562 F.2d 1209 | C.C.P.A. | 1977
Lead Opinion
Appeal by the United States from a judgment of the United ^States Customs Court, 78 Cust. Ct. 59, C.D. 4691, 430 F. Supp. 242 (1977), holding that remission of a Japanese commodity tax, on electronic products exported from Japan, constitutes a bounty or grant 'under § 303, Tariff Act of 1930, as amended, 19 USC 1303 (Supp. V 1975), and granting summary judgment to Zenith Radio Corporation (Zenith). We reverse.
In 1970, Zenith, petitioned the Commissioner of Customs,
The Japanese Tax
The Japanese Commodity Tax Law, Law No. 48 of 1962, as revised and insofar as it appears in the record, imposes a single-stage “commodity tax” upon a manufacturer’s shipment of specified electronic products for consumption in Japan. The same products are exempt from the tax when shipped for export.
The Customs Court
Upon application by the United States, a three-judge panel was convened pursuant to § 108, Customs Court Act of 1970. 28 USC 225 (1970). Both parties moved for summary judgment. Relying heavily upon Downs v. United States, 187 U.S. 496 (1903), the court held that remission of the Japanese Commodity Tax constituted a bounty or grant under § 303, as a matter of law.
Accordingly, the court granted Zenith’s motion for summary judgment and ordered the Secretary of the Treasury to determine the
The Issue
The dispositive issue is whether the mere remission of an excise
§ 1303. Countervailing duties.
(a) Levy of countervailing duties.
(1) Whenever any country, dependency, colony, province, or other political subdivision of government, person, partnership, association, cartel, or corporation, shall pay or bestow, directly or indirectly, any bounty or grant upon the manufacture or production or export of any article or merchandise manufactured or produced in such country, dependency, colony, province, or other political subdivision of government, then upon the importation of such article or merchandise into the United States, whether the same shall be imported directly from the country of production or otherwise, and whether such article or merchandise is imported in the same condition as when exported from the country of production or has been changed in condition by remanufacture or otherwise, there shall be levied and paid, in all such cases, in addition to any duties otherwise imposed, a duty equal to the net amount of such bounty or grant, however the same be paid or bestowed.
OPINION
Prior Cases
The rationale supporting the judgment below begins with the view that the applicable law is to be found in a paragraph from the 1903 Supreme Court opinion in Doums, supra.
The details of this elaborate procedure for the production, sale, taxation and exportation of Russian sugar are of much less*134 importance than the two facts which appear clearly through this, maze of regulations, viz.: that no sugar is permitted to be soldi in Russia that does not pay an excise tax of R. 1.75 per pood,, and that sugar exported pays no tax at all. The mere imposition! of an import duty of three rubles per pood, paid upon foreigru sugar, is, like all protective duties, a bounty, but is a bounty upon, production and not upon exportation. When a tax is imposed upon all sugar produced, but is remitted upon all sugar exported, then,, by whatever process, or in whatever manner, or under whatever name it is disguised, it is a bounty upon exportation. [187 U.S. at 515.]
Opinions must be read in their entireties and in the light of the facts-of the case. Armour & Co. v. Wantock, 323 U.S. 126, 133 (1944). Though the first and last sentences of the quoted paragraph, considered in vacuo, would support the judgment below, their effect as binding precedent depends upon their relationship to the underlying facts and the remainder of the opinion in Downs. “It is a maxim, not to -be-disregarded, that general expressions, in every opinion, are to betaken in connection with the case in which those expressions are used.”' Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 398 (1821).
The clearest complete explanation of the complex Russian sugar-scheme in Downs appears in the Board of General Appraisers’ opinion, Downs v. United States, 4 Treas. Dec. 405, 409-413, T.D. 22984 (1901). The excise tax and certificate elements of the scheme were there-described as:
VI. That, upon the exportation of said sugar * * *, the* Russian Government, * * * released said sugar from said tax of 1.75 rubles * * * by a refund * * * a cancellation of indebtedness, or otherwise.
VII. That, in addition to remitting said excise tax, the Government issued to the exporter a certificate certifying that he had< exported * * * free sugar. That * * * such certificates * * *! have a substantial market value * * *.
VIII. That said certificates are sold to and used by sugar manufacturers or refiners, who are thereby enabled to transfer from their “free reserve or free surplus” to their “free sugar” an amount of sugar equal to the amount shown by said certificates-to have been exported, which amount may then be sold for domestic consumption on paying the ordinary tax of 1.75 rubles-ger pood (to which free sugar is regularly subject). [4 Treas. >ec. at 411.]
The board recognized that the combination of (1) regular and
It is manifest * * * that the * * * receives a valuable-bonus * * * and that this bonus accrues * * * upon the exportation * * *. The export certificates or vouchers * * * are-only the legal evidence of this valuable privilege or grant conferred:*135 by tbe Government, without whose authority such transfers of sugar would be valueless and of no effect.
Our conclusion, therefore, is that a bounty or grant * * * has been paid or bestowed * * * so as to work a benefit or advantage * * * as follows:
First. * * * the Government remitted or refunded the excise tax * * * or otherwise canceled the indebtedness of the sugar manufacturer, so that he was enabled to place his product upon the market free from the burden of either the regular or additional excise tax.
Second. The certificate * * * had a substantial market value, and was transferable, and operated as a premium, grant, bonus, or reward. [Id. at 413.]
The whole Eussian scheme, involving import duties, remission of regular and additional excise taxes, export certificates, and sugar transfers, was before the board, which did not decide the matter piecemeal. Hence, the appellate courts were faced with a board decision resting not on either of two independent grounds, but on a single ground having at least two important elements, and there was no call in Downs for the board, the Fourth Circuit, or the Supreme Court to decide whether a non-excessive remission of an excise tax constitutes a per se bounty or grant.
On appeal, the Fourth Circuit affirmed, Downs v. United States, 113 F. 144 (4th Cir. 1902), adopting the board opinion and focusing its own attention on the export certificates:
We reach the conclusion that the collector of the port of Baltimore, under the provisions of the fifth section of the tariff act of July 25, 1897, properly imposed the duty now complained of by the appellant. We find that the Eussian exporter of sugar obtains from his government a certificate, solely because of such exportation, which is worth in the open markets of that country from 1 ruble and 25 Kopecks to 1 ruble and 64 kopecks per pood, or from 1.8 to 2.35 cents per pound. Therefore we hold that the government of Eussia does secure to the exporter of that country, as the inevitable result of its action, a money reward or gratuity whenever he exports sugar from Eussia, and we think it was from such indirect grants as this that the congress of the United States intended to protect the manufacturers of this country, by authorizing the secretary of the treasury to make all proper regulations for the assessment and collection of such additional duties as were imposed by the collector on the sugars imported by the appellant. [Id. at 145.]
After devoting over ten pages to the elaborate Eussian scheme in Downs, the Supreme Court referred to the petitioner’s position, 187 U.S. at 512:
It is practically admitted in this case that a bounty equal to the value of these certificates is paid by the Eussian government,*136 and the main argument of the petitioner is addressed to the proposition that this bounty is paid, not upon exportation, but upon production.
The remainder of the paragraph initiated by that sentence explains at length how bounties upon exportation may operate as bounties upon production and vice-versa.
But the fact that he receives the same amount, whether the goods are exported or sold at home, is not the proper test whether a bounty is paid upon exportation. If no bounty at all were paid all sugar, or at least all “free sugar,” would pay the same tax, whether sold at home or exported abroad; and in this case the free sugar upon which the tax is remitted when exported would go abroad burdened with an excise tax of it. 1.75 per pood, which would prevent the manufacturer from selling it at such a price abroad as would enable him to realize a profit. The amount he receives for his export certificate, say, R. 1.25, is the exact amount of the bounty he receives upon exportation, and this enables him to sell at a profit in a foreign market. All manufacturers would prefer to sell at a profit in a foreign market. All manufacturers would prefer to sell at home if they could realize a greater price than by selling abroad, but if by being paid a drawback, or by a remission of taxes, they can find a profitable market in a foreign country, so much sugar as is not needed at home will be sent abroad. [187 U.S. at 514-515.]
Earlier in its extended opinion, the Court discussed the conjunctive effect of the import tariff and excise tax exemption parts of the scheme:
If the additional bounty paid by Russia upon exported sugar were the result of a high protective tariff upon foreign sugar, and a further enhancement of prices by a limitation of the amount of free sugar put upon the market, we should regard the effect of such regulations as being simply a bounty upon production, although it might incidentally and remotely foster an increased exportation of sugar; but where in addition to that these regulations exempt sugar exported from excise taxation altogether, we think it clearly falls within the definition of an indirect bounty upon exportation. [Emphasis added. 187 U.S. at 513.]
In the middle sentence of the paragraph containing the sentences quoted by the Customs Court, the Supreme Court reiterated its view that an import duty is a bounty upon production. Not without some confusion, the court thus bracketed its reference to import duty with comments that sugar sold in Russia was taxed and that exported was not and that a tax on “all sugar produced,” but remitted on sugar
The Supreme Court not only considered the Russian scheme as a whole, but listed the actual price differences it created. The Court ended its opinion with the statement (re certificates) of the Fourth Circuit quoted above and stated, “We all concur with this expression of opinion.” 187 U.S. at 516. Thus the Court’s decision was that the scheme bestowed a bounty. The Court did elect to insert in its opinion the broad language of the two sentences which served as foundation stones for the judgment now under review, That broad language was not necessary to the Supreme Count’s decision and was not, therefore, its ratio decidendi.
