author: CARMAN, Judge:

text:
    CABOT CORPORATION, Plaintiff, v. UNITED STATES, Defendant, and Hules Mexicanos, S.A.; and Negromex, S.A., Defendants-Intervenors.
    Court No. 83-7-01044.
    United States Court of International Trade.
    Oct. 4, 1985.

      Stewart & Stewart, Washington, D.C. (Terence P. Stewart and Eugene L. Stewart, Washington, D.C., on the motion), for plaintiff.
    Richard K. Willard, Acting Asst. Atty. Gen., Washington, D.C., Joseph I. Liebman, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, New York City (Shiela N. Ziff, Washington, D.C., on the motion), for defendant.
    O’Connor & Hannan, Washington, D.C. (Joseph E. Pattison, Washington, D.C., on the motion), for defendant-intervenors.
   OPINION AND ORDER

CARMAN, Judge:

Plaintiff commenced this action pursuant to section 516A(a)(2)(A)(ii) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(A)(ii) (1982), to challenge a final affirmative countervailing duty determination by the International Trade Administration (ITA). The case is consolidated with Hules Mexicanos, S.A., and Negromex, S.A. v. United States, Court Number 83-7-01049, because of the similarity of the issues presented.

Plaintiff, a United States producer of carbon black, moves to review the final affirmative countervailing duty determination and order of the ITA pursuant to Rule 56.1 of the rules of this court. Contending that the determination is unsupported by substantial evidence or otherwise not in accordance with law, the plaintiff seeks a remand to the ITA for redetermination. Defendant and defendant-intervenors oppose the motion, with defendant United States cross-moving to affirm the administrative determination.

THE ITA DETERMINATION

On December 3, 1982, the ITA published notice that it was initiating a countervailing duty investigation of carbon black imports from Mexico as a result of a petition, filed by plaintiff Cabot Corporation, which alleged that Mexican carbon black producers received a multitude of bounties or grants. 47 Fed.Reg. 54526 (1982). During the investigation, the ITA determined “that the case is extraordinarily complicated because the alleged subsidy practices are numerous and complex and present novel issues”. 48 Fed.Reg. 29564, 29564 (1983). But in the final determination, the ITA found the net bounty or grant to be 0.88 percent ad valorem and that only the following programs constituted countervailable subsidies:

(1) FOMEX pre-export financing loans at preferential interest rates;
(2) A discount to Hules Mexicanos on its natural gas and electric power costs at its carbon black plant; and
(3) FONEI long term financing at preferential interest rates to Negromex.

The ITA determined that the following programs did not confer bounties or grants to the Mexican producers:

(1) Preferential pricing under the NIDP on petroleum feedstock and natural gas purchased by the carbon black producers from PEMEX at prices below world market prices, and below the prices applicable to the sale of natural gas to commercial and residential consumers; and
(2) the dual currency exchange rate system.

Finally, the ITA additionally determined the following programs are not used by the carbon black producers and exporters:

(1) preferential benefits from the Mexican Government’s direct and indirect shareholdings in the two Mexican carbon black producers;
(2) preferential federal and state tax incentives;
(3) FOGAIN and FOMIN preferential financing;
(4) internal transportation benefits;
(5) preferential exports marketing benefits (IMCE);
(6) import duty rebates on equipment used in export production; and
(7) preferential rates on commercial risk insurance.

Plaintiff in this action now makes the following challenges to the final determination of the ITA:

(1) The ITA’s finding that the provision of carbon black feedstock and natural gas to Mexican carbon black producers does not constitute a countervaila-ble subsidy is unsupported by substantial evidence and is not supported by law;
(2) the ITA’s finding that Hules Mexica-nos paid all applicable taxes is unsupported by substantial evidence; and
(3) the ITA’s failure to make any finding regarding the receipt of FONEP preferential financing by Negromex is effectively a negative finding and is unsupported by substantial evidence; and
(4) the ITA erred in calculating the percent ad valorem benefit for FONEI loans to Negromex.

BACKGROUND

Carbon black is elemental carbon with incidental or planned surface oxidation that is formed under the controlled cracking, heating and quenching of a petroleum derivative feedstock, commonly referred to as carbon black feedstock. Carbon black is used primarily in the rubber industry, but is also used in the production of paints, inks, plastics and carbon paper.

Carbon black feedstock, along with natural gas and water, is essential for the production of carbon black. The feedstock is one of many types of petroleum products obtainable from crude oil, but results relatively early in the refining process. After crude oil is heated to cause a breakdown into its constituent parts, one of the constituent parts, “gas oil” or “heavy gas oil,” is refined further in a catalytic cracker. In the typical catalytic cracking process, a catalyst is introduced into the heating treatment of the gas oil. At extremely high temperatures and pressures, the gas oil breaks down — cracks—and yields gasoline. Catalytic cracking is a crucial process in the production of gasoline and the prime goal is to produce gasoline. 14 Encyclopedia Britannica, Petroleum Refining 183 (15th Ed.1982). There is, however, a further product that results from the catalytic cracking of gas oil: catcracker bottoms, or carbon black feedstock. Catcracker bottoms are the residue that collects at the “bottoms” of catalytic cracking towers after the lighter distillates have been removed.

