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DAVIS WALKER CORP. v. BLUMENTHAL

May 25, 1978

DAVIS WALKER CORPORATION et al., Plaintiffs,
v.
W. Michael BLUMENTHAL et al., Defendants



The opinion of the court was delivered by: GASCH

Plaintiffs Davis Walker Corporation and United International Corporation seek declaratory and injunctive relief with respect to the "trigger price mechanism" (TPM). Plaintiffs claim that the adoption by the Department of the Treasury (Treasury) of the TPM insofar as it pertains to steel wire rod contravenes the Antidumping Act, 19 U.S.C. §§ 160-173 (1970), As amended, (Supp.V 1975), is arbitrary and capricious in violation of section 10(e) of the Administrative Procedure Act (APA), 5 U.S.C. § 706(2)(A), and is invalid for failure to comply with the rulemaking requirements of the APA, 5 U.S.C. § 553 (1976).

 Davis Walker Corporation (Davis Walker) is a manufacturer of wire and wire products, such as barbed wire, chain link fence, and welded wire fabric. Plaintiff United International Corporation, a wholly-owned subsidiary of Davis Walker, purchases steel wire rod, the principal raw material used in the manufacture of wire and wire products, from foreign suppliers and then sells the wire rod to Davis Walker. *fn1" Defendants are the United States and five officials of the Department of the Treasury, W. Michael Blumenthal (Secretary), Anthony M. Solomon (Under Secretary for Monetary Affairs), Robert H. Mundheim (General Counsel), Peter D. Ehrenhaft (Deputy Assistant Secretary for Tariff Affairs), and Robert H. Chasen (Commissioner of Customs). Korf Industries, Inc. (Korf), parent company of Georgetown Steel Company of Georgetown, South Carolina and Georgetown Texas Steel Corporation of Vidor, Texas, was granted leave to intervene.

 The Antidumping Act, 19 U.S.C. §§ 160-173 (1970), As amended, (Supp.V 1975), was enacted to protect American industries from the detrimental effects of importation of foreign goods at unfairly low prices. The statute ultimately authorizes the imposition of a "dumping duty" (the amount by which the product is sold below its "fair value" in the home market) against importers determined to be in violation of the Act. However, before this duty can be imposed, detailed statutory procedures must be followed.

 The Court will briefly outline the procedures required by statute. The statute provides:

 
(c)(1) The Secretary shall, within thirty days of the receipt of information alleging that a particular class or kind of merchandise is being or is likely to be sold in the United States or elsewhere at less than its fair value and that an industry in the United States is being or is likely to be injured, or is prevented from being established, by reason of the importation of such merchandise into the United States, determine whether to initiate an investigation into the question of whether such merchandise in fact is being or is likely to be sold in the United States or elsewhere at less than its fair value.

 19 U.S.C. § 160(c)(1). If the Secretary decides to initiate an investigation, he must publish notice of this decision in the Federal Register. If the Secretary declines to initiate an investigation, all inquiry is ended and the case is closed. Id.

 The Secretary is required, within six months after the publication of a decision to initiate an investigation, to make a tentative determination "whether there is reason to believe or suspect, . . . that the purchase price is less, or that the exporter's sales price is less or likely to be less, than the foreign market value (or, in the absence of such value, than the constructed value)" and publish such determination in the Federal Register. 19 U.S.C. § 160(b)(1)(A). If the determination is affirmative, the Customs Service must withhold appraisement of the affected merchandise. Id.

 The Secretary is required to make a final determination within three months after publication of the notice of the tentative determination. If the final determination is affirmative, the Secretary must notify the United States International Trade Commission (Commission). The Commission must determine within three months whether "an industry in the United States is being or is likely to be injured, or is prevented from being established, by reason of the importation of such merchandise into the United States." 19 U.S.C. § 160(a). The Secretary must publish in the Federal Register both his and the Commission's determination, as well as a statement of findings, conclusions, and reasons. *fn2" If the determinations of the Secretary and the Commission are affirmative, a dumping duty is levied on the affected merchandise. 19 U.S.C. § 161. The imposition of such a dumping duty may be challenged in the Customs Court. 19 U.S.C. § 169.

 The Report next described and evaluated the procedures and remedy under the Antidumping Act. The Task Force concluded that the statutory "procedure is too cumbersome to provide relief quickly from sudden surges of imports that may cause injury to an American industry." Id. at 12. The Task Force estimated that the entire statutory procedure, from the date a complaint was filed to the publication of a dumping duty, would take approximately thirteen months in addition to the time it takes the complainant industry to prepare the petition. It also noted the limitations imposed by the "specific product orientation of individual investigations and findings." Id. at 13.

