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Timex V.I. Inc. v. United States

September 23, 1998

TIMEX V.I., INC., PLAINTIFF-APPELLANT,
v.
UNITED STATES, WILLIAM DALEY, SECRETARY OF THE DEPARTMENT OF COMMERCE, BRUCE BABBITT, SECRETARY OF THE DEPARTMENT OF INTERIOR, FRANK CREEL, DIRECTOR, STATUTORY IMPORT PROGRAMS STAFF, IMPORT ADMINISTRATION AND DEPARTMENT OF COMMERCE, DEFENDANTS-APPELLEES.



Mayer, Chief Judge, Plager and Schall, Circuit Judges.

The opinion of the court was delivered by: Plager, Circuit Judge

Appealed from: United States Court of International Trade

Senior Judge Dominick L. DiCarlo United States Court of Appeals for the Federal Circuit

This case presents a question of statutory construction, one of first impression. The statute at issue provides benefits on an annual basis to those companies that produce wristwatches in the United States insular possessions, e.g., the Virgin Islands. See Harmonized Tariff Schedule of the United States, § XVIII, ch. 91, Additional U.S. Note 5, para. (h)(i) (Supp. I 1995). The question presented is whether, in order to qualify for the statutory benefits for watch production in a given year, the company must be a "producer" in the insular possessions in the following year.

In response to the application of Timex V.I., Inc. ("Timex") for the statutory benefits for its 1995 Virgin Islands watch production, the U.S. Department of Commerce *fn1 denied Timex's application because Timex was not a "producer" in the Virgin Islands in the following year (1996). In turn, the Court of International Trade determined that the statute does not directly address the question and then affirmed Commerce's statutory construction as "reasonable." Timex V.I., Inc., v. United States, 969 F. Supp. 1345, 1347-49 (Ct. Int'l Trade 1997). Because Commerce's statutory construction is contrary to Congress's clearly expressed intent, we reverse the judgment of the Court of International Trade.

BACKGROUND

Timex V.I., Inc., is a wholly-owned subsidiary of Timex Corporation. Timex began watch assembly operations in the Virgin Islands in 1986, and there at various times through 1995 employed up to 120 people and assembled up to 700,000 watches annually. However, in response to changing market conditions, Timex determined that its Virgin Islands assembly operations were no longer economically viable and that it would therefore cease those operations by the end of 1995. In July 1995, Timex informed Commerce of its planned closing of its Virgin Islands facility.

The statutory benefits at issue are specified in paragraph (h) of note 5 of the Additional U.S. Notes to Chapter 91 of Section XVIII of the Harmonized Tariff Schedule of the United States (Supp. I 1995). *fn2 Paragraph (h) of note 5 reads in relevant part: (h) (i) In the case of each calendar year beginning after December 31, 1982, and before January 1, 2007, the Secretaries, acting jointly, shall: (A) verify the wages paid by each producer to permanent residents of the insular possessions during the preceding calendar year; and (B) issue to each producer (not later than March 1 of such year) a certificate for the applicable amount. (ii) . . . "[A]pplicable amount" means an amount equal to the sum of: (A) 90 percent of the producer's creditable wages . . . during the preceding calendar year of the first 300,000 units; plus (B) the applicable graduated declining percentage . . . of the producer's creditable wages . . . during the preceding calendar year of units in excess of 300,000 but not in excess of 750,000.

Accordingly, by its terms the statutory provision provides a rebate for wages paid by watch manufacturers in the insular possessions in any given year. The statute calls for payment of wage rebates in the form of negotiable, duty-refund certificates, issued on a calendar year basis. *fn3 The statute specifies that the amount of the certificate, and hence the amount of the rebate, is to be directly proportional to the amount of wages paid in the applicable year. The Secretaries of the U.S. Department of Commerce and the U.S. Department of Interior (herein "Commerce") are directed by the statute to verify the wages paid in that year and to issue the certificate based on the amount of those wages. However, the statute does not call for issuance of the certificate until March of the following year.

