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46 B.T.A. 442 | OPINION.
Van Fossan:
Section 501 (a) (1) of the Eevenue Act of 1936 limits the unjust enrichment tax to 80 percent of the taxpayer's net income for the entire taxable year from the sale of articles with respect to which the excise tax was imposed. Petitioner's entire net income for the taxable year was $17,460.40, from which respondent deducted $3,123.59, the same being income from a farm and having no relation to net income from the sale of articles with respect to which the processing tax was imposed. Petitioner contends that the resultant sum of $14,347.01 should be further reduced by deducting, as an unrelated activity, the sum of $21,253.82, the net profits from the operation of the store. If petitioner be sustained in this there will be no unjust enrichment tax due, because petitioner derived no net income from the sale of articles with respect to which the processing tax was imposed.
The facts dictate that petitioner's contention should be sustained. The store is operated not as a unit of the mill, but as an independent business. It faced keen competition in merchandise, prices, and service from several competitors. The fact that most of its patrons were mill employees does not indicate that the store was an integrated part of the mill operation. It sold for cash or credit to patrons outside the mill rolls. The mill employees were under no compulsion to buy at the company store. It survived and prospered only by successfully competing with other stores.
Eespondent's principal argument respecting this phase of the case is that certain items of overhead were not accurately and separately kept, a flat charge of $1,000 per year being made to cover depreciation, light, fuel, water, etc. On the record we are convinced that $1,000 is an inadequate sum and we have accordingly fixed the sum of $3,500 as a proper charge for overhead. The fact that we have increased the amount chargeable to overhead does not require a conclusion different from that above indicated, i. e., that the operation of the store was an independent business enterprise carried on for profit, only incidentally related to the mill operation. Eespondent excluded the income from the farm in making his computations. In our opinion he should also have excluded the net income from the store.
We have found that the net income of the store amounted to $18,753.82. If this be deducted from petitioner's net income for the taxable year, it is obvious that petitioner derived no net income from the sale of articles with respect of which the processing tax was imposed and no tax is due.
Decision will be entered for the petitioner.
SEC. 501. TAX ON NET INCOME FROM CERTAIN SOURCES.
(a) The following taxes shall be levied, collected and paid for each taxable year (in addition to any other tax on net income), upon the net income of every person which arises from the sources specified below:
(1) A tax equal to 80 per centum of that portion of the net income from the sale of articles with respect to which a Federal excise tax was imposed on such person but not paid which is attributable to shifting to others to any extent the burden of such Federal excise tax and which does not exceed such person's net income for the entire taxable year from the sale of articles with respect to which such Federal excise tax was imposed. |
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533 U.S. 966 | Application for certificate of appealability, addressed to Justice Stevens and referred to the Court, denied. |
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469 U.S. 1191 | Ct. Sp. App. Md. Certiorari denied. |
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513 U.S. 969 | C. A. 9th Cir. Certiorari denied. |
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534 U.S. 1147 | C. A. 1st Cir. Certiorari denied. |
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21 Ct. Int'l Trade 761 | Opinion
POGUE, Judge:
Plaintiffs, Siderca and SidercaS.A.I.C. ("Siderca") and U.S. Steel ("domestic producers"), filed separate actions challenging aspects of the International Trade Administration's final determination in Oil Country Tubular Goods from Argentina, 60 Fed. Reg. 33,539 (Dep't. Commerce 1995)(final det.)[hereinafter Final Det.]. The two actions were consolidated.
The Court has jurisdiction under 28 U.S.C. § 1581(c) and 19 U.S.C. § 1516a(a)(2)(A).
Background
On July 26,1994, Commerce initiated an antidumping investigation of oil country tubular goods (OCTG) from Argentina pursuant to 19 U.S.C. § 1673a (1988). Oil Country Tubular Goods From Argentina, Austria, Italy, Japan, Korea, Mexico, and Spain, 59 Fed. Reg. 37,962 (Dep't. Commerce 1994)(init. antidumping duty investigations). In such an investigation, Commerce compares foreign market value and United States price to determine whether dumping exists, and to calculate the dumping margin.
In the course of the investigation, Commerce issued an antidumping questionnaire to Siderca and verified Siderca's responses. Commerce determined that home market (i.e., Argentine) sales were not "viable" during the period of investigation, January 1 through June 30, 1994, i.e., Commerce decided that Siderca's home market sales were not adequate for the purpose of determining foreign market value ("FMV") of oil country tubular goods ("OCTG"). Therefore, Commerce decided to base FMV upon sales of OCTG to the People's Republic of China ("PRC" or "China").
In its preliminary determination, Commerce found a dumping margin for Siderca of 0.61%. See Oil Country Tubular Goods From Argentina, 60 Fed. Reg. 6503 (Dep't. Commerce 1995) (prelim, det. & postponement final det.). Subsequently, Commerce issued an Amended Preliminary Determination in order to correct the Preliminary Determination for a clerical error. See Oil Country Tubular Goods From Argentina, 60 Fed. Reg. 13,119 (Dep't. Commerce 1995) (am. prelim, det.). In the Amended Preliminary Determination Commerce found a dumping margin for Siderca of 0.42%, see id. at 13,119, a de minimis dumping margin under Commerce's regulations.
After verification, Commerce made a final determination that Sider-ca's dumping margin was 1.36%. See Final Det., 60 Fed. Reg. at 33,550. Because Commerce found a dumping margin for Siderca above the de minimis level, and the International Trade Commission found that a domestic industry was materially injured or threatened with material injury by reason of imports of the subject merchandise, See Oil Country Tubular Goods from Argentina, 60 Fed. Reg. 41,055, 41,055 (Dep't. Commerce 1995) (antidumping duty order), Commerce issued an anti-dumping duty order for OCTG from Argentina. Id.
Siderca objects to Commerce's Final Determination contending that Commerce's circumstance of sale ("COS") adjustment for indirect tax rebates was improper. The domestic steel producers object to the Final Determination for the following reasons: 1) In determining Siderca's cost of production, Commerce relied on budgeted rather than actual figures for Siderca's per-unit fixed costs; 2) Commerce allowed Siderca to offset its general expenses with revenues from miscellaneous sales; and 3) Commerce deducted the full amount of Siderca's indirect tax rebate from its cost of production.
Standard of Review
In reviewing a final antidumping determination the Court of International Trade must decide whether Commerce's determination is in accordance with law and whether Commerce's conclusions are supported by substantial evidence on the record. 19 U.S.C. § 1516a(b)(l)(B)(1994).
When Commerce's interpretation of the antidumping statute is challenged, this court applies the two-step analysis articulated in Chevron U.S.A. v. Natural Resources Defense Council, Inc., as applied and refined by the Federal Circuit. Considerable weight is accorded Commerce's construction of the antidumping laws, whether that construction manifests itself in the application of the statute, see, e.g., Daewoo Elec. Co. v. Int'l Union of Elec., Technical, Salaried and Mach. Workers, 6 F.3d 1511, 1516 (Fed. Cir. 1993), cert. denied 512 U.S. 1204, 114 S. Ct. 2672 (1994), or in the promulgation of a regulation, see, e.g., Smith-Corona Group v. United States, 713 F.2d 1568, 1575 (Fed. Cir. 1983), cert. denied 465 U.S. 1022, 104 S. Ct. 1274 (1984).
When examining Commerce's factual determinations to decide whether they are supported by substantial evidence, the court must determine whether the record contains "such relevant evidence as a reasonable mind might accept as adequate to support Commerce's conclusion." Consol. Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S. Ct. 206, 217 (1938); Universal Camera Corp. v. NLRB, 340 U.S. 474, 477, 71 S. Ct. 456, 459 (1951)(quoted in Matsushita Elec. Indus. Co., Ltd. v. United States, 3 Fed. Cir. (T) 44, 750 F.2d 927, 933 (1984)). Substantial evidence "is something less than the weight of the evidence, and the possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency's finding from being supported by substantial evidence." Consolo v. Fed. Maritime Comm'n, 383 U.S. 607, 620, 86 S. Ct. 1018, 1026 (1966)(citations omitted).
The Circumstance of Sale Adjustment
A. Facts Pertinent To Siderca's COS Adjustment Issue
The Government of Argentina has adopted a cumulative, indirect tax system pursuant to which certain indirect taxes are imposed at various stages of production, become embedded in the price of the product at those stages, and are then passed on to the next stage through the price of the intermediate product. This system is cumulative because the indirect taxes imposed at a given stage of production become embedded in the price of the product at the next stage of production, with indirect taxes again imposed on the total value of the product at that stage. The Government of Argentina also has a tax rebate program (the reintegro system, formerly the reembolso system), which provides for government rebate, upon export, of indirect taxes imposed and embedded in the price of the finished product.
In response to Commerce's antidumping questionnaire, Siderca reported that the indirect tax rebate amount received for sales of OCTG to the United States differed from the rebate amount for sales to the PRC. Specifically, for sales to the PRC, Siderca received the full amount of the allowable rebate for OCTG: 15%. For sales to the United States, however, Siderca received only a partial rebate of the total allowable amount: 8.3%. (U.S. Dep't. of Commerce Verification of Production and Constructed Value Data, April 26,1995 at 2 (Mem. U.S. Steel Group in Opp'n. to the Mot. for J. Agency R. Siderca, Tab 5)).
In the Final Determination, Commerce explained:
Included in Siderca's manufacturing costs of OCTG are taxes paid to the Argentine government. Siderca received a rebate of these taxes upon exportation of the merchandise. However, the amount of the rebate claimed by Siderca for the two export markets was not identical. Because only apartial rebate is taken for U.S. sales, a portion of the tax imposed by the Argentine government remains in the U.S. price (the difference between the total rebate and the partial rebate taken). Because these rebates are directly related to the sales of the merchandise in the two markets, it is necessary to make a circumstance-of-sale adjustment to FMV to account for the different amount of taxes included in the Chinese and U.S. prices.
In calculating dumping margins, the Department equalizes the effective rates in each market. Normally ( the home market sale is taxed, but the export sale to the United States is not taxed) . Here, the pipe exported to the United States was taxed in excess of the tax on the pipe exported to China •*. Because the statute provides no mechanism for removing tax from the U.S. price, however, we achieved the necessary equivalence in tax rates by adding the difference between the effective rebate percentages claimed by Siderca to the price of the pipe exported to China as a circumstance-of-sale adjustment, . This prevented Siderca's acceptance of a complete tax rebate on the sales to China, but only a partial export tax rebate on the sales to the United States from masking any tax-net dumping margin.
60 Fed. Reg. at 33,546-47 (Comment 6).
Commerce raised FMV by 6.1%, which is the amount of the difference in rebates claimed by Siderca between sales for export to the PRC and to the United States.
B. Discussion
1. Siderca argues that Commerce's circumstances of sale adjustment was "inconsistent with the statutory provisions governing the permitted adjustments to USP and FMV (Mem. E & A. Supp. ofMot. Siderca S.A.I.C. and Siderca Corp. for J. on the Agency R. [hereinafter Siderca's Mot. J. Agency R.] at 18). As Siderca points out, indirect taxes are mentioned only once within these statutory provisions, at 19 U.S.C. § 1677a(d)(l)(C), which says that USP shall be increased by:
the amount of any taxes imposed in the country of exportation directly upon the exported merchandise or components thereof, which have been rebated by reason of the exportation to the extent that such taxes are added to or included in the price of such or similar merchandise when sold in the country of exportation.
"Implicit in this provision," Siderca argues, " is that the price comparison at issue involve (sic) a comparison of the USP to an FMV that is based on the exporter's sales in its home market." (Siderca's Mot. for J. Agency R. at 19). The government agrees that the provision applies only when FMV is based on home-market sales. See letter from U.S. Department of Justice to U.S. Court of International Trade, October 8,1996 at 8 ("The statutory scheme provides specifically for an adjustment for rebated taxes only when the comparison is between sales to the U.S. and sales for home market consumption .") As Commerce noted in the Final Determination, in the usual case, home-market sales are taxed and exports are not taxed. In such a case, when comparing the prices of merchandise exported to the United States and merchandise exported to a third country, no adjustment for taxes is necessary. The statute does not contain a provision that specifically addresses the situation now before the court, in which sales in the United States are taxed in excess of sales in the country upon which FMV is based.
In the absence of such a provision, Commerce made an adjustment pursuant to 19 U.S.C. § 1677b(a)(4)(B) (1988), which states:
In determining foreign market value, if it is established to the satisfaction of the administering authority that the amount of any difference between the United States price and the foreign market value (or that the fact that the United States price is the same as the foreign market value) is wholly or partly due to :!:
(B) other differences in circumstances of sale then due allowance shall be made therefor.
Siderca argues that under the statute the tax rebate does not qualify as a circumstance of sale. Siderca also argues that the adjustment does not meet the requirements of the regulation enacted by Commerce to carry out the circumstance of sale provision. The regulation states:
In calculating foreign market value, the Secretary will make a reasonable allowance for a bona fide difference in the circumstances of the sales compared if the Secretary is satisfied that the amount of any price differential is wholly or partly due to such difference. In general, the Secretary will limit allowances to those circumstances which bear a direct relationship to the sales compared.
19 CFR § 353.56. Siderca contends that the regulation's "direct relationship" language has been interpreted to mean that the party requesting the COS adjustment must show a causal link between the alleged circumstance of sale and the price of the subject merchandise. Siderca concludes that Commerce has failed to adequately demonstrate that such a link exists and that the COS adjustment was not lawful. The Court does not agree.
In Smith-Corona Group v. United States, 1 Fed. Cir. (T) 130, 713 F.2d 1568 (1983), cert. denied 465 U.S. 1022, 1045 S. Ct. 1274 (1984), the court held that Section 1677b(a)(4) "does not expressly limit the exercise of the Secretary's authority to determine adjustments, nor does it include the precise standards or guidelines to govern the exercise of that authority. Congress has deferred to the Secretary's expertise in this matter." Id. at 137, 713 F.2d at 1575. Thus Commerce has broad discretion to decide what constitutes a bona fide circumstance of sale. See id. at 132, 713 F.2d at 1571.
In Sawhill Tubular Div. Cyclops Corp. v. United States, 11 CIT 491, 666 F. Supp. 1550 (1987), the court found that Commerce had properly made a circumstance of sale adjustment in the amount of an export rebate paid to a foreign carbon steel pipe and tube manufacturer. The Sa-whill court rejected plaintiffs argument that a circumstance of sale adjustment is appropriate only in the case of a difference in selling expenses. "[Tjhis Court declines to adopt a narrow construction of the circumstances of sale provision. Section 1677b(a)(4)(B) was designed to facilitate a fair and efficient comparison between foreign market value and price in the United States market." Id. at 497, 666 F. Supp. at 1555. Thus, Sawhill established that under certain circumstances an export rebate can constitute a circumstance of sale. As in Sawhill, in this case Commerce has established that the rebate was "'directly related to, and in fact contingent upon, the export sale of the merchandise under investigation.'" Id. at 498, 666 F. Supp. at 1555-56 (quoting Certain Welded Carbon Steel Standard Pipe and Tube from India, 51 Fed. Reg. 9089, 9091 (Dep't Commerce 1996)(final det.). See also Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland Cement v. United States, 13 F.3d 398, 400 ("[tjhere is no specific statutory authorization for Commerce to deduct home-market transportation expenses from its calculations of FMV In the past, Commerce determined whether to deduct home-market transportation costs by looking to the 'circumstances of sale' provision of 19 U.S.C. § 1677b(a)(4) (1988)."), cert. denied sub nom Cemex, S.A. v. United States, 513 U.S. 813, 115 S. Ct. 67 (1994).
The rebate also meets the conditions set out in Budd Co., Wheel & Brake Div. v. United States, 14 CIT 595, 746 F. Supp. 1093 (1990). The Budd court stated, "circumstance of sale adjustments 'should be permitted if they are reasonably identifiable, quantifiable, and directly related to the sales under consideration and if there is clear and reasonable evidence of their existence and amount.'" 14 CIT at 607, 746 F. Supp. at 1103 (quoting H.R. REE No. 96-317, at 76 (1979) )• The reintegro rebate was both identifiable and quantifiable, based on evidence presented to Commerce by Siderca. As stated above, the reintegro was also directly related to the sales under consideration. Therefore, Commerce's determination that the different rebate amounts constituted different circumstances of sale was a reasonable application of the statute.
Siderca argues that under Mantex, Inc. v. United States, 17 CIT 1385, 841 F. Supp. 1290 (1993), Commerce may only make a circumstance of sale adjustment if a causal link is established between the differing circumstances of sale and the differing amounts of FMV and USE In Man-tex, the court affirmed Commerce's decision not to grant a COS adjustment for rebates received by a foreign manufacturer on exported goods. "[T]o be entitled to a COS adjustment," the court said, "an importer must demonstrate a 'causal link' between the differences in circumstances of sale and the differential between United States price and foreign market value." 17 CIT at 1396, 841 F. Supp. at 1300 (citing Smith-Corona v. United States, 1 Fed. Cir. (T) at 138, 713 F.2d at 1577).
The scope of the "causal link" requirement was discussed in Brother Industries Ltd. v. United States, 3 CIT 125, 540 F. Supp. 1341 (1982), aff'd sub nom. Smith-Corona Group v. United States, 1 Fed. Cir. (T) 130, 713 F.2d 1568 (1983), cert. denied 465 U.S. 1022, 1045 S. Ct. 1274 (1984). The Brother court stated, "it must be stressed that the statute requires only that a causal link be established to the satisfaction of the administering authority." 3 CIT at 130, 540 F. Supp. at 1349 (emphasis in original). Also, "if there are differences in circumstances of sale, and if there is also a price differential, then the administering authority will be satisfied that there is a causal connection between those events upon a showing that the costs to the seller are different, Id. at 131, 540 F. Supp. at 1350.
Mantex did not diminish Commerce's discretion to find that a causal link exists when costs to the seller are different in different markets; Mantex simply says that Commerce does not have to make such a finding. See 17 CIT at 1398, 841 F. Supp. at 1302 ("[A] (though [the rebate at issue] may explain the company's lower United States price relative to its home market, Commerce is not required to assume such a causal relationship exists.")
The reasoning of Smith-Corona supports Commerce's COS adjustment in this case. See Smith-Corona, 1 Fed. Cir. (T) at 139, 713 F.2d at 1577 n.26 (" [AJbsent evidence that costs do not reflect [FMV], the Secretary may reasonably conclude that cost and value are directly related. "); see also Daewoo Elecs. Co. v. Int'l Union, 6 F.3d 1511, 1518-19 (Fed. Cir. 1993), cert. denied 114 S. Ct. 2672 (1994)(holdingthat Commerce need not conduct an econometric study to measure the pass-through of indirect taxes to home market consumers).
The difference in costs for sales to the United States and costs for sales to the PRC due to the different rebate amounts was amply demonstrated by Siderca's own submissions and verified by Commerce staff. (Commerce Verification Mem., April 26,1995 at 13 (Mem. of U.S. Steel Group Opp'n. Mot. J. Agency R. Siderca, Tab 5)) ("We tested the actual receipt of payments from the government to Siderca for export sales to both the U.S. and China."). Siderca's submissions also support Commerce's finding that the tax rebate amounts are reflected in the price of the finished product. Siderca specifically stated in its response to Section C of Commerce's questionnaire that "[bjecause indirect taxes are rebated on all exports the price for the merchandise sold in the comparison market (China) does not include any indirect taxes." (Def.'s Ex. 9 at 18-19) (emphasis added). Furthermore, in its brief to this Court, Siderca describes the reintegro system as one in which taxes which are "imbedded in the finished product produced and sold in the domestic market " are rebated to "reduce or eliminate any disadvantage that the country's exporters otherwise would face in export markets as a result of these domestic indirect taxes." (Siderca's Mot. for J. Agency R. at 5).
2. Siderca also argues that Commerce's circumstance of sale adjustment "is [biased on a [sjerious [mjisinterpretation of [rjecord [f]acts." Id. at 25. Specifically, Siderca claims that much of the pipe sold in the United States during the period of investigation was exported from Argentina before the rebate for the U.S. market was lowered to 8.3 percent. Id. at 25. "Simply stated, the 'difference in export rebates' which the Department explained as its sole justification for its circumstance of sale adjustment simply did not exist for much of the Siderca pipe sold in the U.S. during the period of investigation." Id. at 25-26. As evidence for this contention, Siderca provided the Court with Argentine Resolution 1754/93.
Siderca did not make this factual argument or submit the Argentine Resolution to Commerce during the administrative proceeding. Rather, Siderca contends that Commerce was aware of the Resolution and urges the Court to take judicial notice of it as a foreign official record. However, even if the Court were to take judicial notice of the Resolution, the Court could not just accept Siderca's claim that it received the full 15-percent rebate on POI sales to the United States. According to a 1995 letter from the Government of Argentina, responding to Commerce's 1993 countervailing duty investigation, although the reintegro rate for exports to the United States was formally set at 8.3 percent by Resolution 1754/93, "Siderca agreed to repay the difference between the two rates [(the nominal 15 percent rate and the requested 8.3 percent rate)] for exports to the United States between November 1, 1992 and January 4,1994." (Mem. U.S. Steel Group Opp'n. Mot. J. Agency R. Sid-erca, Ex. 1).
It would be inappropriate for this Court to usurp Commerce's investigatory role by delving beyond the record to decide this factual issue. Moreover, it is not necessary for the Court to pursue this inquiry.
In its questionnaire response, Siderca reported that the reintegro rate for exports of OCTG to China was 14.75 percent, and the rate for exports to the United States was 7.8 percent. Id. at Tab 1 (Attach. D-19). These figures were verified by Commerce. It is on the basis of this information that Commerce made its COS adjustment to FMV Thus, Commerce's determination that Siderca received different rebates on its United States and Chinese sales during the period of investigation was supported by substantial evidence, provided by Siderca, on the record. Therefore, the Court will not disturb that determination.
3. Finally, Siderca argues that Commerce never gave Siderca an opportunity to comment on the circumstance of sale adjustment, and for that reason, the adjustment was procedurally unfair. Siderca's Mot. J. Agency R. at 27. According to Siderca, "[the Department] announced a completely new approach to an important issue for the first time in its final determination, after all opportunity for comment and argument had passed." Id.
The record shows, however, that Siderca was aware that the difference in tax rebates could be an issue in this investigation. On March 2, 1995, after publication of the Preliminary Determination and before Commerce conducted its on-site verification, counsel to a co-petitioner submitted a letter to the Department suggesting avenues of inquiry for the forthcoming verification. (Letter from Wiley, Rein & Fielding to Secretary of Commerce of March 2, 1995, Prop. Doc. 60, Def.'s Ex. 14). In that letter, counsel framed the rebate issue as one concerning sales, and not cost, stating in relevant part:
I. SALES VERIFICATION
A. The "Reembolso" (rebates)
In its preliminary determination, the Department did not adjust U.S. and third country prices for rebated indirect taxes, contrary to long-standing Department practice and precedent. According to the company 'sown figures Siderca receives an average of US$40/ton more in rebates on its sales to China than sales to the United States. In cases where third country sales are being used as the basis for FM\j and there is a significant differential in the amount of rebated duties or taxes between the markets, the Department adjusts the prices in both markets by the amount of the rebates (citations omitted).
Id. at 2 (emphasis supplied).
Siderca demonstrated its awareness of petitioner's letter by responding to the letter in its rebuttal brief, "[Pjetitioners [argue] that the prices in a price-to-price comparison should be adjusted for the rebated taxes. Based on the final determination and the Department's calculation memorandum, this appears to be an incorrect interpretation." Siderca's Rebuttal Br. at 51 n. 116.
Siderca also had ample opportunity to present exactly the factual evidence it is trying to present here. Commerce specifically asked that Sid-erca "[s]tate the amount of indirect taxes applicable to each sale, whether or not included in the price," for both Chinese and U.S. sales. AntidumpingReq. Info., attached to Aug. 26 Letter, Antidumping Duty Investigation of Oil Country Tubular Goods (OCTG) from Argentina, App. I, Section B-l, field 17; and App. I, Section C-l, field 16. Instead of supplying this information, Siderca merely stated that no adjustment to U.S. price was necessary "since the taxes are rebated on all export sales and the price for the merchandise sold in both the U.S. and China are exclusive of the indirect taxes." (Siderca's Resp. to section B of the Department's questionnaire at 6)(Conf. App. To Br. U.S. Steel in Supp. Mot. J. Under Rule 56.2, Tab 3). In addition, Department of Commerce regulations permit any interested party to make a submission to rebut, clarify, or correct factual information submitted by an interested party within 10 days of service of the submission. See 19 C.F.R. § 353.31(a)(2). Siderca never challenged the factual supposition underlying petitioner's suggestion, that different reintegro rates were applied to Siderca's Chinese and U.S. sales duringthe period of investigation. Instead, Sider-ca made a legal argument that the statute does not permit an adjustment for indirect taxes when FMV is based on third-country sales.
Because Siderca had ample notice that the difference in tax rebates was an issue in Commerce's investigation, and because Commerce specifically asked for the information necessary to make a determination on this issue, this case is distinguishable from the cases cited by Siderca: Usinor Sacilor, Unimetal and Ascometal v. United States, 893 F. Supp. 1112 (CIT 1995), British Steel PLC v. United States, 879 F. Supp. 1254 (CIT 1995), Creswell Trading Co., Inc. v. United States, 15 F.3d 1054 (Fed. Cir. 1994) and Sigma Corp. v. United States, 17 CIT 1288, 841 F. Supp. 1255 (1993), in which Commerce's determinations were remanded to correct procedural unfairness.
PETITIONERS' COST OF PRODUCTION ISSUES
A. Siderca's Fixed Factory Overhead Costs:
Plaintiffs, the Petitioners at the administrative level alleged that Sid-erca's prices to China were below the cost of production (COP). Commerce used Siderca's cost data to calculate the cost of production for the OCTG sold to the PRC, and determined that there were no below-cost sales.
In its Section D questionnaire, Commerce requested Siderca to submit cost of production figures including fixed and variable costs. Sider-ca' s accounting system assigns only materials costs and variable costs to individual units of merchandise, and not fixed costs. (Dep't Commerce Verification of COP andCVDataat 7 (April 26,1995) (Defs' Ex. 16)). "As a general rule, Commerce considers variable factory overhead costs to be those cost items which are a function of the production levels. Fixed factory overhead costs are those costs that do not vary as production levels increase or decrease." (Def.'s Mem. Opp'n. Mot. Siderca Partial Opp'n. Mot. U.S. Steel Group J. Upon the Agency R. at 49, n. 33). To comply with Commerce's request, Siderca allocated the actual fixed costs to specific cost centers and then allocated those costs to individual products based on the products' budgeted machine hours and productivity (tons/machine hour) for the given cost center.
Plaintiffs charge that Siderca's reported product-specific fixed cost's were not reflective of Siderca's actual costs. (Mot. U.S. Steel Group A Unit of USX Corp., USS/Kobe Steel Co., and Koppel Steel Corp. J. Under Rule 56.2 at 26-36). "[T]he allocation system calculated Siderca's product-specific fixed costs based on budgeted, rather than actual, operating hours and standard, rather than actual, productivity rates." Id. at 27 (emphasis in original). Due to Siderca's use of budgeted hours and standard productivity rates, Commerce was unable to reconcile Siderca's questionnaire response to its financial statements, which reflect actual costs. See Final Det. at 33,548.
"Where a respondent submits information that cannot be verified," plaintiffs argue, "the Department must use best information otherwise available ("BIA")(Pls.' Mot. at 36). Commerce responds that although it could not reconcile the data submitted by Siderca, it performed three al ternative verification procedures to test Siderca's allocation methodology for fixed costs. "These alternative verification procedures gave Commerce a 'reasonable assurance of the accuracy' of the respondents' reported costs (Def.'s Mem. in Opp'n. Mot. Siderca S.A.I.C. and Siderca Corp. and Partial Opp'n. Mot. U.S. Steel Group a Unit of USX, Corp., et. al. for J. Agency R. at 60).
The antidumping law requires that Commerce verify all information relied upon in making a final determination in an investigation. 19 U.S.C. § 1677e. In publishing its determination Commerce is to "report the methods and procedures used to verify such information." 19 U.S.C. § 1677e(b). The statute does not specify how verification is to be accomplished. Itdoes stipulate that " [i]f the administering authority is unable to verify the accuracy of the information submitted, it shall use the best information available to it as the basis for its action, Id. Here, as an alternative verification procedure, Commerce compared Siderca's average company-wide fixed costs per ton to the per-unit fixed costs allocated by Siderca to the subject merchandise. This comparison led Commerce to conclude that Siderca's allocation of fixed costs was reasonable. Commerce also verified that the fixed costs were assigned to individual cost centers and allocated to each product using productivity ratios used in the allocation of variable costs. (Def.'s Mem. Opp'n. Mot. Siderca S.A.I.C. and Siderca Corp. and Partial Opp'n. Mot. U.S. Steel Group a Unit of USX, Corp., et al for J. Agency R. at 51).
"Congress has afforded ITA a degree of latitude in implementing its verification procedures . The decision to select a particular method of verification rests solely within the agency's sound discretion. " Floral Trade Council v. United States, 17 CIT 392, 399, 822 F. Supp. 766, 772 (1993)(upholding the ITA's decision not to apply BIA based on ITA's claim that it was able to verify respondent's questionnaire response through "alternative means") (citations omitted); see also American Alloys, Inc. v. United States, 30 F.3d 1469, 1475 (Fed. Cir. 1994) ("[T]he statute gives Commerce wide latitude in its verification procedures.").
In this case, Commerce relied on Siderca's normal accounting practices and then verified Siderca's cost data reporting and cost accounting system. The Court finds that Commerce's alternative verification methods were adequate under the circumstances and represented a reasonable application of 19 U.S.C. §1677e.
In addition to the requirement that Commerce's interpretation of the antidumping statute be reasonable, the law requires that Commerce's factual findings be supported by substantial evidence on the agency record. See 19 U.S.C. § 1516a(b)(l)(B). The "reasonableness test" conducted by Commerce showed that Siderca's reported fixed costs for the subject merchandise were different than its company-wide per-unit fixed costs. Commerce accepted Siderca's explanation that the discrepancy was due to the difference between the mix of products manufactured for export to the United States and the PRC and Siderca's overall product mix.
The Court finds that there is sufficient evidence on the record demonstrating Siderca's company-wide product mix and the mix of products contained in the subject merchandise to support Commerce's determination. Specifically, Siderca's production report for fiscal year 93/94, discussed by Commerce in its verification report, demonstrates that there was no significant difference between Siderca's budgeted and real production during the relevant period. Under the heading "Factorable Por Producto, " the report shows a breakout of production by product type, and by end finish. Summing the actual production of plain end casing and plain end tubing yields a total plain end production of 66,616 tons, approximately 10 percent of Siderca's total actual production. (Siderca S.A.I.C. Cost Verification Ex. 12)(Mem. P & Aof Def.-Ints. Sid-erca S.A.I.C. and Siderca Corp. Opp. Pis.' Mot.-J. Agency R., App. 8). This supports Siderca's statement that "approximately 10 percent of Siderca's production is plain end pipe." (Siderca's Case Brief at 29). Sid-erca's related statement, that "virtually 50 percent of the merchandise sold to the United States is plain end id. at 30, is supported by Siderca's explanation that it ships plain end pipe to the United States for threading at its manufacturing facilities in Houston. (Siderca's Section E Response at 4, Nov. 10,1994). That explanation is supported by Siderca's U.S. sales listing. (Def.'s Ex. 14 of Prop. Doc. 32)).
Accordingly, the Court finds that Commerce's use of alternative verification methods was a permissible construction of the antidumping statute, and that Commerce's determination as to Siderca's allocation of fixed costs was supported by substantial evidence on the record.
B. The Use of Miscellaneous Income to Offset Siderca's General Expenses:
In calculating cost of production, Commerce adds to the producer's cost of manufacture (materials, labor and overhead costs) an amount for general and administrative expenses. "General and administrative expenses (G & A) are an element of COP and consist of those expenses which relate to the activities of the company as a whole, rather than to the production process." (Def.'s Mem. Opp'n. Mot. Siderca S.A.I.C. and Siderca Corp. and Partial Opp'n. Mot. U.S. Steel Group a Unit of USX, Corp., et. al. J. Agency R. at 65).
In calculating Siderca's cost of production Commerce offset general and administrative expenses with "miscellaneous income" comprised of revenues from the sale of intermediate products such as sponge iron, bar, and other miscellaneous products; sales of OCTG purchased from other countries and resold in other countries; and sales of technical assistance to other steel companies. (Rebuttal Br. on Behalf of Siderca S.A.I.C. and Siderca Corp. at 58-59 (May 17, 1995)(Def.'s Ex. 18)).
According to Commerce's final determination, "miscellaneous income relating to production operations of the subject merchandise may be permitted as an offset to G&A." Final Det. at 33550 (citing Saccharin from Korea, 59 Fed. Reg. 58,826, 58,828 (Dep't Commerce 1994)(final det.Xemphasis added). The court finds that this approach represents a permissible construction of the statute and a longstanding agency practice. The antidumping law itself does not define cost of production nor does it include a discussion of miscellaneous profit as an offset to cost. When a statute is silent or ambiguous, the court must defer to Commerce 's reasonable interpretation. Daewoo Elec. Co., Ltd. v. Int'l. Union of Electronic Elec., Technical, Salaried and Mach. Workers, 6 F.3d at 1516.
However, Commerce's determination must also be supported by substantial evidence. Commerce failed to cite evidence in the Final Determination to support the notion that Siderca's miscellaneous sales were related to the production operations of the subject merchandise. Sider-ca's practice of including the costs related to these sales in its production costs is not enough.
In its memorandum to this Court, Defendant revised its statement of the legal standard for allowing offsets to general and administrative costs. Defendant argues that, "[i]t is Commerce's practice, to permit offsets to expenses for revenue relating to the respondent's general production operations." (Def.'s Mem. Opp'n. Mot. Siderca S.A.I.C. and Siderca Corp. and Partial Opp'n. Mot. U.S. Steel Group a Unit of USX Corp., et. al. J. Agency R. at 67). However, it is not clear to the Court that this is actually Commerce's usual practice. The three cases cited by Commerce involved offsetting interest expenses with interest income. As petitioners note, interest income and expense are usually related to general production operations because the Department has reasoned that money is fungible. Thus these cases are not relevant to the issue before the Court.
Furthermore, the legal standard articulated in Commerce's memorandum to the Court was not the same as that set out in the Final Determination. "Post-hoc rationalizations of agency actions first advocated by counsel in court may not serve as the basis for sustainingthe agency's determination." U.H.F.C. Co. v. United States, 9 Fed. Cir. (T) 1, 13, 916 F.2d 689, 700 (1990) (citing Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168, 83 S. Ct. 239, 246 (1962); Atcor, Inc. v. United States, 11 CIT 148, 153, 658 F. Supp. 295, 299 (1987)).
Therefore, this issue is remanded so that Commerce can reconsider its treatment of Siderca's miscellaneous income.
C. Adjustment of COP for Reintegro Tax Rebate:
As explained above, the Argentine government imposes a series of indirect taxes at various stages of production, which become embedded in the price of the product at each stage and are passed on to the next stage of production through the price of the intermediate product. Under the reintegro program these taxes are rebated for merchandise produced for export. In calculating Siderca's cost of production, Commerce deducted the full amount of the rebate Siderca received for its sales to the PRC.
In response to plaintiffs' argument that Commerce should only deduct that part of the rebate attributable to taxes on material inputs of the subject merchandise, Commerce explained:
the Department's Offices of Countervailing Investigations and Countervailing Compliance normally test to determine whether or not the reintegro is countervailable . To be non-countervail-able, the rebate must be for taxes on merchandise which was physically incorporated into the exported product and the rebate must be no greater than the actual taxes imposed. In [1991], the Department determined that Siderca was entitled to the entire reinte-gro without incurring countervailing duties.
Final Determination at 33,546. The reimbursement percentage on OCTG was raised in 1992, but Siderca only accepts the pre-1992 rebate percentage on U.S. sales because the countervailing duty order is still in place. "Based on the fact that the Department has previously determined that Siderca was entitled to a rebate without incurring countervailing duties and because [Siderca] currently accepts a lower rebate, it is reasonable to assume that the entire reintegro is attributable only to material inputs." Id.
Commerce's explanation is insufficient. The tax rebate on exports to the United States was only 12.5 percent in 1989, the year for which Commerce determined that the rebate was not countervailable. (Siderca's Mot. J. Agency R. at 9, n. 11). The subsidy on PRC exports is 15 percent. Therefore, it is not reasonable for Commerce to assume that the entire amount of the PRC rebate is attributable to material inputs. Furthermore, Siderca acknowledged that the reintegro rebates taxes on various cost elements other than material inputs. (Mem. P&ADef.-Ints. Siderca S.A.I.C. and Siderca Corp. Opp'n Pis.' Mot. J. Agency R. at 30).
Pursuant to Commerce's request, the Court is remanding this issue to give Commerce an opportunity to correct this error and to more plainly articulate its standard for adjusting Siderca's costs for the amount of the rebate received.
Conclusion
For the reasons stated above, Commerce's determination is affirmed with respect to the circumstances of sale adjustment and the use of Sid-erca's allocated fixed costs in calculating Siderca's cost of production. Commerce's determination is remanded with respect to the treatment of miscellaneous income and the adjustment of Siderca's cost of production to account for the reintegro rebate.
OCTG are hollow steel products of circular cross-section, including oil well casing, tubing, and drill pipe, or iron (other than cast iron) or steel (both carbon and alloy), whether seamless or welded, whether or not conforming to American Petroleum Institute ("API") or non-API specifications, whether finished or unfinished (including green tubes and limited service OCTG products). 59 Fed. Reg. at 37,962.
19 U.S.C. § 1677a, 1677b (1988). The terminology has since changed. The antidumping law was amended by the Uruguay Round Agreements Act, Pub. L. No. 103-465,108 Stat. 4809 (1994) (URAA). The URAA does not apply to investigations initiated prior to January 1995. Under the current statute "normal value" has replaced the term "foreign market value," and "export price and constructed export price" have replaced the term "United States price." See 19 U.S.C. § 1677a, 1677b (1994).
FMV is normally based upon the sales price of the merchandise in the home market. Because Commerce determined that the home market was not a viable one for the relevant time period, Commerce based FMV on Siderca's sales to a third country market, i.e., the PRC. See 19 U.S.C. § 1677b(a)(l)(B). This decision is not challenged in this action.
Pursuant to regulations applicable to this antidumping investigation, Commerce disregards any weighted-average dumping margin that is less than 0.5% ad valorem.. See 19 C.F.R. § 353.6.
When a court reviews an agency's construction of the statute which it administers, it is confronted with two questions. First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute.
Chevron U.S.A. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 104 S. Ct. 2778, 2781-82 (1984) (footnotes omitted). See generally KENNETH CULP DAVIS & RICHARD J PIERCE, JR, ADMINISTRATIVE LAW TREATISE, k 3.2 (1994).
The reason for raisingFMVby 6.1%, and not 6.7% was that Siderca reported average effective rebates and, as Commerce explained, it calculated the difference between these average effective rebates:
We calculated the difference between the effective rebate received on sales to China and the effective rebate received on sales to the U.S. The respective nominal rebates, 15% and 8.3%, are applied to the FOB price adjusted for importations of materials under temporaiy importation bond. Siderca calculated the average effective rebate for both markets, see verification exhibit 19. Siderca calculated effective rebates by first dividingtheshipmentspecific rebate by the FOB price, then calculating a weighted average for the period. The effective rebate to China was 13.68%. The effective rebate to the U.S. was 7.58%. The difference between the effective rebate received on sales to China and the effective rebate received on sales to the U.S. was 13.68% — 7.58% = 6.1%. This amount represents an adjustment to third country price.
Mem. from Accountant to Program Manager of Office of Accounting, dated June 16,1995, at 2, para. 4, Prop. Doc. 89, Def.'s Ex. 19.
Siderca accepts a full tax rebate on merchandise sold to the PRC and only a partial tax rebate for merchandise sold to the United States. The net effect is that Siderca pays a higher tax on goods sold to the United States.
Siderca argues that the only reason the Government of Argentina lowered the rebate to 8.3 percent was "Argentina's specific good-faith effort to avoid or offset a possible subsidy on products shipped to the U.S. in deference to U S. countervailing duty law." (Siderca's Mot. J. Agency R. at 34). Siderca cites 19 U.S.C. § 1677a(d)(2)(B) for the proposition that "fwlhere, as here, the exporting country reduces its effective indirect tax rebate rate with the specific intent 'to offset the subsidy received,' such reduction cannot be used to create a dumping margin where one does not otherwise exist." Id.
Section 1677a(d)(2)(B) says specifically that U.S. price shall be reduced by:
the amount, if included in such price, of any export tax, duty or other charge imposed by the country of exportation on the exportation of the merchandise to the United States other than an export tax, duty or other charge described in section 1677(G)(0) of this title.
Section 1677(6)(0) refers to "export taxes, duties, or other charges levied on the export of merchandise to the United States" to offset a countervailablc subsidy.
In this case Commerce did not reduce U.S. price for any export tax, duty or other charge related to the reintegro rebates. COS adjustments are made to FMV and the adjustment in this case was made to account for differing levels of tax rebates in the U.S. and Chinese markets. A reduction of a tax rebate does not constitute an export tax, duty or other charge for the purposes of 19 U.S.C. § 1677(6X0). The COS adjustment allowed a comparison of U.S. and Chinese sales on a comparable basis. The dumping margin found by the department did not result from Siderca's acceptance of a lower rebate on U.S. sales. Rather, the dumping margin resulted from Commerce's comparison of Siderca's U.S. and Chinese prices on a comparable basis after adjusting for tax differences.
According to the English translation provided by Siderca, Resolution 1754/93 officially set the reimbursement level for exports of OCTG to the U.S. at 8.3 percent. By its own terms, the resolution did not come into force until its publication date, Jan. 4, 1994 (Pis.' App. 5.)
Preliminary Determination, 60 Fed. Reg at 6505.
Under 19 U.S.C. § 1677b(b), if Commerce determines that sales made at less than cost of production "(1) have been made over an extended period of time and in substantial quantities, and (2) are not at prices which permit recovery of all costs within a reasonable period of time in the normal course of trade ' "• *" it must disregard such sales when determining FMV If the remaining above-COP sales were insufficient for determining FMV Commerce would have calculated FMV on the basis of constructed value (CV) for the OCTG models sold to the United States and compared the CV-based FMV with the United States price. Because Commerce found that the sales to China were not below-COR it did not need to compare CV-based FMV with USE Thus, CV is not involved in this case.
See Saccharin from Korea, 59 Fed. Reg. 58826, 58828 (Dep't Commerce 1994)(fínal detJOIMlisceUaneous income should be permitted as an offset to G&A because this income is related to [respondent's] production operations."Kemphasis added); Polyethylene Terephthalate Film, Sheet, and Strip from the Republic of Korea, 56 Fed. Reg. 16,305,16,317 (Dep't Commerce 1991)(final det.)("fRespondentl did not establish during verification that its recorded miscellaneous income and expense amounts were related to the company's PET film production. We therefore excluded the net income amount from Cheil's general expenses ")
See e g. Certain Fresh Cut Flowers From Columbia, 61 Fed. Reg. 42833,42843 (Dept, of Comm. Aug. 19,1996)(fi-nal det.Krefusing to allow revenues from cuttings, other materials, or sales of services to be used to offset constructed value).
The cases cited by Commerce were Timken Co. v. United States, 18 CIT 1, 852 F. Supp. 1040 (CIT 1994), Floral Trade Council of Davis, Cal. v. United States, 15 CIT 497, 775 F. Supp. 1492 (1991); and NTN Bearing Corp. v. United States, 905 F. Supp. 1083 (CIT 1995).
See Certain Small Business Telephone Systems and Subassemblies Thereof from Korea, 54 Fed. Reg. 53141,49 (Dep't. Commerce 1989) (final det.). |
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544 U.S. 989 | C. A. 4th Cir. Cer-tiorari denied. |
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246 U.S. 662 | Petition for a writ of certiorari to the United States Circuit Court of Appeals, for the First Circuit denied. |
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519 U.S. 1044 | Ct. App. Ohio, Hamilton County. Certiorari denied. |
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15 B.T.A. 1281 | OPINION.
Van Fossan :
The only issue pressed at the hearing in these cases arises from the disallowance by respondent of certain large items of deductions styled by petitioner " contract expenses." The appellation is a misnomer and gives no indication of the true character of the expenditures, which were made under the following circumstances.
Petitioner was a one-man corporation, solely and completely dominated by P. S. Thorsen, its president and the owner of from 82 per cent to 88 per cent of its stock. During the taxable years involved the company enjoyed approximately 98 per cent of the ship-insulation business at the Port of New York. Much of this work was rush work in which it was necessary to assemble labor quickly and get expedited action at whatever cost. To accomplish these ends Thor-sen, as president of petitioner, followed a practice of drawing large sums of money from the company treasury to spend as he saw fit in carrying out the company business. These sums were drawn by him without any explanation of purpose or relation to specific expenditures and varied in amount from approximately $18,000 in 1923 to $57,000 in 1919.
Thorsen spent these funds at his own discretion for payments to labor delegates, bonuses to truck drivers, commissions to ships' officers, traveling expenses, and other similar purposes, and made no record of such expenditures or accounting to the corporation therefor. The company's books show only the amounts of the several checks drawn to Thorsen's order and contain no record of the amount, nature, or purpose of final expenditures. Thorsen kept no books of any kind and made no record of what he spent or to whom it was paid. Asked to indicate how the money claimed to have been spent for labor was spent and the amount thereof in any year, Thorsen replied, " It can't be done." Similar replies greeted inquiries as to specific amounts spent for any other items. Thorsen frankly admits that he is utterly unable to specify the amount of any item for any •year; that there are no records to which resort may be had and that his approximations as to the amounts spent in any year for any particular item might vary largely (as much as $2,000) if he were asked a second time.
The entire case is predicated on Thorsen's reiterated statement that all of the money advanced to him in the several years, admitted to amount to a sum in excess of $200,000, was spent " in the business of the company." As to what constituted the company's business, he testified, " When I am in New York I am on business all of the time. If I leave my house in the morning that is business from then until I get back, and I usually work about fourteen hours a day." He stated, further, that he has spent as much as $5,000 in a single day in the manner outlined, as to which " I make no accounting. When I need more money I go to the bookkeeper and say,£ Draw a check for so much and give it to me.' That is all there is to it." Asked how he segregated his, daily personal expenses from the cash carried in his pocket which was available for use in the company's interests, he replied, " I never did." He did not carry " two separate pocketsful of money."
Thorsen also supplied from his drawings large sums of money to his foreman and other trusted employees to use in the manner outlined as to himself, and he never demanded an accounting as to how this money was spent. The sum in the foreman's hands daily varied from one hundred to several hundred dollars. The testimony of the foreman as to specific expenditures is equally as vague as is Thorsen's.
On a record of which the quoted excerpts are typical and might be multiplied, if necessary, we are asked to find that the sums so expended, aggregating more than $200,000, were ordinary and necessary expenses of the corporation, including reasonable allowances for salaries and other compensation for personal services actually rendered.
The Lord Chancellor of England, in the old case of Wing v. Underwood, observed: "We may guess, imagine or fancy, but the law of England requires evidence." His animadversion is apt in the instant case. The record is replete with admissions of inability to indicate the amount of any specific expenditure. Though petitioner purports to approximate certain amounts, the approximations are shown to be so uncertain as to amount to nothing but an estimate or a guess. A recollection so deficient as to the expenditure of such large sums of money can scarcely be trusted to make reasonably accurate approximations. In fact, the only precise approximations submitted were a sort of " fair average during the several years " and made no pretense of precise application to any one year, or of being specific or aggregate sums spent for any one purpose.
Thus, in sum, we are asked to allow these large deductions as ordinary and necessary expenses solely on the statement that they were made in the company's business. It is so obvious as not to require demonstration or citation of instances that the test proposed is far too broad. Not every expenditure in "the business of the company " is an allowable deduction. Certain expenditures are expressly excluded by law. Others depend on the reasonableness of the amount expended. Many expenditures, proper in one situation, might be improper in the presence of other facts.
Nor is this a case where the returns were prepared from accurate information not now available in evidence. Here, the returns were based on equally vague data without supporting records as to the character and propriety of the ultimate expenditures. There is no controversy over the fact of payment to Thorsen. The payments to him are admitted, but this fact, supported only by his statement that the money was spent in furthering the company's interest, does not establish deductibility. Our concern is to ascertain how Thorsen, the president and representative of the company, spent the money. The cases cited by counsel for the petitioner are not controlling. Undoubtedly, where the issue is so framed that the undisputed testimony establishes the ultimate fact in question, decision should not be influenced by an unsupported or unverified doubt or suspicion. Such is not the case before us. No fraud is charged, the honesty of petitioner's testimony is unchallenged, and it might fairly be assumed that included in the expenditures made by Thorsen and his employees are many items properly deductible as expense if they were capable of ascertainment. Here the ultimate question to be established is the amount, propriety and allowability as tax deductions of specific expenditures. This requires proof, not merely of the fact that an expenditure has been made, but, when challenged, specifically its amount, purpose and character, and, in some instances, the reasonableness thereof. It might go further — where a blanket deduction is sought of a lump sum, admittedly subject to a wide inaccuracy, it may become necessary to negative the possibility that some part of the item has been spent for prohibited or unallowable purposes.
To place the stamp of approval on the practice proposed in this case would, if carried to its logical conclusion, permit corporations to dispense with much of their bookkeeping and would effectively require this Board to abdicate the function and duty imposed by law to determine the allowability of contested expense deductions. It would make the designated corporation officer the supreme arbiter.
We are reluctant to decide this case adversely to petitioner, entertaining as we do the feeling that hidden in the transactions may be many allowable items, but on the record before us, and it is as complete as it is possible to make it in the absence of book records and in dependence on hazy recollections, we have no alternative but to hold that petitioner has failed to prove that respondent erred.
Judgment will be entered for the respondent. |
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1 Vet. App. 441 | STEINBERG, Associate Judge:
This case presents for review a January 31,1990, decision of the Board of Veterans' Appeals (BVA or Board) denying service connection for post-traumatic osteoarthritis of the knees, hips, spine, left ankle, and shoulders. We reverse the Board's decision as it pertains to the right shoulder because we find the decision to be "arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with law". 38 U.S.C. § 7261(a)(3)(A) (formerly 4061(a)(3)(A)). As to the knees, hips, spine, left ankle, and left shoulder, we vacate the decision and remand the case for readjudi-cation and a statement of the Board's findings and conclusions and the "reasons or bases" for those findings and conclusions. 38 U.S.C. § 7104(d)(1) (formerly 4004(d)(1)); See Gilbert v. Derwinski, 1 Vet.App. 49 (1990).
I. BACKGROUND
The appellant, a veteran of the Second World War, had active duty, including service as a turret gunner on a B-17, in the United States Army Air Corps from December 13, 1942, to October 29, 1945. On February 10, 1944, while on a bombing mission over Germany, his plane was shot down by enemy anti-aircraft and fighters. He was captured and held as a prisoner of war of the German government for 14V2 months, until April 26, 1945, when he was returned to U.S. military control.
In early 1947 he filed a claim for disability compensation benefits from the Veterans' Administration (now the Department of Veterans Affairs) (VA) for arthritis and other disabilities. In support of his claim, he submitted a January 21, 1947, medical statement from Dr. Stewart, a private physician, who stated that he had been treating the veteran for two months for "acute arthritis". R. at 15. A January 23, 1947, VA exam revealed "[n]o orthopedic abnormality at this time." R. at 19. In April 1947 the claim was denied by a VA Regional Office (RO) rating decision. The rating board noted that the VA exam "failfed] to find chronic residual Arthritis from the acute condition reported by Dr. Stewart." R. at 23.
In May 1947 the veteran submitted a statement describing a forced parachute jump from 13,000 feet at the time his plane was shot down, the cold conditions of the POW camps, and a forced march he endured from February to April 1945. In January 1948 a second statement from Dr. Stewart was submitted. Dr. Stewart stated that the veteran had complained of pain in the hands, feet, and knees in 1947. He also stated that the veteran "clearly had an acute arthritis" of the knees in January 1947, and since then he "has been able to continue regularly at work. However, for periods of several days his knees are moderately painful." R. at 28. In 1949 three statements from fellow POWs were submitted on behalf of the veteran. All three recounted that they were exposed to severe weather and endured a poor diet while prisoners of war. They also stated that they withstood a forced march of 600 to 700 miles from February to April of 1945 and that during that time they marched and slept in the open in cold and snow. Another VA examination was performed in March 1949. Complaints of pain in the knees and the right shoulder were noted. The diagnosis was "[ojrganic orthopedic disease not found." R. at 35. In April 1949 the VARO awarded the veteran service connection (rated at 10 percent) for a condition related to his POW experiences, but unrelated to arthritis. R. at 39.
Another VA examination was conducted in early 1951. Complaints of stiffness and weakness of the left knee were noted. Physical examination found "no swelling, deformity or tenderness of any major joint." R. at 47. On January 19, 1951, the arthritis claim was again denied by VARO rating decision. R. at 49.
In 1974 the veteran was hospitalized at a private facility and diagnosed with "os teoarthritis, left knee." R. at 51. In 1978, and again in 1982, the claim was denied by the RO. On March 15, 1983, the BVA issued a decision denying service connection for arthritis. The BVA found that the "[m]ultiple joint arthritis . is not a result of the veteran's experiences as a prisoner of war." R. at 60.
In January 1984 a former-prisoner-of-war protocol examination was conducted by VA, producing a diagnosis of "osteoarthritis generalized] 10-yrs plus". R. at 67. It was also noted that the veteran had had a total left knee replacement in 1983. The record indicates that in 1984 his right knee was also replaced.
In June 1987 another VA physical examination was conducted by Dr. Crowder, a VA physician. He noted that there were "minimal findings of osteoarthritis with no significant swelling of any of the joints at the present time." R. at 85. He also noted that the "major problem" complained of by the veteran was the right shoulder and that the veteran also had complained of "problems" with the lower back, the ankles, the feet, the wrists, and the hands. Ibid. In conjunction with the physical examination, a radiological examination of the shoulders, the lumbar spine, the ankles, the feet, the hands, and the wrists was performed by Dr. Frere, a VA physician. He recorded the following opinion: "[Mjoderate to moderately severe arthritis of the wrists", "moderate post-traumatic arthritis of the right ankle", "minimal osteoarthritis of the left ankle", "moderate degenerative changes and arthritis of the lower lumbar spophyseal joints and sacroiliac joints", "moderate arthritis of the right shoulder", and "minimal arthritis of the left shoulder." R. at 90. Also, as to the right shoulder the examiner stated: "I would presume the patient has had previous shoulder trauma, perhaps even dislocations and this is a residual osteoarthritis." R. at 89. As to the wrists, the examiner stated: "I presume this is post-traumatic though it could represent a[n] erosive osteoarthritis. Looks more post-traumatic than erosive." R. at 90. After receiving Dr. Frere's opinion, Dr. Crowder made a diagnosis of "[d]e-generative arthritis" involving "primarily" both knees, involving "probably" the lumbar spine and both ankles, and involving the shoulders, particularly on the right. R. at 91.
On February 8, 1988, the BVA issued a decision based upon a de novo review of the appellant's claim as a result of the enactment of Public Law No. 99-576, § 108(a)(2), 100 Stat. 3248, 3252 (1986), which added "post-traumatic osteoarthritis" to the list of former POW presumptive disorders. The BVA granted service connection for post-traumatic osteoarthritis of the wrists and the right ankle (service medical records show that the veteran had sprained his right ankle in service in 1943), both of which were "presumed to be related to service." R. at 97. The BVA found that "arthritis involving other joints, including the knees, hips, shoulders, lumbar spine or left ankle, is not shown to be of service origin or to be traumatic in nature." Ibid.
