Slip Op. 05-46
UNITED STATES COURT OF INTERNATIONAL TRADE
Before: Judge Judith M. Barzilay
____________________________________
x
Dixon Ticonderoga Company, :
Plaintiff, :
Court No. 04-00027
v. :
United States Customs and Border :
Protection
and Robert C. Bonner, :
Defendants. :
____________________________________x
[Plaintiff’s Motion for Judgment on Agency Record granted.]
Decided: April 4, 2005
Gray Robinson, P.A. (A. Anthony Giovanoli), Guy S. Haggard for Plaintiff.
Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director; Jeanne E. Davidson,
Deputy Director, (David S. Silverbrand), Trial Attorney, U.S. Department of Justice, Civil
Division, Commercial Litigation Branch; Charles Steuart, Office of Chief Counsel, United States
Customs & Border Protection, of counsel, for Defendant.
OPINION
BARZILAY, JUDGE:
Plaintiff, Dixon Ticonderoga Company (“Dixon”), seeks review of a decision by
Defendant, United States Customs and Border Protection of the Department of Homeland
Security (“Customs” or “the Government”) to deny its application to receive its share of assessed
Chinese pencil anti-dumping duties for fiscal year 2003. Customs denied Dixon’s application
because it was filed late, and Dixon argues that this decision was arbitrary and capricious because
Court No. 04-00027 Page 2
Customs itself failed to publish notice of intent to distribute the offset in the Federal Register at
least 90 days before the end of Customs’ fiscal year, as required by Customs’ own regulations.
Dixon also argues that Customs’ failure to timely publish this notification was substantially
prejudicial, and requests that this court either require Customs to reverse its denial of Dixon’s
application and allow Dixon to receive its share of the disbursement for fiscal year 2003, waive
the 2003 application deadline for all U.S. pencil manufacturers, or require Customs to void the
distribution process thus far and republish its Notice of Intent so that applications may be
resubmitted. Although the court finds that the regulatory deadline set forth in 19 C.F.R. §
159.62(a) constitutes a mere procedural guideline, Dixon’s motion is granted because the court
finds that Customs’ failure to abide by its own notice regulations was substantially prejudicial to
Dixon.
Background
This case concerns a distribution pursuant to the Continued Dumping and Subsidy Offset
Act of 2000 (“CDSOA”), also known as the Byrd Amendment.1 19 U.S.C. § 1675c (2005). In
1994, the Pencil Manufacturers Association, of which Dixon is a member, petitioned the United
States Department of Commerce (“Commerce”) alleging that certain cased pencils from the
People’s Republic of China were being sold in the United States at less-than-fair value. See
1
The CDSOA provides that assessed duties received from antidumping orders,
countervailing duty orders, or findings under the Antidumping Act of 1921 be distributed to
“affected domestic producers” for certain qualifying expenditures. 19 U.S.C. § 1675c. This
court notes that recently, a WTO Appellate Panel held that the Byrd Amendment is not in
conformity with the United States’ obligations under the WTO Agreements. WTO Appellate
Body, United States Continued Dumping and Subsidy Offset Act of 2000,
http://docsonline.wto.org/DDFDocuments/t/WT/DS/234ABR.doc, at 120-21. The validity of the
Byrd Amendment is not at issue in this case, and this court applies the law as it stands.
Court No. 04-00027 Page 3
Notice of Final Determination of Sales at Less than Fair Value: Certain Cased Pencils From the
People’s Republic of China, 59 Fed. Reg. 55625 (Nov. 8, 1994). After concluding that pencils
from China were being sold at less-than-fair value in the United States, Commerce published an
antidumping duty order. See Antidumping Duty Order: Certain Cased Pencils from the People’s
Republic of China, 59 Fed. Reg. 66909 (Dec. 28, 1994).