We axe mindful, as was the Customs Court, of subsequent references to broad statements in Downs. See e.g., Nicholas & Co. v. United States, 249 U.S. 34 (1919); American Express Co. v. United States, 67 Cust. Ct. 141, C.D. 4266, 332 F. Supp. 191 (1971), aff'd on other ground, 60 CCPA 86, C.A.D. 1087, 472 F. 2d 1050 (1973); F.W. Meyers & Co. v. United States, 6 Treas. Dec. 260, T.D. 24306 (Bd. Gen. App. 1903). Those references cannot, however, require us to disregard the facts in Downs, Nicholas, American Express, and Meyers.
There being no prior instance in which any court has been presented with the question of whether, as a matter of law, the remission of an excise tax, without more, bestows a countervailable bounty or grant, we confront a case of first impression.
The Statute
The intent of Congress, as expressed in § 303 itself, is not difficult to fathom. As the predecessor of this court, in Nicholas & Co. v. United States, 7 Ct. Cust. Appls. 97, T.D. 36426 (1916), and the Supreme Court in Nicholas, 249 U.S. at 39, indicated, the words “bounty” and “grant” are broad but not ambiguous. “Net amount” necessarily means that countervailing duties should equate to the true bounty or grant actually conferred. Congress’ intent to provide a wide latitude, within which the Secretary of the Treasury (Secretary) may determine the existence or non-existence of a bounty or a grant, is clear from the statute itself, and from the congressional refusal to define the words “bounty,” “grant,” or “net amount,” in the statute or anywhere else, for almost 80 years. As affects the present case, and consistent with that broad intent, Congress has not statutorily required that every governmental action distinguishing between products consumed at home and those exported shall be deemed the bestowing of a bounty or grant.
As this court’s predecessor said in Nicholas, supra, 7 Ct. Cust. Appls. at 106: “It was a result Congress was seeking to equalize regardless of whatever name or in whatever manner or form or for whatever purpose it was done.” On appeal in Nicholas, 249 U.S at. 39, the Supreme Court said: “The statute was addressed to a condition and its words must be considered as intending to define it, and all of them — ‘grant’ as well as ‘bounty’ must be given effect.”
Neither form nor nomenclature being decisive in determining
The factual underpinnings of the Secretary’s negative countervailing duty determination in this case are not under attack. On the contrary, the sole question on this appeal is whether the mere remission of the Japanese Commodity Tax must be deemed a bounty or grant as a matter of law. Nothing in the statute itself so requires.
Legislative History
The imposition of countervailing duties, on imports other than sugar, was first provided for in § 5 of the Tariff Act of 1897, 30 Stat. 205. The parties agree that Congress repeatedly reenacted that basic provision without substantial change (§ 6 of the Tariff Act of 1909, 36 Stat. 85; para. E of the Tariff Act of 1913, 38 Stat. 193; § 303 of the Tariff Act of 1922, 42 Stat. 935; § 303 of the Tariff Act of 1930, 46 Stat. 687; and as § 331(a) of the Trade Act of 1974, 19 USC 1303 (Supp. V 1975)).'
The United States says the absence of definitions for “bounty,” “grant” and “net amount” creates ambiguity, requiring resort to legislative histories of the Tariff Acts of 1890, 1894, and 1897. Zenith, as did the Customs Court, cites the Supreme Court’s indication in Nicholas, supra, that “bounty” and “grant” are not ambiguous. Both parties have supplied extensive reviews of legislative history in support of their respective positions.
Respecting the legislative history behind “bounty,” “grant,” and “net amount,” we are convinced, after careful review of the cited floor statements, committee reports, submissions and testimony, and after full consideration of the conflicting inferences drawn therefrom by the parties, that Congresses since 1890 have elected to refrain from stating that any specific condition would constitute a bounty or grant effective to require imposition of countervailing duties under
Not without reason has Congress refrained from spelling out either the precise criteria for determining what shall constitute a bounty or grant and what shall not, or the calculations to be followed in determining net amount. As this court said in Hammond Lead, supra note 11: “In the assessment of a countervailing duty, the determination that a bounty or grant is paid necessarily involves judgments in the political, legislative or policy spheres,” 58 CCPA at 137, 440 F. 2d at 1030, to which the court might well have added the eminently important economic sphere. Our nation’s relationships in the world family are particularly sensitive to the assessment of the additional duties known as “countervailing” duties. Such assessment is not just a means of protecting our producers, as Congress has recognized in refusing to require proof of injury before making such assessment; it is also one of the chips in a game played by governments on a world stage. Presumably enacting and reenacting §303 in this broad light, illumina-tive of the statute’s role in the world, Congress in its wisdom has simply refrained from calling all the countervailing duty plays in advance.
Nothing, therefore, in § 303 itself, or in the cited and researched legislative history relating to the terms “bounty,” “grant”, or “net amount,” aids the decisional process in the present appeal.
Congressional Ratification
The Customs Court considered the reenactments of § 5 of the 1897 Act as congressional ratification of the court’s interpretation of Downs. We disagree.
In Downs v. United States, 187 U.S. 496 (1903), it. was held that the remission of the excise tax imposed on sugar sold in Russia granted to the exporter of sugar, which remission is awarded in the form of a certificate having a substantial market value,- and the subject of purchase and sale, is equivalent to a bounty, and such sugar when imported into the United States is subject to an additional duty equal to the amount of such bounty. [16 ]
An assumption that Congress had the quoted paragraph in mind, when it acted in 1909, would not warrant the further assumption that it thereby ratified a holding that excise tax remission alone is a bounty. The author of the submission said the tax remission was “in the form of a certificate having a substantial market value.” We shall never know whether he interpreted Downs as merging remission and certificate elements of the Russian scheme or whether he considered the saleable certificates alone an excessive remission. We know only that a committee was told that the Court had held excise tax remission “in the form of” saleable certificates equivalent to a bounty.
Moreover, if Congress must be assumed to have been informed of Downs in 1908, it must be equally assumed to have been better informed over the last half-century. In 1916, Congress established the Tariff Commission. 39 Stat. 796. In reporting to Congress in 1918, the Commission described Downs:
The [Supreme] Court affirmed the decision of the Circuit Court of Appeals. The substance of the decision may be summarized as follows: “When a tax is imposed on all sugar produced but is remitted upon all sugar exported,” and the exporter obtains from his government, “solely because of such exportation,” a certificate which possesses an actual value and is saleable in the open market, the remission of the tax is in effect a bounty upon the exportation. [Emphasis added.] [17 ]
Thus, Congress was advised in 1918 that the bounty in Downs involved more than tax remission, and the Commission’s report tends to defeat the notion that Congress, in reenacting §303, intended to require the imposition of countervailing duties in response to tax remission alone.
In all events, the applicable statute is §331 (a) of the Trade Act of 1974, 88 Stat. 2049 (amending §303 of the Tariff Act of 1930), 19 USC 1303, and rusted segments of legislative history, generated in other
Administrative Practice
Since 1898, the Treasury Department has consistently and uniformly interpreted §303 as requiring that there be an “excessive” remission of an excise tax, i.e., the governmental giving of something above and beyond mere excise tax remission, to have a bounty or grant.
A long-continued, uniform administrative practice, if not contrary to or inconsistent with law, is entitled to great weight, Saxbe v. Bustos, 419 U.S. 65 (1976), particularly where, as here, those charged with its administration adopted that practice contemporaneously with the inception of the statute Power Reactor Development Co. v. International Union of Electrical Workers, 367 U.S. 396 (1961), and when Congress has repeatedly reenacted the statute without change,
The Customs Court dismissed the effect of Treasury’s administrative practice because it deemed that practice contrary to the law it had gleaned from Downs, and because it found a failure of Congress to codify the practice. As above indicated, there is no judicial precedent contrary to or even inconsistent with the Treasury practice. So too, our study of the applicable legislative history from 1890 to 1975 finds no congressional action contrary to or inconsistent with the administrative practice.
The record does reflect unrequited suggestions to Congress that it enact the Treasury practice. We cannot, however, join the Customs Court in inferring therefrom a rejection or disapproval. At the outset, we find it difficult to believe that Congress would harbor in its breast a disapproval of an administrative practice for almost 80 years, while remaining so supine or irresponsible as not to change it. The suggestions on which the Customs Court focused were not that Congress should legislate a new, unheard-of practice. Though the record shows the first specific notice to Congress in 1949,
In 1950, the Treasury proposed an amendment which would have codified its practice and required injury to domestic industry. Objections were raised only to the injury requirement.
In 1968, the Senate Committee on Finance was advised that Treasury considered § 303 inapplicable to nonexcessive remissions of excise taxes.
In considering the proposed Trade Reform Act of 1973, which evolved into the Trade Act of 1974, the cognizant Committees of Congress were informed, not only of Treasury’s long continued practice, but of the very remission of the Japanese Commodity Tax and of Zenith’s countervailing duty petition now before us'. At that time, also, an amendment defining “bounty or grant” as encompassing the remission of an excise tax, the relief sought here,
* * * The amendment would conform the standard in the Antidumping Act to the standard under the countervailing duty law, thereby harmonizing tax treatment under the two statutes. However, your committee, in recommending this amendment, does not express approval or disapproval of the standard employed by the Treasury Department in administering the countervailing duty law with regard to the treatment under that law of' rebates or remissions of direct and indirect taxes.28
And the Senate Committee on Finance stated:
* * * The standard in the proposed amendment parallels that standard employed by the Treasury Department under the countervailing duty law in determining whether tax rebates and remissions constitute bounties or grants. However the Committee, in recommending this amendment, does not express approval or disapproval of that Treasury practice.29
The effect of the Committees’ mutually contradictory approve-disapprove statements is necessarily to leave untouched the status quo with respect to the administrative practice on countervailing duties.