In 1988, following the BVA's denial of the claim, the appellant submitted a 1976 statement of Dr. Conley, a private physician, noting that the veteran had a "long standing history of degenerative arthritis involving the knees, occasionally the shoulders." R. at 102. He also submitted a November 8, 1988, statement of Dr. Jef-fries, a private physician, regarding the arthritis of the knees. Dr. Jeffries noted that he had treated the veteran's knee problems since 1982 when he had found "much more severe arthritis than one would expect in a 59 year old man." R. at 107. He stated that "[wjhile it is impossible to abs[o]lutely prove or disprove the chain of events leading to the severe arthritis which Mr. Bailey has sustained and which ultimately lead to bilateral total knee joint replacements, it is my opinion that the trauma which he received during World War II was substantially involved in this process in a causal manner." R. at 108. He also made the following observations: (1) "the negative impact on the knee [caused by parachute jumping] was definitely real and substantial and I believe within the reasonable degree of medical certainty is causally related to later knee arthritis", (2) "[t]he very severe conditions found in prisoner of war camps as well as the forced march that Mr. Bailey endured would have been very traumatic to his knees and I believe within a reasonable degree of medical certainty would have been causally related to his subsequent knee arthritis", and (3) Dr. Stewart's 1948 statement "would certainly substantiate that Mr. Bailey was having problems very soon after his liberation at the end of World War II and in general go along with the picture of early post traumatic arthritis." R. at 107.
In December 1988 a VA examination was conducted by Dr. Crowder again. Dr. Crowder noted that the veteran "has had arthritis or pain and bursitis perhaps in his shoulders. Has had injections in them. At the present they are doing relatively well." R. at 117. The diagnosis was: "Generalized osteoarthritis with particular involvement of the wrists, knees and ankles, and also the lumbosacral spine, etc. NOTE: As was said by Dr. Jeffries, it is impossible to say whe[ jther this is traumatic in origin or not. I suppose theoretically with his parachute jumps in service, some of the etiology could have been traumatic although we have no specific instance to relate to. Even the forced marches theoretically may have been etiologic." R. at 126.
On February 3, 1989, the RO rating board issued a decision denying the claim, finding that "[ojutside of mere speculation, we cannot find any basis on which to associate the arthritis of the knees, hips, shoulders, lumbar spine, and left ankle with the experience of his military service." R. at 128.
On January 31, 1990, the BVA issued a decision denying the claim. The BVA stated that the newly submitted evidence "suggests that arthritis of multiple joints, other than the wrists and right ankle, is of degenerative etiology, which is associated with the aging process. Medical opinion to the contrary notwithstanding, we must conclude that, as the Board did previously, the veteran does not have traumatic arthritis in his knees, hips, spine, left ankle and shoulders." Jack L. Bailey, BVA 90-02581, at 6 (Jan. 31, 1990). A timely appeal to this Court followed pursuant to 38 U.S.C. § 7252(a) (formerly § 4052(a)) and 7266 (formerly § 4066).
II. ANALYSIS
A.
The first issue we address is whether, as required by 38 U.S.C. § 5108 (formerly 3008), new and material evidence was submitted to reopen the claim in 1988 with respect to the shoulders, knees, hips, spine, and left ankle. We hold that new and material evidence was submitted to reopen the claim. In Colvin v. Derwinski, 1 Vet.App. 171, 174-75 (1991), this Court held "that to justify a reopening on the basis of new and material evidence, there must be a reasonable possibility that the new evidence, when viewed in the context of all the evidence, both old and new, would change the outcome." See also Godwin v. Derwinski, 1 Vet.App. 419, 424 (1991). In the present case, the new evidence included the 1976 statement of Dr. Conley noting a "longstanding history of degenerative arthritis involving the knees, occasionally the shoulders"; the 1988 statement of Dr. Jeffries providing an opinion that the trauma the veteran received in WWII was "substantially involved" in causing the veteran's arthritis of the knees; and the 1988 VA examination conducted by Dr. Crowder which noted that the veteran "has had arthritis or pain and bursitis perhaps in his shoulders", "crepitance in the right shoulder", "generalized osteoarthritis" of the wrists, knees, ankles, and lumbosacral spine, and the theoretical possibility that the generalized osteoarthritis may be traumatic in origin. R. at 102, 107-8, 117, and 126. In light of the BVA's finding in its February 1988 decision that the arthritis of the knees, hips, shoulders, lumbar spine, and left ankle was not shown to be traumatic in nature, the above evidence, specifically raising the possibility that the arthritis was traumatic in nature, created a reasonable possibility that when the new evidence was viewed in the context of all the evidence there would be a change in out come such that the arthritis of those joints would be found to be traumatic in nature.
Because new and material evidence was submitted to reopen the claim, the BVA was required under 38 U.S.C. § 5108 to "review the disposition of the claim" with respect to the arthritis of the knees, hips, spine, left ankle, and shoulders. In reviewing the disposition of a claim, the BVA must look "at the new and material evidence in the context of the other evidence of record and not in isolation." Jones v. Derwinski, 1 Vet.App. 210, 215 (1991). However, that was not the standard of review applied by the BVA here. Rather, it examined only the "newly submitted evidence" and found that it did "not establish that the arthritis of the knees, hips, spine, left ankle, and shoulders is traumatic in nature or otherwise related to the veteran's active service." Bailey, BVA 90-02581, at 6, 7. A remand on this basis would be required under our precedents. See, e.g., Jones, at 215; Manio v. Derwinski, 1 Vet.App. 140, 146-47 (1991).
However, in our review of the BVA's January 31, 1990, finding that the arthritis of the knees, shoulders, hips, left ankle, and spine was not traumatic in nature, we also find reversible error in part.
B.
38 U.S.C. § 1112(b)(12) (formerly § 312(b)(12)) provides in pertinent part:
[I]n the case of a veteran who is a former prisoner of war and who was detained or interned for not less than thirty days, the disease of . post-traumatic osteoarthritis, . which became manifest to a degree of 10 percent or more after active military, naval, or air service shall be considered to have been incurred in or aggravated by such service, notwithstanding that there is no record of such disease during the period of service.
38 U.S.C. § 1112(b)(12). The statute does not require that the post-traumatic osteoarthritis become manifested within a certain period of time after separation from service in order for the presumption of service connection to arise. Nor is there any requirement that there be a finding that the trauma occurred in service. See Godwin, 1 Vet.App. at 426. The presumption arises, as long as a post-traumatic osteoarthritis becomes manifest, to a degree of 10 percent, at any time after separation from service. The presumption of service connection is rebutted under 38 U.S.C. § 1113 (formerly § 313) only where affirmative evidence to the contrary, evidence establishing intercurrent injury or disease, or willful misconduct by the veteran, is present. 38 U.S.C. § 1113.
In proposing the traumatic arthritis presumption in 1986, the Senate Committee on Veterans' Affairs made special note of the "disagreement as to the adequacy of current medical science to distinguish between arthritis resulting from earlier trauma and arthritis which is the result of other causes or which normally occurs during the aging process." S.Rep. No. 444, 99th Cong., 2d Sess. 30, reprinted in 1986 U.S.Code Cong. & Admin.News 5468, 5469, 5480.
C.
We hold that the Board's conclusion in its 1990 decision that "the veteran does not have traumatic arthritis in his [right] shoulder[]", Bailey, BVA 90-02581, at 6, must be reversed because it was reached in a manner that was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" under 38 U.S.C. § 7261(a)(3)(A). In reviewing the claim of post-traumatic arthritis of the right shoulder, the Board, as noted in part A, above, was required by 38 U.S.C. § 5108 to review all of the evidence of record.
The evidence of record as to the right shoulder includes: complaints as early as 1949 of pain in the right shoulder; the 1987 VA examination report of Dr. Crowder which noted that the "major problem" complained of by the veteran was the right shoulder; the 1987 opinion of Dr. Frere of "moderate arthritis of the right shoulder" and his statement that "I would presume the patient has had previous shoulder trauma, perhaps even dislocations and this is a residual osteoarthritis"; the 1976 state ment (submitted in 1988) of Dr. Conley that the veteran "had a longstanding history of degenerative arthritis involving the knees, occasionally the shoulders"; and the 1988 VA examination report of Dr. Crowder which noted that the veteran "has had arthritis or pain and bursitis perhaps in his shoulders". R. at 35, 85, 89-90, 102, 117.
The record also indicates that in 1988 the Board awarded service connection for post-traumatic arthritis of the wrists based on "evidence of record indicating that the arthritic disease of these joints is post-traumatic in nature." R. at 97. That evidence included arthritic-type complaints of the wrists in 1947 and 1948 and Dr. Prere's 1987 opinion that the veteran had "moderate to moderately severe arthritis of the wrists" and his statement that "I presume this is post-traumatic arthritis though it could represent a[n] erosive osteoarthritis. Looks more post-traumatic than erosive."
However, the Board in its 1990 decision denied the claim for post-traumatic arthritis of the right shoulder despite the very similar evidence, including the complaints of right shoulder pain in 1947 and Dr. Frere's opinion that the veteran had "moderate arthritis of the right shoulder" and "has had previous shoulder trauma, perhaps even dislocations and this is a residual osteoarthritis." Whether the Board was arbitrary and capricious in the process it employed to find in 1988 that the arthritis of the wrists was post-traumatic in nature and that the arthritis of the right shoulder was not is not an issue that is before us here. However, in reviewing the reopened claim in 1990, the Board was obligated to review the old evidence in the context of the new evidence, which indicated that the right shoulder arthritis was, even as of 1976, "longstanding". In light of the evidence of record and the previous findings of the Board, the Board's conclusion in its 1990 decision, in the face of the almost identical evidence to that in the record as to the wrists, that the right shoulder arthritis was due to the aging process rather than trauma was the result of an arbitrary and capricious decision-making process under 38 U.S.C. § 7261(a)(3)(A).
We note that at oral argument VA counsel argued that the section 1112(b)(12) presumption was rebutted as to the right shoulder under section 1113 by a lack of post-service complaints as to the right shoulder, whereas, the presumption had not been rebutted as to the wrists because of the 1947 clinical records indicating "arthritic type complaints". Without deciding whether rebuttal under section 1113 could be based on such a lack of post-service complaints, we point out that the record indicates that the veteran did indeed complain of "some pain in the right shoulder" as early as 1949 at a VA examination. R. at 34. Thus, the presumption as to the right shoulder could not have been rebutted by a lack of evidence of post-service complaints.
D.
As to the veteran's claim to entitlement to service connection for arthritis of the knees, hips, spine, left ankle, and left shoulder, we remand the claim to the BVA for readjudication and a statement of "reasons or bases" for the Board's findings and conclusions under 38 U.S.C. § 7104(d)(1). In denying the claim as to those joints (and the right shoulder), the Board made the following statement: "Medical opinion to the contrary notwithstanding, we must conclude that, as the Board did previously, the veteran does not have traumatic arthritis of the knees, hips, spine, left ankle and shoulders." Bailey, BVA 90-02581, at 6.
In Gilbert v. Derwinski, 1 Vet.App. 49 (1990), we stated:
[T]he Board must identify those findings it deems crucial to its decision and account for the evidence which it finds to be persuasive or unpersuasive. These decisions must contain clear analysis and succinct but complete explanations. A bare conclusory statement, without both supporting analysis and explanation, is neither helpful to the veteran, nor 'clear enough to permit effective judicial review', nor in compliance with the statutory requirements.
Id. at 57 (citation omitted). See also Moore v. Derwinski, 1 Vet.App. 401, 404 (1991) and cases cited there.
The above quoted statement from the BYA decision is exactly the type of "bare conclusory statement" which Gilbert held to be inadequate. See also Sammarco v. Derwinski, 1 Vet.App. 111, 113-14 (1991); Ohland v. Derwinski, 1 Vet.App. 147, 149-50 (1991). The Board provided no explanation as to what "medical opinion to the contrary" it was referring, nor did it explain why such medical opinion was unpersuasive. Further, the Board provided no explanation for its statement that the "evidence suggests that arthritis of multiple joints, other than the wrists and right ankle, is of degenerative etiology, which is associated with the aging process." Bailey, BVA 90-02581, at 6. The Board did not indicate what evidence suggested that the arthritis was associated with the aging process, nor did it explain why that evidence was more persuasive than the "medical opinion to the contrary".
We note in particular that the Board provided no analysis of Dr. Jeffries' opinion that trauma received by the veteran during World War II was "substantially involved . in a causal manner" in the severe arthritis of the knees which ultimately lead to the total knee replacements. R. at 108. Nor did the Board provide any explanation as to what bearing, if any, the evidence that the veteran had had, as early as 1976, a "longstanding history of degenerative arthritis of the knees" (R. at 102), that he had been seen for "acute arthritis" of the knees as early as 1948 (R. at 35), and that in 1982 he had had "much more severe arthritis than one would expect in a 59 year old man" (R. at 107) had on its totally unsupported conclusion that that arthritis was due to the aging process.
We note further that in Colvin, 1 Vet.App. at 175, the Court held that the BVA must support its decision with "a medical basis other than the panel's own unsubstantiated [medical] opinion." Although that may not be the explanation for the reference to the aging process by the Board here, the requirements of Colvin must be followed on remand and, if the medical evidence of record is insufficient, the BVA is always free to supplement the record by seeking an advisory opinion, ordering a medical examination or providing medical authority, from recognized medical treatises or otherwise, that clearly supports its ultimate conclusions. See Colvin, at 175; Murphy v. Derwinski, 1 Vet.App. 78, 81 (1990).
At oral argument, VA counsel argued that Dr. Jeffries and Dr. Crowder, unlike the RO and the BVA, did not have before them the complete record, and, therefore, their opinions as to the possible causes of the arthritis should be given less weight. That may or may not be a valid reason for finding those opinions unpersuasive; however, the Board did not articulate it as a reason or basis for denying the claim. Thus, it does not alleviate the need for a remand for a statement of the reasons or bases for the Board's findings and conclusions.
In addition, the Board provided no explanation or support for its statement that "the facts in this case" do not raise a reasonable doubt. See 38 U.S.C. § 5107(b) (formerly 3007(b)); see also 38 U.S.C. § 1154(b) (formerly § 354(b)) (reasonable doubt specifically applicable to combat veterans); 38 C.F.R. § 3.102 (last sentence) (1990) (to the same effect as the statute). In readjudicating this claim on remand, the Board should take into account in determining whether the veteran is entitled to the benefit-of-the-doubt the statement quoted above from the Senate Report that there is disagreement as to the adequacy of current medical science to distinguish between arthritis resulting from trauma and arthritis resulting from the aging process or other causes.
Finally, we note that if on remand the veteran is successful with respect to his claim for entitlement to service connection for post-traumatic osteoarthritis of the knees, the veteran, based on Dr. Jeffries' opinion of the status of the arthritis in 1982 prior to the two knee-replacement procedures, might have a claim for discretionary reimbursement from VA under 38 U.S.C. § 503(a) (substantially similar to former § 210(c)(2)) (administrative error), for any expenses he incurred for those procedures that were performed in private facilities.
III. CONCLUSION
Accordingly, we reverse the January 31, 1990, finding of the Board that the veteran's right-shoulder arthritis was not traumatic in nature because, based on the evidence of record and the previous findings of the Board, we hold that that finding was reached in a manner that was "arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with the law." under 38 U.S.C. § 7261(a)(3)(A). The right-shoulder claim is remanded for a determination of the degree of disability of the veteran's right shoulder post-traumatic osteoarthritis, including a determination of whether the right-shoulder arthritis had manifested itself to the degree of 10 percent for purposes of presumptive service connection under 38 U.S.C. § 1112(b)(12). As to the claim for entitlement to service connection for arthritis of the knees, hips, spine, left ankle, and left shoulder, we vacate and remand the decision for readjudi-cation in accordance with this opinion.
REVERSED IN PART AND VACATED AND REMANDED IN PART. |
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429 U.S. 1027 | C. A. 4th Cir. Certiorari denied.
Mr. Justice Powell took no part in the consideration or decision of these petitions. |
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505 U.S. 1241 | It is ordered that Oscar Burén Ladner, of Gulfport, Miss., be suspended from the practice of law in this Court and that a rule issue, returnable within 40 days, requiring him to show cause why he should not be disbarred from the practice of law in this Court. |
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29 Ct. Int'l Trade 681 | FINDINGS OF FACT & CONCLUSIONS OF LAW
I. Introduction
WALLACH, Judge:
This matter is before the court for decision following a bench trial on November 30, 2004, December 1, 2004, and December 2, 2004. In this action, Plaintiff BASF Corporation ("BASF" or "Plaintiff") challenges United States Customs and Border Protection's ("Customs") classification of its imported merchandise, Lucarotin® 1% CWD S/K ("Lucarotin® 1%"), a food colorant, un der Harmonized Tariff Schedule of the United States ("HTSUS") (1999) subheading 2106.90.99 at 7% ad valorem as "food preparations not elsewhere specified or included: Other: Other: Other: Other: Other: Other." Plaintiff claims that its product is properly classifiable under subheading 3204.19.35 of the HTSUS, as "beta carotene and other carotenoid coloring matter," which is duty free pursuant to the Pharmaceutical Appendix, or alternatively duty-free under subheading 2936.90.00 of the HTSUS, as a mixture of provitamins and vitamins. Shortly before the trial, Defendant abandoned its alternative claim that Lucarotin® 1% is classifiable under subheading 2106 and now argues that the product is properly classifiable under HTSUS 3204.19.40 "Other: Products described in additional U.S. note 3 to section VI" or HTSUS 3204.19.50 "Other: Other." This Court has jurisdiction pursuant to 28 U.S.C. § 1581(a) (2004). For the following reasons, the court finds that Lucarotin® 1% is properly classified under HTSUS 3204.19.35 as "beta-carotene and other carotenoid coloring matter."
II. Background
On or about November 19, 1999, Plaintiff entered the subject merchandise under Entry No. 110-0697173-2 under HTSUS subheading 3204.19.35 from Germany through the Port of Newark, New Jersey. The subject merchandise is a red-orange powder sold as a food colorant and is used to impart color to a variety of foods and beverages. As the name of the product indicates, the subject merchandise contains 1% beta-carotene and 99% other materials.
Customs liquidated the entry and classified the Lucarotin® 1% under HTSUS Subheading 2106.90.99 assessing a 7% ad valorem duty thereon, and liquidating accordingly. Plaintiff paid all liquidated duties, taxes, and fees and filed a timely protest on July 25, 2000, with the Port Director at Newark, New Jersey, challenging Customs' classification. Plaintiff claimed that Lucarotin® 1% should have been classified under HTSUS subheading 3204.19.35 with a 3.1% ad valo-rem duty. Customs denied Plaintiff's protest on October 6, 2000. On April 3, 2001, Plaintiff commenced this action by filing a Summons with this court.
III. Standard of Review
Pursuant to the court's jurisdiction under 28 U.S.C. § 1581(a) (2001), the statute provides for judicial review of denied protests filed in accordance with 19 U.S.C. § 1514 (2001). Although Customs's decisions are entitled to a presumption of correctness under 28 U.S.C. § 2639(a)(1) (2001), the Court makes its determinations upon the basis of the record made before the Court, rather than that developed by Customs. See United States v. Mead Corp., 533 U.S. 218, 233 n.16, 121 S. Ct. 2164, 150 L. Ed. 2d 292 (2001). Accordingly, the Court makes the following findings of fact and conclusions of law as a result of the de novo trial. See 28 U.S.C. § 2640(a) (2001).
IV. Findings of Fact
A. Facts Uncontested By The Parties And Agreed To In The Pretrial Order
1. The imported merchandise is sold under the name Lucarotin® 1% CWD S/K.
2. "Lucarotin® 1%" is a registered trademark of BASF Corporation.
3. Lucarotin® 1% CWD S/K a free-flowing, red-orange powder that is cold water dispersible, consisting of a dispersion of beta-carotene stabilized in soybean oil, which is embedded in the form of very fine beadlets in a matrix of dextrin and d-glucose. It is stabilized with dl-alpha tocopherol and ascorbyl palmitate, and contains tricalcium phosphate as a flow-aid.
4. Lucarotin® 1% CWD S/K is a mixture of the following chemicals with the respective Chemical Abstract Service ("CAS") registry number in the stated amounts:
5. Beta-carotene is a carotenoid.
6. Beta-carotene is organic coloring matter that imparts a yellow, orange or reddish color.
7. Beta-carotene is provitamin A.
8. Beta-carotene is an antioxidant.
9. The Beta-carotene in Lucarotin® 1% CWD S/K is synthetically derived.
10. Beta-carotene is fat soluble.
11. Beta-carotene is not water soluble.
12. The d-glucose is used as a filler, to harden the beadlet, and as a dispersant making the beta-carotene water soluble.
13. The maltodextrin is used as a filler, to harden the beadlet, and as a dispersant making the beta-carotene water soluble.
14. The beta-carotene is dissolved in the soybean oil, which functions as a carrier for the beta-carotene.
15. The ascorbyl palmitate is a fat soluble antioxidant used to stabilize the beta-carotene.
16. Ascorbyl palmitate is a derivative of vitamin C.
17. The dl-alpha-tocopherol is an antioxidant used to stabilize the beta-carotene.
18. Dl-alpha-tocopherol is vitamin E.
19. The water is a non-functioning component that is residual content from the manufacturing process and that is not deliberately left in the product.
20. The tricalcium phosphate is an anticaking agent.
21. The d-glucose and maltodextrin are carbohydrates.
22. Lucarotin® 1% CWD S/K is sold for use as a food colorant.
23. Lucarotin® 1% CWD S/K is used to impart color to a wide variety of foods, including fruit drinks and other beverages, yellow cakes, bagels, and breads.
B. Facts Established At Trial
24. Dr. Herbert Woolf, witness for Defendant, is the North American Market Development Manager in the Human Nutrition Group at BASF Corporation. He is a scientist responsible for technical sales and technical marketing. The Court found the testimony of Dr. Woolf highly probative and credible.
25. Lucarotin® 1% is BASF's highest-selling beta-carotene product used for coloration of a variety of food stuffs. Customers do not buy Lucarotin® 1% for any purpose other than delivery of a beta-carotene colorant.
26. The word "Lucarotin® 1%" is a trademarked name comprising of the words: "carotin," the German word for beta-carotene, and the "Lu," for "Ludwigshafen," the German town in which the product was produced.
27. Lucarotin® 1% contains beta-carotene, which is "nature identical," an industry term meaning that the composite chemicals are synthesized to mimic or represent naturally derived materials. Chemically, synthetic beta-carotene is identical to natural crystalline beta-carotene.
28. Pure crystalline beta-carotene cannot be added directly to a beverage as a colorant.
29. Beta-carotene is a known food colorant and its primary use is as a colorant. In larger doses, beta-carotene can be a dietary supplement as an antioxidant.
30. Because beta-carotene is fat soluble by nature, not water soluble, Lucarotin® 1% is cold water dispersible, that is, the beta-carotene must be formulated as such to be dispersible in water.
31. BASF produces 99.9 pure, crystalline beta-carotene, but it does not sell it in this form. BASF and other companies who manufacture synthetic beta-carotene, however, do provide samples of the material to researchers for analytical purposes.
32. BASF does not buy pure beta-carotene from any other company.
33. BASF does not produce crystalline beta-carotene for direct sale for use as a colorant because the crystals are unstable and pyrogenic.
34. Pure, crystalline beta-carotene, because of its pyrogenic qualities, must be transported under specific conditions: in an airtight container in which the container is flushed with an inert gas such as helium or nitrogen.
35. In the production of Lucarotin® 1%, BASF takes the synthetic beta-carotene crystals and disperses them in vegetable oil with heat, making it into a solution. The production process requires the mixing of this solution with another solution containing sugars and dextrin. Vitamin emulsifiers in the ester form and ascorbyl palmitate are added. When all of these are combined, Lucarotin® 1% is produced.
36. The processing of the beta-carotene into Lucarotin® 1% is to provide standardization, so that the colored products are consistent from one batch to the next. The design of Lucarotin® 1% accomplishes two things: crystalline beta-carotene is unstable as it oxidizes and self-combusts. The stabilizers, antioxidants (Vitamin E, also known as dl-alpha-tocopherol, and a derivative of Vitamin C, known as ascorbyl palmitate), protect the beta-carotene from being oxidized. The design also provides a product to the food industry in a form in which it can be used as a colorant.
37. BASF Corporation has a Technical Bulletin which describes the physical characteristics of Lucarotin® 1% so that a user can identify it based on the description contained therein. The document is provided with every sample and is available on the BASF's website. The document describes Lucarotin® 1% as a "stabilized beta-carotene [that] is dispersed in soybean oil and embedded as minute droplets in a polysaccharide sugar matrix. . . ."
38. BASF also provides a Material Data Safety Sheet to customers or potential customers-which gives safety guidance for use in handling the material if there is incidental exposure to a concentrated form. The document gives the common chemical ingredient in Lucarotin® 1% as beta-carotene.
39. The beta-carotene in Lucarotin® 1% does not go through chemical alterations in the manufacturing process. The beta-carotene in Lucarotin® 1% that goes into the manufacturing process is the same as the beta-carotene in Lucarotin® 1% at the end of the manufacturing process.
40. Beta-carotene is the only active ingredient in Lucarotin® 1% - the other 99% percent of the ingredients are stabilizers or delivery agents.
41. The beta-carotene in Lucarotin® 1% is the only ingredient that imparts color.
42. The beta-carotene in Lucarotin® 1% is by far the most expensive ingredient.
43. Dr. Paul Lachance, witness for Plaintiff, is a Professor Emeritus of Food Science at Rutgers, The State University of New Jersey. The court found Dr. Lachance qualified to testify as an expert witness in the areas of carotenoids, beta-carotene, and carotenoid coloring matter.
44. The court found the testimony of Dr. Lachance generally unpersuasive. The court found Dr. Lachance's diction and volume difficult to understand and indicated this during Trial. Because of the prevalent discrepancies the court has found between the trial transcript and the recorded trial proceedings throughout the Trial, the court will give only limited weight to the transcript of Dr. Lachance's testimony.
45. Beta-carotene, canthaxanthin, and beta-apo-8-carotenal are all carotenoids used as colorants.
46. Beta-carotene imparts the essential character to Lucarotin® 1%.
47. The Government acknowledged that the active ingredient in Lucarotin® 1% is beta-carotene.
48. Mr. Barry Kaufman, witness for Plaintiff, is a Senior Product Manager at BASF corporation who is responsible for the marketing of many products, including Lucarotin® 1% and the whole Lucarotin® 1% product line. The court found that Mr. Kaufman, within his area of knowledge, demonstrated factual knowledge and the ability to perceive and recollect.
49. Lucarotin® 1% is marketed as one-percent beta-carotene for coloration.
50. Customers of Lucarotin® 1%, including the bakery, beverage, soup, and candy industries, use the product to impart an orange-yellow color to their products.
51. Eighty to ninety percent of the Lucarotin® 1% that is produced is used in the beverage industry.
52. Customers buy beta-carotene based colorants like Lucarotin® 1% (as opposed to cheaper synthetic colorants) so that they can advertise as such.
53. A brochure BASF provides to its customers reads: "BASF's line of Lucarotin® 1% Beta-carotene products provide a broad range of colors and application to the food industry."
54. In the United States, the companies DSM (formerly known as Hoffman Laroche) and Allied sell similar and competitive products to Lucarotin® 1% and market their colorants in the same way.
55. There is no market for crystalline beta-carotene in the United States.
56. Mr. Harvey Kuperstein, witness for Defendant, is a National Import Specialist for the United States Bureau of Customs and Border Protection. The court found the testimony of Mr. Kuperstein to be unpersuasive. He contradicted himself and was not entirely accurate in terms of his knowledge and ability to recollect.
57. Mr. Kuperstein conceded that subheading 3204.19.35 is not limited to crystalline or U.S. Pharmacopeia grade beta-carotene and other carotenoids.
58. The Government approved a protest on Customs' Entry No. WBA 9034927-4, a similar product to Canthaxanthin 10 per cent CWS/N made by Roche Vitamins and classified the entry under HTSUS subheading 3204.19.35 on August 13, 2004.
59. Dr. Robert Olson, witness for Defendant, received his A.B. from Gustavus Adolphus College, Ph.D. in Biochemistry from St. Louis University, and his M.D. from Harvard Medical School. Dr. Olson testified as an expert in the fields of biochemistry and nutrition. The court found the testimony of Dr. Olson highly probative and credible.
60. Dr. Olson stated that the active ingredient in Lucarotin® 1% is beta-carotene.
61. Dr. Olson testified that the essential use of Lucarotin® 1% is to dye products.
62. Dr. Olson stated that the beta-carotene in Lucarotin® 1% gives the product its essential character as opposed to the other materials in the product.
63. If any of these Findings of Fact shall more properly be Conclusions of Law, they shall be deemed to be so..
V. Conclusions of Law
1. Lucarotin® 1% is piroperly classified under heading 3204.
2. Lucarotin® 1% is a mixture pursuant to the General Rules of Interpretation because it is a composite good consisting of different materials.
3. GRI 2(b) directly applies to the classification of mixtures and refers to GRI 3 for guidelines for classification. Because GRI 3(b) applies to mixtures and provides that for goods not classifiable under GRI 3(a) - in which the most specific description is preferred to the more general description in headings - the mixture shall be classified according to the material or component which gives it its "essential character."
4. The beta-carotene in Lucarotin® 1% gives the product its essential character because it is the only active ingredient.
5. The other ingredients in Lucarotin® 1% are inert ingredients that enrobe the beta-carotene to enhance stability, to make it soluble in water (since beta-carotene is only oil soluble), and to standardize the product for commercial purposes.
6. HTSUS Heading 3204 includes "[sjynthetic coloring matter, whether or not chemically defined; preparations as specified in note 3 to this chapter based on synthetic organic coloring matter . . . [s]ynthetic organic coloring matter and preparations based thereon as specified in note 3 to this chapter."
7. The relevant section of Note 3 to Chapter 32 states that "Headings . . . 3204 [list of headings], apply also to preparations based on coloring matter . , of a kind used for coloring any material or used as ingredients in the manufacture of coloring preparations."
8. Subheading 3204.19.35 covers "[b]eta carotene and other carotenoid coloring matter."
9. The structure of Heading 3204 down to Subheading 3204.19.35 is very similar in structure to Heading 3203 which was at issue in Lynteq, Inc. v. United States, 976 F.2d 693, 697 (Fed. Cir. 1992).
10. In Lynteq, which dealt with the classification of a colorant Cromophyl-L, Heading 3203 included vegetable or animal coloring matter and used the same language about preparations as in Heading 3204. The subheading 3203.00.10 listed a number of specific items: "annato, archil, cochineal, cudbear, litmus, logwood and marigold meal." Lynteq, 976 F.2d at 697. The Federal Circuit found that Cromophyl-L could not be classified under this subheading because "[t]he language of subheading 3203.00.10 [was] clear and unambiguous. That the eo nomine subheading, by its very clear terms, covers only coloring matter which comes within the common meaning of the items specifically enumerated therein: annato, archil, cochineal, cudbear, litmus, logwood and marigold meal." Id. at 696. Thus, K[a]n eo nomine provision which does not specifically provide for preparations does not encompass preparations within its ambit." Id. at 697.
11. Defendant argues that Lucarotin® 1% is a "preparation" and thus, pursuant to Lynteq, it should not be classified under HTSUS 3204.19.35. Plaintiff claims that Lucarotin® 1% is not a "preparation," and rather is only a "mixture." Alternatively, Plaintiff states that even if the court were to find that Lucarotin® 1% is a "preparation," the product should nevertheless be classified under HTSUS 3204.19.35. Since the parties do not disagree that Lucarotin® 1% is a mixture , their disagreement hinges on the definition of "preparation" and, in turn, the difference between the terms "preparation" and "mixture."
12. According to the General Rules of Interpretation, a "mixture" is a "composite [good] consisting of different materials or made up of different components."
13. The term "preparation" is not defined in the HTSUS or the General Rules of Interpretation.
14. In United States v. Hanrahan, 45 C.C.P.A. 120, 122 (1958), a "preparation" is defined as: "where the imported merchandise is a distinct and recognized article of commerce, having an individual name, and which is produced from a raw material by a definite series of steps, such merchandise is a preparation."
15. The Federal Circuit in Orlando Food Corp. v. United States, 140 F.3d 1437, 1441 (Fed. Cir. 1998) stated
Inherent in the term "preparation" is the notion that the object involved is destined for a specific use. The relevant definition from The Oxford English Dictionary defines "preparation" as "a substance specially prepared, or made up for its appropriate use or application, e.g. as food or medicine, or in the arts or sciences." 12 The Oxford English Dictionary 374 (2d. ed. 1989).
16. These definitions of "preparation" in both Hanrahan and Orlando Foods are broad and unclear - the ambiguity of which make their application difficult and of little utility for the essential role of law - the prediction of results.
17. Even at Trial in the present case, there was a lack of consensus among the witnesses regarding exactly what the term "preparation" means.
18. Dr. Woolf suggested that because the beta-carotene in Lucarotin® 1% undergoes no "chemical reactions" in its manufacturing process, that the product is a "mixture." Trial Tran script ("TV.") at 34. He, however, went on to explanation that the term "preparation" is not a term of art used in the food colorant industry. TV. at 41-42.
19. Dr. Lachance suggested that some type of a chemical reaction was required among the ingredients of the product for it to be a "preparation." TV. at 127.
20. Mr. Kuperstein claimed that "preparation" could be defined as "a purposeful mixture . for a specific use," but upon questioning was hard pressed to differentiate between a "preparation" and a "purposeful mixture." TV. at 283.
21. Dr. Olson stated that "preparation" can have "multiple definitions." TV. at 446.
22. From these varying definitions, both in the case law and during trial, Lucarotin® 1% could be a "preparation," but depending on the product or merchandise at issue and context, any such item could be a "mixture" or "preparation."
23. The court, however, needs neither to determine the meaning of the tariff term "preparation," nor whether Lucarotin® 1% is a "preparation," see Orlando Foods, 976 F.2d at 697, because Lucarotin® 1% falls squarely within the scope of subheading 3204.19.35.
24. In the present case, subheading 3204.19.35 is less restrictive than the subheading in Lynteq, which just lists the particular raw material colorants, and suggests a more inclusive scope.
25. The subheading 3204.19.35 enumerates "beta carotene and other carotenoid coloring matter": using the canon of statutory construction noscitur a sociis both "beta carotene" and "other carotenoid" modify the term "coloring matter." This is because "beta carotene" is a type of carotenoid along with, e.g. canthaxanthin, 8'-apo-beta-carotenol, which would be classified as the"other carotenoid [s]."
26. The relevant definition of the term "matter" is "a material substance of a particular kind or for a particular purpose <vegetable matter>." Merriam Webster Online Dictionary.
27. The inclusion of the term "matter" in subheading 3204.19.35 clearly contemplates that products within the scope of the subheading would be beta-carotene or other carotenoid colorants of a particular kind or for a particular purpose. For,
When an article is in character or function something other than as described by a specific provision in the tariff schedule, either more limited or more diversified, and the difference is significant, it cannot be classified within that provision. Robert Bosch Corp. v. United States, 63 Cust. Ct. 96, 103 — 04, C.D. 3881 (1969) (citations omitted). If the difference is merely an improvement or amplification, and the essential character of the merchandise is preserved or only incidentally altered, the rule is that an eo nomine designation will include all forms of the article, absent contrary legislative intent or commercial designation. Id. at 104 (citing Nootka Packing Co. v. United States, 22 C.C.P.A. 464, T.D. 47,464 (1935)).
Nestle Refrigerated Food Co. v. United States, 18 C.I.T. 661, 664 (1994).
28. Because the subheading 3204.19.35 includes "beta carotene . . . coloring matter" and Lucarotin® 1% is a beta-carotene coloring matter, Lucarotin® 1% is classifiable in subheading 3204.19.35.
29. If only pure, crystalline beta-carotene could be classified under subheading 3204.19.35, as Defendant suggests, the subheading would be an empty provision since pure beta-carotene cannot be used as a colorant without processing.
30. BASF produces synthetic beta-carotene, but there is no market for crystalline, pure beta-carotene as a colorant.
31. Lucarotin® 1% is marketed and sold by BASF and bought by customers as a beta-carotene colorant.
32. Congress is presumed to have known that the correct meaning of a term in a tariff provision is the common meaning understood in trade and commerce, see Schott Optical Glass, Inc. v. United States, 612 F.2d 1283, 1285 (C.C.P.A. 1979), and that the legislative purpose is expressed by the ordinary meaning of the words used, see Richards v. United States, 369 U.S. 1, 9, 82 S. Ct. 585, 7 L. Ed. 2d 492 (1962).
33. A product's actual use cannot be ignored in determining whether it falls within an eo nomine tariff provision. See United States v. Quon Quon Co., 46 C.C.P.A. 70, 73 (1959).
34. Lucarotin® 1% therefore must be classified as a beta-carotene coloring matter under subheading 3204.19.35 to effectuate Congress' intent. See Len-Ron Mfg.Co. v. United States, 24 CIT 948, 961, aff'd 334 F.3d 1304 (Fed. Cir. 2003).
35. The Harmonized Commodity Description and Coding System Explanatory Notes ("Explanatory Notes") , provide further support for classifying Lucarotin® 1% under HTSUS subheading 3204.19.35.
36. Explanatory Note (I)(A) to Subheading 32.04 states that the Heading "Synthetic Organic Colouring Matter, Whether or not Chemically Defined; Preparations as Specified in Note 3 to this Chapter Based on Synthetic Coloring Matter"
applies, inter alia, to:
(A). . . [s]ynthetic organic colouring matter diluted with substances which have no dyeing properties (e.g., anyhdrous sodium sulphate, sodium chloride, dextrin, starch) to decrease or standardise their colouring power. The addition of small quantities of surface-active products to encourage penetration and fixation of the dye does not affect the classification of colouring matter.
37. The components of Lucarotin® 1% apart from the beta-carotene itself comprise the types of dilutants mentioned by the Explanatory Notes. The d-glucose and maltodextrin are carbohydrate fillers similar to "starch." The ascorbyl palmitate and dl-alpha-tocopherol serve to stabilize the beta-carotene and the tricalcium phosphate is an anticaking agent. The Explanatory Notes suggest that these sorts of ingredients do not affect the classification of products like Lucarotin® 1%..
38. If any of these Conclusions of Law shall more properly be Findings of Fact, they shall be deemed to be so.
Effective March 1, 2003, the United States Customs Service was renamed the United States Bureau of Customs and Border Protection. See Homeland Security Act of 2002, Pub. L. 107-296, § 1502, 116 Stat. 2135, 2308-09 (2002); Reorganization Plan for the Department of Homeland Security, H.R. Doc. No. 108-32 (2003).
HTSUS Subheading 3204.19.35 through 3204.19.50 provide for:
3204.00 Synthetic organic coloring matter, whether or not chemically defined; preparations as specified in note 3 to this chapter based on synthetic organic coloring matter; synthetic organic products of a kind used as fluorescent brightening agents or as luminophores, whether or not chemically defined:
Synthetic organic coloring matter and preparations based thereon as specified in note 3 to this chapter:
+ •!= *
Other, including mixtures of coloring matter of two or more of the subheadings 3204.11 to 3204.19: 3204.19
Other:
Beta-carotene and other carotenoid coloring matter.....kg.3.1% Free (A*,CA,E,IL, 25% J,K,MX) 3204.19.35
Other:
Products described in additional U.S. note 3 to section VI.kg.10.8% Free (A+,CA,E,IL, 50.5% J) 6% (MX) 3204.19.40
Other..kg.13.2% Free (A+,CA,E,IL, 50.5% J) 8% (MX) 3204.19.50
Note 3 to this chapter states that
Headings 3203, 3204, 3205 and 3206 apply also to preparations based on coloring matter (including, in the case of heading 3206, coloring pigments of heading 2530 or chapter 28, metal flakes and metal powders), of a kind used for coloring any material or used as ingredients in the manufacture of coloring preparations. The headings do not apply, however, to pigments dispersed in nonaqueous media, in liquid or paste form, of a kind used in the manufacture of paints, including enamels (heading 3212), or to other preparations of heading 3207, 3208, 3209, 3210, 3212, 3213 or 3215.
Additional U.S. note 3 to section VI states
The term "products described in additional U.S. note 3 to section VF refers to any product not listed in the Chemical Appendix to the Tariff Schedule and—
(a) For which the importer furnishes the Chemical Abstracts Service (C.A.S.) registry number and certifies that such registry number is not listed in the Chemical Appendix to the Tariff Schedule; or
(b) Which the importer certifies not to have a C.A.S. registry number and not to be listed in the Chemical Appendix to the Tariff Schedule, either under the name used to make Customs entry or under any other name by which it may be known.
HTSUS Subheading 2106.90.99 provides for:
2106.00 Food preparations not elsewhere specified or included:
2106.90 Other:
Other:
Other:
Other:
Other:
2106.90.99 Other:.7% Free (A,CA,E,IL,J, 20% MX)
GRI 2(b) states that
[a]ny reference in a heading to a material or substance shall be taken to include a reference to mixtures and combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of rule 3.
Pursuant to GRI 3(a) & (b)
When, by application of rule 2(b) or for any other reason goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:
(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put of retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.
(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or the component which gives them their essential character, insofar as this criterion is applicable.
"A canon of construction holding that the meaning of an unclear word or phrase should be determined by the words immediately surrounding it." Black's Law Dictionary at 1087 (8th ed. 1999).
Plaintiff has argued that Lucarotin® 1% is a form of beta-carotene and is entitled to duty-free treatment because subheading 3204.19.35 grants duty-free treatment for products that are included in the Pharmaceutical Appendix to the Tariff Schedule, symbolized by "K."
The application of the Pharmaceutical Appendix is different from that of the Chemical Appendix, and it should not be construed so broadly. While both Appendices state in their notes that products "by whatever name known" should fall under their respective scopes, the intent behind their existence appears to be different. In Ciba-Geigy Corp. v. United States, 178 F. Supp.2d 1336 (CIT 2001), the court discusses in great detail the legislative history of the Chemical Appendix.
No such detailed legislative history exists for the Pharmaceutical Appendix which was added to U.S. law pursuant to the pharmaceutical agreement of the General Agreement of Tariffs and Trade ("GATT"). Uruguay Rounds Agreements Act ("URAA"), Pub. L. 103-465, 108 Stat. 4809 (1994); see Proclamation No. 6763, 60 Fed. Reg. 1007 (Jan. 4, 1995); Pharmaceutical Tables 1 and 3 of the HTSUS, 60 Fed. Reg. 20,558 (April 26,1995). During the Uruguay Round negotiations, the then GATT contracting parties, including the United States, European Union, Japan, Canada, and others, agreed to eliminate tariffs on thousands of pharmaceutical products. This so called "zero-for-zero initiative" included an immediate elimination of duties on certain pharmaceutical products as well as reviews by the signatories at least once every three years to identify more products which could be covered by this duty reduction program. The products which were to obtain duty-free treatment based on this "zero-for-zero" program are identified in the Pharmaceutical Appendix for duty-free treatment. The basis for the Pharmaceutical Appendix is thus not a protectionist one; however, since the products identified in the Pharmaceutical Appendix for duty-free treatment were based on specific, ongoing negotiations, see section 111(b) of the URAA, the list should be construed narrowly as "the conduct of foreign relations is committed by the Constitution to the political departments of the Federal Government." United States v. Pink, 315 U.S. 203, 223-23, 62 S. Ct. 552, 86 L. Ed. 796 (1942).
Lucarotin® 1% is a mixture and a beta-carotene coloring matter-, it is neither pure beta-carotene nor a form of beta-carotene. See Customs Headquarters Ruling Letter 961704, dated Oct. 14, 1998 ("A product is not entitled to duty-free treatment unless it is actually listed in the Pharmaceutical Appendix. Despite having each of [the] component compounds [of the product at issue] included in the Appendix, this merchandise, a mixture . , is not itself listed in the Pharmaceutical Appendix. Customs has no statutory authority to expand the Pharmaceutical Appendix."). Lucarotin® 1% is not "used in the prevention, diagnosis, alleviation, treatment, or cure of disease in humans or animals," which the ITC identifies as a pharmaceutical or "drug." See Advice Concerning the Addition of Certain Pharmaceutical Products and Chemical Intermediates to the Pharmaceutical Appendix to the Harmonized Tariff Schedule of the United States, USITC Pub. 3167, at 3 (April 1999). Lucarotin® 1% is thus not eligible for duty-free treatment under the Pharmaceutical Appendix.
The Explanatory Notes are persuasive, but not binding on this court. H.R. Conf. Rep. No. 100-576, 100th Cong., 2d Sess. 549 (1988), reprinted in 1988 U.S.C.C.A.N. 1547, 1582; see Bauer Nike Hockey USA, Inc. v. United States, 393 F.3d 1246, 1250 (Fed. Cir. 2004); Mita Copystar Am. v. United States, 21 F.3d 1079, 1082 (Fed. Cir. 1994). |
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464 U.S. 843 | C. A. 6th Cir. Certiorari denied. |
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10 Cust. Ct. 461 | Opinion by
Cline, J.
It was stipulated that certain of the merchandise in question consists of crude drugs the same in all material respects as those passed upon in Oy Wo Tong Co. v. United States (5 Cust. Ct. 70, C. D. 372). In accordance therewith they were held entitled to free entry under paragraph 1669. It was further stipulated that other of the items consist of drugs, sliced, the same as those covered by the decision in Oy Wo Tong Co. v. United States, supra. These were held dutiable as drugs, advanced, at 10 percent under paragraph 34 as claimed |
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519 U.S. 1079 | Ct. App. Md. Certiorari denied. |
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429 U.S. 1037 | Appeal from D. C. S. D. Ohio. Probable jurisdiction noted. |
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536 U.S. 928 | C. A. 8th Cir. Certiorari denied. |
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358 U.S. 870 | 349 U. S. 965. Motion for leave to file second petition for rehearing denied.
Mr. Justice Stewart took no part in the consideration or decision of this application. |
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524 U.S. 919 | C. A. 5th Cir. Certiorari denied. |
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9 Cust. Ct. 37 | Ekwall, Judge:
Three varieties of peat moss are involved in this case. The importations were made at several ports and duty was assessed on the peat moss at the rate of 50 cents per ton under the eo nomine provision of paragraph 1548 of the Tariff Act of 1930 for peat moss. It is claimed by the plaintiffs that the commodity is free of duty under paragraph 1685 of the same act, which paragraph is as follows:
Par. 1685. Guano, basic slag (ground or unground), manures, and (notwithstanding any other provision of this Act) those grades of all other substances used chiefly for fertilizers, or chiefly as an ingredient in the manufacture of fertilizers.
The varieties or grades of peat moss are designated on the invoices as Holland horticultural standard or garden, Holland poultry standard, and Holland stable standard peat moss. The claim with respect to the Holland stable standard was abandoned and is therefore overruled as to that merchandise.
Samples of the horticultural and poultry grades were produced and admitted in evidence as exhibits 1 and 2, respectively. There was also introduced a chemical analysis of the two grades (exhibit 3). It was agreed at the second hearing that all of the peat moss described on the invoices as horticultural or garden peat moss is the same and that the commodity described as poultry peat moss is the same in all material respects in all of the consolidated cases. As to these two grades the government examiner of peat moss at the port of New' York, after examining the samples and the analyses and comparing the samples with the two samples in the case of Peat Moss Corp. v. United States (4 Cust. Ct. 181, C. D. 319), testified that in his opinion these two types are similar in all material respects to the peat moss which was before the court in the cited case. The record in the Peat Import Corp. case, supra, was incorporated herein.
In the case incorporated it is noted that the merchandise was imported in October, 1937. The peat moss now before us was brought into the United States during the period from October, 1938, through January, 1940. In the decision cited the court held that horticultural peat moss was free of duty as fertilizer under paragraph 1685, supra. This was based upon a finding that the peat moss there involved was shown to be chiefly used as a fertilizer at and immediately prior to the time of its importation.
In so holding the court cited the case of Wilbur-Ellis Co. et al. v. United States, 18 C. C. P. A. (Customs) 472, T. D. 44762, which held, and we quote:
While the common, or commercial meaning of an eo nomine designation in a tariff act must be determined as of the effective date of that act, we think that where it is provided that an article shall be classified under a particular provision of a tariff law if chiefly used for a specified purpose, a different rule should prevail. In such case, if there be an eo nomine designation, the common meaning thereof must be determined as of the date of the enactment of the tariff act, but if it is further provided that the thing designated shall be classified under a given provision only if chiefly used for a specified purpose, the question of use should be determined, not as of the effective date of the tariff act but as of the date of the importation of the particular merchandise involved or immediately prior thereto.
Whether the proof produced in the case before us is sufficient to prove the use of the horticultural peat moss here involved at and immediately prior to the respective dates of importation, however, is a question which we need not decide in view of the government's concession in its brief as follows:
Since it was stipulated by the parties hereto that the horticultural peat moss involved herein is similar in all material respects to the merchandise involved in Peat Import Corporation, C. D. 319, supra, we, therefore, respectfully refer this court to the Government's brief filed in that case without further comment.
An examination of the brief in the incorporated case fails to disclose any reason to depart from the finding of the court there made that the horticultural peat moss is properly free of duty under paragraph 1685, as there held.
We therefore have before us the question whether the commodity known as poultry peat moss is dutiable under the eo nomine provision for peat moss in paragraph 1548, supra, or whether its use at and immediately prior to the dates of importation brings it within the provision in paragraph 1685, supra, as a substance used chiefly for fertilizer or as an ingredient in the manufacture of fertilizer.
The following stipulation as to this merchandise was entered into by the litigants:
It is stipulated by counsel that the imported merchandise consists of poultry peat moss, or with similar variations indicating poultry uses in its imported condition, and is chiefly used by poultry farmers as bedding on the floors of chicken houses, to keep the floors clean and to absorb the chicken droppings. That after-wards the imported merchandise with the chicken droppings mixed throughout is chiefly used as a fertilizer by the said poultry farmers or is sold by them to other farmers who use it chiefly as a fertilizer.
It was further agreed that this stipulation was limited to merchandise described on the invoices as "poultry peat moss," with or without other qualifying words.
This stipulation as to the use of the poultry peat moss is not specific as to time. However Mr. Vuyk, the first witness produced on behalf of the plaintiffs, testified that he has seen poultry peat moss used in hen houses many times ever since 1921. His testimony, therefore, covers the use of the commodity at and immediately prior to the' period of importation. He stated that after being removed from the hen houses it is used as a fertilizer. His description of the use of the mixture of peat moss and hen droppings after removal from the hen houses was as follows:
If the farmer uses it for ordinary farming, it is simply thrown out as it is, as it comes out, but when it is put up into bags for sale, it is generally screened, pulverized and put into the bags for sale.
We find no proof in the record as to the respective quantities of the poultry peat moss that is used directly on the land as it comes from the hen houses and that which is screened, pulverized, and packed in bags. Under the plaintiff's theory of the case this would seem to be an important element of proof.
It was further shown by the testimony that as the mixture comes out of the hen houses it has a different appearance from the peat moss that is placed in the hen houses in that it is darker in color, has different characteristics, and is higher in nitrogen and in phosphoric acid; that it is generally sold as peat moss chicken manure.
The question for the court's determination is whether this commodity is a grade of a substance used chiefly as an ingredient in the manufacture of fertilizers. It is contended by the plaintiffs in their brief that while the process of manipulation is comparatively simple, it comes clearly within the various definitions laid down by the court for a manufactured article. In support of this claim they cite the early case of Hartranft v. Wiegmann, 121 U. S. 609, 30 L. ed. 1012. That case held:
. The application of labor to an article, either by hand or by mechanism, does not make the article necessarily a manufactured article, within the meaning of that term as used in the tariff laws.
It would seem that the holding in the Hartranft case, supra, is not authority for plaintiff's contention.
The Government contends that the original poultry peat moss was never subjected to any manufacturing process. In answer to this contention the plaintiffs in a reply brief state:
It can hardly be supposed that a workman would be called upon to unbale and scatter over the floors of chicken houses several tons of imported poultry peat moss, would hardly regard such exercise as being in the nature of recreation or amusement, nor would he likely regard the removal of such material, after it had been saturated with chicken droppings, in the nature of light entertainment. It is equally likely that the workman would not regard the screening, pulverizing and packing of this saturated material as anything other than labor.
The holding in the case of Frazee v. Moffitt, 20 Blatchf. 267, sustains the Government's contention. There hay pressed into bales, ready for market, was held not to be a manufactured article, though labor had been bestowed in cutting and drying the grass and baling the hay. Plaintiffs' argument as set forth above might be applied to that situation with equal force. Nevertheless it was the opinion of the court that the hay there involvéd was not a manufactured article.
However that may bo, it has been agreed that the poultry peat moss as imported is "chiefly used by poultry farmers as bedding on the floors of chicken houses, to keep the floors clean and to absorb the chicken droppings." It appears from the testimony that as a result of this chief use the peat moss becomes an ingredient in a fertilizer The importers having agreed that the chief use of the peat moss is as bedding in chicken houses, proof that after having served its chief use, it becomes an ingredient in a fertilizer, cannot serve to alter that agreement. The only conclusion that can be arrived at under such circumstances is that the use of the commodity as an ingredient in a fertilizer must be a secondary use. There cannot be two chief uses.
We therefore find that the plaintiffs have failed to sustain the burden of proof on the question of chief use necessary to permit free entay under paragraph 1685, supra, as to the poultry peat moss.
Judgment will be rendered sustaining plaintiffs' claim as to the horticultural or garden peat moss in all of the protests except protest 18664-K, and overruling it as to all other merchandise. Protest 18664-K is dismissed as untimely. |
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371 U.S. 812 | Motion for leave to proceed in forma pauperis and petition for writ of certiorari to the United States Court of Appeals for the Ninth Circuit granted. Case transferred to the appellate docket. In briefs and oral argument, counsel are directed to discuss the question of federal jurisdiction. |
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352 U.S. 973 | Court of Criminal Appeals of Texas. Certiorari denied. |
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425 U.S. 962 | C. A. 6th Cir. Certiorari denied. |
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517 U.S. 1196 | C. A. 8th Cir. Certiorari denied. |
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318 U.S. 793 | Petition for writ of certiorari to the United States Court of Appeals for the District of Columbia denied.
Mr. Justice Rutledge took no part in the consideration or decision of this application. |
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497 F.2d 902 | MILLER, Judge.
This appeal is from the decision and judgment of the Customs Court, Carrington Co. v. United States, 358 F.Supp. 1286, 70 Cust.Ct. 105, C.D. 4415 (1973), overruling appellants' protests concerning classification of Flextrack-Nodwell motor vehicles imported with Mayhew drills. We affirm.
Familiarity with the opinion below is assumed. However, we point out that in one protest the drills were mounted on the vehicles, and in the other protest the drills merely accompanied the vehicles in an unassembled condition for subsequent mounting; also, that one vehicle which was entered without an accompanying drill was granted free entry under item 692.11 as a motor vehicle for the transport of persons or articles.
The imported vehicle with the mounted Mayhew drill circled is shown below:
The following reproduction shows the vehicle with the drill ready for operation:
The Customs Court held that classification of the imported vehicles was properly made under item 692.16, TSUS (the duty varying according to the date of entry). Pertinent provisions are as follows:
PART 6. — TRANSPORTATION EQUIPMENT
a s*
Subpart B. — Motor Vehicles
Motor vehicles specially constructed and equipped to perform special services or functions, such as, but not limited to, fire engines, mobile cranes, wreckers, concrete mixers, and mobile clinics:
692.14 Fire engines .
692.16 Other . 9% ad val.
C8% ad val.I
OPINION
The issue is whether the imported vehicles are specially constructed to perform special services or functions other than the mere transportation of goods or persons within the meaning of item 692.16, appellants having admitted that the drill is sufficient to make the imported vehicle specially equipped.