In considering Timex's application for a rebate certificate for its 1995 production, Commerce construed the statutory provision and based thereon rejected Timex's application. In a letter, and in a subsequent decision memorandum, Commerce opined that the statute requires that the applicant be a "producer" in the year in which the certificate is issued, i.e., in the following year. See Director's Letter of Sept. 27, 1995, at 1; Secretaries' Decision of Jan. 25, 1996, at 2. Timex was a "producer" in the Virgin Islands in 1995, producing in that year over three-hundred thousand watches and paying nearly $1.5 million in wages. However, because Timex ceased its Virgin Islands operations at the end of 1995, it was not a "producer" there in the following year, 1996. Commerce decided, therefore, based on its statutory construction, that Timex was not entitled to a certificate for its 1995 production.

The precise question presented is whether, in order to qualify for a rebate certificate for wages paid in the applicable year, the statute requires that the certificate applicant be a "producer" in the insular possessions in the following year. On Timex's appeal to the Court of International Trade, that court reviewed a portion of the statute and concluded that it "does not speak directly to the question" and that therefore the only matter for review is whether Commerce's statutory construction is reasonable. Timex, 969 F. Supp. 1345, 1347-48 (Ct. Int'l Trade 1997) (citing Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842 (1984)). Finding Commerce's statutory construction reasonable, the trial court affirmed Commerce's decision. See id. at 1349.

Discussion

I. The Initial Question of `Chevron' Deference

We do not fulfill our duty to say what the law is, see Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803), by merely agreeing to Commerce's interpretation of the statutory provision at issue if it is `reasonable,' regardless of whether we think it correct. Rather, before granting an agency's statutory interpretation such great deference (commonly referred to as `Chevron' deference), we must first carefully investigate the matter to determine whether Congress's purpose and intent on the question at issue is judicially ascertainable. See Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 & n.9 (1984). Only if, after this investigation, we conclude that Congress either had no intent on the matter, or that Congress's purpose and intent regarding the matter is ultimately unclear, do we reach the issue of Chevron deference. See id.; cf. Muwwakkil v. Office of Personnel Management, 18 F.3d 921, 925 (Fed. Cir. 1994) ("When an agency's interpretation of a statute . . . is contrary to the intent of Congress, as divined from the statute and its legislative history, we owe it no deference."). Indeed, if we hastily `throw up our hands' and declare that Congress's intent is unclear, we abdicate our duty; in essence, we leave statutory construction to an Article II agency, rather than accept the responsibility the Constitution imposes on Article III courts. See Marbury, 5 U.S. (1 Cranch) at 177.

To ascertain whether Congress had an intention on the precise question at issue, we employ the "traditional tools of statutory construction." Chevron, 467 U.S. at 843 n.9. The first and foremost "tool" to be used is the statute's text, giving it its plain meaning. See VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1579 (Fed. Cir. 1990). Because a statute's text is Congress's final expression of its intent, if the text answers the question, that is the end of the matter. See Muwwakkil, 18 F.3d at 924 ("When statutory interpretation is at issue, the plain and unambiguous meaning of a statute prevails."); West Virginia Univ. Hosp., Inc. v. Casey, 499 U.S. 83, 98-99 (1991).

If, on the other hand, the statute's text does not explicitly address the precise question, we do not at that point simply defer to the agency. Our search for Congress's intent must be more thorough than that. The Supreme Court made this clear in Chevron: "If a court, employing traditional tools of statutory construction, ascertains that Congress had an intention on the precise question at issue, that intention is the law and must be given effect." 467 U.S. at 843 n.9 (emphasis added). Beyond the statute's text, those "tools" include the statute's structure, canons of statutory construction, and legislative history. See Dunn v. Commodity Futures Trading Comm'n, 117 S. Ct. 913, 916-20 (1997) (considering the overall statute, a canon of statutory construction, and legislative history to ascertain Congress's intent, when more than one reading of the literal text of the particular statutory phrase at issue is possible); Oshkosh Truck Corp. v. United States, 123 F.3d 1477, 1481 (Fed. Cir. 1997) (noting that Congress's intent is ...


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