The opinion
Slip Op. 05-51
United States Court of International Trade
THE PILLSBURY COMPANY,
Plaintiff,
v. Before: Pogue, Judge
Court No. 03-00096
UNITED STATES,
Defendant.
[Plaintiff’s Motion for Summary Judgment granted; Defendant’s
Cross-Motion for Summary Judgment denied.]
April 19, 2005
Neville Peterson LLP (John M. Peterson, Maria E. Celis, Margaret R.
Polito, and George W. Thompson) for The Pillsbury Company.
Peter D. Keisler, Assistant Attorney General, Barbara S. Williams,
Attorney in Charge, International Trade Field Office, Commercial
Litigation Branch, Civil Division, U.S. Department of Justice
Chi S. Choy, Of Counsel, Office of Assistant Chief Counsel, U.S.
Customs and Border Protection, for Defendant.
Pogue, Judge: Plaintiff, The Pillsbury Company (“Pillsbury”),
challenges a decision by the United States Bureau of Customs and
Border Protection (“Customs” or “Defendant”) classifying certain
imports of ice cream. Customs classified Plaintiff’s imports under
subheading 2105.00.20 of the Harmonized Tariff Schedule of the
United States (1999) (“HTSUS”) dutiable at a rate of 51.7 cents per
kilogram plus 17.5% ad valorem. Pillsbury asserts that Customs
Court No. 03-00096 Page 2
should have classified these imports under subheading 2105.00.10,
HTSUS, and assessed a 20% ad valorem duty.
Before the Court are cross-motions for summary judgment. As
the parties have agreed to all the essential facts, the issue
presented is a pure question of law, rendering this case ripe for
summary judgment. Brother Int’l Corp. v. United States, 26 CIT
867, 869, 248 F. Supp. 2d 1224, 1226 (2002); USCIT R. 56©). The
Court has exclusive jurisdiction over this question pursuant to 19
U.S.C. § 1514 (2000) and 28 U.S.C. § 1581(a). For the reasons set
forth below, the Court finds that Customs should have classified
the imports in question under subheading 2105.00.10, HTSUS, and
therefore grants summary judgment for the Plaintiff.
I. BACKGROUND
A.
As part of the Uruguay Round of the General Agreement on
Tariffs and Trade (“GATT”), the member states of the World Trade
Organization (“WTO”)1 agreed to abolish quantitative limitations on
imports of agricultural products. WTO Agreement on Agriculture,
art. 4(2)2; see also 7 U.S.C. § 624(f), 7 C.F.R. § 6.20 (2005).
1
The World Trade Organization (WTO) was created as part of the
Uruguay Round and replaced the General Agreement of Tariffs and
Trade (“GATT”).
2
The Agreement can be found at:
http://www.wto.org/english/docs_e/legal_e/14-ag.pdf (last
accessed April 11, 2005).
Court No. 03-00096 Page 3
Nevertheless, the Uruguay Round did permit member states to adopt
tariff rates that are contingent on the volume of imports of a
certain product, often referred to as tariff rate quotas (“TRQs”).
Under the TRQ regime, the tariff rate is adjusted depending on the
volume of imports of a given product into the United States during
a certain year. TRQs are a departure from the absolute quota
restrictions under the GATT because nations are not allowed to set
specific limits on imports – rather, member states are only allowed
to increase tariff rates for imports after certain levels of
imports have been reached. To take a simplified version of the
facts in this case as an example of a TRQ, the United States may
agree to allow 5,191,031 liters of ice cream into the United
States, at a tariff rate of 20% ad valorem, and then, after that
quota level has been reached, assess a tariff rate of 51.7 cents
per kilogram plus 17.5% ad valorem for all subsequent entries.3
3
This is one example of a TRQ. The United States’ TRQs can
be classified into three general categories: (1) minimum access
provisions, (2) maximum access provisions, and (3) licensing
provisions. See Def.’s Mem. Supp. Cross-Mot. Sum. J. & Opp’n Pl.’s
Mot. Sum. J. (“Def.’s Mem.”) at 7. Minimum access provisions
establish that an aggregate quantity of a classified product "shall
not exceed" a certain quantity. See e.g., Chapter 20, Additional
Note 4, HTSUS; Chapter 18, Additional U.S. Note 2, HTSUS. Maximum
Access provisions provide that the aggregate quantity of a product
"shall not exceed" the quantities specified for each state or group
of states. See Chapter 24, Additional U.S. Note 5, HTSUS.
Licensing provisions require import licenses for specified
products. See Chapter 4, Additional Note U.S. 19, HTSUS; see also
David W. Skully, Economics of Tariff-Rate Quota Administration,
Technical Bulletin No. 1893, available at
http://www.ers.usda.gov/publications/tb1893/tb1893.pdf (April 2001)
(last accessed April 11, 2005) (setting out categories of
Court No. 03-00096 Page 4
The United States, a member state of the WTO, has adopted many
TRQs.
Before the Uruguay Round began, Congress expressed the
negotiating objectives of the United States: to develop “(1) more
open, equitable, and reciprocal market access; (2) the reduction or
elimination of barriers and other trade-distorting policies and
practices; and (3) a more effective system of international trading
disciplines and procedures.” 19 U.S.C. § 2901(a). To this end,
Congress granted the President the authority to “enter into trade
agreements with foreign countries; and [subject to certain
limitations proclaim[4]] -- (I) such modification or continuance of
any existing duty, (ii) such continuance of existing duty-free or
excise treatment, or (iii) such additional duties; as he determines
to be required or appropriate to carry out any such trade
agreement.” 19 U.S.C. § 2902 (emphasis added).
Specifically, with regard to the provisions at issue in this
case, during the Uruguay Round negotiations, the United States
agreed to certain commitments with regard to the importation of ice
cream. This agreement is recorded as “Schedule XX” (a schedule
listing the United States’ tariff concessions for numerous
administration methods of TRQs in the WTO as "applied tariffs,"
"first-come, first-served," "licenses on demand," "auctioning,"
"historical," "state trader producer group," "mixed" and "other or
not specified.").
4
The term “proclaim” means to amend the tariff laws of the
United States. See 19 U.S.C. § 3004©).