It is a well-established principle that classification of an imported article must rest upon its condition as imported. United States v. Baker Perkins, Inc., 46 CCPA 128, C.A.D. 714 (1959). That the imported vehicle is differently classified when imported without an accompanying drill or with different equipment would not be inconsistent with this principle. Moreover, the fact that the drill can be removed and replaced with other equipment, such as a kitchen diner or water tank, does not affect classification of the vehicle when imported with the drill. Nothing in item 692.16 requires that a vehicle chassis be suitable for one and only one purpose.
Accordingly, we conclude that versatility of purpose did not preclude the Customs Court from finding that the imported vehicles were specially constructed.
From the evidence of record, we also conclude that the vehicles in question are, for all practical purposes, mobile drills. They are specially constructed to transport and (with a drive-line power take-off from the engine) to operate a drill at a chosen site. It is to be noted that transportation and operation of equipment fixed to the vehicle to perform special services or functions are the two essential features which the imported vehicles have in common with the exemplars shown for item 692.16.
In view of the foregoing, we hold that the imported vehicles are specially constructed and equipped to perform special services or functions within the meaning of item 692.16 TSUS.
The judgment of the Customs Court is affirmed.
Affirmed.
LANE, Judge, concurs in the result.
. Under General Interpretative Rule 10(h), Tariff Schedules of the United States, unless the context requires otherwise, a tariff description for an article covers such article, whether assembled or not assembled.
. Item 692.11 applies to motor vehicles (except motorcycles) for the transport of persons or articles and imported from Canada (not including three-wheeled vehicles).
. See United States v. Volkswagen of America, C.A.D. 1113, 490 F.2d 977, 61 CCPA - (1974). |
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11 Ct. Int'l Trade 70 | Opinion and Order
Tsoucalas, Judge:
Plaintiff challenges the classification of seven different styles of brassieres each containing some element of lace. The merchandise, exported from the Philippines, and entered through the Port of New York in 1981, was classified by Customs under item 376.24, TSUS:
Corsets, girdles, brassieres, and similar body-supporting garments for women and girls; all the foregoing of any materials:
Lace or net articles, whether or not ornamented, and other articles, ornamented.32% ad val.
Defendant contends style nos. 3511, 3590, 3665 (Plaintiffs Exhibits 1-3) are lace articles; and style nos. 3032, 3364, 3703 and 3952 (Plaintiffs Exhibits 5-8), are ornamented. Plaintiff alleges that the brassieres in issue are neither lace nor ornamented, and should be classified under item 376.28, TSUS:
Corsets, girdles, brassieres, etc.
Other articles, not ornamented.18% ad val.
At trial, the lone witness, presented by plaintiff, was Mr. Sumner Spivak, associated with Gelmart Industries brassiere department for 20 years. As Coordinator of Corporate Affairs, Mr. Spivak participates in, and coordinates, the design, production, sales, marketing and import of plaintiffs brassieres. His experience includes working with 1,000 different models of brassieres over the years. He testified as to the different types of brassiere construction, which include: strapless, full figure, contour, molded, seamcups and stretch. Tr. at 14. The materials used in brassiere construction include polyester cotton, lace, tricot, Simplex; and in marketing, brassieres are categorized by material: lace, tricot, or Simplex. Tr. at 14.
A sample of each brassiere style in issue was introduced into evidence. On Exhibits 1 and 2, the upper cup is composed of a lace insert, which connects the frame to the lower cup. Mr. Spivak stated that Simplex is the major component of these garments. Exhibit 3 contains stretch lace in the top cup connecting the top frame with the bottom cup, and the witness identified Techsheen, or tricot (stretch fabric) as the major component. Tr. at 24. On Exhibits 5, 7, and 8, there is scalloped lace, and on Exhibit 6, there is a strip of lace, present along the upper edge of each top cup. This latter exhibit also contains lace along the outer edge of each cup, connecting the back panel to the cups.
Discussion
The headnote to Schedule 3, under which items 376.24, and 376.28 appear, defines a lace article as:
2. (h) an article which (exclusive of any added ornamentation) is wholly or almost wholly of lace, including burnt-out lace, whether the lace or net pre-existed or was formed in the process of producing the article.
The relevant General Headnote to the TSUS is:
9. Definitions.
(f)(ii) "wholly of' means that the article is, except for negligible or insignificant quantities of some other material or materials, composed completely of the named material;
(iii) "almost wholly of' means that the essential character of the article is imparted by the named material, notwithstanding the fact that significant quantities of some other material or materials may be present;
The tariff term "almost wholly of' was interpreted in United States China & Glass Co. v. United States, 61 Cust. Ct. 386, C.D. 3637, 293 F. Supp. 734 (1968). In applying the definition in General Headnote 9(f), the court stated that "[t]he character of an article is that attribute which strongly marks or serves to distinguish what it is. Its essential character is that which is indispensable to the structure, core or condition of the article, i.e., what it is." 61 Cust. Ct. at 389, 293 F. Supp. at 737. In that instance, a glass water ball, with an inset of plastic decorative flowers set on a base, was not almost wholly of plastic. The court held that it was the glass ball which was indispensable and distinguishing since the plastic flowers could easily be substituted; but without the glass ball, the flowers and base were without utility. Id.
In an attempt to sharpen this analysis, it has been stated that discernment of the essential characteristic may:
be found in concentrating on whether the material in question supplies the distinctive feature of the article and not in examining all the characteristics of the article and, if some other material contributes important characteristics, declining to give one material the primacy which its role deserves .
Therefore, the existence of other materials which impart something to the article ought not to preclude an attempt to isolate the most outstanding and distinctive characteristic of the article and to detect the component material responsible for that "essential characteristic."
Canadian Vinyl Industries, Inc. v. United States, 76 Cust. Ct. 1, 2-3, C.D. 4626 (1976), aff'd, 64 CCPA 97, C.A.D. 1189, 555 F.2d 806 (1977).
The issue in this case, therefore, is whether the lace provides the essential characteristic to the brassieres and makes them what they are. Of the styles considered by Customs to be of lace (Exhibits 1, 2 and 3), the lace inserts comprise the top cup of the brassieres. The major components of the articles are the Techsheen and Simplex (the stretch material). Notwithstanding the significant quantities of these materials, can it be said that the lace is the outstanding and distinctive attribute of these garments: are these lace brassieres? According to Mr. Spivak, in the industry, lace brassieres consist of full cups of lace. Tr. at 25. These articles do not meet that standard. Furthermore, Mr. Spivak stated that the purpose of a brassiere is to give support, and to contain and shape a woman's breasts. Tr. at 22. The lace is not the component responsible for these functions. As to Exhibits 1-3, the witness identified the bottom cup, bands, frames and back panels as providing the major sources of support. Tr. at 23-24.
Defendant argues that the lace distinguishes these particular styles from other types of brassieres, citing A.N. Deringer, Inc. v. United States, 66 Cust. Ct. 378, C.D. 4218 (1971). Children's waterproof snowsuits consisting of an outershell of neoprene waterproof coated nylon and a quilted lining, were distinguishable by their water resistant quality. While the quilted lining supplied warmth to the wearer, an important characteristic of a snowsuit, the added feature which furnished the essential characteristic to the article was its water resistance.
No doubt the articles here in issue are more appealing to the eye than are brassieres without lace. However, it does not follow that because the lace is visually distinctive, it provides the essential characteristic. Cf. Larry B. Watson Co., A/C Decoration Products Co. v. United States, 64 Cust. Ct. 343, C.D. 4001 (1970). Defendant maintains that the lace brassieres are a more attractive, and thus more marketable item; therefore, this is the essential characteristic since the lace causes the consumer to purchase these styles. Nonetheless, the Court is mindful of Mr. Spivak's testimony that a prettier garment would likely sell more "as long as it does the function it's supposed to do." Tr. at 49. Clearly, the function of the garments, for support and shape, is not provided by the lace. Thus, when other components of the article provide equally essential aspects, the court should decline to characterize this one component as imparting the essential character to the garments. Marshall Co., Inc., et. al. v. United States, 67 Cust. Ct. 316, 324, C.D. 4291, 334 F. Supp. 643, 648-649 (1971); accord Oak Laminates v. United States, 8 CIT 175, 182, 628 F. Supp. 1577, 1583 (1984). Therefore, the lace is not the essential characteristic of Exhibits 1-3. These styles cannot be classified as lace articles within the meaning of that term under item 376.24.
The second issue is whether Exhibits 5-8 are ornamented as a result of the lace edging. Headnote 3 to Schedule 3, TSUS, sets forth the relevant criteria for ornamentation:
3. (a) the term "ornamented", means fabrics and other articles of textile materials which are ornamented with—
(iii) lace, netting, braid, fringe, edging, tucking, or trimming, or textile fabric; [emphasis added]
❖ ❖ ❖ ^ ^
(b) ornamentation of the types or methods covered consists of ornamenting work done to a pre-existing textile fabric, whether the ornamentation was applied to such fabric—
(i) when it was in the piece,
(ii) after it had been made or cut to a size for particular furnishings, wearing apparel, or other article, or
(iii) after it had actually been incorporated into another article,
and if such textile fabric remains visible at least in significant part, after ornamentation: Provided, That lace, netting, shall not be required to have had a separate existence from the fabric or other article on which it appears in order to constitute ornamentation for the purpose of this headnote;
The focus is not on whether the lace is ornamental, but rather whether the addition of lace makes the brassieres an ornamented fabric in an accepted trade sense. Excelsior Import Associates, Inc. v. United States, 79 Cust. Ct. 144, 147, C.D. 4726, 444 F. Supp. 780, 782 (1977), aff'd, 66 CCPA 1, C.A.D. 1212, 583 F.2d 513 (1978). "[T]he emphasis is upon the article to be adorned or embellished, not the substantive matter of what constitutes ornamentation in the first instance." Blairmoor Knitwear Corp. v. United States, 60 Cust. Ct. 388, 392, C.D. 3396, 284 F. Supp. 315, 318 (1968). Further, it is the resultant effect upon the merchandise and not the subjective motivation of the importer which controls classification of the article. Excelsior, 79 Cust. Ct. at 148, 444 F. Supp. at 783.
The presence of lace per se does not constitute ornamentation. Rather, the application of a two step analysis set forth in United States v. Endicott Johnson Corp., 67 CCPA 47, C.A.D. 1242, 617 F.2d 278 (1980), determines whether an article is ornamented for tariff purposes. The first question is: Does the addition of the feature impart no more than an incidental decorative effect? The second inquiry is whether the feature has a functionality which is primary to any ornamentive nature. An affirmative response to either results in a nonornamental classification, and resolution of the first inquiry may eliminate the necessity of the second. 67 CCPA at 50, 617 F.2d at 281. The issue as to the ornamental effect is a question of fact and if the importer proves by a preponderance of the evidence that the ornamental aspects are incidental, no additional proof of functionality is needed. Id. See also Tariff Classification Study, Schedule 3, Textile Fibers and Textile Products, Explanatory and Background Materials at 6-7 (primary purpose of the decorative feature must be for ornamentation).
Clearly, an examination of the garments reveals that the lace provides more than an incidental decorative effect. Each style, (Exhibits 5-8) contains scalloped lace or a strip of "dainty lace", extending approximately one half to one inch from the end of the stretch material, trimming the edge of each cup. This provides a sharp contrast to the stretch material or nylon composing the remainder of the garment. Ornamentation has been construed to embrace that which enhances, embellishes, decorates, or adorns. Blairmoor, 60 Cust. Ct. at 395, 284 F. Supp. at 320. The scalloped lace certainly embellishes and adorns the brassieres by adding eye appeal. The question therefore, is whether this lace serves a utilitarian function which is primary to its ornamentive aspects.
As the court in Blairmoor stated, "a distinction must be drawn between that which finishes, joins, serves a utilitarian purpose, and only incidentally ornaments, and that which primarily adorns, embellishes, or ornaments." 60 Cust. Ct. at 393, 294 F. Supp. at 319. In that instance, crochet stitches used to finish the edge of a sweater and connect it to the knitted lining did not constitute ornamentation. It was held that the edging was an integral part of the sweater since neither the outer shell nor the lining could be worn alone. Similarly, in The Ferriswheel v. United States, 68 CCPA 21, C.A.D. 1260, 644 F.2d 865 (1981), fringe on the edge of the merchandise was primarily functional to prevent unraveling. It was evident that the cut edges of the merchandise needed some form of finishing to prevent fraying.
Plaintiffs witness testified that the lace serves a similar purpose in that it finishes the edges of the cups and in some styles, connects the component parts of the brassieres, or helps contain the breast. The witness further concluded that there was no distinction between Exhibits 5-8, and Exhibit 4, which the government conceded was not ornamented. However, in determining whether the primary purpose of the laCe is ornamentation or functionality, the controlling consideration is the actual appearance of the decorative material. Ferriswheel, 68 CCPA at 26, 644 F.2d at 868. The fringe in that case was less than one quarter inch wide, matched the fabric of the garment, and was noticeable only upon close inspection. Id. The fringe was indistinguishable from the edging in Blairmoor, where the crochet stitches were similar in kind and color to those used in the sweater, which was so decorative in itself, that the stitches were scarcely distinctive. 60 Cust. Ct. at 393, 284 F. Supp. at 319. The same cannot be said of the lace on these brassieres. While the lace may provide functionality in that some material was necessary to finish the edges, and to complete and connect the cups for proper support, the lace is patently distinctive from the rest of the garment. See Brittania Sportswear v. United States, 5 CIT 212, 214 (1983).
There is no question that other material could have been used instead of the lace, but as the witness stated, this material was chosen because it "looked better". The Court is mindful that the test for ornamentation is not whether the added fabric is necessary, Ferriswheel, 68 CCPA at 25, 644 F.2d at 868; nor is it per se ornamentation because a simpler fabric might have been used. Blairmoor, 60 Cust. Ct. at 393, 284 F. Supp. at 319. Nonetheless, the evidence demonstrates that the primary purpose of the lace is for its ornamental effect while serving an incidental utilitarian function. See The Baylis Bros. Inc. v. United States, 56 CCPA 115, 117, C.A.D. 964, 416 F.2d 1383, 1384-1385 (1969). Therefore, the merchandise represented by plaintiffs exhibits 5-8 are properly classified under item 376.24, TSUS.
CONCLUSION
As to those entries represented by style nos. 3511, 3590, and 3665, classified by Customs under item 376.24, TSUS, plaintiff has overcome the presumption of correctness attaching to the Customs' deci sion. The Court is persuaded that the lace is not the essential characteristic of the brassieres. Therefore, these entries must be classified under item 376.28, TSUS. However, in reference to style nos. 3032, 3364, 3703, and 3952, plaintiff has failed to demonstrate that the lace is either incidentally decorative, or primarily functional. The Customs' classification of these styles under item 376.24, TSUS, as ornamented articles, is thus affirmed. Judgment will enter accordingly.
Originally, plaintiff also contested the classification of an eighth model, #3892 (Plaintiffs Exhibit 4). However, before trial, defendant conceded that the proper classification was under item 376 28 as claimed by plaintiff, and consented to judgment in plaintiffs favor.
Defendant concedes that the articles are not "wholly of l.ice" and they do not meet the definition in General Headnote 9(f)(ii). |
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301 U.S. App. D.C. 44 | PER CURIAM:
Appellant Kevin M. Dawson was sentenced to 151 months' incarceration after he pleaded guilty to drug-related offenses. At his sentencing hearings, Dawson sought a downward departure pursuant to the policy statement comprising section 5K2.0 of the United States Sentencing Guidelines (Guidelines). Section 5K2.0 allows a departure from the prescribed sentencing range if no other provision of the Guidelines adequately addresses the defendant's circumstances. The district court did not grant a downward departure because it concluded that the policy statement comprising section 5K1.1 of the Guidelines covers Dawson's circumstances. On appeal, Dawson challenges on various theories the validity of the section 5K1.1 policy statement. Because Dawson did not make his challenges below, we will consider them on appeal only to decide whether the district court committed plain error. We conclude that the district court did not commit plain error and, accordingly, we affirm.
I.
As part of his written plea agreement, Dawson agreed to "testify[] completely and truthfully before any grand jury, or at any trial or other proceeding." Government's Appendix at R.10. Although he initially cooperated with the government, Dawson refused to testify at the trial of his codefendants. As a result, in part, of his refusal, the government dismissed its case against one codefendant and proceeded with a weakened case against the other, ultimately leading to the latter's acquittal. Defendant's Appendix at 24-25. According to Dawson, he refused to testify because threats were being made against his family but his family had declined police protection. At sentencing, Dawson contended that "the peculiar circumstances of his refusal to testify being based on a justifiable concern for the safety of his family is [sic] exactly the type of mitigating circumstance not adequately considered by the Sentencing Commission," Defendant's Memorandum in Aid of Sentencing at 2, and sought a downward departure under section 5K2.0 of the Guidelines. That section, entitled "Grounds for Departure (Policy Statement)," provides:
Under 18 U.S.C. § 3553(b) the sentencing court may impose a sentence outside the range established by the applicable guideline, if the court finds 'that there exists an aggravating or mitigating circumstance of a kind, or to a degree, not adequately taken into consideration by the Sentencing Commission in formulating the guidelines that should result in a sentence different from that described.'
U.S.S.G. § 5K2.0, p.s.
At the first sentencing hearing, Dawson asked the court "to depart downward[] because in the end he had cooperated fully[ ] and . his failure to testify, while it was his decision, was based on factors totally beyond his control." Defendant's Appendix at 22. The district court continued the hearing to allow the Departure Committee of the United States Attorney's Office (Departure Committee) to reevaluate Dawson's cooperation. The Departure Committee again concluded that a downward departure was not warranted. At the second hearing, Dawson reemphasized his cooperation and repeated his argument that the Guidelines "allow a court to recognize the unusual or peculiar circumstances of an individual case" such as his. Id. at 43.
The district court rejected Dawson's argument, concluding that section 5K1.1 addressed his circumstances and therefore section 5K2.0 did not apply. Section 5K1.1, entitled "Substantial Assistance to Au thorities (Policy Statement)" provides that "[u]pon motion of the government stating that the defendant has provided substantial assistance in the investigation or prosecution of another person who has committed an offense, the court may depart from the guidelines." U.S.S.G. § 5K1.1, p.s. (emphasis added). The district judge explained:
I did believe early on, even before sentencing began, that the only basis for departure in this case would be a recommendation from the U.S. Attorney alleging substantial assistance. So, therefore, I cannot depart. I do not believe I can depart under the section that you have recommended. It was in your memorandum in aid of sentencing, and I have reviewed it, and I have reviewed the Guidelines, and I just disagree that I have the ability under that to depart.
Defendant's Appendix at 47. In other words, the district court concluded that the section 5K1.1 procedure was the only way in which a departure could be granted.
Dawson appeals the district court's refusal to depart by challenging the validity of section 5K1.1. First, Dawson asserts that section 5K1.1 is invalid because Congress, in enacting 28 U.S.C. § 994(n), directed that "[t]he Commission shall assure that the guidelines reflect the general appropriateness of imposing a lower sentence than would otherwise be imposed . to take into account a defendant's substantial assistance." 28 U.S.C. § 994(n) (emphasis added). Because section 5K1.1 is entitled "Policy Statement" instead of "Guideline," it does not, according to Dawson, comply with the congressional directive. Second, he contends that section 5K1.1 is a rule of practice and procedure and only the Supreme Court can promulgate such a rule. Third, he argues that the provision of section 5K1.1 conditioning the substantial assistance to authorities departure on the government's motion invalidly modifies the departure standard set forth in 18 U.S.C. § 3553(b). Finally, he argues that the court has virtually plenary power to depart under section 3553(b) if the Guidelines do not adequately cover the defendant's circumstances and section 5K1.1 invalidly restricts the court's power. As we explain below, because Dawson failed to make his arguments in the district court, we consider their merits only to determine if plain error occurred.
II.
As noted above, Dawson principally relied upon section 5K2.0 at the sentencing hearings as a ground for departure on the basis that the threats to his family constituted a mitigating circumstance not adequately considered by the Guidelines. His reliance on his cooperation with the government, however, could be read as an attempt to invoke section 5K1.1. Even assuming Dawson argued that a departure was warranted under section 5K1.1, his reliance on that section would be unavailing for another reason: the government did not make the required motion. He did not challenge the government motion condition nor did he argue the guideline/policy statement distinction or that section 5K1.1 is an invalid rule of practice and procedure.
We have consistently declared that if a defendant fails to except to the district court's ruling on a specific ground, we will review the district court's ruling only for plain error. See United States v. Ortez, 902 F.2d 61, 64 (D.C.Cir.1990). "Plain errors are those errors which so fundamentally violate a defendant's rights that they require reversal regardless of the defendant's failure to object to them at trial." Id. Put another way, the error must "rise to the level of error so 'obvious and substantial' or so 'serious and manifest' that it affects the very integrity of the trial process." United States v. Blackwell, 694 F.2d 1325, 1341 (D.C.Cir.1982) (citations omitted).
The district court's decision not to depart under section 5K2.0 does not constitute plain error because section 5K1.1 adequately addresses the defendant's circumstances. Moreover, there was no reason for the district court to question the validity of section 5K1.1. On two previous occasions, we have rejected challenges to the validity of section 5K1.1. In United States v. Doe, 934 F.2d 353 (D.C.Cir.), cert. denied, — U.S. -, 112 S.Ct. 268, 116 L.Ed.2d 221 (1991), we rejected the defendant's various statutory and constitutional challenges to section 5K1.1. She had argued, in part, that the government motion requirement offends due process and that it conflicts with the language of 28 U.S.C. § 994(n). Similarly, in United States v. Ortez, 902 F.2d 61, 64 (D.C.Cir.1990), we rejected the defendant's argument that the government motion requirement conflicts with the Guidelines' enabling legislation or is unconstitutional. Our court has twice previously rejected constitutional and statutory challenges to section 5K1.1 and we cannot say that Dawson's challenge exposes an error "so 'obvious and substantial' or so 'serious and manifest' that it affects the very integrity of the trial process." Blackwell, 694 F.2d at 1341.
Indeed, Ortez guides us in Dawson's case. In Ortez, the defendant contended in the district court that his cooperation justified a downward departure. The government did not move for a downward departure because it determined that Ortez had not provided substantial assistance. Ortez raised the constitutional and statutory challenges only on appeal. We concluded that the district court's "application of § 5K1.1 was not plain error." Id. Likewise, Dawson challenged the validity of section 5K1.1 only on appeal and we conclude that, in reading section 5K1.1 to deny a downward departure under section 5K2.0, the district court did not commit plain error. The judgment of the district court accordingly is
Affirmed.
. The district court held two sentencing hearings, one on May 10, 1991, and one on June 21, 1991.
. The Departure Committee evaluates a defendant's cooperation in order to decide whether the government will make a motion to depart under section 5K1.1 of the Guidelines. Government's Brief at 6.
. Section 3553(b) states:
The court shall impose a sentence of the kind, and within the range, referred to in subsection (a)(4) unless the court finds that there exists an aggravating or mitigating circumstance of a kind, or to a degree, not adequately taken into consideration by the Sentencing Commission in formulating the guidelines that should result in a sentence different from that described.
. In neither of the cases did the defendant argue that section 5K1.1 is invalid because it is a policy statement. |
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278 U.S. 565 | Per Curiam:
Reversed and remanded for a new trial on the authority of (1) Chicago, Milwaukee & St. Paul Ry. v. Coogan, 271 U. S. 472; (2) Southern Pacific Co. v. Berkshire, 254 U. S. 415; Chesapeake & Ohio Ry. v. Leitch, 276 U. S. 429; (3) Gulf, Colorado & Santa Fe Ry. v. Moser, 275 U. S. 133. |
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350 U.S. 847 | C. A. 4th Cir. Certiorari denied.
Mr. Justice Black is of the opinion certiorari should be granted. |
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412 U.S. 930 | C. A. 7th Cir. Certiorari denied. |
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565 U.S. 1253 | C. A. 7th Cir. Cer-tiorari denied. |
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208 U.S. App. D.C. 55 | Motion to Hold Case in Abeyance
Before WRIGHT, Chief Judge, and ROBINSON and MacKINNON, Circuit Judges.
Opinion for the court per curiam.
PER CURIAM:
Six months after oral argument was heard in these cases, but before a decision was handed down, LIA filed a motion for leave to file certain documents with the court and, on the basis of these documents, to have the court remand the case to EPA or, alternatively, to hold the case in abeyance pending the outcome of supplemental proceedings before the Agency. At the same time LIA filed a petition with EPA for reconsideration of the lead standards that are the subject of this appeal, alleging that it had uncovered new information that undermined the Agency's analysis. Both LIA's motion in this court and the petition it filed with EPA rested on an affidavit by Anthony J. Yankel, one of three authors of a study entitled "The Silver Valley Lead Study — The Relationship Between Childhood Blood Lead Levels and Environmental Exposure." This study is one of several studies referred to in Chapter 12 of the Lead Criteria Document, and it is mentioned in the preamble to the final lead standards as one of three studies EPA found particularly useful in determining the appropriate air lead/blood lead ratio to use in calculating the lead standards. Two points are made in the Yankel affidavit. First, Mr. Yankel indicates that a previously undetected error in the study has led him to conclude that the air lead levels shown in the study are in error by a factor of 25 percent or more. According to Mr. Yankel, if the correct air lead values are used the study would indicate an air lead/blood lead ratio of 1:0.8, rather than the ratio of 1:1.95 EPA calculated. Second, Mr. Yankel indicates his agreement with one of the objections raised by LIA in its briefs in this case. Specifically, Mr. Yankel objects to the fact that EPA used one method for calculating the air lead/blood lead ratio indicated by the data in his study and different methods for calculating the ratios indicated by the data in the other two studies discussed in the preamble to the final regulations.
By order dated May 30, 1980 we denied LIA's motion to remand the lead standards to EPA, pointing out that under the statutory scheme LIA must first present a petition for reconsideration to EPA, with judicial review available only after a decision to deny the petition is made by EPA's Admin istrator. Lead Industries Ass'n, Inc. v. EPA, D.C.Cir. No. 78-2201, Order of May 30, 1980. At the same time we withheld decision on LIA's alternative suggestion that the case be held in abeyance pending the outcome of supplemental proceedings before the Agency, and we directed EPA to inform the court by June 11, 1980 of its decision on LIA's petition for reconsideration. Id. EPA has now notified the court of the Administrator's decision denying LIA's petition. Thus there seems to be no reason for further postponing a ruling on LIA's motion to hold the case in abeyance.
Since LIA's motion requested that the case be held in abeyance "pending the outcome of supplemental agency proceedings" which have now been completed, it would seem at first blush that nothing more remains to be decided with regard to LIA's motion. However, it appears that the "supplemental agency proceedings" LIA has in mind is actual reconsideration of the standards by EPA rather than just the Agency's decision on whether to grant its petition for reconsideration. As such, now that EPA has denied its petition we assume that LIA would have us further defer action on this appeal until such time as it is able to obtain judicial review of EPA's decision denying its petition for reconsideration. Thus LIA argued in its response to EPA's opposition to its motion that it should not be required to file a separate petition for review should EPA deny the motion for reconsideration, but instead should be allowed to file a response to such an EPA order.
We do not believe that further delay of our review of the lead standard — whether to allow a separate review of EPA's denial of LIA's motion for reconsideration, or to review this decision ourselves — is appropriate in this case. Nothing in the statute suggests that judicial review of an EPA regulation may not proceed even though there is also pending before the court a petition for review of an EPA decision denying a "new information" petition for reconsideration of the same regulation. To the contrary, there is evidence in the statute of a strong congressional desire that the procedure for establishing air quality standards be completed expeditiously and with considerable finality. The Act prescribes strict deadlines for completion of various steps in promulgation of the standards. Moreover, Section 307(d)(7)(B) of the Act, 42 U.S.C. § 7607(d)(7)(B) (Supp. I 1977), states that even "new information" reconsideration by EPA does not automatically postpone the effectiveness of the rule, and it limits any stay that may be issued by EPA or a court during such reconsideration to a period of no longer than three months. Id.
There can be no question that, if our decision in the lead standards case had been handed down before LIA filed its petition for reconsideration with EPA, LIA would have had to bring a separate petition for review of EPA's decision without regard to any challenge to the standards themselves. The fact that LIA's petition and EPA's decision to deny it come at a time when a petition for review of the standards is before the court may, in certain circumstanc es, justify delaying review of the standards pending a challenge to EPA's decision to deny the petition for reconsideration. In order to conclude that such a delay is justified, however, the court must be convinced that the "new information" which provides the basis for the reconsideration petition raises substantial questions about the validity of the Agency's analysis.
We do not believe that this case presents an appropriate instance in which to delay review of the standards. In reaching this conclusion we have found it necessary to examine the merits of LIA's "new information" challenge to the lead standards since this is the only way to determine whether LIA has a substantial case. Of course, this examination is by no means a review of EPA's decision to deny LIA's petition for reconsideration. Rather, our review of the merits is analogous to a court's taking a peek at the merits to assess the likelihood of success in ruling on a motion for a preliminary injunction or a petition for a stay. See Virginia Petroleum Jobbers Ass'n v. FPC, 259 F.2d 921, 925 (D.C.Cir.1958).
First, we note that the only issue raised in Mr. Yankel's affidavit that merits consideration is his claim that there is a previously undetected error in his study. His objection to the fact that EPA used different methods in calculating air lead/blood lead ratios from the three studies merely repeats an objection LIA raised in its briefs in the lead standards case which we dealt with in our opinion in the case.
Second, even if we were to assume that Mr. Yankel's claim of error is correct, this "new information" would not warrant remand of the lead standards to EPA. As we have previously indicated, that Yankel study is only one of three studies that were discussed in the preamble to the final regulations. In turn, these three studies were only part of the evidence on which EPA relied in selecting an air lead/blood lead ratio of 1:2; the decision was also supported by the conclusions in the Criteria Document (which reviewed a large number of studies including these three studies), as well as other expert testimony in the record. Indeed, in our opinion in the lead standards case we specifically pointed out that "even if we were to disregard [the] calculations [EPA made from the three studies], we would still conclude that the Criteria Document and the expert testimony in the record provide adequate support for the Administrator's choice of an air lead/blood lead ratio of 1:2." It is clear from this that there simply can be no basis for LIA's claim that an alleged error in the Yankel study would justify delaying our review of the lead standards.
Third, we also find it significant that there must be considerable doubt both about whether in fact there is an error in the Yankel study and about whether this error has any effect on the ratios indicated by the study. The sole basis of LIA's claim of error is the Yankel affidavit, which merely asserts in conclusory terms that there is a previously undetected error in the study. Neither LIA nor Mr. Yankel has presented any facts, data, or analysis to support this claim of error or information that would have allowed EPA or other interested parties to evaluate the claim of error. Indeed, comments received by EPA on LIA's petition for reconsideration indicate that Mr. Yankel has not even bothered to share his purported new information with his two co-authors of the study, and that his co-authors do not share his misgivings about the study. One co-author, Mr. von Lindern, stated in a letter to EPA:
On April 28,1980, [Mr. Yankel's affidavit is dated April 29, 1980 ] Mr. Yankel visited me in New Haven, informed me that he was working for the Bunker Hill Co. (a lead/zinc smelting firm [which is an intervenor in the lead standards case]) and requested that I explain the original calculations in our study. After I had done so, he made a vague and non-specific reference to not agreeing with the results of that study. The conversation lasted less than one hour and represents the only professional contact Mr. Yankel and I have had in the last two years.
The assertions he makes in the affidavit come as a complete surprise to me. I have reviewed the data and calculations he refers to and find no justification for his claims. It is true, as Mr. Yankel asserts, that a model was constructed to predict air lead levels at locations where no data were available. However, I find the model does not systematically under-predict at areas for which data existed. I find both underpredictions and overpredictions, (as expected with a 'best fit' model) and none of the magnitude of '25 percent or more' as he alleges.
I fully recognize Mr. Yankel's right and responsibility to exercise his professional judgement [sic] as he deems fit and proper. However, I wish to make it absolutely clear that he has not shared the basis for his change of opinion [with], neither does he have the concurrence of, the other researchers in this study. I would rather that he shared the basis for his assertions and calculations with his co-authors before renouncing the work publically [sic]. I object to his use of the term 'error'. I have no idea whether he believes he has found a computational mistake, has changed the data base, or introduced a new method of calculation.
Mr. Yankel's other co-author, Dr. Walter, while stating that he has no reason to believe that the study contains the error alleged by Mr. Yankel, went on to calculate the effect of this "error" on the study's estimates of the air lead/blood lead ratios. He found that the study would indicate ratios ranging between 1:1 and 1:1.8, as compared with the range of between 1:1.1 and 1:2.1 indicated in the published study. Dr. Walter concluded: "It is my professional opinion that even if Mr. Yankel's position could be substantiated his conclusions do not provide a basis for altering the EPA standards." Thus it appears that Mr. Yankel's claim of error is anything but proven. This uncertainty about the validi ty of LIA's "new information" challenge militates against any further delay in handing down our decision on LIA's petition for review of the lead standards.
For the reasons indicated above, we conclude that LIA's motion to hold this appeal in abeyance must be denied. LIA is, of course, free to file a petition for review of EPA's decision to deny its petition for reconsideration of the lead standards.
So ordered.
. The documents consisted of a copy of the Petition for Reconsideration LIA filed with EPA and a supporting affidavit made on April 29, 1980 by Anthony J. Yankel.
. 27 J. A. Air Pollut. Cont. Ass'n 763-767 (1977).
. EPA's "Air Quality Criteria for Lead," Chapter 12.
. See Lead Industries Ass'n, Inc. v. EPA, 647 F.2d 1130, 1163 n.85 (D.C.Cir.1980).
. See brief for petitioner LIA at 37; reply brief for petitioner LIA at 20-21.
. See 42 U.S.C. § 7607(d)(7)(B) (Supp. I 1977).
. Motion of Lead Industries Association, Inc. for Leave to File Annexed Documents and to Remand or to Hold This Appeal in Abeyance (LIA Motion) at 1.
. Thus LIA urged the court to remand the case to EPA and direct EPA to hold the reconsideration proceedings specified by 42 U.S.C. § 307(d)(7)(B) (Supp. I 1977) or, alternatively, to "hold the case in abeyance pending action by EPA on LIA's petition, and to keep the record open to receive any record materials generated by those proceedings." LIA Motion, supra note 7, at 5.
. It would seem that, ideally, LIA would like us to review EPA's decision without requiring it to bring an independent action for this purpose. See Reply of Lead Industries Association, Inc. to EPA's Response in Opposition to LIA's Motion to File Documents and to Remand or Hold Appeal in Abeyance (LIA Response) at 3-4.
. Id
. See 42 U.S.C. § 7408, 7409, 7607 (Supp. I 1977); Lead Industries Ass'n, Inc. v. EPA, supra note 4, 647 F.2d at 1136-1137.
. See brief for petitioner LIA at 37; reply brief for petitioner LIA at 20-21.
. See Lead Industries Ass'n, Inc. v. EPA, supra note 4, 647 F.2d at 1162-1163 & n.85.
. See id., 647 F.2d at 1163.
. See id.
. Id., 647 F.2d at 1163 n.85.
. See note 1 supra and note 20 infra. With respect to the von Lindern letter, in denying the motion for reconsideration EPA stated:
In connection with LIA's petition for reconsideration EPA has received several written comments. Mr. Ian H. von Lindern, a co-au thor of the Silver Valley study, commented that on April 28, 1980 Mr. Yankel came to see him and stated that he was now working for the Bunker Hill Company (a lead/zinc smelting firm that is a member of LIA and an intervenor in the legal challenge to the lead standard). According to Mr. von Lindera, Mr. Yankel made some vague and non-specific statement that he no longer agreed with the results of the Silver Valley study but did not elaborate. Mr. von Lindera commented that the assertions made in Mr. Yankel's affidavit came as a complete surprise to him and that after reviewing the data and calculations Mr. Yankel refers to he found no justification for such claims and no reason for EPA to reconsider the lead standard.
EPA's Denial of Petition for Reconsideration or Revision of the Lead Ambient Air Quality Standards (Denial of Petition), - Fed.Reg. - (filed June 11, 1980).
.Letter from Ian H. von Lindera to EPA, annexed to Supplemental Response of the Environmental Protection Agency to Motion of LIA to Remand or Hold This Appeal in Abeyance. Mr. von Lindera goes on to note that in the last two years he has conducted further studies related to the Silver Valley study and has found nothing to warrant reconsideration of the latter study. He concluded:
I believe EPA has made appropriate use of our study in their formulation of a national standard for lead. I believe there is nothing substantive to Mr. Yankel's affidavit and reconsideration [on] the part of EPA is unjustified.
Id
. Letter from Stephen D. Walter, Ph.D., attached to Response of Natural Resources Defense Council, Inc. to Petition of Lead Industries Association, Inc. for Reconsideration of Lead Standards.
. In its order denying LIA's petition for reconsideration EPA suggested that the comments by Mr. Yankel's co-authors "raise questions about the credibility of Mr. Yankel's statements ." Denial of Petition, supra note 17, - Fed.Reg. - n.2. EPA may want to consider pursuing this matter further and, if necessary, referring the matter to the Department of Justice for investigation pursuant to 18 U.S.C. § 371, 1001 (1976).
Before this decision was handed down LIA had filed its petition for review of the Administrator's decision, D.C.Cir. No. 80-1677. |
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444 U.S. 963 | C. A. 6th Cir. Certiorari denied. |
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2 C.M.A. 330 | Opinion of the Court
Paul W. Brosman, Judge:
Accused was convicted by special court-martial of several offenses — only one of which, larceny, in violation of the Uniform Code of Military Justice, Article 121, 50 USC § 715, is of moment here. The Judge Advocate General, United States Navy, has certified to this Court the following question:
"Whether the instructions to the court by the President with regard to Charge III, Violation of Article 121, were sufficient as a matter of law."
Additional assignments of error have been made by appellate defense counsel.
II
Charge III, that now in question, alleged a violation of Article 121 of the Code, supra, in that the accused did "steal" specified sums of money from named individuals. In his instructions to the court with respect to the ingredients of larceny, the president stated that these were:
". . . That the accused wrongfully took, obtained, or withheld from the possession of the true owner or of any other person the property described in the specification; (b) that such property belonged to a certain person named or described; (c) that such property was of the value alleged, or of some value; and (d) the facts and circumstances of the case showing that the taking, obtaining, or with-holding [sic] by the accused was with intent permanently to deprive or defraud another person of the use and benefit of property or to appropriate the same to his own use or the use of any person other than the true owner. . . ."
The argument of defense — joined in by the Government — is that the president erred in including within his instructions the elements of what at common law constituted three distinct offenses: those of larceny, embezzlement, and a taking under false pretenses. The contention is that the instructions should have been tailored specifically to fit the theory of the Government's case and the evidence.
We observe at the outset that, in conformity with the form provided in the Manual for Courts-Martial, United States, 1951, the specification alleged merely that the accused did "steal" the sums thereafter enumerated, from the individuals named, in violation of Article 121 of the Code, supra. That Article provides that:
"(a) Any person subject to this code who wrongfully takes, obtains, or withholds, by any means whatever, from the possession of the true owner or of any other person any money, personal property, or articles of value of any kind—
(1) with intent permanently to deprive or defraud another person of the use and benefit of property or to appropriate the same to his own use or the use of any person other than the true owner, steals such property and is guilty of larceny . . . ."
An examination of the legislative history of Article 121 discloses that it was the clear intent' of Congress to create the single offense of "larceny," and to abolish the technical distinctions theretofore, existing among the crimes of larceny, embezzlement, and taking under false pretenses. Hearings before House Committee on Armed Services, 81st Congress, 1st Session, on H. R. 2498, at pages 815 and 1282. Thus, the particular means of acquisition of the property became relatively unimportant, and the critical question in each case now is the intent with which the property in question is held by the accused. If the accused intended permanently to deprive or defraud the person entitled to possession of the property of its use and benefit, or if he intended permanently to appropriate the property to his own use, or to the use of one not entitled thereto, he has stolen it in law and is guilty of larceny. At first blush, it may appear that through the multiple use of the disjunctive, a number of variables are presented. However, closer scrutiny demonstrates that this is not in truth the case. In all situations, an intent permanently to deprive the owner of his property is required'. Where the accused permanently appropriates another's goods to his own use, or to the use of one other than the true owner, quite clearly the first and ostensibly separate condition — that is, "with intent permanently to deprive," etc. — is satisfied. The only additional situation in which one might intend to deprive another of his property permanently, without appropriating it to his own or another's use, would be where he merely, if neutrally, retains it, destroys it, or expends it — if it is of an expendable nature. Manifestly, the essential distinction between the two possible situations is slight indeed— particularly from a practical point of view — and the disposition of the property established at the trial will in each case reveal the basic requisite of an intent permanently to ' deprive the owner of its use and benefit.
The concededly tortuous course of this analysis is, we think, rather due to the inartful wording of Article 121, supra, than to deficiencies in ourselves. However, we do not sit in judgment on the phrasing of Congressional intent. It is simply our task to interpret and apply that phrasing and to serve that intent. Basically, the Article in question requires proof of no more than two elements: (1) that the accused obtained possession of the property in question, of some value, (2) with an intent, then or thereafter conceived, permanently to deprive the true owner of its use and benefit. The eclecticism expressed in the Article as to each of these elements is calculated merely to afford alternative means of establishing what we have discerned to be the essential and basic elements.
Ill
This dissection brings into bold relief the distinction between the offense of larceny, proscribed in Article 121, and that of desertion delineated in Article 85 of the Code, 50 USC § 679. The latter Article spells out three very different offenses, to wit: desertion with intent to remain away permanently, desertion with intent to avoid hazardous duty, and desertion with intent to shirk important service — -each involving a separate and distinct specific intent. United States v. Shull (No. 45), 2 CMR 83, decided February 18, 1952; United States v. Hemp (No. 290), 3 CMR 14, decided April 8, 1952. For that reason we have demanded that the law officers, in desertion cases, restrict their instructions on offense elements to the specific intent required in the crime charged. United States v. Russell L. Williams (No. 133), 2 CMR 92, decided February 21, 1952; United States v. Hemp, supra; United States v. Shepard (No. 343), 4 CMR 79, decided July 25, 1952; United States v. Johnson (No. 498), 4 CMR 128, decided August 7, 1952. Compare United States v. Jenkins (No. 238), 3 CMR 63, decided April 21, 1952; United States v. Moynihan (No. 278), 3 CMR 152, decided April 21, 1952; United States v. Boone (No. 320), 3 CMR 115, decided May 9, 1952.
No such precise instructional specificity need be required in the instance of the crime charged in the case at bar, for the reason that there is but one offense of larceny. By the president's instructions here — certainly no more inartful than the statute upon which they were based — the members of the court were required to find that accused had acquired possession of the sums of money specified, from the individuals named, and had intended permanently to deprive the rightful owners thereof. That is all that is demanded by the law. We, therefore, hold that there was no error in the instructions of the president in this -particular.
IV
In United States v. Snyder (No. 409), 4 CMR 15, decided June 5, 1952, and elsewhere, we have recognized the need for such certainty in specifying an offense as is required to apprise the accused of the nature of the crime charged against him, and to provide him adequate protection against a second prosecution for the same offense. In view of what we have said in preceding portions of this opinion, is there danger that this necessary certainty is substantially lacking? We think not. A larceny specification will always furnish the accused with notice of the goods and victim involved, together with information as to time, place and value. In addition, he may know, of course, that it is alleged that he possessed the goods concerned with the requisite intent as to permanent deprivation of the owner. Beyond this lie mere matters of evidence. Certainly the disclosure of details of this nature prior to trial may never be demanded by one charged with crime in the courts of the civilian community. Through the pretrial investigation, a military accused may — in fact, almost always does — secure fully as many, if not more, of these than are customarily available to his civilian counterpart. Sight must not be lost of the fact that the prosecution of crime — - military or civilian — is not a fox hunt, and that rather different ground rules should obtain. From the standpoint of protection from double jeopardy, it must be apparent that there are no dangers here. The allegations of the specification, together with the evidence of record, amply assure of this.
V
The numerous assignments of error filed by the accused have been considered fully and found to be without merit.
Accordingly, the decision of the board of review is affirmed.
Chief Judge Quinn and Judge LatimeR concur. |
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568 U.S. 871 | C. A. 11th Cir. Certiorari denied. |
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439 U.S. 822 | C. A. 2d Cir. Certiorari denied. |
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536 U.S. 946 | C. A. 5th Cir. Certiorari denied. |
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323 U.S. 783 | Petition for writ of certiorari to the Court of Appeals of New York denied for want of a final judgment.
Messrs. Thomas P. Healy and Harold H. McLean for respondent. |
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61 Cust. Ct. 666 | Newman, J.
In accordance with stipulation of counsel that the merchandise covered by the foregoing protests consists of finger jointed moldings similar in all material respects to those the subject of Best Moulding Corporation v. United States (Brown, Alcantar & Brown, Inc., Party in Interest) (51 CCPA 7, C.A.D. 829), the claim of the plaintiffs was sustained. |
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318 U.S. 322 | Mr. Justice Reed
delivered the opinion of the Court.
This writ of certiorari brings here for review the question of the taxability, as income, of rent and interest on accounts owed by the taxpayer which were cancelled by its creditors.
The taxpayer, a corporation, respondent here, owed certain past due bills for merchandise. This indebtedness was represented by interest-bearing notes. Interest upon these notes had been accrued for the years prior to 1937 and deducted in the taxpayer's income tax returns, to the amount of $11,435.22. In November, 1936, the creditors agreed to cancel all interest accruing after January 1, 1932. The first entry on the taxpayer's books which records the cancellation appears in December, 1937, the tax year here involved, when over $16,000 was credited.
The taxpayer in December, 1933, also owed back rent amounting to $15,298.99. This back rent had been accrued as an expense. A new lease was negotiated at that time and the lessor promised to make an adjustment of the accumulated obligation. The following April the lessor advised the taxpayer that he would accept $7,500 in payment of the back rent and would cancel the rest. The reduced sum was paid in February, 1937, by cash and notes which were met the same year. In 1937 the first entries were made on both the lessor's and the taxpayer's books, showing the partial forgiveness of the back rent.
The date of the book entries of the cancellations and the deduction of the interest for the whole of 1936 by the taxpayer led the Board of Tax Appeals to uphold the Commissioner's determination, that the cancellation of all items of indebtedness involved here took place in 1937. This determination is accepted by us. Wilmington Trust Co. v. Commissioner, 316 U. S. 164, 168.
The taxpayer credited the total amount of the cancelled debts, $25,219.65, to earned surplus. It did not return any of the sum as taxable income. No proof appears of the insolvency of the taxpayer before or after the cancellation. Its balance sheets show assets exceeding liabilities at the opening and close of 1937 with net assets greater than the asserted adjustment of income. Under these circumstances the Commissioner increased the taxpayer's reported income by $19,234.21, the sum of the items of the cancelled indebtedness which the Board of Tax Appeals found had served to offset income in like amounts in prior years. The taxpayer had accrued the rent and interest in former years. No claim for additional taxes is made by the Commissioner.
The taxpayer sought a redetermination on the ground that the cancellations were exempt gifts and that it was not enriched beyond the tax advantages gained by the deductions in former tax returns. The Board of Tax Appeals found that the cancellations were not gifts, concluded that the tax benefits in dollars obtained by the deductions of former years did not limit the 1937 tax springing from the cancellation and affirmed the Commissioner's determination of a deficiency. The Court of Appeals reversed on the ground that the cancellations constituted exempt gifts. 128 F. 2d 254. On account of a variety of views in the circuits as to the taxability of similar adjustments of indebtedness, we granted certiorari.
The applicable statutory provisions are § 22 (a) and (b) (3) of the Revenue Act of 1936. The general definition of gross income has varied little in the successive revenue acts, and, from the earliest, gifts have been excluded by substantially identical statutory language. Act of October 3, 1913, 38 Stat. 166. The Treasury Department Regulations 94, relating to the Revenue Act of 1936, Art. 22 (a)-14, covered cancellation of indebtedness. This regulation first appeared in Regulations 86 under the 1934 Act. It marked a change in the Treasury's concept of the tax effect of debt forgiveness. The old article as it appeared in Regulations 77, relating to the 1932 Act, read in part:
"If, however, a creditor merely desires to benefit a debtor and without any consideration therefor cancels the debt, the amount of the debt is a gift from the creditor to the debtor and need not be included in the latter's gross income."
The same language appeared in the former Regulations.
In fields closely related to the cancellation of indebtedness which we are considering here, this Court has treated gains in net assets as income. In United States v. Kirby Lumber Co., 284 U. S. 1, the taxpayer purchased its own bonds at a discount. It was held taxable on the increase in net assets which resulted. This holding was confirmed by Helvering v. American Chicle Co., 291 U. S. 426. See also Commissioner v. Coastwise Transp. Corp., 71 F. 2d 104. Forfeiture or surrender of a lease by which the lessor gains property or money makes such gain taxable. Helvering v. Bruun, 309 U. S. 461; Hort v. Commissioner, 313 U. S. 28. The narrow line between taxable bonuses and tax free gifts is illuminated by Bogardus v. Commissioner, 302 U. S. 34, on the one side and upon the other by Noel v. Parrott, 15 F. 2d 669, as approved in Old Colony Trust Co. v. Commissioner, 279 U. S. 716, 730.
Normally cancellations of indebtedness occur only when the beneficiary is insolvent or at least in financial straits. Possibly because it seems beyond the legislative purpose to exact income taxes for savings on debts, the courts have been astute to avoid taxing every balance sheet improvement brought about through a debt reduction. Where the indebtedness has represented the purchase price of property, a partial forgiveness has been treated as a readjust ment of the contract rather than a gain. Hirsch v. Commissioner, 115 F. 2d 656; Helvering v. A. L. Killian Co., 128 F. 2d 433; Gehring Publishing Co. v. Commissioner, 1 T. C. 345. Where a stockholder gratuitously forgives the corporation's debt to himself, the transaction has long been recognized by the Treasury as a contribution to the capital of the corporation. Regulations 45, Art. 51, through to Regulations 94, Art. 22 (a)-14. Commissioner v. Auto Strop Safety Razor Co., 74 F. 2d 226.
The uncertainties of the effect of the remission of indebtedness on income tax brought about legislation to clarify the problems. The Chandler Bankruptcy Act of June 22, 1938, instituted adjustments deemed desirable. The provisions of Chapter X of the Bankruptcy Act relating to corporate reorganizations are typical. They declare that no income should be recognized "in respect to the adjustment of the indebtedness of a debtor" under reorganization proceedings, § 268,52 Stat. 904, provided that the basis of the property should be reduced correspondingly as specified in § 270 as amended July 1, 1940, 54 Stat. 709. The basis requirements do not appear throughout the sections, e. g., Chapter XV. The Revenue Act of 1939 amended the Internal Revenue Code, §22 (b) and 113 (b), so as to extend similar relief to all corporate taxpayers "in an unsound financial condition."
It was provided that § 215 should not apply to any discharge of indebtedness occurring prior to the enactment of the Revenue Act of 1939. No further explanation for this limitation appears beyond the language of the House Report:
"The amendments made by section 215 of the bill are applicable only to taxable years beginning after December 31, 1938. They are not applicable to discharges of corporate indebtedness occurring prior to the date of the enactment of the bill. They are also not applicable to a discharge occurring in any taxable year beginning after December 31, 1942. They likewise do not apply to any discharge of corporate indebtedness occurring in any proceeding under section 77B, or under chapter X or XI, of the Bankruptcy Act of 1898, as amended, since such discharges are governed by other provisions of law." P. 25.
The Revenue Act of 1942, 56 Stat. 798, 811, § 114, amended § 22 (b) (9) of the Internal Revenue Code so as to make the exclusion from gross income of income arising from discharge of indebtedness applicable generally to all corporations, whether or not financially sound.
In the light of these views upon gain, profit and income, we must construe the meaning of the statutory exemption of gifts from gross income by § 22 (b) (3). The broad import of gross income in § 22 (a) admonishes us to be chary of extending any words of exemption beyond their plain meaning. Cf. Heiner v. Colonial Trust Co., 275 U. S. 232, 235; United States v. Stewart, 311 U. S. 60, 63. "Gifts," however, is a generic word of broad connotation, taking coloration from the context of the particular statute in which it may appear. Its plain meaning in its present setting denotes, it seems to us, the receipt of financial advantages gratuitously.
The release of interest or the complete satisfaction of an indebtedness by partial payment by the voluntary act of the creditor is more akin to a reduction of sale price than to financial betterment through the purchase by a debtor of its bonds in an arm's-length transaction. In this view, there is no substance in the Commissioner's differentiation between a solvent or insolvent corporation or the taxation of income to the extent of assets freed from the claims of creditors by a gratuitous cancellation of indebtedness. Lakeland Grocery Co. v. Commissioner, 36 B. T. A. 289. Cf. Madison Railways Co. v. Commissioner, 36 B. T. A. 1106; Spokane Office Supply Co. v. Commissioner, B. T. A. Docket No. 86762, memo. op. of April 29, 1939; Model Laundry v. Commissioner, B. T. A. Docket No. 93493, memo. op. of January 15, 1940. See also Haden Co. v. Commissioner, 118 F. 2d 285, which supports the Commissioner.
The Board of Tax Appeals decided that these cancellations were not gifts under § 22 (b) (3). It was said:
"No evidence was introduced to show a donative intent upon the part of any creditor. The evidence indicates, on the contrary, that the creditors acted for purely business reasons and did not forgive the debts for altruistic reasons or out of pure generosity." 44 B. T. A. 425, 428.
With this conclusion we cannot agree. We do not feel bound by the finding of the Board because it reached its conclusions, in our opinion, upon an application of erroneous legal standards. Section 22 (b) (3) exempts gifts. This does not leave the Tax Court of the United States free to determine at will or upon evidence and without judicial review the tests to be applied to facts to determine whether the result is or is not a gift. The fact that the motives leading to the cancellations were those of business or even selfish, if it be true, is not significant. The forgiveness was gratuitous, a release of something to the debtor for nothing, and sufficient to make the cancellation here gifts within the statute.
Affirmed.
Me. Justice Rutledge took no part in the consideration or decision of this case.
There is an unexplained and immaterial variance between the sum of the items cancelled and the total credited to surplus.
Dallas Transfer & Warehouse Co. v. Commissioner, 70 F. 2d 95; Commissioner v. Coastwise Transp. Corp., 71 F. 2d 104; Hirsch v. Commissioner, 115 F. 2d 656; Helvering v. A. L. Killian Co., 128 F. 2d 433; Haden Co. v. Commissioner, 118 F. 2d 285.
49 Stat. 1648, 1657, § 22, Gross income:
"(a) General Definition. — 'Gross income' includes gains, profits, and income derived from salaries, wages, or compensation for personal service, of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever. .
"(b) Exclusiom from Gross Income. — The following items shall not be included in gross income and shall be exempt from taxation under this title:
"(3) Gifts, Bequests, and Devises. — The value of property acquired by gift, bequest, devise, or inheritance (but the income from such property shall be included in gross income); ."
