Wednesday, June 29, 2011

Who Left USTR In Charge?

Usually, when a federal agency takes some action, it provides a statement of legal authority. While this may look like boilerplate, it can be important. For example, the statute providing legal authority might include procedural steps that must be followed before the action can be taken. Or, the legal authority might dictate whether a court has jurisdiction to review the action. Almond Bros. Lumber v. United States, is an example of the latter.

This case from the Court of Appeals for the Federal Circuit involves the long-running dispute between the United States and Canada over softwood lumber imports to the U.S. Softwood lumber is possibly the Jarndyce v. Jarndyce of the trade world. [Note: I never actually read Bleak House, I just like the metaphor.] All you need to understand this case is the gist, and that is all I will give you.

Canada sells lots of softwood lumber to the U.S. Back in 1986, a coalition of U.S. lumber producers filed a petition seeking the imposition of countervailing duties on the imports. Before the countervailing duty investigation was complete, the U.S. and Canada entered into a Memorandum of Understanding to manage the softwood lumber trade. Eventually, Canada terminated that agreement, which prompted the Commerce department to self-initate a new investigation. Following a CVD order, the U.S. engaged in marathon litigation in U.S. courts, the U.S.-Canada Binational Panel, an Extraordinary Challenge Committee (“ECC”), and possibly the Galactic Senate on Coruscant. As all that played out, but before an order was finalized, the U.S. and Canada entered into another Softwood Lumber Agreement (“SLA”) in 1996.

That SLA expired in 2001, which prompted the U.S. industry to file a new petition; this time, seeking countervailing and antidumping duties. For the first time, these petitions actually resulted in orders. As you can guess, that spawned more litigation including a Binational Panel, ECC, WTO panel, and a hearing before the Guardians of the Universe on Oa (in 3D!). All of which was superseded by a 2006 SLA. That agreement required Canada to distribute $500 million to members of the U.S. industry represented by the Coalition.

[Side note: To keep DC Comics from getting mad at me for using their image, I note first that I spend too much money on their products. Second, I paid to see the movie. Third, readers to my blog are encouraged to buy these Guardians of the Universe action figures from DC Direct.]

As you might guess, the plaintiffs in this case are not members of the Coalition. They went to the Court of International Trade arguing that they are entitled to a portion of the funds from Canada because the purpose of the SLA was to protect the U.S. industry, not just the Coalition members, affected by Canada’s wrongdoing.

That’s a reasonable enough argument. The question is whether the CIT has the subject matter jurisdiction to decide the case. The answer to that turns on exactly what law authorized the USTR to enter into all these agreements. Keep in mind that the USTR acts on behalf of the President in trade negotiations. If the USTR was acting under some non-specific or constitutional authority, the CIT might not be the place to bring the case (and there may be no court with jurisdiction). If, on the other hand, the USTR was acting pursuant to U.S. law relating “tariffs, duties, fees, or other taxes on the importation of merchandise for reasons other than the raising of revenue,” then the Court of International Trade is the right place pursuant to 28 U.S.C. 1581(i).

So, what exactly was the USTR doing? According to the Federal Circuit, the USTR was making agreements pursuant to Section 301 of the Trade Act of 1974, which is 19 U.S.C. 2411. This is a provision that allows the President to take action when a foreign country imposes an unreasonable or discriminatory policy that burdens or restricts U.S. commerce. One action permitted under Section 301 is the collection of duties, which would not be for the raising of revenue.

The government essentially argued that the USTR never said it was acting under sec. 2411.  Rather, it stated in a press release that it was acting under its general authority to negotiate, including under the Trade Act of 1974. Further, the government argued that had the USTR been acting pursuant to sec. 2411, it would have followed the required procedure. Since it did not, it must have been acting under other authority.

The Federal Circuit did not buy this argument. Rather, it looked back to the beginning of the dispute. The Court noted that the 1996 SLA was made pursuant to sec. 2411 and that USTR followed all the procedural requirement of that statute. Nothing in the record indicated that the 2006 agreement, which was intended to address the same issues, was based on any different legal authority. Furthermore, all of the parties to the dispute had plenty of notice from 1986 onward that the USTR might enter into agreements of this nature. Further, the USTR release invoked the Trade Act of 1974 as a basis for its action. The Federal Circuit took this as an indication that sec. 2411 was the relevant authority. Lastly, President Reagan referenced Section 301 of the Trade Act of 1974 in a letter published in the Federal Register relating to the 1986 agreement. All together, the Federal Circuit found this a sufficient basis to conclude that SLA is a tariff measure not related to the raising of revenue and, therefore, the Court of International Trade should have taken jurisdiction.

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