As part of the CDSOA distribution process, Customs is statutorily required to publish a
“Notice of Intent to Distribute” at least 30 days before the distribution of a continued dumping
and subsidy offset. 19 U.S.C. § 1675c(d)(2) (2003). Furthermore, according to Customs’ own
regulations, it is required to publish the Notice of Intent to Distribute at least 90 days before the
end of the fiscal year. 19 C.F.R. § 159.62(a) (2003). Claimants seeking a share of the
distribution then have 60 days from the date of publication of the Notice of Intent to Distribute to
file the certifications required to receive an offset distribution. 19 C.F.R. § 159.63(a) (2003). In
2003, Customs published the Notice of Intent to Distribute on July 14 – 78 days prior to the end
of the fiscal year and 12 days after the regulatory deadline. Distribution of Continued Dumping
and Subsidy Offset to Affected Domestic Producers, 68 Fed. Reg. 41,597 (July 14, 2003).
On October 23, 2004 – 102 days after Customs’ publication of the Notice of Intent to
Distribute – Dixon filed its application to receive a portion of the assessed Chinese pencil duties
for that fiscal year. Dixon argued to Customs that Customs’ own failure to provide notice as
required by 19 C.F.R. § 159.62(a) caused it as well as other domestic pencil manufacturers to file
late. Nonetheless, Customs denied Dixon’s application in a letter dated December 16, 2003,
stating that because “all certifications were due no later than September 12, 2003,” and because
Court No. 04-00027 Page 4
Customs received Dixon’s certification on October 24, 2003, “more than 60 days after the
publication date of the FR Notice, [Customs] must deny [Dixon’s] claim for a FY 2003
disbursement under the CDSOA.” Certified Admin. R. at 3.
Analysis
This court has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(i). Thus, the
court will set aside any agency action, findings or conclusions found to be arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C. § 706(2)(A) (2005).
Under this standard of review, an administrative action must be upheld if the court finds that the
agency “has considered the relevant factors and articulated a rational connection between the
facts found and the choice made.” Baltimore Gas & Electric v. N.R.D.C., 462 U.S. 87, 105
(1983).
It is uncontested that Customs failed to timely comply with the regulatory notice
requirement of section 159.62(a)2. Customs, however, asserts that although it published notice of
its intent to distribute late, it retains the authority to reject distribution applications for
untimeliness pursuant to 19 C.F.R. § 159.63(a)3. Dixon argues that this seeming “double-
2
Section 159.62(a) states:
At least 90 days before the end of a fiscal year, Customs will publish in the
Federal Register a notice of intention to distribute assessed duties received as the
continued dumping and subsidy offset for that fiscal year. The notice will include
the list of domestic producers, based upon the list supplied by the USITC (see §
159.61(b)(1)), that would be potentially eligible to receive the distribution.
3
Section 159.63(a) states:
Requirement and purpose for certification. In order to obtain a distribution of the
offset, each affected domestic producer must submit a certification, in triplicate,
or electronically as authorized by Customs, to the Assistant Commissioner, Office
of Regulations and Rulings, Headquarters, or designee, that must be received
Court No. 04-00027 Page 5
standard” of treating its own deadline to provide notice to the domestic industry as a “mere
guideline” while treating the domestics’ deadline to apply for distributions as a “hard and strict
rule” constitutes an arbitrary and capricious construction of Customs’ own regulations. Dixon
further argues that Customs’ failure to provide notice of its intent to distribute by the regulatory
deadline is a strong signal to the domestic industry that no distribution is forthcoming for that
fiscal year, as domestics have no other indication that a distribution is forthcoming.4 Thus,
because of its own failure to provide timely notice, according to Dixon, Customs should have
waived the deadline for domestic pencil manufacturers, provided notice of a reasonable
extension, or simply re-started the process.
Customs responds that it acted reasonably in providing the full 60 days required by
section 159.63(a) after the date of publication of notice in the Federal Register of its intent to
within 60 days after the date of publication of the notice in the Federal Register,
indicating that the affected domestic producer desires to receive a distribution.
