A five-judge federal appeals panel ruled yesterday that imported Japanese electronic products are not being indirectly subsidized by the Japanese government and that the U.S. Treasury does not have to impose retailiatory levies.
The U.S. Court of Customs and Patent Appeals overturned an April decision by a lower court that administration officials said could have triggered a world trade war with the United States at the center.
"We are very pleased," said Robert S. Strauss, the President's special trade representative.
A spokesman for the Zenith Rado Corp., which brought suit against the Treasury Department seeking to force the agency to impose so-called countervailing dutis equal to the amount of the alleged subsidy, said the Chicago-based electronics producet would appeal to the Supreme Court.
In April, the U.S. Customs Court in New York ruled that Japan subsidizes its exports to the United States by refunding to exporters an excise tax that is paid by all domestic Japanese consumers of the same products, such as televisions, radios, phonographs and tape recorders. Japan ships about $1.5 billion in electronic products to the United Sates each year.
U.S. officials have feared that if the courts upheld Zenith's contention, a host of similar suits would be brought that could disrupt world trade. Under international trading rules that the United States had a major hand in writing, rebates of domestic excise taxes on exported products are legal.
U.S. Steel Corp. has already filed a similar suit in the Customs Court asking it to declare that by rebating an excise tax (called a value-added tax) on all exports, the nin-member European Economic Community illegally subsidizes more than $2 billion in steel exports to the United States.
In early June, after, the Customs Court ruled in Zenith's favor, U.S. Steel asked the court for a summary judgment, a move that angered Strauss. He said that using the courts to solve difficult questions of international trade policy could seriously damage the nation's trade relationships and bring retaliation from other major trading nations, such as Japan and those in the European community.
The Customs Court denied U.S. Steel's request for an immediate judgement and said it would hear the case in December, as scheduled.
The appeals panel ruled 3 to 2 yesterday in the government's favor. The panel, with Chief Judge Howard Markey writing the opinion said that nothing in the law requires the Treasury to regard rebates of domestic consumption taxes as illegal subsidies.
If Congress had intended these rebates to be considered illegal subsidies, "we find it difficult to believe that Congress would harbor in its breast a disapproval of an administrative practice for almost 80 years" without directing the Treasury to change its ways.
The majority also noted that trade laws are not merely regulatory laws but "one of the chips in a game played by governments on a world stage . . . Congress in its wisdom has simply refrained from calling all the countervailing duty plays in advance."
Strauss and Treasury Secretary W. Michael Blumenthal said that if the courts ruled in Zenth's favor, the administration would have to ask Congress to write a new law.
Strauss charged in June that producers such as U.S. Steel and Zenith were pushing the nation into a position of telling "every country in the world that if they don't change their internal tax system, we'll level duties agains them."
The appeals court said yesterday that the Customs Court, in relying on a 1903 Supreme Court decision about Russian sugar subsidies based its decision on a case that did not say what it seemed to say and that was out dated.
The potential countervailing duties would average about 15 per cent of the value of the imported goods - roughly $200 million a year.