Xerox Corp.. v. United States, Slip Op. 11–8.Court No. 07–00337.

• Decision Date: 24 January 2011
• Docket Number: Slip Op. 11–8.Court No. 07–00337.
• Citation: 753 F.Supp.2d 1355
• Parties: XEROX CORPORATION, Plaintiff,v.UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

753 F.Supp.2d 1355

XEROX CORPORATION, Plaintiff,

v.UNITED STATES, Defendant.

Slip Op. 11–8.Court No. 07–00337.

United States Court of International Trade.

Jan. 24, 2011.

Neville Peterson LLP, New York, NY (John M. Peterson, Michael T. Cone), for Plaintiff.Tony West, Assistant Attorney General, Barbara S. Williams, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (Saul Davis, Aimee Lee); Chi S. Choy, of counsel, Office of the Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection, U.S. Department of Homeland Security, for Defendant.

Opinion & Order

CARMAN, Judge.

Plaintiff Xerox Corporation (“Plaintiff” or “Xerox”) has brought this action pursuant to 28 U.S.C. § 1581(e) to challenge a final determination issued by Customs and Border Protection (“Customs” or “CBP”) relating to the country of origin of certain laser printer toner cartridges for purposes of government procurement. This is the first case brought in the U.S. Court of International Trade pursuant to 28 U.S.C. § 1581(e). Defendant United States (“Defendant,” “United States” or the “government”) has moved to dismiss under USCIT Rule 12(b)(1), alleging that the particular determination Customs actually made in this instance is not the type of determination this court has jurisdiction to review, and that this case does not present a justiciable controversy. For the reasons set forth below, Defendant's motion is denied.

Background

I. Statutory Context of Jurisdictional Questions

When Congress passed the Trade Agreements Act of 1979 (“TAA”), it conferred upon the Customs Court, and subsequently upon the U.S. Court of International Trade,¹ “exclusive jurisdiction of any civil action commenced to review any final determination of the Secretary of the Treasury under section 305(b)(1) of the Trade Agreements Act of 1979.” 28 U.S.C. § 1581(e). Section 305(b)(1) of the TAA, codified at 19 U.S.C. § 2515(b)(1), states that the Secretary of the Treasury (or Customs, the Secretary's designee ²) “shall provide for the prompt issuance of advisory rulings and final determinations on whether ... an article is or would be a product of a foreign country or instrumentality designated” by a separate statute as eligible for certain benefits described below. 19 U.S.C. § 2515(b)(1). The TAA establishes a rule of origin for CBP to apply in making these determinations, set out in 19 U.S.C. § 2518(4)(B), and also sets out criteria for how a foreign country or instrumentality becomes “designated,” 19 U.S.C. § 2511(b). To understand the purpose of a final determination made under § 2515(b)(1) (a “Section 305(b)(1) final determination”), and the role of this Court in reviewing these final determinations pursuant to § 1581(e), one must first have a broad view of the statutes and regulations pertaining to country of origin in government procurement.

When purchasing goods for its own use, the federal government has long had a preference for domestically manufactured products. This preference was established in 1933 by the Buy American Act (41 U.S.C. §§ 10a–10d) (“BAA”), which remains in effect today, and has recently been described as “the immovable object” of U.S. government procurement law.³ The BAA does not mandate that the government make purchases of domestic goods, but rather establishes a domestic preference. This preference is implemented by regulations which require that, when both foreign and domestic offers have been received for a particular procurement contract, the contracting officer must add a margin to the foreign offer, typically of 6, 12 or 50 percent, before comparing the bids and awarding the contract. 48 C.F.R. §§ 25.105(b), 225.105(b).

While the Buy American Act remains a significant part of the government procurement landscape, its effect was dramatically altered by the Trade Agreements Act of 1979, which permits the domestic preference of the BAA to be waived under certain conditions. Title III of the TAA implements the Agreement on Government Procurement (“GPA”), which is a plurilateral agreement developed during the Tokyo Round for the purpose of creating and protecting international reciprocity in government procurement. S. REP. NO. 96–249, at 128 (1979), reprinted in 1979 U.S.C.C.A.N. 381, 514. When a party to the GPA is procuring products above a certain price threshold, that party agrees to treat products from other GPA parties no less favorably than it treats domestic products. Through the TAA, the United States has also extended this benefit of no-less-favorable treatment to countries that extend reciprocal government procurement opportunities to the U.S. (even if such countries are not parties to the GPA), and to least developed countries (without demand for reciprocity). Collectively, parties to the GPA, countries extending GPA-equivalent opportunities to the U.S. and least developed countries are referred to as designated foreign countries and instrumentalities (“DFCIs”). See 19 U.S.C. § 2511(b)(1)-(4). Additionally, as an incentive to encourage adoption of the GPA by other foreign countries, the TAA allows the U.S. to prohibit procurement of otherwise eligible products from foreign countries that are not a DFCI. 19 U.S.C. § 2512. The net effect of the TAA is that for procurement offers above the price threshold, the domestic preference imposed by the BAA is waived for all articles that are “products of” a designated foreign country or instrumentality. See 19 U.S.C. § 2511(a).