The certification must enumerate the qualifying expenditures incurred by the
domestic producer since the issuance of an order or finding for which a
distribution has not previously been made, and it must demonstrate that the
domestic producer is eligible to receive a distribution as an affected domestic
producer.
4
The court notes that domestic producers are under notice that Customs may publish its
intent to distribute in the Federal Register at any time prior to the 90th day before the end of the
fiscal year. 19 C.F.R. § 159.62(a) (2003). Although Customs cites to a number of cases in
support of the proposition that publication of an item in the Federal Register constitutes
constructive notice of anything within that item, see, e.g., Fed. Crop Ins. Corp. v. Merrill, 332
U.S. 380 (1947), the court finds merit in Plaintiff’s response that such a position renders the
regulation meaningless. Under Defendant’s theory, domestic producers would be required to
expect notice not prior to the 90th day before the end of the fiscal year, as directed by the
regulation, but rather at any given time because constructive notice, even outside the purview of
the regulation, would suffice to trigger the 60-day deadline within which certification must be
submitted under section 159.63(a).
Court No. 04-00027 Page 6
distribute, and that Dixon was given constructive notice of the intent to distribute by virtue of
this publication.
The Supreme Court, in Brock v. Pierce County, 476 U.S. 253 (1986), provides direction
regarding this issue. The Court in that case considered section 106(b) of the Comprehensive
Employment and Training Act (“CETA”), 29 U.S.C. § 816(b) and its implementing regulations.
476 U.S. at 255. The statute and regulations directed the Secretary of Labor to issue a final
determination as to the misuse of CETA funds by a grant recipient within 120 days after
receiving a complaint alleging such a misuse. Id. at 256. After examining the statutory language
and legislative history, the Court held that the Secretary’s failure to satisfy the 120-day statutory
timing requirement did not necessarily deprive the Secretary of the power to recover misused
funds. Id. at 266. The Court stated that it “would be most reluctant to conclude that every failure
of an agency to observe a procedural requirement voids subsequent agency action, especially
when important public rights are at stake.” Id. at 260.
Furthermore, the Federal Circuit’s opinion in Kemira Fibres Oy v. United States, 61 F.3d
866 (Fed. Cir. 1995), is instructive. In that case, the Department of Commerce failed to publish a
notice of its intention to revoke a particular finding that had been made under the antidumping
laws, in violation of Commerce’s own regulations. Kemira, 61 F.3d at 868. Considering
whether Commerce’s failure to comply with the regulatory notice requirement voided its
subsequent administrative action, the Court held that the administrative default by Commerce did
not compel the court to revoke the antidumping finding where the plaintiff, a foreign importer,
could not establish that it was prejudiced by the default. Id. at 876. The Court explained that the
Court No. 04-00027 Page 7
plaintiff “should not become immune from the antidumping laws because Commerce missed the
deadline . . . [t]he national interest in the regulation of importation should not fall victim to an
oversight by Commerce . . .” Id. at 873.
Thus, this court must first determine whether, under the Brock standard, Congress
intended Customs to lose its authority to administer the CDSOA, having failed to meet its
regulatory timing requirements. Cf. Brock, 476 U.S. at 266. If the court finds that Congress did
not intend Customs to lose its authority, and that the timing requirements are merely procedural
guidelines, the court must then inquire into whether Dixon was substantially prejudiced by
Customs’ failure. Cf. Kemira, 61 F.3d at 873.
A. Customs’ Authority to Administer the CDSOA
As a general rule, an agency is required to comply with its own regulations. Kemira, 61
F.3d at 871 (citation omitted). However, “not every failure of an agency to observe timing
requirements voids subsequent agency action.” Id. (citing Brock, 476 U.S. at 260). In Kemira,
the Federal Circuit noted that “in the context of an agency’s failure to comply with statutorily-
mandated timing directives, the Supreme court has rejected the argument that non-compliance
with a timing requirement renders subsequent agency action voidable.” 61 F.3d at 872. The
Federal Circuit went on to indicate that this argument “is even less cogent . . . when the relevant
statute does not provide a timing requirement, but the requirement is found in the administering
agency’s implementation regulations.” Id. at 873. The court is therefore directed to the statute
and its history to determine whether Customs’ construction of the regulation is a permissible one.