"Art. 22 (a)-14. Cancellation of indebtedness. — The cancellation of indebtedness, in whole or in part, may result in the realization of income. If, for example, an individual performs services for a creditor, who in consideration thereof cancels the debt, income in the amount of the debt is realized by the debtor as compensation for his services. A taxpayer realizes income by the payment or purchase of his obligations at less than their face value. (See article 22 (a) — 18.) If a shareholder in a corporation which is indebted to him gratuitously forgives the debt, the transaction amounts to a contribution to the capital of the corporation. Income is not realized by a taxpayer by virtue of the discharge of his indebtedness as the result of an adjudication in bankruptcy, or by virtue of a composition agreement among his creditors, if immediately thereafter the taxpayer's liabilities exceed the value of his assets."
The article relating to the exclusion of gifts from gross income is not helpful. It merely says gifts are exempt from the income tax. Art. 22 (b) (3) — 1.
The whole article was as follows:
"Art. 64. Forgiveness of indebtedness. — The cancellation and forgiveness of indebtedness may amount to a payment of income, to a gift, or to a capital transaction, dependent upon the circumstances. If, for example, an individual performs services for a creditor, who in consideration thereof cancels the debt, income to that amount is realized by the debtor as compensation for his services. If, however, a creditor merely desires to benefit a debtor and without any consideration therefor cancels the debt, the amount of the debt is a gift from the creditor to the debtor and need not be included in the latter's gross income. If a shareholder in a corporation which is indebted to him gratuitously forgive^ the debt, the transaction amounts to a contribution to the capital of the corporation."
Regulations 74, Art. 64 (1931); Regulations 69, Art. 49 (1926); Regulations 65, Art. 49 (1924), for individuals; Regulations 62, Art. 50 (1922), for individuals; Regulations 45 (1920 ed.), Art. 51, for individuals.
When the gift tax was revived in 1932, the House Report gave as an example of a gift "the forgiveness or payment by A of B's indebtedness." H. Rep. No. 708, 72nd Cong., 1st Sess., p. 28 (5).
The fact that the purchase was made in the taxable year of issue is immaterial. Burnet v. Sanford & Brooks Co., 282 U. S. 359, 364, 365; Commissioner v. Norfolk Southern R. Co., 63 F. 2d 304.
For discussions of the general problem see "The Revenue Act of 1939 and the Income Tax Treatment of Cancellation of Indebtedness," 49 Yale L. J. 1153; "Cancellation of Indebtedness and Its Tax Consequences," 40 Col. L. Rev. 1326; "Discharge of Indebtedness and the Federal Income Tax," 53 Harv. L. Rev. 977.
Corporate reorganizations under Chap. X or 77B, § 268, 270, 276 (c) (3), 52 Stat. 904, 905; arrangements under Chap. XI, § 395, 396, 52 Stat. 915; real property arrangements under Chap. XII, § 520, 521, 522, 52 Stat. 929; wage earners plans under Chap. XIII, §679, 52 Stat. 938; railroad adjustments under Chap. XV, § 735, 53 Stat. 1140.
53 Stat. 875, § 215.
See S. Rep. No. 648, 76th Cong., 1st Sess., p. 5; H. Rep. No. 855, 76th Cong., 1st Sess., p. 23.
See S. Rep. No. 1631, 77th Cong., 2d Sess., p. 77; 26 U. S. C. § 22:
"(b) Exclusions from gross income. The following items shall not be included in gross income and shall be exempt from taxation under this chapter:
"(9) Income from discharge of indebtedness. — In the case of a corporation, the amount of any income of the taxpayer attributable to the discharge, within the taxable year, of any indebtedness of the taxpayer . . . evidenced by a security. . . . This paragraph shall not apply to any discharge occurring before the date of enactment of the Revenue Act of 1939, or in a taxable year beginning after December 31, 1945."
Helvering v. Clifford, 309 U. S. 331, 334. |
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374 U.S. 849 | Supreme Court of North Carolina. Certiorari denied. |
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7 B.T.A. 465 | OPINION.
Akttndell:
The petitioner admits that $1,400, or one-half of the interest paid on the note in 1922, represents income to him, but contends that the balance was paid to his wife and belonged to her and that he is not subject to tax thereon. It is his contention that he and his wife owned the note and mortgage jointly. The respondent denies the joint ownership and has computed the deficiency on the theory that the petitioner made a gift of the interest to his wife.
Although the common law doctrine with reference to joint tenancies in personal property has never been adopted by statute in Michigan, the Supreme Court of that State has recognized that such tenancies may be validly created by specific provision therefor in the instrument of conveyance. Lober v. Dorgan, 215 Mich. 62; 183 N. W. 942.
It therefore seems clear that the petitioner and his wife held the note here involved as joint tenants. As a result of such ownership each tenant had an equal right to share in the property so held and the income therefrom-. Thompson on Real Property, § 1710; 7 R. C. L. 811; Case v. Owen, 139 Ind. 22; 38 N. E. 395; Kissam v. McElligott, 280 Fed. 212.
The Michigan Married Woman's Act, 3 Mich. Comp. Laws, 1915, sec. 11485, provides:
That the real and personal estate of every female, acquired before marriage, and all property, real and personal, to which she may afterwards become entitled, by gift, grant, inheritance, devise, or in any other manner, shall be aiv remain the estate and property of such female, and shall not be liable fo the debts, obligations and engagements of her husband, and may be contracted, sold, transferred, mortgaged, conveyed, devised or bequeathed by her, in the same manner and with the like effect as if she were unmarried.
As the petitioner and his wife were joint owners of the note here involved and each was entitled to one-half of the income therefrom, we are of the opinion, that in view of the provisions of the Married Woman's Act as set forth above, one-half of the income from the note was properly taxable to the petitioner's wife and only the remaining half was taxable to the petitioner.
Judgment mil be entered on 15 days' notice, under Rule 50. |
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507 U.S. 1039 | C. A. 2d Cir. Certiorari denied. |
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40 Cust. Ct. 521 | Ford, Judge:
The suit listed above challenges the action of the collector of customs in classifying certain imported merchandise as synthetic textile filaments, singles, not specially provided for, and levying duty thereon at the rate of 45 per centum ad valorem under paragraph 1301 of the Tariff Act of 1930. Plaintiff claims said merchandise to be properly dutiable at the rate of 20 per centum ad valorem under paragraph 1533 of said act, as modified by the General Agreement on Tariffs and Trade, 82 Treas. Dec. 305, T. D. 51802, by reason of the similitude provisions of paragraph 1559, as catgut or manufactures thereof.
The pertinent provisions of the tariff act here involved are as follows:
Paragraph 1301 of the Tariff Act of 1930:
Par. 1301. Filaments of rayon or other synthetic textile, single or grouped, and yarns of rayon or other synthetic textile, singles, all the foregoing not specially Erovided for, weighing one hundred and fifty deniers or more per length of four undred and fifty meters, 45 per centum ad valorem; Provided, That none of the foregoing filaments shall be subject to a less duty than 40 cents per pound, and none of the foregoing yarns shall be subject to a less duty than 45 cents per pound.
Paragraph 1533, as modified by T. D. 51802:
Paragraph 1559, Tariff Act of 1930:
Pab. 1559. That each and every imported article, not enumerated in this Act, which is similar, either in material, quality, texture, or the use to which it may be applied to any article enumerated in this Act as chargeable with duty, shall be subject to the same rate of duty which is levied on the enumerated article which it most resembles in any of the particulars before mentioned; .
At the trial of this case, counsel for the respective parties agreed that the imported material involved in this case is not a product made by any artificial process from cellulose, a cellulose hydrate, a compound of cellulose, or a mixture containing any of the foregoing.
In view of the foregoing stipulation, the pronouncements in J. M. P. R. Trading Corp. v. United States, 33 Cust. Ct. 226, C. D. 1658, affirmed Same v. Same, 43 C. C. P. A. (Customs) 1, C. A. D. 600, definitely removed the subject merchandise from classification under not only paragraph 1301, but from any other paragraph in schedule 13.
In our decision in the J. M. P. R. Trading Corp. case, supra, we held as follows:
In view of what we consider the very sound pronouncements in the authorities quoted above, we are satisfied that the involved merchandise cannot find classification by similitude under paragraph 1312 of the Tariff Act of 1930, as contended by counsel for the defendant, or under any of the other paragraphs contained in schedule 13, because the provisions of said paragraph 1313 are equally applicable to each of the paragraphs embraced in said schedule 13. To arrive at this conclusion, does not require a strict construction of said paragraph 1313 by this court. As heretofore stated, the Congress, by clear and unambiguous language, has excluded all merchandise from schedule 13, except "rayon" and "other synthetic textile" "made by any artificial process from cellulose, a cellulose hydrate, a compound of cellulose, or a mixture containing any of the foregoing." To give to said paragraph 1313 any other construction, would be nothing short of attempted judicial legislation. This we decline to do.
The only witness who testified in this case stated, without contradiction, that:
A. We imported the material and we did nothing to it, packaging the material, we jobbed it to sporting goods dealers and tennis professionals for restringing tennis racquets. And when a dealer buys a 600 yard reel he buys it because it's cheaper than individual sets, and he can take off as much length as he wants to restring one racquet. That was all used for tennis racquet stringing.
Q. As far as you know is there any other use for this material? — A. I can't think of any.
Based upon the facts in this case and following the J. M. P. R. Trading Corp. case, supra, we hold all the merchandise on the invoice covered by entry 10565 in this case, which was assessed with duty at 45 per centum ad valorem under paragraph 1301 of the Tariff Act of 1930, to be properly dutiable at 20 per centum ad valorem under paragraph 1533 of said act, as modified by T. D. 51802, by reason of the similitude provisions in paragraph 1559, as alleged by the plaintiff.
To the extent indicated, the specified claim in this suit is sustained; in all other respects and as to all other merchandise, all the claims are overruled. Judgment will be rendered accordingly. |
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21 Cl. Ct. 143 | ORDER
LYDON, Senior Judge.
In this military pay case, plaintiff, pro se, challenges his separation from the United States Air Force. Plaintiff also contends his reenlistment eligibility rights were violated by the Air Force. The complaint, filed on July 3, 1990, is far from a model of informative pleading. Indeed, the complaint fails to set forth sufficient operative facts on which to gauge the thrust of the legal arguments contained therein. While pro se plaintiffs are not expected to frame issues with the precision of a common law pleading, Rock v. United States Postal Service, 828 F.2d 1555, 1558 (Fed. Cir.1987), a complaint may not be so general and confusing as to leave the defendant in doubt as to what must be met. Merritt v. United States, 267 U.S. 338, 341, 45 S.Ct. 278, 279, 69 L.Ed. 643 (1925). Like its predecessor court, this court is most lenient in overlooking pleading deficiencies in pro se complaints. See Clinton v. United States, 191 Ct.Cl. 604, 605-06, 423 F.2d 1367, 1368 (1970). Often, these pro se deficiencies are corrected by responsive pleadings by defendant wherein the operative facts are set forth. The Rules (RUSCC) of the court recognize this fact. For example, under RUSCC 56(a), a party seeking to recover on a claim, counterclaim or to obtain a declaratory judgment, must wait sixty (60) days from the date the action is commenced before filing a motion for summary judgment. See also RUSCC 30(a) (Deposition upon Oral Examinations). In this case, defendant has not as yet filed its response to plaintiffs complaint and its time to do so under the rules of this court has not as yet expired.
As indicated above, plaintiff's complaint was filed on July 3, 1990. Under RUSCC 12(a), defendant has sixty (60) days in which to file its answer or response to plaintiff's complaint. In this case, defendant's answer or response is due on September 3, 1990. On July 25, 1990, before any answer or response by defendant, plaintiff filed an "Application For A Preliminary Injunction." This "Application", like the complaint, is lacking in operative fact allegations. Defendant did not file a response to this "Application." It is the filing of this "Application" that triggers the issuance of this order.
In his "Application" plaintiff seeks to enjoin his continued separation from the "Air Force until such time as plaintiff's rights to employment can be resolved by this Honorable Court."
The court's equitable powers are limited. United States v. King, 395 U.S. 1, 3-5, 89 S.Ct. 1501, 1502-03, 23 L.Ed.2d 52 (1969). The court can exercise equitable powers in a limited way as an adjunct to its power to enter money judgments. When the court determines for example, that a service man has been unlawfully separated from the service, it can order that he be paid pay and allowances for the remaining period of his enlistment and/or direct reinstatement to his position for the remaining period of his enlistment if such enlistment period had not expired at the time such determination was made. See 28 U.S.C. § 1491(a)(2); Sanders v. United States, 219 Ct.Cl. 285, 301, 594 F.2d 804, 813 (1979) (en banc). However, the court has no injunctive power to preclude his separation until such time as the determination of the legality of his separation is made. Such injunctive relief must be sought in the District Court. This court has not been granted injunctive authority of the type sought by plaintiff's motion. Harris v. United States, 4 Cl.Ct. 418, 419 (1984). Absent express and direct statutory injunctive authority as was conferred on the court by Pub.L. No. 97-164, 28 U.S.C. § 1491(a)(3) (Supp.1984), the jurisdiction of this court is generally limited to money claims and thus the court is without authority to grant prejudgment injunctive relief in military pay cases such as the one now before the court. Harris, supra; see also United States v. King, supra; Williams Intern. Corp. v. United States, 7 Cl.Ct. 726, 729-31 (1985).
Since this court, as demonstrated above, has no prejudgment injunctive authority, plaintiff's application for a preliminary injunction must be, and is denied.
. Even before the District Court, injunctive relief may well be denied if plaintiff has pending before the Claims Court a suit seeking to set aside his separation as unlawful since the Claims Court, if he prevailed on the merits, could order correction of records, an award of full backpay, and reinstatement (if an officer, or to the extent of the unexpired term of an enlisted man). See Harris v. United States, 745 F.2d 535 (8th Cir.1984). Following denial of his claim for prejudgment injunctive relief in the Claims Court (4 Cl.Ct. 418) Harris, an Air Force Captain contesting his discharge from military service, sought injunctive relief in the District Court for the Eastern District of Arkansas. The District Court's denial of injunctive relief was affirmed on appeal (745 F.2d 535). |
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449 U.S. 865 | C. A. 9th Cir. Certiorari denied. |
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179 L. Ed. 2d 895 | Petition for writ of cer-tiorari to the United States Court of Appeals for the Ninth Circuit denied.
Same case below, 593 F.3d 1084. |
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317 U.S. 666 | Petition for writ of certiorari to the Court of Appeals of Georgia denied on the ground that it does not appear from the record that application therefor was made within the time provided by law. § 8 (a), Act of February 13, 1925 (43 Stat. 936, 940), 28 U. S. C., § 350. |
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440 U.S. 925 | Sup. Ct. Ohio. Cer-tiorari denied. |
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562 U.S. 1013 | Ct. App. Cal., 3d App. Dist. Certiorari denied. |
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25 Ct. Int'l Trade 583 | Opinion
Tsoucalas, Senior Judge:
Plaintiffs and defendant-intervenors, NSK Ltd. and NSK Corporation (collectively "NSK"), Koyo Seiko Co., Ltd. and Koyo Corporation of U.S.A. (collectively "Koyo"), NTN Bearing Corporation of America, NTN Corporation, American NTN Bearing Manufacturing Corporation, NTN Driveshaft, Inc. and NTN-Bower Corporation (collectively "NTN"), and plaintiffs, Nippon Pillow Block Sales Co. Ltd. and FYH Bearing Units USA Inc. (collectively "NPB"), move pursuant to USCIT R. 56.2 for judgment upon the agency record challenging various aspects of the United States Department of Commerce, International Trade Administration's ("Commerce") final determination, entitled Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, Singapore, and the United Kingdom; Final Results of Antidumping Duty Administrative Reviews ("Final Results"), 62 Fed. Reg. 2081 (Jan. 15, 1997), as amended, Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, and Singapore; Amended Final Results of Antidumping Duty Administrative Reviews, 62 Fed. Reg. 14,391 (Mar. 26,1997). Defendant-intervenor and plaintiff, The Torrington Company ("Torrington"), also moves pursuant to USCIT R. 56.2 for judgment upon the agency record challenging certain aspects of Commerce's Final Results.
Specifically, NSK argues that Commerce erred in: (1) calculating constructed value ("CV") profit; (2) its application of level-of-trade ("LOT") adjustments to normal value ("NV"); (3) including its zero-value United States transactions in the margin calculations; (4) failing to include inventory carrying costs in the constructed export price ("CEP") offset when it matches CEP sales to CV; and (5) failing to find that NSK successfully rebutted the presumption of affiliation between itself and its supplier.
Koyo contends that Commerce erred in: (1) failing to grant an LOT adjustment; and (2) failing to exclude sales made out of the ordinary course of trade from the home-market database. Koyo subsequently abandoned its claim regarding Commerce's failure to grant an LOT adjustment.
NTN contends that Commerce erred in: (1) failing to exclude sales made out of the ordinary course of trade from the home-market database; (2) making certain adjustments to the starting price of CEP and denying a price-based LOT adjustment for CEP sales; (3) recalculating United States indirect selling expenses without regard to LOT; (4) determining CEP without regard to LOT; and (5) refusing to use NTN's affiliated-party sales in its calculation of NV
NPB contends that Commerce erred in: (1) finding that NPB failed to correctly indicate whether a housed bearing model was further manufactured in the United States during the period of review ("POR"); and (2) applying total facts available.
Torrington contends that Commerce erred in: (1) accepting Koyo's home-market billing adjustments; (2) accepting Koyo's home-market rebates; (3) accepting NTN's home-market billing adjustments; and (4) accepting NSK's home-market rebates.
Background
This case concerns the sixth review of the antidumping duty order on antifriction bearings (other than tapered roller bearings) and parts thereof ("AFBs") imported to the United States from Japan during the review period of May 1, 1994 through April 30,1995. On July 8, 1996, Commerce published the preliminary results of the subject review. See Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, Romania, Singapore, Thailand and the United Kingdom; Preliminary Results of Antidump-ing Duty Administrative Reviews, Termination of Administrative Reviews, and Partial Termination of Administrative Reviews ("Preliminary Results"), 61 Fed. Reg. 35,713. Commerce issued the Final Results on January 15, 1997, see 62 Fed. Reg. 2081, and the Amended Final Results on March 26, 1997, see 62 Fed. Reg. 14,391.
Since the administrative review at issue was initiated after December 31,1994, the applicable law is the antidumping statute as amended by the Uruguay Round Agreements Act ("URAA"), Pub. L. No. 103-465, 108 Stat. 4809 (1994) (effective January 1, 1995). See Torrington Co. v. United States, 68 F.3d 1347, 1352 (Fed. Cir. 1995) (citing URAA § 291(a)(2), (b) (noting effective date of URAA amendments)).
Jurisdiction
The Court has jurisdiction over this matter pursuant to 19 U.S.C. § 1516a(a) (1994) and 28 U.S.C. § 1581(c) (1994).
Standard of Review
The Court will uphold Commerce's final determination in an anti-dumping administrative review unless it is "unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(l)(B)(i) (1994); see NTN Bearing Corp. of Am. v. United States ("NTN Bearing"), 24 CIT 385, 389,104 F. Supp. 2d 110, 115-16 (2000) (detailing Court's standard of review in antidumping proceedings).
Discussion
I. Commerce's CV Profit Calculation for NSK
A. Background
For this POR, Commerce used CV as the basis for NV "when there were no usable sales of the foreign like product in the comparison market." Preliminary Results, 61 Fed. Reg. at 35,718. Commerce calculated the profit component of CV using the statutorily preferred methodology of 19 U.S.C. § 1677b(e)(2)(A) (1994). See Final Results, 62 Fed. Reg. at 2113. Specifically, in calculating CV the statutorily preferred method is to calculate an amount for profit based on "the actual amounts incurred and realized by the specific exporter or producer being examined in the investigation or review in connection with the production and sale of a foreign like product [made] in the ordinary course of trade, for consumption in the foreign country." 19 U.S.C. § 1677b(e)(2)(A).
In applying the preferred methodology for calculating CV profit, Commerce determined that "the use of aggregate data that encompasses all foreign like products under consideration for NV represents a reasonable interpretation of [§ 1677b(e)(2)(A)] and results in a practical measure of profit that [Commerce] can apply consistently in each case." Final Results, 62 Fed. Reg at 2113. Also, in calculating CV profit under § 1677b(e)(2)(A), Commerce excluded below-cost sales from the calculation which it disregarded in the determination of NV pursuant to § 1677b(b)(1) (1994). See id. at 2114.
B. Contentions of the Parties
1. NSK's Contentions
NSK contends that Commerce defined "foreign like product" for purposes of the CV profit calculation in a manner contrary to the statutory definition of the term and well-established agency practice. See NSK's Mem. E & A. Süpp. Mot. J. Agency R. ("NSK's Mem.") at 12. In particular, NSK asserts that 19 U.S.C. § 1677b(e)(2)(A) requires that Commerce first tiy to calculate CV profit for imported merchandise based on actual profit amounts incurred in the home-market production and sale of "foreign like product," that is, model or family products, that match each bearing model sold in the United States. See id.
NSK notes that 19 U.S.C. § 1677(16) (1994) defines "foreign like prod-, uct" by establishing three distinct categories of products for model- matching purposes. See id. at 13. The first category of merchandise is identical merchandise, the next category is nonidentical merchandise made by the same producer in the same country and is similar in value to the merchandise under investigation, and the third category is merchandise made by the same producer in the same country and used for the same purposes as the merchandise under investigation. See id. NSK asserts that once Commerce finds merchandise in one category, merchandise in the subsequent categories can never be considered foreign like product because § 1677(16) directs Commerce to determine foreign like product in the first of the listed categories. See id. at 13-14. NSK argues, therefore, that since the plain language of § 1677(16) clearly creates a descending hierarchy for selecting foreign like product, Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 457 U.S. 837 (1984) dictates that the Court, as well as Commerce, must give effect to the unambiguously expressed intent of Congress and, thus, the reasonableness of Commerce's interpretation of 19 U.S.C. § 1677b (e)(2)(A) is irrelevant. See id. at 12-13.
NSK also maintains that the legislative history of the URAA confirms that Commerce should calculate CV profit on a model or family basis when using the preferred methodology under 19 U.S.C. § 1677b(e)(2)(A). See id. at 15. NSK notes that when Commerce revised its regulations to conform to the URAA, in particular 19 C.F.R. § 351.405, the agency specified it would use "'an aggregate calculation that encompasses all foreign like products under consideration for normal value.'" Id. (quoting Antidumping Duties; Countervailing Duties; Final Rule ("Final Regulations"), 62 Fed. Reg. 27, 296, 27, 359 (May 19, 1997)). NSK further notes that Commerce found this method of calculating CV profit to be "'consistent with the Department's method of computing SG&A and profit under the pre-URAA version of the statute, and, while the URAA revised certain aspects of the SG&A and profit calculation, we do not believe that Congress intended to change this particular aspect of our practice.'" Id. Nevertheless, NSK claims that contrary to Commerce's finding, the URAA legislative history makes
clear that the current preferred methodology for calculating CV profit is not consistent with Commerce's pre-URAA methodology. See id. The URAA legislative history, according to NSK, first recites the pre-URAA law, 19 U.S.C. § 1677b(e)(l)(B) (1988), with reference to profit amounts based on the same general class or kind as the merchandise under investigation, then announces that 19 U.S.C. § 1677b(e)(2)(A) (1994) "'establishes new methods of calculating SG&A expenses and profits consistent with methods provided for in the [URAA].'" Id. at 15-16 (quoting State ment of Administrative Action ("SAA"), H.R. Doc. 103-316, at 839 (1994), reprinted in 1994 U.S.C.C.A.N. 4040) (emphasis added)). NSK specifically notes that the new § 1677b(e)(2)(A) "'establishes as a general rule that Commerce will base amounts of SG&A expenses and profits only on amounts incurred and realized in connection with sales in the ordinary course of trade of the particular merchandise in question (foreign like product).'" Id. at 16 (quoting SAA at 839) (emphasis added). NSK, therefore, argues that the URAA legislative history directly contradicts Commerce's position and demonstrates Congress' clear intent to alter the preferred basis on which Commerce calculates CV profit. See id.
NSK further notes that after taking into account changes in nomenclature of the URAA, the first alternative methodology for CV profit, 19 U.S.C. § 1677b(e)(2)(B)(i), is nearly identical to the pre-URAA CV profit methodology, 19 U.S.C. § 1677b(e)(l)(B), except that sales at issue do not have to be in the ordinaiy course of trade. See id. NSK also notes that the URAA legislative history provides that "'[w]ith respect to alternative (1), this methodology is consistent with the existing practice of relying on a producer's sales of products in the same'" general class or kind of merchandise. Id. (quoting SAA at 840). NSK, therefore, maintains that if § 1677b(e)(l)(B) is meant to be consistent with Commerce's pre-URAA practice, then § 1677b(e)(2)(A) is necessarily meant to be different. See id. at 17.
2. Commerce's Contentions
In response, Commerce asserts that it applied a reasonable interpretation of 19 U.S.C. § 1677b(e)(2)(A) and properly based CV profit for each respondent, including NSK, upon the actual profit data of that respondent. See Def.'s Mem. in Partial Opp'n to Pis.' Mots. J. Agency R. ("Def.'s Mem.") at 15-16. Although Commerce recognizes that 19 U.S.C. § 1677(16) establishes a descending hierarchy that articulates preferences for the type of foreign like product the agency must select for matching purposes, it claims that where the subject merchandise is complex and encompasses numerous characteristics for matching, the foreign like product typically embraces more that one of the § 1677(16) categories. See id. at 18. Commerce contends that the term "foreign like product" is not limited to the product which is "identical" (i.e., "model-specific") or "like" (i.e., "similar to") the subject merchandise, because if neither is available, merchandise of the same "general class or kind" as the subject merchandise will qualify as the foreign like product. See id. at 18-19.
Commerce also claims that there is no indication by reference to "a foreign like product" in 19 U.S.C. § 1677b(e)(2)(A) that Congress intended that CV profit be calculated based on merchandise that is identical or similar to the subject merchandise. See id. at 18. Commerce also notes that CV becomes available for NV only when identical or similar home-market merchandise is not available for comparison with United States sales either because there are no such home-market sales or they are below cost and, thereby, are disregarded. See id. Commerce maintains that Congress could not have intended to limit the CV profit calculation under § 1677b(e)(2)(A) to profit incurred in the production or sale of merchandise identical or similar to the subject merchandise because, in that event, the preferred method of § 1677b(e)(2)(A) would rarely be applicable. See id. at 18-19. Commerce, therefore, argues that since there were sales of foreign like products that were not disregarded and actual profit amounts were realized by each respondent in connection with these sales, Commerce properly applied the preferred method by aggregating those profits. See id. at 20. To apply an alternative methodology where there are sales of the foreign like product, according to Commerce, would virtually eliminate the statutoiy preference to calculate CV profit based upon § 1677b(e)(2)(A). See id. at 21.
Moreover, Commerce disagrees with NSK's assertion that Commerce ignored the explicit hierarchy of 19 U.S.C. § 1677(16) by calculating CV profit based on profits for products from all § 1677(16) categories. See id. at 22. Citing U.H.F.C. Co. v. United States, 916 F.2d 689 (Fed. Cir. 1990) (a pre-URAA case), and Toyota Motor Sales, U.S.A., Inc. v. United States, 22 CIT 643, 15 F. Supp. 2d 872 (1998) (a post-URAA case), Commerce argues that it is simply following its practice established under pre- and post-URAA law of applying the categories set forth under § 1677(16), which defines "such or similar" merchandise (now "foreign like product"), depending upon the particular context. See id. at 22-23.
3. Torrington's Contentions
In support of Commerce, Torrington first contends that 19 U.S.C. § 1677b(e)(2)(A) on its face permits a flexible application of "foreign like product" in CV profit calculations. See Torrington's Resp. to Pis.' Mems. Supp. Mots. J. Agency R. ("Torrington's Resp.") at 16. Torring-ton asserts that § 1677b(e)(2)(A)'s plural expression, "profits," and flexible expression, "in connection with," carries the clear meaning and intent that Commerce may calculate CV profit from multiple sales of relevant merchandise and by reference to more than one bearing "family," so long as the models in the calculation are reasonably "connected" to the particular model for which CV is being determined. See id. Tor-rington, therefore, argues that § 1677b(e)(2)(A) does not limit Commerce to any particular narrow product group. See id.
Torrington also contends that rules of statutoiy construction necessitate Commerce's broad and flexible interpretation of 19 U.S.C. § 1677b(e)(2)(A). See id. at 17. Torrington first notes that § 1677b(e)(2)(A) is the general rule and preferred basis for determining CV profit. See id. Torrington also notes that in most cases, CV forms NV only when a respondent reports insufficient sales of "foreign like product," as the term is narrowly understood, in the ordinary course of trade. See id. Accordingly, Torrington claims that if the Court construes § 1677b(e)(2)(A) narrowly in the CV profit context, it will effectively negate the general rule and preferred basis for CV profit calculations. See id. In support of its claim, Torrington asserts that: (1) "courts [must] strive to give effect to all provisions in a statute, so as not to render a provision inoperative," id. (citing United States v. Menasche, 348 U.S. 528, 538-39 (1955)); and (2) courts must also "avoid giving statutes manifestly absurd interpretations which literal readings would otherwise support," id. (citing United States v. Brown, 333 U.S. 18, 27 (1948)). Torrington argues if the Court were to adopt NSK's position for calculating CV profit, the Court would clearly violate both of these rules. See id. at 17-18.
Torrington further contends that the crux of NSK's argument is that the term "foreign like product" under 19 U.S.C. § 1677(16) must be applied with rigid consistency in two different contexts, namely, those for: (1) calculating price-based NV from home-market sales of comparable, merchandise, and (2) calculating CV profit. See id. at 19. Torrington disagrees with NSK; arguing first that the language of 19 U.S.C. § 1677(16) clearly provides that Commerce has discretionary authority to select among the categories of identical and similar merchandise to reach a satisfactory determination. See id. In other words, Commerce has the authority to make a satisfactory determination of what is encompassed by "foreign like product" and, therefore, it acted reasonably when it based CV profit on the sales of all foreign like products. See id. at 19-20.
Torrington also asserts that Commerce reasonably concluded that "foreign like product" can differ by context, that is, depending upon whether the dumping comparison is based on: (1) price-to-price, or (2) price-to-CV See id. at 20. First, Torrington notes that when there are adequate home-market sales made at above-cost prices of identical or similar merchandise, there is no need to determine profit, and the application of "foreign like product" turns to model-matching issues. See id.
Torrington also argues, inter alia, that, contrary to NSK's suggestion that the Court interpret the term "a foreign like product" of 19 U.S.C. § 1677b(e)(2)(A) in all contexts as referring to a singular class of identical merchandise or to a singular bearing family, the selection of the word "a" in the statute commonly means "any," and can be "applied to more than one individual object; whereas 'the' is an article which particularizes the.subject spoken of." Id. at 23 (quoting Allstate Ins. Co. v. Foster, 693 F. Supp. 886, 889 (D. Nev. 1988) (quoting, in turn, Black's Law Dictionary, 1,1324 (5th ed. 1979)). In addition, Torrington claims that judicial precedent supports construing the word "a" in a broader manner. See id. at 23-24. Consistent with the common meaning and judicial pre cedent, Torrington asserts that the Court should sustain Commerce's interpretation that "a foreign like product" can mean "any" such product and all such products combined for purposes of calculating CV profit under § 1677b(e)(2)(A). See id. at 25.
C. Analysis
In RHP Bearings Ltd. v. United States, 23 CIT 967, 83 F. Supp. 2d 1322 (1999), this Court upheld Commerce's CV profit methodology of using aggregate data of all foreign like products under consideration for NV as being consistent with the antidumping statute. See id. at 978, 83 F. Supp. 2d at 1336. Since Commerce's CV profit methodology and the parties' arguments at issue in this case are practically identical to those presented in RHP Bearings, the Court adheres to its reasoning in RHP Bearings. The Court, therefore, finds that Commerce's CV profit methodology is in accordance with law.
II. NSK's Zero-Value United States Transactions
NSK argues that in light oí NSK Ltd. v. United States, 115 F.3d 965, 975 (Fed. Cir. 1997), the Court should remand the matter to Commerce to exclude its zero-value transactions from their margin calculations. See NSK's Mem. at 28. NSK maintains that United States transactions át zero value, such as samples, do not constitute true sales and, therefore, should be excluded from the margin calculations pursuant to NSK. See id. The identical issue was decided by this Court in SKF USA Inc. v. United States, Slip Op. 99-56, 1999 WL 486537, *7 (June 29, 1999).
Torrington concedes that a remand may be necessary in light of NSK, but argues that further factual inquiry by Commerce is necessary to determine whether the zero-price transactions were truly without consideration. See Torrington's Resp. at 29. Torrington argues that only if the transactions are truly without consideration can they fall within NSK's exclusion. See id.
Commerce concedes that the case should be remanded to it to exclude the sample transactions for which NSK received no consideration from its United States sales databases. See Def.'s Mem. at 25.
Commerce is required to impose antidumping duties upon merchandise that "is being, or is likely to be, sold in the United States at less than its fair value." 19 U.S.C. § 1673(1) (1994). A zero-priced transaction does not qualify as a "sale" and, therefore, by definition cannot be included in Commerce's NV calculation. See NSK, 115 F.3d at 975 (holding "that the term 'sold' requires both a transfer of ownership to an unrelated party and consideration."). Thus, the distribution of AFBs for no consideration falls outside the purview of 19 U.S.C. § 1673. Consequently, the Court remands to Commerce to exclude any transactions that were not supported by consideration from NSK's United States sales database and to adjust the dumping margins accordingly.
III. Commerce's Exclusion of Inventory Carrying Costs in the CEP Offset When it Matched NSK's CEP Sales to CV
In the Final Results, Commerce "regard[ed] the inventory carrying costs [NSK] incurred in the home market, which are incurred prior to the sale, transfer, or shipment of the merchandise to the U.S. affiliate, as an expense incurred on behalf of the sale to the U.S. affiliate." 62 Fed. Reg. at 2124. Commerce did not consider this to reflect a commercial activity in the United States and, therefore, it did not deduct domestic inventory carrying costs from CEP for the Final Results. See id.
NSK contends that Commerce included inventory carrying costs in the CEP offset when matching CEP sales to NY but erroneously neglected to include such costs in the CEP offset when it matched CEP sales to CV See NSK's Mem. at 29. Commerce agrees with NSK. See Def.'s Mem. at 25.
Torrington disagrees, contending that the "rationale for an offsetting deduction has evaporated" because Commerce no longer deducts the costs at issue from the factory to the time of sale to the United States affiliate from the United States sale. Torrington Mem. at 32. NSK responds that in calculating the CEP offset, the statute compels Commerce to reduce NV '"by the amount of indirect selling expenses incurred in the country in which [NV] is determined on sales of the foreign like product,"' subject to the CEP offset. NSK's Reply Mem. at 3 (quoting 19 U.S.C. § 1677b(a)(7)(B)). Since the costs at issue constitute an indirect selling expense incurred in the home market on sales of the foreign like product, NSK asks the Court to disregard Torrington's argument as inconsistent with the statute. See id.
Title 19, United States Code, § 1677b(a)(l)(B) requires Commerce to establish NV to the extent practicable, at the same LOT as the EP or CEE When Commerce is unable to match United States sales with foreign market sales at the same LOT, an adjustment to NV should be made to account for the differences in price that result from the differences in LOT. See 19 U.S.C. § 1677b(a)(7)(A). When the data available does not provide an appropriate basis to grant an LOT adjustment under § 1677b(a)(7)(A), but NV is established at an LOT constituting a more advanced stage of distribution than the LOT of the CER the statute ensures a fair comparison between United States price and NV by reducing NV by what is known as the "CEP offset." See 19 US.C. § 1677b(a)(7)(B) (CEP offset is an adjustment that is made to NV when NV is being compared to CEP sales in the United States). Specifically, the CEP offset adjustment is made by reducing NV "by the amount of indirect selling expenses incurred in the country in which [NV] is determined on sales of the foreign like product," but this deduction may not exceed (i.e., it is "capped" by) the amount of the indirect selling expenses deducted in calculating CEE Id. Since the inventory carrying costs at issue constitute an indirect selling expense incurred in the home market on the sales of the foreign like product, the Court remands to Commerce to include the imputed inventory carrying costs in the calculation of CEP offset for NSK when matching CEP sales to CV See generally Notice of Final Determination of Sales at Less Than Fair Value: Static Random Access Memory Semiconductors From Taiwan, 63 Fed. Reg. 8909, 8915 (Feb. 23, 1998) (Commerce included inventory carrying costs in the CEP offset for CEP sales matched to price-based NVs and CV).
IV NSK's Affiliation With Its Supplier; Exhaustion of Administrative Remedies
NSK does not dispute that 19 U.S.C. § 1677(33) establishes a rebut-table presumption that NSK controls a supplier by virtue of the fact that NSK owns at least five percent of the supplier's equity. See NSK's Mem. at 33. NSK argues that it has rebutted the statutory presumption by placing facts on the record showing that "NSK is not legally or operationally in a position to exercise restraint or discretion over" its supplier. Id. NSK requests that the Court remand the issue to Commerce and instruct it to consider the evidence of NSK's lack of control of its supplier in order to rebut the presumption of affiliation. See id.
Commerce argues that NSK failed to exhaust its administrative remedies. See Def.'s Mem. at 25. In its preliminary analysis memorandum, Commerce stated that for purposes of calculating CV NSK had based its cost of manufacturing ("COM") on the transfer price of parts supplied by affiliates, but that Commerce adjusted COM so that it was based on the actual cost of the parts. See id. at 28. In its brief, NSK argued that the transfer prices fairly reflected market value, and that Commerce need not reject the transfer prices. See id. NSK also argued that its supplier was not in a position to provide favorable treatment to NSK, and contended that the supplier dealt with NSK at arm's length. See id. at 29. Despite its acknowledgment that NSK raised the supposed "affiliation" between it and its supplier in its cáse brief, Commerce maintains that NSK failed to raise the issue during the administrative process. See id. Torrington argues that Commerce reasonably determined that the transfer prices of NSK's supplier were not at arm's length. See Torring-ton's Resp. at 33-36.
It is a cardinal principle of administrative law that a court may not consider a party's arguments that were not made before the agency. See United States v. L.A. Tucker Truck Line, Inc., 344 U.S. 33, 36-37 (1952) ("We have recognized that orderly procedure and good administration require that objections to the proceedings of an administrative agency be made while it has opportunity for correction in order to raise issues reviewable by the courts."); Unemployment Compensation Comm'n of Alaska v. Aragon, 329 U.S. 143, 155 (1946) ("A reviewing court usurps the agency's function when it sets aside the administrative determination upon a ground not theretofore presented and deprives the [agency] of an opportunity to consider the matter, make its ruling, and state the reasons for its action."). In this case, however, there is no absolute requirement of exhaustion in the Court of International Trade. See Alhambra Foundry Co. v. United States, 12 CIT 343, 346-47, 685 F. Supp. 1252, 1255-56 (1988). Section 2637(d) of Title 28 of the United States Code directs that "the Court of International Trade shall, where appropriate, require the exhaustion of administrative remedies." By its use of the phrase "where appropriate," Congress vested discretion in the Court to determine the circumstances under which it shall require the exhaustion of administrative remedies. See Cemex, S.A. v. United States, 133 F.3d 897, 905 (Fed. Cir. 1998). "[E]ach exercise of judicial discretion in not requiring litigants to exhaust administrative remedies" has been characterized as "'an exception to the doctrine of exhaustion.'" Alhambra Foundry, 12 CIT at 347, 685 F. Supp. at 1256 (citing Timken Co. v. United States, 10 CIT 86, 93, 630 F. Supp. 1327, 1334 (1986)).
Here, NSK has exhausted its administrative remedies. As Commerce acknowledges, NSK brought forth the issue of affiliation in its case brief following Commerce's preliminary analysis memorandum. See Def.'s Mem. at 28. Relying upon its argument that NSK failed to exhaust its administrative remedies, Commerce did not address the merits of the issue in its brief to the Court. Accordingly, the Court remands this issue to Commerce for reconsideration.
Y Commerce's Inclusion of NTN's Home-Market Alleged Sample Sales and Sales with High Profit Levels in the Home-Market Database; Commerce's Inclusion of a Particular Ball Bearing Model in Koyo's Home-Market Database and its Finding Regarding Foreign Like Product
A. Background
Commerce is required to base its NV calculation upon "the price at which the foreign like product is first sold in the ordinary course of trade." 19 U.S.C. § 1677b(a)(l)(B)(i). Analogously, CV must be calculated using "amounts incurred for profits, in connection with the production and sale of a foreign like product, in the ordinary course of trade, for consumption in the foreign country 19 U.S.C. § 1677b(e)(2)(A). NTN contended during the review that Commerce, in calculating NY should have excluded sample sales and sales with high profit levels because they were outside of the ordinary course of trade. See Final Results, 62 Fed. Reg. at 2123. Commerce rejected NTN's contention, explaining as follows:
We have determined that NTN's characterization of its reported data is not substantiated by the administrative record. NTN's sales information merely identifies certain sales as home[-]market sample sales and other sales with "abnormally high profits" as not in the ordinary course of trade. NTN examined only quantify and frequency of sales in determining which sales to report as outside the ordinary course of trade. NTN's supplemental questionnaire response provided no additional information; it simply identified the sales as having been made outside the ordinary course of trade. [T]he fact that a respondent identified sales as sample and prototype sales does not necessarily render such sales outside the ordi nary course of trade. Verification of the designation of certain sales as samples merely proves that the respondent identified sales recorded as samples in its own records. Such evidence does not indicate that such sales were made outside the ordinary course of trade for purposes of calculating NV in these reviews. In addition, [Commerce] noted at the home[-]market verification of NTN's data that the firm was unable to substantiate that all sales coded as samples were sample sales.
Id. at 2123-24.
Koyo alleged that Commerce matched United States sales of one particular model to a home-market model which it sold out of the ordinary course of trade and which does not qualify as a foreign like product as defined by the antidumping statute. See id. at 2124. Koyo contended that the home-market model: (1) is produced to unusual product specifications; (2) was sold at aberrational prices; and (3) is not a foreign like product because it is "not identical in physical characteristics and is not like the United States model being compared to it because of a different end-use." Id.
Commerce rejected Koyo's contentions, stating the following:
In spite of Koyo's arguments, this model and the respective bearing family meet the matching criteria as outlined in [Commere's] questionnaire. Also, the difference-of-merchandise adjustment for the family to which we matched the U.S. model does not exceed plus or minus 20 percent of the U.S. model's COM. Koyo has not demonstrated how the model's costs can meet our 20-percent test yet be so dissimilar. Moreover, sales of models at high prices is insufficient to establish a sale outside the ordinary course of trade.
Id.
B. Contentions of the Parties
NTN argues that Commerce's failure to exclude NTN's sales with unusually high profit levels from the NV and CV calculations, despite NTN providing sufficient evidence on record indicating that these sales were outside of the ordinary course of trade, was inconsistent with 19 U.S.C. § 1677b(a)(l)(B), the SAA and the regulation 19 C.F.R. § 351.102(h), all of which clearly instruct Commerce to make such an exclusion. See NTN's Mem. Supp. Mot. J. Agency R. ("NTN's Mem.") at 8-9. NTN also argues that Commerce erred in including its home-market sample sales in the calculation of NV because facts on the record support that the sales were made outside of the ordinary course of trade. See id. at 10-11. NTN, therefore, requests that its sales with high profit levels and samples sales he disregarded in the calculation of NV See id.
Koyo argues that Commerce should have excluded sales of a particular ball bearing model, "Model X," from the database and margin calculation because the transactions in which Model X was sold were outside the ordinary course of trade as defined by the antidumping statute and the SAA. See Koyo's Mem. E & A. Supp. Mot. J. Agency R. at 23-24. Koyo contends that in determining whether transactions are outside the ordinary course of trade, Commerce should have considered factors other than price at which the merchandise was sold, such as the fact that Model X is produced according to unusual product specifications. See id. at 25.
Koyo also maintains that even if sales of Model X are not outside the ordinary course of trade, there is no basis for concluding that these sales provide an acceptable match to United States sales. See id. at 29. Koyo asserts that Model X falls within none of the categories of a "foreign libe product" and should have not been matched to United States sales. See id. at 30. Koyo again criticizes Commerce's reliance upon the single factor of cost in making its determination. See id.
Commerce alleges that it properly exercised its discretion in rejecting NTN's argument that Commerce must disregard sales with high profit levels as sales not in the ordinary course of trade because "NTN provided no information, other than numerical profit amounts, to support its claim," and a "mere claim that certain sales were 'sales with abnormally high profits' does not constitute sufficient evidence to exclude them upon the basis that they are outside of the ordinary course of trade." Def.'s Mem. at 47. Commerce further asserts that the Court should reject NTN's request to exclude samples for which it received no consideration on the basis that the sales were outside the ordinary course of trade because NTN failed to provide sufficient evidence to support its claim. See id. at 49-50. Although NTN cites NSK for the proposition that "sample sales are commonly considered to be outside the ordinary course of trade," Commerce contends that NSK is not applicable because that case did not address NTN's claim regarding sample sales that are outside the ordinary course of trade, but rather addressed sample sales that are unsupported by consideration. See id. at 52.
Commerce also contends that it properly rejected Koyo's arguments. Commerce argues that by referencing Final Results of Antidumping Administrative Reviews; Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan and Tapered Roller Bearings, Four. Inches or Less in Outside Diameter, and Components Thereof, From Japan, 58 Fed. Reg. 64,720 (Dec. 9, 1993), it explained that it based its determination on the standard set forth in that review, namely, that Commerce accounts for all the circumstances particular to the relevant sales rather than one factor in isolation. See Def.'s Mem. at 38. Commerce rejects Koyo's contention that the use of certain materials to make the model as well as the use to which Model X is put render the bearing unusual because Koyo failed to show that Model X does not meet Commerce's model match criteria for ball bearings or that Model X is not used as a ball bearing. See id. at 39. Commerce also rejects Koyo's characterization of its sales as aberrant based on their price because high price alone is not sufficient to exclude sales that would otherwise be within the ordinary course of trade. See id. at 40.
Commerce further contends that it properly determined that Model X was a foreign like product because the statute requires that "if foreign market sales of 'similar' merchandise are not available for comparison, Commerce must select foreign market sales of merchandise of the same general class or kind as the merchandise being compared." Id. at 41. Commerce argues that it was granted broad discretion in determining what constitutes similar merchandise for purposes of comparison and exercised this discretion in two ways. See id. First, Commerce developed a model-matching criteria for the purpose of identifying similar merchandise where there were sales of identical merchandise in the foreign market, and it used sales of the most similar bearing family when identical matches could not he found. See id. at 42. Second, Commerce applied the 20 percent difmer test to identify the most similar merchandise. See id. The difmer test required Commerce to consider whether "the difference between the variable costs of manufacturing of the U.S. and foreign market merchandise is greater than 20 percent of the variable cost of the U.S. merchandise," and to disregard sales of foreign market merchandise failing this test. Id. at 42-43. Commerce "relies upon variable costs of manufacturing to indicate the impact of physical differences on the costs," and Commerce assumes "that the fixed costs of manufacturing the United States merchandise and the foreign market merchandise are not affected by the physical differences of the merchandise and that the additional variable costs that are incurred due to physical differences are fully reflected in the price of the merchandise." Id. at 44.
Commerce argues that the model-matching criteria it used, and that Koyo criticizes, properly account for physical characteristics such as bearing types and precision grades and, when identical matches do not exist, Commerce matches the United States sales to a bearing model family. See id. at 45. Commerce maintains that even when costs are similar, it will consider bearing models to be comparable only if they meet the matching criteria. See id. at 46. Here, Commerce claims that it knew that the ball bearing model was comparable since "it shared the same eight pertinent characteristics as the U.S. bearing and all the other bearings within the family." Id. at 45-46.
Torrington claims that Commerce properly rejected NTN's request to exclude high profit levels sales from the NV and CV calculation and sample sales from the NV calculation because: 1) a higher profit on a particular sale does not establish that a sale is outside the ordinary course of trade, and (2) NTN failed to show that the contested sales were not in the ordinaiy course of trade. See Torrington's Resp. at 37-39.
Torrington also claims that Koyo failed to carry the burden of establishing that the sales at issue were outside the ordinary course of trade. See id. at 12. Torrington maintains that "the product matched the criteria in Commerce's questionnaire and was reported as a foreign like product by Koyo." Id. at 13.
C. Analysis
The term "ordinary course of trade" is defined as:
the conditions and practices which, for a reasonable time prior to the exportation of the subject merchandise, have been normal in the trade under consideration with respect to merchandise of the same class or kind. [Commerce] shall consider the following sales and transactions, among others, to be outside the ordinary course of trade:
(A) Sales disregarded under section 1677b(b)(l) of this title.
(B) Transactions disregarded under section 1677b(f)(2) of this title.
19 U.S.C. § 1677(15) (emphasis supplied). Section 1677b(b)(l) deals with below-cost sales. Section 1677b(f)(2) deals with sales to affiliated persons. Therefore, Commerce must consider below-cost sales and sales between related parties as sales outside the ordinary course of trade. Although § 1677b(b)(l)'s below-cost sales and § 1677b(f)(2)'s affiliated-party transactions are specifically designated as outside the ordinary course of trade, the "among others" language of § 1677(15) clearly indicates that other types of sales could be excluded as being outside the ordinary course of trade. Commerce "may consider sales or transactions to be outside the ordinary course of trade if [Commerce] determines, based on an evaluation of all of the circumstances particular to the sales in question, that such sales or transactions have characteristics that are extraordinary for the market in question." 19 C.F.R. § 351.102(b) (emphasis supplied). Examples that could be considered outside the ordinary course of trade include: (1) off-quality merchandise; (2) merchandise produced according to unusual product specifications; (3) merchandise sold at aberrational prices or with abnormally high profits; (4) merchandise sold pursuant to unusual terms of sale; or (5) merchandise sold to an affiliated party not at an arm's-length transaction. See 19 C.F.R. § 351.102(b).
Determining whether a sale or transaction is outside the ordinary course of trade is a question of fact. In making this determination, Commerce considers not just "one factor taken in isolation but rather all the circumstances particular to the sales in question." Murata Mfg. Co., Ltd. v. United States, 17 CIT 259, 264, 820 F. Supp. 603, 607 (1993) (citation omitted). Commerce's methodology for making this determination is codified in section 351.102(b) of Commerce's regulations. See 19 C.F.R. § 351.102(b); see also Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, Romania, Sweden, and the United Kingdom; Final Results of Antidumping Duty Administrative Review, 64 Fed. Reg. 35,590, 35,620 (July 1, 1999). Thus, Commerce has the discretion to interpret § 1677(15) to determine which sales are outside the ordinary course of trade, such as sales involving aberrational prices and abnormally high profit levels.
Section 351.102(b) of Title 19 of the Code of Federal Regulations effectively interprets the statutory phrase "outside the ordinary course of trade." 19 U.S.C. § 1677(15). In resolving questions of statutory interpretation, the Chevron test requires this Court first to determine whether the statute is clear on its face. If the language of the statute is clear, then this Court must defer to Congressional intent. See Chevron, 467 U.S. at 842-43. If the statute is unclear, however, then the question for the Court is whether the agency's answer is based on a permissible construction of the statute. See id. at 843; see also Corning Glass Works v. United States Int'l Trade Comm'n, 799 F.2d 1559, 1565 (Fed. Cir. 1986) (finding the agency's definitions must be "reasonable in light of the language, policies and legislative history of the statute").
Here, the statutory provision defining what is considered outside the ordinary course of trade is unclear. While the statute specifically defines "ordinary course of trade," it provides little assistance in determining what is outside the scope of that definition. The statute merely identifies a non-exhaustive list of situations in which sales or transactions are to be considered outside the "ordinary course of trade." This Court finds the statute is ambiguous as to what constitutes a sale outside the ordinary course of trade. What Congress intended to exclude from the "ordinary course of trade" is also not immediately clear from the statute's legislative history. In the SAA, Congress stated that in addition to the specific types of transactions to be considered outside the ordinary course of trade, "Commerce may consider other types of sales or transactions to be outside the ordinary course of trade when such sales or transactions have characteristics that are not ordinary as compared to sales or transactions generally made in the same market." H.R. DOC. No. 103-826, vol. 1, at 834. Congress also stated that as the statute does not provide an exhaustive list of situations which qualify as being outside the ordinary course of trade, "the Administration intends that Commerce will interpret section 771(15) [19 U.S.C. § 1677(15)] in a manner which will avoid basing normal value on sales which are extraordinary for the market in question." Id. This Court finds the legislative history is also ambiguous as to what constitutes a sale outside the ordinary course of trade.
Because neither the statutory language nor the legislative history explicitly establishes what is considered to be outside the "ordinary course of trade," the Court assesses the agency's interpretation of the provision to determine whether the agency's interpretation is reasonable and in accordance with the legislative purpose. See Chevron, 467 U.S. at 843. In determining whether Commerce's interpretation is reasonable, the Court considers, among other factors, the express terms of the provisions at issue, the objectives of those provisions, and the objective of the antidumping scheme as a whole. The purpose of the ordinary course of trade provision is "to prevent dumping margins from being based on sales which are not representative" of the home market. See Monsanto Co. v. United States, 12 CIT 937, 940, 698 F. Supp. 275, 278 (1988). Commerce's methodology for deciding when sales are outside the "ordinary course of trade" has been to examine the totality of the circumstances surrounding the sale or transaction in question to determine whether the sale or transaction is extraordinary. Commerce's regulation specifically states, "sales or transactions [may be considered] outside the ordinary course of trade if [,]*** based on an evaluation of all of the circumstances particular to the sales in question, [] such sales or transactions have characteristics that are extraordinary for the market in question." 19 C.F.R. § 351.102(b). Commerce's methodology allows it, on a case-by-case basis, to examine all conditions and practices which may be considered ordinary in the trade under consideration and to determine which sales or transactions are, therefore, outside the ordinary course of trade. Because such a methodology gives Commerce wide discretion in deciding under what circumstances sales or transactions are outside the ordinary course of trade and circumstances differ in each case, this Court finds that, in light of the statute's legislative purpose, Commerce's interpretation of the statute and exercise of its discretion by requiring additional evidence demonstrating that sales with high profit levels were outside of the ordinary course of trade before excluding such sales from the NV and CV calculations was reasonable.
NTN provided Commerce with insufficient evidence to show that Commerce should have excluded sales with abnormally high profits. The mere fact of abnormally high profits is not enough to put these sales outside of the ordinary course of trade. The presence of profits higher than those of other sales is merely an element for Commerce to take into consideration and does not necessarily place the sales outside of the ordinary course of trade; nor does it strip Commerce of the right to exercise its discretion and conclude that sales with abnormally high profits lack the characteristics necessary to place them outside the ordinary course of trade.
Consequently, because Commerce's interpretation and application of the statute was reasonable and the record reflects that NTN did not provide sufficient additional evidence that supports its claim that the disputed sales were extraordinary for the market in question, Commerce was justified in its decision to include NTN's sales with unusually high profit levels in the NV and CV calculations. The Court also finds that Commerce rightfully included NTN's home-market "sample" sales in the NV calculation because NTN failed to provide sufficient additional evidence that those sales were outside the ordinary course of trade.
By contrast, Commerce's determinations with respect to Koyo must be reconsidered. Koyo provided evidence in support of its contention that Model X was outside the ordinary course of trade in addition to evidence that sales of Model X were at aberrational prices. In addition to evidence of price, Koyo presented evidence of quantity, product specifications requiring special materials, standards and processes required to produce the model, particular use of the model, and packaging requirements. There is no indication that Commerce even considered these factors; in the Final Results, Commerce simply stated that "Koyo has not demonstrated how the model's costs can meet our 20-percent test yet he so dissimilar" and that "sales of models at high prices [are] insufficient to establish a sale outside the ordinary course of trade." 62 Fed. Reg. at 2124. The Court, therefore, remands this issue to Commerce, instructing it to reconsider its determination that Model X was outside the ordinary course of trade and to articulate a clear basis for any conclusion it reaches.