The adopted amendment to the Antidumping Act provides that in determining “purchase price” of imports there shall be added to the price charged the importer:
[a] the amount of any taxes imposed in the country of exportation directly upon the exported merchandise or components thereof, which have been rebated, or which have not been collected, by reason of the exportation of the merchandise to the United States, but only 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; and [b] plus the amount of any taxes rebated or not collected, by reason of the exportation of the merchandise to the United States, which rebate or noncollection has been determined*146 by the Secretary to be a bounty or grant within the meaning of section 303 of the Tariff Act of 1930 [Emphasis added. P.L. 93-618, § 321(b), 88 Stat. 2045 (amending 19 USC 162 (1970)]31
In so doing, Congress signaled its continuing intent to let the administrative practice under § 303 stand unmolested. Having decreased the number of taxes added to the purchase price in (a), to the disadvantage of the exporting manufacturer, Congress then added to the price, in (b), the amount of taxes “rebated or not collected” and “determined by the Secretary” to be a bounty or grant. If Congress intended that all rebates or noncollections by reason of exportation be deemed bounties or grants, no room would have been left for Secretarial determination. In American Express, supra, we expressed the view that Congress required the Secretary to impose a countervailing duty when a bounty or grant has been bestowed, but left to the Secretary the determination of whether a bounty or grant had in fact been bestowed. Nothing has occurred since 1973 to require change in that view.
Summary
Nothing in § 303, or in its legislative history, requires that the remission of an excise tax alone must be deemed a bounty or grant as a matter of law. Congress has, through many years and repeated reenactments of § 303, refrained from exercising its power to make such remission a bounty or grant as a matter of law. There is no judicial precedent requiring that under § 303 such remission must be deemed a bounty or grant. The remaining tool in the decision-making inventory — a long-continued administrative practice not inconsistent with law — rests on an interpretation of § 303 as not requiring that such remission be deemed a bounty or grant.
As the Supreme Court said in Saxbe v. Bustos, 419 U.S. at 74:
This longstanding administrative construction is entitled to great weight, particularly when, as here, Congress has revisited*147 the Act and left the practice untouched. Such a history of administrative construction and congressional acquiescence may add a gloss or qualification to what is on its face unqualified statutoiy language. [33 ]
Paraphrasing what the Court later said in Saxbe, 419 U.S. at 79-80, to fit our case:
Second, if * * * [a nonexcessive remission of an excise tax alone is now to be deemed a bounty,] the Congress [or the Executive] must do it. The changes suggested implicate so many policies and raise so many problems of a political, economic, and social nature that it is fit that the Judiciary recuse itself. At times judges must legislate “interstitially” to resolve ambiguities in laws. But the problem of * * * [changing a 79 year administrative practice effecting world trade] is not “interstitial” or, as Mr. Justice Holmes once put it, “molecular.” It is a massive or “molar” action for which the Judiciary is ill-equipped.
Conclusion
Until lawfully changed, the administrative practice of the Treasury Department, in uniformly considering a nonexcessive remission of an excise tax as failing to constitute a bounty or grant, must stand as a lawfully permissible interpretation of § 303. On this record, that interpretation is fully applicable to the Japanese Commodity Tax Law.
It follows that the Customs Court erred in granting Zenith’s motion for summary judgment and in denying that of the United States. There being no issue of fact, the judgment of the Customs Court is reversed and the case is remanded for entry of an order granting the motion for summary judgment of the United States.
Although § 303 imposes the burden of making countervailing duty determinations upon the Secretary of the Treasury, regulations (19 CFR § 16.24(b) (1970), now 19 CFR § 159.47(b) (1976), require communication with the Commissioner of Customs.
The products include: television receivers, radio receivers, radio-phonograph combinations, radio-television-phonograph combinations, radio/lape recorder combinations, tape players, record players and phonographs complete with amplifiers and speakers, tape recorders, and parts of television receivers: color television picture tubes, resistors, transformers (deflection components), and tuners for receivers with integrated circuits. 37 Fed. Reg. 10,087 (1972), as amended 37 Fed. Reg. 11,487 (1972).
Tax exemption is also accorded certain goods sold at home to educational and welfare institutions, the National Museum, and other specified purchasers.
We employ “remission” to denote both tax exemption and tax refund, which are legally indistinct on this appeal.
A tax on American exports would be unconstitutional. U.S. Const, art. 1, § 9, cl. 5. Fairbank v. United States, 181 U.S. 283 (1901). Amicus cites the remission of state taxes upon shipments into other states of the United Slates. Neither consideration is applicable to a determination under § 303.
Judge Bichardson wrote for the court. Judges Newman and Boe filed concurring opinions. The thorough treatment given the issues by the distinguished judges of the panel rests essentially upon an interpretation of Downs with which we differ.
The parties have described the tas as a “commodity,” “consumption,” and “excise” tax. Tor clarity, we employ “excise” throughout.
The United States contends on appeal that under § 516(g), 19 USC 1516(g) (Supp. V 1975), the Customs Court exceeded its subject matter jurisdiction in ordering dutiesi mposed prior to publication of the decision in the Customs Bulletin. We do not reach that issue.
Post Downs, the world has seen two World Wars, an industrial revolution, a scientific revolution, and flight from Kitty Hawk to the moon. Customs duties, though large, are not our sole source of government funds, as they virtually were prior to 1916. If, nonetheless, the Supremo Court had established the law in 1903, mere passage of years could not effect our decision, the duty of revising laws to fit a new would having been constitutionally assigned to the Congress.
The Tariff Act of 1922, ch. 356, § 303, 42 Stat. 935, broadened the countervailing duty law to include bounties or grants paid on manufacture and production.
Tiie language has been described as dicta by some commentators, e.g., Butler, Countervailing Duties and Export Subsidization: A Re-emerging Issue in International Trade, 9 Va. J. Int’l L. 82 (1968-69); Feller, Mutiny Against the Bounty: An Examination of Subsidies, Border Tax Adjustments, and the Resurgence of the Countervailing Duty Law, 1 Law & Pol. Int’l Bus. 17 (1969); Note, The Michelin Decision: A Possible New Direction for U.S. Countervailing Duty Law, 6 Law & Pol. Int’l Bus. 237 (1974), and by this court, inreferring to the Customs Court’s reliance on Downs ane Nicholas, infra, in United States v. Hammond Lead Products, Inc., 58 CCPA 129, 137, C.A.D. 1017, 440 F. 2d 1024, 1030 (1971), cert. denied, 404 U.S. 1005 (1971).
[2] A review of the cited and researched cases establishes, as in Downs, that the bounty or grant in each case was found to reside in, and was measured by, an excess over the remission of excise taxes. Nor is that surprising in view of Treasury’s practice, discussed infra. Thus, in Franklin Sugar Refining v. United States, 1 Ct. Cust. Appls. 242, T.D. 31276 (1911), a 2.50 mark “export bounty” was countervailed and a remitted 20 mark consumption tax was not. In Nicholas a British scheme involved tax remission and an “allowance” of 3d and 5d per gallon for exported spirits. On appeal in American Express, supra, this court found it unnecessary to review the Customs Court’s broad interpretation of Downs and Nicholas and looked to the many hidden taxes which were remitted in excess of any remitted excise tax. United States v. Hills Bros. Co. 107 F. 107 (2d Cir. 1901) involved excess rebates on sugar exports. F. W. Woolworth Co. v. United States, 28 CCPA 239 (1940), involved a bounty created by currency manipulation. In Marion R. Gray v. United States, 70 Treas. Dec. 811, T.D. 48679 (1936), the Customs Court stated, “* * * at least apart of the excess of Great Britain’s drawback paid to the manufacturer, constitutes a bounty or grant * * * under section 303 of the tariff act involved.” [Emphasis added. Id. at 813.[
United States v. Passavant, 169 U.S. 16 (1898), involved dutiable value, not countervailing duties. F. W. Meyers, supra, involved an export duty governed by para. 393, Tariff Act of 1897, not the remission of an excise tax.
Judicial review of negative countervailing duty determinations was not sought before 1971. Congres made it available to manufacturers, producers and wholesalers in 1975, § 516(d), Tariff Act of 1930, as amended, 19 USC § 1516(d) (Supp. V 1975), in response to this court’s recognition of its nonavailability to those groups in I-Iammond Lead, supra note 11.
Congress did not, however, require hearings and preparation of a hearing record from which it might be determined, on review, whether the Secretary’s action was supported by substantial evidence or was arbitrary or capricious, in the manner practiced, for example, under the Administrative Procedure Act, 5 USC 551 et seq. Nor have the regulations, 19 CFR 159.47, Part 175 (1976), prescribed under § 516(h), done so. Congress did require hearings, on request, in antidumping cases, 19 USC 160(d) (Supp. V 1975).
The United States cites the exclusion of internal taxes remitted on exports from the cost of materials in determining constructed value, § 402(d), Tariff Act of 1930, as’amended, 19 USC 1401a(d), and the including of such remitted taxes in determining purchase price under § 203, Antidumping Act of 1921, 19 USC 162 (Supp. V 1975), as indicating congressional evaluation of such remissions as neither unfair nor prohibitive. The point may be useful in urging consistency on the part of the Congress. It cannot, however, supply a congressional definition of “bounty,” “grant” or “net amount” appearing in § 303.