Kemira, 61 F.3d at 873. (citing Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.,
Court No. 04-00027 Page 8
467 U.S. 837, 844-45 (1984); Asociacion Colombiana de Exportadores de Flores v. United
States, 903 F.2d 1555, 1559 (Fed. Cir. 1990) (“[An agency’s] interpretation of its own
regulations implementing ‘the statutes it administers’ is entitled to ‘substantial weight.’”)
(citation omitted)). The CDSOA instructs Customs to publish a Federal Register notice at
least 30 days before a distribution, but does not bind this time limitation to any specific date in
either the calendar or fiscal year. Specifically, it provides that:
[t]he Commissioner shall publish in the Federal Register at least 30 days before
the distribution of a continued dumping and subsidy offset, a notice of intention to
distribute the offset and the list of affected domestic producers potentially eligible
for the distribution based on the list obtained from the Commission under
paragraph (1). The Commissioner shall request a certification from each
potentially eligible affected domestic producer . . .
19 U.S.C. § 1675c(d)(2) (2003). Thus, the statute left up to Customs’ determination when during
the fiscal year to publish the Federal Register notice, and also when applications for distributions
must be received after notice has been provided. Customs further explains that
there is a window of 90 days between the date Customs receives the certification
and the date the monies are distributed during which Customs must review and
process the claims. . . . [C]alculating the distribution amounts is a long, detailed,
and difficult process. . . . At a certain point there must be a deadline . . . Without
the deadline, the amount available for distribution could never be fixed, there
would never be an end to the processing of CDSOA distributions . . . .
Def.’s Opp. to Pl.’s Mot. for J. on the Agency Record at 8-9. The statutory language clearly
indicates Congress’ intention that the domestic industry affected by dumping or subsidies benefit
from the trade laws, but is silent regarding timing requirements. Thus, notification for domestic
parties of a forthcoming distribution is a paramount concern to the administration of the CDSOA,
as is ensuring that applications are received and offsets are disbursed according to a strict time
Court No. 04-00027 Page 9
line. The court finds that the timing requirements of section 159.62(a) are merely procedural aids
in applying the CDSOA. Furthermore, Customs has articulated a rational connection between
the statutory and regulatory framework and its decision to strictly apply section 159.63(a).
B. Substantial Prejudice
Since the requirements at issue are merely procedural aids, in order to prevail Dixon must
establish that it was prejudiced by Customs’ non-compliance with section 159.62(a). See
Kemira, 61 F.3d at 875 (citing American Farm Lines v. Black Ball Freight Serv. 397 U.S. 532,
539 (1970); Cornelius v. Nutt, 472 U.S. 648, 663 (1985); Belton Indus., Inc. v. United States, 6
F.3d 756, 761 (Fed. Cir. 1993)) (“Since the requirement at issue is merely procedural, Kemira
must establish that it was prejudiced by Commerce’s non-compliance with this requirement.”).
See also Intercargo Insurance Co. v. United States, 83 F.3d 391 (1996) (“The public interest in
the administration of the importation laws should not ‘fall victim’ to the failure by the Customs
Service to use the requisite language in its extension notices, if the oversight has not had any
prejudicial impact on the plaintiff”). Prejudice means “injury to an interest that the statute,
regulation, or rule in question was designed to protect.” Id. (citing Hernandez-Luis v. INS, 869
F.2d 496, 498 (9th Cir. 1989); State of Texas v. Lyng, 868 F.2d 795, 799-800 (5th Cir. 1989);
United States v. Cerda-Pena, 799 F.2d 1374, 1377 (9th Cir. 1986); Aero Mayflower Transit, Inc.
v. ICC, 228 U.S. App. D.C. 438, 711 F.2d 224, 232 (D.C. Cir. 1983); Diaz v. Department of the
Air Force, 63 F.3d 1107, 1109 (Fed. Cir. 1995)).
