Timex V.I., Inc. v. U.S.

• Decision Date: 30 June 1997
• Docket Number: Court No. 96-02-00528.,Slip Op. 97-85.
• Citation: 969 F.Supp. 1345
• Parties: TIMEX V.I., INC., Plaintiff, v. UNITED STATES of America, William Daley as Secretary of the United States Department of Commerce, Bruce Babbitt as Secretary of the United States Department of Interior and Frank W. Creel as Director, Statutory Import Programs Staff, Import Administration, United States Department of Commerce, Defendants.
• Court: U.S. Court of International Trade

969 F.Supp. 1345

TIMEX V.I., INC., Plaintiff, v. UNITED STATES of America, William Daley as Secretary of the United States Department of Commerce, Bruce Babbitt as Secretary of the United States Department of Interior and Frank W. Creel as Director, Statutory Import Programs Staff, Import Administration, United States Department of Commerce, Defendants.

Slip Op. 97-85.

Court No. 96-02-00528.

United States Court of International Trade.

June 30, 1997.

Timex Corporation (Frank T. Judge, III, Middlebury, CT), for plaintiff.

Frank W. Hunger, Assistant Attorney General, David M. Cohen, Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, (Velta A. Melnbrencis) and Robert E. Nielsen, Washington, DC, Office of Chief Counsel for Import Administration, U.S. Department of Commerce, of counsel, for defendants.

MEMORANDUM OPINION

DiCARLO, Senior Judge.

This case involves plaintiff Timex V.I., Inc.'s challenge to a decision issued by the Secretaries of Commerce and of the Interior. (Secretaries' Decision of Jan. 25, 1996, Pub. Doc. 13.) The Secretaries affirmed a decision by the Director of the Statutory Import Programs Staff, Department of Commerce denying Timex a production incentive certificate (PIC) for 1996, because Timex planned to close its watch facility in the Virgin Islands by the end of 1995 and would not be continuing watch assembly in the Virgin Islands in 1996. Timex contends the Secretaries' administrative decision unlawfully denied Timex of its PIC.

BACKGROUND

Plaintiff Timex V.I., Inc. is a wholly-owned subsidiary of Timex Corporation that began watch assembly operations in the Virgin Islands in 1986. Timex V.I. at various times employed up to 120 people and assembled up to 700,000 watches annually. In response to changing market conditions, however, Timex determined that its Virgin Islands assembly operations were no longer economically viable. In July of 1995, plaintiff informed the Director of Statutory Import Programs Staff, International Trade Administration, Department of Commerce, that its Virgin Islands facility would be closed by the end of 1995. In August 1995, the Director requested a written statement describing Timex's shutdown plans before a decision would be made regarding Timex's eligibility for a PIC in 1996. Timex provided the requested information in a September 7, 1995 letter.

Paragraph (h)(i) of Note 5 of the additional U.S. notes to Chapter 91 of the Harmonized Tariff Schedules of the United States (HTSUS), as amended, provides for the issuance of PICs. It reads:

(i) In the case of each calendar year beginning after December 31, 1982, and before January 1, 2007, the Secretaries, acting jointly, shall —

(A) verify the wages paid by each producer to permanent residents of the insular possessions during the preceding calendar year; and

(B) issue to each producer (not later than March 1 of such year) a certificate for the applicable amount.

HTSUS, § XVIII, ch. 91, Additional Note 5, para. (h)(i) (Supp. I 1995); see also Uruguay Round Agreements Act, Pub.L. No. 103-465, § 602(a), 108 Stat. 4809, 4991 (1994). The parties to this litigation have referred to this provision as "Section 110(h)(i)." For the sake of consistency, the court will do the same.

A production incentive certificate provides for a duty refund on the import of dutiable watches from countries other than U.S. insular possessions. HTSUS, § XVIII, ch. 91, Additional Note 5, paras. (h)(i), (h)(v) (Supp. I 1995). The dollar value of each certificate is calculated from the creditable wages and duty-free shipments made by each insular possessions producer during the previous calendar year. Because the watches and watch movements produced in the Virgin Islands already receive duty-free treatment, the certificate is negotiable and may be transferred to another company which has made duty-paid entries into the United States.

