ZENITH RADIO CORP. v. UNITED STATES
Legal provision: 19 U.S.C. 1303
Argument of Fredrick L. Ikenson
Chief Justice Warren E. Burger: We will hear arguments next in Zenith Radio Corporation against the United States.
Mr. Ikenson, I think you may proceed when you are ready.
Mr. Fredrick L. Ikenson: Mr. Chief Justice, and May it please the Court.
This case presents the question whether the forgiveness of a commodity tax on the exportation of certain consumer electronic products from Japan is a bounty or grant under our countervailing duty law.
The petitioner is a domestic producer of such consumer electronic products as television sets, radios and the like.
In 1970, the petitioner filed a complaint with the Treasury Department, claiming that Japan conferred a bounty or grant upon the exportation of like products by reason of the remission of a commodity tax on exportation.
In January of 1976, the Secretary of the Treasury made a determination that no bounty or grant was paid or bestowed on exportation.
Under a then recently enacted statute, the petitioner sought and obtained judicial review over the secretary?s negative determination in the United States Customs Court.
From the pleadings filed by the parties in the Court, it became clear that the essential facts were not in dispute.
Japan imposes a commodity tax on certain products when shipped from the manufacturer?s factory for domestic consumption, that is consumption in Japan, however, the same products when shipped for export from Japan are exempt from payment of the commodity tax.
Each of the parties moved for summary judgment.
Petitioner arguing that as a matter of law, the remission of the tax on exportation constituted a bounty or grant, the government arguing the contrary.
A three-judge panel of the Customs Court agreed with the petitioner and awarded a summary judgment.
On appeal, the Court of Customs on Patent Appeals, reversed in a 3 to 2 decision and on February of this year, this Court granted certiorari.
We say, Your Honors, that the tax remission clearly is a bounty or grant on exportation and that off setting duties called countervailing duties, should be assessed on imported products from Japan which benefit from the tax remission.
The Countervailing Duty Law as it now exists has remained essentially unchanged since the first general countervailing duty law was enacted as Section 5 of the Tariff Act of 1897.
Since that time the law was re-enacted five times and it was twice construed by this Court in the Downs case and in the Nicholas case.
Both decisions make clear that the statute?s coverage is extremely broad and particularly with respect to the remission of tax and exportation that that event is a bounty or grant.
In Downs, the first of the two of countervailing duty cases considered by this Court, the Court had before it a very complex Russian program which sought to control the production, price and exportation of sugar.
The scheme was extremely complicated, but it included two facts which this Court considered most important.
Fact number one, all sugar sold domestically was subject to an excise tax.
Fact number two, all sugar exported from Russia was exported free of such tax.
The Court proceeded to state that whenever a tax is imposed upon all sugar produced, but is remitted on all sugar exported then by whatever process or in whatever manner or under whatever name it is disguised, it is a bounty upon exportation.
Now, it is true there was another aspect of the Russian plan which the Court considered.
Exporters of sugar received certificates which were marketable and valuable.
The Court discussed whether or not these certificates also constituted a bounty or grant.
The Court said that it did, but that does not detract from the Court?s very forceful language that the principle and the key facts in the entire scheme were the two that I mentioned to Your Honors, that all sugar sold in the home market was taxed and that all sugar exported was sold free of tax.
This language of this Court declaring that the remission of tax under such circumstances is a bounty or grant, requiring the imposition of countervailing duties is not or was not unguarded language as the government would characterize it.
That language is consistent with repeated statements of this Court, both in the Downs case and in cases subsequent to and prior to Downs.
In the Nicholas case, the only other countervailing duty case this Court cited as an example of a bounty or grant on exportation, the remission of the tax when that tax is levied on products sold in the home market.
In an earlier case, in Passevant, the Court expressed its recognition as to why governments remit taxes on exportation.
The Court said, ?Doubtless, to encourage exportation, to encourage the introduction of domestic goods into export markets, taxes are remitted on exportation.
There was no mystery about the benefits of tax remission on exportation.
The Court perceived the benefit and the Court deemed such a benefit to be a countervailable bounty or grant.
Notwithstanding the teachings of this Court which are quite clear, the Secretary of the Treasury has developed a practice under the countervailing duty law of excusing from countervail remissions of indirect tax.
The practice unquestionably conflicts with decisions of this Court.
Now, as I said earlier, the Congress re-enacted the statute five times since 1897 and it re-enacted it several times after this Court?s Downs decision and after this Court?s Nicholas decision.
Of course, the Congress re-enacted the statute after the administrative practice began to be put into place.
A fundamental question arises, by re-enactment of the statute after this Court?s decision and after the administrative practice of the Secretary, what did Congress have in mind?
Did Congress intend to ratify the practice or did Congress intend to ratify this Court?s decisions?
The question is so simple --
Unknown Speaker: Or neither?
Mr. Fredrick L. Ikenson: That is always a possibility, Your Honor, except that I think it is a rather well settled principle that when Congress re-enacts a statute after a judicial interpretation of the statute becomes known to it, it is deemed to have ratified that interpretation.
Chief Justice Warren E. Burger: Or is it possible that the problem was regarded as so delicate and difficult that they would rather have this Court decide it?
Mr. Fredrick L. Ikenson: I think not, Your honor.
I think, clearly the Congress --
Justice John Paul Stevens: But your point is that this Court did decide it, in the Downs case, is it not?
Mr. Fredrick L. Ikenson: That is correct.