The statute at issue in this case is the CDSOA, which provides for distribution of all
funds (including all interest earned on the funds) from assessed duties received in the preceding
Court No. 04-00027 Page 10
fiscal year to affected domestic producers. 19 U.S.C. § 1675c(d)(3) (2003). While Congress has
provided no indication that it intended that Customs lose its authority to administer the CDSOA
if it misses the regulatory deadline imposed by section 159.62(a), Congress has made it clear that
the purpose of the CDSOA is the protection of domestic producers. See CONGRESSIONAL
FINDINGS ACT , Oct. 28, 2000, P.L. 106-387, § 1(a), 114 Stat. 1549 (enacting into law § 1002 of
Title X of H.R. 5426 (114 Stat. 1549A-72), as introduced on Oct. 6, 2000) (“Consistent with the
rights of the United States under the World Trade Organization, injurious dumping is to be
condemned and actionable subsidies which cause injury to domestic industries must be
effectively neutralized.”); WTO DECISION AND THE CDO ACT , 108th Cong. (2003), 149 Cong.
Rec. S1064-03 (statement of Mr. Hollings) (“The [CDSOA] ensures that the U.S. companies and
their workers can compete against unfair imports from foreign companies who dump their
products in the U.S. If a foreign company continues to dump its products in the U.S. after having
been found guilty of that practice, the [CDSOA] allows that future penalty tariff payments be
made to the companies who are being injured. We would all prefer that companies halt their
illegal dumping, but if a foreign competitor chooses to continue the predatory practices, then the
tariffs assist the U.S. workers and industry to remain competitive. . . . [T]he money assists the
impacted companies to help them remain competitive, invest in new technologies and keep jobs
in the U.S.”).5 Unlike in Kemira, where the plaintiff was a foreign importer of fiber and found to
5
The court notes that the legislative history of the CDSOA is not as robust as that of
other provisions of the United States Code. See 146 CONG . REC. S10732-01 (Oct. 18, 2000)
(statement of Sen. Nickels). Such as it is, however, the legislative history strongly supports
Plaintiff’s claim that the CDSOA was enacted to benefit domestic producers, and that it
accomplishes this objective in part by providing for collected duties to be distributed to qualified
domestic producers.
Court No. 04-00027 Page 11
be outside the national interest of the timing regulation implicated in that case, the harm to Dixon
by Customs’ delay in this case is emblematic of the harm done to the domestic industry. Cf.
Kemira, 61 F.3d at 875-76 (“we strongly deplore Commerce’s or any other agency’s failure to
follow its own regulations . . . [s]uch failure harms those who assume agency compliance . . .
[h]owever, such prejudice has not been shown here.”).
Dixon is precisely one of the contemplated beneficiaries of the CDSOA. See 19 U.S.C. §
1675c(b)(1) . Thus, Dixon’s interest in receiving its share of the anti-dumping duties assessed
against Chinese pencil manufacturers was clearly injured by Customs’ failure to give timely
notice of its intent to distribute – the only notice that Customs’ regulations direct domestic
producers to expect. Such failure harms those who assume agency compliance with section
159.62(a) and are prejudiced by non-compliance, particularly because domestic producers receive
no other indication of Customs’ intent to distribute an offset or the deadline within which to file
for a share of the offset. Kemira, 61 F.3d at 875-76. Such prejudice has been shown here.
Conclusion
Because Customs’ failure to publish timely notice of its intent to distribute the
antidumping duty offset substantially prejudiced Dixon, Dixon’s motion for judgment on the
agency record is granted. Counsel are ordered to confer regarding a remedy and are further
ordered to advise the court, 30 days from the date of this opinion, of the proposed remedy.
April 4, 2005 /s/ Judith M. Barzilay
Dated:_______________________________ _____________________________
New York, NY Judith M. Barzilay, Judge