Dominican Republic where the suits were assembled, and that as a matter of law defendant is entitled to summary judgment dismissing the action. See Sweats Fashions, Inc. v. Pannill Knitting Co., 833 F.2d 1560 (Fed.Cir.1987); Mingus Constructors, Inc. v. United States, 812 F.2d 1387 (Fed.Cir.1987); Barmag Barmer Maschinenfabrik AG v. Murata Machines, 731 F.2d 831 (Fed.Cir. 1984).

Pertinent Statute and Regulations

Statute:

Section 204 of the Agricultural Act of 1956, as amended, 7 U.S.C. § 1854 (1988) provides:

The President may, whenever he determines such action appropriate, negotiate with representatives of foreign governments in an effort to obtain agreements limiting the export from such countries and the importation into the United States of any * * * textiles or textile products, and the President is authorized to issue regulations governing the entry or withdrawal from warehouse of any such * * * textiles, or textile products to carry out any such agreement. * * *

Regulations:

19 C.F.R. § 12.130(b) (1993):

(b) Country of origin. For the purpose of this section and except as provided in paragraph (c), a textile or textile product, subject to section 204, Agricultural Act of 1956, as amended, imported into the customs territory of the United States, shall be a product of a particular foreign territory or country, or insular possession, of the U.S., if it is wholly the growth, product, or manufacture of that foreign territory, or country, or insular possession. However, except as provided in paragraph (c), a textile or textile product, subject to section 204, which consists of materials produced or derived from, or processed in, more than one foreign territory or country, or insular possession of the U.S., shall be a product of that foreign territory, or country, or insular possession where it last underwent a substantial transformation. A textile product will be considered to have undergone a substantial transformation if it has been transformed by means of substantial manufacturing or processing operations into a new and different article of commerce.

19 C.F.R. § 12.130(c)(2) (1993), the interim regulation at issue:

(c) Articles exported for processing and returned.

(2) Applicability to U.S. insular possession products processed outside the insular possession. Unless otherwise required by law, the rules of origin applicable to products of the U.S. shall also apply to products of insular possessions of the U.S. Accordingly, notwithstanding paragraph (b) of the section, for purpose of section 204, * * * products of insular possessions of the U.S., if imported into the U.S. after having been

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