The Court also remands Commerce's determination that Koyo's home-market ball bearing could be compared to United States sales because it is a foreign like product. Koyo does not contend that Model X failed the model match methodology and the difmer test. Commerce applied them here and found the merchandise comparable; however, Commerce did not indicate whether it made its determination under § 1677(16)(B) or (C). Accordingly, the Court remands this issue to Commerce. Commerce is directed to articulate the basis for its determination and demonstrate how each element of the applicable subsection is satisfied.
VI. Commerce's Determination of the Level of Trade for NTN and Denial of a Level of Trade Adjustment for NTN and NSK
A. Background
1. Statutory Provisions
Under pre-URAA antidumping law, there were no specific provisions providing for an adjustment to foreign market value ("FMV") for any difference in LOT between United States price (now EP or CEP) and FMV Commerce, however, promulgated a regulation stating that: (1) it normally would calculate FMV and United States price based on sales at the same commercial LOT; and (2) if such sales were insufficient to permit an adequate comparison, Commerce would calculate FMV based on such or similar sales at the most comparable LOT in the United States market, making appropriate adjustments for differences affecting price comparability. See 19 C.F.R. § 353.58 (1994); see generally NEC Home Elecs., Ltd., 54 F.3d at 739 (discussing 19 C.F.R. § 353.58).
The URAA amended the antidumping statute to provide for a specific provision regarding adjustments to NV for differences in LOTs. Instead of FMV see 19 U.S.C. § 1677b (1988), the statute now provides for NV see URAA § 233(a)(1), 108 Stat. at 4898 (replacing the term FMV with NV), which shall be based on:
the price at which the foreign like product is first sold (or, in the absence of a sale, offered for sale) for consumption in the exporting country, in the usual commercial quantities and in the ordinary course of trade and, to the extent practicable, at the same level of trade as the export price or constructed export price.
19 U.S.C. § 1677b(a)(l)(B)(i) (emphasis added). The statute also provides for an LOT adjustment to NV under the following conditions:
The price described in [§ 1677b(a)(l)(B), i.e., NV1 shall also be increased or decreased to make due allowance for any difference (or lack thereof) between the export price or constructed export price and the price described in [§ 1677b(a)(l)(B)] (other than a difference for which allowance is otherwise made under [§ 1677b(a)]) that is shown to be wholly or partly due to a difference in level of trade between the export price or constructed export price and normal value, if the difference in level of trade—
(i) involves the performance of different selling activities; and
(ii) is demonstrated to affect price comparability, based on a pattern of consistent price differences between sales at different levels of trade in the country in which normal value is determined.
In a case described in the preceding sentence, the amount of the adjustment shall be based on the price differences between the two levels of trade in the country in which normal value is determined.
19 U.S.C. § 1677b(a)(7)(A). In sum, to qualify for an LOT adjustment to NV a party has the burden to show that the following two conditions have been satisfied: (1) the difference in LOT involves the performance of different selling activities; and (2) the difference affects price comparability. See SAA at 829 (stating that "if a respondent claims [an LOT] adjustment to decrease normal value, as with all adjustments which benefit a responding firm, the respondent must demonstrate the appropriateness of such adjustment"); see also NSK Ltd. v. United States, 190 F.3d 1321, 1330 (Fed. Cir. 1999) (noting that a respondent bears the burden of establishing entitlement to an LOT adjustment).
When the available data does not provide an appropriate basis to grant an LOT adjustment, but NV is established at an LOT constituting a more advanced stage of distribution than the LOT of the CER the statute ensures a fair comparison by providing for an additional adjustment to NV known as the "CEP offset." See 19 U.S.C. § 1677b(a)(7)(B). Specifically, the CEP offset provides that NV "shall he reduced by the amount of indirect selling expenses incurred in the country in which normal value is determined on sales of the foreign like product but not more than the amount of such expenses for which a deduction is made [from CEP] under [19 U.S.C. § 1677a(d)(l)(D)]." 19 U.S.C. § 1677b(a)(7)(B).
2. Commerce's LOT Methodology
During this review, Commerce applied the following LOT methodology. See Final Results, 62 Fed. Reg. at 2105; Preliminary Results, 61 Fed. Reg. at 35,718. In accordance with § 1677b(a)(l)(B)(i), Commerce first calculates NV based on exporting-country (or third-country) sales, to the extent practicable, at the same LOT as the United States (EP and CEP) sales. See Final Results, 62 Fed. Reg. at 2105. When Commerce is unable to find comparison sales at the same LOT as the EP or CEP sales, it compares such United States sales to sales at a different LOT in the comparison (home or third-country) market. See id.
With respect to the LOT methodology for CEP sales, Commerce first calculates CEP by making adjustments to. its starting price under 19 U.S.C. § 1677a(d) (1994), but before making any adjustments under § 1677a(c). See id. Commerce reasoned that the § 1677a(d) "adjustments are necessary in order to arrive at, as the term CEP makes clear, a 'constructed' export price," that is, it is intended to reflect as closely as possible a price corresponding to an EP between non-affiliated exporters and importers. Id. at 2107. Once the starting price is adjusted under § 1677a(d), Commerce has a "hypothetical transaction price that would likely have been charged to the first purchaser in the United States had that purchaser been unaffiliated to the exporter." Def.'s Mem. at 49-50.
The next step in its LOT analysis is to determine whether sales in the home market exist that are at the same LOT as the adjusted CEP sales. In making such a determination, Commerce examines whether the home-market sales are "at different stages in the marketing process than the export price or CER" that is, Commerce reviews and compares the distribution systems in the home market and U.S. export markets, "including selling functions, class of customer, and the level of selling expenses for each type of sale." Final Results, 62 Fed. Reg. at 2105.
If the adjusted CEP sales and the NV sales are at a different LOT, Commerce then considers whether an LOT adjustment is appropriate. In determining the propriety of an adjustment to NV Commerce determines whether two conditions specified in § 1677b(a)(7)(A) are satisfied: (1) "there must be differences between the actual selling activities performed by the exporter at the level of trade of the U.S. sale and the level of trade of the comparison market sales used to determine NV"; and (2) "the differences must affect price comparability as evidenced by a pattern of consistent price differences between sales at the different levels of trade in the market in which NV is determined." Preliminary Results, 61 Fed. Reg. at 35,718. If there is no pattern of consistent price differences, no adjustment is made. Finally, for CEP sales, if NV is established at an LOT which constitutes a more advanced stage of distribution than the CEP LOT, and if there is no appropriate basis for granting an LOT adjustment, Commerce makes a CEP offset to NV under § 1677b(a)(7)(B). See id.
B. NSK's Issues
1. NSK Failed to Exhaust Its Administrative Remedies
Commerce maintains that NSK failed to raise the issue of Commerce's failure to grant a partial LOT adjustment for NSK's home-market level 2 sales. See Def.'s Mem. at 74-75. Commerce contends that NSK had ample opportunity to raise this issue, and it would be unjust to require Commerce to waste public resources in addressing it. See id. at 76.
NSK maintains that it raised the issue of the LOT adjustment in its General Issues Case Brief, its original response to Commerce and at the Commerce General Issues hearing. See NSK's Reply at 14. NSK maintains that although it may not have clearly expressed its argument in those submissions, it clearly raised the issue of appropriate LOT matches and adjustments before Commerce and that the issue is ripe for review by the Court. See id. at 15.
Commerce is not contending that NSK altogether failed to raise the issue of the LOT adjustment; rather, Commerce takes issue with NSK's failure to raise the particular matter of a partial, price-based LOT adjustment. Regardless of whether NSK failed to properly raise the issue during the administrative process, the Court exercises its discretion to rule on the issue since it has been resolved in prior decisions.
2. Commerce Properly Denied a Partial, Price-based LOT Adjustment to NV for NSK's CEP sales
NSK agrees that Commerce properly used the CEP as adjusted for § 1677a(d) expenses prior to its LOT analysis. NSK also argues that Commerce should have granted it a "partial," price-based LOT adjustment. See NSK's Mem. at 27.
NSK first notes that Commerce found two LOTs in the home market, one corresponding to original equipment manufacturers ("OEM") sales and the other to after market ("AM") sales. See id. at 23. NSK also agrees that when Commerce matched CEP sales to some home-market sales, Commerce correctly applied a CEP offset because there was no basis for quantifying a price-based LOT adjustment for CEP to certain NV matches. See id. Further, NSK notes that Commerce correctly concluded "that there is no record information that would allow Commerce to quantify the downward price adjustment to adjust fully [one home-market LOT] to the CEP [LOT]." Id. at 26. Nevertheless, NSK disagrees with Commerce's decision to apply a CEP offset when Commerce matched CEP sales to other home-market sales. In these situations, NSK argues that § 1677b(a)(7)(A) and the SAA direct Commerce to calculate a partial, price-based LOT adjustment to NV for CEP sales mea sured by the price differences between the home-market LOTs. See id. at 26.
NSK notes that the statute directs Commerce to adjust NY for any difference between CEP and NV '"wholly or partly'" due to a difference in LOT between CEP and NV Id. (quoting § 1677b(a)(7)(A)). NSK also notes that § 1677b(a)(7)(B) indicates a CEP offset should only be used in the total absence of price-based LOT adjustments. See id. Accordingly, NSK claims that Commerce's failure to calculate a price-based LOT adjustment that partly accounted for such LOT differences violated the plain language of § 1677b(a)(7)(A). See id. at 27.
Commerce argues that it properly denied a partial LOT adjustment and applied a CEP offset to NV for all of NSK's CEP transactions. See Def.'s Mem. at 76. Contrary to NSK's reading of § 1677b(a)(7)(A), Commerce asserts that the statute does not provide for LOT adjustments "other than those based upon price differences in the home market between the [LOT] of the CEP and the [LOT] of the NV" Id. at 80. Commerce asserts that the statute's use of the term "partly" refers to the situation "where there is a home[-]market pattern of price differences between the [LOT] of the CEP and the [LOT] of the NV Commerce shall adjust only for that portion of the price difference which is associated with the difference in level of trade." Id. (emphasis in original). Commerce maintains that "there is no indication that the pattern of price differences between two levels of trade in the home market, absent a CEP level of trade in the home market, can justify a level of trade adjustment — be it 'whole' or 'partial.'" Id. Commerce, therefore, asserts that since it reasonably interpreted § 1677b(a)(7)(A), the Court should sustain its denial of an LOT adjustment and grant of a CEP offset for all of NSK's CEP transactions. See Def.'s Mem. at 82.
Torrington generally agrees with Commerce's positions, emphasizing that Commerce reasonably interpreted § 1677b(a)(7)(A) as not providing for a "partial" LOT adjustment as contended by NSK. See Torring-ton's Resp. at 28. Torrington further argues that even if § 1677b(a)(7)(A) permits a partial LOT adjustment, NSK nevertheless failed to submit record evidence to show entitlement to. such an adjustment. See id.
The Court has already resolved this issue in NTN Bearing, 24 CIT at 413, 104 F. Supp. 2d at 127-31. As this Court decided in NTN Bearing, Commerce's decision to deny NSK a partial, price-based LOT adjustment measured by price difference between home-market OEM and AM sales was in accordance with law. There is no indication in § 1677b(a)(7)(A) that the pattern of price differences between two LOTs in the home market, absent a CEP LOT in the home market, justifies an LOT adjustment. Rather, Commerce's interpretation of § 1677b(a)(7)(A) as only providing an LOT adjustment based upon price differences in the home market between the CEP LOT and the NV LOT was reasonable, especially in light of the existence of the CEP offset to cover situations such as those at issue here.
C. NTN's Issues
1. Contentions of the Parties
NTN contends that Commerce improperly denied a price-based LOT adjustment under § 1677b(a)(7)(A) for CEP sales made in the United States market at an LOT different from the home-market sales. See NTN's Mem. at 11. In particular, NTN argues, inter alia, that Commerce incorrectly determined NTN's CEP LOT because the agency failed to use the sale to the first unaffiliated purchaser in the United States to determine NTN's CEP LOT. See id. at 13. NTN requests that the Court remand the LOT issue to Commerce to determine NTN's CEP LOTs prior to any § 1677a(d) deductions and, afterwards, to grant NTN a price-based LOT adjustment for its CEP sales. See id. at 13.
Commerce, in turn, argues that it properly determined the LOT for NTN's CEP sales after deducting expenses and profit from the price to the first unaffiliated purchaser in the United States pursuant to § 1677a(d) because § 1677b(a)(7)(A), which provides for an LOT adjustment, requires Commerce to compare CEE not the "unadjusted" starting price of CEE with NV See Def.'s Mem. at 52-70. Commerce notes CEP is defined in § 1677a(b) as the price at which the subject merchandise is first sold (or agreed to be sold) in the United States as "adjusted" under § 1677a(d). See id. at 56. According to Commerce, the adjusted CEP price is to be compared to prices in the home market based on the same LOT whenever it is practicable; when it is not practicable and the LOT difference affects price comparability, Commerce makes an LOT adjustment. See id. at 59-60. Commerce makes a CEP offset when "Commerce is not able to quantify price differences between the CEP level of trade and the level of trade of the comparison sales, and if NV is established at a more advanced state of distribution than the CEP level of trade." Id. at 60. If the CEP price is not adjusted before it is compared under the approach advocated by NTN, "there will always be substantial deductions from the resale prices in the United States (because they are mandatory)," but they "will be compared to resale prices in the home market from which virtually [there will] never be any equivalent deductions," thus creating a substantial imbalance and a skewed comparison between NV and CEE Id. at 64 (emphasis in the original).
Commerce claims that it properly denied an LOT adjustment for NTN's CEP sales because NTN failed to establish its entitlement to an LOT adjustment. Commerce was unable to calculate an LOT adjustment because "NTN did not have a level of trade equivalent to the CEP level of trade in the home market," making it impossible to quantify the difference in price between the CEP LOT and the home-market LOT. Id. at 86. Commerce maintains that the Court should uphold its refusal to grant to NTN an LOT adjustment. See id.
Torrington generally agrees with Commerce's positions, emphasizing that: (1) Commerce correctly made § 1677a(d) adjustments to the starting price of CEP prior to determining an LOT for NTN's CEP sales; and (2) properly denied an LOT adjustment for NTN's CEP sales. See Tor-rington's Resp. at 39-48. Accordingly, Torrington contends that this Court should not disturb Commerce's reasonable interpretation of the statute as applied to .the record evidence. See id.
2. Analysis
In Micron Tech., Inc. v. United States, 243 F.3d 1301 (Fed. Cir. 2001), the Court of Appeals for the Federal Circuit ("CAFC") held that the plain text of the antidumping statute and the SAA require Commerce to deduct the expenses enumerated under § 1677a(d) before making the LOT comparison. The CAFC examined §1677b(a)(l)(B)(i), which provides that Commerce must establish NV "to the extent practicable, at the same level of trade as the export price or [CEP]," and § 1677a(b), which defines CEP as "the price at which the subject merchandise is first sold (or agreed to be sold) in the United States * as adjusted under subsections (c) and (d) of this section." (Emphasis supplied). The CAFC concluded that "[r]ead together, these two provisions show that Commerce is required to deduct the subsection (d) expenses from the starting price in the United States before making the level of trade comparison." Micron Tech., Inc., 243 F.3d at 1315. The court further stated that this conclusion is mandated by the SAA, which states that "'to the extent practicable, [Commerce should] establish [NV] based on home[-]market (or third[-]country) sales at the same level of trade as the constructed export price or the starting price for the export price.'" Id. (citing SAA at 829).
Thus, the Court finds that Commerce properly made § 1677a(d) adjustments to NTN's starting price in order to arrive at CEP and make its LOT determination. The Court also finds that Commerce's decision to deny NTN an LOT adjustment is supported by substantial evidence. Section 1677b(a)(7)(A) permits Commerce to make an LOT adjustment "if the difference in level of trade involves the performance of different selling activities [] and is demonstrated to affect price comparability, based on a pattern of consistent price differences between sales at different levels of trade in the country in which normal value is determined." With respect to CEP sales, Commerce found that the same LOT as that of the CEP for merchandise under review did not exist for any respondent in the home market; therefore, Commerce was unable to "determine whether there was a pattern of consistent price differences between the [LOTs] based on respondent's [home-market] sales of merchandise under review." See Final Results, 62 Fed. Reg. at 2106.
Commerce looked to alternative methods for calculating LOT adjustments in accordance with the SAA. See id. In particular, Commerce noted that the SAA states:
"if information on the same product and company is not available, the [LOT] adjustment may also be based on sales of other products by the same company. In the absence of any sales, including those in recent time periods, to different levels of trade by the exporter or producer under investigation, Commerce may further consider the selling expenses of other producers in the foreign market for the same product or other products."
Id. (quoting SAA at 830). Commerce did not have the information that. would have supported the use of these alternative methods. See id. Consequently, with respect to CEP sales which Commerce was unable to quantify an LOT adjustment, it granted a CEP offset to respondents, including NTN, where the home-market sales were at a more advanced LOT than the sales to the United States, in accordance with 19 U.S.C. § 1677b(a)(7)(B). See id. In sum, Commerce acted well within the directive of the statute in denying the LOT adjustment and granting a CEP offset instead. See 19 U.S.C. § 1677b(a)(7).
VII. Commerce's Recalculation of NTN's Home-Market and United States Indirect Selling Expenses Without Regard to Level of Trade
A. Background
In its preliminary calculations, Commerce had calculated NTN's United States indirect selling expenses without regard to LOTs. See Final Results, 62 Fed. Reg. at 2105. NTN argued that Commerce should have recalculated NTN's United States selling expenses to reflect its reported indirect selling expense allocations based on LOT. See id. Tor-rington, in turn, contended that Commerce should reject NTN's indirect selling expense allocations based on LOT because they bear no relationship to the way in which NTN incurs the expenses. See id.
Commerce responded that in three prior reviews it determined that NTN's methodology for allocating its indirect selling expenses based on LOTs did not bear any relationship to the manner in which NTN incurred these United States selling expenses and its methodology led to distorted allocations. See id. Commerce noted that the court upheld its methodology in NTN Bearing Corp. of Am. v. United States ("NTN"), 19 CIT 1221, 1233-34, 905 F. Supp. 1083, 1094-95 (1995). See id. Commerce "found that the allocations NTN calculated according to levels of trade were misplaced and that it could not conclusively demonstrate that its [indirect selling expenses] vary across levels of trade." Id. Because Commerce found during this POR that NTN "did not provide sufficient evidence demonstrating that its selling expenses are attributable to levels of trade," the agency recalculated NTN's United States indirect selling expenses to represent such selling expenses for all United States sales. Id.
B. Contentions of the Parties
NTN contends that Commerce's decision to reallocate NTN's indirect selling expenses violates its mandate to administer the antidumping laws. See NTN's Reply at 14. NTN notes that Commerce has accepted NTN's methodology of allocating its United States indirect selling expenses based on LOT in previous reviews and even stated that NTN's '"methodology prevents, rather than creates, certain distortions.'" Id. at 13 (quoting Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan; Final Results of Antidumping Duty Administrative Reviews and Revocation in Part of an Antidumping Finding, 61 Fed. Reg. 57,629, 57,636 (Nov. 7, 1996)). Accordingly, NTN requests that the Court remand the matter to Commerce and instruct it to recalculate NTN's margins by using NTN's reported indirect selling expense LOT allocations. See id. at 14.
Commerce responds that there is no evidence of quantitative analysis tying the allocation method to the expenses. See Def.'s Mem. at 88. Commerce asserts that NTN only quantified the allocation itself and, therefore, the Court should sustain the agency's recalculation of NTN's United States indirect selling expenses. See id.
Torrington supports Commerce and argues that NTN has not distinguished the current review from previous reviews in which the Court affirmed Commerce's recalculation of NTN's indirect selling expenses without regard to LOT. See Torrington's Resp. at 49-50.
C. Analysis
The Court disagrees with NTN that it adequately supported its LOT adjustment claim for its reported United States indirect selling expenses. Although NTN purports to show that it incurred different selling expenses at different trade levels, the evidence to which it points does not show that its allocation methodology reasonably quantifies the United States indirect selling expenses incurred at different LOTs. See NTN Bearing, 24 CIT at 414,104 F. Supp. 2d at 131-33; NTN, 19 CIT at 1234, 905 F. Supp. at 1095. Given that NTN had the burden before Commerce to establish its entitlement to an LOT adjustment, its failure to provide the requisite evidence compels the Court to conclude that it has not met its burden of demonstrating that Commerce's denial of the LOT adjustment was not supported by substantial evidence and was not in accordance with law. See NSK Ltd., 190 F.3d at 1330.
Accordingly, the Court denies NTN's remand request for recalculation of its margins using its reported United States indirect selling expense data.
VIII. Constructed Export Price Profit Calculation Without Regard to Level of Trade
A. Background
In calculating CER Commerce must reduce the starting price used to establish CEP by "the profit allocated to the expenses described in paragraphs (1) and (2)" of § 1677a(d). 19 U.S.C. § 1677a(d)(3). Under 19 U.S.C. § 1677a(f), the "profit" that will be deducted from this starting price will be "determined by multiplying the total actual profit by [a] percentage" calculated "by dividing the total United States expenses by the total expenses." Id. § 1677a(f)(l), (2)(A). Section 1677a(f)(2)(B) defines "total United States expenses" as the total expenses deducted un der § 1677a(d)(l) and (2), that is, commissions, direct and indirect selling expenses, assumptions, and the cost of any further manufacture or assembly in the United States. Section 1677a(f)(2)(C) establishes a tripartite hierarchy of methods for calculating "total expenses." First, "total expenses" will be "[t]he expenses incurred with respect to the subject merchandise sold in the United States and the foreign like product sold in the exporting country" if Commerce requested such expenses for the purpose of determining NV and CEE Id. § 1677a(f)(2)(C)(i). If Commerce did not request these expenses, then "total expenses" will be "[t]he expenses incurred with respect to the narrowest category of merchandise sold in the United States and the exporting country which includes the subject merchandise." Id. § 1677a(f)(2)(C)(ii). If the data necessary to determine "total expenses" under either of these methods is not available, then "total expenses" will be "[t]he expenses incurred with respect to the narrowest category of merchandise sold in all countries which includes the subject merchandise." Id. § 1677a(f)(2)(C)(iii). "Total actual profit" is based on whichever category of merchandise is used to calculate "total expenses" under § 1677a(f)(2)(C). See id. § 1677a(f)(2)(D).
During this POR, NTN argued that profit levels differed by LOT and had an effect on prices and CEP profit and, therefore, Commerce should calculate CEP profit on an LOT-specific basis rather than for each class or kind of merchandise. See Final Results, 62 Fed. Reg. at 2125. NTN reasoned that § 1677a(f)(2)(C) "expresses a preference for the [CEP] profit calculation to be done as specifically as possible with respect to sales in the appropriate markets of the subject merchandise or the narrowest category of merchandise which includes the subject merchandise." Id.
Commerce rejected NTN's argument, concluding that:
Neither the statute nor the SAA require us to calculate CEP profit on bases more specific than the subject merchandise as a whole. Indeed, while we cannot at this time rule out the possibility that the facts of a particular case may require division of CEP profit, the statute and SAA, by referring to "the" profit, "total actual profit," and "total expenses" imply that we should prefer calculating a single profit figure. NTN's suggested approach would also add a layer of complexity to an already complicated exercise with no guarantee that the result will provide any increase in accuracy. We need not undertake such a calculation (see Daewoo Electronics v. International Union, 6 F.3d 1511, 1518-19 (CAFC 1993)). Finally, subdivision of the CEP-profit calculation would be more susceptible to manipulation. Congress has specifically warned us to be waiy of such manipulation of the profit allocation (see S. Rep. 103-412, 103d Cong., 2d Sess at 66-67).
Id.
B. Contentions of the Parties
NTN contends that Commerce erred by refusing to calculate CEP profit on LOT-specific basis. See NTN's Mem. at 17. Highlighting the "narrowest category of merchandise" language of § 1677a(f)(2)(C)(ii) and (iii), NTN again argues that there is a clear statutory preference that profit be calculated on the narrowest possible basis. See id. at 18. Moreover, NTN claims that since CV profit is calculated by LOT and matching is by LOT, CEP profit should be calculated to account for differences in LOT. See id. NTN asserts that the mere fact that a calculation is difficult is not a valid reason to sacrifice accuracy. See id. at 19. NTN further asserts that Commerce's speculation that an adjustment is susceptible to manipulation provides no grounds for rejecting an adjustment. See id. NTN, therefore, requests that the Court remand the issue to Commerce to calculate CEP profit on an LOT-specific basis.
Commerce responds that it properly determined CEP profit without regard to LOT. See Def.'s Mem. at 90. Commerce notes, inter alia, that § 1677a(f) does not refer to LOT, that is, the statute does not require that CEP profit be calculated on an LOT-specific basis. See id. at 91. In addition, Commerce asserts that even assuming that a narrower basis for the CEP-profit calculation is warranted in some circumstances, NTN has not provided any factual support for such a deviation from Commerce's standard methodology for calculating CEP profit. See id. at 92. Torrington generally agrees with Commerce's CEP-profit calculation. See Torrington's Resp. at 51-53.
C. Analysis
Section 1677a(f), as Commerce correctly notes, does not make any reference to LOT. Accordingly, the Court's duty under Chevron is to review the reasonableness of Commerce's statutory interpretation. See IPS-CO, Inc. v. United States, 965 F.2d 1056, 1061 (Fed. Cir. 1992) (quoting Chevron, 467 U.S. at 844).
This Court upheld Commerce's refusal to calculate CEP on an LOT-specific basis in NTN Bearing, 24 CIT at 414, 104 F. Supp. 2d at 133-35, finding it to be reasonable and in accordance with law. The Court examined the language of the statute and concluded that the statute clearly contemplates that, in general, the "narrowest category" will include the class or kind of merchandise that is within the scope of an investigation or review. The Court based its conclusion on its examination of subsections (ii) and (iii) of § 1677a(f)(C)'s "total expense" definition. Both subsections refer to "expenses incurred with respect to the narrowest category of merchandise which includes the subject merchandise." The term "subject merchandise" is defined as "the class or kind of merchandise that is within the scope of an investigation, a review, a suspension agreement, an order under this subtitle or section 1303 of this title, or a finding under the Antidumping Act, 1921." 19 U.S.C. § 1677(25).
Accordingly, as in NTN Bearing, the Court finds that Commerce reasonably interpreted § 1677a(f) in refusing to apply a narrower subcate gory of merchandise such as one based on LOT. The Court, moreover, agrees with Commerce's conclusion that a "subdivision of the CEP-profit calculation would be more susceptible to manipulation," a result that Congress specifically warned Commerce to prevent. Final Results, 62 Fed. Reg. at 2125. Finally, even if the Court were to assume that a narrower basis for calculating CEP profit would be justified under some circumstances, the Court agrees with Commerce that NTN failed to provide adequate factual support of how the CEP-profit calculation was distorted by Commerce's standard methodology.
IX. Commerce's Exclusion of Certain NTN Home-Market Sales to Affiliated Parties From the Normal Value Calculation; Exhaustion of Administrative Remedies
A. Background
During the POR, NTN made home-market sales to affiliated and unaffiliated parties. In its preliminary analysis, Commerce conducted an arm's-length test to determine whether NTN's affiliated-party sales could be used for purposes of calculating NV See Commerce's Preliminary Results Analysis Mem. for NTN (Case No. A-588-804) (Sixth Administrative Review 5/1/94-4/30/95) at .6. Specifically, Commerce compared NTN's home-market selling prices to affiliated and unaffiliated parties for all classes and kinds of merchandise. See id. Commerce, in accordance with 19 U.S.C. § 1677b(f)(2), "disregarded sales of bearings to certain affiliated parties for certain classes or kinds of merchandise because [it] found that the net price of these products, when sold to these affiliated parties, was, on average, less than when these products were sold to unaffiliated parties." Id. Commerce stated that it "used sales to affiliated customers only where [it] determined such sales were made at arm's-length prices, i.e., at prices comparable to prices at which the firm sold identical merchandise to unrelated customers." Preliminary Results, 61 Fed. Reg. at 35,717.
B. Contentions of the Parties
NTN argues that Commerce erred in applying the arm's-length test when it refused to use certain NTN sales to affiliated parties in the NV calculation. See NTN's Mem. at 20. NTN asserts that Commerce should have examined factors other than price in determining whether affiliated and unaffiliated sales were comparable before disregarding NTN's affiliated-party sales from the NV calculation. See id.
Commerce argues that pursuant to 19 C.F.R. § 353.38(c)(1)(h), (c)(2) (1995), if NTN disagreed with the agency's use of prices in determining whether to use or disregard sales to affiliated customers, NTN was obligated to raise the issue in its case brief to the Final Results. See Def.'s Mem. at 93. Commerce, therefore, asserts that the Court must reject NTN's untimely argument or, in the alternative, sustain Commerce's arm's-length test because it is supported by substantial evidence and in accordance with law. See id. at 93-98. Torrington generally agrees with Commerce's determination. See Torrington's Resp. at 53-58.
In response, NTN asserts, inter alia, that it would have been futile to raise the issue of looking at factors other than price when determining price comparability at the administrative level because Commerce refused to look at additional factors in prior administrative reviews. See NTN's Reply Br. to Def. and Def.-Intervenor's Resps. to Koyo's Mot. J. Agency R at 16.
C. Analysis
The Court declines to require exhaustion here. Regardless of whether it was futile for NTN to raise the issue at the administrative level since Commerce refused in prior reviews to consider looking at factors other than price, see, e.g., Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, Singapore, Sweden, and the United Kingdom; Final Results of Antidump-ing Duty Administrative Reviews and Partial Termination of Administrative Reviews, 61 Fed. Reg. 66,472, 66,511 (Dec. 17, 1996) (stating that "regulations direct us to focus on price"), the Court exercises its discretion to rule on the issue here. The Court has repeatedly rejected the argument that Commerce should consider additional factors, that is, factors other than price, when determining whether sales prices to affiliated and unaffiliated parties are comparable. The Court finds no basis under the circumstances of this case to depart from its prior holdings in NTN Bearing, 24 CIT at 444, 104 F. Supp. 2d at 148 and NTN, 19 CIT at 1241, 905 F. Supp. at 1099 (disagreeing "with NTN that Commerce's arm[']s-length test is flawed because Commerce did not take into account certain factors proposed by NTN"). Accordingly, Commerce's application of the arm's-length test to exclude certain home-market sales to affiliated parties from the NV calculation is affirmed.
X. Commerce's Finding That NPB Failed to Correctly Indicate Whether a Bearing Model Was Further Manufactured in the United States During the Period of Review and Its Application of Total Facts Available to NPB
A. Background
NPB reported that approximately one-third of its United States sales consisted of housed bearings that did not undergo further manufacturing in the United States. The other two-thirds of NPB's United States sales consisted of unhoused bearings which were exported to its United States affiliate, FYH Bearing Units USA ("FYH"), and further manufactured into housed hearings by FYH. All United States sales were CEP transactions.
In its questionnaire, Commerce asked NPB to indicate whether a bearing model was further manufactured in the United States during the POR. See Questionnaire for 1994-95 Administrative Review (7/6/95) (A-100-001) at C-5; 19 U.S.C. § 1677a(d). Commerce asked NPB to identify United States sales with the complete product code and a matching control number. See id. at C-5, C-6. For further-manufactured products, NPB was instructed to "report the control number of the product imported not the product sold. " Id. at C-6 (emphasis supplied). The purpose of Commerce's instruction was to enable it to distinguish sales of housed bearings that underwent further manufacturing in the United States from sales of housed bearing that did not require further manufacturing, and to enable Commerce to match United States sales and home-market sales. See Def.'s Mem. at 104.
In attempting to verify NPB's response, Commerce discovered that the reporting of sales of fiirther-manufactured merchandise was inaccurate, and that there were omissions and other discrepancies in NPB's databases. See Final Results, 62 Fed. Reg. at 2087-90. Because of these problems, Commerce determined that the data provided by NPB's response could not be verified and Commerce could not calculate a dumping margin. See id.
Unable to verify NPB's response, Commerce resorted to total facts available under 19 U.S.C. § 1677e(a) (1994). Pursuant to § 1677e(b), Commerce decided to resort to adverse facts available and used a rate of 45.83 percent, reflecting the "all others" rate from the less than fair value ("LTFV") investigation. See Final Results, 62 Fed. Reg. at 2089. Commerce used an inference adverse to NPB upon finding that NPB failed to act to the best of its ability in responding to Commerce's requests for information.
B. Contentions of the Parties
NPB contends that Commerce's application of total facts available is unsupported by substantial evidence and is otherwise not in accordance with law. See NPB's Mem. Supp. Mot. J. Agency R. at 11. First, NPB contends that it properly assigned further-manufacturing designations to products sold in the United States and that these designations were verified as completely as possible. See id. at 12. NPB claims that it maintained detailed records identifying "the model code of every housed bearing assembled in the United States and of every bearing and housing used in assembly." Id. NPB argues that if a bearing was further manufactured in the United States, records of the assembly were available. See id. at 13. NPB states that no evidence demonstrates that NPB incorrectly identified sales involving further-manufactured bearings. See id. at 14. NPB also claims that Commerce's requirement that it identify the bearing model "as entered on a sale-by-sale basis" demands the impossible and departs from Commerce's established practice. Id. at 15. NPB maintains that its product-specific estimate of whether particular sales involved further-manufactured bearings was reasonable. See id. at 18.
Second, NPB argues that Commerce's resort to total adverse facts available was improper under the antidumping statute. See id. at 20. NPB maintains that such action was improper because it provided full and complete information and that Commerce's "verification demonstrated that NPB correctly reported whether every model sold in the United States was or was not further manufactured in the United States." Id. NPB argues that the fact that it "cannot demonstrate with metaphysical certainty whether the bearing involved in every particular sale entered U.S. customs territory attached to a housing or unattached to a housing" does not mean that it withheld information. Id. NPB objects to the use of adverse facts since it denies that it refused to cooperate and maintains that it acted to the best of its ability in all respects. See id. at 21. NPB attributes its inability to provide the requested information to the "commingling [of] merchandise, from multiple customs entries and from assembly in the United States, into inventory before a sale is made." Id. at 22. NPB also argues that information on the record should have been used rather than facts available from the LTFV investigation. See id. NPB concedes that certain sales are omitted, but claims that the "magnitude of omitted sales does not constitute significant omission." Id. at 26. NPB maintains that if facts available is to be applied at all, it should he applied only to omitted sales. See id. at 35.
Commerce responds that if it does not have accurate reporting of sales of further-manufactured merchandise, it cannot conduct the analysis necessary for the proper computation of CEE See Def.' s Mem. at 105. The "proper identification of sales of further-manufactured merchandise allows Commerce to properly match sales in the United States and in the home market" in order to calculate dumping margins. Id. Accurate data is necessary to correctly deduct the costs of further manufacturing and calculate CEP; if sales are misidentified, a lower deduction from CEP may result, benefitting the respondent. See id. at 106. At verification, Commerce found several reporting inaccuracies: (1) certain housed bearings entered the United States but were reported by NPB as unhoused bearings; (2) NPB's United States sales database was incomplete and inaccurate; and (3) NPB's home-market sales database was incomplete and inaccurate. See id. at 106-114. Because of these inaccuracies, Commerce argues that it properly resorted to total facts available. See id. at 114.
Commerce further contends that its use of adverse facts was warranted. See id. at 115. Commerce argues that since it found that NPB did not act to the best of its ability to comply with Commerce's requests for information, it properly exercised it discretion to resort to adverse facts available. See id. at 115-16. Commerce also argues that its use of information from the LTFV investigation was proper under 19 U.S.C. § 1677e(b), which provides that Commerce may rely upon information derived from "'a final determination in the investigation under this title.'" Id. at 117 (quoting 19 U.S.C. § 1677e(b)). Commerce's use of the all others rate was aimed to ensure that NPB does not obtain a more favorable result than it would have by failing to provide timely, complete, and accurate responses and would also serve as an inducement to comply with Commerce's requests in the future. See id. at 118.
Torrington argues that Commerce lawfully applied facts available information to calculate NPB's margins. See Torrington's Resp. at 59. Torrington claims that NPB does not contest any of the errors found by Commerce, but merely tries to convince the Court to overlook them. See id. at 60-61. Torrington argues that Commerce discovered the errors on a subset of data at verification, and this discovery permits Commerce to conclude that examination of the complete data would likely reveal more errors. See id. at 61.
C. Analysis
The antidumping statute mandates that Commerce use "facts otherwise available" (commonly referred to as "facts available") if "necessary information is not available on the record" of an antidumping proceeding. 19 U.S.C. § 1677e(a)(l). In addition, Commerce may use facts available where an interested party or any other person: (1) withholds information that has been requested by Commerce; (2) fails to provide the requested information by the requested date or in the form and manner requested, subject to 19 U.S.C. § 1677m(c)(l), (e) (1994); (3) significantly impedes an antidumping proceeding; and (4) provides information that cannot be verified as provided in section 19 U.S.C. § 1677m(i). See id. § 1677e(a)(2)(A)-(D). Section 1677e(a) provides, however, that the use of facts available shall be subject to the limitations set forth in 19 U.S.C. § 1677m(d).
Once Commerce determines that use of facts available is warranted, § 1677e(b) permits Commerce to apply an "adverse inference" if it can find that "an interested party has failed to cooperate by not acting to the best of its ability to comply with a request for information." Such an inference may permit Commerce to rely on information derived from the petition, the final determination, a previous review or any other information placed on the record. See 19 U.S.C. § 1677e(c) (1994). When Commerce relies on information other than "information obtained in the course of the investigation or review, [Commerce] shall, to the extent practicable, corroborate that information from, independent sources that are reasonably at [its] disposal." Id.
In order to find that a party "has failed to cooperate by not acting to the best of its ability," it is not sufficient for Commerce to merely assert this legal standard as its conclusion or repeat its finding concerning the need for facts available. See Ferro Union, Inc. v. United States, 23 CIT 178, 196, 44 F. Supp. 2d 1310, 1329 (1999) ("Once Commerce has determined under 19 U.S.C. § 1677e(a) that it may resort to facts available, it must make additional findings prior to applying 19 U.S.C. § 1677e(b) and drawing an adverse inference."). Rather, to be supported by substantial evidence, Commerce must clearly articulate: (1) "why it concluded that a party failed to comply to the best of its ability prior to applying adverse facts," and (2) "why the absence of this information is of significance to the progress of [its] investigation." Ferro, 22 CIT at 198, 44 F. Supp. 2d at 1331.
The Court finds that Commerce's decision to apply adverse facts available was supported by substantial evidence and in accordance with law. Commerce made extensive findings regarding NPB's refusal to provide accurate and complete information regarding sales of further-manufactured merchandise. See Final Results, 62 Fed. Reg. at 2087-2090; Memo to Laurie Parkhill Regarding NPB Verification Report (6/13/96) (A-588-804); Memo to Joseph A. Spetrini Regarding Preliminary Results for the Sixth Administrative Review (6/27/96) (A-588-804).
Commerce determined that the use of facts available was appropriate because it was unable to verify NPB's information. See Final Results, 62 Fed. Reg. at 2087. Under § 1677e, Commerce is authorized to decline to consider information necessary to its determination if the information submitted by a respondent cannot be verified or is so incomplete that it is unreliable. Complete information regarding further-manufactured merchandise is necessary to calculate the dumping duties; deficient information prevents Commerce from matching home-market to United States sales and in determining adjustments to CEE Commerce's questionnaire asked NPB to identify its further-manufactured sales with a model code and to identify the cost of further manufacturing on a model-specific basis. See Questionnaire for 1994-95 Administrative Review (7/6/95) (A-100-001) at C-5, C-6. NPB provided incomplete information for its home-market and United States sales databases and Commerce was unable to verify the information provided. See Final Results, 62 Fed. Reg. at 2087. Additionally, the information provided was found to be inaccurate. During verification, examination of a sample of merchandise showed a contradiction between NPB's entry documents and its questionnaire response, and "NPB could not support the designation of these sales as being further-manufactured merchandise." Id. at 2087-88. As a result of the inaccuracies, Commerce could not calculate CER could not match approximately two-thirds of sales to the correct home-market model and could not employ its normal antidumping analysis. See id. at 2088. Consequently, Commerce's decision to resort to facts available was proper.
NPB maintains that the issue is not whether it failed to comply with Commerce's instructions but that the issue involves its "ability to identify with certainty whether or not the bearing component of housed bearings sold in the United States was attached to a housing at the time of importation." NPB's Reply at 3. NPB argues that because of the way it stores inventory, it cannot trace merchandise that is sold to particular customs entries and that Commerce should determine the dumping margin based on sales instead of entries. See id. at 4. It is, however, NPB's responsibility to provide Commerce with data properly reflecting the nature of the merchandise entered into the United States and indicating whether it underwent any further manufacturing, irrespective of its method of storing inventory. If NPB claims that certain merchandise has been further manufactured, it must provide support for its claim.
Commerce was also justified in using an inference adverse to NPB's interests. Commerce made a specific finding that NPB failed to cooperate by not acting to the best of its ability in complying with requests for information. See id.; 19 U.S.C. § 1677e(b). In assessing NPB's ability to comply, Commerce considered NPB's familiarity with the review process and also found that NPB was in control of the data needed to make accurate dumping calculations. See id. Commerce also considered that the use of NPB's flawed response would result in a reward to NPB for failing to cooperate. See id.
The Court also finds that Commerce's use of the all-others rate from the LTFV investigation was proper. Commerce considered selecting one of the following three rates: (1) the highest rate ever applicable to NPB (45.83%); (2) the last published rate of NPB (18%); or (3) the highest calculated rate in the instant review (22.32%). See Memo to Joseph A. Spe-trini Regarding Preliminary Results for the Sixth Administrative Review (6/27/96) (A-588-804) at 6. Commerce selected the rate of 45.83%, which also represented the "all others" rate and was based on the "average of calculated margins from the [LTFV] investigation." Id. Section § 1677e(b) clearly provides that an "adverse inference may include rebanee on information derived from a final determination in the [antidumping] investigation." Because the 45.83% rate was derived from the LTFV investigation, Commerce's selection of that rate is reasonable and in accordance with law. Additionally, Commerce's selection of the highest rate so that NPB would not benefit from its lack of cooperation and so that NPB would have an incentive to cooperate in future reviews was reasonable. Accordingly, Commerce's determination is affirmed.
XI. Commerce's Treatment of Certain Discounts, Rebates and Billing Adjustments Reported by Koyo, NTN and NSK
A. Background
Koyo's Home-market Billing Adjustments
Commerce accepted certain model- or transaction-specific billing adjustments claimed by Koyo in field BILLADJ — 1H. See Memorandum to The File Regarding Analysis Methodology Used to Determine Dumping Margins for Koyo (7/8/96) (A-588-804). The adjustments claimed in field BILLADJ-1H were reported through customer-wide allocations. In accepting the adjustments reported in Koyo's BILLADJ-1H field, Commerce stated the following:
We agree with Koyo that we should treat its billing adjustment as a direct adjustment to NV We determined at the home[-]market verification that in preparing its response to [Commerce] Koyo summed, on a customer-specific basis, the amount of this adjustment, which was only granted on in-scope merchandise, and then allocated the customer-specific total expense over in-scope merchandise on a customer-specific basis. Koyo acted to the best of its ability in reporting this information using customer-specific allocations. [T]he customer-specific allocation methodology it used to report this expense to the Department was not unreasonably dis-tortive.
Final Results, 62 Fed. Reg. at 2096.
Koyo's Home-market Rebates
Koyo granted rebates to its distributors on a customer-specific basis. Koyo calculated a single factor for a customer "by dividing the total rebate payments to the distributor in the POR by the total sales during that period of bearings and bearing-related products." Questionnaire for 1994-95 Administrative Review (9/27/95) (A-588-804) Koyo Sec. B Resp. at 20. In accepting Koyo's rebates, Commerce stated the following:
During the verification of Koyo's rebates, we noted that, once a distributor participating in the rebate program had purchased a pre-established amount of sales, Koyo applied a pre-established percentage rebate to all sales of that distributor. Therefore, reporting the percentage is the equivalent of reporting its rebates on a transaction-specific basis because the rebate was granted as a fixed and constant percentage of all affected sales. Therefore, we determine that Koyo acted to the best of its ability and that its response methodology is not unreasonably distortive.
Final Results, 62 Fed. Reg. at 2096.
NTN's Home-market Billing Adjustments
NTN reported certain home-market billing adjustments on an allocated basis. In accepting the adjustments, Commerce stated the following:
NTN's reporting methodology was consistently customer- and product-specific for billing adjustments. As a result of our verification of NTN's HM sales, we found that NTN reported the great majority of billing adjustments on a transaction-specific basis. [W]e prefer transaction-specific amounts for these kinds of adjustment claims. Because NTN acted to the best of its ability in reporting the adjustments and its allocations were not unreasonably distortive, we have accepted the reported adjustments for the final results.
Final Results, 62 Fed. Reg. at 2097.
NSK's Home-market Rebates
NSK reported lump-sum rebates to certain customers on a customer-specific basis. See Questionnaire for 1994-95 Administrative Review (9/27/95) (A-588-804) NSK Sec. B Resp. at B-22, B-23. Such rebates were paid on the basis of subject and non-subject merchandise. In accepting the adjustments, Commerce stated the following:
We agree with NSK that we should treat its lump-sum rebates as a direct adjustment to NY Although NSK allocates these rebates on a customer-specific basis, we determine that NSK acted to the best of its ability in reporting this information using customer-specific al locations. Our review of the information NSK submitted and our findings at verification indicate that, given the lump-sum nature of this adjustment, the fact that NSK's records do not readily identify a discrete group of sales to which each rebate pertains, and the extremely large number of POR sales NSK made, it is not feasible for NSK to report this adjustment on a more specific basis.
We also do not find that the customer-specific POR-allocation methodology NSK used shifts expenses incurred on sales of out-of-scope merchandise to sales of in-scope merchandise or that it is otherwise unreasonably distortive. [W]e find that it is likely that NSK granted this adjustment in proportionate amounts with respect to sales of out-of-scope and in-scope merchandise.
Final Results, 62 Fed. Reg. at 2092.
B. Contentions of the Parties
Torrington alleges that Commerce improperly accepted Koyo's home-market billing adjustments and home-market support rebates, as well as NTN's home-market billing adjustments and NSK's home-market support rebates. Torrington maintains that the CAFC has clearly defined "direct" adjustments to price as those that "vary with the quantity sold, or that are related to a particular sale," and Commerce cannot treat adjustments that do not meet this definition as direct. Torrington's Mem. Supp. Mot. J. Agency R. at 12 (citing Torrington Co. v. United States ("Torrington CAFC"), 82 F.3d 1039, 1050 (Fed. Cir. 1996) (quotations omitted)). Torrington contends that here Commerce "redefined 'direct' to achieve what Torrington CAFC had previously disallowed" by allowing respondents to report allocated post-sale price adjustments ("PSPAs") if they acted to the best of their abilities in light of their record-keeping systems and the results were not unreasonably distortive. Id. at 14. Torrington acknowledges that this Court has already approved of Commerce's practice as applied under post-URAA law in Timken Co. v. United States ("Timken"), 22 CIT 621, 16 F. Supp. 2d 1102 (1998), but asks the Court to reconsider its approval. See Torrington's Reply at 6-7.
Furthermore, Torrington maintains that the amendments to the URAA did not modify the distinction between direct and indirect adjustments established under pre-URAA law such as Torrington CAFC. See Torrington's Mem. at 16 (citing 19 U.S.C. § 1677a(d)(l)(B), (D) (1994) and § 1677b(a)(7)(B) (1994)). Torrington is not convinced that the SAA contradicts its contentions. See id. at 17 (citing SAA at 823-24).
Torrington also contends that even under its new methodology, Commerce's determination was not supported by substantial evidence inasmuch as respondents failed to show that: (1) their reporting methods did not result in distortion; and (2) they put forth their best efforts to report the information on a more precise basis. See id. at 22. Torrington emphasizes that respondents have the burden of showing non-distortion and best efforts, and having failed to carry the burden, they must not benefit from the adjustment. See id. at 23. Torrington, therefore, re quests that this Court reverse Commerce's determination with respect to the various PSPAs and remand the case to Commerce with instructions to disallow all of the claims. See id. at 24.
Commerce responds that its treatment of the adjustments is consistent with current law. See Def.'s Mem. at 119. Even though the adjustments were not reported in a transaction-specific manner, Commerce accepted them as part of its new policy to accept allocated adjustments where it is not feasible for the respondent to report them on a transaction-specific basis and the respondent has acted to the best of its ability. See id. at 128. Additionally, Commerce examines whether the allocation method used is not unreasonably distortive pursuant to 19 U.S.C. § 1677m(e). See id. at 128-29.
Commerce argues that Torrington erred in relying on Torrington CAFC because the case does not stand for the proposition that direct price adjustments may only be accepted when they are reported on a transaction-specific basis. See id. at 134. Rather, the Torrington CAFC court "merely overturned a prior Commerce practice of treating certain allocated price adjustments as indirect expenses," id. (citing Torrington CAFC, 82 F.3d at 1047-51), and does "not address appropriate allocation methodologies" used in reporting the price adjustments in question, id. at 134-35 (quoting Final Results, 62 Fed. Reg. at 2091). Also contrary to Torrington's assertion, Commerce did not consider Torrington CAFC as addressing proper ¿location methodologies; rather, Commerce only viewed Torrington CAFC as holding that "Commerce could not treat as indirect selling expenses 'improperly' allocated price adjustments." Id. at 136. Commerce notes that pursuant to its new methodology, it does not consider price adjustments to be any type of selling expense, either direct or indirect, and, therefore, Torrington's argument is not only without support, but ¿so inapposite to Torrington CAFC. See id. at 136-37.
Additionally, Commerce argues that its findings are supported by substantial evidence. See id. at. 139. With respect to Koyo's BILLADJ-1H and rebates, Commerce maintains that: "(1) Koyo had reported the adjustments on the most specific basis possible and, thus, had cooperated to the best of its ability, and (2) that the allocation method was not dis-tortive." Id. at 140 (quoting Final Results, 62 Fed. Reg. at 2096). Koyo reported BILLADJ-1H adjustments on a customer-specific basis- and limited them to in-scope merchandise. See id. Commerce argues that it "verified the manner in which Koyo maintained its normal records and confirmed that Koyo's reporting was reasonable in light of its records." Id. at 142. Because Commerce found that its allocation reflects Koyo's normal books and records, is limited to in-scope merchandise and is granted on a customer-specific basis, Commerce believes that it acted reasonably in accepting the adjustment. See id.
Commerce also argues that it properly accepted Koyo's home-market rebates. See id. at 143. Commerce found no evidence that Koyo's adjustments were granted disproportionately on out-of-scope merchandise, and instead found that Koyo's method accurately apportioned to each sale the amount of the rebate for which the sale was responsible. See id. Commerce maintains that "reporting a rebate earned on a group of sales by spreading it over those sales is the most accurate, way to report such a rebate." Id. at 144.
With respect to NTN's home-market billing adjustments, Commerce maintains that NTN's reporting "involves a veiy small number of transactions, which have been allocated on an extremely narrow basis, and under circumstances in which Commerce found that NTN simply could not determine the specific transactions to which these adjustments should be linked." Id. at 147. Commerce argues that NTN acted to the best of its ability in reporting the adjustment and that the method used was not unreasonably distortive. See id. at 147-48.
Commerce argues that it properly accepted NSK's lump-sum rebates as well. See id. at 148. At verification, Commerce determined that the rebates were granted on a customer-specific basis rather than on the basis of any particular transaction or product. See id. Commerce also found that NSK could provide information supporting the calculation and that the method was not unreasonably distortive. See id.
Koyo, NSK and NTN generally concur with Commerce's position. See Koyo's Mem. Resp. to Torrington's Mot. J. Agency R.; NSK's Mem. Opp'n to Torrington's Mot. J. Agency R; NTN's Resp. to Torrington's Mot. J. Agency R.
C. Analysis
Commerce's decision to accept Koyo's, NSK's and NTN's billing adjustments was supported by substantial evidence and was fully in accordance with the post-URAA statutory language, as well as with the SAA that accompanied the enactment of the URAA because: (1) Commerce verified the adjustments to determine that they were reliable and could not be reported more specifically; (2) Commerce properly determined that respondents acted to the best of their abilities in reporting the adjustments; and (3) Commerce properly accepted the allocation methodologies of the respondents after carefully reviewing the differences between such merchandise and ensuring that the allocations were not unreasonably distortive. See Final Results, 62 Fed. Reg. at 2094-96.
After the enactment of the URAA, Commerce reevaluated its treatment of PSPAs, and since that time it treats them as adjustments to price and not as selling expenses. Indeed, Commerce's treatment of the home-market support rebates, early-payment discounts and billing adjustments as adjustments to price instead of selling expenses is the issue left unanswered by the pre-URAA cases upon which Torrington relies, namely, Torrington CAFC; Koyo Seiko Co. v. United States ("Koyo"), 36 F.3d 1565 (Fed. Cir. 1994); and Consumer Prods. Div., SCM Corp. v. Sil ver Reed Am.., Inc. ("Consumer Products"), 753 F.2d 1033 (Fed. Cir. 1985).
The Court disagrees with Torrington that Torrington CAFC mandates that direct price adjustments may only be accepted when they are reported on a transaction-specific basis. Rather, as Commerce correctly pointed out, Torrington CAFC merely overturned a prior Commerce practice of treating certain allocated price adjustments as indirect selling expenses and did not address the propriety of the allocation methods that respondents used in reporting the price adjustments in question. See Final Results, 62 Fed. Reg. at 2091. Although (1) "Commerce treated rebates and billing adjustments as selling expenses in preceding reviews under pre-URAA law," and (2) "previously decided that such adjustments are selling expenses and, therefore, should not be treated as adjustments to price," this did not "preclude Commerce's change in policy or this Court's reconsideration of its stance in light of the newly-amended antidumping statute [(that is, 19 U.S.C. § 1677m(e) (1994))]." Timken, 16 F. Supp. 2d at 1107. "Neither the pre-URAA nor the newly-amended statutory language imposes standards establishing the circumstances under which Commerce is to grant or deny adjustments to NV for PSPAs." Id. at 1108 (citing Torrington CAFC, 82 F.3d at 1048). Moreover, 19 U.S.C. § 1677m(e) "specifically directs that Commerce shall not decline to consider an interested party's submitted information if that information is necessary to the determination but does not meet all of Commerce's established requirements, if the [statute's] criteria are met." Id.
Commerce applied its post-URAA methodology to analyze adjustments to price, explaining that Commerce accepted PSPAs as direct adjustments to price if Commerce determined that a respondent, in reporting these adjustments, acted to the best of its ability to associate the adjustment with the sale on which the adjustment was made, rendering its reporting methodology not unreasonably distortive. See Final Results, 62 Fed. Reg. at 2090. In evaluating the degree to which an allocation over scope and non-scope merchandise may be distortive, Commerce examines "the extent to which the out-of-scope merchandise included in the allocation pool is different from the in-scope merchandise in terms of value, physical characteristics, and the manner in which it is sold." Id. Torrington argues that Commerce's methodology is unlawful. See Torrington's Reply at 9-12. Torrington is incorrect. Although the URAA does not compel Commerce's new policy on price adjustments, the statute does not prohibit Commerce's new practice.