Our point is this. Congress was aware of the Downs case and certainly by the time of the last re-enactment in the Trade Act of 1974, it was aware of the Nicholas case, it was aware of the administrative practice.
How did Congress respond in the Trade Act of 1974?
Firstly, it opened the courts to American manufacturers by providing especially for judiciary review over negative countervailing duty determinations by the Secretary.
This enabled the American manufacturers who were aggrieved by the non-assessment of countervailing duties on imports which were benefited by tax remission on export to come to the courts and to invoke this Court?s teachings of Downs and Nicholas.
The Congress went further.
The key committees of the Congress discussed the administrative practice in the legislative history of the Trade Act and said that ?We are neither approving nor disapproving of that practice.
They rather invited resolution of the question of the courts, by making judicial review available to American manufacturers, by stating clearly that they were not expressing approval or disapproval of the administrative practice.
Justice Byron R. White: Mr. Ikenson, can I ask you a factual question about the Downs case because it is kind of a hard case to understand?
Mr. Fredrick L. Ikenson: Yes, Your Honor.
Justice Byron R. White: The Solicitor General says that the actual countervailing duty that was assessed there was measured by the value of the certificates rather than the certificates plus the Russian tax.
Do you agree with that analysis as a matter of fact?
I know you would draw a different inference, but can we accept that as a correct interpretation?
Mr. Fredrick L. Ikenson: I must preface my response to Your Honor by saying that the value of the grant in the Downs case was not before the Court.
It was the understanding of the parties at the time and of the courts below that the amount of countervail was not judicially reviewable.
The sole question was whether or not the entire Russian scheme constituted a conferral of a bounty or grant.
So whether or not the actual amount of countervailing duty was correct was never put before the Court.
Now, to respond more directly to Your Honor?s question, the amount of countervail put on by the Secretary of the Treasury was equal to what the Secretary determined to be the profit gained by the Russian exporter by reason of the export certificate.
I would not say that the amount of countervail equaled the value of the certificate.
It was based upon the Secretary?s determination of profit that was earned.
Justice Byron R. White: I see.
Mr. Fredrick L. Ikenson: When the Court discussed the certificate and indicated what value it felt the certificate had, it said clearly the value of the certificate is 1.25 rubles per pood which was the unit of weight because that was the amount of money that an exporter could receive for his certificate.
The Court looked differently at the value of the certificate than the Secretary of the Treasury, but I hope I have not given Your Honor too long an answer to a short question.
Justice Byron R. White: No, no, it is a very helpful answer and I thank you for it.
Justice William H. Rehnquist: Mr. Ikenson, what is the role of the administrative practice in a case such as this?
Is there latitude for the Secretary of the Treasury as the statute is presently drawn to decide one way or the other and be affirmed by the courts in either case?
Mr. Fredrick L. Ikenson: We say, Your Honor, that there is no latitude at all.
The statute is mandatory.
It is clear, and as understood by Congress the amount of discretion given to the Secretary of the Treasury is very slight if existent at all.
The Secretary has discretion to determine the amount of a bounty or grant.
He does not have discretion to determine what a bounty or grant is.
Justice Byron R. White: Well, do not you more accurately say, in response to my brother Rehnquist?s question, if this amounts to a bounty or grant then he has no discretion whatsoever?
Mr. Fredrick L. Ikenson: That is true, Your Honor.
Justice Byron R. White: And you further say that as a matter of law this is a bounty or grant?
Mr. Fredrick L. Ikenson: That is true, Your Honor.
Justice William H. Rehnquist: Would you not allow for any situations where the Secretary in a close case might decide something was or was not a bounty or grant and say that his determination should be affirmed by the Customs Court in either event or do you say flatly, ?no,? that it goes either one way or the other depending on how the Court decides?
Mr. Fredrick L. Ikenson: I would say that as a matter of law, a program is or is not a bounty or grant.
Justice Byron R. White: But we do not need to win that argument, though, because it has already been decided, you say, whether it is or is not?
Mr. Fredrick L. Ikenson: That is correct.
My next point was, Your Honor, that in this particular case, with this particular type of program, the Court has determined that as a matter of law a tax remission on export is a bounty or grant.
I would like to comment further --
Justice Byron R. White: You know in some other context, sometimes a Court has approved a decision of an administrator construing a statute and two or three years later or 10 years later he comes back with a different construction of the statute and he gets affirmed here then too?
Mr. Fredrick L. Ikenson: Yes, but in those cases the administrator is conferred a broad discretion in administering the statute --
Justice Byron R. White: He has always got as the words of the statute to interpret and enforce and he does it one way in one decade and another way in another way?
Justice William H. Rehnquist: Every eight years in the case of the Labor Board?
Mr. Fredrick L. Ikenson: Well, in this particular statute, Your Honor, the Secretary of the Treasury is not even named as the person who shall determine whether a bounty or grant is bestowed instead the statute has read consistently whenever a bounty or grant is bestowed, etc., then the Secretary shall determine the amount of bounty or grant and assess the duty.
Justice Byron R. White: So as far as the statute reads he has no role in determining one way or another?
Mr. Fredrick L. Ikenson: As a practical matter --
Justice John Paul Stevens: But somebody has to have (Inaudible)
Mr. Fredrick L. Ikenson: That is correct and I should say that this has already been discussed by a lower court in 1940.
