Slip Op. 11–8
UNITED STATES COURT OF INTERNATIONAL TRADE
XEROX CORPORATION,
Plaintiff,
Before: Gregory W. Carman, Judge
v.
Court No. 07‐00337
UNITED STATES,
Defendant.
[Defendant’s motion to dismiss is denied. Customs’ final determination is remanded for further
action consistent with this Opinion and Order.]
Dated: January 24, 2011
Neville Peterson LLP (John M. Petersvon, Michael T. Cone), for Plaintiff.
Tony West, Assistant Attorney General, Barbara S. Williams, Attorney in Charge,
International Trade Field Office, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice (Saul Davis, Aimee Lee); Chi S. Choy, of counsel, Office of the
Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border
Protection, U.S. Department of Homeland Security, for Defendant.
OPINION & ORDER
CARMAN, JUDGE: Plaintiff Xerox Corporation (“Plaintiff” or “Xerox”) has brought this
action pursuant to 28 U.S.C. § 1581(e) to challenge a final determination issued by
Customs and Border Protection (“Customs” or “CBP”) relating to the country of origin
of certain laser printer toner cartridges for purposes of government procurement. This
is the first case brought in the U.S. Court of International Trade pursuant to 28 U.S.C.
§ 1581(e). Defendant United States (“Defendant,” “United States” or the “government”)
Court No. 07‐00337 Page 2
has moved to dismiss under USCIT Rule 12(b)(1), alleging that the particular
determination Customs actually made in this instance is not the type of determination
this court has jurisdiction to review, and that this case does not present a justiciable
controversy. For the reasons set forth below, Defendant’s motion is denied.
BACKGROUND
I. Statutory Context of Jurisdictional Questions
When Congress passed the Trade Agreements Act of 1979 (“TAA”), it conferred
upon the Customs Court, and subsequently upon the U.S. Court of International Trade,1
“exclusive jurisdiction of any civil action commenced to review any final determination
of the Secretary of the Treasury under section 305(b)(1) of the Trade Agreements Act of
1979.” 28 U.S.C. § 1581(e). Section 305(b)(1) of the TAA, codified at 19 U.S.C.
§ 2515(b)(1), states that the Secretary of the Treasury (or Customs, the Secretary’s
designee2) “shall provide for the prompt issuance of advisory rulings and final
determinations on whether . . . an article is or would be a product of a foreign country
1
Section 1001(b)(4)(B) of the TAA amended former 28 U.S.C. § 1582 (1976) on July
26, 1979, conferring jurisdiction on the Customs Court to exercise judicial review over
these final determinations. Pursuant to the Customs Courts Act of 1980, jurisdiction
was reassigned to the Court of International Trade, effective November 1, 1980, and
codified at 28 U.S.C. § 1581(e).
2
For more on the transfer of functions from the Secretary of the Treasury to the
Secretary of Homeland Security, see the note “Transfer of Functions” following 28
U.S.C. § 2631.
Court No. 07‐00337 Page 3
or instrumentality designated” by a separate statute as eligible for certain benefits
described below. 19 U.S.C. § 2515(b)(1). The TAA establishes a rule of origin for CBP to
apply in making these determinations, set out in 19 U.S.C. § 2518(4)(B), and also sets out
criteria for how a foreign country or instrumentality becomes “designated,” 19 U.S.C.
§ 2511(b). To understand the purpose of a final determination made under § 2515(b)(1)
(a “Section 305(b)(1) final determination”), and the role of this Court in reviewing these
final determinations pursuant to § 1581(e), one must first have a broad view of the
statutes and regulations pertaining to country of origin in government procurement.
When purchasing goods for its own use, the federal government has long had a
preference for domestically manufactured products. This preference was established in
1933 by the Buy American Act (41 U.S.C. §§ 10a‐10d) (“BAA”), which remains in effect
today, and has recently been described as “the immovable object” of U.S. government
procurement law.3 The BAA does not mandate that the government make purchases of
domestic goods, but rather establishes a domestic preference. This preference is
implemented by regulations which require that, when both foreign and domestic offers
have been received for a particular procurement contract, the contracting officer must
3
John A. Howell, The Trade Agreements Act of 1979 versus The Buy American Act:
The Irresistible Force Meets The Immovable Object, 35 Pub. Cont. L. J. 495 (Spring 2006).
Court No. 07‐00337 Page 4
add a margin to the foreign offer, typically of 6, 12 or 50 percent, before comparing the
bids and awarding the contract. 48 C.F.R. §§ 25.105(b), 225.105(b).