II. The Section 305(b)(1) Final Determination

The final determination of whether an article “is ... a product of” a DFCI is the determination that this Court has jurisdiction to review. 28 U.S.C. § 1581(e); see also 19 U.S.C. § 2515(b)(1). Customs has promulgated regulations to establish the procedures through which it would issue Section 305(b)(1) advisory rulings and final determinations. See 19 C.F.R. Part 177, Subpart B. These regulations implement various aspects of the TAA, including the applicable rule of origin ( compare 19 U.S.C. § 2518(4)(B), with 19 C.F.R. § 177.22(a)), and the definition of who qualifies as a party-at-interest with the right to request a country-of-origin determination or to seek its judicial review ( compare 28 U.S.C. § 2631(e), (k)(2),⁴ with 19 C.F.R. §§ 177.22(d), 177.23, 177.30).

Over the three decades that the TAA has been in effect, Customs has rendered final determinations pursuant to Section 305(b)(1) that, while consistent with the statute, are arguably more specific than minimally statutorily required. The statute provides for the issuance of final determinations as to whether “an article is or would be a product of a foreign country or instrumentality designated pursuant to 19 U.S.C. § 2511(b)”—a question that could be answered accurately, if somewhat narrowly, with a “yes” or a “no.” See 19 U.S.C. § 2515(b)(1). The phrase “country of origin determination” does not appear in Section 305(b) of the TAA, and nothing in the statute compels Customs to make formal pronouncement about what the country of origin is for a given article—only whether it is a product of a DFCI. And yet, Customs has chosen to implement this statute via regulations requiring itself to produce full blown “country-of-origin determinations” in virtually every case where a Section 305(b)(1) final determination has been requested. See 19 C.F.R. § 177.21 (explaining that “[t]his subpart applies to the issuance of country-of-origin ... final determinations”), and § 177.23 (explaining who may request a “country-of-origin ... final determination”) (emphases added).

Customs' regulatory construal of Section 305(b)(1) is not inconsistent with the statute, because when the country of origin of an article has been identified, it is self-evident whether that country is a DFCI. When issuing final determinations pursuant to this subpart, Customs routinely frames the issue presented as “what is the country-of-origin of [Product X] for the purpose of U.S. government procurement?” Customs then typically issues its ruling in the form: “the country of origin of [Product X] for the purpose of U.S. government procurement is [Country Y].” Because Country Y either is or is not a DFCI, Customs' ruling therefore satisfies the requirement of Section 305(b)(1). Moreover, the notion that Section 305(b)(1) should be implemented with a country-of-origin determination has its roots in the legislative history of the TAA, and has been consistently applied by Customs for over thirty years. The first reference to the Section 305(b)(1) final determination as identifying “the country of origin of specified products” is found in the Senate Report to the TAA.1979 U.S.C.C.A.N. at 523 (emphasis added). And from the first proposed draft (published April 9, 1981) to the current heading of 19 C.F.R. Part 177, Subpart B, Customs has consistently referred to the Section 305(b)(1) final determination as a “country-of-origin determination.” See 46 Fed.Reg. 21,194–01; see also 19 C.F.R. Part 177, Subpart B (2010).

It bears noting—for reasons that will become clear upon hearing Defendant's contentions in this case—that the statute does not mandate any specific outcome of a Section 305(b)(1) final determination, and is indifferent to which particular outcome the party requesting the ruling is hoping to obtain. As long as Customs' ruling makes clear whether or not the article in question “is or would be a product of” a designated foreign country or instrumentality, it has conformed with the statutory requirement. See 19 U.S.C. § 2515(b). In fact, the statutory scheme seems designed to produce rulings sought by parties whose economic incentive is to obtain a “negative” ruling. The remarkably broad party-at-interest standards crafted by Congress not only permit rulings to be issued to parties that wish to qualify their own product as TAA waiver-eligible, but also to parties hoping for a...