The Court of Customs and Patent Appeals noted that the statute does not even provide that the Secretary should make the initial determination, however, as a matter of custom and common sense it should be the Secretary to make this determination.
Unknown Speaker: Mr. Ikenson, do we know here, exactly what principle the Secretary applied in reaching this decision?
Mr. Fredrick L. Ikenson: We do not know, Your Honor.
The Secretary did not offer any explanation as to his reason for not countervailing.
However, we do not claim that that is an error in this case because we view the role of the Customs Court as being a court that accords trial de novo, and we are not reviewing it under the general terms of general standards of review.
We look to an administrative record or the standards of arbitrariness and propitiousness and the like.
We had a trial de novo available to us in the Customs Court and under those circumstances we do not feel that it was error for the Secretary not to have elaborated on his reasons for his negative determination.
I would like to comment briefly on a point made by the Chief Justice regarding the Congress? awareness of the sensitivity of this problem.
There is no question that Congress appreciates that the application of countervailing duties is a very delicate issue, that the application of countervailing duties by the United States unilaterally, certainly can cause international friction.
Congress was aware of this when it enacted the Trade Act and it devised a master plan to deal with countervailing duties.
On the one hand, it was concerned about promoting international harmony and international trade.
On the other hand, it was concerned about permitting domestic industry to stand by and suffer because it had to compete with unfair competition with bounty fed or subsidized competition.
So Congress struck a very delicate balance.
It directed the executive branch to try to negotiate an agreement on the application of countervailing duties.
On the other hand, it directed the Secretary of the Treasury to enforce the countervailing duty law by putting time limits on him in handling countervailing duty petitions.
It also provided for judicial review of negative determinations.
Congress had to do more to prevent American manufacturers? suits from upsetting the international applecart.
So what Congress did was to give limited discretion to the Secretary of the Treasury to postpone the assessment of countervailing duties in cases where bounties or grants were bestowed.
This is the way that international friction could be avoided under the congressional plan.
This is what Congress provided.
However, the government was not content with this plan.
Rather the government has chosen to call to Your Honor?s attention the alarming consequences that could follow from a reversal by this Court.
We say that those consequences need not occur and, furthermore Congress was aware of the danger of such consequences, it provided for it and any consideration of them by this Court would be unnecessary, it would be improper.
It is not part of the Congressional contemplation.
I would reserve the balance of my time for rebuttal, Your Honors.
Chief Justice Warren E. Burger: Mr. Solicitor General, would you prefer to begin in the morning, there are four minutes now?
Argument of Wade H. Mccree
Mr. Wade H. Mccree: I would prefer to begin in the morning.
Chief Justice Warren E. Burger: Very well, we will let you begin at 10 o'clock tomorrow morning.
Mr. Wade H. Mccree: Thank you.
Argument of Mccree
Chief Justice Warren E. Burger: We will resume arguments in Zenith Radio Corporation v. the United States.
Mr. Solicitor General?
Mr. Mccree: Mr. Chief Justice and May I please the Court.
The question presented in this appeal is whether the remission of the Japanese commodity tax which is imposed on certain consumer electronics products only if they are sold on Japan is a bounty or grant with in the meaning of the Tariff Act of 1930.
When the Congress required the imposition of a countervailing duty in addition to any duties otherwise imposed whenever a bounty or grant was payed or bestowed upon the manufacture or production or export of an article imported into Unite States, it did not define the words bounty or a grant.
And it then became the duty of the Secretary of the Treasury not only to compute the net amount of a countervailing duty that might be due, but also and initially to determine whether the triggering event, the bounty had occurred. Since a variety of government activities could properly be regarded as bestowing the a bounty or grant, for example a favorable property tax rate or perhaps the exemption from a property tax all together, the Secretary required some guidance in defining this words.
As we have set forth on pages 19 to 24 of our brief, the secretary was not without direction from the Congress.
In the evolution of statutory language and in the explanation of the Congressional debates, it became evidence the Congress did not regard the non excessive remission of an excise tax as bounty or grant and we define non excessive to mean a forgiveness of the tax not in excess of what was actually paid.
In that portion of our brief we point out that as early as 1890 in the sugar tariff, we find the earliest use of the word bounty in the context of the encouragement of an export.
The record on debate indicates what Congress understood then by its use bounty and this was the remission or drawback of indirect taxes exceeding the taxes the exporters had paid on the goods.
By leave of Court, I would like to read one sentence from the remarks of the Senator Gibson in the Congressional debate on that Act and this is found at page 21 of the government's brief and Senator Gibson after giving an example said, “But upon the export of a ton of sugar he receive back as a drawback $117.60 making a clear bounty of $20.54 per gross ton of sugar imported.
This follows the statement that only $97.06 per gross ton was paid.
So it’s clear from that example that it was the $20.54 excess over the tax paid by the exporter that was regarded as a bounty.
Justice William H. Rehnquist: General McCree do you not think that the words directly or indirectly in the statue that we are presently dealing might expend that view of the word bounty?
Mr. Mccree: They might be so regarded except in 1890, in the first Sugar Act, the language was used directly or indirectly was also employed at the time Senator Gibson gave us this as example which would indicate that it was understood then just to indicate the excessive remission.
It was not added subsequently.
On page 20 of our brief we set forth about half way the-down the page, the language of the 1890 statue and in the 2nd or 3rd line from the bottom of the coded language, we show that directly or indirectly it was found initially when bounty was first employed.