Commerce's "change in policy substitutes a rigid rule with a more reasonable method that nonetheless ensures that a respondent's information is reliable and verifiable." Timken, 16 F. Supp. 2d at 1108. Commerce's decision to accept SKF's and NTN's allocated adjustments to price is acceptable, "especially in light of the more lenient statutory instructions of [19 U.S.C. § ] 1677m(e)." Id. Accordingly, "Commerce's decision to accept the PSPAs is fully in accordance with the post-URAA statutory language and directions of the SAA," and the decision to accept SKF's, NTN's and INA's adjustments was reasonable even though the adjustments were not reported on a transaction-specific basis and even though the allocations included rebates on non-scope merchandise. Id.
Torrington argues that the post-URAA statute retains the distinction between "direct" and "indirect" expenses and, therefore, does not permit Commerce to alter its treatment of adjustments to price. See Tor-rington's Reply at 6-8. Torrington trivializes the statutory changes that prompted Commerce to reevaluate its treatment of adjustments and-consequently revise its regulations. Because Commerce now treats PSPAs as adjustments to price rather than selling expenses, the distinction between direct versus indirect selling expenses is no longer relevant for the purpose of determining the validity of allocated price adjustments. One of the goals of Congress in passing the URAA was to liberalize certain reporting requirements imposed on respondents in antidumping reviews. Such intent is evident both in the amendments enacted by the URAA and in the SAA. The URAA amended the anti-dumping law to include a new subsection, 19 U.S.C. § 1677m(e). The provision states that:
In reaching a determination under [19 U.S.C.] section 1671b, 1671d, 1673b, 1673d, 1675, or 1675b the administering authority and the Commission shall not decline to consider information that is submitted by an interested party and is necessary to the determination but does not meet all the applicable requirements established by the administering authority or the Commission, if—
(1) the information is submitted by the deadline established for its submission,
(2) the information can be verified,
(3) the information is not so incomplete that it cannot serve as a reliable basis for reaching the applicable determination,
(4) the interested party has demonstrated that it acted to the best of its ability in providing the information and meeting the requirements established by the administering authority or the Commission with respect to the information, and
(5) the information can be used without undue difficulties.
19 U.S.C. § 1677m(e). This section of the statute liberalized Commerce's general acceptance of data submitted by respondents in antidumping proceedings by directing Commerce not to reject data submissions once Commerce concludes that the specified criteria are satisfied.
Next, Torrington suggests that Commerce has accepted the adjustments without requiring respondents to carry the burden of proving that the adjustments are non-distortive. See Torrington's Mem. at 23. This argument is without merit. As a routine part of its antidumping practice, Commerce accepts a range of reporting methodologies and allocations adopted by respondents. The mere acceptance of an adjustment as reported cannot be a sufficient ground for rejecting Commerce's decision. It would be anomalous indeed to expect a respondent to provide Commerce, in addition to the information on the basis of which Commerce could conclude that the respondent's reporting methods are not distortive, with a proof of the validity of Commerce's determination of that sort. Such a scheme would effectively allow the respondent to bind Commerce, restricting Commerce's inherent power to investigate, examine and render a decision.
In determining whether Koyo's, NSK's and NTN's allocation over scope and non-scope merchandise was unreasonably distortive, Commerce reasonably has not required respondents to demonstrate the non-distortive nature of the allocation directly, for example, by compelling them to identify separately the adjustments on scope merchandise and compare them to the results of allocations over both scope and non-scope merchandise. Such a burdensome exercise would defeat the entire purpose underlying the more flexible reporting rules, by compelling the respondent to go through the enormous effort that the new rules were intended to obviate. Rather, Commerce has adopted criteria by which Commerce itself could determine whether an allocation over scope and non-scope merchandise was likely to cause unreasonable distortions.
In the case at hand, Commerce's determination with respect to Koyo's billing adjustments was reasonable. Commerce premised its conclusion on its finding that the customer-wide allocations by Koyo of the price adjustments were not unreasonably distortive, having been "only granted on in-scope merchandise" and then allocated over in-scope merchandise on a customer-specific basis. Final Results, 62 Fed. Reg. at 2096. Commerce also found that Koyo acted to the best of its ability in reporting the information. See id.
Commerce also properly accepted Koyo's home-market rebates. Koyo's home-market rebates were granted on a customer-specific basis. See id.; Questionnaire for 1994-95 Administrative Review (9/27/95) (A-588-804) Koyo Sec. B Resp. at 20. These rebates were granted as a fixed and constant percentage of all affected sales, a method entirely proper under the law and consistent with Commerce's policy. See id. Commerce also found that Koyo acted to the best of its ability and that the method was not unreasonably distortive. See id.
Commerce's determination with respect to NTN was reasonable. Commerce premised its determination on its finding that NTN reported the adjustment on a basis that was consistently customer- and product-specific. See id. at 2097. Moreover, Commerce determined that NTN acted to the best of its ability in reporting the adjustments and that the method was not unreasonably distortive. See id.
Additionally, Commerce was justified in concluding that NSK's reporting of its home-market rebates on a customer-specific basis was proper. Commerce considered the large number of transactions, NSK's records and the lump-sum nature of the adjustment and concluded that it is not feasible for NSK to report the adjustment on a more precise basis. See id. at 2092. Commerce also determined that the allocation methodology was not unreasonably distortive. See id.
Torrington asserts that Commerce improperly determined that Koyo, NTN and NSK acted to the best of their ability in reporting adjustments. See Torrington's Mem. at 23-29. Torrington's assertion is without merit. When respondents' adjustments were granted over both scope and non-scope merchandise without reference to any particular model or transaction, Commerce could not have reasonably expected them to be recorded or reported to Commerce in a manner more specific than that which was used. It was equally appropriate for Commerce to consider, as a part of its decision whether respondents acted to the best of their ability in reporting the adjustments, the volume of adjustments when deciding whether it is feasible to report these adjustments on a more specific basis. In light of the considerable size of their databases, Commerce reasonably found that "given the extremely large volume of transactions involved in these AFBs reviews[,] [i]t is inappropriate to reject allocations that are not unreasonably distortive in favor of facts otherwise available where a fully cooperating respondent is unable to report the information in a more specific manner." Final Results, 62 Fed. Reg. at 2090. The large volume of data is precisely one of the factors that one would expect Commerce to consider in deciding whether a respondent has acted to the best of its ability in reporting a given adjustment.
In sum, the Court finds that Commerce's decision to accept Koyo's, NTN's and NSK's reported home-market adjustments was supported by substantial evidence and was fully in accordance with the post-URAA statutory language and the SAA. The record demonstrates that the requirements of 19 U.S.C. § 1677m(e) were satisfied by the respondents in that: (1) the reported adjustments were submitted in a timely fashion, see 19 U.S.C. § 1677m(e)(l); (2) the information submitted was verified by Commerce; (3) the respondents' information was not so incomplete that it could not serve as a basis for reaching a determination, see 19 U.S.C. § 1677m(e)(3); (4) respondents demonstrated that they acted to the best of their abilities in providing the information and meeting Com merce's new reporting requirements, see § 1677m(e)(4); and (5) there was no indication that the information was incapable of being used without undue difficulties. See § 1677m(e)(5).
Commerce's determinations with respect to Koyo, NTÑ and NSK were also consistent with the SAA. The Court agrees with Commerce's finding in the Final Results that given the extremely large.volume of transactions, the level of detail contained in normal accounting records, and time constraints imposed by the statute, the reporting and allocation methodologies were reasonable. This is consistent with the SAA directive under § 1677m(e), which provides that Commerce "may take into account the circumstances of the party, including (but not limited to) the party's size, its accounting systems, and computer capabilities." SAA at 865. Thus, the Court finds that Commerce properly considered the ability of Koyo, NTN and NSK to report itsbilling adjustments on a more specific basis. Accordingly, the Court concludes that Commerce's acceptance of Koyo's, NTN's and NSK's reported adjustments was supported by substantial evidence and fully in accordance with law.
Conclusion
This case is remanded to Commerce to: (1) exclude any transactions that were not supported by consideration from NSK's United States sales database and to adjust the dumping margins accordingly; (2) reconsider the issue of NSK's relationship to its supplier; (3) reconsider its determination that a certain model of Koyo's was outside the ordinary course of trade; and (4) reconsider its determination that a certain home-market ball bearing of Koyo's could be compared to United States sales because it is a foreign like product and to clearly articulate the basis of its determination.
The Statement of Administrative Action ("SAA") represents "an authoritative expression by the Administration concerning its views regarding the interpretation and application of the Uruguay Round agreements." H.R. Doc. 103-316, at 656 (1994), reprinted in 1994 U.S.C.C.A.N. 4040. "It is the expectation of the Congress that future Administrations will observe and apply the interpretations and commitments set out in this Statement." Id.; see also 19 U.S.C. § 3512(d) (1994) ("The statement of administrative action approved by the Congress shall be regarded as an authoritative expression by the United States concerning the interpretation and application of the Uruguay Round Agreements and this Act in any judicial proceeding in which a question arises concerning such interpretation or application.").
The SAA accompanying the URAA provides that aside from § 1677b(b)(l), (f)(2) transactions:
Commerce may consider other types of sales or transactions to be outside the ordinary course of trade when such, sales or transactions have characteristics that are not ordinary as compared to sales or transactions generally made in the same market. Examples of such sales or transactions include merchandise produced according to unusual product specifications, merchandise sold at aberrational prices, or merchandise sold pursuant to unusual terms of sale. As under existing law, amended section 771(15) does not establish an exhaustive list, but the Administration intends that Commerce will interpret section 771(15) in a manner which will avoid basing normal value on sales which are extraordinary for the market in question, particularly when the use of such sales would lead to irrational or unrepresentative results.
H.R. DOC. No. 103-316, vol. 1, at 834 (emphasis supplied). The SAA also provides that "[o]ther examples of sales that Commerce could consider to be outside the ordinary course of trade include sales of off-quahty merchandise, sales to related parties at non-arm's-length prices, and sales with abnormally high profits." Id. at 839-40.
NTN points out that its sample sales were (a) made for customer evaluation and not for consumption purposes and (b) marked with, letters "SS" in NTN's accounting and record keeping systems. NTN's Mem. at 11. The Court is unconvinced. NTN provided Commerce with no record showing that NTN's customers were precluded from consumption of NTN's samples and the peculiarity of NTN's designation of such sales in its accounting and record-keeping systems does not strip Commerce of the right to exercise its discretion and conclude that these sales lacked the characteristics necessary to place them outside the ordinary course of trade.
In its motion for judgment on the agency record, Koyo argued that Commerce acted unlawfully in failing to grant it an LOT adjustment. Koyo later abandoned its claim. See Koyo's Reply Br. to Def. and Def.-Intervenor's Resps. to Koyo's Mot. J. Agency R. at 2. In light of Koyo's abandonment of its claim, the Court will not address Koyo's arguments regarding the LOT adjustment.
The CAFC's decision reversed the Court of International Trade's determination in Borden, Inc. v. United States, 22 CIT_, 4 F. Supp. 2d 1221 (1998), a case discussed by the parties in the instant matter.
In Toirington CAFC, the Court of Appeals did not hold that billing adjustments must he treated as selling expenses. The Torrington CAFC court specifically noted that it was treating billing adjustments as selling expenses only because there was no argument offered suggesting otherwise, and the issue whether such treatment was appropriate remained open. Torrington CAFC, at 1050 n.15. Torrington's reliance on Koyo and Consumer Products is equally unjustified. The Koyo court, citing Consumer Products, noted that "[d]irect selling expenses are 'expenses which vary with the quantity sold, such as commissions'" and did not address the issue of billing adjustments. Koyo, 36 F.3d at 1569 n.4 (quoting Consumer Products, 753 F.2d at 1035). Because these cases address Commerce's treatment of selling expenses, and Commerce did not treat the adjustments at issue as selling expenses, these cases are irrelevant to the issue at hand.
Consistent with § 1677m(e), the SAA states that "[t]he Administration does not intend to change Commerce's current practice, sustained by the courts, of allowing companies to allocate these expenses when transaction-specific reporting is not feasible, provided that the allocation method used does not cause inaccuracies or distortions." SAA at 823-24. Therefore, the statute and the accompanying SAA both support Commerce's use of allocations in circumstances such as those present here. |
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176 L. Ed. 2d 358 | Motion to direct the Clerk to file a petition for writ of certiorari out of time denied. |
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17 Cust. Ct. 203 | Opinion by
Kincheloe, J.
It was stipulated that the merchandise is the same in all material respeets as the gloves which were the subject of United States v. Julius Kayser & Co. (33 C. C. P. A. 179, C. A. D. 333). In accordance therewith the claim of the plaintiff was sustained. |
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31 Cust. Ct. 289 | Fobd, Judge:
This petition, praying for the remission of additional duties incurred by reason of undervaluation of certain imported merchandise on entry, was filed under the provisions of section 489 of the Tariff Act of 1930.
The merchandise involved consists of rough gray iron castings dedicated for use as automobile manifolds, imported by petitioner herein from Ford Motor Company of Canada, Ltd. Patterns produced in the United States at a cost of $40,100 were shipped by petitioner to the Ford Motor Company of Canada, Ltd., for use in manufacturing the castings herein. The merchandise was appraised on the basis of cost of production. In making entry of these eastings, petitioner did not include the cost of the patterns which it had furnished to the Ford Motor Company of Canada, Ltd. In arriving at a value for this merchandise, the appraiser included, as a part of the value, the cost of these patterns.
The record shows that prior to making entry, petitioner herein consulted with the customs officials at the port of entry, making clear to them its contention that the cost of these patterns should not be included as a part of the cost of production of the imported merchandise, furnishing to said customs officials the cost of producing the said patterns. The action of the appraiser in including as a part of the cost of production the cost of the patterns was approved by this court in Ford Motor Company v. United States, 29 Cust. Ct. 553, A. R. D. 9.
In this case, there was only one issue between the petitioner and appraiser, whether or not the cost of the patterns used in the manufacture of the castings should be included as a part of the cost of production. On that one question, the petitioner advised the appraiser the amount of the cost of producing the patterns, which it insisted was not to be included as a part of the cost of production. The fact that petitioner was not successful in its reappraisement case furnishes no reason for denying remission of additional duties in this proceeding where, as here, the record shows that the importer exercised what is, under the circumstances of this case, absolute good faith in making its entry, and fully and candidly disclosed to the appraiser all the material facts bearing upon the value of the merchandise. Syndicate Trading Co. v. United States, 13 Ct. Cust. Appls. 409, T. D. 41339.
In the Syndicate Trading Co. case, supra, the Court of Customs Appeals observed:
It is clear that Mr. Arnold desired, as he had a right, to test the legality of the appraisal and the adverse decision by the appraisement board does not deprive importer of its right to a remission of additional duties.
We have recently in effect held, in cases of this character, that if the importer exercises what is, under the circumstances of the case, absolute good faith in making his entry, and fully and candidly discloses all the material facts bearing upon the value of the merchandise, he is entitled to a remission of additional duties. Hauptman v. United States, 13 Ct. Cust. Appls. 295; T. D. 41218; Linen Thread Co. v. United States, 13 Ct. Cust Appls. 301; T. D. 41220; Klein, Messner Co. v. United States, 13 Ct. Cust. Appls. 273; T. D. 41212.
We are clear that in this case importer has discharged the burden thus cast upon him and are at a loss to know upon what theory the Board of General Appraisers could reach the conclusion it did.
*
The judgment below is reversed and the cause remanded for further proceedings not inconsistent herewith.
Upon the facts in this case, we are satisfied that petitioner in entering its merchandise at a value less than that returned upon final appraisement acted in absolute good faith and that there was no intention on its part to defraud the revenue of the United States or to conceal or misrepresent the facts of the case or to deceive the appraiser as to the true value of the merchandise.
The petition is therefore granted. Judgment will be rendered accordingly. |
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8 Cust. Ct. 504 | Opinion by
Ekwall, J.
In accordance with stipulation of counsel and following Bullocks v. United States (6 Cust. Ct. 110, C. D. 441) the merchandise in question was held not subject to countervailing duty as claimed. |
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489 U.S. 1003 | D. C. W. D. Ky. Application for stay pending appeal to the United States Court of Appeals for the Sixth Circuit, presented to JUSTICE Scalia, and by him referred to the Court, denied. |
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365 U.S. 708 | Mr. Justice Clark
delivered the opinion of the Court.
The issue in these habeas corpus cases concerns the validity, under the Equal Protection Clause of the Fourteenth Amendment, of the requirement of Iowa law that necessitates the payment of statutory filing fees by an indigent prisoner of the State before an application for a writ of habeas corpus or the allowance of an appeal in such proceedings will be docketed. As we noted in Burns v. Ohio, 360 U. S. 252, 256 (1959), "[t]he State's commendable frankness in [these] . . . case[s] has simplified the issues." In its brief, the State conceded that "indigent convicted criminals are unable to file a petition for habeas corpus in Iowa." We hold that to interpose any financial consideration between an indigent prisoner of the State and his exercise of a state right to sue for his liberty is to deny that prisoner the equal protection of the laws.
In No. 174, Neal Merle Smith v. John E. Bennett, Warden, the petitioner was convicted and sentenced to serve 10 years in the state penitentiary for the offense of breaking and entering. In due coursé he was released on parole. After a short period, however, this was revoked for' violation of its conditions. Petitioner was arrested and was thereafter returned to the penitentiary for completion of his sentence. • He then forwarded to the Clerk of the District Court of Lee County, Iowa, a petition for a writ of habeas corpus with accompanying motion to proceed in forma pauperis and an affidavit of poverty. In the petition he raised constitutional questions as to the validity of the warrant of arrest under which he was taken into custody and returned to the penitentiary. The Clerk refused to docket the petition without payment of the $4 filing fee. Petitioner then filed a motion in the Iowa Supreme Court for leave to appeal in forma pauperis, together with a pauper's oath, which the court denied without opinion. On appeal to this Court, we dismissed the appeal but treated the papers as a petition for certiorari, which was granted, limited to the above question, 363 U. S. 834.
In No. 177, Richard W. Marshall v. John E. Bennett, Warden, the petitioner, who was represented by counsel, pleaded guilty to an information charging the offense of breaking and entering and was sentenced to 10 years' imprisonment at the Iowa State Penitentiary. A year later he forwarded to the Clerk of the District Court of Lee County, Iowa, a petition for a writ of habeas corpus alleging that he was detained "contrary to the provisions of the 14th Amendment, § 1" because the information to which he pleaded guilty was "fatal on its face" in that "it does not charge Petitioner with 'intent' " and further because his "plea thereon was obtained by coercion and duress." Accompanying the petition was a motion for leave to proceed in forma pauperis and a pauper's affidavit. Thereafter, in an unreported written order, the court refused to docket the petition without the payment of the statutory filing fee but, nevertheless, examined the petition and found it "would have to be denied if properly presented to the Court." Petitioner forwarded appeal papers to the Supreme Court of Iowa but that application was also denied. Petitioner's motion for leave to proceed here in forma pauperis was granted, as was his petition for certiorari, which wa,s limited to the question posed in the opening paragraph, supra. 363 U. S. 838.
In Burns v. Ohio, supra, we decided that a State could not "constitutionally require . an indigent defendant in a criminal case [to] pay a filing fee before permitting him to file a motion for leave to appeal in one of its courts." At p. 253. That decision was predicated upon our earlier holding in Griffin v. Illinois, 351 U. S. 12 (1956), that an indigent criminal defendant was entitled to a transcript of the record of his trial, or an adequate substitute therefor, where needed to effectively prosecute an appeal from his conviction. The gist of these cases is that because "[t]here is no rational basis for assuming that indigents' motions for leave to appeal will be less meritorious than those of other defendants," Burns v. Ohio, supra, at 257-258, "[t]here can be no equal justice where the kind of trial a man gets depends on the amount of money he has," Griffin v. Illinois, supra, at 19, and consequently that "[t]he imposition by the State of financial barriers restricting the availability of appellate review for indigent criminal defendants has no place in our heritage of Equal Justice Under Law." Burns v. Ohio, supra, at 258. Iowa had long anticipated the rule announced in these cases, i. e., indigent defendants may-appeal from criminal convictions without prior payment of filing fees, Iowa Code § 789.20 (enacted in 1917), and transcripts are provided by the county to be used in such appeals, Iowa Code § 792.8 (enacted in 1878). As the State points out, those cases "were concerned with the rights of a convicted criminal seeking to make a direct attack upon his conviction by appeal . . . ." Habeas corpus, on the other hand, is not an attack on the conviction but on the validity of the detention and is, therefore, a collateral proceeding. The State, however, admits that the Great Writ "is an available post-conviction civil remedy in . . . Iowa" and concedes that a prisoner's inability to pay the $4 fee would render it unavailable to him. The question is therefore clearly posed: Since Iowa does make the writ available to prisoners who have the $4 fee, may it constitutionally preclude its use by those who do not?
The State insists that it may do so for three reasons. First, habeas corpus is a civil action brought by a prisoner to obtain his personal liberty, a civil right, and if it must be made available to indigents free of fees in protection of that right then it must be made available in like manner to all indigents in the protection of every civil right. Second, habeas corpus is a statutory right, Iowa Code § 663.5, and the' legislature may constitutionally extend or limit its application. Finally, a habeas corpus action may be brought in the United States District Court because Iowa's fee requirement fulfills the demand of 28 U. S. C. § 2254, that "the existence of circumstances rendering such [state corrective] process ineffective to protect the rights of the prisoner" be present.
While habeas corpus may, of course, be found to be a civil action for procedural purposes, Ex parte Tom Tong, 108 U. S. 556 (1883), it does not follow that its availability in testing the State's right to detain an indigent prisoner may be subject to the payment of a filing fee. The State- admits that each petitioner here is an indigent and that its requirement as to the $4 fee payment has effectively denied them the use of the writ. While $4 is, as the State says, an "extremely nominal" sum, if one does not have it and is unable to get it the fee might as well be $400 — which the State emphasizes it is not. In Iowa, the writ is a post-conviction remedy available to all prisoners who have $4. We shall not quibble as to whether in this context it be called a civil or criminal action for, as Selden has said, it is "the highest remedy in law, for any man that is imprisoned." 3 Howell's State Trials 95 (1628). The availability of a procedure to regain liberty lost through criminal process cannot be made contingent upon a choice of labels. Ever since the Magna Charta, man's greatest right — personal liberty — has been guaranteed, and the procedures of the Habeas Corpus Act of 1679 gave to every Englishman a prompt and effective remedy for testing the legality of his imprisonment. Considered by the Founders as the highest safeguard of liberty, it was written into the Constitution of the United States that its "privilege . . . shall not be suspended, unless when in cases of rebellion or invasion the public safety may require it." Art. I, § 9. Its principle is imbedded in the fundamental law of 47 of our States. It has long been available in the federal courts to indigent prisoners of both the State and Federal Governments to test the validity of their detention. Over the centuries it has been the common law world's "freedom writ" by whose orderly processes the production of a prisoner in court may be required and the legality of the grounds for his incarceration inquired into, failing which the prisoner is set free. We repeat what has been so truly said of the federal writ: "there is no higher duty than to maintain it unimpaired," Bowen v. Johnston, 306 U. S. 19, 26 (1939), and unsus-pended, save only in the cases specified in our Constitution. When an equivalent right is granted by a State, financial hurdles must not be permitted to condition its exercise.
To require the State to docket applications for the post-conviction remedy of habeas corpus by indigent prisoners without the fee payment does not necessarily mean that all habeas corpus or other actions involving civil rights must be on the same footing. Only those involving indigent convicted prisoners are involved here and we pass only upon them.
The Attorney General of Iowa also argues that indigent prisoners in the State's custody may seek "vindication of federal rights alleged to have been denied by the state" in the federal courts. But even though this be true — an additional point not involved or passed upon here — it would ill-behoove this great State, whose devotion to the equality of rights is indelibly stamped upon its history, to say to its indigent prisoners seeking to redress what they believe to be the State's wrongs: "Go to the federal court." Moreover, the state remedy may offer review of questions not involving federal rights and therefore not raisable in federal habeas corpus.
Because Iowa has established such a procedure, we need consider neither the issue- raised by petitioners that the State is constitutionally required to offer some type of post-conviction, remedy for the vindication of federal rights, nor the State's converse claim that the remedy is' a matter of legislative grace. However, the operation of the statutes under attack has, perhaps inadvertently, made it available only to those persons who can pay the necessary filing fees. This is what it cannot do.
Throughout the centuries the Great Writ has been the shield of personal freedom insuring liberty to persons illegally detained. Respecting the State's grant of a right to test their detention, the Fourteenth Amendment weighs the interests of rich and poor criminals in equal scale, and its hand extends as far to each. In failing to extend the privilege of the Great Writ to its indigent prisoners, Iowa denies them equal protection of the laws. The judgments of the Supreme Court of Iowa are vacated and each cause is remanded to that court for further action consistent with this opinion.
Vacated and remanded.
Iowa Code Ann. (Cum. Supp. 1960) § 606.15 provides in pertinent part that "[t]he clerk of the district court shall charge and collect . . . [f] or filing any petition . . . and docketing the same, four dollars." Section 685.3 states in relevant part that "[t]he clerk [of the Supreme Court] shall collect . . . [u]pon filing each appeal, three dollars."
31 Car. II, c. 2. |
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178 L. Ed. 2d 347 | Application for an injunction pending appeal, presented to Justice Alito, and by him referred to the Court, denied. |
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368 U.S. 56 | Per Curiam.
The appeal is dismissed. Treating the papers whereon the appeal was taken as a petition for writ of certiorari, certiorari is denied. |
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2 Cust. Ct. 682 | Opinion by
Cline, J.
On the record presented the protest was overruled. |
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312 U.S. App. D.C. 427 | Opinion for the Court filed by Circuit Judge STEPHEN F. WILLIAMS.
STEPHEN F. WILLIAMS, Circuit Judge:
This is an interlocutory appeal from a denial of preliminary injunctive relief. The four individual plaintiffs are former employees of the Resolution Trust Corporation who allege that they suffered illegal retaliation for publicly exposing instances of RTC mismanagement and waste. The fifth plaintiff, the Government Accountability Project, is a self-described public-interest group dedicated to supporting government employees who come forward with reports of official misconduct. All five plaintiffs sought a preliminary injunction barring the RTC from persisting in the alleged harassments of the four individual plaintiffs and from taking action against other would-be whistleblowers who have not come forward or joined the suit for fear of agency retaliation.
We affirm the district court's denial of the injunction. The motion is moot with respect to three of the individual plaintiffs, who have left the RTC and have not alleged any retaliation that would extend beyond the period of their employment. The fourth individual plaintiff has alleged post-termination retaliation, but in light of the district court's specific findings of fact — findings to which we owe deference — we find he has not adequately shown that he will succeed on the merits of his suit or suffer irreparable injury in the absence of interim relief. Finally, although we find that the group plaintiff has standing to bring one of its claims, its motion for preliminary injunctive relief fails for want of an ongoing injury that the injunction would relieve.
I.
The four individual plaintiffs worked for the RTC in different capacities and in different offices, and they challenge different agency actions. Before their reassignment and later resignation, Jacqueline Taylor and Bruce Pederson were both senior attorneys in the Professional Liability Section of the RTC's Western Regional Office in Denver. In 1992, they began protesting a reorganization of their office, claiming that it was both grossly mismanaged and designed to gut their section just as it was getting ready to bring several large fraud suits against fiduciaries of failed savings and loan institutions. In addition to preparing briefings on the subject for RTC senior management, the agency's Inspector General's Office, and the General Accounting Office, Pederson and Taylor testified several times before the Senate Banking Committee, and their testimony received substantial publicity. They allege that as punishment for going public with their complaints, the RTC eliminated their positions and "exiled" them to another unit, where they were given make-work duties and physically isolated from other agency employees. They further complain that their applications to return to substantive management positions were summarily denied, that their mail and computer files were opened and monitored, and that their superiors slandered them to other employees and took action against co-workers who continued to socialize with them. In addition, Taylor says that the RTC General Counsel put her under a "gag order" by commanding her in a memorandum not to speak publicly about any matter concerning the agency without prior approval. In response, the RTC argues that it downsized the Denver office in anticipation of having to phase out the entire agency's operations by the end of 1995, that Pederson's and Taylor's complaints were simply efforts to preserve their own status during the reorganization, that the two were less qualified than the candidates hired for the new positions for which they applied, and that the supposed "gag order" was merely a reminder to Taylor of her ethical obligations as an attorney not to disclose client confidences.
The third individual plaintiff, Juan Luis Burgos-Gandia, was a litigator in the RTC's Dallas field office. Burgos alleges that he was assigned to "problem cases" and temporarily stripped of all responsibilities after he complained to RTC management and the GAO about overbillings by one of the agency's outside law firms. The RTC responds that Burgos's assignments changed only as a result of a general reallocation of work in his division. In addition, the agency accuses Burgos of severe misconduct with respect to one of his cases. Burgos's supervisors asked him to have outside counsel move to vacate a default judgment entered against the agency, but Burgos disagreed with this strategy and instead ordered the motion withdrawn; when his superiors countermanded the order, Bur-gos filed what he called an "informative motion" with the court detailing his dispute with his supervisors and, according to the RTC, disclosing client confidences and litigation strategy in an attempt to avoid being sanctioned for his own conduct in the episode. The RTC initially notified Burgos that he would be fired for his insubordination but later placed him on paid administrative leave; in December 1994, the agency ultimately decided not to terminate Burgos but instead to demote him by two pay grades.
Richard Dunn, the fourth individual plaintiff, was employed for about two years by an RTC office in Pennsylvania as an asset manager, overseeing the consolidation of banks taken over by the RTC and the sale of their properties to other banks. Dunn discovered that an outside contractor had overcharged the agency and brought the matter to the attention of RTC management. Several months later, Dunn failed to receive an expected promotion to a higher pay grade; he alleges that he was punished for exposing a favored contractor's wrongdoing, while the agency points to an unfavorable performance review he received for his previous year's work. The RTC allowed Dunn's temporary appointment to lapse, citing his poor interpersonal skills, inflexibility, and poor judgment.
Dunn's problems with the RTC continued after his employment ended. Shortly after his departure, private security officers began conducting surveillance on him; these detectives presented homemade "RTC Special Agent" credentials to local police who investigated when Dunn reported that he was being-followed by unknown men. An investigation of the incident by the RTC Inspector General concluded that there had been a miscommunication between the private detective agency and the RTC: the agency had retained the firm to provide extra security at some upcoming meetings that it thought Dunn might disrupt, but it had never authorized surveillance of Dunn or the use of false credentials.
Dunn also alleges that he applied for a number of jobs after leaving the agency but did not find employment until he was hired as an asset manager by Coopers & Lybrand in May 1994. He was fired on his fifth day of work. When Dunn, through counsel, pressed Coopers for an explanation, the firm replied that "sources within the RTC" had informed it that Dunn had threatened employees at the agency, that he had claimed to have a gun, and that "[t]he situation [had become] so serious that at one meeting of senior RTC officials, four armed guards were hired by the RTC for protection." Coopers also reported that the agency had told the firm it was "specifically prohibited from using Mr. Dunn on any RTC related work." Dunn denies that he ever engaged in such conduct, and the RTC does not now suggest otherwise. The agency asserts that it never put Dunn on any formal list of suspended or excluded contractors nor adopted any informal policy of excluding him from work on RTC contracts; it does not otherwise challenge his depiction of the Coopers incident.
Joining these four individual plaintiffs is the Government Accountability Project ("GAP"), an organization that represents individual whistleblowers and uses the information they provide to mount public education campaigns about government waste, fraud and misconduct. One of GAP's projects has been to challenge alleged mismanagement in the RTC; as part of this campaign, the group has helped RTC employees testify before congressional banking committees and has helped to draft and pass RTC-reform and whistleblower-protection legislation. As discussed below in greater detail, GAP claims that the RTC's retaliation against would-be whistleblowers has interfered with its attempts to communicate with willing speakers inside the agency.
The five plaintiffs filed a complaint alleging that the RTC's actions violated 12 U.S.C. § 1441a(q), which prohibits the RTC and its agents from discriminating against employees who disclose agency or contractor wrong doing to certain overseeing authorities. (Both parties refer to this provision as the RTC Whistleblower Act, as will we.) In addition, they assert numerous constitutional violations: for example, Taylor alleges that the General Counsel's alleged "gag order" was a prior restraint on her speech violating the First Amendment, GAP argues that the agency's conduct violated its First Amendment rights to receive information from willing speakers, Dunn maintains that the RTC's contacts with outside employers following his termination deprived him of a Fifth Amendment liberty interest, and Burgos argues that his being placed on administrative leave from his government employment denied him a property interest without due process. The plaintiffs moved for preliminary injunctive relief, which the district court denied on the grounds that they had failed to demonstrate irreparable injury and were unlikely to succeed on the merits of their claims. They filed an interlocutory appeal, which we expedited.
II.
A. Mootness
A federal court's Article III power to heai' disputes extends only to live cases or controversies. A request for injunctive relief remains live only so long as there is some present harm left to enjoin. See Renne v. Geary, 501 U.S. 312, 320-21, 111 S.Ct. 2331, 2338, 115 L.Ed.2d 288 (1991) ("Past exposure to illegal conduct does not in itself show a present case or controversy regarding injunctive relief . if unaccompanied by any continuing, present adverse effects.") (ellipses in original) (quoting O'Shea v. Littleton, 414 U.S. 488, 495-96, 94 S.Ct. 669, 675-76, 38 L.Ed.2d 674 (1974)); Christian Knights of the Ku Klux Klan v. District of Columbia, 972 F.2d 365, 369 (D.C.Cir.1992). Once the movant is no longer in harm's way, a motion for an injunction becomes moot. See, e.g., Craig v. Boren, 429 U.S. 190, 192, 97 S.Ct. 451, 454, 50 L.Ed.2d 397 (1976) (request for injunction against enforcement of alcohol consumption restriction applicable only to males aged 18 to 20 becomes moot once plaintiff turns 21); Ringgold v. United States, 553 F.2d 309, 310 (2d Cir.1977) (cadet's suit to enjoin military academy's application of honor code against him becomes moot when he resigns from academy before appeal and thereby removes himself from code's coverage).
For this reason, while a court may enjoin an employer from retaliating against its current employees who are challenging the employer's wrongdoing, e.g., Wagner v. Taylor, 836 F.2d 566, 570-75 (D.C.Cir.1987), and former employees can recover damages for past retaliation suffered while employed, a request for an injunction against future retaliation in the workplace normally becomes moot once the employees no longer work for that employer. In Bois v. Marsh, 801 F.2d 462 (D.C.Cir.1986), a former Army audiologist alleged that her supervisor in the military had discriminated against her and had retaliated when she complained; she sought both damages and an injunction. Although we held that her claims for damages were still live and proceeded to analyze them on the merits, 801 F.2d at 468-71, we dismissed her request for injunctive relief as moot. Because the plaintiff "voluntarily resigned from the Army and . asserted no intention of returning to active duty," she was effectively seeking "reform of military procedures to which she [was] no longer subject." Id. at 466. She thus "ha[d] nothing to gain from the equitable relief she [sought]," making her claim moot. Id. We further held that the plaintiffs injuries were not "capable of repetition" such that they fell within the exception to the mootness requirement for cases "capable of repetition, yet evading review": the plaintiff had no "reasonable expectation" that she would ever again be subject to the Army's grievance procedures, as she did not intend to rejoin the armed forces and would not be recalled to service except in the event of a national emergency. Id. at 466-67 (quoting Weinstein v. Bradford, 423 U.S. 147, 149, 96 S.Ct. 347, 349, 46 L.Ed.2d 350 (1975) (per curiam)).
The individual plaintiffs in the present case are in a similar difficulty. All have left the RTC. Dunn's temporary contract was not renewed, and Burgos resigned in January 1995, just after this appeal was filed. In addition, two months before oral argument, Pederson and Taylor took advantage of a Voluntary Separation Incentive Payment program to resign from the RTC; these resignations became effective shortly after the case was argued. None of these four has indicated that he or she plans to work again at the RTC. Nor is such reemployment likely, given that the agency is scheduled to be phased out of existence by the end of this year. See 12 U.S.C. § 1441a(m)(1). In short, these plaintiffs have no "reasonable expectation" of returning to the RTC and being subjected to the same treatment as before. See James v. Department of Health and Human Svcs., 824 F.2d 1132, 1136 (D.C.Cir.1987) (for plaintiff to have "reasonable expectation" that past injury will recur, "there must exist not merely a physical or theoretical possibility of recurrence, but rather a demonstrated probability") (internal quotation marks omitted).
Of the four individual plaintiffs, only Dunn has alleged that the RTC retaliated against him after the end of his employment with the agency, specifically, by wrongfully conducting surveillance and making false statements to potential employers. The other plaintiffs' affidavits (and the remaining sections of Dunn's submissions) are filled with allegations of adverse hiring and compensation decisions, offensive work assignments, and other workplace mistreatment suffered at the hands of supervisors and co-workers. But there is nothing indicating that these actions could continue once the plaintiffs left the RTC. Taylor, to be sure, argues that the General Counsel's memorandum (the so-called "gag order") subjects her First Amendment rights to continuing restraint, but we cannot see how it would have that effect: the memorandum simply (and rather vaguely) invokes "[t]he general principle that attorneys do not discuss client matters with the media absent express client permission" and notes that her prior unauthorized disclosures "impact[ed] detrimentally on the ability of the RTC to efficiently carry out its mission, on the public image of the RTC, and on [its] morale." As Taylor no longer works for the RTC and her statements cannot be perceived as official agency pronouncements, she no longer needs to clear her speech with the agency except to the extent that she is ethically obligated not to disclose the confidences of her past client — a wholly non-controversial obligation incumbent upon every attorney; we see nothing in the General Counsel's memorandum purporting to impose any further obligation on Taylor after the end of her RTC employment, a scenario that the memorandum, so far as appears, does not even consider. Finally, the individual plaintiffs other than Dunn may not just point to his charges of post-termination retaliation and assert without more that they too will be subjected to continuing harassment: Dunn's allegations are specific to his own situation and do not support an inference that the other offices of the RTC would take similar actions against any of the other plaintiffs now that they have left the agency. In sum, the individual plaintiffs are no longer with the agency, there is no serious prospect of their return, and (with the exception of Dunn) they make no showing of a risk of continuing retaliation; their requests for preliminary injunctive relief would therefore seem moot.
Plaintiffs argue, however, that the RTC's misconduct effectively forced them to resign their positions and that our using the resignations to find their claims moot would enable the agency to benefit from its wrongdoing. Some reasoning along these lines may be implicit in Bois v. Marsh, where we considered (though ultimately rejected as factually unsupported) the plaintiffs contention that she was forced to resign from the Army by her discriminatory superior's continuing position of authority. See 801 F.2d at 466 n. 5. And more generally, mootness and vacatur jurisprudence frequently recognizes the risk that parties might game the system to avert binding judicial pronouncements. Thus, a defendant cannot moot the case for an injunction against it merely by ceasing its wrongful conduct unless it also shows that there is no reasonable expectation that it will repeat the wrong. United States v. W.T. Grant Co., 345 U.S. 629, 632-33, 73 S.Ct. 894, 897-98, 97 L.Ed. 1303 (1953); see also United States v. Oregon State Medical Soc'y, 343 U.S. 326, 333, 72 S.Ct. 690, 695-96, 96 L.Ed. 978 (1952) (discounting "protestations of repentance and reform, especially when abandonment seems timed to anticipate suit"); cf. U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, — U.S. -, -, 115 S.Ct. 386, 391-92, 130 L.Ed.2d 233 (1994) (describing availability of vacatur upon mootness as contingent on equities of litigants' procedural postures on appeal and noting that "a suitor's conduct in relation to the matter at hand may disentitle him to the relief he seeks") (citations and quotation marks omitted). By the same token, wrongdoing employers should not be able to moot disputes unilaterally by increasing their offensive conduct to the point where the victim is shoved out of harm's way—assuming, however, that the shove is itself illegitimate and that damages would be an inadequate substitute relief for the wrongdoing.
These last caveats are critical. Employer misconduct causing an end of the employment relationship should not undermine the otherwise resulting mootness unless it rises to the level of an unlawful dismissal of the complainants, actual or constructive. An employee who is mistreated on the job but who voluntarily chooses to leave the workplace permanently bears responsibility for the dispute becoming moot and must forego injunctive relief in favor of damages. Cf. Ringgold, 553 F.2d at 310 and n. 2 (deeming cadet's resignation from academy voluntary and holding suit over disciplinary code moot, notwithstanding allegations that cadet was subject to unfair discipline and that academy induced resignation by offering possibility of reapplying). Furthermore, the burden of demonstrating this improper dismissal rests with the employee. Cf. Bois, 801 F.2d at 466 n. 5 (declining to excuse mootness because of plaintiff's failure to proffer evidence and present more than "vague allegations" of an unlawful constructive discharge).
Of the four individual plaintiffs, only Burgos and Dunn have made specific representations to the court beyond their arguments on brief challenging their terminations as wrongful. Because Dunn had left the RTC before the filing of the complaint, his initial submissions to the district court fully laid out his challenges to his dismissal. The district court thoroughly reviewed these submissions as part of its decision to deny preliminary injunctive relief. It found "no substantial likelihood that Dunn's performance evaluation for August 1991-August 1992 was in retaliation for his complaints about client overcharging" and it credited "the judgment of Dunn's superiors with respect to his poor judgment and interpersonal skills." Accordingly, it "conclude[d] that Dunn ha[d] failed to demonstrate a substantial likelihood of any causal link between his alleged whistleblowing and his termination." These findings were adequately supported by the detailed descriptions of deficient job performance laid out in the August 1991-August 1992 evaluation, which was co-signed and concurred in by two of Dunn's supervisors; by a subsequent performance review, which found that although Dunn's work and attitude had improved some, his judgment skills were still below average and "he still ha[d] much to learn in foreseeing how people will react" to his various actions; and by two independent reviews of the performance evaluations— both concluding that Dunn had suffered no retaliation—undertaken by the Field Operations Officer and the vice-president of the Operations Division as part of the agency's internal grievance process. As we cannot say that the court's findings were clearly erroneous, see City of Las Vegas v. Lujan, 891 F.2d 927, 931 (D.C.Cir.1989), we cannot find that Dunn has met his burden of proving that the RTC's failure to renew his contract was a wrongful and retaliatory discharge.
Burgos, on the other hand, was still employed by the RTC at the start of the litigation and resigned only after the district court's denial of preliminary relief. He did, however, submit a copy of his resignation letter to this court in conjunction with the plaintiffs' emergency motion to expedite the appeal. Burgos's letter details the conditions that motivated his resignation, which he characterizes as a constructive discharge: he cites the dispute over his alleged insubordination during litigation, his being placed on administrative leave for nine months following the dispute, and his eventual two-grade demotion. Although this letter was filed after the district court's opinion, we still have the benefit of that court's findings concerning all the events Burgos cites as premises for his resignation. According to the court, the disciplinary measures imposed by Burgos's superiors "only resulted when [Burgos] refused to accept their tactical decision [during the contested litigation] and risked placing his client's interests in jeopardy by filing his 'Informative Motion' out of an instinct for self-preservation, i.e., to avoid the stain of sanctions by the . court." It concluded that Burgos's "claim that defendants took such action in retaliation for 'whistleblowing' strains credulity." Again, we cannot say that these findings are clearly erroneous, especially in light of the absence of evidence connecting Burgos's punishment to his prior disclosure of overbilling by outside counsel— Burgos's only action that could reasonably be considered protected whistleblowing. Hence, even if we believed that the RTC's disciplining of Burgos constituted a constructive discharge, we could not say it was wrongful.
The cases of Pederson and Taylor are slightly different, as they made no submissions to the court explaining their decisions to accept the RTC's severance packages and resign. Nonetheless, we can safely say that they have not sustained the burden imposed by Bois. They do not suggest that the RTC's allegedly retaliatory conduct so increased around this time that they were forced out of the agency; rather, their decision to leave at that point appears to have been motivated by the general availability of the new Voluntary Separation Incentive Program. Even assuming that RTC misbehavior was an essential factor in their decision to accept the incentive program (a weight on the scale but for which they would have declined the attractive opportunity to quit), that behavior had plainly not been enough to sway them before the program was established. An employer does not effect a constructive discharge merely because its creation of a general separation program makes resignation attractive enough to bring about the departure of an employee otherwise inclined to remain. Here, the timing suggests overwhelmingly that but for the general program of sweetened departure terms, Taylor and Pederson would have been content to remain. This analysis is not altered by the short handwritten notes that both plaintiffs added to their form resignation letters summarily contradicting the form letter's statement that the decision to take advantage of the severance program was "entirely voluntary." These notes add nothing substantive to the inadequate evidence that Taylor and Pederson's decisions to leave the RTC were wrongfully coerced.
We therefore hold that Taylor, Pederson, and Burgos's requests for preliminary injunctive relief are moot in their entirety. Dunn's request remains live to the-extent that he seeks to enjoin future post-termination retaliation by the RTC along the lines of that alleged in his affidavits. But even his request is moot with respect to the agency's conduct prior to his termination and to the termination itself.
B. Dunn's Fifth Amendment Claims and Other Injuries
We now turn to Dunn's remaining live claims for relief. To be entitled to a preliminary injunction, Dunn must — at a minimum — demonstrate four things: (1) that he is substantially likely to succeed on the merits of his suit, (2) that in the absence of an injunction, he would suffer irreparable harm for which there is no adequate legal remedy, (3) that the injunction would not substantially harm other parties, and (4) that the injunction would not significantly harm the public interest. See, e.g., Wagner v. Taylor, 836 F.2d 566, 575 (D.C.Cir.1987); Virginia Petroleum Jobbers Ass'n v. FPC, 259 F.2d 921, 925 (D.C.Cir.1958). We review a district court's balancing of these factors for abuse of discretion. City of Las Vegas, 891 F.2d at 931.
Dunn asserts that the RTC has interfered with his employment prospects since he left the agency and thus deprived him of a liberty interest protected by the Fifth Amendment without due process; he further argues that this infringement of his constitutional rights is irreparable injury sufficient to support preliminary relief. But while Dunn has made allegations of seriously defamatory conduct on the part of the RTC — allegations that have to this point largely gone unrebutted — we agree with the district court that he has not demonstrated government action rising to the level of a constitutional deprivation.
Constitutional injury supposes something more than simple defamation or stigma. Paul v. Davis, 424 U.S. 693, 96 S.Ct. 1155, 47 L.Ed.2d 405 (1976). Even a plaintiff who receives an admittedly defamatory recommendation from a prior government employer that "would undoubtedly . impair his future employment prospects" cannot establish a constitutional violation "so long as such damage flows from injury caused by the defendant to a plaintiffs reputation" alone. Siegert v. Gilley, 500 U.S. 226, 234, 111 S.Ct. 1789, 1794, 114 L.Ed.2d 277 (1991). To prove constitutional injury, the plaintiff must show not only that the government has imposed some stigma upon him, but also that it has worked some change in his status under law. See Paul v. Davis, 424 U.S. at 711-12, 96 S.Ct. at 1165-66.
Our circuit recently described two ways that a litigant alleging government interference with his future employment prospects may demonstrate the tangible change in status required to prove constitutional injury. In Kartseva v. Department of State, 37 F.3d 1524 (D.C.Cir.1994), we held that "if [the government's] action formally or automatically excludes [the plaintiff] from work on some category of future [government] contracts or from other government employment opportunities, that action . implicates a liberty interest." Id. at 1528. Alternatively, the plaintiff may demonstrate that the government's action precludes him — whether formally or informally — -from such a broad range of opportunities that it "interferes with [his] constitutionally protected 'right to follow a chosen trade or profession.'" Id. at 1529 (quoting Cafeteria and Restaurant Workers v. McElroy, 367 U.S. 886, 895-96, 81 S.Ct. 1743, 1749, 6 L.Ed.2d 1230 (1961)). In other words, government action precluding a litigant from future employment opportunities will infringe upon his constitutionally protected liberty interests only when that preclusion is either sufficiently formal or sufficiently broad.
The district court found — without clear error — • that neither was the case for Dunn. The court credited the RTC's assertion that the agency had taken no action to formally debar Dunn or automatically disqualify him from working on any future RTC contracts, and Dunn presents no convincing evidence to the contrary. The Coopers letter, recording that "sources within the RTC" had told the firm it was "specifically prohibited from using Mr. Dunn on any RTC related work," is too second-hand and vague to seriously undermine the sworn statement of the Contractor Ethics Program Manager, credited by the district court, denying any formal debarment.
Nor has Dunn demonstrated that the agency took informal action against him so broad that it infringed upon his "right to follow a chosen trade or profession." The standard Dunn must meet in this regard— showing that the government "has seriously affected, if not destroyed, his ability to obtain employment in [his] field," Greene v. McElroy, 360 U.S. 474, 492, 79 S.Ct. 1400, 1411, 3 L.Ed.2d 1377 (1959) — is high: the RTC's misconduct must substantially reduce the value of his human capital, as it would if his skills were highly specialized and rendered largely unmarketable as a result of the agency's acts. Compare Greene, 360 U.S. at 492, 79 S.Ct. at 1411 (exclusion of aerospace engineer from work in all government-sponsored aeronautics facilities infringes constitutional liberty interest), with Cafeteria and Restaurant Workers v. McElroy, 367 U.S. at 895-96, 81 S.Ct. at 1748-49 (revocation of short-order cook's permission to work on military base does not implicate liberty interest because she "remained entirely free to obtain employment as a short-order cook or to get any other job," even with same employer at a different facility). Yet all Dunn proffered in this regard was a simple assertion that he has been unable to find employment in his chosen field, a difficulty that if true might easily be explained in other ways in light of his record at the RTC. The district court therefore did not clearly err in finding that the Coopers & Lybrand incident was only an isolated, "one-time occurrence." Dunn has failed to carry his burden of persuasion.
Given the inadequacy of Dunn's prospects for success on the merits, there may be no showing of irreparable injury that would entitle him to injunctive relief. We note, however, that should Dunn ultimately prevail, his economic losses would be recoverable under 12 U.S.C. § 1441a(q)(3), which provides for compensatory damages; and in the absence of special circumstances, which Dunn does not assert, recoverable economic losses are not considered irreparable. See Sampson, 415 U.S. at 90, 94 S.Ct. at 952-53 ("temporary loss of income, ultimately to be recovered, does not usually constitute irreparable injury"); Wisconsin Gas Co. v. FERC, 758 F.2d 669, 674 (D.C.Cir.1985). Accordingly, we find no abuse of discretion in the district court's denial of Dunn's request for a preliminary injunction.
C. GAP's Standing and Continuing Injury
Before addressing GAP's request for injunctive relief on the merits, we must first resolve a jurisdictional issue: whether the organization has standing to pursue its claims in federal court at all. Humane Soc'y v. Babbitt, 46 F.3d 93, 96 (D.C.Cir.1995). GAP offers two theories. It argues that the RTC's alleged violations of the RTC Whistle-blower Act interfere with the organization's "ability to gather and disseminate information about the RTC" and frustrate its "concrete, programmatic activities." In addition, it maintains that the agency's interception of and interference with confidential communications from sources within the RTC violates its First Amendment right to receive the communications of willing speakers. We hold that GAP lacks standing entirely under the RTC Whistleblower Act; furthermore, while we hold that GAP has standing to bring suit under the First Amendment, we find that it has not sufficiently alleged a continuing injury that would justify granting its motion for preliminary relief.
A litigant challenging government action under a federal statute must satisfy not only the constitutional requirements of standing but also its prudential prerequisites; the litigant must show that it falls within the statute's "zone of interests" by demonstrating "either a congressional intent to protect or regulate the interest asserted, or some other indication that the litigant is a suitable party to pursue that interest in court." Animal Legal Defense Fund v. Espy, 23 F.3d 496, 502 (D.C.Cir.1994). ¶ GAP's doubtless sincere interest in promoting the underlying purposes of the RTC Whistleblower Act is not enough to support standing to sue under that statute; otherwise, any party that bothered to sue would ipso facto locate itself within the relevant zone of interests. See Haitian Refugee Ctr. v. Gracey, 809 F.2d 794, 813 (D.C.Cir.1987). In identifying the Act's intended zone of interests, we look to the means selected by Congress to fulfill its purposes. Animal Legal Defense Fund, 23 F.3d at 503. And Congress has focused solely on the actual employees of the RTC and of its contractors: only to them does the Act afford explicit protection and remedies. 12 U.S.C. § 1441a(q)(1). Furthermore, GAP cannot even claim to be an intended recipient of protected disclosures under the Act, which protects disclosures only to a small number of named entities — "the [Resolution Trust] Corporation, the Thrift Depositor Oversight Board, the Attorney General, or any appro priate Federal banking agency." Id. Given Congress's explicit designation of a class of direct beneficiaries and its clear statement of remedies, which are seemingly adequate to elicit vigorous, aggressive enforcement, we can see no ground for inferring any intent to designate other potential recipients, unnamed by the Act and different in character from the named recipients, as supplemental challengers of possibly illegal activity.
On the other hand, we agree with GAP that it has a First Amendment interest in receiving information from willing speakers within the RTC sufficient to support its standing to bring a constitutional challenge. "[W]here a speaker exists . the protection afforded [by the First Amendment] is to the communication, to its source and to its recipients both." Virginia Pharmacy Bd. v. Virginia Consumer Council, 425 U.S. 748, 756, 96 S.Ct. 1817, 1823, 48 L.Ed.2d 346 (1976) (collecting cases and holding, on that principle, that consumers of prescription drugs had standing to challenge state law forbidding advertising of prescription drug prices). GAP has met the requirement of pleading the existence of specific willing speakers. See Gregg v. Barrett, 771 F.2d 539, 547-48 (D.C.Cir.1985). Indeed, four of these speakers are the individual plaintiffs whose claims we have already discussed; furthermore, GAP has alleged specific ways, direct and indirect, by which the RTC has intercepted and interfered with the organization's communications with these speakers. Thus GAP has adequately pled facts supporting its standing to bring suit on First Amendment grounds.
But to establish the grounds for a preliminary injunction GAP must show more: it must demonstrate a substantial probability of success on the merits and an irreparable injury that the proposed injunction would avert. This inquiry overlaps with the standing issue somewhat; without adequate proof of a threatened injury, plaintiff lacks both standing and an adequate basis in equity for an injunction. City of Los Angeles v. Lyons, 461 U.S. 95, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983); Fair Employment Council v. BMC Marketing Corp., 28 F.3d 1268, 1272-74 (D.C.Cir.1994). Here the district court found that "none of the plaintiffs named in this action has been so chilled as to keep his or her story from GAP" and that GAP failed to show that "other RTC employees have been 'chilled' from providing GAP with information." These findings are not clearly erroneous. Not only does it appear that the four individual plaintiffs have overcome any reluctance to speak that might have been caused by the RTC's behavior, but none — for the reasons stated before — is any longer potentially subject to direct retaliation, harassment or surveillance as an employee. Only Dunn has alleged potentially chilling conduct by the RTC following his termination, but as noted above, the only alleged post-employment retaliation that the district court credited was the single, discrete Coopers & Lybrand episode, which is inadequate to chill Dunn's future communications to GAP.