Court No. 03-00096 Page 5
products). See Schedule XX -- United States of America, annexed to
the Marrakesh Protocol to the General Agreement on Tariffs and
Trade 1994 ("Schedule XX"). Pursuant to his authority granted by
Congress, i.e., 19 U.S.C. § 2902, President Clinton proclaimed
portions of Schedule XX into United States law. See Presidential
Proclamation 6763 of Dec. 23, 1994, 60 Fed. Reg. 1007, 1131 & 1137
(Jan. 4, 1995). Nearly simultaneously, Congress expressed its
support for the United States’ commitments under Schedule XX by
providing the President specific authority to: (i) proclaim
Schedule XX into U.S. law;5 (ii) proclaim future agreements to
5
19 U.S.C. § 3521(a)(1)-(3). Title 19 Section 3521
provides:
(a) In general
In addition to the authority provided by [19 U.S.C. §
2902], the President shall have the authority to
proclaim--
(1) such other modification of any duty,
(2) such other staged rate reduction, or
(3) such additional duties,
as the President determines to be necessary or
appropriate to carry out Schedule XX.
(b) Other tariff modifications
Subject to the consultation and layover requirements of
[19 U.S.C. § 3524], the President may proclaim-
(1) the modification of any duty or staged rate
reduction of any duty set forth in
Schedule XX if--
(A) the United States agrees to such
modification or staged rate reduction in
a multilateral negotiation under the
auspices of the WTO, and
(B) such modification or staged rate
reduction applies to the rate of duty on
an article contained in a tariff category
Court No. 03-00096 Page 6
reduce duties under the “auspices of the WTO”;6 and (iii) to
correct “technical errors in Schedule XX or to make other
rectifications to the Schedule.”7 See H.R. Rep. No. 103-826, pt.
1, at 28-29 (1994); S. Rep. No. 103-412, at 18 (1994).8 As part of
these concerted actions of Congress and the President, the United
States adopted a TRQ for ice cream codifying Schedule XX as Note 5
to Chapter 21, HTSUS (“Note 5”).9
Note 5 provides:
that was the subject of reciprocal duty
elimination or harmonization negotiations
during the Uruguay Round of multilateral
trade negotiations, and
(2) such modifications as are necessary to
correct technical errors in Schedule XX
or to make other rectifications to the
Schedule.
6
19 U.S.C. § 3521(b)(1)(A).
7
19 U.S.C. § 3521(b)(2); see also Presidential Proclamation
7011 of June 30, 1997, 62 Fed. Reg. 35,909 at para. 3 (July 2,
1997). Although 19 U.S.C. § 3521 was passed after the President
proclaimed Note 5, 19 U.S.C. § 3521 would have required the
President to amend Note 5 to conform with Schedule XX if Note 5 had
not already conformed to Schedule XX.
8
Nevertheless, although Note 5 became part of United States
law, the exact language of Note 5 was never voted on by the House
and the Senate nor presented to the President for his signature.
Cf. U.S. Const. art 1 sec. 7.
9
Although Customs initially maintained that Schedule XX and
Note 5 conflicted, Customs now maintains that “there is no
substantive conflict” between Note 5 and Schedule XX. Def.’s Supp.
Mem. Resp. Chambers’ Letter Dated Jan. 25, 2005, (“Def.’s Supp.
Mem.”) at 3.
Court No. 03-00096 Page 7
The aggregate quantity of ice cream entered under
subheading 2105.00.10 in any calendar year shall
not exceed 5,191,031 liters (articles the product
of Mexico shall not be permitted or included in
the aforementioned quantitative limitation and no
such articles shall be classifiable therein).
Of the quantitative limitations provided for in
this note, the countries listed below shall have
access to not less than the quantities specified
below:
Quantity
(liters)
Belgium 922,315
Denmark 13,059
Jamaica 3,596
Netherlands 104,477
New Zealand 589,312
If ice cream imports fall within these limits (i.e., “in-quota”),
Customs classifies the entries under subheading 2105.00.10 and
assesses a 20% ad valorem duty rate. Subheading 2105.00.10, HTSUS.
Alternatively, if the quota level is exhausted (i.e., “over-
quota”), Customs classifies the entries under subheading
2105.00.20, HTSUS, and assesses a duty of 51.7 cents per kilogram
plus 17.5% ad valorem. Subheading 2105.00.20, HTSUS. As is
apparent in the language quoted above, Note 5 further provides that
enumerated nations, i.e., those specifically mentioned, shall have
access to a specified volume of imports regardless of how many
liters of ice cream are imported from other nations. Additionally,
because the amounts specifically allocated to the enumerated
nations total 1,632,759 liters, far less than aggregate level
Court No. 03-00096 Page 8
allowable of 5,191,031 liters, the language implies that there
exists a “common pool” which may be used by all WTO nations --
including the enumerated nations if they have exceeded their
minimum access quotas. For imports implicating the “common pool,”
Customs allocates the quota on a first-come-first-served basis.
See 19 C.F.R. § 130 et seq.
What is unclear from Note 5's language, and what is at issue
here, is whether ice cream imported from nations, other than those
specifically listed, may qualify under the unused portions of the
enumerated nations’ allotments at the expiration of the year. To
wit, whereas Note 5 is clear that the enumerated nations’ imports
may invade the “common pool” if the “common pool” has not been
exhausted, the parties in this case disagree as to whether all
other nations may invade the enumerated nations’ unused allotments.
B.
Plaintiff is an importer of ice cream products. On March 27,
1999, an ice cream factory exploded in Le Mars, Iowa. That factory
had been producing Haagen-Dazs ice cream for Pillsbury. Pl.’s Mem.
Points and Authorities R. 56 Supp. Mot. Summ. J. at 2 (“Pl.’s
Mem.”). As a result of the explosion, Pillsbury did not have
sufficient production in the United States to meet demand.
Consequently, in the spring of 1999, Pillsbury imported ice cream
Court No. 03-00096 Page 9
from its Haagen-Dazs factory in France in order to meet its
production needs. Id.