Unknown Speaker : Mr. Solicitor General does the word drawback have, is that term of archive sounds it is familiar to me?
Mr. Mccree: It was my first acquaintance with it too if the Court please and it is used as I understand it, synonymously with, it means a pay back, a remission, maybe an exemption from the tax.
A drawback is a return of the amount paid and it has been used consistently to mean a non excessive drawback unless it indicates otherwise.
After that first Sugar Tariff Act in 1890, in 1894 as we point out on pages 21 and 22 of our brief, a proviso was added to the Sugar Tariff that makes clear that a non excessive remission does not require a countervailing duty.
That proviso was found at the bottom of page 21 and it provides that the importer of sugar produced in the foreign country, the government of which grants such direct or indirect bounty maybe relieved from this additional duty which was a countervailing duty, in case said importer produces a certificate of said government that no indirect bounty has been received upon such sugar in excessive of the tax collected upon the beet or cane from which it was produced and there again we have the guidance that the Secretary found in the early statuary history of countervailing duties.
Finally, in this brief excursion into the statutory history, in 1897 we find that the statute was revised and made applicable to all imported products and not just sugar and there the proviso was deleted, but we find the addition of language which we believe for the reasons I will state to be a substitute for the proviso and that language is that there should be levied that paid an additional duty equal to the net amount of such bounty or grant.
And we believe that the use of net amount means the amount in excess of the tax otherwise paid and this would appear to be the intention from the floor debate that we set forth on page 22 and 23 of our brief.
And if this legislative of history then is proper guidance, the Secretary has indeed followed it consistently in his application and interpretation of the statue for 80 years, during which time as my brother pointed out, the Congress has re-enacted this statue in almost the identical language.
We point out in footnote 15 on page 24 that the Congress had explicit notification in 1949 of the Secretary's construction and application of the statute and nonetheless re-enacted the statute, knowing that he did not apply it to the non excessive remission of a excise tax.
Also and perhaps even more pertinently, in 1973 when the Zenith petition was pending before the Secretary, a witness requested an amendment to require the countervailing non excessive remission and that amendment was rejected and the Congress of course was aware not only of the practice that is attacked here, but also of its application indeed to the litigant before us.
Justice William H. Rehnquist: General McCree you agree with your opponent as to the allocation of function between the Secretary, the Customs Code and the CCPA that he stated yesterday?
Mr. Mccree: Well, the Secretary has by regulation impose on the Collector of Customs, this was delegated to him, the duty placed upon the Secretary of the Treasury and the Collector of Customs makes the determination which can be challenged in the Customs Court and in the Court of Customs Appeal.
Justice William H. Rehnquist: What standard does the Customs Code use in determining whether or not the Secretary properly determined that something was a direct or indirect bounty?
Mr. Mccree: We submit that the Customs Court determines whether the Secretary or his delegate has made a reasonable interpretation of the statue.
We believe that this a statute very much like other statutes that are entrusted or the administration of which is entrusted to administrator, either an agency or a cabinet officer and that he has the right, indeed the duty to make classifications to implement its application and we submit that the proper judicial review is whether the classification is reasonable to carry out the purposes of the statue.
Unknown Speaker : Mr. Solicitor General, I thought yesterday that your opposition said that the Customs Code regarded this as de novo, do you agree with that?
Mr. Mccree: I heard him say that and I disagree with him.
I don’t think the Customs Code decides itself whether this is a bounty or grant.
I think it decides whether the Secretary's determination is a reasonable one.
Unknown Speaker : Then my next question is why it would have asked him if I presented in other way, how do we know from this record what the standard is the secretary employed here?
Mr. Mccree: We know because we have 80 years of consistent interpretation on varying from ruling made you today that made in this case that the non excessive remission is not a grant or a bounty.
Unknown Speaker : Well, certainly in this case the Secretary did not say that much, he said that for years and and he must (Voice Overlap) about for the democracy.
Mr. Mccree: If the Court please, that is correct and we would agree that a detailed reason would have to be given if the Secretary was considering something that had not been considered by him before, but here ever since as our brief on page 10, I think note 5 points out, since 1898 in the first Synopsis of decision 696 has made the same construction and after having done that since 1898 if my memory serves is the year that Spanish war began and and varyingly he has so interpreted and applied the statue.
So we suggest that under those circumstances, perhaps he need not give the kind of detailed reasoning that would be necessary otherwise for appropriate judicial review of his acts.
Unknown Speaker : I guess all I am saying is I would feel a little more comfortable had he spelled out his reasons where we have judicial review.
Mr. Mccree: If the Court please I share the Court's concern for responsible administrative action and I think that is that something an administrator should do, but I suggest that when this is a consistent application perhaps here we need not be as concerned as we might be otherwise if it were a new application.
I’d like to suggest that not only has the Secretary consistently made this interpretation, but also the international trading community understands this to be the construction of our statute and indeed in the General Agreement on Tariffs and Trade, an acronym pronounced GATT, the agreement which we have entered into through the executive to the branch of the government because the Congress has not specifically set forth that the non excessive remission of a consumption tax or an excise tax that this Japanese community tax as my brother would agree is, is not the grant of a bounty or subsidy that would trigger the imposition of countervailing duties which all of the subscribers to the General Agreement on Tariffs and Trade employ in one way or another.
So we suggest that here we have 80 years of uninterrupted, unvarying construction of the statute, of the original statute with Congressional re-enactment 5 times with awareness not only of the practice, but also of the specific application to Zenith, the petitioner in this case.
