Dus & Derrick v. U.S. Secretary of Agr.

469 F.Supp.2d 1326

DUS & DERRICK, INC., Plaintiff, v. UNITED STATES SECRETARY OF. AGRICULTURE, Defendant.

SLIP OP. 07-2. Court No. 05-00346.

United States Court of International Trade.

January 8, 2007.

Steven D. Schwinn, for plaintiff.

Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director, Commercial Litigation Branch, Civil Division, United States Department of Justice; Jeanne E. Davidson, Deputy Director, Commercial Litigation Branch, Civil Division, United States Department of Justice (Michael J. Dierberg), for defendant.

OPINION AND ORDER

EATON, Judge.

This matter is before the court on plaintiff Dus & Derrick, Inc.'s ("plaintiff" or "Dus & Derrick") motion for judgment upon the agency record pursuant to USCIT Rule 56.1(a). By its motion, plaintiff challenges the decision of the Foreign Agricultural Service of the United States Department of Agriculture (the "Department") to deny its application under the Trade Adjustment for Farmers program for trade adjustment assistance ("TAA") pursuant to 19 U.S.C. § 2401e (2002).¹ See Letter from Ronald Lord, Deputy Director Import Policies and Program Division to Dus & Derrick, Inc. (Mar. 7, 2005) ("Negative Determination"), AR² at 55; see generally Pl.'s Mem. Supp. R. 56.1 Mot. J. Agency R. ("Pl.'s Mem."). The Department concluded that because plaintiffs net fishing income for calendar year 2003 was not less than its net income for calendar year 2001, plaintiff failed to "meet the net income³ requirement, in accordance with [7 C.F.R. § 1580.401(e) (2005)]," and therefore was ineligible to receive benefits. Negative Determination, AR at 55.⁴

Plaintiff asserts two arguments in support of its request for remand. First, in plaintiffs view, the Department's regulations required a comparison of plaintiff's net income for 2002, not 2001, to that from 2003. Second, plaintiff contends that by basing its denial solely on a comparison of the information contained in line 28 of plaintiffs submitted 2001 and 2003 Form 1120 tax returns,⁵ the Department unreasonably determined that plaintiff's net fishing income for 2003, the marketing year,⁶ was not less than its net fishing income for 2001, the pre-adjustment year.⁷ See Pl.'s Mem. at 9, 11. Jurisdiction lies with 19 U.S.C. § 2395(c). For the following reasons, the Department's Negative Determination is remanded.

BACKGROUND

Plaintiff is a family-owned shrimp fishing company that has operated its business off the Texas Gulf Coast since the early 1970's. Plaintiff owns its own shrimp boat and, in addition to other business-related expenses, regularly incurred maintenance costs including fuel, new equipment, repairs and labor associated with the boat. Plaintiff, for the most part, received a steady income from its operations. Its business benefitted from the price of shrimp being determined primarily by domestic market forces of supply and demand. Beginning in 2001, however, increased shrimp imports caused the domestic price of shrimp to drop. See Def.'s Resp. Pl.'s Mot. J. Agency R. ("Def.'s Resp.") at 4. In October 2003, as a result of the steadily declining price of U.S. shrimp, the Texas Shrimp Association ("TSA") filed with the Department a petition on behalf of Texas shrimp producers (including Dus & Derrick) for TAA certification in accordance with 19 U.S.C. § 2401a and 7 C.F.R. § 1580.201.⁸ See Trade Adjustment Assistance for Farmers, 68 Fed.Reg. 60,078 (Dep't of Agric. Oct. 21, 2003) (notice). On November 19, 2003, after conducting an investigation, the Department found that increased shrimp imports had contributed importantly "to a decline in the landed prices of shrimp in Texas by 27.8 percent during January 2002 through December 2002, when compared with the previous 5-year average," and granted the petition. Trade Adjustment Assistance for Farmers, 68 Fed.Reg. 65,239 (Dep't of Agric. Nov. 19, 2003) (notice).⁹ The downward trend in domestic shrimp prices continued and, on November 30, 2004, the Department, having found that "continued increases in imports of like or directly competitive products contributed importantly to a decline in the average landed price of shrimp in Texas by 33.7 percent during the 2003 marketing period (January-December 2003), compared to the 1997-2001 base period," recertified the TSA and its member producers as eligible to apply for TAA benefits. Trade Adjustment Assistance for Farmers, 69 Fed.Reg. 69,582 (Dep't of Agric. Nov. 30, 2004) (notice).

In accordance with the statutory scheme, once the TSA received its certification, plaintiff (one of the agricultural commodity producers covered by the certification) became eligible to individually apply for a cash payment. See 19 U.S.C. § 2401e (a).

