Zenith Radio Corp. v. United States
437 U.S. 443 (1978)

Annotate this Case

U.S. Supreme Court

Zenith Radio Corp. v. United States, 437 U.S. 443 (1978)

Zenith Radio Corp. v. United States

No. 77-539

Argued April 25, 1978

Decided June 21, 1978

437 U.S. 443

CERTIORARI TO THE UNITED STATES COURT OF CUSTOMS

AND PATENT APPEALS

Syllabus

Petitioner, an American manufacturer of consumer electronic products, filed a petition with the Commissioner of Customs, requesting assessment under § 303 of the Tariff Act of 1930 of countervailing duties on various consumer electronic products exported from Japan to this country. Petitioner contended that the products benefited from bounties or grants paid or conferred by Japan because Japan imposes a commodity tax (an "indirect" tax) on those products when they are sold in that country, but "remits" the tax when the products are exported, any tax paid on the shipment of a product being refunded upon the subsequent exportation. Section 303 provides that, whenever a foreign country pays a "bounty or grant" upon the exportation of a product from that country, the Secretary of the Treasury (Secretary) must levy a countervailing duty "equal to the net amount of such bounty or grant" upon the importation of the product into the United States. After rejection of its request, petitioner filed suit in the Customs Court, claiming that the Treasury Department had erred in concluding that remission of the Japanese tax was not a bounty or grant within the purview of § 303. The Secretary contended that, since the remission of the tax was "nonexcessive" (i.e., not above the amount of the tax paid or otherwise due), § 303 did not require assessment of a countervailing duty. Relying on Downs v. United States,187 U. S. 496, the Customs Court ruled in petitioner's favor. The Court of Customs and Patent Appeals reversed.

Held: Japan does not confer a "bounty or grant" within the meaning of § 303 on the consumer electronic products by failing to impose a commodity tax on those products when they are exported to this country, while imposing the tax on the products when they are sold in Japan. Downs v. United States, supra, distinguished. Pp. 437 U. S. 450-462.

(a) The Secretary's statutory interpretation that was followed in this case has been consistently maintained since the basic countervailing duty statute was enacted in 1897, and that administrative interpretation is entitled to great weight. See Udall v. Tallman,380 U. S. 1, 380 U. S. 16. Pp. 437 U. S. 450-451.

(b) The legislative history of the statute suggests that the term

Page 437 U. S. 444

"bounty" was not intended to encompass the nonexcessive remission of an indirect tax. Pp. 437 U. S. 451-455.

(c) The Secretary's interpretation was reasonable in light of the statutory purpose of the countervailing duty, viz., offsetting the unfair competitive advantage that foreign products would otherwise enjoy from export subsidies paid by their governments. In deciding in 1898 that a nonexcessive remission of indirect taxes did not give the exporter an unfair competitive advantage, the Secretary permissibly viewed the remission as a reasonable measure for avoiding double taxation of exports -- once by the foreign country and once upon sale in this country. Pp. 437 U. S. 455-457.

(d) The Secretary's interpretation is as permissible today as it was in 1898. The statute has been reenacted five times with no modification of the relevant language, and the Secretary's position has been incorporated into an international agreement followed by every major trading nation in the world. It is not for the judiciary to substitute its views as to the fairness and economic effect of remitting indirect taxes. Pp. 437 U. S. 457-459.

(e) Downs v. United States, supra, did not involve the issue of whether a nonexcessive remission of taxes, standing alone, would have constituted a bounty on exportation, and is not dispositive of this case. Pp. 437 U. S. 459-462.

64 C.C.P.A. 130, 562 F.2d 1209, affirmed.

MARSHALL, J., delivered the opinion for a unanimous Court.

Page 437 U. S. 445

MR. JUSTICE MARSHALL delivered the opinion of the Court.

Under § 303(a) of the Tariff Act of 1930, 46 Stat. 687, as amended, 19 U.S.C. § 1303(a) (1976 ed.), whenever a foreign country pays a "bounty or grant" upon the exportation of a product from that country, the Secretary of the Treasury is required to levy a countervailing duty, "equal to the net amount of such bounty or grant," upon importation of the product into the United States. [Footnote 1] The issue in this case is whether Japan confers a "bounty" or "grant" on certain consumer electronic products by failing to impose a commodity tax on those products when they are exported, while imposing the tax on the products when they are sold in Japan.