 The Task Force recommended that:

 
The Department of the Treasury, in administering the Antidumping Act, set up a system of trigger prices, based on the full costs of production including appropriate capital charges of steel mill products by the most efficient foreign steel producers (currently the Japanese steel industry), which would be used as a basis for monitoring imports of steel into the United States and for initiating accelerated antidumping investigations with respect to imports priced below the trigger prices.

 Id. at 13-14 (emphasis in original). The President approved the Report on December 6, 1977.

 On December 30, 1977, the Treasury published in the Federal Register a notice of proposed rulemaking relating to a new Customs invoice, the Special Summary Steel Invoice (SSSI), for certain steel mill products. In the introductory comments to this notice, the Treasury, characterizing the SSSI as one aspect of the TPM, announced its intention to implement the TPM. It described the TPM as a four-part system:

 
(1) The establishment of trigger prices for steel mill products imported into the United States; (2) adoption of a new Special Summary Steel Invoice ("SSSI") applicable to imports of all steel mill products; (3) the continuous collection and analysis of data concerning (a) the cost of production and prices of steel mill products in the countries that are the principal exporters of such products to the United States, and (b) the condition of the domestic steel industry; and (4) where appropriate, the expedited initiation and disposition of proceedings under the Antidumping Act of 1921 with respect to imports below the trigger prices.

 42 Fed.Reg. 65,215 (1977) (to be codified in 19 C.F.R. § 141). The Treasury also explained the general method for computing trigger prices, the products for which it intended to develop trigger prices, and the way in which the SSSI would be used to monitor imports and expedite investigations. While the purpose, methods, and limitations of the TPM are described in the introductory comments of the notice, the notice of proposed rulemaking pertained only to the use of the SSSI. Final regulations on the SSSI were promulgated on February 13, 1978, and became effective on February 21, 1978. 43 Fed.Reg. 6065 (1978).

 On January 3, 1978, the Treasury announced trigger prices for certain steel mill products, including steel wire rod. These trigger prices were published in the Federal Register on January 9, 1978, and became effective on that date to all goods entering the United States on or after February 21, 1978. 43 Fed.Reg. 1464 (1978).

 On January 27, 1978, the Treasury announced trigger prices for steel "extras," including "extras" for steel wire rod. These prices were published in the Federal Register on February 3, 1978, and became effective on that date with respect to all goods entering the United States on or after February 21, 1978. 43 Fed.Reg. 4703 (1978).

 Plaintiffs assert three legal theories in this lawsuit. First, plaintiffs claim that the TPM circumvents the procedures prescribed in the Antidumping Act by establishing a minimum price system that will deter imports of steel mill products at prices below the published prices, without regard to the fair value of such imports or whether such imports are likely to injure an American industry. Second, plaintiffs contend that the TPM is a substantive rule subject to the rulemaking requirements of the APA, 5 U.S.C. § 553 (1976), and is therefore invalid for failure to comply with these requirements. Finally, plaintiffs assert that the TPM insofar as it pertains to steel wire rod is arbitrary and capricious. In response, defendants filed a motion to dismiss or, in the alternative, for summary judgment.

 After a hearing on the motion for preliminary injunction, the Court on March 24, 1978, concluded that plaintiffs "demonstrated a substantial likelihood of succeeding on the merits of its claim that the inclusion of steel wire rod in the "trigger price system' without the simultaneous inclusion of steel wire and wire products is arbitrary and capricious in violation of section 706(2)(A) of the Administrative Procedure Act." Accordingly, it ordered the Secretary to make findings with respect to the effects on domestic producers of steel wire and wire products of the inclusion of steel wire rod in the TPM without the simultaneous inclusion of steel wire and wire products. Finally, the Secretary was "enjoined preliminarily from the continued enforcement of the "trigger price mechanism' as it pertains to steel wire rod pending this Court's review of the Secretary's findings." The Secretary's findings were filed with the Court on April 10, 1978.

 The motions for summary judgment and for continuance of the preliminary injunction are presently pending before this Court. For the reasons stated below, the Court will dissolve the preliminary injunction and grant summary judgment for defendants on all three issues.

 JURISDICTION.

 Defendants claim that the Customs Court has exclusive jurisdiction to address the issues in this case. They base this claim on 28 U.S.C. § 1582, which provides:

 
(a) The Customs Court shall have exclusive jurisdiction of civil actions instituted by any person whose protest pursuant to the Tariff Act of 1930, as amended, has been denied, in whole or in part, by the appropriate customs officer, where the administrative decision, including the legality of all orders and findings entering into the same, involves: . . . (2) the classification and rate and amount of duties chargeable; (3) all charges or exactions of whatever character within the jurisdiction of the ...

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