At first, Customs classified Pillsbury’s entries under
subheading 2105.00.10, HTSUS. However, commencing in July, 1999,
3,558,272 liters of the “common pool” had been imported and Customs
then assessed Pillsbury’s imports at the over-quota rate. When the
quota year ended on December 31, 1999, the enumerated nations had
not used their allotments. In fact, Belgium, Denmark, Jamaica, and
New Zealand had shipped no ice cream to the United States during
1999, and the Netherlands had shipped only 82 liters of ice cream.
See Pl.’s R. 56 Statement Material Facts Not in Dispute at paras.
13, 14; Def.’s Pl.s Stat. Mat. Facts at paras. 13, 14.
Consequently, Customs permitted only 3,558,354 liters of ice cream
to enter under the lower tariff rate. Given this short-fall,
Pillsbury made a timely request to have certain of its over-quota
imports reliquidated at the lower tariff rate. Customs did not
respond to Pillsbury’s request and, after 30 days, the protest was
deemed denied. See 19 C.F.R. § 174.22(d). Pillsbury timely
sought judicial review of Customs’ denied protest.
II. STANDARD OF REVIEW
Although the parties disagree over the proper standard of
review, this question is squarely addressed by the Supreme Court’s
decisions in United States v. Haggar Apparel Co., 526 U.S. 380
Court No. 03-00096 Page 10
(1999) and United States v. Mead, 533 U.S. 218 (2001). In Haggar
Apparel Co., 526 U.S. at 386-89, the Supreme Court held that when
Commerce adopts regulations pursuant to notice and comment rule
making, the Court should accord those regulations deference
pursuant to the Supreme Court’s decision in Chevron U.S.A., Inc. v.
National Resources Defense Council, Inc., 467 U.S. 837, 842-43
(1984) (“Chevron deference”). However, when Customs has not issued
a regulation adopted by notice and comment rule making, its
interpretation of an ambiguous statute is entitled to deference
only commensurate with its power to persuade (“Skidmore
deference”). See Mead, 533 U.S. 218, 235 (2001) (citing Skidmore
v. Swift & Co., 323 U.S. 134, 140 (1944)).
Customs argues three theories as bases for its claim of
entitlement to Chevron deference: (1) one of its regulations, 19
C.F.R. § 133.2(c), is at issue, (2) the absence of any regulations
supporting Pillbury’s position, and (3) the United States Trade
Representative’s (“USTR”) role in proclaiming modifications to the
HTSUS. The Court disagrees that any of these theories implicate
Chevron deference.
First, 19 C.F.R. § 132.2(c) states that the “terms of a
Presidential proclamation, Executive order, or legislative
enactment establishing a quota, and the regulations implementing
the quota, must be strictly complied with.” According to Customs,
this regulation requires that unless the statute clearly permits
Court No. 03-00096 Page 11
the reallocation of unused quotas, then reallocation is forbidden
under its regulations.10 Alternatively, Customs argues that this
regulation supports its interpretation of Note 5, and that
specifically its determination as to whether Note 5 is ambiguous or
unambiguous is entitled to deference. Customs’ analysis, however,
does not follow established administrative law.
The HTSUS is, of course, a statute. An agency’s
interpretation of a statute is entitled to deference only after the
Court, reviewing the statute de novo (commonly referred to as
Chevron Step I), finds that there is a statutory ambiguity or gap.
Gen. Dynamic Land Sys. v. Cline, 540 U.S. 581, 600 (2004) (“Even
for an agency able to claim all the authority possible under
Chevron, deference to its statutory interpretation is called for
only when the devices of judicial construction have been tried and
10
This argument entirely begs the question. Customs must
strictly comply with Note 5, but with what meaning applied to Note
5? Certainly regulations are the creatures of an agency’s own
creation, and agency interpretations of their regulations may be
entitled to deference. Auer v. Robbins, 519 U.S. 452, 461-62
(1997), Cathedral Candle Co. v. United States ITC, slip op. 04-1083
(Fed. Cir. March 9, 2005); but cf. Keys v. Barnhart, 347 F.3d 990,
993 (7th Cir. 2003) (Posner, J.) (“Probably there is little left of
Auer.”). But this is true only so long as the “interpretation” is
not wholly erroneous. Auer, 519 U.S. at 461. Here, the cited
regulation in no way leads to the interpretation Customs places on
it – it does not mention reallocation or in any way suggest the
resolution of this matter. Deferring to Customs’ interpretation
here would be tantamount to giving deference solely to an agency’s
litigation position. Moreover, the Court’s conclusion is bolstered
by the fact that it does not appear that Customs is even entitled
to promulgate regulations entitled to deference in this matter.
See infra at note 19.
Court No. 03-00096 Page 12
found to yield no clear sense of congressional intent.”), Barnhart
v. Sigmon Coal Co., 534 U.S. 438, 462 (2002) (“In the context of an
unambiguous statute, we need not contemplate deferring to the
agency's interpretation.”); see also EEOC v. Arabian Am. Oil Co.,
499 U.S. 244, 260 (Scalia, J. concurring) (rejecting the majority’s
characterization that the EEOC’s decision be viewed under Skidmore
rather than Chevron deference, but noting that the presumption
against extraterritoriality trumps Chevron deference).11 In
conducting this initial de novo review, the Court will look to the
plain language of the statute, grammatical, and substantive canons
of statutory interpretation, Barnhart, 534 U.S. at 452, DeBartolo
Corp. v. Florida Gulf Coast Bldg. & Constr. Trades Council, 485
U.S. 568, 575 (1988), the statute’s legislative history, Rust v.
Sullivan, 500 U.S. 173, 186 (1991), and all other relevant tools of
statutory construction, FDA v. Brown & Williamson Tobacco Corp.,
529 U.S. 120 (2000), to determine whether Congress has spoken on
the question. Whether an agency, by regulation or otherwise, deems
a statute to be ambiguous or unambiguous, or should be strictly
construed, is immaterial to this inquiry and Customs is not
entitled to deference on this question.
11
An agency’s authority to give meaning to a statute is also
only proper where Congress has so delegated that authority to an
agency by leaving a statutory gap or ambiguity. The Court must
first assure itself that Congress has delegated that task to an
agency before any deference to that agency is warranted.
Accordingly, this review is conducted de novo. See Chevron, 467
U.S. at 843-44.