While the Buy American Act remains a significant part of the government
procurement landscape, its effect was dramatically altered by the Trade Agreements
Act of 1979, which permits the domestic preference of the BAA to be waived under
certain conditions. Title III of the TAA implements the Agreement on Government
Procurement (“GPA”), which is a plurilateral agreement developed during the Tokyo
Round for the purpose of creating and protecting international reciprocity in
government procurement. S. REP. NO. 96‐249, at 128 (1979), reprinted in 1979
U.S.C.C.A.N. 381, 514. When a party to the GPA is procuring products above a certain
price threshold, that party agrees to treat products from other GPA parties no less
favorably than it treats domestic products. Through the TAA, the United States has also
extended this benefit of no‐less‐favorable treatment to countries that extend reciprocal
government procurement opportunities to the U.S. (even if such countries are not
parties to the GPA), and to least developed countries (without demand for reciprocity).
Collectively, parties to the GPA, countries extending GPA‐equivalent opportunities to
the U.S. and least developed countries are referred to as designated foreign countries
and instrumentalities (“DFCIs”). See 19 U.S.C. § 2511(b)(1)–(4). Additionally, as an
incentive to encourage adoption of the GPA by other foreign countries, the TAA allows
Court No. 07‐00337 Page 5
the U.S. to prohibit procurement of otherwise eligible products from foreign countries
that are not a DFCI. 19 U.S.C. § 2512. The net effect of the TAA is that for procurement
offers above the price threshold, the domestic preference imposed by the BAA is waived
for all articles that are “products of” a designated foreign country or instrumentality.
See 19 U.S.C. § 2511(a).
II. The Section 305(b)(1) Final Determination
The final determination of whether an article “is . . . a product of” a DFCI is the
determination that this Court has jurisdiction to review. 28 U.S.C. § 1581(e); see also 19
U.S.C. § 2515(b)(1). Customs has promulgated regulations to establish the procedures
through which it would issue Section 305(b)(1) advisory rulings and final
determinations. See 19 C.F.R. Part 177, Subpart B. These regulations implement
various aspects of the TAA, including the applicable rule of origin (compare 19 U.S.C.
§ 2518(4)(B), with 19 C.F.R. § 177.22(a)), and the definition of who qualifies as a party‐at‐
interest with the right to request a country‐of‐origin determination or to seek its judicial
review (compare 28 U.S.C. § 2631(e), (k)(2),4 with 19 C.F.R. §§ 177.22(d), 177.23, 177.30).
4
The party‐at‐interest language was originally included in Section 1001 of the
TAA, which assigned jurisdiction to judicially review these determinations to the
Customs Court. The Customs Courts Act of 1980 removed the party‐at‐interest
language from the jurisdictional statute (newly created 28 U.S.C. § 1581), and placed it
in 28 U.S.C. § 2631.
Court No. 07‐00337 Page 6
Over the three decades that the TAA has been in effect, Customs has rendered
final determinations pursuant to Section 305(b)(1) that, while consistent with the statute,
are arguably more specific than minimally statutorily required. The statute provides for
the issuance of final determinations as to whether “an article is or would be a product of
a foreign country or instrumentality designated pursuant to 19 U.S.C. § 2511(b)”—a
question that could be answered accurately, if somewhat narrowly, with a “yes” or a
“no.” See 19 U.S.C. § 2515(b)(1). The phrase “country of origin determination” does not
appear in Section 305(b) of the TAA, and nothing in the statute compels Customs to
make formal pronouncement about what the country of origin is for a given
article—only whether it is a product of a DFCI. And yet, Customs has chosen to
implement this statute via regulations requiring itself to produce full blown “country‐
of‐origin determinations” in virtually every case where a Section 305(b)(1) final
determination has been requested. See 19 C.F.R. § 177.21 (explaining that “[t]his
subpart applies to the issuance of country‐of‐origin . . . final determinations”), and
§ 177.23 (explaining who may request a “country‐of‐origin . . . final determination”)
(emphases added).
Customs’ regulatory construal of Section 305(b)(1) is not inconsistent with the
statute, because when the country of origin of an article has been identified, it is self‐
evident whether that country is a DFCI. When issuing final determinations pursuant to
Court No. 07‐00337 Page 7
this subpart, Customs routinely frames the issue presented as “what is the country‐of‐
origin of [Product X] for the purpose of U.S. government procurement?” Customs then
typically issues its ruling in the form: “the country of origin of [Product X] for the
purpose of U.S. government procurement is [Country Y].” Because Country Y either is
or is not a DFCI, Customs’ ruling therefore satisfies the requirement of Section 305(b)(1).