Plaintiff did not Me for benefits under the original certification but rather made its application upon recertification on January 19, 2005. See Application for TAA for Individual Producers for Dus & Derrick, Inc. ("Pl.'s Application"), AR at 1. In its application, plaintiff certified that it was entitled to a cash payment in part because its net fishing income in calendar year 2003 (what the application refers to as the "crop year") was less than its net fishing income in calendar year 2002,¹⁰ the year plaintiff understood to be the pre-adjustment year. See Pl.'s Application, AR at 1 ("I reported on the applicable federal tax form that my net farm or net fishing income declined from the petition's pre-adjustment year."); see also 19 U.S.C. § 2401e(a)(1)(C); 7 C.F.R. § 1580.301(e)(4).

In support of its application, plaintiff submitted its Form 1120 corporate tax returns for calendar years 2001, 2002 and 2003. On line 28 of each return, which is entitled "Taxable income before net operating loss deduction and special deductions," the following data is provided: (1) for 2001, a net loss of $17,750.00; (2) for 2002, a net loss of $16,003.00; and (3) for 2003, a net profit of $9,044.00. See Pl.'s Mem. at Apps. C, D and E. While standing on their own these tax forms indicate that plaintiff's net income improved in each year, plaintiff states in its papers that it believed it would be given an opportunity to demonstrate this was not the case.

In addition, plaintiff understands the language of 7 C.F.R. § 1580.102 defining "net fishing income" to require the Department to at least review the tax returns in their entirety in order to understand fully the circumstances that led to the net figures. See Pl.'s Mem. at 11-12.

The Department maintains, however, that such a review is not mandated by either the TAA statute or the regulations. See Def.'s Resp. at 14 ("[N]either [the Department]'s regulations nor the TAA statute require [the Department] to engage in the sort of ad hoc analysis that Dus & Derrick suggests would have been more appropriate."). Thus, without more, the Department compared plaintiff's net income figure on line 28 of its 2003 Form 1120 to that reported on line 28 of its 2001 return and, finding that the 2003 amount was not less than the 2001 number, denied plaintiffs application. In doing so, the Department used 2003 as the "marketing year" and 2001 as the "pre-adjustment year." See id. ("[I]n determining whether [plaintiff] qualified for benefits ..., [the Department] compared [plaintiff's] net income as reported to the IRS for 2003 with its net income reported to the IRS for 2001. This net income is reflected in line 28 ... of [plaintiff's] Form 1120, which was circled by [the Department].").

On May 6, 2005, plaintiff timely commenced the instant action asking that this matter be remanded to afford it the opportunity to explain its net income figures. See Letter from Wanda F. Walls to Office of the Clerk of the Court (May, 6, 2005) ("Complaint Letter") at 1. For the following reasons, the Department's denial of plaintiffs application is remanded.

STANDARD OF REVIEW

When reviewing a final determination by the Department, "[t]he findings of fact by the ... [Department] ... if supported by substantial evidence, shall be conclusive; but the court, for good cause shown, may remand the case to [the Department] to take further evidence, and [the Department] may thereupon make new or modified findings of fact and may modify [its] previous action...." 19 U.S.C. § 2395(b); see also Former. Employees of Gateway Country Stores LLC v. Chao, 30 CIT ___, 2006 WL 539129, *5 (CIT Mar. 3, 2006) (not published in the Federal Supplement). "Substantial evidence is `such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.'" Huaiyin Foreign Trade Corp. (30) v. United States, 322 F.3d 1369, 1374 (Fed.Cir.2003) (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126 (1938)). The existence of substantial evidence is determined "by considering the record as a whole, including evidence that supports as well as evidence that `fairly detracts from the substantiality of the evidence." Id. (quoting Atl. Sugar, Ltd. v. United States, 744 F.2d 1556, 1562 (Fed. Cir.1984)).

The court reviews whether the. Department's determination is in accordance with law pursuant to "the default standard outlined in the Administrative Procedure Act." Former Employees of Elec. Data Sys. Corp. v. U.S. Sec'y of Labor, 28 CIT ___, 350 F.Supp.2d 1282, 1286 (2004) (referencing 5 U.S.C. § 706); see also Former Employees of Gateway Country Stores LLC, 30 CIT at ___, 2006 WL 539129, *7; Former Employees of Rohm & Haas. Co. v. Chao, 27 CIT 116, 122, 246 F.Supp.2d 1339, 1346 (2003); Woodrum v. Donovan, 5 CIT 191, 193, 564 F.Supp. 826, 828 (1983); Alaska Dep't of Envtl. Conservation v. EPA, 540 U.S. 461, 496-97, 124 S.Ct. 983, 157 L.Ed.2d 967 (2004).

DISCUSSION

I. Plaintiff's Individual Agricultural Commodity Producer Application for TAA Cash Payments

A. Relevant Law

Receipt of TAA benefits by an individual agricultural commodity producer is the result of a two-step process. Only the second step, the application of an individual commodity producer for TAA...