Court No. 03-00096 Page 13
Second, Customs contends that the absence of regulations
supporting Plaintiff’s position substantiates its position, i.e.,
this absence demonstrates that Customs has not adopted Pillsbury’s
interpretation.12 Customs further argues that this “absence” of
regulations is entitled to Chevron deference.
Again, Customs’ analysis is does not follow established
jurisprudence. Non-existent regulations are not “promulgated”
through notice and comment rule making, Haggar Apparel Co., 526
U.S. at 388, nor are there “any other circumstances reasonably
suggesting that Congress ever thought [of Customs] as deserving the
deference claimed for them here.” Mead, 533 U.S. 218, 231. Nor
do non-existent regulations offer any explanations of the law or
reasoning for their legal conclusions, and consequently, non-
existent regulations could not have the “power to persuade,” Id.
at 233.13 Accordingly, this “absence” of regulations is entitled
to no deference.
Customs’ third argument has also been rejected by the United
States Supreme Court. Despite the fact that USTR and the
12
Customs contends that if Pillsbury were correct, Customs
would have a procedure for reallocation. The Court finds this
argument curious in the light of 19 C.F.R. § 132.13(a)(1)(i)
(establishing a procedure for refunding money paid at the over-
quota rate) which could be employed in this case.
13
Of course, had Customs promulgated regulations, which
occupied the interpretative field of this provision, the Court’s
analysis would be different. But when Customs has issued no
regulations directing the enforcement of this provision, Chevron
deference cannot be warranted.
Court No. 03-00096 Page 14
International Trade Commission (“ITC”) have extensive authority to
proclaim changes directly to the tariff schedule, Congress did not
entrust them with the authority for administering the adopted
tariff schedules. Haggar Apparel Co., 526 U.S. at 388-89.
Accordingly, it is for the “Customs Service, not for USTR or ITC,
to issue regulations entitled to judicial deference in the
interpretation of the tariff schedules.” Id. Customs may not ride
the coat-tails of USTR and ITC in claiming deference because of
other agencies’ authority.
Accordingly, Customs is not entitled to Chevron deference
here. Nor is Customs entitled to Skidmore deference. Customs did
not issue a Headquarters Letter Ruling and has provided no
justification, outside of its briefs, for its actions. Moreover,
Customs’ only related Letter Ruling contradicts its decision in
this case. Headquarter Ruling Letter 962316 (Nov. 5 1998)
(recognizing that “minimum access” guarantees do not establish
limits on importation). Therefore, no deference will be granted,
and the Court will consider the question presented de novo.
III. DISCUSSION
The question presented is whether Customs must reallocate
the enumerated nations’ unused allotments. Consequently, at
issue is the proper meaning of Note 5 to Chapter 21:
Court No. 03-00096 Page 15
The aggregate quantity of ice cream entered under
subheading 2105.00.10 in any calendar year shall
not exceed 5,191,031 liters (articles the product
of Mexico shall not be permitted or included in
the aforementioned quantitative limitation and no
such articles shall be classifiable therein).
Of the quantitative limitations provided for in
this note, the countries listed below shall have
access to not less than the quantities specified
below:
Quantity
(liters)
Belgium: 922,315
Denmark: 13,059
Jamaica: 3,596
Netherlands: 104,477
New Zealand: 589,312
The issue that gives rise to this dispute centers around the word
“access.” More specifically, the question centers on what type of
“access” is implicated. Customs essentially argues that there is
an implied term “exclusive” before the word “access,” i.e., that
“the countries listed below shall have [exclusive] access to the
quantities listed below.” Pillsbury disagrees essentially
asserting that the implied term is “the right of first” access,
i.e., that “the countries listed below shall have [the right of
first] access to the quantities listed below.” As discussed above,
Note 5 implements the United States’ international commitments
under Schedule XX. See discussion on the history of this provision
supra at 4-6. Read in light of Schedule XX, the meaning of Note 5
is unambiguous. Consequently, the Court answers this question by
reference to Schedule XX.
Court No. 03-00096 Page 16
A.
In this case, two interrelated bedrock principles of statutory
construction strongly counsel in favor of using Schedule XX as an
aid in construing Note 5: the canon of constitutional avoidance and
the Charming Betsy canon.
As Customs has conceded, the relevant statutory authorizations
permitted the President to proclaim modifications to the HTSUS to
bring the HTSUS in accord with the United States’ international
legal obligations stated under Schedule XX. See 19 U.S.C. §§ 2902
& 3521. If Note 5 differs from Schedule XX without good cause, the
President’s actions would have been ultra vires, i.e., exceeded his
authority, and therefore his actions would have been unlawful as
not in accordance with Congressional intent.
This proposition is, in part,14 driven by the fact that the
provisions of the HTSUS are “statutory provisions of law.” 19
U.S.C. § 3004(c). Accordingly, any amendments thereto must conform
14
The Court notes that even if the HTSUS were a regulation, the
President could still only proclaim that which he was instructed to
proclaim by Congress. The only difference is the degree of
discretion afforded to the President. If the HTSUS were only a
regulation, Congress need only enunciate an intelligible principle,
J.W. Hampton Jr., & Co. v. United States, 276 U.S. 394, 406-410
(1928); however, given that the HTSUS is statutory law,
constitutionally, the President may be accorded only limited
discretion. Accordingly, any attempt to read broad discretion into
Congress’ authorization would be improper. See sources cited infra
at note 15. This is especially true here where Customs may have
discretion, through the promulgation of regulations, in the
execution of the law proclaimed by the President, see Haggar
Apparel Co., 526 U.S. at 388, creating the possibility of two
layers of deference.
Court No. 03-00096 Page 17
with the strictures of Article I Section 7 of the Constitution so
long as the amendments can be considered “law-making”.15 As the
Supreme Court found in Field v. Clark, certain changes to a
statutory scheme are not considered “law-making” when Congress
delegates the President the authority to make changes to the law
such that: (1) those changes are necessary to accommodate to future
contingent (international) developments, and (2) where Congress has
specifically instructed the President on how, (3) and when, the law
is to be amended, leaving little to the President’s discretion.