Moreover, the notion that Section 305(b)(1) should be implemented with a country‐of‐
origin determination has its roots in the legislative history of the TAA, and has been
consistently applied by Customs for over thirty years. The first reference to the Section
305(b)(1) final determination as identifying “the country of origin of specified
products” is found in the Senate Report to the TAA. 1979 U.S.C.C.A.N. at 523
(emphasis added). And from the first proposed draft (published April 9, 1981) to the
current heading of 19 C.F.R. Part 177, Subpart B, Customs has consistently referred to
the Section 305(b)(1) final determination as a “country‐of‐origin determination.” See
46 Fed. Reg. 21,194‐01; see also 19 C.F.R. Part 177, Subpart B (2010).
It bears noting—for reasons that will become clear upon hearing Defendant’s
contentions in this case—that the statute does not mandate any specific outcome of a
Section 305(b)(1) final determination, and is indifferent to which particular outcome the
party requesting the ruling is hoping to obtain. As long as Customs’ ruling makes clear
whether or not the article in question “is or would be a product of” a designated foreign
Court No. 07‐00337 Page 8
country or instrumentality, it has conformed with the statutory requirement. See 19
U.S.C. § 2515(b). In fact, the statutory scheme seems designed to produce rulings
sought by parties whose economic incentive is to obtain a “negative” ruling. The
remarkably broad party‐at‐interest standards crafted by Congress not only permit
rulings to be issued to parties that wish to qualify their own product as TAA waiver‐
eligible, but also to parties hoping for a ruling that a competitor’s product is not from a
DFCI, and therefore not waiver‐eligible. See 28 U.S.C. 2631(e), (k)(2); 19 C.F.R.
§§ 177.22(d), 177.23.
In other words, the Section 305(b)(1) final determination is highly mechanical.
Any party‐at‐interest can request a final determination about any article for which they
qualify as a party‐at‐interest. So long as that party complies with the regulatory
requirements for requesting a ruling, and provides enough information for Customs to
reach a conclusion, a final determination will issue. See 19 C.F.R. § 177.23‐.28
(specifying, inter alia, who may request a Section 305(b)(1) determination; the form and
contents of that request; how, where and by whom it is to be filed; how to request oral
discussion of the issues; and that Customs, upon receipt of a properly made request,
“will promptly issue a final determination.”). By issuing the final determination in the
format Customs prefers (“the country of origin of [Product X] . . . is [Country Y]”), all
parties‐at‐interest are left with an outcome that both answers the central question posed
Court No. 07‐00337 Page 9
by the statute, and complies with the regulatory requirement to issue a country‐of‐
origin determination, thereby providing valuable additional specificity. Once issued,
the determination comes with no strings attached; these parties‐at‐interest are free to
use a Section 305(b)(1) final determination for whatever purpose they see fit.
III. Rules of Origin Under the TAA and BAA
While Customs’ regulations spell out the conditions under which determinations
can be obtained, the substance of the Section 305(b)(1) final determination is found in
the application of a rule of origin, set out in the TAA, to the facts of a particular
product’s manufacture. See 19 U.S.C. §§ 2515(b)(1), 2518(4)(B). Under the TAA rule of
origin,
An article is a product of a country or instrumentality only if (i) it is wholly
the growth, product, or manufacture of that country or instrumentality, or
(ii) in the case of an article which consists in whole or in part of materials
from another country or instrumentality, it has been substantially
transformed into a new and different article of commerce with a name,
character, or use distinct from that of the article or articles from which it
was so transformed.
19 U.S.C. § 2518(4)(B) (emphasis added). Disputes under part (i) of this rule of origin
would be rare. Consequently, in the context of a Section 305(b)(1) final determination,
conflicts regarding the country of origin typically hinge on where a particular article is
found to have been substantially transformed.5 While this is the first 28 U.S.C. § 1581(e)
5
For ease of reference, the court will refer to this rule of origin from the TAA
simply as a “substantial transformation” rule of origin.
Court No. 07‐00337 Page 10
case brought at the U.S.C.I.T., the court has frequently dealt with similar substantial
transformation issues in the context of reviewing other types of country of origin
determinations. See, e.g., Ugine and ALZ Belgium, N.V. v. U.S., 31 CIT 1536, 1541‐43,
517 F. Supp. 2d 1333, 1337‐38 (2007) (noting the substantial transformation
determinations made by both Customs and the U.S. Department of Commerce in the
context of a countervailing duty proceeding), Torrington Co. v. U.S., 8 CIT 150, 596 F.
Supp. 1083 (1984) (making a substantial transformation determination in the context 28
U.S.C. § 1581(a)).