Congress’ most recent reference to the international inplications of export incentives and countervailing duties, and to the role of the Executive in connection herewith, appears in §331 (a), Trade Act of 1974, 19 USC 1303(d)(1) (Supp. V. 1975):
It is the sense of the Congress that the President, to the extent practicable and consistent with United States interests, seek through negotiations the establishment of internationally agreed rules and procedures governing tho use of subsidies (and other export incentives) and the application of countervailing duties.
To facilitate negotiations, Congress, while continuing to refrain from a definition of “bounty” or “grant,” granted authority to the Secretary to suspend during the four years beginning January 3,1975, and under certain conditions, the imposition of countervailing duties, after having determined that a bounty or grant is in fact being bestowed, 19 USC 1303(d)(2), and to reinstate such duties, 19 USC 1303(d)(3). In §1303(e), Congress provided for reports to it of actions under §1303 (d) (2), and for the undoing thereof upon a resolution oi disapproval by the Senate or the House.
Notes on Tariff Revision (1908). The quoted paragraph appears on page 834 of the 953 page document; The portions on court interpretation wore prepared by an assistant counsel of the Treasury;
United States Tariff Commission, Reciprocity and Commercial Treaties, 434 (1919) (available, Department of State Library).
See 1 Treas. Dec. 696, T.D. 19321 (1898); 2 Treas. Dec. 157, T.D. 19729 (1898); 2 Treas. Dec. 996, T.D. 20407 (1898); 26 Treas. Dec. 825, T.D. 34466 (1914); 54 Treas. Dec. 101, T.D. 4 2895 (1928); 56 Treas. Dec. 342, T.D. 43634 (1929); 73 Treas. Dec. 107, T.D. 49355 (1938). See also, the countervailing duty cases in note 12, supra.
Treasury's administrative practice and some of its rationale was described to Congress in Executive Branch GATT Studies, S. Comm. on Finance, 93d Cong,, 2d Sess. 11-12 (1974):
Under administrative precedents dating back to 1897, the Treasury Department has generally not construed the rebate, remission or exemption on exports of ordinary indirect taxes (consumption taxes on goods) to be a “bounty or grant" within the meaning of our countervailing duty statute * * * since exports are not consumed in the country of production, they should not be subject to consumption taxes • in that country. * * * application of countervailing duties to the rebate of consumption taxes would have the effect of double taxation * * * the United States would * * * impose * * * Federal and state excise taxes and state and local sales taxes, but would also collect, through * * * countervailing duty, the indirect tax imposed by the exporting country on domestically consumed goods.
The Treasury Department has not applied these precedents to tax “rebates" in excess of taxes collected on the exported product. If, for example, the foreign exporter has paid $1 in excise taxes on a product he exports to the United States but receives a rebate of $1.20 on exportation, under long-established administrative precedents of the Treasury Department the imported merchandise would be subject to a countervailing duty of $0.20.
The Treasury Department has historically assumed that an excise tax is part of the price paid by home consumers. On the present record, that must be assumed true of the Japanese Commodity Tax. Where the tax is “paid" by home consumers, its remission on exports has not been considered a bounty or grant because the remission does not increase the manufacturer’s profit margin. In recent years, a dichotomy has grown among economists regarding the possible difference in result when all or part of the tax is either “forward shifted" or “absorbed." See the commentaries listed supra note 11, and Rosendahl, Border Tax Adjustments: Problems and Proposals, 2 Law Pol. Int’l Bus. 85 (1970).
For example, in Copper Queen Mining Co. v. Territorial Board of Equalization, 206 U.S. 474, 479 (1907), the Court was faced with an 18-year-old administrative interpretation of the statute. Justice Holmes wrote: “[W]hen for a considerable time a statute notoriously has received a construction in practice from those whose duty it is to carry it out, and afterwards is reenacted in the same words, it may be presumed that the construction is satisfactory to the legislature, unless plainly erroneous, since otherwise naturally the words would have been changed."
The United States cites the reasonableness of its practice and numerous cases setting forth guidelines for judicial review of agency action under the Administrative Procedure Act. We are not, however, reviewing a record under that Act in this case. See, supra note 13.
The United States also argues that its long practice coincides with iuternational agreements (e.g., the GATT) and with international practice, that international trade would become a shambles, and that trade wars would erupt, if the Secretary were now required to find that mere remissions of excise taxes bestowed bounties. Such arguments are irrelevant here. No agency practice may, for any reason, repeal a statute or overrule the courts. If the practice were in conflict with the statute, the intent of Congress, or judicial precedent, it could not stand, and such arguments would have to be directed to the Congress. If no conflict or inconsistency exists, the arguments are unnecessary.
Extension of Reciprocal Trade Agreements Act, Hearings Before the Senate Comm. on Finance, 81st Cong., 1st Sess., 1195-99 (1949) (memorandum).
See H.R. 8304, 81st Cong., 2d Sess. (1951) and Hearings on H.R. 1685 Before the House Comm, on Ways and Means, 82d Cong., 1st Sess., 2,79 (1951). See Hearings on H.R. 5505 Before the Senate Comm, on Finance, 82d Cong., 2d Sess., 115, 124-125 (1952).
In 1951, the State Department advised the Senate Finance Committee of the administrative practice under 303 and that an amendment specifically stating that practice would merely clarify the law and would effect no change in the practice followed since the original enactment in 1897. See Hearings on H.R. 1612 Before the Senate Comm, on Finance, 82d Cong., 1st Sess., 1197 (1951).
See 2 Compendium of Papers on Legislative Oversight Review of U.S. Trade Policies, Comm, on Finance, 90th Cong., 2d Sess. 475-476, 568-569, 887-889, 918-919 (1968).
See S. Finance Comm, Rep. No. 91-1481 [to accompany H.R. 17550], 91sfc Cong., 2d Sess. 284-285 (1970).
The growing tendency of those who fail in their objective before the Congress to thereafter submit the same plea to undermanned federal courts is one factor contributing to the current appellate flood, which threatens to drown justice in the thrashings of a litigious sea. See D. Horowitz, The Courts and Social Policy 4-16 (The Brookings Institution, 1977). Sadly, moreover, the ciowd can jam the courthouse door against the more deserving and less-advantaged.
See Hearings on H.R. 6767 Before the House Comm, on Ways and Means, 93d Cong., 1st Sess., 2169-2171, 2496-2500, 3097, 3292-3293, 3814r-3815 (1973). The Senate Committee on Finance Subcommittee on International Trade was so advised in 1971. See Hearings on World Trade and Investment Issues Before the Sub-comm, on International Trade of the Senate Comm, on Finance, 92d Cong., 1st Sess. 102,109-111 (1971). Though Congress' current interest in governmental assistance to foreign manufacturers may be assumed to have been occasioned by falling shares of the American market for American manufacturers, an abrupt change in a long-standing practice may have been viewed as both counter-productive in a trading world of increasingly interdependent economies and as injurious to American consumers on whom the countervailing duty might fall in the foim of increased prices. However that may be, it is sufficient to our present task that Congress did not make the requested change in Treasury's practice.
H.R. Rep. No. 93-571, 93d Cong., 1st Sess. 69 (1973);
S. Rep. No. 93-1298, 93d Cong., 2d Sess. 172 (1974).
That the two key committees of the Congress, with Treasury’s treatment of the Japanese Commodity Tax law and the fact of Zenith’s objections before them, and with full investigative powers and resources available, could not either approve or disapprove the administrative practice on its merits, is a dramatic exemplification of the reasons why a court should avoid entry into that policy thicket. Under appropriate conditions, courts may, as we do here, hold that an administrative practice reflects a permissible interpretation of a statute, while neither approving or disapproving the merits of the practice. Approving or disapproving the wisdom, effectiveness, etc., of an agency practice is a function of the Congress, the shifting-of which to the courts conflicts with the fundamental separation of powers doctrine.
The United States argues that the Japanese Commodity Tax would fall within (a), rendering (b) redundant if Congress intended remission of such a tax to constitute a bounty or grant. On the premise that the Japanese tax is “added to or included in the piice of such or similar merchandise” when sold in Japan, see note 19, supra, the argument has merit. Whether Japanese manufacturers absorb or shift the Japanese Commodity Tax, however, is an economic issue not before us.
This court expressed the same view in United States v. Hammond Lead, 58 CCPA at 134-139, 440 F. 2d at 1027-28, 1031. The prompt congressional provision of judicial review, supra note 13, while remaining silent ■with respect to this court’s description of the Secretarial function under the statute, further confirms Congress’ acquiescence, in the Treasury’s administrative practice.
We do not imply that the Secretary has carte blanche, or the right to be totally arbitrary or inconsistent in applying a long-standing practice. Whether the Secretary could, however, under appropriate conditions, change present practice and begin to deem excise tax remission alone a bounty or grant is not before us. The value and effect of administrative practice, and the Secretary’s authority to change it, have acquired statutory recognition in the field of customs. Under 19 USC 1315 (d) (Supp. V 1975), a practice setting a particular duty, and found by the Secretary to have been uniform, can be changed to assess a higher duty, but only as to imports occurring at least 30 days after publication of the higher duty. In the Trade Act of 1974, Congress amended this section to exempt the assessment of countervailing duties from the 30 day delay provision and thus altered Treasury’s practice. § 331(c), Tariff Act of 1974, 19 USC 1315(d) (Supp. V 1975). See [1974] U.S. Code Cong. & Ad. News 7320.