We suggest that the classification that the administrator has adopted is reasonable under all the circumstances and so that even if this case fell outside of it, it would still be appropriate as this Court has recognized if a classification is reasonable, although we do not have to argue that because we believe that this case is well inside of it.
We also --
Justice William H. Rehnquist: You concede in your brief, do you not and I take it here too that GATT does not supersede an Act of Congress?
Mr. Mccree: If the Court please, we do make that concession, yes and that is correct as we understand it.
We would also like to observe that as my brother has argued and as the dissent in the Court of Customs and Patent Appeals urges, this is not inconsistent with any of the decisions of this Court as Mr. Justice Stevens' inquiry yesterday afternoon brought out, in the Downs case which my brother urges is a governing precedent and would require this Court to the rule to the contrary, we did not have an excessive remission of an excise tax simplicitor, we have there instead the remission of the tax and the bestowing of a certificate which was the matter of great economic value and as the colloquy between the Court and my brother developed and demonstrated, the amount of the duty that was countervailed was either the value of that certificate or a profit derived from the exercise of that certificate and was not in the amount of a excise tax that was remitted.
Also my brother made reference to other authority which he believe was controlling of this, contrary to the position of the government, we suggest that in examination of that authority would reveal that it is not.
The Nicolas case involve a clear export premium.
This was a case involving the export of spirits from the British Isles to the United States and therein an express premium of (Inaudible) and 5 pence on different quality or strength of spirits was bestowed and indeed the question there was whether there was some warehouse tax that would justify England giving this advantage found to be a grant or bounty and the Court held that regardless of the British Government's purpose, it was indeed a grant or bounty.
Justice Potter Stewart: Mr. General you must have to concede I should expect that the language in the Downs case is squarely against your position?
Mr. Mccree: If the Court please, we do concede that there is that language in Downs that is against us and this Court has cautioned us us and other counsels that appear here many times of the hazard of taking language out of the context of an opinion and urging it is controlling in another situation.
Justice Potter Stewart: And how that is out of the context to the opinion?
Mr. Mccree: If the Court please, I wish I can answer that simply and I will give you the best answer I can because I find that the Downs opinion is one of the most confusing opinion I tried to parse in a number of years.
Justice Potter Stewart: It has a lot of competition.
Mr. Mccree: I would like to think that it was alone in this classification, but I have to agree that it is not, but Downs concerns a very complex system of controlling sugar prices within Souris (Ph) Russia and apparently every producer had to place his sugar into three categories, so called free sugar, other sugar that could be transferred into free sugar under certain circumstances and then surplus sugar and there was a one level of tax on the free sugar and that was an excise that could be levied for domestic consumption.
There was a double tax on the surplus sugar.
The sugar in the middle apparently was subject to manipulation by bureaucracy that over saw this entire scheme.
To sell the surplus sugar to double tax was prohibitive so nobody would want to do that, but apparently some of these person would like to export that and if they exported that sugar then the tax would be remitted and it could go abroad.
Now, it was not just a remission of this tax that occurred when it was exported, but also a certificate was given, a thing of value that permitted a person then to transfer from his surplus sugar to his free sugar.
Justice Potter Stewart: In the domestic market?
Mr. Mccree: In the domestic market an equivalent amount and it was not the remission the tax that was countervailed there, but it was an amount equivalent either to the value of the certificate or computed in some way on the value of the certificate and as for this reason that I respond to the Court that language is taken utterly out of context.
Justice Potter Stewart: Well, out of the context, perhaps of the facts of the case, but not really out of context to the opinion in the case and this we were told you yesterday by your brother, it was understood at that time and by that court, he tells us, that the amount of the tax was not a review of the matter and was not there an issue, the amount therefore of the grant or bounty?
Mr. Mccree: Well, it appears that the parties conceded the amount that they were discussing and I submit that if a court uses language not necessary to the decision of the case that that language is not controlling because a case decides a controversy and this Court does not issue advisory opinions and if this language is to cover a situation not before the Court, it should not be deemed by anyone who reads it or this Court, to bind the Court in another situation.
Justice Potter Stewart: It purports to be the statement kind of the summary of the test?
Mr. Mccree: It purports to be that and in this respect its confusing.
Chief Justice Warren E. Burger: And it’s not casual in an written language as it is quite positive and repetitive even?
Mr. Mccree: It has all the vices of irresponsibility, but it does not decide the controversy.
Chief Justice Warren E. Burger: But you suggest that he may have been in error, but he was not the author, he was in any doubts about it?
Mr. Mccree: I would doubt that and wish that I had suggested it earlier.
Chief Justice Warren E. Burger: Chavez was not only author, there were eight other members of the court joined it?
Mr. Mccree: That is exactly so.
Justice William H. Rehnquist: General McCree by your presumption all the whole Miranda opinion is dicta because it addressed a number of subjects that were not before the Court at all.
Mr. Mccree: I leave the Court, I am having enough difficulties of this problem and I would like for you to make a comment.
Justice Thurgood Marshall: I think Miranda has had a lot difficulty without being involved in.
Justice John Paul Stevens: But Mr. Solicitor General the fact that the court has dicta in other cases does not mean this was not dicta?
Mr. Mccree: That is correct and I would suggest too that since Downs, the Secretary has consistently countervailed only excessive remissions and the Congress has been aware of it and the Congress must be presumed to be aware of Downs, including this language.