The substantial transformation rule of origin stands in contrast to the rule of
origin that applies under the Buy American Act. In order for a good to be considered a
“domestic end product,” procurable under the BAA, it must be manufactured in the
United States “substantially all from articles, materials, or supplies mined, produced, or
manufactured . . . in the United States.” 41 U.S.C. § 10a(a). By executive order,
“substantially all” has been clarified to mean greater than 50% domestic content. Exec.
Order No. 10,582, 19 Fed. Reg. 8,723 (Dec. 17, 1954), reprinted as amended after 41
U.S.C. § 10d at 346‐47 (2006).
The disparity between the applicable rules of origin under the TAA and the BAA
is not without consequence. As originally implemented, this incongruity threatened to
effect a disadvantage for certain goods manufactured in the U.S., that was nothing short
Court No. 07‐00337 Page 11
of ironic. While the purpose of the TAA had been to extend no‐less‐favorable treatment
to products from preferred trading partners than was given to domestic products, it
soon became clear that certain foreign goods might be treated more favorably than
goods comparably produced in the United States. Specifically, there was uncertainty as
to the procurement eligibility of goods substantially transformed in the United States
from mostly foreign components.
These so‐called “U.S.‐made end products” cannot receive the BAA’s domestic
procurement preference, because they are distinct from domestic end products, which
meet the 50% domestic content requirement of the BAA. However, they were not
automatically guaranteed to fare better under the TAA. Because U.S.‐made end
products are not substantially transformed in a designated foreign country or
instrumentality, they were thought not to be eligible for a TAA waiver of BAA
requirements. See generally 19 U.S.C. § 2511. But at the same time, while U.S.‐made
end products did not appear to qualify for preferential treatment under the BAA or the
TAA, the TAA does not permit their procurement to be prohibited. The prohibition
provision of the TAA only applies to goods substantially transformed in foreign
countries that are not a DFCI. See 19 U.S.C. § 2512. The consequence of the bare
overlay of the rules of origin in the BAA and the TAA was the peculiar, and politically
unpalatable prospect that a good substantially transformed in a DFCI—say,
Court No. 07‐00337 Page 12
Canada—from entirely foreign components, could be preferred in U.S. government
procurement over an identical product substantially transformed in the U.S. from the
same foreign components. Fortunately, as will be explained below, administrative
action has spared U.S.‐made end products from such an ignominious fate.
IV. The Section 305(b)(1) Final Determination at Issue in This Case
Xerox challenges a final determination issued in ruling letter HQ H009107 on
August 2, 2007 to Nukote International—a company that is not a party to this action.
(See Compl., Ex. A.) Nukote had sought a Section 305(b)(1) final determination
regarding the country‐of‐origin of its refurbished laser printer toner cartridges. (Id.)
Customs was presented with three different manufacturing scenarios, and was asked to
determine the country‐of‐origin for the printer cartridges in each. Customs framed the
issue as “[w]hat is the country of origin of the subject laser printer cartridge models for
the purpose of U.S. Government procurement?” (Id.) Customs’ holding in HQ
H009107 was that the merchandise in question was not substantially transformed in the
United States. (Id. at 3.) Customs did not articulate where the goods were substantially
transformed, and therefore did not positively identify the country of origin. (See id.)
Moreover, Customs’ ruling did not otherwise establish whether or not the articles in
question were products of a designated foreign country or instrumentality. (See
generally, id.)
Court No. 07‐00337 Page 13
Xerox has brought this case seeking a determination from the Court that
Customs erred, because the processing of Nukote’s goods in the United States was
sufficient to effect substantial transformation, and that the country of origin for
purposes of government procurement is therefore the United States. (Compl. ¶¶ 21‐42.)
While the Court was not provided with a copy of Nukote’s original request that
precipitated this ruling letter, based on the way Customs framed its holding, it appears
that Nukote presented the question to Customs in essentially the same way–seeking a
determination of whether or not its goods had been substantially transformed in the
United States.
PARTIES’ CONTENTIONS
I. Defendant’s Contentions
Defendant advances two central arguments in its motion to dismiss: (1) that the
determination issued by Customs is not a final determination described in Section
305(b)(1), and the Court therefore lacks jurisdiction to review it, and (2) that even a
favorable ruling from the Court is incapable of providing meaningful relief to Xerox,
and as such this case raises no justiciable controversy. (Mem. In Supp. Of Def.’s Mot.
To Dismiss This Action (“Def.’s Mot.”) 1‐3, 9‐21.)