Field v. Clark, 143 U.S. at 693-94; see also Clinton v. City of New
York, 524 U.S. 417, 442-45 (1998); but cf. Terran v. Secretary of
HHS, 195 F.3d 1302, 1313 (Fed. Cir. 1999) (suggesting in dicta that
this may extend to domestic issues as well). This principle was
reaffirmed in the Supreme Court’s decision in Clinton v. City of
New York, 524 U.S. 417 (1998) (invalidating an unconstitutional
delegation of lawmaking authority).
15
See, e.g., Clinton v. City of New York, 524 U.S. 417, 442
(1998) (invalidating an unlawful delegation of lawmaking power),
Field v. Clark, 143 U.S. 649, 693 (1898), Star-Kist Foods, Inc. v.
United States, 47 CCPA 52, 60, 275 F.2d 472, 380 (1959); see also
INS v. Chadha, 462 U.S. 919, 951 (1983); Youngstown Sheet & Tube
Co. v. Sawyer, 343 U.S. 579, 587 (1952); US Const. art. I sec. 7
(“Every Bill which shall have passed the House of Representatives
and the Senate, shall, before it becomes a Law, be presented to the
President.”).
The Court further notes that even at the apex of the
President’s inherent authority, the Court would only give effect to
an executive agreement by the terms stated in the agreement. See
Am. Ins. Ass’n v. Garamendi, 539 U.S. 396, 417 (2003) (refusing to
preempt state law on the basis of an executive agreement because
the agreement did not contain a preemption clause).
Court No. 03-00096 Page 18
The Court need not dwell on this issue because Schedule XX,
interpreted in light of the plain language of Note 5, contains no
ambiguity regarding the issue presented here. See infra at §
III.c. Therefore, as counseled by the canon of constitutional
avoidance, the Court will give effect to that reading of Note 5
which is implicated by Schedule XX. Clark v. Martinez, 125 S. Ct.
716, 724 (2005) (“It is a tool for choosing between competing
plausible interpretations of a statutory text, resting on the
reasonable presumption that Congress did not intend the alternative
which raises serious constitutional doubts.”), DeBartolo Corp. v.
Florida Gulf Coast Bldg. & Constr. Trades Council, 485 U.S. 568,
575 (1988); Industrial Union Dep’t, AFL-CIO v. Am. Petroleum Inst.,
448 U.S. 607, 646 (1980) (overturning the Secretary of Labor’s
interpretation of a statute because a “construction of the statute
that avoids this kind of open-ended grant should certainly be
favored.”) (opinion of Justice Stevens).
This proposition is reinforced by the Charming Betsy canon of
statutory construction. “For two centuries [courts] have affirmed
that the domestic law of the United States recognizes the law of
nations.” Sosa v. Alvarez-Machain, 124 S. Ct. 2739, 2765 (2004).
One important way the courts have recognized this principle is
through the invocation of the Charming Betsy canon of statutory
construction. Appropriately named after the Supreme Court’s
decision in Murray v. The Schooner Charming Betsy, 6 U.S. (2
Court No. 03-00096 Page 19
Cranch) 64 (1804)), the Charming Betsy canon holds that “an act of
congress ought never be construed to violate the law of nations, if
any other possible construction remains.” Charming Betsy, 6 U.S.
(2 Cranch) at 118. In this case, the United States has accepted
obligations to permit specified levels of ice cream into the United
States at certain duty levels under Schedule XX. To suggest that
there is a conflict between Schedule XX and Note 5 would offend the
well settled principle that the abrogation of international
agreements by implication is strongly disfavored. See e.g.,
Weinberger v. Rossi, 456 U.S. 25, 35 (1982) ("affirmative
congressional expression [is] necessary to evidence an intent to
abrogate provisions in 13 international agreements"), United States
v. Lee Yen Tai, 185 U.S. 213, 221 (1902) (“the purpose by statute
to abrogate a treaty or any designated part of a treaty . . . must
not be lightly assumed, but must appear clearly and distinctly from
the words used in the statute"), Roeder v. Islamic Republic of
Iran, 333 F.3d 228, 237-38 (D.C. Cir. 2003) (neither a treaty nor
executive agreement will be deemed abrogated unless Congress
clearly expresses its intent). Pursuant to this principle, unless
Note 5 explicitly conflicts with the United States’ international
obligations, see e.g., McCulloch v. Sociedad Nacional de Marineros
de Honduras, 372 U.S. 10, 21 (1963), The Chinese Exclusion Case,
130 U.S. 581, 600 (1889), the Court should endeavor to read Note 5
in harmony with Schedule XX. This conclusion is rendered
Court No. 03-00096 Page 20
unavoidable by the fact that Congress specifically expressed its
intent that the United States comply with its international legal
obligation, rather than clearly expressing an intent to abrogate
the United States’ international commitment. See 19 U.S.C. §§ 2902
& 3521; see also 19 U.S.C. § 2901 (expressing the aspiration for
reciprocal and fair trade); cf. Intel Corp. v. Advanced Micro
Devices, Inc., 124 S. Ct. 2466, 2479 (2004) (employing
Congressional instructions as an interpretative aid).
B.
Schedule XX provides in relevant part:
There shall be permitted entry an aggregate quantity of
ice cream, entered under subheading 2105.00.10 during any
calendar year, of not less than the total quantity
specified below.
Quantity
(liters)
1995 3,283,772*
1996 3,760,587*
1997 4,237,402*
1998 4,714,216*
1999 5,191,031*
2000 5,667,846*
and thereafter
* Of the quantitative limitation provided for in
this note, an access level is reserved as follows:
Quantity
(liters)
Belgium 922,315
New Zealand 589,312
Denmark 13,059
Netherlands 104,477
Jamaica 3,596
Court No. 03-00096 Page 21
An additional aggregate quanitity of 366,000 liters
is reserved for Mexico under this note and
additional note 3 to chapter 4 combined.
The quantitative limitation established by this note
may be administered through regulations (including
licenses and reallocation of the unfilled quotas)
issued by the Secretary of Agriculture.
The Court construes international agreements in a manner similar to
its interpretation of statutes. “The analysis must begin . . .
with the text of the treaty and the context in which the written
words are used.” Air France v. Saks, 470 U.S. 392, 396-97 (1985).