Chief Justice Warren E. Burger: Would you prefer to say that the Secretary has consistently ignored the language of Downs?
Mr. Mccree: Well, I would prefer to say that the Secretary has consistently recognized what Downs really held despite the language and he has consistently followed that practice and with Congressional concurrence and here we are concerned with the matter that is entirely within the province of the Congress, the Congress has established the countervailing tax and the Congress can take this away and I believe our job here is to decide what has the Congress decided to do and when the Congress has specifically declined to require the countervailing of non excessive remission in the case of this very litigant it would appear that the Secretary is indeed following the Congress' direction.
Unknown Speaker : Mr. Solicitor General could I ask a question and perhaps I should ask, it maybe little delicate, but at the request of the Department of the State, you distributed a communication from the Government of Japan on this matter and let me read from one portion of that.
The Government of Japan fully understands that the Government of the United State has acted in good faith and so forth.
In the unlikely event that the United States should proceed in the manner violative of the very international rules and the establishment of which it is taken leadership to further the objective of free international trade.
Those countries who join with the United States in establishing such rules to promote economic development through normalization of international trade might be compelled to question the good faith to United States.
What does that mean vis-a-vis this case?
Mr. Mccree: I do not think it means anything as far as the duty of this Court is concerned here today.
Unknown Speaker : You do not regard that as instruct to this Court?
Mr. Mccree: I do not and I certainly circulated it only because it had been forwarded to us from the Department of State and we circulated it for what it was worth.
We do not suggest that this Court should be responsive either to any threat or any apprehension of apocalyptic consequences in the field of international trade.
This Court's task as we see it is to decide what did the Congress mean by these words bounty or grant in the Tariff Act of 1930 as illuminated by the legislative history that we have written about in our brief and discussed this morning and as illustrated by the consistent practice of the Secretary over 80 years and as illustrated by the understanding of the international trading community and we think that this Court of course would expect the Congress to respond in any way it deem fit if the Congress did not agree with the statute as this Court will ultimately construe it, but this Court has the power, has the absolute power to construe this as it sees it in its inform judicial judgment.
Unknown Speaker : In any event you are here in good faith arguing with us to uphold the position followed by the Government of Japan anyway?
Mr. Mccree: Well if the Court please, I regard my role here as seeking to uphold the construction that the Secretary of the Treasury has placed upon the statute committed to him to administer and the client of the government here is the Secretary of the State and not upon principle to take.
Unknown Speaker : You mean Secretary of Treasury?
Mr. Mccree: The official whom we represent here is the Secretary of the Treasury who is the person who is required to do this?
Unknown Speaker : you say the you talk about the consistent administrative construction just to make it so I’m sure of it, he is never having a rule making proceeding on this, has he?
Mr. Mccree: He has not.
Unknown Speaker : And it’s all rested in adjudication or it is rested in rulings by the Collector of Customs and which in essence is an adjudication by him.
Mr. Mccree: That is exactly correct, if the Court pleases.
Unknown Speaker : Except and that is subject to review?
Mr. Mccree: And that is subject to review.
Unknown Speaker : So it is rested in the line of adjudications?
Mr. Mccree: Indeed does and very much like the Labor Board does.
The Labor Board does not --
Unknown Speaker : Do you or do you recall in your work on this whether the statute that was at issue in Downs also delegated power to the Secretary or was it directly to the Collector of Customs?
Mr. Mccree: My recollection is that it did not identify the person.
Unknown Speaker : Because that case started out by a ruling of the Collector Customs I take it and there was a Board of Appraisers?
Mr. Mccree: That is correct.
Unknown Speaker : But did the Secretary of Treasury get into the act for the first time after Downs?
Mr. Mccree: I believe the delegation is really to the general counsel of the treasury by the Secretary.
Unknown Speaker : Well, it is not now.
Mr. Mccree: Yes.
Unknown Speaker : But the Congress now delegates, it is clearly the Secretary of Treasury and I am just wondering if under the statute that was in force at the time of Downs that the Congress empowered the Secretary rather than the Customs Collector?
Mr. Mccree: I cannot give you the exact quotation, but it was to the Secretary of the Treasury, he was the executive branch official required to --
Unknown Speaker : At the time of Downs?
Mr. Mccree: At the time of Downs.
Chief Justice Warren E. Burger: Mr. Solicitor General I assume that had the Secretary of Treasury back 75 years ago after Downs and all his successors since then had taken the language of Downs literally, the language that you describe as dictum and they had done this consistent interpretation pursunat to the Downs case and Congressional acquiescence, Legislative acquiescence as you have suggested then you would not be here?
Mr. Mccree: I think that is a fair statement, if the Court pleases.
Chief Justice Warren E. Burger: Your friend would have prevailed in the earlier stage?
Mr. Mccree: I think he would have Mr. Chief Justice.
Unknown Speaker : Alright, do you what position the Secretary may took at the time of Downs?
Mr. Mccree: The Secretary's position at the time of Downs was as we indicate --
Unknown Speaker : You do not think it was what the Court said?
Mr. Mccree: He was not, if one reads the briefs in Downs and reads the record before it reached the Supreme Court in Downs, the entire contention was what to do about amount the amount of the certificate, the value of the certificate and not the excise tax that was remitted.
It was a thing above the remission of the excise tax and that is the nub of our entire argument.