In making its first argument, Defendant points out that 28 U.S.C. § 1581(e)
jurisdiction is only available to review a final determination issued pursuant to Section
Court No. 07‐00337 Page 14
305(b)(1) of the TAA. Quoting the language of Section 305(b)(1), Defendant argues that
in the present case “Customs never made a determination on whether the products in
question were, or were not,6 a product of a designated foreign country or
instrumentality,” and that therefore, “conspicuously absent is a decision by Customs
that is reviewable by the Court pursuant to section 1581(e).” (Id. at 13 (internal
quotation omitted) (emphasis in original).) Instead, Defendant argues that Customs
decided whether or not Nukote’s toner cartridges were products of the United States, a
final determination it believes falls outside the scope of Section 305(b)(1). (Id. at 12‐13.)
Defendant offers no theory as to why its client—Customs—issued a ruling that it now
claims was without statutory authorization.
The government evinces its belief that the only reason Nukote and Xerox could
have possibly wanted a determination that the goods in question were substantially
transformed in the United States would be to qualify these goods for procurement
6
In its reply, Defendant actually takes this argument a step further, claiming that
under Section 305(b)(1) and 19 C.F.R. § 177.21, Customs is “only permit[ted] to make
rulings related to products of foreign designated countries and instrumentalities.” (Def.’s
Reply to Pl.’s Opp’n. to Def.’s Mot. to Dismiss this Action (“Def.’s Reply.”) 12 (emphasis
added).)
If Customs’ decision making ability during a Section 305(b)(1) final
determination was constrained as suggested by Defendant, Customs would be
prohibited from issuing a determination about any product which it might conclude
was not a product of a designated foreign country or instrumentality. Clearly, as
negative determinations are fully contemplated by the statute, Defendant’s view is
unduly restrictive.
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under the Buy American Act. Defendant points out that this would not work. Citing
the “different criteria for the determination of country of origin” under the BAA and
TAA, Defendant points out—correctly—that “the criteria for one cannot be substituted
for the other.” (Id. at 13.) A ruling that Nukote’s goods were substantially transformed
in the U.S. would not address whether they met the 50% domestic content requirement
of the BAA. Defendant can imagine no other purpose for which Nukote or Xerox could
have wanted the requested ruling.
Defendant’s second argument—that this case lacks a justiciable controversy—is
built on its belief that the ruling sought by Nukote and Xerox would be useless.
Because the government believes that “the only relief that would be meaningful to
Xerox” would be a determination that its goods qualify for U.S. government
procurement under the BAA, and because HQ H009107 only addresses itself to the
issue of substantial transformation, Defendant claims that a determination by the Court
that Plaintiff’s goods were substantially transformed in the U.S. would be worthless. In
addition to assailing the “meaningful[ness]” of any relief the Court could provide,
Defendant also characterizes such relief as not “effectual,” not “consequential”, not
“concrete”, not “specific”, not “conclusive”, and with “no practical application.” (Def.’s
Mot. 17‐20.)
II. Plaintiff’s Contentions
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Xerox responds to the motion to dismiss primarily by asserting that Defendant’s
arguments evince a misunderstanding of the status of the U.S.‐made end product in
government procurement. (Mem. in Opp’n. to Def.’s Mot. to Dismiss (“Pl.’s Resp.”)
12‐19.) According to Xerox, Nukote’s ruling request (and Xerox’s case) are not
misguided attempts to qualify the goods in question for government procurement
under the BAA, nor did they need to be, because “at all times relevant to this litigation,”
federal regulations establish that U.S.‐made end products were eligible for government
procurement in their own right. (Id. at 16 (citing 48 C.F.R. §§ 25.003, 25.403.)
Plaintiff devotes virtually all of the argument in its response brief to
demonstrating that Defendant’s understanding of government procurement law is
considerably out of date. (Id. at 12‐19.) Plaintiff cites a 1990 decision by the General
Services Administration Board of Contract Appeals (“GSBCA”) in which this “federal
tribunal” addressed the conundrum created by the overlapping rules of origin between
the BAA and TAA, described above. (Id. at 12‐16); see also supra at 9‐12. In Protest of
International Business Machines Corporation, 90‐2 B.C.A. (CCH) P22,824, 1990 GSBCA
LEXIS 213 (May 18, 1990), IBM had offered certain computers for sale to the U.S.
government that had been substantially transformed in the United States but that did
not contain more than 50% domestic content. Id. at *10‐11. By operation of a federal
acquisition regulation in effect at the time, IBM’s offer was rejected: the computers did
Court No. 07‐00337 Page 17
not qualify as designated country end products under the TAA, and did not qualify as
domestic end products under the BAA. Id. The GSBCA reviewed the regulation that
had led to the exclusion of IBM’s U.S.‐made end products in the government
procurement bidding process, and held that it was inconsistent with 19 U.S.C. § 2512,
which only permits the exclusion of products from foreign countries that have not been
designated. Id. at *17‐21. The GSBCA found that goods like IBM’s could not be
excluded from government procurement by virtue of the TAA. Id. As a result, the
General Services Administration, which was bound by the GSBCA determination,
created a special category of procurable goods it denoted “U.S.‐made end products.”