Page 437 U. S. 446

I

Under the Commodity Tax Law of Japan, Law No. 48 of 1962, see App. 44-48, a variety of consumer goods, including the electronic products at issue here, are subject to an "indirect" tax -- a tax levied on the goods themselves, and computed as a percentage of the manufacturer's sales price, rather than the income or wealth of the purchaser or seller. The Japanese tax applies both to products manufactured in Japan and to those imported into Japan. [Footnote 2] On goods manufactured in Japan, the tax is levied upon shipment from the factory; imported products are taxed when they are withdrawn from the customs warehouse. Only goods destined for consumption in Japan are subject to the tax, however. Products shipped for export are exempt, and any tax paid upon the shipment of a product is refunded if the product is subsequently exported. Thus, the tax is "remitted" on exports. [Footnote 3]

In April, 1970, petitioner, an American manufacturer of consumer electronic products, filed a petition with the Commissioner of Customs, [Footnote 4] requesting assessment of countervailing duties on a number of consumer electronic products exported from Japan to this country. [Footnote 5] Petitioner alleged that Japan

Page 437 U. S. 447

had bestowed a "bounty or grant" upon exportation of these products by, inter alia, remitting the Japanese Commodity Tax that would have been imposed had the products been sold within Japan. In January, 1976, after soliciting the views of interested parties and conducting an investigation pursuant to Treasury Department regulations, see 19 CFR § 159.47(c) (1977), the Acting Commissioner of Customs published a notice of final determination, rejecting petitioner's request. 41 Fed Reg. 1298 (1976). [Footnote 6]

Petitioner then filed suit in the Customs Court, claiming that the Treasury Department had erred in concluding that remission of the Japanese Commodity Tax was not a bounty or grant within the purview of the countervailing duty statute. [Footnote 7] The Department defended on the ground that, since the remission of indirect taxes was "nonexcessive," the statute did not require assessment of a countervailing duty. In the Department's terminology, a remission of taxes is "nonexcessive" if it does not exceed the amount of tax paid or otherwise due; thus, for example, if a tax of $5 is levied on goods at the factory, the return of the $5 upon exportation would be "nonexcessive," whereas a payment of $8 from the government to the manufacturer upon exportation would be "excessive" by $3. The Department pointed out that the current

Page 437 U. S. 448

version of § 303 is, in all relevant respects, unchanged from the countervailing duty statute enacted by Congress in 1897, [Footnote 8] and that the Secretary -- in decisions dating back to 1898 --has always taken the position that the nonexcessive remission of an indirect tax is not a bounty or grant within the meaning of the statute. [Footnote 9]

On cross-motions for summary judgment, the Customs Court ruled in favor of petitioner and ordered the Secretary to assess countervailing duties on all Japanese consumer electronic

Page 437 U. S. 449

products specified in petitioner's complaint. 430 F.Supp. 242 (1977). The court acknowledged the Secretary's longstanding interpretation of the statute. It concluded, however, that this administrative practice could not be sustained in light of this Court's decision in Downs v. United States,187 U. S. 496 (1903), which held that an export bounty had been conferred by a complicated Russian scheme for the regulation of sugar production and sale, involving, among other elements, remission of excise taxes in the event of exportation.

On appeal by the Government, the Court of Customs and Patent Appeals, dividing 3-2, reversed the judgment of the Customs Court and remanded for entry of summary judgment in favor of the United States. 64 C.C.P.A. 130, 562 F.2d 1209 (1977). The majority opinion distinguished Downs on the ground that it did not decide the question of whether nonexcessive remission of an indirect tax, standing alone, constitutes a bounty or grant upon exportation. The court then examined the language of § 303 and the legislative history of the 1897 provision and concluded that,

"in determining whether a bounty or grant has been conferred, it is the economic result of the foreign government's action which controls."