In a letter dated September 27, 1995, the Director explained that Timex was not eligible to receive a PIC in 1996, because it was closing operations by the end of 1995. (Letter from Director of SIPS, Pub. Doc. No. 11.) Pursuant to 15 C.F.R. § 303.13(a) (1995), Timex filed an appeal of the Director's decision with the Secretaries of Commerce and the Interior. (Letter appealing denial of PIC, Pub. Doc. No. 12.) The Secretaries affirmed the Director's decision denying the issuance of the PIC. Timex filed this action contesting that decision. Jurisdiction is proper under 28 U.S.C. § 1581(i) (1994).

DISCUSSION

Timex argues "that the plain language of [Section 110(h)(i)] simply directs the Secretaries to verify the wages paid by Timex to its employees in the Virgin Islands in 1995 and to issue to Timex not later than March 1, 1996 a certificate for the applicable amount." (Pl.'s Mot. for J. Upon Agency R. at 8.) Timex claims the Secretaries are given no discretion under the statutory provision, and that once wages are verified, a PIC must be given. Plaintiff contends that the prerequisite established by the Secretaries — that the recipient firm must actually be a watch producer in the year the PIC is issued — creates a substantive burden that Congress did not envision and for which the statute does not provide. The court disagrees.

Section 110(h)(i) provides, in relevant part, that the Secretaries shall "issue to each producer ... a[PIC] for the applicable amount." HTSUS, § XVIII, ch. 91, Additional Note 5, para. (h)(i)(B) (Supp. I 1995) (emphasis added). In reviewing the Secretaries' construction of the statute, the court must first consider "whether Congress has directly spoken to the precise question at issue." Chevron v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842, 104 S.Ct. 2778, 2781, 81 L.Ed.2d 694 (1984). The statute does not define the term "producer," and does not speak directly to the question as to whether a potential PIC recipient must be a current producer in the year in which the PIC is actually issued. In such a situation, "the court does not simply impose its own construction on the statute; . . . the question for the court is whether the agency's answer is based on a permissible construction of the statute." Id. at 843, 104 S.Ct. at 2782. "To survive judicial scrutiny, an agency's construction need not be the only reasonable interpretation or even the most reasonable interpretation. Rather, a court must defer to an agency's reasonable interpretation of a statute even if the court might have preferred another." Koyo Seiko Co., Ltd. v. United States, 36 F.3d 1565, 1570 (Fed.Cir.1994) (citation omitted).

When Congress leaves a gap for an agency to fill, an administrative agency is empowered to "elucidate a specific provision of the statute by regulation." Chevron, 467 U.S. at 844, 104 S.Ct. at 2782. The HTSUS grants the Secretaries the authority to issue various regulations. It reads, in relevant part: "(ij) the Secretaries are authorized to issue such regulations, not inconsistent with the provisions of this note, as they determine necessary to carry out their respective duties under this note. Such regulations shall include minimum assembly requirements." HTSUS, § XVIII, ch. 91, Additional Note 5, para. (ij) (Supp. I 1995). In reviewing such regulations, the court is further guided by the principle that an agency's "interpretation of its own regulations implementing `the statutes it administers' is entitled to `substantial weight.'" Asociacion Colombiana de Exportadores de Flores v. United States, 903 F.2d 1555, 1559 (Fed.Cir.1990) (quoting Floral Trade Council v. United States, 888 F.2d 1366, 1368 (Fed.Cir.1989)). "When the construction of an administrative regulation rather than a statute is in issue, deference is even more clearly in order. `[T]he administrative interpretation ... becomes ... controlling . . . unless it is plainly erroneous or inconsistent with the regulation.'" Id. at 1559-60 (quoting Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965)).

The relevant implementing regulations define "producer" as "[A] duty-exemption holder which has maintained its eligibility for further allocations by complying with these regulations." 15 C.F.R. § 303.2(6) (1995). The term "duty-exemption" is defined as "the...