General Services Administration Acquisition Regulation, 55 Fed. Reg. 46,068‐01
(temporary rule Nov. 1, 1990); 57 Fed. Reg. 42,708‐01 (final rule Sep. 16, 1992). Over the
following decade or so, the U.S.‐made end product came to be viewed as a sensible
component of government procurement law, and exceptions were created for it by the
heads of individual agencies, and eventually in the general federal acquisition
regulations and defense federal acquisition regulations. (Pl.’s Resp. at 16‐19); see also
Defense Federal Acquisition Regulation Supplement, 62 Fed. Reg. 47,407‐01 (proposed
rule Sep. 9, 1997) (waiving the restrictions of the BAA for Defense Department
acquisition of certain information technology products), Federal Acquisition Regulation;
Foreign Acquisition (Part 25 Rewrite), 64 Fed.Reg. 72,416‐01, 72,422 (final rule Dec. 27,
Court No. 07‐00337 Page 18
1999) (creating a category for U.S.‐made end products in the general Federal
Acquisition Regulations). As a result of these and other changes to the government
procurement landscape, it has been the case for many years, and at all times relevant to
this litigation, that products substantially transformed in the U.S. are highly eligible for
government procurement.
While Plaintiff therefore responds to Defendant’s second argument in great
detail, it devotes considerably less attention to Plaintiff’s first argument – that the
determination issued by Customs in this case is not a Section 305(b)(1) determination.
On that point, Plaintiff simply points out that HQ H009107 was “rendered pursuant to
Section 305(b)(1) of the Trade Agreements Act of 1979.” (Pl.’s Resp. at 8.) Plaintiff does
not address the apparent disparity identified by Defendant: how a final determination
as to whether the goods in question were substantially transformed in the United States
satisfies the requirement of Section 305(b)(1) that Customs decide whether the articles
are products of “a foreign country or instrumentality designated” pursuant to the TAA.
19 U.S.C. § 2515(b).
ANALYSIS
I. This Case Presents a Justiciable Controversy
Defendant’s argument that this case lacks a justiciable controversy, because even
a favorable ruling on Xerox’s claims could not provide Plaintiff with meaningful relief,
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is without merit. The relief sought by Xerox in its Complaint is an order that would “set
aside the final determination of Customs as unlawful,” and “such further and
additional relief as this Court may deem proper.” (Compl. at 14.) Defendant does not
argue that this relief is fundamentally unavailable, but rather claims that Plaintiff will
not be able to turn such a judgment into something with real utility or economic value.
That concern does not raise a problem of justiciability. Moreover, given the status of the
U.S.‐made end product in government procurement, it appears that, should Xerox
prevail in this case, it would have no trouble extracting utility out of a favorable
judgment.
This case is justiciable because it presents an appropriate occasion for judicial
action. See 13 Wright & Miller § 3529. Namely, it presents “a real and substantial
controversy” between Xerox and the government, which the Court may resolve by
providing “specific relief through a decree of conclusive character.” See Aetna Life Ins.
Co. of Hartford, Conn. v. Haworth, 300 U.S. 227, 241 (1937). Contrary to Defendant’s
assertions, this case will not require the court to stray “into a prediction of future
events,” nor does it involve “uncertain or contingent future events” at all. (See Def.’s
Mot. at 16 (citations omitted).) Namely, it is possible the Court could determine that the
goods described in the ruling letter were substantially transformed in the United States,
or in some other country, and reverse the determination made by Customs. Plaintiff
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faces no more of a challenge in rendering economic value from such a favorable
judgment than a plaintiff in any civil case. It is always incumbent on a plaintiff to know
why it seeks a particular ruling, and the fact that the Defendant is puzzled by Plaintiff’s
motivation does not raise a problem of justiciability. As noted above, the right to obtain
a Section 305(b)(1) final determination (or to obtain judicial review of it) is unaffected by
the motivation of the party requesting the determination, and the consequences that
flow from it. See supra at 7‐8.