Mr. Justice White’s dissent in Saxbe saw the statute there involved as leaving nothing open to construction, the administrative practice as in conflict with the statute, the Congress as not having been shown aware of the practice and its silence, which may have been due to unawareness, preoccupation or paralysis, as inadequate proof of acceptance. In the present case, “bounty” and “grant” have remained undefined by Congress; the statute delegates to the Secretary the determination of what is a bounty or grant; the administrative practice is not in conflict with the statute, judicial decisions, or congressional expression; Congress has long and often been aware of the practice; and, concerning customs matters, Congress has in no manner been paralyzed.
The complaint alleged the following rates: Large television receivers (20%); Small television receivers (15%); Color television picture tubes — large (20%) and small (15%); Radio receivers — stereo (15%), other than stereo (and other than housed in metal cases of specified dimension) (10%), and other than stereo housed in metal cases of said specified dimension (5%); Radio-phonograph combinations (15%); Radio-television-phonograph combinations — if television qualifies for 20% rate (20%) and if television qualifies for 15% rate (15%); Record players and phonographs (15%); Tape players, tape recorders, and radio/tape recorder combinations — stereo (15%) and other (10%).
Dissenting Opinion
dissenting, with whom Baldwin, Judge, joins.
The issue is whether the Customs Court correctly determined that remission of the Japanese commodity tax upon export of the involved electronic goods, coupled with the levy of such tax on consumption of like goods in Japan, constitutes the payment or bestowal, “directly or indirectly,” of a “bounty or grant” for purposes of section 303 of the Tariff Act of 1930, as amended (19 USC 1303).
Contrary to the majority opinion, I conclude that the controlling question is a matter of law and not a factual inquiry into the “economic result” of the Japanese commodity tax; that this is really not a case of first impression, since the key language of the statute has been inter
I would affirm the decision and judgment of the Customs Court except with respect to the date as of which countervailing duties are to be imposed.
The facts
The Customs Court stated the “essential facts” as follows:
The Japanese Commodity Tax Law, cited as Commodity Tax Law (March 31, 1962, Law No. 48) as revised, is a single-stage consumption tax which is levied usually at the manufacturing level on a fairly extensive list of consumer goods, inclusive of electronic products of the types manufactured by plaintiff. Bates of tax range generally from 5 to 40 percent. Upon exportation of these products from Japan, the tax is either remitted, if previously paid, or the products are exempted from the payment of the tax. [Footnote omitted.]
Additionally, in its answer to Zenith’s complaint, the Government admitted that the commodity tax is levied on goods shipped for home consumption and that the tax base is generally the manufacturer’s sales price; however, it denied, “for lack of knowledge or information sufficient to form a belief as to the truth thereof,” that the commodity tax rates set forth in the complaint were applicable to the enumerated products.
Controlling question a matter of law
The majority opinion declares that it is the economic result of the foreign government’s action which controls [whether such action is a “bounty or grant”] and that this requires a factual inquiry. It then says that “the record is silent regarding the economic result of the mere remission of the Japanese commodity tax” and that “[t]he Secretary has presumably determined that the economic result here is not
Of course, such “factual underpinnings” are not under attack, because there are none to attack. Indeed, even a presumption that the Secretary made a determination regarding the economic result is rebutted by the record. The majority opinion has confused the Secretary’s determination of whether or not remission of the Japanese commodity tax constitutes the payment or bestowal, “directly or indirectly,” of a “bounty or grant,” which is a matter of law, with the factual determination yet to be made by the Secretary of the “net amounts of the bounty or grant paid or bestowed” (on the basis of which countervailing duties are to be assessed) in accordance with the order of the Customs Court.
Concerning the Secretary’s “determination” here, all that the record shows is set forth in (1) the Notice of Preliminary Determination, approved by an assistant Secretary of the Treasury on January 30, 1975 (40 Fed. Reg. 5378), referring to the Notice of Countervailing Duty Proceedings
Any other programs alleged to result in the payment or bestowal of a bounty or grant within the meaning of section 303 of the Act have been terminated by the Japanese Government and/or are preliminarily determined not to result in the payment or bestowal of a bounty or grant.5
and (3) the Final Negative Countervailing Duty Determination, approved by an Acting Assistant Secretary of the Treasury on December 31, 1975 (41 Fed. Reg. 1298), merely repeating the notice of Preliminary Determination that information developed in the investigation established that benefits under the three Japanese programs
Accordingly, on the basis of the additional facts gathered and the investigation conducted ... a final determination is hereby made in this proceeding, that for the reasons stated, herein and in the notice referred to above [the Notice of Preliminary Determination], no bounty or grant is being paid or bestowed, directly or indirectly, within the meaning of section 303 .. . upon the manufacturer [sic], production, or exportation of certain consumer electronic products from Japan.
Thus, it is seen that there was no determination of economic result by the Secretary with respect to the Japanese commodity tax — not even a de minimis determination as in the case of the three other programs referred to — but only a conclusion of law that under any current programs, no bounty or grant is being paid or bestowed, directly or indirectly, within the meaning of section 303. It is the correctness of this conclusion of law that was before the Customs Court, whose decision thereon we review.
Key language of statute previously interpreted by Supreme Court
In Downs v. United States, 187 U.S. 496 (1903), the Supreme Court interpreted the key language of section 5 of the Tariff Act of 1897, 30 Stat. 205,
*151 the smgle question whether, under the laws and regulations of Russia, a bounty is allowed upon the export of sugar which subjects such sugar, upon its importation into the United States, to an additional duty equal to the entire amount of such bounty, under [section 5 of the Tariff Act of 1897].
The Russian scheme relieved exporters from the ordinary excise tax that would have been payable had the sugar been sold domestically and also provided exporters with certificates which could be sold to sugar producers, who would use them to free-up their surplus sugar for sale in the domestic market without payment of a prohibitive tax burden.
As noted in the majority opinion, the Board of General Appraisers (4 Treas. Dec. 405, T.D. 22984 (1901)) stated, at 413:
Our conclusion, therefore, is that a bounty or grant, within the meaning of section 5 of our tariff act, has been paid or bestowed by the Russian Government upon the exportation of this sugar, so as to work a benefit or advantage to the Russian sugar exporter as follows:
First. Upon the exportation of the sugar, the Government remitted or refunded the exicse tax due thereon ... so that he was enabled to place his product upon the market free from the burden of either the regular or additional excise tax.
Second. The certificate which the Government issued to him upon the exportation of his sugar had a substantial market value, and was transferable, and operated as a premium, grant, bonus, or reward.
Looked at from the Russian standpoint, these advantages might, perhaps, be described as a bounty on production, but (in the language of the circuit court of appeals in the Hills Brothers case [United States v. Hills Bros. Co., 107 F. 107 (CA 2 1901)], supra) “from the standpoint of other countries,” they become a bounty or grant on exportation.” [Emphasis supplied.]
Although the Fourth Circuit, in affirming the Circuit Court for the District of Marlyand, which had affirmed the Board (opinion unreported), held that the Government of Russia secured to the exporter of that country a money reward or gratuity whenever he exported sugar from Russia and premised that holding on its finding that the Russian exporter of sugar received a certificate, it said [Downs v. United States, 113 F. 144, 146 (CA 4 1902)):
In affirming the decree of the court below, we also affirm the judgment rendered by the board of general appraisers, whose opinion so fully expresses our views, and so ably presents the facts involved herein and the law applicable thereto, that we deem it entirely appropriate to adopt the same as part of the opinion of this court.
It is clear that the Supreme Court regarded both the remission of excise taxes upon exportation and the provision of certificates to
A bounty may be direct, as where a certain amount is paid upon the production or exportation of particular articles, of which the act of Congress of 1890, allowing a bounty upon the production of sugar, and Rev. Stat. sections 3015-3027, allowing a drawback upon certain articles exported, are examples; or indirect, by the remission of taxes upon the exportation of articles which are subjected to a tax when sold or consumed in the country of their production. . . .
Later in its opinion, the Court applied this interpretation to the Russian government’s remission of excise taxes as follows, supra at 515:
The details of this elaborate procedure for the production, sale, taxation and exportation of Russian sugar are of much less importance than the two facts which appear clearly through this maze of regulations, viz.: that no sugar is permitted to be sold in Russia that does not pay an exicse tax of R. 1.75 per pood and that sugar exported pays no tax at all. . . . When a tax is imposed upon all sugar produced, but is remitted upon all sugar exported, then, by whatever process, or in whatever manner, or under whatever name, it is disguised, it is a bounty on exportation.
With respect to the certificate part of the Russian scheme, the Court noted, supra at 512:
It is practically admitted in this case that a bounty equal to the value of these certificates is paid by the Russian government, and the main argument of the petitioner is addressed to the proposition that this bounty is paid, not upon exportation, but upon production.
Referring to the certificate as an additional bounty, the Court then proceeded to answer petitioner’s argument and to determine that the certificate came within its interpretation of the key statutory language, supra at 513:
If the additional bounty paid by Russia upon exported sugar were the result of a higher protective tariff upon foreign sugar, and a further enhancement of prices by a limitation of the amount of free sugar put upon the market, we should regard the effect of such regulations as being simply a bounty upon production, although it might incidentally and remotely foster an increased exportation of sugar; but where in addition to that these regulations exempt sugar exported from excise taxation altogether, we think it clearly falls within the definition of an indirect bounty upon exportation. [Emphasis supplied.]