Because “treaties are the subject of careful consideration before
they are entered into, and are drawn by persons competent to
express their meaning and to choose apt words,” Rocca v. Thompson,
223 U.S. 317, 332 (1912), the courts must “give the specific words
of the treaty a meaning consistent with the shared expectations of
the contracting parties,” Air France, 470 U.S. at 399. The plain
language of Schedule XX demonstrates why Customs’ argument must
fail.
Schedule XX explicitly provides that “[t]here shall be
permitted entry an aggregate quantity of ice cream, entered under
subheading 2105.00.10 during [1999], of not less than . . .
5,191,031 [liters].” The unavoidable conclusion that this language
requires reallocation is demonstrated by the facts of this case.
In 1999, the United States imported no ice cream from Belgium,
Denmark, Jamaica, and New Zealand and only imported 82 liters from
Court No. 03-00096 Page 22
the Netherlands. Accordingly, (and as Customs administered the
matter in this instance) only 3,448,354 liters entered under
subheading 2105.00.10, HTSUS. Therefore, Customs did not “permit[]
entry an aggregate quantity of ice cream . . . of not less than .
. . 5,191,031" liters; rather, Customs permitted entry of an
aggregate quantity far less than required by Schedule XX to be
entered under subheading 2105.00.10, HTSUS. This plain reading of
Schedule XX clearly dictates why Customs’ interpretation is
untenable.16 See, e.g., Soc’y for Propagation of the Gospel in
Foreign Parts v. Town of New Haven, 21 U.S. (8 Wheat.) 464, 490
(1823) (“Where the language of the parties is clear of all
ambiguity, there is no room for construction.”); cf. Koons Buick
Pontiac GMC, Inc. v. Nigh, 125 S. Ct. 460, 469 (2005) (“‘there is
16
When pressed at oral argument, Customs averred that this
language only requires the United States to permit a certain access
level and because the United States made available the opportunity
for importation of the requisite aggregate quantity of ice cream,
it fulfilled its duty under Schedule XX. However, this argument
betrays the plain language of the first clause. See Def.’s Mem.
Reply Pl.’s Opp. Def.’s Cross-Mot. Summ. J. at 10 (“Schedule XX, to
the contrary, indicates that the aggregate quantity of ice cream
must be ‘not less than the total quantity specified below’. . . .
Schedule XX affirmatively sets forth a minimum aggregate amount of
ice cream which may be imported from all countries.”). Moreover,
Customs’ argument creates tension with the word “entered.” In
order for products to be “entered under subheading 2105.00.10,”
HTSUS, something must occur (i.e., be “entered, or withdrawn from
[a] warehouse for consumption, in the customs territory of the
United States” pursuant to U.S. Additional Note 19, HTSUS) – not
the mere possibility of entry occurring. Even if the Court were to
have any doubt, the canon of liberal construction would apply
resolving the ambiguity in favor of the Court’s reading. See infra
at 29.
Court No. 03-00096 Page 23
no canon against using common sense in construing laws as saying
what they obviously mean.’”) (quoting Roschen v. Ward, 279 U.S.
337, 339 (1929)).
That Schedule XX employs the word “shall” demonstrates that
the United States agreed to provide not less than this minimum
access level. The word “shall,” generally speaking, imposes a
requirement. That this is a mandatory requirement is reinforced
when the word “shall” is viewed in contraposition to the Section’s
later use of the word “may,” i.e., “the Department of Agriculture
may regulate.” Cf. Jama v. Immigration and Customs Enforcement,
125 S. Ct. 694, 703 (2005). Therefore, the plain text of Schedule
XX requires that the United States allow 5,191,031 liters into the
United States at the reduced tariff rate regardless of whether the
enumerated nations have exhausted their reserved allotments.
Customs departs from this common sense reading even though,
in its initial briefs to the Court, it maintained that the plain
language of Schedule XX conflicted with its interpretation of Note
5, i.e., that Schedule XX required reallocation but Note 5 did not,
and therefore there was a conflict between the two.17 Customs now
17
In its initial brief Customs argued: “Pillsbury quotes a WTO
document referred to as ‘Schedule XX’ which indicates that the
aggregate quantity of ice cream would be ‘not less than the total
quantity specified below.’ If this language was in Additional U.S.
Note 5 to Chapter 21, HTSUS, there would be some merit to
Pillsbury’s claim. However, the language in Additional U.S. Note
5 is quite different.” Def.’s Mem. at 12 n.1; see also Def.’s Mem.
Reply Pl.’s Opp. Def.’s Cross-Mot. Summ. J. at 10 (“Schedule XX, to
the contrary, indicates that the aggregate quantity of ice cream
Court No. 03-00096 Page 24
advances three arguments as to why reallocation is not required.
First, Customs alleges that the term “reserved” signals that the
United States is not required to reallocate. Second, it argues
that the permission to regulate (including reallocation) suggests
that reallocation is not required. Third, it submits a
correspondence from the Embassy of New Zealand interpreting such
provisions. The Court will address each argument in turn.
1.
First, Customs points to the word “reserved,” i.e., “[o]f the
quantitative limitation provided for in this note, an access level
is reserved as follows,” claiming that the word “reserved” means
that Customs is not required to reallocate unused quotas. Citing
Webster’s Third New international Dictionary of the English
Language 1930 (1993), Customs argues that the word “reserved” means
“to keep in store for future or special use: hold or keep in
reserve . . . to set aside or apart – usu. with to or for . . . .”
must be ‘not less than the total quantity specified below’. . . .
Schedule XX affirmatively sets forth a minimum aggregate amount of
ice cream which may be imported from all countries.”).
Concerned by Customs’ representations in its initial brief,
the Court requested that the parties submit supplemental briefs on
the question of whether Note 5 and Schedule XX conflicted. The
Court permitted a month to submit a ten-page response. Customs
twice asked for extensions citing the need to conduct “a
significant” amount of research. The six page submission by
Customs cited a single authority: the Webster’s Third New
International Dictionary. Customs failed to even address the “not
less than” language of Schedule XX in its supplemental submission
to the Court.
Court No. 03-00096 Page 25
Def.’s Supp. Mem. at 5 n.2 (emphasis in original). As this
definition indicates, “reserved” means to keep for a “special use.”
However, when that “special use” has expired, i.e., the time that
the enumerated nations may use their allotments has elapsed, the
definition of “reserved” is not implicated.
