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TIMKEN CO. v. UNITED STATES CUSTOMS SERV.

June 18, 1980

THE TIMKEN COMPANY, Plaintiff,
v.
UNITED STATES CUSTOMS SERVICE, et al., Defendants.



The opinion of the court was delivered by: GREENE

MEMORANDUM AND ORDER

This is an action under the Freedom of Information Act (FOIA), 5 U.S.C. § 552 in which plaintiff Timken Company, a manufacturer of roller bearings, seeks disclosure of documents in the possession of defendant Customs Service relating to the determination of appraised value, for customs duty assessment purposes, of tapered roller bearings and components imported from Japan. Eleven documents which are responsive to plaintiff's request have been released, while two documents have been partially withheld and one entirely withheld based on Exemptions 4, 5 and 7(A) of the FOIA, 5 U.S.C. § 552(b)(4), (5) and (7)(A). This matter came on for hearing before the Court on the parties' cross-motions for summary judgment on January 29, 1980. After considering the arguments of counsel, the Court ordered submission of the allegedly exempt documents for an in camera inspection. The Court has reviewed these documents to determine whether the agency has carried its burden of establishing the claimed exemptions.

 The documents at issue are reports generated by the Customs Service in its valuation of imported roller bearings from Japan as part of its responsibility to assess customs duties pursuant to 19 U.S.C. § 1202. The applicable law and decisions require that bearings be valued for assessment of ordinary duty at foreign or export value and, if both are known, at the higher of the two. This value is determined by a Customs officer based on confidential commercial information supplied by the importer. 19 U.S.C. § 1402(a)(1), (2), (3) and (4); Treasury Decision 54521. In some instances, however, when the Customs officer suspects that all the proper information has not been supplied to him by the importer for his value determination, he may reject the invoice value in assessing the duty and instead commence a value investigation.

 Documents Nos. 9 and 11 which have been released in part, are each one-page documents entitled "Report of Classification and Value" prepared by Customs officials from confidential commercial information provided by the importer, American Koyo Corporation ("AKC"), as required by law. 19 C.R.F. 141.61, 141.83, 143.1 (1979). Document No. 10, withheld in its entirely, is an eleven-page report prepared by the Customs office in Japan, as part of an ongoing investigation to determine the statutory value of various tapered roller bearings and components sold in the Japanese home market and to determine possible noncompliance with Section 402a of the Tariff Act of 1930, 19 U.S.C. § 1402.

 The defendants have claimed that these three documents are either partially or completely exempt from disclosure under Exemptions 4, 5 and 7(A) of the FOIA. Because of its resolution of the issues under Exemption 4, the Court need not consider the applicability of Exemptions 5 and 7(A).

 I

 Exemption 4 exempts from mandatory disclosure trade secrets and commercial or financial information which is obtained from a person outside the government and is privileged or confidential. 5 U.S.C. § 552(b)(4). *fn1" The plaintiff concedes that the withheld material is commercial or financial information and that it was obtained from a person, *fn2" but it argues that the information is not "confidential" within the meaning of Exemption 4. The government, on the other hand, contends that disclosure of the three documents would reveal sensitive marketing and pricing information, would impair Customs' ability to obtain necessary information in the future, and is therefore "confidential" within the meaning of the FOIA.

 Information is considered confidential for the purposes of the exemption if disclosure is likely to (1) impair the government's ability to obtain necessary information in the future or (2) to cause substantial harm to the competitive position of the entity from whom the information was received. National Parks and Conservation Ass'n, supra at 770; see also Gulf & Western Industries v. United States, supra at 530. In order to show that disclosure would cause substantial competitive harm to the entity, the agency seeking to avoid disclosure need not prove that actual competitive harm has or will result from disclosure. Gulf & Western Industries v. United States, supra at 530; National Parks and Conservation Ass'n v. Kleppe, 178 U.S. App. D.C. 376, 547 F.2d 673, 679 (D.C.Cir.1976). The Court concludes that the defendant has met this burden of proof both with respect to the material deleted from Documents 9 and 11 and the complete withholding of Document No. 10.

 II

 The information in Documents Nos. 9 and 11 was furnished by American Koyo Corporation (AKC), an American importer of tapered roller bearings from a Japanese manufacturer, Koyo Seiko. Customs claims that the price and quantity data withheld would cause competitive injury to both the importer AKC and the exporter Koyo Seiko because it would allow their competitors and customers to estimate the company's profit margin and production costs, thereby giving competitors insight into the company's competitive strengths and weaknesses. *fn3" Affidavits submitted by the government explain that release of the unit price data may allow the competition to approximate the production costs of Koyo and the profit margin of AKC for its roller bearings since the sales involved are between the parent company and its subsidiary. Plaintiff, to be sure, argues that the competitive harm to the manufacturer and importer is speculative because (1) the information is outdated and therefore useless in determining marketing plans in 1980 and because (2) release of the unit price would not, in itself, enable the plaintiff to compute the cost of production or the profit margin. *fn4" These arguments are unpersuasive.

 First, although the price data concerned the sale of roller bearings in 1977, the plaintiff and other competitors could make projections of Koyo's current and future cost and prices based on this same information. Second, even if the price data would be insufficient, standing by itself, to allow computation of the cost of production, this cost would be ascertainable when coupled with other information either possessed by plaintiff or sought by plaintiff in other pending FOIA actions. *fn5" In Carlisle Tire and Rubber Company, C.A. No. 78-2001 (D.D.C.1979) (on appeal) the Court in response to an argument that release of undisclosed financial information would not in itself threaten competitive injury, held that the plaintiff had independent sources of information which it could use to complete a financial picture of its competitors and thus, the undisclosed material was confidential under Exemption 4. Id. at 8.

 The Court concludes that the suppliers of information face actual competition in the American market and that the deleted information is of a nature that, if disclosed, would likely result in substantial competitive injury to the suppliers of that information to defendants. *fn6"

 III

 Document No. 10 is the Report of Investigation resulting from the statutory value investigation conducted to determine the foreign value of roller bearings. The document contains a list of Koyo Seiko's exported bearings, their prices for various years, and an outline of its distribution network and sales, including prices and discount formulas. In addition, the document also contains information supplied by unrelated Japanese distributors of roller bearings, such as quantities and values of roller bearings sold to customers, the amount and number of quantity discounts, terms of sales, costs and charges incurred in selling on the Japanese market and a list of United States purchasers and terms of sales. The government has ...


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