Thus, the fact that this “additional bounty” was coupled with remission of the excise tax, which the Court determined to come within
Not to be overlooked is the fact that in their briefs before the Court, both Downs and the Government argued the question of whether the remission of excise taxes upon exportation of sugar is a “bounty or grant on exportation” as the terms were used in the statute, with Downs, the importer, contending in the negative and the Government saying (R 236):
For it seems that any special favor, benefit, advantage, or inducement conferred by the Government, even if it is given as a release from the burden and is not a direct charge upon the Treasury, is fairly included in the idea and meaning of an indirect bounty.
Nevertheless, the majority opinion would treat the Supreme Court’s interpretation of the key language in section 5 as mere dictum, saying that the court’s decision was that the Russian scheme (as a whole) bestowed a bounty and that “the broad language” (quoted above) “was not necessary to the Supreme Court’s decision and was not, therefore, its ratio decidendi”; further, that the “broad language did not constitute a Supreme Court holding that every nonexcessive remission of every excise tax constitutes a bounty or grant as a matter of law.” Of course, the quoted interpretative language did not say that every nonexcessive remission of every excise tax constitutes a bounty or grant. The Court carefully phrased its interpretation to couple with such remission the condition that such tax be paid on the articles when sold or consumed domestically.
Thus, the Court’s determination that remission of the excise tax was a “bounty” did not constitute mere obiter dictum as did the statement treated in Kastigar v. United States, 406 U.S. 441 (1972), cited by the majority, whose assertion that “we confront a case of first impression” simply begs the question. Rather, the Court’s interpretation is akin to the Court’s explanation in Towne v. Eisner, 245 U.S. 418 (1918), of the essential nature of a stock dividend in interpreting the Income Tax Act of October 3, 1913.
Therefore, Towne v. Eisner cannot be regarded as turning upon the point that the surplus accrued to the company before the act took effect and before adoption of the Amendment. And what we have quoted from the opinion in that case cannot be regarded as obiter dictum, it having furnished the entire basis for the conclusion reached. We adhere to the view then expressed, and might rest the present case there . . . because the conclusion there reached as to the essential nature of a stock dividend necessarily prevents its being regarded as income in any true sense.
In its efforts to downgrade Downs, the majority opinion ignores the Supreme Court’s own recognition of its precedential value in Nicholas & Co. v. United States, 249 U.S. 34 (1919), which involved the petitioner’s protest against the action of collectors of customs at Boston and New York assessing countervailing duties on whiskey
The statute was addressed to a condition and its words must be considered as intending to define it, and all of them — “grant” as well as “bounty” must be given effect. If the word “bounty” has & limited sense the word “grant” has not. A word of broader significance than “grant” could not have been used. Like its synonyms “give” and “bestow,” it expresses a concession, the conferring of something by one person upon another. And if the “something” be conferred by a country “upon the exportation of any article or merchandise” a countervailing duty is required by Paragraph E.
The Court next, supra at 39-40, stated, in language reminiscent of Downs, the pragmatic principle on which it rested its decision that the payment by the British government was the bestowal “directly or indirectly” of a “bounty or grant”:
We have the fact of spirits able to be sold cheaper in the United States than in the place of their production, and this the result of an act of government because of the destination of the spirits being a foreign market. For that situation Paragraph E was intended to provide.
The Court cited United States v. Passavant, 169 U.S. 16 (1898), as support for its pragmatic approach, saying: “It [the Court in Passa-
Downs v. United States, 187 U.S. 496, is a like example [of the pragmatic approach], and direct and indirect bounties are illustrated. . . . [A]s instances of the latter, that is, of indirect bounties, the remission of taxes upon the exportation of articles which are subject to a tax when sold or consumed in the country of their production is given, and, as another example, the laws permitting distillers of spirits to export the same without payment of an internal revenue tax or other burden. [Emphasis supplied.]'
If the majority’s erroneous approach to precedent were followed, the judicial function of statutory interpretation would be reduced to merely deciding that the facts of a particular case are or are not within the reach of a particular statute. The judicial function of giving life and meaning to the words of a statute for guidance to other courts as well as to the executive and legislative branches of government would be emasculated, and interminable litigation would be spawned.
Judicial interpretation prevails over “long-continued, uniform, administrative practice”
The majority opinion states that, since 1898, the Treasury Department has consistently and uniformly interpreted §303 as requiring that for a remission of an excise tax to constitute a bounty it must be “excessive.”
There is another familiar rule, namely: continued reenactment of a statute following its judicial interpretation (especially by the Supreme Court) creates a presumption of Congressional approval of that interpretation. Shapiro v. United States, 335 U.S. 1, 16 (1947);
When there is a conflict between administrative practice and judicial interpretation, as has been the case here, this court’s predecessor long ago held that judicial interpretation prevails. United States v. Douglas & Berry, 6 Ct. Cust. Appls. 100, T.D. 35342 (1915). That case involved the question of whether the imported goods in question were classifiable as “plain woven fabrics” under paragraph 283 of the Tariff Act of 1913. In two earlier cases, the court had interpreted identical language in the predecessor provisions to paragraph 283 (contained in the Tariff Acts of 1897 and 1909) and had rejected the classification of similar goods as “plain woven fabrics.” Responding to the importers’ argument that goods like those in question were,, during the history of the Tariff Act of 1909, classified as plain woven fabrics and that employment of that language in the Tariff Act of 1913 must be presumed to be a recognition of such administrative practice, the court said supra at 104:
Force is often given to such administrative practice, hut in the present case it is difficult to see how it could have the force contended for, for the reason that prior to the enactment of this tariff law rulings of this court had been made in the two cases cited, and more specifically and definitely in the later case of White v. United States (3 Ct. Cust. Appls”,- 382; T.D. 32968), that, excluded the goods in question from the term “plain woven fabrics,” and it is the latter authoritative decision which the Congress must he presumed to have followed rather than the administrative practice. [Emphasis supplied.]
The fact that the executive branch does not follow the interpretation of a law by the judicial branch does not render that interpretation any less the law. Nor would acquiescence by the legislative branch in the failure of the executive branch to follow the interpretation of the law by the judicial branch do so. Indeed, a contrary conclusion would deny the role of the judicial branch in our system of government “to. say what the law is,” as declared in Marbury v. Madison, 5 U.S. (1 Cranch) 87, 111 (1803).
The myth of Congressional acquiescence in administrative practice
Although the principle stated in United States v. Douglas & Berry disposes of the administrative practice point, the following portion of the majority opinion should be answered:
[W]e find it difficult to believe that Congress would harbor in its breast a disapproval of an administrative practice for almost 80*158 years, while remaining so supine or irresponsible as not to change it. . . . Though the record shows the first specific notice- to-Congress in 1949, we cannot assume that Congress had earlier reenacted the statute four times without ever informing itself of Treasury’s practice. But whether awareness of the practice has-continued for 79 years or for 28 years, the inference of acquiescence from Congress’ failure to act against the practice over the-many years involved, and through many reenactments of the statute, overbalances any inference of rejection from failure to-codify it. [Footnote omitted.]
Actually, the record shows that the “first specific notice to Congress”' came in 1949 during the .course of hearings before the Senate Finance Committee. In 1970 Congress amended section 516 of the Tariff Act. of 1930 to provide that, in the case of any imported article or merchandise with respect to which the Secretary has not determined whether or not any bounty or grant is being paid, any person may file a petition setting forth his belief that a bounty or grant is being paid.
As Judge Newman noted in his concurring opinion below, the Treasury Department attempted to persuade Congress to amend section 303 of the Tariff Act of 1930 to accord with the Department’s practice of not' assessing countervailing duties on the remission of taxes.
It is apparent, then, that Congress could have, but declined to, nullify the Supreme Court’s interpretation of the countervailing duty statute insofar as tax remissions are concerned. A reasonable conclusion from the congressional rejection of the . . . proposed amendments ... is that Congress was satisfied with*159 tbe way it bad earlier written, tbe statute, and- approved of tbe Supreme Court’s construction of tbe law.[19 ]
Tbe majority opinion recalls that during bearings before tbe House Committee on Ways and Means in 1973 on tbe bill wbicb matured-into the Trade Act of 1974 (Pub. L. No; 93-618, 88 Stat. 1978), “a witness” recommended an amendment defining “bounty or grant” as encompassing tbe remission of an excise tax and that there was no action taken on- tbe recommendation. This, can hardly be said to rise to the level of Congressional acquiescence in administrative practice, much less a repudiation by Congress of tbe interpretation of the key language in section 303- by tbe Supreme Court.
Tbe majority opinion points to Congressional adoption, as § 321(b). of tbe Trade Act of 1974, of an amendment to the Antidumping Act, 19 USC 162 (Supp. V 1975), wbicb parallels the standard in that Act to tbe standard set forth in tbe countervailing duty law; further, to tbe following statements in tbe committee reports;
However, your committee [Ways and Means], in recommending this amendment, does not express approval or disapproval of tbe standard employed by tbe Treasury Department in administering tbe countervailing duty law with regard to tbe treatment under that law of rebates, or remissions of direct and indirect taxes. [H.R. Rep. No. 93-571, 93d Cong., 1st Sess. 69 (1973).]
And—
Tbe standard in tbe proposed amendment parallels that standard employed by tbe Treasury Department under tbe countervailing duty law in determining whether tax rebates and remissions constitute bounties or grants. However, tbe Committee [Senate Finance], in recommending this amendment, does not express approval or disapproval of that Treasury practice. [S. Rep. No. 93-1298, 93d Cong., 2d Sess. 172 (1974).]