64 C.C.P.A. at 138-139, 562 F.2d at 1216. Relying primarily on the "long-continued" and "uniform" administrative practice, id. at 142-143, 146-147, 562 F.2d at 1218-1219, 1222-1223, and secondarily on congressional "acquiescence" in this practice through repeated reenactment of the controlling statutory language, id. at 143-144, 562 F.2d at 1220, the court held that interpretation of "bounty or grant" so as not to include a nonexcessive remission of an indirect tax is "a lawfully permissible interpretation of § 303." Id. at 147, 562 F.2d at 1223.

We granted certiorari, 434 U.S. 1060 (1978), and we now affirm.

Page 437 U. S. 450

II

It is undisputed that the Treasury Department adopted the statutory interpretation at issue here less than a year after passage of the basic countervailing duty statute in 1897, see T.D. 19321, 1 Synopsis of [Treasury] Decisions 696 (1898), and that the Department has uniformly maintained this position for over 80 years. [Footnote 10] This longstanding and consistent administrative interpretation is entitled to considerable weight.

"When faced with a problem of statutory construction, this Court shows great deference to the interpretation given the statute by the officers or agency charged with its administration."

"To sustain [an agency's] application of [a] statutory term, we need not find that its construction is the only reasonable one, or even that it is the result we would have reached had the question arisen in the first instance in judicial proceedings."

Udall v. Tallman,380 U. S. 1, 380 U. S. 16 (1965), quoting Unemployment Compensation Comm'n v. Aragon,329 U. S. 143, 329 U. S. 153 (1946). Moreover, an administrative

"practice has peculiar weight when it involves a contemporaneous construction of a statute by the [persons] charged with the responsibility of setting its machinery in motion, of making the parts work efficiently and smoothly while they are yet untried and new."

Norwegian Nitrogen Products Co. v. United States,288 U. S. 294, 288 U. S. 315 (1933); see, e.g., Power Reactor Co. v. Electricians,367 U. S. 396, 367 U. S. 408 (1961).

The question is thus whether, in light of the normal aids to statutory construction, the Department's interpretation is "sufficiently reasonable" to be accepted by a reviewing court. Train v. Natural Resources Defense Council,421 U. S. 60,

Page 437 U. S. 451

421 U. S. 75 (1975). Our examination of the language, the legislative history, and the overall purpose of the 1897 provision persuades us that the Department's initial construction of the statute was far from unreasonable; and we are unable to find anything in the events subsequent to that time that convinces us that the Department was required to abandon this interpretation

A

The language of the 1897 statute evolved out of two earlier countervailing duty provisions that had been applicable only to sugar imports. The first provision was enacted in 1890, apparently for the purpose of protecting domestic sugar refiners from unfair foreign competition; it provided for a fixed countervailing duty on refined sugar imported from countries that "pay, directly or indirectly, a [greater] bounty on the exportation of" refined sugar than on raw sugar. Tariff Act of 1890, 11237, 26 Stat. 584. Although the congressional debates did not focus sharply on the meaning of the word "bounty," what evidence there is suggests that the term was not intended to encompass the nonexcessive remission of an indirect tax. Thus, one strong supporter of increased protection for American sugar producers heavily criticized the export "bounties" conferred by several European governments, and attached a concise description of "The Bounty Systems in Europe"; both the remarks and the description indicated that the "bounties" consisted of the amounts by which government payments exceeded the excise taxes that had been paid upon the beets from which the sugar was produced. See 21 Cong.Rec. 9529, 9532 (1890) (remarks of Sen. Gibson); id. at 9537 (description). According to the description, for example, French sugar manufacturers paid an

"excise tax [of] $97.06 per gross ton[,] [b]ut upon the export of a ton of sugar . . . , received back as a drawback $117.60, making a clear bounty of $20.54 per gross ton of sugar exported."

Ibid.

Page 437 U. S. 452

This concept of a "net" bounty -- that is, a remission in excess of taxes paid or otherwise due -- as the trigger for a countervailing duty requirement emerged more clearly in the second sugar provision, enacted in 1894. Tariff Act of 1894,

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