Moreover, Defendant’s qualms about a potential judgment lacking meaning stem
from a radical misapprehension of the state of government procurement law. As Xerox
has compellingly demonstrated, the U.S.‐made end product has been highly procurable
for quite some time. Accordingly, a ruling that a particular article has been
substantially transformed in the U.S. has great potential value. Nukote and Xerox are
by no means the only parties to have seen economic value in this type of ruling. The
Court’s review of relevant legal databases reveals that no less than half of the Section
305(b)(1) final determinations issued by Customs over the last 30 plus years have dealt
squarely with the issue of whether a given article was substantially transformed in the
United States. Therefore, hearing no persuasive argument to the contrary, the Court
finds that this case presents a justiciable controversy.
Court No. 07‐00337 Page 21
II. HQ H009107 Contains a Section 305(b)(1) Final Determination
The government’s remaining argument—that the Court lacks jurisdiction
because the final determination issued by Customs in HQ H009107 is not a Section
305(b)(1) determination—is also unavailing. The ruling letter states that it is issued
“[p]ursuant to Subpart B of Part 177, 19 CFR [§] 177.21 et seq., which implements Title III
of the Trade Agreements Act of 1979, as amended (19 U.S.C. § 2511 et seq.)[.]” It could
scarcely be clearer. When Customs issued this ruling, it did so pursuant to its authority
conferred by Title III of the TAA. The document Customs produced indicates that the
agency issued what it believed to be a Section 305(b)(1) final determination. Moreover,
under 28 U.S.C. § 1581(e), this court has exclusive jurisdiction to review “any final
determination . . . under section 305(b)(1).” 28 U.S.C. § 1581(e) (emphasis added). Even
if the decision actually rendered contains shortcomings, HQ H009107 is clearly a final
determination under Section 305(b)(1) and as such, the court has jurisdiction to review
it.
It must be noted that Customs flirted briefly with the theory here advanced by its
attorneys, but ultimately chose the analysis advocated by Plaintiff. In the first Section
305(b)(1) final determination issued after the GSBCA’s decision in IBM, HQ 734977,
Customs explained that, on advice of the U.S. Trade Representative, it believed it was
“not authorized to render final determinations concerning whether an article is a
Court No. 07‐00337 Page 22
product of the U.S. for purposes of Title III of the Trade Agreements Act,” because
Section 305(b)(1) final determinations may only be made about products of designated
foreign countries, a category that necessarily excludes the United States. Final
Determination ‐ U.S. Government Procurement, 1993 U.S. Custom HQ Lexis 2084 at
*3–*4. (April 2, 1993); see also Gary H. Sampliner & Brian J. O’Shea, Rules of Origin for
Foreign Acquisitons Under the Trade Agreements Act of 1979, NAFTA, and the New GATT
Accords, 23 Pub. Cont. L.J. 207, 220‐21 (1994). However, Customs quickly abandoned
this position without apparent explanation. In the very next Section 305(b)(1) final
determination issued by the agency (HQ 735346), Customs proceeded without objection
to determine that the country of origin of some articles in question was the United
States. U.S. Government Procurement; Final Determination; 1995 U.S. Custom HQ
Lexis 243 at *9, *18–*19 (Feb. 23, 1995).7 No rationale was provided for this change in
the ruling letter, and the Court has located no final determination in which Customs has
revisited the issue since. Over the following fifteen years, Customs has repeatedly
issued determinations that various products were or were not substantially transformed
in the United States, without once claiming that it lacked statutory authority to do so.
7
The Court notes that both of these ruling letters were issued by the same
Customs official, Harvey B. Fox, then the Director of the Office of Regulations and
Rulings.
Court No. 07‐00337 Page 23
Defendant, though, has raised an interesting point. What if its client, Customs,
has been issuing final determinations pursuant to Section 305(b)(1) that are beyond the
scope of that statute? As noted above, the nature of the ruling issued to Nukote was not
unusual; more than half of the purported Section 305(b)(1) final determinations ever
issued by Customs have addressed whether the articles in question were products of
the United States. If the theory advanced by Defendant is correct, Customs has
flagrantly spurned the requirements of the statute and engaged in an unchecked pattern
of ultra vires activity. Fortunately, Defendant is wrong.
When issuing a Section 305(b)(1) final determination, as long as Customs actually
determines the country of origin (or rules that the country of origin is indeterminate
under the facts of the case), it complies with the requirements of 19 U.S.C. § 2515(b)(1)
and 19 C.F.R. § 177 Subpart B. As explained above, from the moment Customs makes
its pronouncement regarding country of origin, whether the “article is or would be a
product of a foreign country or instrumentality designated pursuant to” the TAA
becomes self‐evident. See id. This conclusion follows whether Customs rules that the
article has been substantially transformed in Canada, North Korea, the United States, or
any other country or instrumentality. Additionally, a final determination that although
sufficient facts have been presented, it cannot be determined where the product was
substantially transformed, is also consistent with the statute. Nothing in the statute
Court No. 07‐00337 Page 24
would require Customs to make a speculative final determination upon insufficient
facts. Such a ruling would have the same practical effect as a negative Section 305(b)(1)
final determination—a finding that the articles in question do not qualify as products of
any DFCI.