On tbe basis of tbe foregoing, tbe majority opinion concludes: “The effect of tbe Committees’ mutually contradictory approve-disapprove statements is necessarily to leave untouched tbe status quo with respect to tbe administrative practice on countervailing duties.” Again tbe majority ignores tbe principle stated in United States v. Douglas & Berry, supra. Tbe Correct conclusion is that such statements left untouched tbe status quo with respect to tbe Supreme Court’s interpretation of tbe key language in section 303.
Tbe majority opinion notes that, in 1968, tbe Senate Finance Committee was advised that Treasury considered §303 inapplicable to
The committee is also aware of the Supreme Court cases, and a recent Customs Court case which has interpreted the works “bounty” or “grant” to apply to virtually all subsidies, including the rebate of indirect taxes.
A request for a study was subsequently made jointly by the chairman of the Senate Finance Committee and the chairman of the Subcommittee on International Trade to the Tariff Commission, which transmitted its voluminous report, TRADE BARRIERS, supra note 6, in 1974.
This can hardly be said to rise to the level of a repudiation by the Congress of the interpretation of the key language in section 303 by the Supreme Court. Rather, the request for a study by the Tariff Commission constituted merely a prudent step by a Congressional committee to acquire information needed to make a decision whether to recommend any changes in the law beyond the 1970 amendment, referred to above, providing for the filing of a petition by any person setting forth his belief that a bounty or grant is being paid. Following receipt of the Trade Commission’s report, the judicial review provision, discussed infra, was enacted as part of the Trade Act of 1974.
Referring to this court’s opinion in American Express Co. v. United States, 60 CCPA 86, C.A.D. 1087, 472 F. 2d 1050 (1973), the majority opinion says that “we expressed the view that Congress required the Secretary to impose a countervailing duty’when a bounty or grant has been bestowed, but left to the Secretary the determination of whether a bounty or grant had in fact been bestowed” and. that ■“[n]othing has occurred since 1973 to require change in that view.” However, a close reading of the opinion in that case reveals no suggestion whatsoever that this court would approve a Secretarial determination that was contrary to the interpretation of “bounty” by the Supreme Court. With respect to what has occurred since 1973,
That provision was enacted in response to the majority opinion of this court in United States v. Hammond Lead Products, Inc., supra note 3. Hammond Lead had filed a complaint with the Commissioner of Customs asserting that litharge
On appeal, this court, split 3-2, held that the Customs Court lacked jurisdiction.
All considered, it appears that countervailing duty is a penal exaction [24 ] that the Congress did not intend the courts to impose, should the Treasury be recalcitrant, in a 516(b) proceeding . . . Z
In the course of extended dicta, the majority opinion obliquely referred to the “dicta” in Downs and went on to say, supra at 140-41:
It may be asked, if our interpretation of section 516(b) is correct, does it leave the American Manufacturer entirely remediless even in case of an arbitrary and capricious refusal by Treasury to take appropriate action under the countervailing duty*162 law. It is difficult to answer the question without deciding in dictum cases not before us, but a few observations will be made. The Second Circuit, in J. C. Penney Company Inc. v. United States, 439 F. 2d 63 (decided March 1, 1971), has considered the new statute and reaffirmed holdings under the old, that the regular Federal courts will not interfere in customs cases reviewable in the Customs Court, because an importer desires to tailor a remedy more satisfactory to him than the Customs Court affords. : . . Thus it may be that any decision limiting 516(b) may correspondingly limit the access of a complaining domestic industry to any kind of court relief. On the other hand, the modem tendency to fashion a remedy for any injury is a srong one, and it could be the regular courts would take jurisdiction in cases outside section 516(b), where the domestic industry showed clear illegality and substantial injury. Such a proceeding would not be a de novo determination like the one the court below made here, but would, we think, be more in the nature of a review of the administrative decision, which would be overturned only if found arbitrary, capricious, or not founded on substantial evidence. A court considering the fashioning of such relief would have to consider its need in light of judicial remedies, and also such extrajudicial ones as the domestic industry might have, in resort to the Congress or to the Tariff Commission, We do not undertake to predict the answer.
The response of Congress was to include in the Trade Act of 1974 an amendment to section 516 which, as noted above, provides for judicial review of the Secretary’s determination that a bounty or grant is not being paid on foreign merchandise.
In view of the foregoing, the conclusion is inescapable that the Congress has not acquiesced in the administrative practice of failing to recognize the ordinary remission of excise taxes as a bounty or grant for purposes of section-303, much less repudiated, or given any signal of its disfavor with, the interpretation of the key language in section 303 by the Supreme Court.
Date for imposition of countervailing duties
The Customs Court ordered that countervailing duties be assessed on the subject electronic products exported from Japan effective the day following the date of entry of its order. Section 516(g) of the Tariff Act of 1930, as amended (19 USC 1516(g)), provides that only merchandise entered for consumption (or withdrawn from warehouse for consumption) after the date of publication of a Customs Court’s decision will be affected. Therefore, the Government argues that the Customs Court’s order in this case “encompasses entries the liquidation of which is not the proper subject of direction by the Customs Court under the enabling statute, which is clearly jurisdictional in its scope and effect.” Appellee contends that entry of the Customs Court’s order constituted “publication” for purposes of section 516(g) and that the Customs Court’s order was proper.
Section 257 of 28 USC provides that all decisions of the Customs Court shall be filed and be open to inspection and that the Secretary shall publish weekly such decisions as he or the court may designate and abstracts of all other decisions. Thus, the statutes distinguish between filing or entry of a decision and publication thereof, which obviously would not occur simultaneously with the filing or entry. Until January 4, 1967, publication was in “Treasury Decisions.” Effective January 4, 1967, the name was changed to “Customs Bulletin” (31 Fed. Reg. 16580).
Although appellee argues that “publication” means “making available to the public,” which would occur upon the filing or entry of
Accordingly affirmance of the Customs Court’s decision and judgment with respect to tfie Japanese commodity tax should be coupled with an order that tfie order of tfie Customs Court with respect to tfie imposition of countervailing duties be modified (1) to become effective tfie day after tfie date of publication of its decision in tfie Customs Bulletin and (2) to provide that assessment of countervailing duties be subject to possible suspension under tfie provisions of 19 USC 1303(d)(2).
The 5 to 40% range referred to by the Customs Court is shown in 1W. Diamond, Foreign Tax and Trade Briefs 84.7 (1977), which notes that the commodity taxes “generally are paid by the manufacturer.’'
This court noted in United States v. Hammond Lead Products, Inc., 58 CCPA 129, 136, C.A.D. 1017, 440 F. 2d 1024, 1029 (1971), that “in tlie case of the countervailing duty assessment, no injury toi domestic Industry need he shown.”
The Notice stated that “Information has heen received . . . which raises a question as to whether certain payments, bestowals, rebates, or refunds granted by the Government of Japan upon the manufacture, production, or exportation of certain consumer electronic products constitute the payment or bestowal of a bounty or grant, directly or indirectly, within the meaning of section 303 of the Tariff Act of 1930 (19 U.S.C. 1303), upon the manufacture, production, or exportation of the merchandise to which the payments, or bestowals, rebates, or refunds apply.”
The broad language could be construed to encompass the Japanese commodity tax.
If the majority remains convinced that the economic result of the remission of the Japanese commodity tax is decisive of the issue "before us, it should at least remand the case to the Customs Court for development of a record on that point, a task that court is specially equipped to undertake. Failing that, I suggest that the rates of the Japanese commodity tax are such as to establish prima facie that the economic impact (e.g. competitiveness of Japanese exports vis-a-vis U.S. manufacturers) of remission of the tax would not be de minimis. Significantly, the United States Tariff Commission (now International Trade Commission) made the following statement in its report to the Senate Finance Committee, 5 TRADE BARRIERS 39 (1974):
For all but a very few U.S. products, the differential between domestic and export prices which is attributable to the exemption of exports from internal comsumption taxes is substantially lower than the price differential found in products of most other major trading nations resulting from the exemption of exports from their domestic consumption taxes. [Footnote omitted.]
In its report, THE FUTURE OF U.S. FOREIGN TRADE POLICY, 90th Cong., 1st Sess. 5 (Comm. Print 1967), the Joint Economic Committee of the Congress stated:
The European Common Market practice of rebating their own indirect taxes on their exports and levying these same taxes on imports — a practice sanctioned, incidentally, by the rules of the GATT— constitutes a conspicuous form of discrimination against U.S. exports. Moreover, similar border adjustments by the United States would be an ineffective weapon, neither mitigating nor offsetting the discriminatory process, because the tax structure of the United States places relatively small emphasis on indirect taxes. This issue is one that the United Stai.es will have to resolve.
“That whenever any country. . . shall pay or bestow directly or indirectly, any bounty . . . upon the exportation of any article or merchandise from such country. . . ." There is no support for the statement in the majority opinion that there was “congressional refusal" to define the words “bounty" or “grant." Customs Law dictates that the common meaning of such words is intended in the absence of evidence to the contrary. United States v. C. J. Tower & Sons, 48 CCPA 87, 89, C.A.D. 770 (1961); Meyer & Lange v. United States, 6 Ct. Cust. Appls. 181, T.D. 35436 (1915). Webster’s International Dictionary (1890) defines “bounty" as:
4. A premium offered or given. . .to encourage any branch of industry, as husbandry or manufactures. It was merely customary legislative practice for Congress to leave it to the Treasury Department, subject to judicial review, to make individual determinations within such a broad definition.