Moreover, Customs’ interpretation departs from the cardinal
principle that international agreements should be read
holistically. Air France v. Saks, 470 U.S. 392, 396-97 (1985)
(“The analysis must begin . . . with the text of the treaty and the
context in which the written words are used”), cf. Koons Buick
Pontiac GMC, Inc. v. Nigh, 125 S. Ct. 460, 466-67 (2005).
According to this principle, any meaning ascribed to the word
“reserved” should, if possible, be read in harmony with the rest of
the Section’s scheme. As previously discussed, the plain language
requires that the overall aggregate level permitted into the United
States be not less than 5,191,031 liters. Customs’ reading of
“reserved” would needlessly set the two parts of the Section in
tension as it would suggest the aggregate level of actual imported
ice cream could be less than 5,191,031 liters. This reading of
“reserved” would also conflict with the word “aggregate,” i.e.,
“[t]here shall be an aggregate quantity” of ice cream admitted into
the United States. The word “aggregate” suggests that all actual
entries are considered in determining the TRQ rate – not that the
enumerated nations’ allotments are hermetically sealed from the
Court No. 03-00096 Page 26
unenumerated nations’ allocations. Customs’ interpretation ignores
this word in the Section.
Customs’ argument is further undercut by another claim it
makes: that Customs may reallocate unused quotas so long as it is
done by regulation. If the term “reserved” had the meaning Customs
ascribed to it, then it could not reallocate unused quotas. That
Customs agrees that it may reallocate unused quotas undermines the
import Customs places on the word “reserved.”18
2.
Next Customs argues that Schedule XX grants the Department
of Agriculture (“Agriculture”) the authority to “administer through
regulations (including licenses and reallocation of the unfilled
quotas)” the TRQ. Therefore, Defendant argues, Agriculture must
promulgate regulations for reallocation if reallocation is to be
allowed – because Agriculture has not promulgated regulations,
Defendant asserts, no reallocation is permitted.19
18
The Court further notes that when the drafters wanted to make
an access level separate from the aggregate level, it stated so
explicitly, as Mexico’s allotment illustrates. See Schedule XX
(“An additional aggregate quantity of 366,000 liters is reserved
for Mexico under this note and additional U.S. note 3 to chapter 4
combined.”) (emphasis added). Accordingly, where the drafters
intended that an enumerated allotment be insulated from access by
other nations it used language quite different from the “an access
level is reserved” language at issue here.
19
The Court notes that this language grants Agriculture the
authority to establish regulations, not Customs. Therefore, any
deference would flow to Agriculture, thereby further undermining
Customs’ claim for Chevron deference. See Haggar Apparel Co. v.
Court No. 03-00096 Page 27
First, the language on which Customs focuses in no way
detracts from, or qualifies, the absolute language of the first
clause, i.e., the “shall be permitted” clause. In essence, Customs
reads the “administered through regulations” language as stating
that the United States “may only” reallocate through regulation,
thereby defeating the mandate of the first clause if no regulation
is promulgated. However, the language admits of no such
restriction and the Court will not imply one.20
Moreover, contrary to Customs’ supposition, the “administered
through regulations” language detracts from, rather than supports,
its argument. This conclusion is best evidenced when considered in
the context of international trade law. See, e.g., Geofroy v.
Riggs, 133 U.S. 258, 271 (1890) (“words [of the treaty] are to be
taken in their ordinary meaning, as understood in the public law of
nations, and not in any artificial or special sense impressed upon
them by local law ”), The Pizarro, 15 U.S. (2 Wheat.) 227, 243
(1827)(Story, J.). Generally, under international trade law,
United States, 526 U.S. at 388.
20
The Court further notes that this language is standard
disclaimer language found in all of the United States’ TRQs which
allocate quotas to nations (or groups of nations), including
maximum access provisions. This broad usage reinforces the Court’s
reading that this language is not intended to derogate rights
created by the operative language used in the other portions of the
ice cream TRQ. Rather, this usage suggests that the United States
wanted the “administered through regulations” language to recognize
its use of regulations in adopting license and reallocation
provisions of in-quota imports.
Court No. 03-00096 Page 28
nations are always free to grant more liberal trade concessions
than those to which they have agreed. Cf. Schedule XX (“There
shall be permitted entry an aggregate quantity of ice cream . . .
of not less than the total specified below.”). If a nation so
desired, it could eradicate all of its tariffs without violating
international law. However, the reverse is not true – if the
United States has agreed to a certain tariff rate, it cannot raise
that rate without violating its international agreements. This
principle sheds light on the meaning of the clause upon which
Customs relies. If the United States did not have to reallocate,
stipulating that it could reallocate by regulation would be
senseless -- of course it could reallocate. Rather, the sensible
reading is that Schedule XX allows the United States to encumber
reallocation through regulations established by Agriculture.21 Such
regulations could, for example, permit Agriculture to provide a
procedure for reallocation.22
21
The Court further notes that the word “regulation” means
“[t]he act or process of controlling by rule or restriction.”
Black’s Law Dictionary 1311 (8th ed. 2004).
22
As the Supreme Court noted in Geofroy v. Riggs, “the treaty
power of the United States extends to all proper subjects of
negotiation between our government and the governments of other
nations[.]” 133 U.S. at 266. Under Customs’ proposed construction,
why the internal allocation of authority of regulatory power of the
United States is addressed when the United States already has the
full authority to regulate (and prohibit) is left unexplained. In
other words, under Customs’ reading, this provision would simply be
an attempt by USTR to enlarge Agriculture’s authority when the
rights of foreign nations were not implicated. Under such a
reading, it is hard to see how the language would have been the
proper subject of negotiations between our government and foreign
Court No. 03-00096 Page 29
Even if the Court were to have any doubt, the oft-quoted
maxim of liberal construction would counsel in favor of
reallocation: if “‘a treaty fairly admits two constructions, one
restricting, the other enlarging, rights which may be claimed under
it, the more liberal interpretation is to be preferred.’” United
States v. Stuart, 489 U.S. 353, 368 (1989) (quoting Bacardi Corp.
of Am. v. Domenech, 311 U.S. 150, 163 (1940)). Pursuant to this
maxim, the Court should, and does, prefer recognizing that Schedule
XX requires reallocation of unused allotments.