The remaining evidence properly before the court was extremely limited. Following their initial submission of a 63-page motion for relief with hundreds of pages of exhibits, and shortly before the government's response was originally due, the plaintiffs tried to submit an additional nine affidavits from alleged victims of RTC retaliation who were not parties to the suit. The court rejected these last minute affidavits, explaining in its final memorandum that it had done so "because defendants lacked an adequate opportunity to respond to those extra-complaint allegations before the hearing on the preliminary injunction motion." Given the district court's repeated attempts to focus the litigation and keep the filings at a manageable level, and in light of District Court Rule 205's exhortation that the original application for a preliminary injunction contain "all affidavits on which the plaintiff intends to rely" (emphasis added), this was not an abuse of discretion. The only relevant evidence properly filed consists of two statements in an affidavit from a GAP official. The first asserts that two RTC employees came forward and provided GAP with "substantial information" about agency misconduct but declined to become plaintiffs in the suit out of fear of retaliation. This hardly helps GAP. It suggests that despite the agency's actions, RTC employees remained willing to supply the organization with information, even if they drew the line at joining GAP's suit; GAP has not asserted (nor can we imagine) a First Amendment right to enjoin government conduct that inhibits other persons who might be potential plaintiffs from filing lawsuits. The other statement in the affidavit says that "Whistleblower [sic] who possess information crucial to [GAP's media campaign] are unwilling to disclose the information due to a well justified fear of reprisal by the RTC." This is entirely conclusory. Neither statement makes the district court's finding that GAP suffers no First Amendment injury clearly erroneous or casts doubt on its conclusion that preliminary relief was unwarranted.
The district court's denial of injunctive to all plaintiffs is therefore
Affirmed.
. The RTC argues that because plaintiffs are challenging federal personnel decisions, they must additionally show that the irreparable harm claimed outweighs the "disruptive effect which the grant of [preliminary relief is] likely to have on the administrative process" and the government's "wide [] latitude in the dispatch of its own internal affairs." Sampson v. Murray, 415 U.S. 61, 83, 94 S.Ct. 937, 949, 39 L.Ed.2d 166 (1974) (citation and quotation marks omitted). But Sampson involved a plaintiff's attempt to short-circuit an administrative scheme explicitly designed to resolve the exact type of personnel dispute at issue. Our circuit has not resolved the applicability of this heightened standard to suits not implicating such an administrative scheme. See Wagner, 836 F.2d at 575 n. 66. We need not decide the matter here, either, given that we find that Dunn has failed to meet even the ordinary standards for a preliminary injunction. We note that the issue may be in large part mooted by post-Sampson decisions finding that the Civil Service Reform Act deprives the federal courts of jurisdiction over claims for which those statutes provide a remedy, see United States v. Fausto, 484 U.S. 439, 108 S.Ct. 668, 98 L.Ed.2d 830 (1988); Spagnola v. Mathis, 859 F.2d 223, 230 n. 13 (D.C.Cir.1988), and in other cases often requires deferral of such action until the plaintiff has exhausted administrative remedies, see Steadman v. U.S. Soldiers' & Airmen's Home, 918 F.2d 963 (D.C.Cir.1990); Suzal v. U.S. Information Agency, 32 F.3d 574 (D.C.Cir.1994). |
|
194 U.S. 630 | In error to the Supreme Court of the State of. Ohio. Motion to docket and dismiss submitted May 16, 1904. Decided May 31, 1904. Motion to docket and dismiss granted, and case docketed and dismissed with costs. Mr. James Rudolph Garfield for defendants in error in support . of motion. No one opposing. |
|
429 U.S. 1123 | C. A. 2d Cir. Certiorari denied.
Mr. Justice Stewart and Mr. Justice Powell would grant certiorari. |
|
63 T.C. 468 | Featherston, Judge:
In these consolidated cases, respondent determined deficiencies in petitioners' Federal income taxes for 1969 in the following amounts:
Petitioner Docket No. Deficiency
Morris G. Underwood_ 2882-73 $4,286.24
Jackie Underwood- 2883-73 4,302.42
The only issue for decision is whether petitioners, on their Federal income tax returns for 1969, properly deducted their respective shares of the net operating loss incurred by an electing small business corporation. The answer depends upon (1) whether the corporation's execution of a promissory note to petitioners gave them an "adjusted basis" in "indebtedness" within the meaning of section 1374(c)(2)(B), and (2) whether respondent is estopped to contend that it did not.
FINDINGS OF FACT
Morris G. Underwood (hereinafter Underwood) and Jackie Underwood, husband and wife (referred to jointly hereinafter as petitioners), were residents of Lubbock, Tex., at the time they filed the petitions herein. They filed separate individual Federal income tax returns for the calendar year 1969, using the cash method of accounting. All of their income, notes, and stock here involved were community property.
During all pertinent years, petitioners were the sole shareholders of Underwood's of Lubbock, Inc. (hereinafter referred to as Lubbock), a corporation engaged in the retail barbecue cafeteria business located in Lubbock, Tex.
In January 1965, petitioners organized another retail barbecue cafeteria business, Underwood's of Albuquerque, Inc. (hereinafter referred to as Albuquerque). As of May 1966, Albuquerque elected to be taxed as a small business corporation under subchapter S of the Internal Revenue Code of 1954, sections 1371-1379. Petitioners became the sole shareholders of Albuquerque as of June 1, 1966, and continued to be so through April 30,1969.
Lubbock filed its income tax returns using the accrual method of accounting and a fiscal-year ending August 31. Albuquerque filed its income tax returns using the accrual method of accounting and a fiscal year ending April 30.
For the period prior to its election to be taxed as a small business corporation, Albuquerque's tax returns reflected the following operating results:
FYEApr. 30— Gain (orloss)
1965 _ 0
1966 _ ($82.49)
As a small business corporation, Albuquerque's operations reflected the following results:
FYEApr. 30— Gain (orloss)
1967_ ($4,003.05)
1968_ (51,815.94)
1969_ (13,054.74)
1970_ (11,331.62)
Lubbock's operations during its fiscal years ended August 31 of 1965 through 1970 consistently resulted in profits.
During the period January 1965 to October 1966, Lubbock made loans to Albuquerque totaling $110,000, in order to help finance the latter's operations. In return, Albuquerque executed a series of demand promissory notes to Lubbock, each bearing 6-percent interest.
Interest due from Albuquerque on its notes was regularly accrued on Lubbock's books as interest income and was consistently reported as such on its income tax returns. Albuquerque's books similarly reflected accruals for interest expense incurred on the loans extended to it by Lubbock.
Albuquerque made no payments of principal or interest on these notes to Lubbock until April 1968, when it paid Lubbock $6,980, which represented the total amount of interest which had accrued on the notes as of January 31,1967.
Ray Lawrence (hereinafter Lawrence) is and has been the C.P.A. for the Underwood interests since about 1953. Sometime prior to January 31, 1967, Lawrence discussed with Underwood the matter of anticipated losses of Albuquerque for its fiscal year ended April 30,1967. Lawrence advised Underwood that losses in Albuquerque could well exceed Underwood's adjusted basis in that corporation's stock in the near future and that, therefore, Underwood should consider steps which would increase his basis in Albuquerque's stock or indebtedness, thereby enabling him to deduct such losses for tax purposes.
At the time this discussion was held, Lubbock was not actively engaged in any expansion program for which it needed the funds previously lent to Albuquerque.
As a result of the discussion between Lawrence and Underwood, the following transactions occurred: (1) Lubbock surrendered its Albuquerque notes to Albuquerque, marking them "paid" as of January 31, 1967; (2) Albuquerque issued a demand promissory note to Underwood dated January 31, 1967, in the amount of $110,000, bearing 6-percent interest per annum; (3) Underwood gave his personal demand note to Lubbock dated January 31, 1967, in the amount of $110,000, bearing 6-percent interest per annum.
Thereafter, the books and records of Lubbock and Albuquerque reflected the ownership of the new notes and cancellation of the original notes in conformity with the transactions described above.
Interest due on the note Underwood executed to Lubbock was regularly accrued and reported for income tax purposes by Lubbock from and after January 31, 1967. Actual payments of interest to Lubbock were made by Underwood on April 11,1968, December 15,1969, and March 6,1970. The note was paid in full on March 27,1970.
On the note Albuquerque issued to Underwood on January 31, 1967, no principal or interest had been actually paid as of April 30, 1972.
As of April 30,1967, petitioners' adjusted basis in Albuquerque stock was $13,000. On their joint Federal income tax return for 1967, petitioners claimed a combined total of $3,695.22 of Albuquerque's April 30, 1967, fiscal year loss of $4,003.05, which left them a remaining basis of $9,304.78 in Albuquerque stock. On their joint Federal income tax return for 1968, peti tioners claimed all of Albuquerque's losses in the amount of $51,815.94 for its fiscal year ended April 30, 1968.
After deducting $9,304.78 of Albuquerque's April 30,1968, net operating loss on their joint income tax return for 1968, petitioners' adjusted basis in Albuquerque stock was reduced to zero. Petitioners also deducted the remainder of the April 30, 1968, fiscal year net operating loss incurred by Albuquerque. The remainder of the loss deducted exceeded the $22,377.50 directly loaned to Albuquerque by Underwood in April 1968, thereby reducing petitioners' adjusted basis in that indebtedness to zero. The remaining $20,133.66 of Albuquerque's April 30, 1968, net operating loss was also fully deducted by petitioners for 1968. Petitioners' computations treated the $110,000 January 31, 1967, note owed by Albuquerque to Underwood as a bona fide indebtedness of Albuquerque, serving to increase the limitation of their deductible portion of Albuquerque's net operating loss.
Subsequently, petitioners' income tax returns for 1967 and 1968 were audited by respondent. The revenue agent's report was dated February 5,1970. With respect to 1967, respondent's agent proposed to treat the January 31, 1967, note exchange as a $110,000 dividend from Lubbock to petitioners. For 1968, he proposed (a) to disallow $20,133.66 of the Albuquerque loss to petitioners on the grounds that Lubbock, and not petitioners, had, in fact, advanced the $110,000 to Albuquerque, and (b) to treat the repayment of $12,000 by Albuquerque to petitioners as taxable capital gain instead of tax-free return of capital.
In conference, respondent dropped the proposed disallowance of Albuquerque's April 30, 1968, loss but maintained his positions on both the 1967 dividend receipt and the capital gain treatment for the 1968 repayments by Albuquerque on the April 9, 1968, loan extended by Underwood.
Early in 1971, as a result of the settlement conference, petitioners were assessed a tax for 1967, which they paid, on the theory that the note they received from Albuquerque for $110,000 on January 31, 1967, was a dividend in that amount from Lubbock. In June 1971, petitioners filed a claim for refund of the tax so assessed and paid, and in January 1972, they filed suit for refund. A pretrial order entered by the United States District Court for the Northern District of Texas stated the opposing claims of the litigants in the following terms:
The plaintiffs contend that the transfer in 1967 by Underwood's of Lubbock, Inc. (Lubbock) of its note receivable from Underwood's of Albuquerque, Inc. (Albuquerque) in the amount of $110,000 to plaintiffs was made in exchange for the note of plaintiffs to Lubbock in the amount of $110,000 and resulted in no dividend to plaintiffs in 1967.
The defendant contends that the advance of the $110,000 note by Lubbock to plaintiffs was a distribution constituting a constructive dividend taxable to plaintiffs as ordinary income in the year 1967.
No issues other than those described above were raised by the parties in the refund suit.
The refund suit was settled in 1973. The amount of tax conceded by petitioners and retained by respondent amounted to approximately 10 percent of the amount in issue. In an offer of settlement, petitioners' counsel proposed an understanding that no part of the refund would be taxable to petitioners as interest (whether assessed interest or interest on overpayment). In order to implement and give sanction to this understanding, petitioners' counsel proposed that "the fact of settlement is not to be used as evidence between the parties in any other proceeding."
In its letter dated February 6,1973, accepting petitioners' offer of settlement, the Government stated:
This offer has been accepted on behalf of the Attorney General subject to the understanding that the Government is not precluded from pursuing the argument of disallowing the taxpayers' deductions for years subsequent to the year in suit for the losses of Underwood's of Albuquerque, Inc., a Subchapter S corporation.
Judgment was entered in accordance with the settlement on April 27,1973, and a partial refund of the tax so assessed on the alleged $110,000 dividend was made.
On their Federal income tax returns for 1969, petitioners each deducted $6,527.37, their community one-half share of the net operating loss incurred by Albuquerque during its taxable fiscal year ended April 30,1969. Petitioners deducted such losses in the belief that their combined adjusted basis in Albuquerque's indebtedness exceeded Albuquerque's losses for that fiscal year.
On April 6, 1973, respondent sent statutory notices of deficiency to petitioners which determined deficiencies for the taxable year ended December 31,1969, based on disallowances of deductions of the Albuquerque losses claimed by petitioners.
OPINION
Section 1374(b) provides that a shareholder of a corporation which has elected to be taxed under subchapter S of the 1954 Code shall be allowed as a deduction his portion of the corporation's net operating loss. Section 1374(c)(2) limits a shareholder's pro rata share of such corporation's net operating loss to the sum of (a) the adjusted basis of the shareholder's stock in the corporation, and (b) the adjusted basis of "any indebtedness of the ¡corporation to the shareholder,, determined as of the close of the taxable year."
1. Deductibility-of-Loss Issue
Whether petitioners are entitled to deduct Albuquerque's losses for its fiscal year ended April 30, 1969, depends upon whether the 1967 exchange of papers — Albuquerque's note to Underwood and Underwood's note to Lubbock — created the kind of indebtedness that is referred to in section 1374(c)(2)(B). We think it did not create that kind of indebtedness.
The record is clear that Underwood advanced no funds, directly or indirectly, to Albuquerque in exchange for the note he received. Lubbock had advanced a total of $110,000 to Albuquerque during^ prior years, and Albuquerque was indebted to Lubbock for that amount. In exchange for Underwood's note obligating him to pay.Lubbock the $110.000. Lubbock canceled Albuquerque's notes to Lubbock. Albuquerque then gave its $110,000 note to Underwood. But the only effect of these new notes was to shift the liabilities for the prior loans.
The facts are similar, in principle, to a guaranty of the indebtedness of a subchapter S corporation. In the case of a guaranty, the guarantor promises to answer for the debt of another person, who himself remains liable for the debt. William H. Perry, 47 T.C. 159, 163 (1966), affd. 392 F.2d 458, 461 (C.A. 8, 1968); Tex. Bus. & Com. Code Ann. sec. 3.416 (1968). In a long list of cases, it has been held that basis-giving indebtedness for the purposes of section 1374(c)(2)(B) does not arise where a shareholder merely guarantees a subchapter S corporation's debt, William H. Perry, supra at 163; Milton T. Raynor, 50 T.C. 762, 770-771 (1968); Wheat v. United States, 353 F. Supp. 720, 722 (S.D. Tex. 1973); Neal v. United States, 313 F. Supp. 393, 396 (C.D. Cal. 1970), or executes a surety agreement with respect to the corporation's debt. Joe E. Borg, 50 T.C. 257, 264-265 (1968). Only after the guarantor or surety performs on his contract of guaranty does the debtor's liability to the creditor become an indebtedness to the guarantor. Putnam v. Commissioner, 352 U.S. 82, 85 (1956); William H. Perry, supra at 164.
Significantly, it is the payment by the guarantor of the guaranteed obligation that gives rise to indebtedness on the part of the debtor to the guarantor. The mere fact that the debtor defaults and thereby renders the guarantor liable is not sufficient. Similarly, the fact that Albuquerque executed a $110,000 note to Underwood is not sufficient to give him an adjusted basis in indebtedness within the meaning of section 1374(c)(2)(B). He had paid out nothing for that note. He had merely promised to pay the $110,000 to Lubbock. For the purposes of section 1374(c)(2)(B), the unpaid note was no different from the liability of a guarantor upon default by the primary obligor or from the liability for an unpaid stock subscription. Until the guarantor or the subscriber has paid his obligation, he has made no actual investment. The adjusted basis for indebtedness referred to in section 1374(c)(2)(B) is "intended to be comparable to actual capital investment by the shareholders," Wheat v. United States, supra at 722, or, stated another way, is limited to "the actual economic outlay of the shareholder," William H. Perry, 54 T.C. 1293, 1296 (1970), affirmed per order (C.A. 8, May 12, 1971).
Thus, in Joe E. Borg, supra at 263, this Court held that a note from a subchapter S corporation to its shareholder for unpaid salary was not a basis-giving indebtedness. Similarly, in Milton T. Raynor, supra at 770, we held that notes executed by the shareholders of such a corporation in favor of its creditors merely constituted additional security to such creditors, and could not, until paid, be considered to give rise to section 1374 (c)(2)(B) corporate indebtedness. Also, where a shareholder had given the subchapter S corporation his demand note in exchange for the corporation's long-term note, this Court held that the shareholder did not thereby acquire a basis in the indebtedness, stating (William H. Perry, 54 T.C. at 1296):
The report of the Committee on Finance of the Senate discloses the purpose of this section [1374(c)(2)(B)] as follows:
"The amount of the net operating loss apportioned to any shareholder pursuant to the above rule is limited under section 1374(c)(2) to the adjusted basis of the shareholder's investment in the corporation; that is, to the adjusted basis of the stock in the corporation owned by the shareholder and the adjusted basis of any indebtedness of the corporation to the shareholder. [Emphasis supplied. 1958-3 C.B.1141.]"
As we construed the language employed by the Committee on Finance, it appears to us that, given its most familiar meaning, the use of the word "investment"3 reveals an intent, on the part of the committee, to limit the applicability of section 1374(c)(2)(B) to the actual economic outlay of the shareholder in question.
The rule which we reach by this interpretation is no more than a restatement of the well-settled maxim which requires that "Before a deduction is allowable there must have occurred some transaction which when fully consummated left the taxpayer poorer in a material sense." [Fn. omitted.]
We conclude that the signing of Underwood's note to Lubbock and Albuquerque's note to Underwood did not give Underwood an adjusted basis in indebtedness within the meaning of section 1374(c)(2)(B).
2. Estoppel Issue
Quite obviously, respondent has had difficulty formulating his legal position on the tax consequences of petitioners' giving of the $110,000 note to Lubbock and simultaneously receiving the note in the same amount from Albuquerque. As detailed in our Findings, respondent initially took the position that the transactions resulted in petitioners' receipt of a $110,000 dividend from Lubbock in 1967 and collected a deficiency on that ground. Petitioners filed a refund suit in the District Court, and the suit was settled by a refund to petitioners of about 90 percent of the amount in dispute.
Petitioners steadfastly maintain that respondent's constructive dividend determination as to 1967 estops him from disallowing the deductions in dispute in the instant case. We do not agree.
In Morris White Fashions, Inc. v. United States, 176 F. Supp. 760, 764 (S.D. N.Y. 1959), where a somewhat similar argument was made, the court quoted the following classic statement of the essential elements of estoppel from Van Antwerp v. United States, 92 F.2d 871, 875 (C.A. 9, 1937):
To constitute estoppel (1) there must be false representation or wrongful misleading silence. (2) The error must originate in a statement of fact and not in an opinion or a statement of law. (3) The person claiming the benefits of estoppel must be ignorant of the true facts, and (4) be adversely affected by the acts or statements of the person against whom an estoppel is claimed.
The evidence presented in this case does not show these enumerated facts.
Moreover, as stated in our Findings, petitioners' offer to settle the District Court refund suit specified that "the fact of settlement is not to be used as evidence between the parties in any other proceeding." The Government's letter accepting the offer stated that acceptance was "subject to the understanding that the Government is not precluded from pursuing the argument of disallowing the taxpayers' deductions for years subsequent to the year in suit for the losses of Underwood's of Albuquerque, Inc., a Subchapter S corporation." In view of these facts, "we cannot say that petitioners were misled or actually relied upon any representation or omission of the respondent." Elizabeth Lewis Saigh, 36 T.C. 395, 423 (1961).
The facts in Joseph Eichelberger & Co. v. Commissioner, 88 F.2d 874 (C.A. 5, 1937), and United States v. Brown, 86 F.2d 798 (C.A. 6, 1936), relied upon by petitioners, are clearly distinguishable.
To reflect the foregoing conclusions,
Decisions will be entered for the respondent.
All section references are to the Internal Revenue Code of 1954, as in effect during the tax year in issue, unless otherwise noted.
On Apr. 9, 1968, Underwood loaned Albuquerque an additional $22,377.50. As of that date, Albuquerque's books reflected principal debts to Underwood in the amount of $132,377.50. Albuquerque repaid principal on this subsequent loan in the amounts of $7,000 on Oct. 14, 1968, and $5,000 on Dec. 12, 1968.
Another shareholder, Jacqueline Underwood, owned some of the stock in Albuquerque as of the beginning of Albuquerque's fiscal year ended Apr. 30, 1967. Her stock ownership ceased June 1, 1966, at which time petitioners became the sole shareholders. Jacqueline Underwood's pro rata share of Albuquerque's net operating loss for its fiscal year ended Apr. 30, 1967, was determined to be $308.28. This figure, when combined with the amount of Albuquerque's fiscal 1967 loss claimed by petitioners, totals $4,003.50, instead of $4,003.05, the correct amount of loss as reflected on Albuquerque's tax return for that taxable year.
As to the $12,000 loan repayments from Albuquerque, respondent determined that 67.89 percent of such repayments represented return of basis to petitioners in the amount of $8,146.80. The remaining amount of repayments, $3,853.20, was treated as capital gain and taxed accordingly. Respondent arrived at the percentage figure applied by computing the ratio existing between what petitioners contended to be their remaining basis ($89,866.34) in indebtedness owed to them by Albuquerque (which, for computation, included the $110,000 note executed Jan. 31,1967) and the figure of $132,377.50 (which also included the $110,000 note) which petitioners contended represented the total bona fide indebtedness owed to them by Albuquerque. The computations relied upon for the settlement of this issue resulted in petitioners' purportedly being left with an adjusted basis of $81,719.54 in indebtedness from Albuquerque.
Notwithstanding this provision in the offer, the evidence on which we have based these Findings of Fact was received without objection by either party.
A worksheet prepared by Lawrence reflects what petitioners believed to be Underwood's basis in Albuquerque stock and indebtedness. It contains the following data:
UNDERWOOD'S ALBUQUERQUE Calculation of M. G. Underwood Basis
is in Loan Actual note balance Net profit (loss) Bas Stock
$110,000.00 4/30/67 _ $110,000.00 $13,000.00
Loss FYE 4/30/67 _ ($3,695.22) (3,695.22)
110,000.00 Basis at 5/1/67-110,000.00 9,304.78
22,377.50 Loans FYE 4/30/68. 22,377.50
132,377.50 Basis at 4/30/68_ 132,377.50 9,304.78
(42,511.16) Loss FYE 4/30/68 _. (51,815.94) (9,304.78)
89,266.34 Basis at 5/1/68_ 132,377.50 0
Repayment to Morris:
10/14/68_ (7,000.00)
12/12/68_ (5,000.00)
(8,146.80) (12,000.00)
81,719.54 Basis at 4/30/69_ 120,377.50
(13,054.74) Loss FYE 4/30/69 (13,054.74)
SEC. 1374. CORPORATION NET OPERATING LOSS ALLOWED TO SHAREHOLDERS.
(b) Allowance of Deduction. — Each person who is a shareholder of an electing small business corporation at any time during a taxable year of the corporation in which it has a net operating loss shall be allowed as a deduction from gross income, for his taxable year in which or with which the taxable year of the corporation ends (or for the final taxable year of a shareholder who dies before the end of the corporation's taxable year), an amount equal to his portion of the corporation's net operating loss (as determined under subsection (c)).
Sec. 1374(c)(2) provides as follows:
(c) Determination of Shareholder's Portion—
(2) Limitation. — A shareholder's portion of the net operating loss of an electing small business corporation for any taxable year shall not exceed the sum of—
(A) the adjusted basis (determined without regard to any adjustment under section 1376 for the taxable year) of the shareholder's stock in the electing small business corporation, determined as of the close of the taxable year of the corporation (or, in respect of stock sold or otherwise disposed of during such taxable year, as of the day before the day of such sale or other disposition), and
(B) the adjusted basis (determined without regard to any adjustment under section 1376 for the taxable year) of any indebtedness of the corporation to the shareholder, determined as of the close of the taxable year of the corporation (or, if the shareholder is not a shareholder as of the close of such taxable year, as of the close of the last day in such taxable year on which the shareholder was a shareholder in the corporation).
The fact that the Government retained a portion of the amount in issue in the District Court case does not show that any amount was taxed twice. Petitioners' payment of the assessment for 1967 included both tax and interest. The interest was deductible when paid, see sec. 163(a), and would have been taxable to petitioners under the tax-benefit theory when refunded, see sec. 111. Yet, petitioners' accepted proposal for the settlement of the District Court case was "on the basis of a refund of $65,000 in tax with the understanding that assessed interest heretofore paid will not have to be reinstated in plaintiffs' taxable income for any year and with the agreement that no part of this refund constitutes taxable interest." |
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562 U.S. 1146 | Ct. App. Minn. Certiorari denied. |
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522 U.S. 1027 | Petition for writ of mandamus and/or prohibition denied. |
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513 U.S. 993 | C. A. 4th Cir. Certio-rari denied. |
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47 B.T.A. 886 | OPINION.
Abttndell:
The principal issue is whether the entire award of $340,-572.50, received by petitioner as compensation for the land taken and as consequential damages to the remaining land and building, is taxable gain to the extent that it exceeds the cost of the land taken ($21,-674.42) plus the expenses of the condemnation proceeding ($11,646.03). Respondent, in accordance with G. C. M. 20322, 1938-2 C. B. 167, determined the issue in the affirmative and held that a profit of $307,-252.05 was realized upon the condemnation award.
Petitioner, however, contends that the award was in substance two distinct awards for separate purposes. The first was the sum of $28,254.57 paid as compensation for the land actually taken, and petitioner concedes that it realized a taxable gain to the extent that this amount exceeded the basis of the property so taken. The second was the amount of $812,317.93 paid to compensate petitioner for the damage to the remaining land and building which was occasioned by the condemnation. Petitioner maintains that the latter amount was paid not for the property taken but to reimburse it for damage to the remaining assets.
It concludes, therefore, that this sum should not be included in the profit resulting from disposition of the strip of land, but should be applied against and reduce the bases of the remaining property.
We agree with petitioner. There is no issue here as to the allocation of the award between compensation for the land taken and severance damages to the remaining property. See Seaside Improvement Co. v. Commissioner, 105 Fed. (2d) 990; certiorari denied, 308 U. S. 618; Langley Collyer, 38 B. T. A. 106. The facts show that damages were actually sustained and that the court, in making the award, stated separately the amount that was to serve each purpose. While the compensation payable to petitioner was included as a unit with that payable to Lehigh, the parties here have stipulated the amount of petitioner's share and the extent to which that figure represented a recovery for the land taken, on one hand, and for severance damages to the remaining property, on the other. Besponclent does not contend, nor indeed could he under the facts as stipulated, that severance damages were not specially awarded or that petitioner did not sustain such damages. Under these circumstances to hold, as does respondent, that petitioner received $340,000 as payment for a strip of land costing only $21,000, is contrary to the facts. Petitioner's computation seems to us sound and logical, and should be adopted here unless there are persuasive considerations in the decided cases requiring a different conclusion.
Bespondent's method of computing gain or loss under similar circumstances was formerly in accord with that urged upon us here by petitioner. He argues, however, that he was led to abandon this position and to assume the one he now maintains because of three adverse decisions of the Ninth Circuit Court of Appeals, this Board having subsequently adopted the view expressed by that court. The decisions upon which this argument rests are Wolf v. Commissioner, 77 Fed. (2d) 455, reversing 29 B. T. A. 702; Christian Ganahl Co. v. Commissioner, 91 Fed. (2d) 343; certiorari denied, 302 U. S. 748, reversing 34 B. T. A. 126; Central & Pacific Improvement Corporation v. Commissioner, 92 Fed. (2d) 88, reversing 34 B. T. A. 208; Calvin C. Green, 37 B. T. A. 25; Jamieson Associates, Inc., 37 B. T. A. 92; affirmed in part and reversed in part sub nom Seaside Improvement Co. v. Commissioner, supra; Palladium Amusement Co., 37 B. T. A. 149; Income Syndicate, Inc., 37 B. T. A. 926; and Langley Collyer, supra.
In each of' these cases the principal issue presented was -what effect should be given to a special benefit assessment levied in a condemnation proceeding against the remaining property of the condemnee. In most instances the assessment had been deducted from the amount of the award, so that the taxpayer had in fact received only the net award. The Commissioner took the position, G. C. M. 12632, C. B. XIII-1, p. 104, and the Board upheld him, that gain or loss on the property actually taken was to be computed separately, and equaled the difference between the award for and the cost of the property taken; and that the basis of the remaining property was either reduced or increased by deducting therefrom the severance damages awarded and adding thereto the special assessment levied. There was thought to be justification for this view in that the assessment was levied only upon the property remaining after the condemnation and therefore should have no bearing upon the computation of gain or loss in connection with the property taken.
The first case to be presented to the Ninth Circuit, Wolf v. Commissioner, supra, was unusual in that the amount of the assessment was approximately $900 in excess of the awards both for the property taken and for severance damages. The court was unwilling to tax the con-demnee on the difference between the cost of the property taken and the award which he had only constructively received by having it set off against his liability on the assessment. To reach this conclusion the court held that the entire proceeding to open a street is one proceeding and the result should be treated as an entirety. It stated that "the petitioner was paid nothing whatever for the land taken, and in addition he was required to pay $891.60, which was the net result of the entire transaction so far as he was concerned. The gain, if any, derived by the taxpayer from the transaction was in the increased value of the property already owned by him. This increase is not a taxable gain." The separate question of how to treat the severance damages was not considered in this case, for the assessment exceeded the total award.
The same issue was before the court in the Christian. Ganahl Co. case, where, although the benefit assessment did not exceed the total award, it did exceed the amount of severance damages allowed. The court thought, however, that the case was indistinguishable in principle from the Wolf case. In Central & Pacific Improvement Corpora tion v. Commissioner, supra, so far as appears no severance damages were awarded, but since the basis of the property taken plus the benefit assessment exceeded the amount of the award, the court held that the taxpayer had derived no taxable gain from the condemnation. In Calvin C. Green, supra, a case in which no briefs were filed •inasmuch as the parties^ .agreed that the rulings of the Ninth Circuit were governing, the Board stated that the proper method of computing the tax was "to include all of the amounts received and to deduct from the total, the assessments paid plus the basis of the property condemned. The basis for the remaining property remains the same and is neither reduced by the amount of the severance damages nor increased by the amount of the assessments." In subsequent Board decisions, Jamieson Associates, Inc., Palladium Amusement Co., Income Syndicate, Inc., and Langley Collyer, all supra, there was no showing that severance damages had been awarded, and the Board decided in each instance, as the only issue before it, that in computing gain on the condemnation the award should first be reduced by the assessment deducted from it, on the theory that the condemnation proceedings must be regarded as an entirety.
Thus it appears that the cases cited by respondent dealt primarily with a problem that is not involved here, namely, the tax treatment to be given benefit assessments in connection with condemnations. The rule there stated, that condemnation proceedings are to be regarded as an entirety, resulted from a refusal to tax the property owner upon an amount which he had not received but which, by reason of the simultaneous assessment, merely represented an increase in the value of the remaining property. Bespondent places particular emphasis upon the language quoted above from the Board's opinion in the Green case, but that statement is not to be divorced from the facts which were then before the Board. In that case, while severance damages had been awarded, an assessment greater in amount had been levied, and under the controlling rule the assessment was to be deducted from the aw'ard. Consistency, perhaps, requires that, if the assessment is to be deducted from the award, it should be deducted from the total award, including that for severance damages.
In the instant case petitioner actually received the amount awarded for the land taken and concedes that it is to be taxed upon the gain therefrom. We can perceive no valid reason for treating the additional award for severance damages as something other than what it actually was. In any case in which there is no assessment, or perhaps even where an assessment is made if it is less in amount than the severance damages awarded, the problem dealt with in the cited cases does not arise. Under such circumstances the condemnee receives in cash the full amount of the award.for the property taken .and .gain or loss thereon may properly be computed by applying against it the basis of the property condemned; and the severance .or consequential damages or so much thereof as remain after deducting the special assessment if one is made, may fairly and logically .be applied against and reduce the basis of the remaining property, which, in the final analysis, is the property affected both by the assessment and by the. severance damages.
Respondent further contends that in any event the consequential damages should be taxed on the ground that they were paid to reimburse petitioner for future loss-of rentals from its warehouse. The cases of Hort v. Commissioner, 313 U. S. 28, and Acme Land & Fur Co., 31 B. T. A. 582; affd., 84 Fed. (2d) 441, are cited in this connection. We think there is no merit in the contention and that there is no analogy between this case and those cited. The Hort case held that the amount received for cancellation of a lease was a substitute for the future rent reserved therein, and, since the rent would have been included in gross income when received, the substitute payment was to be similarly treated. In the Acme case it was held that an amount received to compensate the taxpayer for damage caused by a flood to its wild animal life was not exempt from tax as a gift or constitutionally immune because received from a state or its political subdivision. The Board took pains to point out that there was no impairment of the taxpayer's capital, since its lands were still . worth more than their cost. In the present case the severance damages were paid in recognition of the injury sustained by petitioner's remaining properties. These were capital assets in which petitioner had a capital investment. "Recovery for injury to capital 'is never income, no matter when collected'. U. S. v. Safety Car Heating '<& Lighting Co., 291 U. S. 88, 98, * ⅝ H. Liebes ét Co. v. Commissioner, 90 Fed. (2d) 932, 935. The fact that the extent of the capital injury is measured in part by an anticipated decrease in future rentals makes the recovery no less a return of capital. Farmers' & Merchants'1 Bank of Catlettsburg, Kentucky ,v. Commissioner, 59 Fed. (2d) 912. We conclude, therefore, that petitioner is entitled to apply the severance damages against the bases of its remaining land and building.
The second question is whether the portion of the award denominated interest is taxable as ordinary income or constitutes part of the award. Respondent recognizes that the Second Circuit Court of Appeals has adopted the latter view and has been followed in this respect by the Board. Seaside Improvement Co. v. Commissioner, supra; Commissioner v. Estate of Appleby, 123 Fed. (2d) 700, affirming 41 B. T. A. 18; Edith Henry Barbour, 44 B. T. A. 1117 (appeal pending, C. C. A., 6th Cir.). Notwithstanding the decision to the contrary by the Third Circuit in Commissioner v. Kieselbach, 127 Fed. (2d) 359, we adhered to our former position in David S. Brown, 47 B. T. A. 139, and we continue to do so. Petitioner is therefore sustained on this issue.
It is stipulated that the amount of the so-called interest is to be allocated among the awards for the land taken, the land retained, and the warehouse, in accordance with figures set forth in the stipulation. Petitioner concedes on brief that a similar allocation should be made with respect to the expenses of the condemnation proceedings. These adjustments, together with those required by petitioner's abandonment of two issues raised by the pleadings, may be given effect in the recomputation under Pule 50.
Reviewed by the Board.
Decision will be entered umder Bule 50.
"After careful consideration, this office is of the opinion that the various steps incident to a street opening or similar improvement project, including the condemnation award for property taken, the award for severance damages to and a special benefit assessment levied against the remaining portion of the plot or parcel of real estate affected, constitute a single proceeding, the results of which are to be calculated as an entirety for Federal income tax purposes.''
In I. T. 2590, C. B. X-2, p. 170, It was held:
" Tlie award being separable, this office is of the opinion that gain or loss will result from that portion of each award which represents the amount paid for tbe acquisition of land. No taxable gain is recognized, however, with respect to that portion of the award which represents the severance damages, but the amount thereof should be deducted from the basis to be used in determining gain or loss upon the subsequent disposition of the remaining portion of the property, unless the amount of the severance damages exceeds the cost or other basis of the remaining portion of the property, in which case such excess is taxable gain." |
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568 U.S. 858 | C. A. 2d Cir. Certiorari denied. |
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502 U.S. 1074 | C. A. 3d Cir. Certiorari denied. |
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23 Cust. Ct. 131 | Opinion by
Johnson, J.
For the reasons stated in Austin, Nichols & Co., Inc. v. United States (22 Cust. Ct. 33, C. D. 1155), the claim of the plaintiff was sustained. |
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20 Ct. Int'l Trade 361 | Opinion
Tsoucalas, Judge:
Plaintiffs, NSK Ltd. and NSK Corporation (collectively "NSK"), commenced this action challenging certain aspects of the Department of Commerce, International Trade Administration's ("Commerce" or "ITA") final results of administrative review entitled Final Results of Antidumping Duty Administrative Reviews; Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan ("Final Results"), 58 Fed. Reg. 64,720 (1993).
Background
On November 27, 1992, Commerce initiated administrative reviews of tapered roller bearings ("TRBs") from Japan covering the period of 1991 to 1992. See Initiation of Antidumping and Countervailing Duty Administrative Reviews, 57 Fed. Reg. 56,318 (1992). Commerce published the preliminary results of these reviews on September 30, 1993. See Preliminary Results of Antidumping Duty Administrative Reviews; Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan, 58 Fed. Reg. 51,058 (1993).
On December 9, 1993, Commerce published its final determinations concerning the review at issue. See Final Results, 58 Fed. Reg. at 64,720. NSK now moves pursuant to Rule 56.2 of the Rules of this Court for judgment on the agency record alleging the following actions by Commerce were unsupported by substantial evidence on the agency record and not in accordance with law: (1) refusing to apply aten percent cap as part of the sum of the deviations methodology; (2) using partial best information available ("BIA") to compute NSK's cost of production; (3) refusing to adjust foreign market value ("FMV") for home market commissions, rebates and discounts; and (4) committing a clerical error. Pls.' Mem. Supp. Mot. J. Agency R. at 10-34.
Discussion
The Court's jurisdiction in this action is derived from 19 U.S.C. § 1516a(a)(2) (1994) and 28 U.S.C. § 1581(c) (1994).
The Court must uphold Commerce's final determination unless it is "unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1)(B) (1994). Substantial evidence is "more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. " Universal Camera Corp. v. NLRB, 340 U.S. 474, 477 (1951) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)). "It is not within the Court's domain either to weigh the adequate quality or quantity of the evidence for sufficiency or to reject a finding on the grounds of a differing interpretation of the record." Timken Co. v. United States, 12 CIT 955, 962, 699 F. Supp. 300, 306 (1988), aff'd, 894 F.2d 385 (Fed. Cir. 1990).
1. Model Match Methodology:
NSK argues that for purposes of calculating dumping margins, Commerce compared dissimilar merchandise because it did not impose a ten percent limit upon individual bearing deviations as part of its five-criteria model match methodology for selecting the most similar home market TRB model. NSK asserts that the antidumping law mandates that Commerce identify the most similar matches. According to NSK, the absence of a ten percent cap allows for matches between products which are not commercially similar. Pis.' Mem. Supp. Mot. J. Agency R. at 10-14.
Commerce responds that when identical merchandise is not available in the home market for comparison with the merchandise sold to the United States, Commerce must select the "most similar" merchandise based upon the physical characteristics of the merchandise being compared. Def.'s Opp'n to Pis.' Mot. J. Agency R. at 11-12; 19 U.S.C. § 1677(16) (1988). In this review, Commerce compared home market sales of TRBs to U.S. sales by devising a "sum of the deviations" methodology. Under this approach, Commerce uses five physical characteristics (inner diameter, outer diameter, width, Y factor, and load rating) as criteria for selecting "similar" model matches. Commerce explains that in conjunction with the "sum of the deviations" methodology, it applied a twenty percent cost cap that prevents the matching of United States and home market models whose variable cost of manufacturing differs by more than twenty percent. Commerce argues its actions are within its discretion and in accordance with law. Def.'s Opp'n to Pis.' Mot. J. Agency R. at 11-15.
The Court of Appeals for the Federal Circuit ("CAFC") recently ruled on this issue in Koyo Seiko Co. v. United States, 66 F.3d 1204 (Fed. Cir. 1995), holding that Commerce's model match methodology, without the ten percent cap, is a permissible approach under 19 U.S.C. § 1677( 16). In reachingits conclusion, the CAFC noted that under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984), where a statute is silent or ambiguous with respect to a specific issue, the court is limited to determining whether the agency's approach is a permissible construction of the statute. Koyo, 66 F.3d at 1209. The CAFC upheld Commerce's construction of the statute stating the following:
Commerce's interpretation is reasonable because there is no evidence that any one of the five criteria should be decisive in determining whether to match a given U.S. TRB with a home-market TRB. By choosing not to apply the ten percent cap, Commerce in essence weighs each of the five criteria equally, which is plainly reasonable.
Koyo, 66 F.3d at 1210.
In light of the decision of the CAFC in Koyo, the Court finds that Commerce's model match methodology without the ten percent cap is a reasonable approach and consistent with law.
2. Use of Partial Best Information Available to Compute Cost of Production:
In the Final Results, Commerce explained its decision to use partial BIA to calculate NSK's cost of production in the following manner:
First, at verification the Department discovered that NSK maintains standard costs and corresponding variances for the subject merchandise. Even though in our cost questionnaire we specifically requested NSK to describe its cost accounting system(s), NSK never disclosed or described its standard cost system. Second the company failed to adequately demonstrate that the "burden" methodology it uses captures the entire variance (i.e., the untranslated variance account) and that it has captured all production costs in its reported costs of manufacturing. For the models we tested, NSK's reported costs in the submission differ significantly from its standard costs plus variances which NSK maintains in its normal course of business. Therefore, for purposes of these final results, we have retained the adjustments we used in the preliminary results, and, as BIA, have adjusted NSK's submitted costs to reflect standard costs plus variances for the models we tested. For the models we did not test, we increased as BIA, NSK's submitted costs by the highest percentage difference between reported costs and standard cost plus variance.
58 Fed. Reg. at 64,727.
NSK contends that Commerce erred in resorting to use of partial BIA as opposed to relying on the cost of production and constructed value data reported by NSK. NSK argues that Commerce erroneously concluded that NSK's actual cost system did not accurately represent cost of production. According to NSK, Commerce's calculations are flawed because Commerce used NSK's company-wide variance which includes variances related to non-scope products. NSK explains that only two of the nine factories included in calculating the company-wide variance produce scope merchandise. NSK also emphasizes that Commerce's methodology resulted in the comparison of non-period of review values to actual costs incurred during the period of review. Pis.' Mem. Supp. Mot. J. Agency R. at 16-22.
NSK further points out that Commerce verified the accuracy of NSK's actual costs finding only one discrepancy concerning NSK's material cost calculation. NSK claims that this alleged discrepancy was in fact accounted for in its cost calculation. Id. at 23-26. In addition, NSK maintains that Commerce accepted NSK's actual cost system in past reviews. Id. at 27-28.
In the alternative, NSK submits that if the Court upholds Commerce's resort to partial BIA, the Court should instruct Commerce to use variances based only on scope products manufactured during the period of review. Id. at 28-29.
In rebuttal, Commerce asserts that it discovered deficiencies in NSK's submission concerning actual costs and, therefore, recalculated NSK's costs of production. According to Commerce, NSK did not explain why the costs of production reported in the questionnaire differed from the costs of production calculated using the information reported in NSK's accounting records. Def.'s Opp'n to Pis.' Mot. J. Agency R. at 17-18. Commerce contends that NSK's failure both to disclose records of variance costs contained in its accounting system, and to explain the discrepancy between the accounting records and the questionnaire, justified using BIA. Id. at 19-21.
Commerce also defends its use of a company-wide variance as consistent with the policy that BIA is a rule of adverse inference. Commerce argues that using the costs contained in NSK's submission would reward NSK for failing to comply with Commerce's requests for information. Id. at 22-23.
Defendant-intervenor, The Timken Company ("Timken"), supports Commerce's decision to rely on partial BIA because of NSK's failure to provide information requested by Commerce concerning NSK's standard cost system until the last day of verification. Def.-Int.'s Opp'n to Pis.' Mot. J. Agency R. at 10-12. Timken also agrees with Commerce's use of a company-wide variance because Commerce did not have sufficient time to verify the group variances identified by NSK on the last day of verification. Id. at 13.
Section 1677e(c) of Title 19, United States Code, states that Commerce "shall, whenever a party or any other person refuses or is unable to produce information requested in a timely manner and in the form required, or otherwise significantly impedes an investigation, use the best information otherwise available." In addition, Commerce's regulations instruct the Secretary to use BIA whenever Commerce:
(1) Does not receive a complete, accurate, and timely response to the Secretary's request for factual information; or
(2) Is unable to verify, within the time specified, the accuracy and completeness of the factual information submitted.
19 C.F.R. § 353.37(a) (1993).
NSK's position that Commerce should not have resorted to use of BIA is inconsistent with the purpose of BIA as "an investigative tool" which Commerce "may wield as an informal club over recalcitrant parties or persons whose failure to cooperate may work against their best interest." Rhone Poulenc, Inc. v. United States, 899 F.2d 1185, 1191 (Fed. Cir. 1990) (quoting Atlantic Sugar Ltd. v. United States, 744 F.2d 1556, 1560 (Fed. Cir. 1984)). The record reveals that NSK failed to provide Commerce with all of the requested information. The fact that Commerce may have only found one discrepancy in NSK's actual cost system does not support the argument that Commerce should have relied on the actual cost system. Commerce specifically requested in the cost questionnaire that respondents describe all cost accounting systems used for the bearings under review. In response, NSK reported its actual cost system and did not make any reference to its budgeted cost system maintained for individual bearings. See Corrections to Cost Verification Report, C.R. Document No. 126, Fiche 300, Frame 9. Even if NSK genuinely believed that the budgeted cost system should not have been reported in response to the questionnaire, NSK should have presented the information in response to Commerce's request during verification for documentation concerning the amount at which pre-selected bearings were valued for inventory purposes during the period of review. See Verification Report on the Cost of Production and Constructed Value of NSK Ltd. and NSK Corporation ("Verification Report"), C.R. Document No. 107, Fiche 292, Frame 32. Instead, NSK stated that its inventory records do not include the values of individual bearings. Id. NSK does not offer a satisfactory explanation for its decision to wait until the last day of verification to submit records of variance costs that allow it to convert standard costs to actual costs for specific product types. See Verification Report, C.R. Document No. 107, Fiche 292, Frames 32-33. NSK's assertion that the information it submitted to Commerce provided a sufficient representation of NSK's cost of manufacturing misses the point that "[i]t is Commerce, not the respondent, that determines what information is to be provided for an administrative review." Ansaldo Componenti, S.p.A. v. United States, 10 CIT 28, 37, 628 F. Supp. 198, 205 (1986). NSK's failure to submit all of the information requested in a timely manner justified Commerce's resort to partial BIA.
The next issue is whether Commerce's selection of BIA was proper. Because the relevant statute does not explicitly state what type of information constitutes "best" information, Congress "explicitly left a gap for the agency to fill." Allied-Signal Aerospace Co. v. United States, 996 F.2d 1185, 1191 (Fed. Cir. 1993) (quoting Chevron, 467 U.S. at 843-44). Accordingly, Commerce's determination as to what constitutes the best information available must be accorded considerable deference. Allied-Signal, 996 F.2d at 1191. It is also important to note that the information used by Commerce does not actually have to be the "best" information. In N.A.R., S.p.A. v. United States, 14 CIT 409, 416, 741 F. Supp. 936, 942 (1990), the Court stated that "[w]hen use of best information is challenged, the question is not whether the ITA has chosen the 'best' of all available information, but rather whether the information chosen by the ITA is supported by substantial evidence on the record" (citing Chinsung Indus. Co. v. United States, 13 CIT 103, 106-07, 705 F. Supp. 598, 601 (1989)). The Court further noted that "best information available 'is not necessarily accurate information, it is information which becomes usable because a respondent has failed to provide accurate information.'" N.A.R., 14 CIT at 416, 741 F. Supp. at 942 (quoting Asociacion Colombiana de Exportadores de Flores v. United States, 13 CIT 13, 28, 704 F. Supp. 1114, 1126 (1989), aff'd, 901 F.2d 1089 (Fed. Cir.), cert. denied, 498 U.S. 848 (1990)).
Commerce is permitted to use adverse partial BIA in cases where the respondent has not substantially complied with information requests. Neutral BIA is "applied only to a respondent who has substantially complied and there is also an inadvertent or unavoidable gap in the record, or when a minor or insignificant adjustment is involved." Ad Hoc Comm, of AZ-NM-TX-FL Producers of Gray Portland Cement v. United States, 18 CIT 906, 916, 865 F. Supp. 857, 866 (1994). NSK's failure to report its budgeted cost system is not substantial compliance and the adjustments required are more than minimal. In Ad-Hoc, however, the Court remanded the issue of whether Commerce selected BIA which resulted in "needlessly distortive" margins where the plaintiff demonstrated that Commerce's selection of BIA resulted in a margin of over 1000%. In contrast, NSK fails to present any evidence that the use of a company-wide variance or non-period of review data resulted in needlessly distortive margins. As such, the Court finds that Commerce's selection of BIA is supported by substantial evidence on the agency record.
3. Treatment of Home Market Commissions, Rebates and Discounts:
In the Final Results, Commerce disallowed certain adjustments to FMV for home market commissions, rebates and discounts. 58 Fed. Reg. at 64,723. Specifically, Commerce addressed NSK's claimed adjustments as follows:
(1) Discounts, rebates and certain commissions. At verification the Department discovered that actual amounts for total sales to two distributors differed from the amounts used in worksheets for the response. Since the Department verified the corrected amounts and the discrepancies were "small", NSK argues that, although company officials were unable to explain the source of the error, the Department should either accept the corrected data or ignore the de minimus errors.
(2) Commissions for delivery on behalf of NSK. NSK argues that since the Department verified the corrected commission amounts, and since most of the errors were unfavorable to NSK, the Department should either accept NSK's corrected information or make no adjustment to the data.
(4) Commissions for repurchase for urgent delivery. NSK objects to the Department's denial of this adjustment for commissions because NSK incurred the expense in question and because the Department verified the amount of commissions paid. Moreover, NSK asserts that the Department has accepted the method of allocation in previous reviews.
Department's Position: As for (1), NSK officials were unable to explain the source of the error, which affected a substantial percentage of its distributors. Therefore, we have disallowed all adjustments which were based on total sales to the distributors associated with the errors. As for (2), we disagree with NSK. The amounts of commissions paid to distributors in the home market were both understated and overstated, compromising the integrity of the response. Although NSK submitted corrected information, because NSK officials could not explain why the response was inaccurate, we have disallowed these claimed adjustments. As for (4), while we recognize that the expenses were in fact incurred, we do not accept NSK's allocation methodology. NSK allocated commission amounts over sales of the related distributors, who bore no expense in the consummation of the new sales, rather than over the sales to the ultimate customer. To associate the expenses with sales to the distributors is distortive, since NSK did not incur the expenses in connection with these sales.
Id.
NSK concedes that it submitted erroneous information concerning rebates, discounts and commissions paid to two unrelated customers but argues that Commerce should not have disallowed the adjustment to FMV According to NSK, it submitted the correct information at verification and the necessary changes were de minimus. Pls.' Mem. Supp. Mot. J. Agency R. at 32. Similarly, NSK contends that Commerce should have adjusted FMV for commissions for delivery on behalf of NSK because, even though NSK did not accurately report the commissions, it corrected its mistakes at verification. Id. at 32-33. Finally, NSK submits that Commerce should have allowed an adjustment to FMV for NSK's repurchase for urgent delivery commissions which, according to NSK, were reasonably reported and allocated. Id. at 33-34.
In response, Commerce claims that the discrepancies found in NSK's questionnaire response were more than de minimus. Commerce contends that it may not have denied the adjustment to FMV for the commissions, rebates and discounts paid to the two unrelated distributors had NSK been able to explain why the reporting discrepancies occurred. Def.'s Opp'n to Pls.' Mot. J. Agency R. at 26-27. Commerce also maintains that NSK's erroneous reporting of its delivery commissions undermined the integrity of NSK's response since NSK was unable to explain the lack of correspondence between the reported information and NSK's records. Id. at 25-26. Finally, Commerce submits that while it verified NSK's urgent delivery commissions, it discovered that the commissions were "allocated across the sales of related distributors who bore no expense with respect to the consummation of the new sales. " Id. at 24-25.
This Court has acknowledged that " [respondents have the burden of creating an adequate record to assist Commerce's determinations." Nachi-Fujikoshi Corp. v. United States, 19 CIT 914, 920, 890 F. Supp. 1106, 1111 (1995) (citing Tianjin Mach. Import and Export Co. v. United States, 16 CIT 931, 936, 806 F. Supp. 1008, 1015 (1992)). The Court further noted in Nachi that Commerce has been given broad discretion in making adjustments. 19 CIT at 920, 890 F. Supp. at 1111 (citing Smith-Corona Group Consumer Prods. Div., SCM Corp. v. United States, 713 F.2d 1568, 1577 n.26 (Fed. Cir. 1983), cert. denied, 465 U.S. 1022 (1984)). In Nachi, the Court upheld Commerce's decision not to adjust FMV for a certain rebate because the claim was unsubstantiated. In the case at bar, NSK admits that it provided incorrect information in its questionnaire response concerning delivery commissions on behalf of NSK, and rebates, discounts and commissions paid to two distributors. Although NSK corrected this information at verification, it did not provide any reasons for the mistakes contained in its response to Commerce's request for information. See Post Verification Submission of NSK Ltd. and NSK Corporation, P.R. Document No. 221, Fiche 135, Frames 5-7. An explanation concerning the source of the error would have allowed Commerce to determine whether, in general, the information submitted by NSK was accurate and reliable. In light of these unexplained errors, Commerce acted reasonably in denying any adjustment to FMV
Commerce also acted reasonably in rejecting NSK's urgent delivery commissions once it determined that the commissions were not directly related to the sales at issue. Commerce's regulations provide the following guidelines concerning adjustments to FMV:
(a) In general. (1) In calculating foreign market value, the Secretary will make a reasonable allowance for a bona fide difference in the circumstances of the sales compared if the Secretary is satisfied that the amount of any price differential is wholly or partly due to such difference. In general, the Secretary will limit allowances to those circumstances which bear a direct relationship to the sales compared.
19 C.F.R. § 353.56 (1993) (emphasis added). It is well-established that the respondent bears the burden of showing the existence of a direct relationship between the commissions paid and the sales under consideration. NSK Ltd. v. United States, 17 CIT 1185, 1187-88, 837 F. Supp. 437, 439-40 (1993); see also Comitex Knitters, Ltd. v. United States, 16 CIT 817, 824, 803 F. Supp. 410, 416 (1992). NSK's allocation methodology failed to establish a direct relationship between the urgent delivery commissions and the sales under consideration. Therefore, Commerce's decision to deny the adjustment to FMV for NSK's urgent delivery commissions is supported by substantial evidence on the agency record.
4. Clerical Error:
NSK contends that at lines 273 and 287 of the computer program, unique home market parts are not identified because the language "BY HMPART" has been omitted. Pls.' Mem. Supp. Mot. J. Agency R. at 34. Commerce concedes that the language "BY HMPART" was inadvertently omitted from the computer program and agrees that a remand is necessary to correct the error. Def.'s Opp'n to Pis.' Mot. J. Agency R. at 27. Defendant-intervenor Timken submits that the error exists in more lines of the computer program than those enumerated by NSK. Def.Int.'s Opp'n to Pls.' Mot. J. Agency R. at 25-26.
Upon a review of the record, the Court agrees with the parties that a remand is necessary to correct the clerical error at issue to the extent necessary.
Conclusion
NSK's motion for judgment upon the agency record is granted to the extent that this case is remanded to correct the clerical error concerning home market parts. Commerce's Final Results, to the extent challenged herein, are sustained in all other respects.
The remand results are due within ninety (90) days of the date that this opinion is entered. Any comments or responses are due within thirty (30) days thereafter; any rebuttal comments are due within fifteen (15) days of the date that responses or comments are due.
Plaintiffs abandoned two counts contained in the original complaint. Pis,' Reply to Def.'s Opp'n to Pis.' Mot. J. Agency R. at 20.