Whether the “hounty or grant” in a particular case would he de minimis (not, therefore, warranting imposition of a countervailing duty) or what the net amount of the “hounty or grant” would he as ahasis for imposition of a countervailing duty is, of course, another matter. Thus, as appellant has shown, the market value of the certificate in Downs was from 1.25 to 1.84 rubles per pood, and the excise tax remitted was 1.75 rubles per pood; whereas, the net hounty determined ranged from only .38 to .50 rubles per pood (T.D. 22814, 4 Treas. Dec. 184 (1901)). It is not disclosed what factors entered into the determination. See F.W. Woolworth Co. v. United States, 28 CCPA 239, C.A.D. 151 (1940).
In Towne v. Eisner, the question was whether a stock dividend made in 1914, against surplus earned before the effective date of the Sixteenth Amendment, was taxable under the Income Tax Act of October 3, 1913. The lower court had decided for the taxpayer, treating the question as inseparable from interpretation of the Sixteenth Amendment. The Supreme Court disposed of the question upon consideration of the essential nature of a stock dividend, disregarding the fact that the dividend involved was based upon surplus earnings .that accrued before the Sixteenth Amendment took effect, and quoting from its opinion in Gibbons v. Mahon, 136 U.S. 549 (1890) as follows:
“A stock dividend really takes nothing from the property of the corporation, and adds nothing to the interests of the shareholders. Its property is not diminished, and their interests are not increased. .. . The proportional interest of each shareholder remanís the same. The only change is in the evidence which represents that interest, the new shares and the original shares together representing the same proportional interest that the original shares represented before the issue of the new ones." Gibbons v. Mahon, 136 U.S. 559, 560. In short, the corporation is no poorer and the stockholder is no richer than they were before. . . . Whathas happened is that the plaintiff’s older certificates have been split up in effect and have diminished in value to the extent of the value of the new. [Id. at 426-27.1
Paragraph E was substantially the same as section 303 of the Tariff Act of 1930 and as section 303(a) (1) under the 1970 amendment, the statute herein involved. Paragraph E was preceded by Paragraph E of ■section 4 of the Tariff Act of 1913 (38 Stat. 114, 193); section 6 of the Tariff Act of 1909 (36 Stat. 11, 85); and section 5 of the Tariff Act of 1897 (30 Stat. 151, 205). Prior to the latter, paragraph 182 34 of the Tariff Act of 1894 (28 Stat. 509, 521) provided for payment of additional duty on sugar, syrups, and molases where the ■exporting country paid a bounty on the export thereof; and paragraph 237 of the Tariff Act of 1890 (26 Stat. 567, 584) made similar provision in the case of sugar only. In its brief, the Government contends that the 1897 Act was intended to apply to the refund of taxes only to the extent that the “refund” exceeded the •amount of tax actually paid (i.e. the “excessive remission”). This appears to have been so under the specific language of the 1890 and 1894 Acts. However, different language appeared in the subsequent acts, and the legislative history of the 1897 Act cited by the Government can hardly be used now to overturn the Supreme ■Court's interpretation in Downs of “bounty” in the 1897 Act. The Government’s argument, of course, has no application to “grant” (added by the 1897 Act). If it did, it would imply that there was no Congressional purpose in adding “grant” to the language of the statute.
The law also provided for payment of an allowance of two pence per gallon “to any Distiller or Pro* prietor of . . . Spirits on the Exportation thereof from a Duty-free Warehouse, or in depositing the same in a Customs Warehouse.” However, this payment was not involved in the case.
Passmmt held that in determining dutiable value of goods imported from Germany, there should be added to the net invoice price the amount of tax imposed upon the goods when sold by the manufacturer thereof for consumption or sale in Germany hut remitted upon exportation of the goods.
As had the Government in its brief, saying of Downs:
The Russian bounty case was summed up in a single sentence in the opinion (187 U.S. 515): “When a tax is imposed on all sugar produced, but is remitted upon all sugar exported, then, by whatever process, or in whatever manner, or under whatever name it is disguised, it is a bounty upon exportation.”
Cf. E. GRISWOLD, THE JUDICIAL PROCESS 31 (1973): “In many areas precedents, especially ones of a few years’ standing, are not given very great weight. This in turn stimulates litigation on a great mass of questions, j i .”
This statement apparently does not take account of the countervailing duties assessed by Treasury in Downs and the Government’s position in its brief before the Supreme Court in support thereof, wherein the Assistant Attorney General went so far as to say (R 236):
For it seems that any special favor, benefit, advantage, or inducement conferred by the Government, even if it is given as a release from burden and is not a direct charge upon the Treasury, is fairly included in the idea and meaning of an indirect bounty;
If the Secretary concludes that a formal investigation is warranted, ho is to initiate one, make a preliminary determination within six months, and make a final-determination within twelve months.
Hearings on H.B. I6S5 Before the House Committee on Ways and Means, 82d Cong., 1st Sess. 2, 16, 35, and 79 (1951). (H.R. 1535, which would have been entitled "Customs Simplification Act of 1951,” was introduced “by request” of the Secretary.) Hearings on H.R. 6605 Before the Senate Committee on Finance, 82d Cong. 2d Sess. 115,124-125 (1952). (H.R. 5505 supplanted H.R. 1535 as a “clean bill”)
The Department’s representative advised the Senate Finance Committee that an amendment to conform section 303 with administrative practice was needed to make the countervailing duty law fully consistent with Article VI of the General Agreement on Tariffs and Trade. Hearings on H.B. 1812 (“Trade Agreements Extension Act of 1951”) Before the Senate Committee on Finance, 82d Cong., 1st Sess. 11 (1951).
The majority opinion notes an earlier unsuccessful attempt by Treasury in 1950, but says: “Congress' failure to act or even speak against it [tbe Treasury proposal] reflected at least a then-current willingness to allow that administrative practice to continue unabated and unchanged.” Such a comment ignores the principle stated in United States v. Douglas & Berry, supra. The correct conclusion to be drawn from failure of the Treasury proposal is that stated by Judge Newman. See United States v. Adolphe Schwob, Inc., 21 CCPA 116, 120, T.D. 46447 (1933).
Oí particular significance, the report (Vol. VI at 30-31) states:
Several governments provide tax advantages to exporters. This is done usually by exempting or deferring taxes on income from export activities, or rebating other direct taxes associated with the production of exported products, or by accelerated amortization of assets used in production for export;
Under current GATT rules, indirect (consumption) taxes may be rebated (or not collected) on exported products, but rebates of direct taxes (income and certain other taxes) are not permitted. This rule is based on the premise that indirect taxes are fully shifted forward to the consumer, whereas direct taxes are not. To the extent, however, that the forward shifting of the indirect taxes is incomplete, the full restitution of the domestic consumption tax at the border on exported products acts, in effect, as a subsidy of exports. [Footnote omitted.]
The court statedt hat lithargeis at ead oxide, made from refined lead by a simple process and containing 93% primary lead metal. Its main use is in stroage batteries and in the chemical and paint industries.
Following devaluation oí the peso in 1964, Mexico increased export taxes on refined lead for the purpose of maintaining domestic supplies and keeping down domestic prices. Refined lead was made available to domestic users at a price approximating the world price minus what the export tax would have been. Exports of litharge were not subjected to the export tax, so that Mexican litharge producers could offer litharge in other countries at a price predicated on the domestic lead price unenhanced by the export tax.
The dissenting opinion concluded that the Customs Court had jurisdiction of the protest under section 516(b), citing Bradford Co. v. American Lithographic Co., 12 Ct. Cust. Appls. 318, T.D. 40318 (1924). Further, it stated that the Customs Court was correct in concluding that there was a bounty or grant, citing the definitions thereof in Nicholas and Downs, supra.
The statement that a countervailing duty is “penal” was repudiated in a 1972 Senate Finance Committee report. Infra, note 26.
Review can be sought in the Customs Court by “an American manufacturer, producer, or wholesaler of merchandise of the same class or kind as that described in such determination.”
In reporting out the amended bill, the Senate Finance Committee report (S. Rep. No. 92-1221, 92d Cong., 2d Sess. 8 (1972)) stated:
Tho Committee amendment providing judicial review to domestic producers in countervailing duty cases is necessitated because of a 1971 decision of the Court of Customs and Patent Appeals (United States v. Hammond Lead Products, Inc.) holding that judicial review was not available to American producers in countervailing duty cases. The Committee is concerned that the decision might adversely affect the ability of American producers to obtain meaningful relief against subsidized import competition under the Countervailing Duty Law (section 303 of the Tariff Act) because of administrative inaction or insufficient action, or because of excessive delay in the administrative process.
In addition, importers enjoy the right to judicial review in countervailing duty cases under existing law. Tho Committee believes that American producers as well as importers should be permitted to have the right to judicial review in countervailing duty cases as a matter of basic equity and fairness, and as a moans to secure administration of tho law in keeping with the intent of Congress reflected in the broad, explicit and mandatory terms used in section 303.
The Countervailing Duty Law requires the Secretary of the Treasury to assess an additional duty on imports of dutiable articles with respect to which a bounty or grant has been paid. The additional duty must be equal to the amount of tho bounty or grant, thereby neutralizing the artificial advantage afforded the foreign product by virtue of tho subsidy. Consequently, countervailing duties are not, nor were they ever intended to be, penal in nature: they are remedial in nature inasmuch as they operate to offset the effect of subsidies afforded foreign merchandise.