Unknown Speaker : That is the way the case started by imposition of a charge by the --
Mr. Mccree: The imposition of a countervailing duty and the amount of that.
In the appendix at 49, 51 the Secretary's view in Downs is set forth in detail and so the government respectfully requests and submits that the judgment of the Court of Customs and Patent Appeals here is correct and ask this Court to affirm it.
Chief Justice Warren E. Burger: Thank you Mr. Solicitor General.
Argument of Frederick L. Ikenson
Mr. Frederick L. Ikenson: Mr. Chief Justice and May it please the Court.
I would first like to address myself to the question imposed by Mr. Justice White regarding the role of the Collector of Customs and the Secretary.
The statue has consistently given authority to the Secretary to determine the amount of countervailing duty to be assessed.
The Secretary delegates functions to Collectors of Customs throughout the United State to assess countervailing duties to offset particular grants.
In the Downs case the Secretary of the Treasury made a determination that the Russian Program conferred a bounty or grant and then issued instructions throughout United State to Collectors of Customs.
The Downs case arose in Baltimore where the collector there imposed a countervailing duty in an amount equal to that contained in the instruction from the Secretary of the Treasury and that was protested by the importer who then litigated the subject.
Unknown Speaker : And this Court agreed to the Secretary, upheld the Secretary?
Mr. Frederick L. Ikenson: That is not correct Your Honor.
Unknown Speaker : Is it not, what are they saying?
Mr. Frederick L. Ikenson: Well, at the very outset of the case, the amount of countervailing duty was not put in an issue for the reasons that I give yesterday.
The amount of countervail is not deem to be judicially reviewable.
The question framed by the parties was whether the Russian Program conferred a bounty or grant.
The courts below, the Board of General Appraisers and then the Fourth Circuit determined that yes there was a bounty or grant for two reasons.
Unknown Speaker : Well, so did the Collector of Customs, I take it?
Mr. Frederick L. Ikenson: The Collector of Customs made no determination.
He just made an assessment of duty.
He made no determination.
The Secretary --
Unknown Speaker : Well, I know, but his assessment had to rest on something?
Mr. Frederick L. Ikenson: It rested on instructions to collect so many cents per ton.
Unknown Speaker : The Secretary of Treasury had made a determination?
Mr. Frederick L. Ikenson: That is correct Your Honor.
Unknown Speaker : And which the collector was following?
Mr. Frederick L. Ikenson: That is correct Your Honor.
Unknown Speaker : And so in that sense did not this Court agree with the Secretary or not?
Mr. Frederick L. Ikenson: I would say not.
It was not asked to agree or to disagree with the Secretary's determination to assess a particular amount of duty.
Unknown Speaker : I know, but how about whether or not there was a reason for a countervailing duty?
Mr. Frederick L. Ikenson: Yes Your Honor, they did agree with the Secretary that there was a reason.
Justice William H. Rehnquist: They could be challenged only by the foreign party upon whom the duty was imposed rather than by any domestics competitor?
Mr. Frederick L. Ikenson: That is correct, to be challenge by the importer.
Justice William H. Rehnquist: The importer, yes.
Mr. Frederick L. Ikenson: That is correct and I think it is very important to appreciate the kind of review that was available to importers at the time of Downs and continuing through the present day.
There was de novo review before the Board of General Appraisers which is predecessors to the Customs Court, it is improper to suggest that the standard of review is review based on administrative record which then must be tested by either substantial evidence or some standard of reasonableness.
There is a trial de novo.
Every countervailing duty case that has ever been litigated since the turn of the century has been the subject of a trial de novo, either before the Customs Court or its predecessor, the Board of General Appraisers.
In the Downs case there was a trial de novo.
Downs argued that --
Unknown Speaker : What issues are determined in the trial de novo?
Mr. Frederick L. Ikenson: I beg your pardon Your Honor?
Unknown Speaker : What issues are determined in de novo?
Mr. Frederick L. Ikenson: Well, it questions fact, a presumption of correctness attaches to the Secretary's determination.
The importer then approaches the Court when those days the Board with the obligation to rebut that presumption, to go forward and present evidence to show that the Secretary's determination was incorrect.
Unknown Speaker : What difference does the Customs Court expected to give to the Secretary's interpretation of the statute, at least as much as we might?
Mr. Frederick L. Ikenson: I would say that they give difference to the Secretary, there are standard presumptions of correctness that attach to government officials' actions and if that is what Your Honor means by suggesting that at least the kind of difference that Your Honors give, I would say, yes.
There is a difference that the judiciary --
Unknown Speaker : Whether or not the Secretary is ignoring Downs or not, I guess it is true that he has for a long time taking a position contrary to yours?
Mr. Frederick L. Ikenson: That is correct Your Honor.
Justice Thurgood Marshall: But is it not also true that the Customs Court did not even have an index of its opinions until the 1940’s?
Mr. Frederick L. Ikenson: An index of its opinion?
Justice Thurgood Marshall: Yes sir.
You say that they have given this a careful attention, but they were indexed for the first time in the 1940’s, were they not, the Customs Court, Judge Richardson did it?
Mr. Frederick L. Ikenson: There may have been some assistance given to the Board for the purpose of helping research cases, but they are bound volumes of Customs Court reports going back to before the turn of the century Your Honor.
Justice Thurgood Marshall: Was it true before 1940?
Mr. Frederick L. Ikenson: Yes.
Justice Thurgood Marshall: I do not get the matters of this case?