3.
Last, Customs points to a letter from the Embassy of New
Zealand to the United States International Trade Commission,
opposing the reallocation of unused in-quota allotments for beef
imports and expressing its opinion that the TRQ for beef “is a
minimum access opportunity, not an obligation; the United States is
not required to import 656,621 tonnes of beef each year.”23 Letter
from Ambassador John Wood, New Zealand, to Chairman, United States
International Trade Commission, Re: Cattle and Beef: Impact of the
governments.
23
The Court notes that the actual language of the Ambassador’s
letter appears to address a matter not at issue here, i.e., whether
the U.S. may reallocate, and thereby limit, New Zealand’s access
level if its allotment is not used. The Court’s conclusion here in
no way abridges New Zealand’s, or any of the enumerated nations’
rights, under Schedule XX. Customs must keep the enumerated
nations’ access levels open to those nations until the end of the
year, and then only reallocate any unused quota for that year.
Court No. 03-00096 Page 30
NAFTA and Uruguay Round Agreements on U.S. Trade (March 13, 1997),
Exhibit B to Def.’s Mem. In its original submissions Customs
erroneously cited this authority as bearing on the interpretation
of United States’ law while, at the same time, arguing that the
United States had appropriately departed from its international
legal obligations. When the United States has departed from
international norms, constructions of U.S. statutes by foreign
governments are wholly irrelevant. Accord Roper v. Simmons, 125 S.
Ct. 1183, 1199-1200 (2005) (looking to international sources to
interpret the Eighth Amendment because the Eighth Amendment
embraced, rather than conflicted with, international norms). This
is especially true given that courts grant only a modicum of
deference to Customs regarding its interpretation of U.S. law – why
the Court would be swayed by the position of foreign governments on
U.S. law is unclear.
Nonetheless, reframing of the issue as an interpretation of
Schedule XX does make this submission arguably probative. Courts
have long recognized that contract states’ post-ratification
understanding may be consulted in construing an international
agreement. Zicherman v. Korean Air Lines Co., 516 U.S. 217, 227-28
(1996). Nevertheless, unilateral actions taken by a single foreign
state are rarely persuasive especially when those actions violate
the letter and spirit of the international agreement. Cf. In re
Kaine, 55 U.S. (14 How.) 103, 113 (1853) (“What Great Britain has
Court No. 03-00096 Page 31
done by its legislation, cannot control our decision; we must abide
by our own laws. If theirs are inconvenient, or supposed to
violate the spirit of the treaty, it is the duty of our government
to complain, and ask that they be reformed.”); Sullivan v. Kidd,
254 U.S. 433, 442 (1921). Customs has failed to corroborate its
proffered interpretation with any minutes of the Uruguay Round
negotiations or any other authoritative source. Moreover, this
position appears contrary to the prior position of our own
government, which required reallocation.24 See Headquarter Ruling
24
In fact, in 2000, the United States proposed the following
before the WTO:
Reallocation: Many TRQ administrative practices,
particularly the use of import licenses, do not
permit sufficient reallocation to allow exporters
to fill TRQs. The United States proposes that
members develop new disciplines on license
reallocation, such as requirements that licensees
surrender unused licenses if they cannot arrange
shipments within specified time periods. Members
would reallocate, in a timely fashion, unused
licenses to provide sufficient commercially viable
opportunities for other importers, including new
entrants.
Proposal for Tariff Rate Quota Reform: Submission from the United
States, G/AG/NG/W/58 (Nov. 14, 2000) available at
http://docsonline.wto.org/DDFDocuments/t/G/AG/NGW58.doc (last
accessed April 15, 2005). Customs has not submitted any
interpretation of the ice cream TRQ, or any other TRQ, by the
United States Trade Representative (the Agency charged with
negotiating and enforcing other nations’ compliance with TRQ’s)
that may shed light on the TRQ’s meaning at issue here.
Court No. 03-00096 Page 32
Letter 962316 (Nov. 5 1998).25 Consequently, this submission is
unpersuasive.
C.
Given that Schedule XX unambiguously requires reallocation
of unused quotas, the Court now considers whether Note 5 is at odds
with this interpretation. The Court finds that it is not.
Note 5's most significant departure from Schedule XX is that
it frames the issue in the negative rather than the positive.
Whereas Schedule XX specifies that the United States “shall permit”
certain quota levels, Note 5 states that imports “shall not
exceed.” The Court does not consider this a meaningful divergence.
The only other significant variation is that Note 5 states that
enumerated nations shall have “access” to certain allotment whereas
Schedule XX says the allotments are “reserved” for the enumerated
nations. Again this variation is immaterial and, if anything,
supports the Court’s interpretation because “access” is more
permissive than the word “reserved.” Certainly, these departures,
when read in light of the plain language of Schedule XX, do not
render Note 5 ambiguous.
25
Customs attempts to discount this Ruling Letter by asserting
that there is a slight variance in the wording between Note 5 and
the provision at issue in the Ruling Letter. Assuming that Customs
is correct in noting that the variance in language does not
establish this Ruling Letter as clear precedent, then Customs’
citation to the New Zealand Letter must also fail as Customs has
failed to prove that the language that gave rise to the letter is
identical to the provision in question here.
Court No. 03-00096 Page 33
Therefore, upon application of the canon of constitutional
avoidance and the Charming Betsy canon, the Court incorporates the
unambiguous interpretation of Schedule XX into the meaning of Note
5. Consequently, the Court deems that Note 5 requires Customs to
reallocate the unused quotas of the enumerated nations.
IV. CONCLUSION
For the foregoing reasons, the Court deems that Note 5
requires Customs to reallocate unused quotas. Accordingly,
Plaintiff’s motion for summary judgment is granted and Defendant’s
motion for summary judgment is denied.
/s/
Donald C. Pogue
Judge
Dated: New York, New York
April 19, 2005
ERRATUM
The Pillsbury Company v. United States, Slip Op. 05-51,
April 19, 2005, Court No. 03-00096:
Page 2: “USCIT R. 56©)” should be “USCIT R. 56(c)”
Page 4 footnote 4: “19 U.S.C. § 3004©)” should read “19
U.S.C. § 3004(c)”
April 20, 2005