III. HQ H009107 is Incomplete, and Warrants a Remand
While nothing about the inquiry undertaken in HQ H009107 was fundamentally
inconsistent with Section 305(b)(1), Customs left the job unfinished. As the final
determination now stands, it fails to indicate whether Nukote’s goods are or are not
products of a DFCI. As such, the Court finds that a remand is appropriate. Customs
adequately framed the issue in HQ H009107 as “[w]hat is the country of origin of the
subject laser printer cartridge models for the purpose of U.S. Government
procurement?” (Compl. Ex. A.) But, Customs held that “[t]he operations performed at
Nukote’s Rochester, New York facility do not result in a substantial transformation of
the cartridges. Therefore, the cartridges will not be considered to be products of the
United States.” (Pl.’s Resp. at 6.) The problem with this holding is that Customs fails to
establish where the goods have been substantially transformed, or even if they have been
substantially transformed.
It is possible, given the facts in this case, that substantial transformation occurred
in one of any number of countries, or that the country of origin is indeterminate. In the
Court No. 07‐00337 Page 25
final determination, Customs explains that Nukote’s printer cartridges are recycled
from empty toner cartridges that have been collected “in the United States and, to a
substantially lesser extent, in Canada, Singapore, the United Kingdom, Hong Kong and
China.” (Id. at 2.) The empty cartridges are sorted in an unnamed “foreign location,”
and certain manufacturing processes take place in an unnamed “second foreign
location,” before final processes are undertaken in the United States. (Id. at 5.) It is
appropriate for Customs to first address whether any of these processes substantially
transformed Nukote’s goods before the Court reaches the merits of this case.
In the context of reviewing administrative action, the Supreme Court has stated
that a court cannot “be expected to chisel that which must be precise from what the
agency has left vague and indecisive.” SEC v. Chenery Corp., 332 U.S. 194, 197 (1947).
When an agency violates a statutory obligation to provide a clear decision, the court
must remand the decision to the agency for clarification, so that the court does not
“propel [itself] into the domain which Congress has set aside exclusively for the
administrative agency.” Id. at 196. Moreover, this Court has explicit statutory
authority to “order any . . . form of relief that is appropriate in a civil action, including
. . . orders of remand.” 28 U.S.C. § 2643(c)(1).8 Customs must remedy the shortcomings
in HQ H009107 by taking action consistent with Section 305(b)(1) of the TAA, consistent
8
Additionally, the Court notes that Plaintiff has requested a remand in its prayer
for relief. (Compl. 14.)
Court No. 07‐00337 Page 26
with its regulations set out in 19 C.F.R. Part 177, Subpart B which require the issuance of
a country of origin determination, and consistent with its 30 year practice of issuing
complete country of origin determinations. On remand, Customs must identify the
country of origin of Nukote’s printer cartridges for purposes of government
procurement, or, alternatively, make an explicit final determination that the country of
origin cannot be determined. For the foregoing reasons, Defendant’s motion to dismiss
is therefore denied, and this case is remanded to Customs.
ORDER
Upon consideration of Defendant’s motion to dismiss, Plaintiff’s response
thereto, and Defendant’s reply, and upon due deliberation, it is hereby
ORDERED that Defendant’s motion to dismiss is hereby DENIED, and it is
further
ORDERED that no later than Tuesday, February 8, 2011, Customs shall file with
the Court a final determination upon remand that is consistent with this Opinion and
Order, and it is further
ORDERED that on remand, Customs must identify the country of origin of
Nukote’s printer cartridges for purposes of government procurement, or, alternatively,
make an explicit final determination that the country of origin cannot be determined,
and it is further
Court No. 07‐00337 Page 27
ORDERED that the parties shall submit to the Court no later than Tuesday,
February 15, 2011 a joint proposed scheduling order governing the balance of this case.
/s/ Gregory W. Carman
Gregory W. Carman, Judge
Dated: January 24, 2011
New York, NY
ERRATA
Please make the following changes to Xerox Corp. v. United States, Court No. 07‐00337,
Slip Op. No. 11‐8:
(1) page 1, counsel list, strike the following
• “John M. Petersvon”
and replace with
• “John M. Peterson”
(2) page 22, line 6, strike the following
• “Foreign Acquisitons”
and replace with
• “Foreign Acquisitions”
January 31, 2011