19 U.S.C. § 1677(16) (1988) provides:
The term "such or similar merchandise" means merchandise in the first of the following categories in respect of which a determination for the purposes of part II of this subtitle can be satisfactorily made:
(A) The merchandise which is the subject of an investigation and other merchandise which is identical in physical characteristics with, and was produced in the same country by the same person as, that merchandise.
(B) Merchandise—
(i) produced in the same country and by the same person as the merchandise which is the subject of the investigation,
(ii) like that merchandise in component material or materials and in the purposes for which used, and
(iii) approximately equal in commercial value to that merchandise.
(C) Merchandise—
(i) produced in the same country and by the same person and of the same general class or kind as the merchandise which is the subject of the investigation,
(ii) like that merchandise in the purposes for which used, and
(iii) which the administering authority determines may reasonably be compared with that merchandise.
The questionnaire asked for the following information concerning cost accounting:
Describe the cost accounting system used by your company for the bearings under review. If you have more than one accounting system, do this for each factory, as necessary. Your description should be provided as a narrative, with flow charts included as appropriate. The description should include, but not be limited to, discussions of the following items:
1. A general description of the company's cost accounting method (e.g., job order, process, actual, or standard costing);
2. If applicable, a description of the company's use of standard costs, including:
a. variances of actual costs from standard, and the period for which the variances are calculated and recorded;
b. the method of distribution of the variances and the basis of each distribution. Note any differences between the cost accounting and financial accounting treatment of these variances;
c. the methods used to develop the standards;
d. the frequency of revisions of the standard costs and the date of the last revision; and
e. how the standard cost system is used for the financial accounting system;
All variances duringthe period of review must be allocated for the submission. Any significant or unusual cost variances during the period of review should be explained.
Antidumping Request for Information, Section VI at 4.
The public record of this administrative review is designated "RR." and the confidential record is designated "C.R."
The Court also finds NSK's assertion that the budgeted cost system is not really a standard cost accounting system unpersuasive. See Pls.' Reply Mem. Supp. Mot. J. Agency R. at 11-14. This argument is inconsistent with NSK's own acknowledgment in the Corrections to Cost Verification Report that it has "considered using this system to respond to the cost section of the questionnaire." C.R. Document No. 126, Fiche 300, Frame 9. NSK's basic reason for deciding against this approach is that "the BC [budgeted cost] system is a cumbersome approach for providing responses to the Department's questionnaire." C.R. Document No. 126, Fiche 300, Frame 10. NSK provides some explanation as to why this system is burdensome to report which the Court will not quote due to the proprietary nature of the information, but the Court remains unconvinced that the budgeted cost system does not represent a standard cost system. If the budgeted cost system does not in some manner represent a standard cost system, there would be no reason for NSK to consider using this system to respond to the cost section of Commerce's questionnaire. |
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454 U.S. 886 | Application for a temporary restraining order; motion for a preliminary injunction; motion to add the State of Georgia as a party defendant; and motion for leave to file a bill of complaint, and the supplements thereto, are all denied without prejudice. [For earlier order herein, see 453 U. S. 945.] |
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514 U.S. 1106 | It is ordered that Allen Nathaniel Smith, Jr., of Indianapolis, Ind., be suspended from the practice of law in this Court and that a rule issue, returnable within 40 days, requiring him to show cause why he should not be disbarred from the practice of law in this Court. |
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380 U.S. 972 | C. C. P. A. Certiorari denied. |
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198 U.S. 581 | Motion for leave to file petition for writs of habeas corpus and certiorari denied. |
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510 U.S. 851 | C. A. 5th Cir. Certiorari denied. |
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540 U.S. 852 | C. A. 1st Cir. Certiorari denied. |
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329 U.S. 688 | The application for a stay of execution is denied. |
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383 U.S. App. D.C. 82 | Opinion for the Court filed by Chief Judge SENTELLE.
Opinion concurring in part and dissenting in part filed by Circuit Judge ROGERS.
SENTELLE, Chief Judge:
In his 2003 State of the Union address, President George W. Bush reported that "[t]he British government has learned that Saddam Hussein recently sought significant quantities of uranium from Africa." Those sixteen words set off a series of events which resulted in the disclosure of Valerie Píame Wilson's previously covert status at the Central Intelligence Agency. Valerie Píame Wilson and her husband, Joseph C. Wilson IV, have filed this action for damages to remedy the injuries they allege they suffered because of that disclosure. Defendants are the United States and four Executive Branch officials — Vice President Richard B. Cheney, former Senior Advisor to the President Karl C. Rove, former Assistant to the President and Chief of Staff to the Vice President I. Lewis "Scooter" Libby, Jr., and former Deputy Secretary of State Richard L. Armitage. On motions to dismiss, the district court dismissed all claims. We affirm.
I. Background
We accept the factual allegations in the Amended Complaint as true for purposes of this appeal. See Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993).
During the spring of 2003, after President George W. Bush informed the Nation that "[t]he British government has learned that Saddam Hussein recently sought significant quantities of uranium from Africa," there was much speculation in the press about whether the uranium allegation was credible and whether individuals at the White House were aware of questions about its credibility when the State of the Union address was given. On May 6, 2003, The New York Times published the first article questioning the veracity of the claim. That article by Nicholas Kristof cited as its source a "former ambassador" who had traveled to Niger in early 2002 and reported back to the Central Intelli gence Agency ("CIA") and the State Department that the uranium "allegations were unequivocally wrong and based on forged documents." Am. Compl. ¶ 19b.
The Vice President's Chief of Staff, I. Lewis "Scooter" Libby, Jr., contacted the State Department and asked for information about the Niger trip reported in The New York Times. The State Department's Bureau of Intelligence and Research was directed to prepare a report about the travel and an Under Secretary kept Libby updated about its progress. The Under Secretary informed Libby that the former ambassador was Joseph Wilson. In June 2003, Libby was further advised by the Under Secretary and by a senior official at the CIA that Valerie Píame Wilson was Joseph Wilson's wife, that she worked at the CIA, and that some thought that she helped plan Joseph Wilson's trip to Niger. Vice President Cheney also told Libby that Valerie Píame Wilson worked at the CIA in the Counter-proliferation Division.
On June 12, 2003, The Washington Post published an article critical of the uranium claim based on the report of a retired ambassador who had traveled to Niger. Another article was published on June 19, 2003, in The New Republic. Entitled "The First Casualty: The Selling of the Iraq War," the article alleged that the Vice President's office had prompted the former ambassador's trip to Niger and that, after the trip, administration officials " 'knew the Niger story was a flat-out lie.' " Am. Compl. ¶ 19k (quoting Spencer Ackerman & John B. Judis, The First Casualty: The Selling of the Iraq War, New Republic, June 30, 2003, at 14). Several news outlets carried the story oh July 6, 2003. The New York Times published an Op-Ed by Joseph Wilson entitled "What I Didn't Find in Africa;" The Washington Post published an article based on an interview with Joseph Wilson; and the Meet the Press television show included Joseph Wilson as a guest. Wilson confirmed the prior reports of his travel to Niger in 2002 and his doubts about the uranium claims and said that he had told the administration of his doubts upon his return from Niger.
The administration commenced an effort to rebut the Wilson allegations. In July, Libby talked to Judith Miller of The New York Times and to Matthew Cooper of Time magazine; Karl Rove talked to Matthew Cooper of Time magazine and to Chris Matthews, host of MSNBC's "Hardball;" and Deputy Secretary of State Richard Armitage met with reporter Robert Novak. Armitage, who had learned of Valerie Wilson's CIA employment from a State Department memo, told Novak that Valerie Wilson worked at the CIA on issues relating to weapons of mass destruction. Novak then wrote an article that was published in several newspapers, including The Washington Post and the Chicago Sun Times, on July 14, 2003. In the article, he wrote that "Wilson never worked for the CIA, but his wife, Valerie Píame, is an Agency operative on weapons of mass destruction." Am. Compl. ¶ 14. That article, Valerie Wilson contends, "destroyed her cover as a classified CIA employee." Id.
The Wilsons filed a complaint in district court seeking money damages from Vice President Cheney, Libby, and Rove for injuries allegedly suffered because of the disclosure of Valerie Wilson's employment at the CIA. They amended their complaint on September 13, 2006, to add Armitage as a defendant. The Wilsons seek damages for constitutional violations under Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), and for the invasion of their privacy under District of Columbia tort law.
The district court dismissed all of their claims. Wilson v. Libby, 498 F.Supp.2d 74 (D.D.C.2007). The court held that the Wilsons failed to state a Bivens claim upon which relief could be granted because special factors counsel against creating a Bivens remedy in this case. The Wilsons' Bivens claims were based on alleged violations of their Fifth Amendment rights to equal protection of the laws, of Joseph Wilson's First Amendment right to freedom of speech, and of Valerie Wilson's Fifth Amendment rights to privacy and property, with each claim based on the disclosure of personal information covered by the Privacy Act, 5 U.S.C. § 552a. Because this Court has held that the Privacy Act is a comprehensive remedial scheme, Chung v. U.S. Dep't of Justice, 333 F.3d 273, 274 (D.C.Cir.2003), aff'g in relevant part No. 00-1912, 2001 WL 34360430 (D.D.C. Sept. 20, 2001), and because the Supreme Court has held that the existence of a comprehensive remedial scheme precludes implication of Bivens remedies even where the scheme does not provide full relief, Wilkie v. Robbins, 551 U.S. 537, 127 S.Ct. 2588, 2600-01, 2604-05, 168 L.Ed.2d 389 (2007); Schweiker v. Chilicky, 487 U.S. 412, 421-22, 108 S.Ct. 2460, 101 L.Ed.2d 370 (1988); Bush v. Lucas, 462 U.S. 367, 388, 103 S.Ct. 2404, 76 L.Ed.2d 648 (1983), the district court concluded that it could not imply a Bivens remedy here. The court further concluded that creating a Bivens remedy in this case would be inappropriate because, if litigated, the case would inevitably require the disclosure of sensitive intelligence information.
The district court held that the invasion of privacy claim also required dismissal. The United States had intervened in the lawsuit with respect to the tort claim and had filed a certification pursuant to the Westfall Act, 28 U.S.C. § 2679(d)(2), that, "at the time of the conduct alleged in the amended complaint the individual federal defendants . were each acting within the scope of their employment as employees of the United States." The court found that the Westfall Act certification was proper, meaning that the case must proceed solely against the United States under the Federal Tort Claims Act ("FTCA"), 28 U.S.C. § 2671-80. Because the Wilsons had not exhausted administrative remedies as required by the FTCA, the court dismissed the claim for lack of jurisdiction. The Wilsons appealed.
II. Jurisdiction
The "first and fundamental question" that we are "bound to ask and answer" is whether we have jurisdiction to decide this appeal. Bancoult v. McNamara, 445 F.3d 427, 432 (D.C.Cir.2006) (citing Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998)) (internal quotation marks omitted). " 'The requirement that jurisdiction be established as a threshold matter "springs from the nature and limits of the judicial power of the United States" and is "inflexible and without exception." ' " Id. (quoting Steel Co., 523 U.S. at 94-95, 118 S.Ct. 1003 (quoting Mansfield, C. & L.M. Ry. v. Swan, 111 U.S. 379, 382, 4 S.Ct. 510, 28 L.Ed. 462 (1884))). Therefore, we must " 'address questions pertaining to [our] jurisdiction before proceeding to the merits.' " Id. (quoting Tenet v. Doe, 544 U.S. 1, 6 n. 4, 125 S.Ct. 1230, 161 L.Ed.2d 82 (2005)).
The Vice President argues that we do not have jurisdiction under the political question doctrine because this case involves the identity of a covert agent and thereby implicates foreign-policy and national-security decisions that are reserved to the Executive Branch. We conclude that the allegations do not implicate the political question doctrine.
The political question doctrine " 'excludes from judicial review those controversies which revolve around policy choices and value determinations constitutionally committed for resolution to the halls of Congress or the confines of the Executive Branch.' " Bancoult, 445 F.3d at 432 (quoting Japan Whaling Ass'n v. Am. Cetacean Soc'y, 478 U.S. 221, 230, 106 S.Ct. 2860, 92 L.Ed.2d 166 (1986)). The doctrine applies where, "[pjrominent on the surface" of the case is:
[1] a textually demonstrable constitutional commitment of the issue to a coordinate political department; or [2] a lack of judicially discoverable and manageable standards for resolving it; or [3] the impossibility of deciding without an initial policy determination of a kind clearly for nonjudicial discretion; or [4] the impossibility of a court's undertaking independent resolution without expressing lack of the respect due coordinate branches of government; or [5] an unusual need for unquestioning adherence to a political decision already made; or [6]the potentiality of embarrassment from multifarious pronouncements by various departments on one question.
Baker v. Carr, 369 U.S. 186, 217, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962). " '[U]nless one of these formulations is inextricable from the case at bar,' we may not dismiss the claims as nonjusticiable under the political question doctrine." Bancoult, 445 F.3d at 432-33 (quoting Baker, 369 U.S. at 217, 82 S.Ct. 691).
The doctrine does not apply here. While "decision-making in the fields of foreign policy and national security is textually committed to the political branches of government," Schneider v. Kissinger, 412 F.3d 190, 194 (D.C.Cir.2005), the Wilsons have not challenged any foreign policy or national security decisions entrusted to the Executive Branch. They have instead challenged disclosures made by high-level executive branch officials when speaking with the press. The disclosures may have implicated national security by identifying a previously covert agent, but the lawsuit itself is not about national security in a manner requiring application of the political question doctrine. We therefore will proceed to the merits of the Wilsons' claims.
III. Analysis
The Wilsons argue that the district court erred in holding that special factors preclude implication of a Bivens claim and that the Government's Westfall Act certification was proper. On each legal issue, our review is de novo. See Rasul v. Myers, 512 F.3d 644, 654 (D.C.Cir.2008).
A. Constitutional Claims
The Wilsons first contest the district court's ruling that Bivens remedies are not available for their injuries. We agree with the district court that we cannot create a Bivens remedy because the comprehensive Privacy Act and the sensitive intelligence information concerns affiliated with this case preclude us from doing so.
1.
We have discretion in some circumstances to create a remedy against federal officials for constitutional violations, but we must decline to exercise that discretion where "special factors eounsel[ ] hesitation" in doing so. See Bivens, 403 U.S. at 396, 91 S.Ct. 1999; Spagnola v. Mathis, 859 F.2d 223, 226 (D.C.Cir.1988) (en banc). In Bivens, the Court implied a remedy where there were no " 'special factors counselling hesitation in the absence of affirmative action by Congress'" that required "the judiciary [to] decline to exercise its discretion in favor of creating damages remedies against federal officials." Spagnola, 859 F.2d at 226 (quoting Bivens, 403 U.S. at 396, 91 S.Ct. 1999). Since Bivens, the Supreme Court has "recognized two more nonstatutory damages remedies, the first for employment discrimination in violation of the Due Process Clause, Davis v. Passman, 442 U.S. 228, 99 S.Ct. 2264, 60 L.Ed.2d 846 (1979), and the second for an Eighth Amendment violation by prison officials, Carlson v. Green, 446 U.S. 14, 100 S.Ct. 1468, 64 L.Ed.2d 15 (1980)," but "in most instances[, the Court has] found a Bivens remedy unjustified." Wilkie v. Robbins, 551 U.S. 537, 127 S.Ct. 2588, 2597, 168 L.Ed.2d 389 (2007). Indeed, in its "more recent decisions[, the Supreme Court has] responded cautiously to suggestions that Bivens remedies be extended into new contexts." Chilicky, 487 U.S. at 421, 108 S.Ct. 2460.
One "special factor" that precludes creation of a Bivens remedy is the existence of a comprehensive remedial scheme. In Bush v. Lucas, 462 U.S. 367, 103 S.Ct. 2404, 76 L.Ed.2d 648 (1983), the Court held that the federal civil service laws were a "special factor" that precluded additional Bivens remedies because they constituted "an elaborate remedial system that ha[d] been constructed step by step, with careful attention to conflicting policy considerations" and thereby reflected Congressional judgment about the type and magnitude of relief available. Id. at 388-90, 91 S.Ct. 1999. The scheme did not provide "complete relief' to the plaintiff, but the Court held that the special factors inquiry does "not concern the merits of the particular remedy that was sought" or its completeness. Id. at 380, 388, 91 S.Ct. 1999. Rather, the doctrine "relate[s] to the question of who should decide whether such a remedy should be provided." Id. at 380, 103 S.Ct. 2404. "[C]onvinced that Congress is in a better position to decide whether or not the public interest would be served" by the addition of legal liability, the Court refused to create new remedies under Bivens for the plaintiff in Bush. Id. at 390, 103 S.Ct. 2404.
The Supreme Court reiterated that a remedial statute need not provide full relief to the plaintiff to qualify as a "special factor" in Schweiker v. Chilicky, 487 U.S. 412, 108 S.Ct. 2460, 101 L.Ed.2d 370 (1988). In Chilicky, "exactly as in Bush, Congress ha[d] failed to provide for 'complete relief: respondents ha[d] not been given a remedy in damages for emotional distress or for other hardships suffered because of delays in their receipt of Social Security benefits." Chilicky, 487 U.S. at 425, 108 S.Ct. 2460. But, the Court noted, "[t]he absence of statutory relief for a constitutional violation . does not by any means necessarily imply that courts should award money damages against the officers responsible for the violation." Id. at 421-22, 108 S.Ct. 2460. Rather, "the concept of 'special factors counselling hesitation in the absence of affirmative action by Congress' . include[s] an appropriate judicial deference to indications that congressional inaction has not been inadvertent." Id. at 423, 108 S.Ct. 2460. Therefore, "[w]hen the design of a Government program suggests that Congress has provided what it considers adequate remedial mechanisms for constitutional violations that may occur in the course of its administration," courts should not "create[ ] additional Bivens remedies." Id. Because "Congress is the body charged with making the inevitable compromises required in the design of a massive and complex welfare benefits program," the Court refused to question the legislative decision to exclude certain remedies from that program. Id. at 429, 108 S.Ct. 2460.
Most recently, in Wilkie v. Robbins, — U.S. —, 127 S.Ct. 2588, 168 L.Ed.2d 389 (2007), the Court again held that the creation of a Bivens remedy is not required solely because there is no alternative statutory remedy. In Wilkie, there was no comprehensive scheme demonstrating "that Congress expected the Judiciary to stay its Bivens hand," but the Court declined to imply a Bivens remedy nonetheless. Id. at 2600. The Court held that a remedy for allegedly harassing conduct of government officials would "come better, if at all, through legislation [because] 'Congress is in a far better position than a court to evaluate the impact of a new species of litigation' against those who act on the public's behalf." Id. at 2604-05 (quoting Bush, 462 U.S. at 389, 103 S.Ct. 2404). The Court's "point . is not to deny that Government employees sometimes overreach, for of course they do, and they may have done so here if all the allegations are true." Id. at 2604. Instead, "[t]he point is the reasonable fear that a general Bivens cure would be worse than the disease." Id. The Court concluded that authority to create a remedy should remain with Congress because Congress can "tailor any remedy to the problem perceived, thus lessening the risk of raising a tide of suits threatening legitimate initiative on the part of the Government's employees." Id. at 2605. Thus, the Court again made clear that there is no "automatic entitlement" to a Bivens remedy regardless of "what other means there may be to vindicate a protected interest." Id. at 2597.
Consistent with Bush, Chilicky, and Wilkie, our Court sitting en banc has held that the availability of Bivens remedies does not turn on the completeness of the available statutory relief. In Spagnola v. Mathis, 859 F.2d 223 (D.C.Cir.1988), we interpreted Bush and Chilicky as "ma[king] clear that it is the comprehensiveness of the statutory scheme involved, not the 'adequacy' of specific remedies extended thereunder, that counsels judicial abstention." Id. at 227. We held that "courts must withhold them power to fashion damages remedies when Congress has put in place a comprehensive system to administer public rights, has 'not inadvertently omitted damages remedies for certain claimants, and has not plainly expressed an intention that the courts preserve Bivens remedies." Id. at 228. Quoting Chilicky, we explained that, "[i]n these circumstances, it is not for the judiciary to question whether Congress' 'response [was] the best response, [for] Congress is the body charged with making the inevitable compromises required in the design of a massive and complex . program.' " Id. (quoting Chilicky, 487 U.S. at 429, 108 S.Ct. 2460).
Our Spagnola decision involved the comprehensive scheme established by the Civil Service Reform Act. 859 F.2d at 230. We have also found comprehensive remedial schemes in Title VII of the Civil Rights Act of 1964, see Ethnic Employees of Library of Congress v. Boorstin, 751 F.2d 1405, 1414-16 (D.C.Cir.1985), the Freedom of Information Act, see Johnson v. Executive Office for U.S. Attorneys, 310 F.3d 771, 777 (D.C.Cir.2002), the Veterans' Judicial Review Act, see Thomas v. Principi, 394 F.3d 970, 975-76 (D.C.Cir.2005), and the Privacy Act, see Chung v. U.S. Dep't of Justice, 333 F.3d 273, 274 (D.C.Cir.2003), affg in relevant part No. 00-1912, 2001 WL 34360430 (D.D.C. Sept. 20, 2001).
2.
The Wilsons concede that this Court has held that the Privacy Act, 5 U.S.C. § 552a, is a "special factor" that counsels hesitation in implying Bivens remedies. Appellants' Br. at 17-18 (citing Chung, 333 F.3d at 274); accord Downie v. City of Middleburg Heights, 301 F.3d 688, 698 (6th Cir.2002) (finding Privacy Act is a "comprehensive legislative scheme" that precludes additional Bivens remedies). But they contend that the Privacy Act should not be found "comprehensive" and preclusive of Bivens remedies here because three defendants in this case are exempted from its terms. The failure of the Privacy Act to provide complete relief to the Wilsons, however, does not undermine its status as a "comprehensive scheme" that stops us from providing additional remedies under Bivens.
The Privacy Act regulates the " 'collection, maintenance, use, and dissemination of information' " about individuals by federal agencies. Doe v. Chao, 540 U.S. 614, 618, 124 S.Ct. 1204, 157 L.Ed.2d 1122 (2004) (quoting Privacy Act of 1974 § 2(a)(5), 88 Stat. 1896). It "authorizes civil suits by individuals . whose Privacy Act rights are infringed," Sussman v. U.S. Marshals Serv., 494 F.3d 1106, 1123 (D.C.Cir.2007), and provides for criminal penalties against federal officials who willfully disclose a record in violation of the Act, 5 U.S.C. § 552a(i)(l).
The claims asserted by the Wilsons are all claims alleging harm from the improper disclosure of information subject to the Privacy Act's protections. The Privacy Act applies to information that is "about an individual," that is stored in a system of records "under the control of any agency," and that is "retrieved by the name of the individual or by some identifying number, symbol, or other identifying particular assigned to the individual." 5 U.S.C. § 552a(a)(4), (5). The amended complaint premises the Wilsons' damages on the publication of Valerie Píame Wilson's CIA employment in the Novak column. Am. Compl. ¶ 40. The publication was the result of a disclosure by Deputy Secretary of State Armitage of information about an individual contained in State Department records. Id. at ¶ 14.
Each claim in the Wilson complaint is based on this disclosure of Privacy Act protected information. In Count One, the Wilsons allege that Joseph Wilson's First Amendment right to free speech was violated when the information was disclosed in retaliation for his speech. Count Two alleges that Valerie and Joseph Wilson's Fifth Amendment rights to equal protection of the laws were violated by the disclosure of information because that disclosure treated them differently from others. Count Three alleges that Valerie Wilson's Fifth Amendment right to privacy was violated when her personal information was publicly disclosed. Count Four alleges that Valerie Wilson's Fifth Amendment right to property was violated when the information was disclosed because the disclosure eliminated the secrecy of her position which was essential to her employment. Thus, each Constitutional claim, whether pled in terms of privacy, property, due process, or the First Amendment, is a claim alleging damages from the improper disclosure of information covered by the Privacy Act.
It is true that the Wilsons cannot obtain complete relief under the Privacy Act because the Act exempts the Offices of the President and Vice President from its coverage. See 5 U.S.C. § 552a(b) (applying Privacy Act requirements to agencies); id. § 552a(a)(l) (adopting definition of "agency" from the Freedom of Information Act (FOIA)); Kissinger v. Reporters Committee for Freedom of the Press, 445 U.S. 136, 156, 100 S.Ct. 960, 63 L.Ed.2d 267 (1980) (Office of the President is not an "agency" under FOIA); Judicial Watch, Inc. v. National Energy Policy Development Group, 219 F.Supp.2d 20, 55 (D.D.C.2002). Thus, even if the Wilsons can prove their allega tions against Vice President Cheney, Rove, and Libby, they will not be remunerated for them. Nonetheless, our precedent is plain that the Wilsons are still not entitled to Bivens relief as to Vice President Cheney, Rove, or Libby, provided their omission from the remedial scheme was not inadvertent. See Spagnola, 859 F.2d at 228.
Congress did not inadvertently omit the Offices of the President and Vice President from the Privacy Act's disclosure requirements. The Privacy Act explicitly defines "agency" by reference to FOIA, 5 U.S.C. § 552a(a)(l), which the Supreme Court has held, based on "unambiguous" legislative history, does not extend to the Office of the President, Kissinger, 445 U.S. at 156, 100 S.Ct. 960 (citing H.R.Rep. No. 93-1380 at 15 (1974)); see also Judicial Watch, 219 F.Supp.2d at 55 (concluding that the Vice President and his staff are not "agencies" for purposes of the FOIA). "There is every indication from the legislative history that the drafters of the Privacy Act, in choosing to apply the FOIA definition of 'agency to the Privacy Act, were cognizant of the Conference Committee Report prepared in connection with the 1974 FOIA Amendments, which specifically provided that 'the term [agency] is not to be interpreted as including the President's immediate personal staff or units in the Executive Office whose sole function is to advise and assist the President.' " Jones v. Executive Office of the President, 167 F.Supp.2d 10, 19 (D.D.C.2001) (quoting H.R.Rep. No. 93-1380, at 15). This intentional omission of the Presidential and Vice Presidential offices from the comprehensive coverage of the Privacy Act requires us to deny the additional remedies to the Wilsons which they seek.
3.
The Wilsons make two principal arguments in attempting to distinguish their case from precedent. First, they rely on the Supreme Court's decision in Carlson. In Carlson the Supreme Court stated that the right of victims of a constitutional violation to a Bivens remedy "may be defeated . in two situations." The Court defined the first as "when defendants demonstrate 'special factors counsel-ling hesitation in the absence of affirmative action by Congress.' " 446 U.S. at 18, 100 S.Ct. 1468. The Supreme Court described the second as "when defendants show that Congress has provided an alternative remedy which it explicitly declared to be a substitute for recovery directly under the Constitution and viewed as equally effective." Id. at 18-19, 100 S.Ct. 1468. The Wilsons argue that the Bivens claim cannot be defeated here because there is no "equally effective alternative remedy." Were we to look at Carlson standing alone, this argument might carry much weight. However, subsequent to Carlson, the Court clarified that there does not need to be an equally effective alternate remedy. Instead, "the decision whether to recognize a Bivens remedy may require two steps." Wilkie, 127 S.Ct. at 2598. First, if there is an "alternative, existing process for protecting the interest," then that is "a convincing reason for the Judicial Branch to refrain from providing a new and freestanding remedy in damages." Id. Even if there is no equally effective alternative remedy, the decision of whether to create "a Bivens remedy is a subject of judgment" that requires the court to " 'make the kind of remedial determination that is appropriate for a common-law tribunal, paying particular heed, however, to any special factors counselling hesitation before authorizing a new kind of federal litigation.' " Id. (quoting Bush, 462 U.S. at 378, 103 S.Ct. 2404). In other words, an equally effective statutory remedy is a sufficient, but not essential, reason for us to abstain from creating Bivens remedies. The presence of a comprehensive remedial scheme is also a sufficient reason for us to stay our hand.
Second, the Wilsons argue that other remedies have been available to the plaintiffs in cases where the Court denied a Bivens remedy. In Bush, the Court referred to the "comprehensive nature of the remedies currently available" under the civil service laws, 462 U.S. at 388, 103 S.Ct. 2404; in Chilicky, the Court described the Social Security Act as a "comprehensive statutory scheme," 487 U.S. at 428, 108 S.Ct. 2460; and in Wilkie, the Court noted that the plaintiff could avail himself of a "patchwork" of remedies for some of his injuries, 127 S.Ct. at 2600. Here, in contrast, the Wilsons assert that they will never be able to obtain any remuneration for injuries allegedly suffered because of the actions of Vice President Cheney, Rove, and Libby if they cannot proceed under Bivens. Thus, they argue, they are like the plaintiffs in Davis and Bivens who were given a Bivens remedy because they had no other avenue of relief available to them. See Davis, 442 U.S. at 245, 99 S.Ct. 2264 ("There are available no other alternative forms of judicial relief."); Bivens, 403 U.S. at 410, 91 S.Ct. 1999 (Harlan, J., concurring in the judgment) ("For people in Bivens' shoes, it is damages or nothing.").
The first problem with this argument is that the Wilsons, unlike the plaintiffs in Davis and Bivens, can seek at least some remedy under the Privacy Act. At the least, as they concede, Valerie Wilson has a possible claim based on the disclosure by Deputy Secretary of State Armitage because the information disclosed about her and the agency involved in the disclosure are subject to the Privacy Act's restrictions. Appellants' Br. at 18 n. 3. So, while the Privacy Act may not provide the Wilsons with full relief regarding the alleged disclosures, and provides Mr. Wilson with no relief, the Wilsons cannot contend that there is no possibility of relief at all under the statute for the disclosure of Privacy Act protected information.
The more significant flaw in the Wilsons' argument is its focus on the necessity of a remedy at all. The special factors analysis does not turn on whether the statute provides a remedy to the particular plaintiff for the particular claim he or she wishes to pursue. In Spagnola, we held that a comprehensive statutory scheme precludes a Bivens remedy even when the scheme provides the plaintiff with "no remedy whatsoever." 859 F.2d at 228 (quoting Chilicky, 487 U.S. at 423, 108 S.Ct. 2460). And the Supreme Court, in its most recent consideration of the issue, did not create a remedy even though there was no cause of action that the plaintiff could pursue to remedy injuries that resulted from a prolonged "course of dealing as a whole." Wilkie, 127 S.Ct. at 2600-01, 2604-05. The pertinent inquiry is "the question of who' should decide whether such a remedy should be provided," Bush, 462 U.S. at 380, 103 S.Ct. 2404, not whether there is a remedy. Indeed, it is where Congress has intentionally withheld a remedy that we must most refrain from providing one because it is in those situations that "appropriate judicial deference" is especially due to the considered judgment of Congress that certain remedies are not warranted. See Chilicky, 487 U.S. at 423, 108 S.Ct. 2460. That deference must be given whether Congress has chosen to exclude a remedy for particular claims, as in Bush and Chilicky, or from particular defendants, as here. Provided "Congress has put in place a comprehensive system to administer public rights, has 'not inadvertently omitted damages remedies for certain claimants, and has not plainly ex pressed an intention that the courts preserve Bivens remedies," Spagnola, 859 F.2d at 228, we cannot create additional remedies.
Therefore, because Congress created a comprehensive Privacy Act scheme that did not inadvertently exclude a remedy for the claims brought against these defendants, we will not supplement the scheme with Bivens remedies.
4.
We also cannot ignore that, if we were to create a Bivens remedy, the litigation of the allegations in the amended complaint would inevitably require judicial intrusion into matters, of national security and sensitive intelligence information. The decision of whether to create a Bivens remedy involves our judgment and "weighing [of] reasons for and against the creation of a new cause of action, the way common law judges have always done." Wilkie, 127 S.Ct. at 2600. Pertinent to that judgment are the difficulties associated with subjecting allegations involving CIA operations and covert operatives to judicial and public scrutiny.
There is no dispute on appeal that a Bivens remedy in this case is not precluded by the Intelligence Identities Protection Act of 1982 ("IIPA"), 50 U.S.C. § 421-26, or by the justiciability doctrine of Totten v. United States, 92 U.S. 105, 23 L.Ed. 605 (1875). The IIPA is not a "comprehensive remedial scheme" for purposes of the special factors analysis because it is a purely criminal statute that only authorizes criminal prosecution of those who intentionally disclose the identity of a covert agent. See 50 U.S.C. § 421. And the doctrine of Totten, which precludes suits "against the Government based on covert espionage agreements," Tenet v. Doe, 544 U.S. 1, 3, 125 S.Ct. 1230, 161 L.Ed.2d 82 (2005), does not apply where the suit is "brought by an acknowledged (though covert) employee of the CIA," id. at 10, 125 S.Ct. 1230. Nonetheless, the concerns that underlie the protective restrictions of the IIPA and the Totten doctrine are valid considerations in the Bivens analysis and weigh against creating a remedy in this case. As the Supreme Court has recognized, " '[e]ven a small chance that some court will order disclosure of a source's identity could well impair intelligence gathering and cause sources to "close up like a clam."'" Id. at 11, 125 S.Ct. 1230 (quoting CIA v. Sims, 471 U.S. 159, 175, 105 S.Ct. 1881, 85 L.Ed.2d 173 (1985)). We will not create a cause of action that provides that opportunity.
Litigation of the Wilsons' allegations would inevitably require an inquiry into "classified information that may undermine ongoing covert operations." See Tenet, 544 U.S. at 11, 125 S.Ct. 1230. The amended complaint alleges that the disclosure of Valerie Píame Wilson's identity "impaired . her ability to cany out her duties at the CIA," Am. Compl. ¶43, increased the risk of violence to her and her family, id. at ¶ 42, and subjected her to treatment different from that given other similarly situated agents, id. at ¶ 51-52. We certainly must hesitate before we allow a judicial inquiry into these allegations that implicate the job risks and responsibilities of covert CIA agents. In eases involving covert espionage agreements, "[t]he state secrets privilege and the more frequent use of in camera judicial proceedings simply cannot provide the absolute protection [the Court] found necessary in enunciating the Totten rule." Tenet, 544 U.S. at 11, 125 S.Ct. 1230. Here, although Totten does not bar the suit, the concerns justifying the Totten doctrine provide further support for our decision that a Bivens cause of action is not warranted.
For all the above-stated reasons, we will not imply a Bivens remedy. The district court's decision in this regard is affirmed.
B. Tort Claim
The Wilsons also contest the district court's dismissal of their tort claim. With respect to the tort claim, the United States made a certification pursuant to the Federal Employees Liability Reform and Tort Compensation Act of 1988 (the "Westfall Act"), 28 U.S.C. § 2679, that "at the time of the conduct alleged in the amended complaint the individual defendants . were acting within the scope of their employment as employees of the United States." The certification carries a rebuttable presumption that the employee has absolute immunity from the lawsuit and that the United States is to be substituted as the defendant. Id. § 2679(d); Osborn v. Haley, 549 U.S. 225, 127 S.Ct. 881, 887-88, 166 L.Ed.2d 819 (2007); Council on Am. Islamic Relations (CAIR) v. Ballenger, 444 F.3d 659, 662 (D.C.Cir.2006). If the presumption is not rebutted in this case, the case must be dismissed because the Wilsons have not exhausted them administrative remedies as required to pursue a claim against the United States pursuant to the Federal Tort Claims Act. See 28 U.S.C. § 2675(a).
The Wilsons seek to rebut the certification's claim that the defendants were working within their scope of employment when the disclosures were made. To determine whether an employee was acting within the scope of employment under the Westfall Act, we apply the respondeat superior law in the state in which the alleged tort occurred. CAIR, 444 F.3d at 663. District of Columbia law, which applies in this case, defines the scope of employment in accordance with the Restatement (Second) of Agency (1958) ("Restatement"). Id. (citing Moseley v. Second, New St. Paid Baptist Church, 534 A.2d 346, 348 n. 4 (D.C.1987)). The Restatement, provides, in pertinent part, that:
Conduct of a servant is within the scope of employment if, but only if:
(a) it is of the kind he is employed to perform;
(b) it occurs substantially within the authorized time and space limits;
(c) it is actuated, at least in part, by a purpose to serve the master, and
(d) if force is intentionally used by the servant against another, the use of force is not unexpectable by the master.
Restatement § 228(1); see CAIR, 444 F.3d at 663. " '[T]he test for scope of employment is an objective one, based on all the facts and circumstances.' " Id. (quoting Weinberg v. Johnson, 518 A.2d 985, 991 (D.C.1986)). "Although scope of employment is generally a question for the jury, it 'becomes a question of law for the court, however, if there is not sufficient evidence from which a reasonable juror could conclude that the action was within the scope of the employment.' " Id. (quoting Boykin v. District of Columbia, 484 A.2d 560, 562 (D.C.1984)).
The Wilsons argue that the disclosure of a covert agent's identity cannot fall within an employee's scope of employment with the United States because the disclosure is unlawful and threatens the security of the nation, its covert agents, and its intelligence-gathering functions. But, as we explained in CAIR, "[t]his argument rests on a misunderstanding of D.C. scope-of-employment law (not to mention the plain text of the Westfall Act), which directs courts to look beyond alleged intentional torts themselves" to the underlying conduct in determining whether that conduct was within the scope of employment. 444 F.3d at 664. As a result, an employ ee's scope of employment " 'is broad enough to embrace any intentional tort arising out of a dispute that was originally undertaken on the employer's behalf.' " Id. (quoting Weinberg, 518 A.2d at 992). We noted in CAIR that D.C. courts have concluded that "a reasonable juror could find that a laundromat employee acted within scope of employment when he shot a customer during a dispute over missing shirts," id. (citing Johnson v. Weinberg, 434 A.2d 404, 409 (D.C.1981)), and that a "jury reasonably found that a mattress deliveryman acted within [the] scope of employment when he assaulted and raped a customer following a delivery-related dispute," id. (citing Lyon v. Carey, 533 F.2d 649, 652 (D.C.Cir.1976)).
We have since held, under D.C. scope of employment law, that the alleged "authorization, implementation and supervision of torture" was within the scope of employment of military officers who interrogated detainees at the United States Naval Base at Guantanamo Bay, Cuba. Rasul v. Myers, 512 F.3d 644, 656-60 (D.C.Cir.2008). In Rasul, the allegation that employees had engaged in "serious criminality" while interrogating detainees did not change the result because "the detention and interrogation of suspected enemy combatants [was] a central part of the [employees'] duties as military officers charged with winning the war on terror." Id. at 658-60. Because "the detention and interrogation of suspected enemy combatants [was] the type of conduct the defendants were employed to engage in," id. at 658, the "alleged tortious conduct was incidental to the defendants' legitimate employment duties," id. at 659, and "allegations of serious criminality d[id] not alter our conclusion that the defendants' conduct was incidental to authorized conduct," id. at 660.
Even more to the point for purposes of this case, we held in CAIR that a congressman's allegedly defamatory statement made during a press interview was within the scope of his employment because "[s]peaking to the press during regular work hours in response to a reporter's inquiry falls within the scope of a congressman's 'authorized duties.' " Id. A congressman's "ability to do his job as a legislator effectively is tied, as in this case, to the Member's relationship with the public and in particular his constituents and colleagues in the Congress." Id. at 665. Thus, we held that the congressman's statement to the press was "of the kind he is employed to perform" and "actuated, at least in part, by a purpose to serve the master." Id. at 664-66 (quoting Restatement § 228(1)).
Here, the Wilsons allege that the defendants spoke to the press in order to diffuse Joseph Wilson's criticism of the Executive's handling of pre-war intelligence. Am. Compl. ¶ 2-3. It can hardly be disputed that such discussions were of the type that the defendants were employed to perform. Even the Wilsons agree that "[o]f course, the defendants may discredit public critics of the Executive Branch." Appellants' Br. at 33. The conduct, then, was in the defendants' scope of employment regardless of whether it was unlawful or contrary to the national security of the United States. Therefore, we agree with the district court that the Wilsons' arguments about the illegality and impropriety of the alleged conduct are misplaced. The government's scope-of-employment certification is proper, and the district court's dismissal of the tort claim is affirmed.
IV. Conclusion
Because the Wilsons have failed to state constitutional Bivens claims for which relief may be granted and have failed to exhaust them administrative remedies as required to pursue a tort claim against the United States, we affirm the judgment of the district court dismissing the Wilsons' amended complaint in its entirety.
. We further agree with the district court that further discovery is not warranted to determine precise times and locations of the defendants' conversations with the press. Even if some conversations took place on Sunday or occurred off White House property as the Wilsons contend and seek to discover, the conversations would still have occurred within the "time and space" of employment of the high-level Executive Branch employees sued here. Neither the Vice President, his chief of staff, nor a close advisor to the President punches out of work at the end of the day or when he leaves White House property.
. Because our decision, based on the grounds considered by the district court, results in the dismissal of all claims against the Vice President of the United States, we need not, and do not, consider his alternate claim for absolute Vice-Presidential immunity.
. 120 Cong. Rec. 12,646 (1974) (statement of Sen. Ervin). |
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21 Ct. Int'l Trade 165 | JUDGMENT
Wallach, Judge:
On May 9, 1996, this Court remanded to the Department of Commerce, International Trade Administration ("Commerce"), one issue arising from the anti-dumping determination titled Final Determination of Sales at Less Than Fair Value: Coumarin From the People's Republic of China, 59 Fed. Reg. 66895 (Dep't Comm. 1994).
Pursuant to the remand order, Commerce filed its Remand Determination: Rhone-Poulenc, Inc. v. United States on September 23,1996. Upon finding errors in the Remand Determination, Commerce filed its Amended Remand Determination: Rhone-Poulenc, Inc. v. United States as of October 3, 1996 (the "Amended Remand Results"). In accordance with the remand order, the amended remand results reflect that Commerce reconsidered its valuation of the by-products of coumarin production by Respondents in light of the presence of impurities, recalculated the value of the by-products, and adjusted the subject Chinese exporters' dumping margins accordingly. Commerce was forced to apply best information available in revaluing Tianjin Native Produce Import and Export Corp.'s by-products because of the company's failure to provide information in response to Commerce's remand questionnaire. After recalculation, the margins are as follows:
Jiangsu Native Produce Import and Export Corp.31.02%
Tianjin Native Produce Import and Export Corp. 70.45%
PRC-Wide Rate. 160.80% (no change).
In Plaintiffs Comments on Amended Remand Determination, filed as of October 7, 1996, Rhone-Poulenc indicated its concurrence with the Amended Remand Results, and asked that they be affirmed by this Court.
For the foregoing reasons, it is hereby
Ordered, adjudged and decreed that the Amended Remand Results are affirmed; and it is further
Ordered, adjudged and decreed that, all other issues having been decided, this case is dismissed.
Familiarity with the Court's opinion of May 9, 1996, which set forth the basis for and substance of the icmand, is ptcsinncd. |
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531 U.S. 1095 | Sup. Ct. Ga. Certiorari denied. |
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538 U.S. 991 | C. A. 11th Cir. Cer-tiorari denied. |
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17 Cust. Ct. 398 | Kinoheloh, Judge:
The appeals for reappraisement listed in schedule A, hereto attached and made a part hereof, have been submitted for decision upon the following stipulation of counsel for the parties hereto:
(Stipulation omitted.)
On the agreed facts I find the export value, as that value is defined in section 402 (d) of the Tariff Act of 1930, to be the proper basis for the determination of the value of the merchandise here involved, and that such values are the appraised values, less the additions made by the importers on entry because of advances by the appraiser in similar cases.
Judgment will be rendered accordingly. |
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352 U.S. 973 | C. A. 3d Cir. Certiorari denied. |
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534 U.S. 858 | C. A. 10th Cir. Certiorari denied. |
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10 Cust. Ct. 370 | Opinion by
Tilson, J.
In accordance with stipulation of counsel that certain of the items in question consist of pincushions composed in chief value of silk, but not composed in any part of any of the materials or articles eo nomine men tioned in paragraph 1529, and that the pincushions áre similar in all material respects to those involved in Abstract 476Ó4, the claim at 65 percent under paragraph 1211 was sustained; |
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6 Cust. Ct. 681 | Keefe, Judge:
This case involves the classification of certain articles assessed for duty at 10 cents per dozen pieces and 50 percent ad valorem as colored earthenware under the provisions of paragraph-211, Tariff Act of 1930. The plaintiffs claim that the earthenware articles are not colored and therefore are properly dutiable under the same paragraph at 45 percent ad valorem and 10 cents per dozen pieces.
At the trial an illustrative exhibit was admitted in evidence as representative, except for shape and size, of the articles in question appearing upon the invoice under item numbers N-ll — 5, N-38-13, N-37-B-10, N-4A-8, N-45-9, N-10-13, N-10-15, N-12-12, N-12-10, N-4A-5, and N-61-150.
The manager of the importing department of the plaintiff company testified that he had observed articles like exhibit 1 manufactured in Japan. That the entire process consisted of removing clay from the ground, adding water, and mixing, to obtain the finer portions, placing the mass of clay upon a turning wheel or lathe where it is shaped into the desired objects, and thereafter baked in an oven. The witness was positive that no color was added at the time of glazing.
The examiner of earthenware at Los Angeles testified that all of the merchandise in question was not similar to the sample in evidence, because items N-44-8, N-10-15, and N-44^5, in addition to a colored glaze, had been further decorated; that the merchandise was classified at 50 percent ad valorem because he was of the opinion that color had been added to the glazed surface upon all of the items in question; that when color is added to a glaze it is not considered to be plain uncolored earthenware. The witness further testified that he believed that a color had been added to the glaze because the glazed surface presented a cream color while the clay interior of the articles was much whiter. Upon an oral examination of the sample in the court room he was still of the opinion that the glaze contained an added color because he believed the glaze to be opaque. The witness further testified that if the article was covered with a transparent glaze the color of the clay and the color of the glazed surface would have been the same.
The question presented herein is purely one of fact, to wit, whether or not the glazed surface of the articles in question contained an added color so that it became opaque rather than remaining transparent or translucent. If a color was added to the glaze the merchandise is properly dutiable as colored earthenware, if not, it takes the lower rate of plain earthenware. The testimony is conflicting. Each witness is equally insistent as to the nature of the glaze.
Fortunately, a sample, agreed by both sides to represent the merchandise so far as the glaze is concerned, is before the court. A portion of the surface is broken so that the inner clay portion as well as the edges of the glaze are readily available for inspection. We note that the inner portion is a few shades whiter than the glazed surface. However, a transparent glaze placed over a white-surface would tend to darken or soften the color, because, according to the lexicographers, all glaze is translucent rather than transparent. An examination of the article in evidence substantiates the testimony of plaintiffs' witness that the glaze applied thereto does not possess any color. A very thin sliver thereof broken from fragments of the exhibit is quite transparent and without color and an observation of the broken surfaces of the glaze establishes that it is translucent. Had a color been added to the glaze the effect thereof would be to make the glaze opaque. From our examination of the sample, therefore, we are of the opinion that the evidence submitted by the plaintiffs establishes that the articles herein are not covered with a colored glaze. We therefore hold that all of the items in question except the items which the examiner stated had been further decorated are held properly dutiable at 10 cents per dozen pieces and 45 percent ad valorem as plain earthenware.
Judgment will therefore be entered in favor of the plaintiffs to the extent indicated and the collector of customs at the port of Los Angeles is directed to reliquidate the entry and make refund accordingly. In all other respects the protest is overruled. |
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469 U.S. 1197 | Sup. Ct. Tenn.; and
Sup. Ct. Fla. Certiorari denied. Reported below: No. 84-5817, 676 S. W. 2d 935; No. 84-5864, 455 So. 2d 351. |
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439 U.S. 955 | C. A. 7th Cir. Certiorari denied. |
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409 U.S. 929 | C. A. 9th Cir. Motion of respondent for leave to proceed in forma pauperis granted. Certiorari denied. |
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20 T.C. 455 | OPINION.
Harron, Judge:
Petitioner contends that all of the expense of installing a new floor in its building in 1946, and of moving and reinstalling the fixtures and partitions which rested on the floor, were expenses of keeping its building in efficient, operating condition, and that the entire expense is deductible under section 23 (a) (1) (A) of the Code. In the alternative, the petitioner contends that the expense of moving and reinstalling the fixtures and partitions is deductible. The respondent has determined that the entire expense is a capital expenditure.
The issue presents questions of fact. One of the questions of fact to be decided is whether the new floor was installed because of the occurrence of an external, physical phenomenon which caused the floor of petitioner's building to suddenly cave in or crack, or which accelerated its deterioration. The petitioner advances a theory that there was an external condition which caused damage to its floor and that this condition made it necessary to put in a new floor in order to permit it to continue the use of its building in its business. In support of its claim that the expense in question is deductible, petitioner relies on the following cases: American Bemberg Corporation, 10 T. C. 361, affd. 177 F. 2d 200; Midland Empire Packing Co., 14 T. C. 635; and Farmers Creamery Co. of Fredericksburg, Virginia, 14 T. C. 879.
The petitioner has failed to establish that there was an accelerated deterioration of the original floor caused by an external condition. The facts of the above-cited cases are clearly distinguishable and they do not control the issue presented. For example, in the case of Farmers Creamery Co., supra, at p. 880, it was found that "The repairs never replaced as much as one-half of any wall, ceiling, or floor ." The petitioner attempted to establish that the settling of sand under its building had caused the level of the floor to change and the surface of the floor to crack and cave in at various places. The evidence did not develop this picture of an alleged situation and condition.
The evidence on the whole shows that the old floor wore out; that it had been patched and repaired to such an extent that further patching was not practical; and that the business of petitioner had expanded to include the handling of heavy goods and equipment which the old floor could not support without the effects of the heavier wear entailed. The floor which was replaced was the original floor of the building, and it was 46 years old. Furthermore, the cost or basis of petitioner's building had been fully recovered through depreciation allowances before January 1, 1946, so that the old floor had been completely depreciated.
Section 24 (a) (3) of the Code prohibits deduction for "Any amount expended in restoring property or in making good the exhaustion thereof for which an allowance for depreciation is or has been made"; and section 29.24-2 of Regulations 111 provides that amounts paid for making good the depreciation (for which a deduction has been made) of property are capital expenditures and are not deductible. This statutory prohibition defeats petitioner's claim for deduction of the expenditures in question.
The old floor of petitioner's building was thin and was not reinforced. It was worn out, and, also, it was not strong enough to support the weight of the heavy materials petitioner, before 1946, had introduced into its line of goods. The new floor installed in 1946 was of reinforced concrete; it was thicker than the old floor; it was made for heavy wear. There was replacement of the entire floor, excepting 225 square feet in the rear of the building which had been put in prior to 1946, in about 1943. The evidence shows, clearly, that the new floor represented a replacement and an improvement; and that it was not merely a repair which kept the building in ordinarily efficient, operating condition. See Illinois Merchants Trust Co., Executor, 4 B. T. A. 103; and Regs. 111, sec. 29.23 (a)-4. The installation of the new floor was an extensive job, and for practical purposes it amounted to putting in an entire floor, because the 225 square feet of new floor in the rear of the building represented only a small and minor part of the entire floor area. The removal of the old floor and the installation of the new floor was a substantial, structural work. Cf. Buckland v. United States, 66 F. Supp. 681, 683. The new floor made the building more valuable for the use of the petitioner in its business, particularly because it accommodated the storing, handling, and moving of heavy equipment and inventories. Black Hardware Co. v. Commissioner, 39 F. 2d 460, certiorari denied 282 U. S. 841; Amsterdam Theatres Corporation, 24 B. T. A. 1161.
It is held that the expense of installing the new floor was a capital expenditure.
The petitioner's alternative contention is that the cost of moving and reinstalling the fixtures which rest on the floor is deductible and is not capital expenditure. Petitioner allocates $6,615.77 to this expense.
The contractor did not allocate the total expense between the cost of the installation of the floor and the cost of moving the fixtures, but even though this could be done, the allocation is immaterial. Assuming that the allocation can be made, the expense of moving the fixtures cannot be treated differently than the expense of installing the new floor. This is not a case where repairs were made which were unrelated to the installation of a capital item as was true in Marble & Shattuck Chair Co., 13 B. T. A. 657, affd. 39 F. 2d 393. On the contrary, the moving and the relocating of the partitions, bins, and fixtures were incidental to and a necessary part of removing the old floor and installing the new floor, and the expense thereof was a capital expenditure. The new floor could not have been installed without moving and relocating the fixtures resting upon the floor. I. M. Cowell, 18 B. T. A. 997; Home News Publishing Co., 18 B. T. A. 1008; Ethyl M. Cox, 17 T. C. 1287.
It is held that the entire expense of $10,653.76 was a capital expenditure.
Decision will be entered for the respondent. |
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25 F. App'x 856 | ORDER
LOURIE, Circuit Judge.
The Secretary of Veterans Affairs moves to waive the requirements of Fed. Cir. R. 27(f) and to dismiss Truitt A. Segers's appeal for lack of jurisdiction because he has appealed from a nonfinal order. Seg-ers has not responded.
On May 31, 1998, the Board of Veterans' Appeals denied Segers' claim for a hght staph epidermidis and hght gaffkya species, concluding that Segers' claim was not well-grounded. Segers appealed to the Court of Appeals for Veterans Claims, and the Secretary moved for remand based on the Veterans Claims Assistance Act of 2000, Pub.L. No. 106-475, 115 Stat.2096 (VCAA). The Court of Appeals for Veterans Claims granted the Secretary's motion, vacated the Board decision, and remanded for readjudication based on the VCAA. In its remand order, the Court of Appeals for Veterans Claims noted that Segers did not oppose the remand in his "answer" to the Secretary's motion, but that if a remand were granted, Segers requested expedited consideration by the Board and that his case be completed "on or before a date set by the Court." In denying that request, the court concluded that Segers did not present "exigent circumstances" to warrant an order directing that Segers' claim be adjudicated by a date certain.
In his informal brief, Segers asserts that statements in support of his claim "were withheld and would have made a material difference in the decision(s) made had they been made a part of the record." However, as noted by the United States Court of Appeals for Veterans Claims in its remand order, Segers "is free to submit additional evidence and argument necessary to the resolution of his claim" on remand. Seg-ers does not challenge the court's denial of his request for expedited consideration on remand.
This court has jurisdiction over final decisions of the Court of Appeals for Veterans Claims. See Winn v. Brown, 110 F.3d 56, 57 (Fed.Cir.1997); Johnson v. Derwinski 949 F.2d 394, 395 (Fed.Cir.1991); 38 U.S.C. § 7292(a). "This court typically does not have jurisdiction over Court of Veterans Appeals [now Court of Appeals for Veterans Claims] remands because they are not final judgments." Winn, 110 F.3d at 57. See also Cabot v. United States, 788 F.2d 1539 (Fed.Cir.1986) (remand to administrative agency for additional findings is not appealable even though remand order resolves an important legal issue). This case does not fall within the "collateral order exception" to the final judgment rule because Segers may later obtain review from an adverse final judgment of the Court of Appeals for Veterans Claims that falls within our jurisdictional mandate. See 38 U.S.C. § 7292(c). Neither does it fall within any of the other exceptions permitting appeals from remand orders. See Adams v. Principi 256 F.3d 1318 (Fed.Cir.2001); Travelstead v. Derwinski 978 F.2d 1244 (Fed.Cir.1992). Therefore, we must dismiss for lack of jurisdiction.
Accordingly,
IT IS ORDERED THAT:
(1) The Secretary's motion to waive the requirements of Fed. Cir. R. 27(f) is granted.
(2) The Secretary's motion to dismiss is granted.
(3) Each side shall bear its own costs. |
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506 U.S. 927 | C. A. 11th Cir. Certiorari denied. |
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430 U.S. 910 | C. A. 8th Cir. Certiorari denied. |
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464 U.S. 1051 | C. A. 6th Cir. Cer-tiorari denied. |
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568 U.S. 1033 | Sup. Ct. Fla. Certiorari denied. |