Mr. Frederick L. Ikenson: It is true Your Honor.
There were bound volumes.
It might have been difficult --
Justice Thurgood Marshall: But there was no index?
Mr. Frederick L. Ikenson: I am afraid I do miss the point of Your Honor's question.
Justice Thurgood Marshall: Well, I have a very hard time of doing research without an index?(Inaudible)
Mr. Frederick L. Ikenson: Yes, Your Honor.
I would like very much to turn back to Downs and the issue as put to the court, Downs argued after the Board of General Appraisers decided against them and after the Fourth Circuit decided against them, they argued before this Court that the lower courts were wrong.
They argued that the lower courts found that the Russian Scheme conferred two bounties, a bounty by the reason of the tax remission, a bounty by reason of the conferring of the certificate.
Downs maybe clear to the Court that this was his understanding of what the lower court had said and then Downs argued in this brief that courts below are wrong on both issues.
Downs argued that the certificate did not constituted a bounty.
Downs also argued that the remission of tax did not constitute a bounty.
This was squarely put before this Court.
It was briefed by Downs.
Downs headed a section of this brief with the following language.
The remission of excise taxes on the exportation of sugar is not a bounty or grant on exportation as the terms are used in Section 5.
The government joined issue with Downs on both points.
The government said that both the remission of the tax could be a bounty and both the certificate could be a bounty.
The Court then decided the issues presented to it.
I would like to turn to some other remarks made by my distinguished advisory.
He indicated that in 1949, Congress received explicit notice of Treasury's practice and did not amended it.
However, that is not the entire story because in that period of time, 1949 and 1950, when the executive branch brought Treasury's practice to the attention Congress, it asked Congress to amend the law because there was a potential conflict between Treasury's practice and judicial interpretations.
Congress refused to amend the law.
Unknown Speaker : Is that in the parole interpretations to the cases in this Court, Downs and what else?
Mr. Frederick L. Ikenson: The Downs and Nicolas, in Treasury department explanation to the Congress, there was no specific reference to the courts' decisions.
Unknown Speaker : By name?
Mr. Frederick L. Ikenson: And So they said they were judicial interpretations.
Congress refused, in 1973 the Solicitor General --
Unknown Speaker : Refused and just did not, was there a bill introduced?
Mr. Frederick L. Ikenson: There was a bill introduced which --
Unknown Speaker : Did it get out of committee?
Mr. Frederick L. Ikenson: It got out of committee in 1950.
It passed the house and then it died.
The following year it was introduced.
It did not get out of the senate finance committee.
Unknown Speaker : Are those committee reports instructive or not?
Mr. Frederick L. Ikenson: The reports indicate that Congress was concerned about other features of the bill which would have provided for injury requirements which was not present in countervailing duty statute.
However, the testimony of the committee hearings are instructive in that --
Unknown Speaker : And what about the report indicated, what did it say about countervailing duties?
Mr. Frederick L. Ikenson: The second time around Your Honor the bill did not get reported and in trying to understand the reason why the bill was not reported out, we can look to the hearings and we find that there is testimony of at least one senator who felt that the conflict between the Treasury's practice and judiciary's interpretation was not satisfactory.
Unknown Speaker : Any reference in that colloquy to Downs by name?
Mr. Frederick L. Ikenson: Not by name Your Honor.
Justice William H. Rehnquist: Well, it has been our practice to give much attention to committee reports of bills that never were passed?
Mr. Frederick L. Ikenson: Well, I raise this Your Honor only to respond to my brother's suggestion that some weight should be given to the fact that Congress knew of the Practice in 1949 and did nothing to repeal it.
It was in fact asked to codfy and refused.
That is my point Your Honor.
Chief Justice Warren E. Burger: Well, is it reasonably arguable that not meant Congress was satisfied with Downs to the extent that any of the members ever give it any thought one way or the?
Mr. Frederick L. Ikenson: I think.
Chief Justice Warren E. Burger: That is the interpretation of Downs by the Secretary, I do not mean the literal language, the Secretary's interpretation of Downs.
Mr. Frederick L. Ikenson: That is that the Congress did not steps to change the statute?
Chief Justice Warren E. Burger: They were satisfied with what the Secretary was doing, notwithstanding this explicifying language in Downs.
Mr. Frederick L. Ikenson: I think not Mr. Chief Justice.
I think if the Congress is told that there is a potential conflict between a judicial interpretation and administrative practice and Congress does nothing, if anything is to be inferred it should be that Congress was satisfied with the judicial interpretation.
Justice Potter Stewart: Or it is satisfied with the conflict, is it not?
Mr. Frederick L. Ikenson: Well, that is something that I did not consider Your Honor.
In 1973, the Solicitor General advised that a witness suggested to the Congress that the law be changed to clearly provide that the remission of indirect tax on exportation be deemed a bounty or grant and Congress did not adopt this suggestion.
I do not think any great weight can be given to this turn of events because Congress in 1973 and 74 clearly wanted to pave the way for a smooth negotiations for international agreement.
It did not wish to begin at that time to isolate specific bounty practices and instruct the Secretary of the Treasury that he must immediately begin countervailing.
Instead Congress did devise this very complex scheme which I described to Your Honors yesterday, I think that was Congress' way of dealing with the problem.
It wanted an international agreement.
It did not want to be selective.
Thank you, Your Honors.
Chief Justice Warren E. Burger: Thank you gentlemen.
The case is submitted.