These catcracker bottoms, according to plaintiff, are a unique product and represent the major cost of producing carbon black. Though there is considerable technical dispute over whether other residual oils not obtained from catalytic cracking, such as number 6 fuel oil, may also be used for feedstock in the production of carbon black, the Mexican carbon black producers use catcracker bottoms exclusively.

The parties also disagree on the quality of Mexican catcracker bottoms: Defendant and intervenors state that the feedstock, high in sulphur content, is unsuitable for use in countries such as the United States with stringent environmental regulations, while plaintiff avers that it has attempted to obtain, and would use, Mexican feedstock.

It is clear, nevertheless, that the quality and chemical makeup of carbon black feedstock may vary within certain parameters, but that a carbon black plant must be adapted to utilize the particular feedstock available to it. In the case of the Mexican carbon black industry, the two producers, Hules Mexicanos and Negromex, have geared their plants to the use of the cat-cracker bottoms available from Petróleos Mexicanos (PEMEX), the government owned petroleum company of Mexico. Thus, due to “the inherent nature of the product and the current levels of technology” in Mexico, 48 Fed.Reg. at 29568, no enterprises or industries in Mexico other than the carbon black producers have the technology and ability to make commercial use of the product. Record at 824-28. Plaintiff contends even further that the only commercial use worldwide of catcracker bottoms is by the carbon black industry.

PEMEX manufactures catcracker bottoms as a byproduct resulting from the production of light and middle distillate products. The cracking process may be varied to distill out more or less of the lighter products relative to the residual oils, including carbon black feedstock, bunker fuel oil and asphalt, but the level of carbon black feedstock production appears at least to some extent determined by the overall mix of products produced by PE-MEX.

Although PEMEX operates nine catalytic crackers in Mexico, the carbon black producers obtained feedstock of catcracker bottoms primarily from only two facilities located at Ciudad Madero and Salamanca. The two carbon black producers have located their plants close to the two PEMEX refineries, assumedly to obtain this important input economically by reducing transportation costs. The record does not show what happens to the catcracker bottoms from the remaining seven refineries and whether these bottoms are suitable for carbon black feedstock, but the parties have stipulated that small quantities of catcracker bottoms may be blended under carefully controlled conditions into the residual fuel oil pool of a refinery.

An understanding of the provision and pricing of carbon black feedstock and natural gas in Mexico begins with the National Industrial Development Plan (NIDP or the Plan), which offers a comprehensive strategy for industrial growth extending through 1990. Its explicit aim is “to facilitate a dynamic, orderly and steady economic growth.” Record, Exhibit F at p. To promote the production of basic consumer goods, the increase of industrial competitiveness in world markets, the exploitation of Mexico’s natural resources, and economic integration, the Plan calls for the use of subsidies to encourage exports, domestic production in priority sectors, and economic development in targeted regions. See supra note 1. Many of these programs are administered through governmental financial institutions whose resources are strengthened by earnings from petroleum exports. On the other hand, Mexico limits the export of oil reserves to avoid becoming reliant on such exports and uses its remaining oil for the benefit of emerging industry. See Joyner, Petroleos Mexica-nos in a Developing Society: The Political Economy of Mexico’s National Oil Industry, 17 Geo.Wash.J. Int’l L. & Econ. 63, 82 (1982).

The NIDP is implemented in part through the special government entity PE-MEX, which owns and controls the production of petroleum products in Mexico, and another government agency, at the time of the investigation the Dirección General de Precios of the Secretaria de Comercio, which establishes the prices for all petrochemical products. The carbon black industry, consisting of two producers, purchases needed carbon black feedstock and natural gas exclusively from PEMEX at the government-set prices. During the period investigated, the price for carbon black feedstock as provided to the two carbon black producers was substantially below the “world market” price. The firms received natural gas at the rate for industrial users which is less than that for residential users. Hules Mexicanos received an additional 30 percent concession on the already discounted price for natural gas for its plant which is located in one of the NIDP regional priority zones. Record at 323g. (The ITA found that this benefit did constitute a domestic bounty or grant. 48 Fed. Reg. at 29,566.)

OPINION

I. Preferential Prices on Carbon Black Feedstock and Natural Gas

Plaintiff first challenges the ITA final determination that Mexico did not confer a countervailable bounty or grant, within the meaning of section 303 of the Tariff Act of 1930, 19 U.S.C. § 1303 (1982), by providing carbon black feedstock and natural gas to Hules Mexicanos and Negromex at below “world market prices”. Plaintiff contends that the term “bounty or grant” in section 1303 is to be broadly construed and includes essentially every governmental program which “bestow[s] an unfair competitive advantage on a foreign company as against U.S. producers of the products.” Plaintiffs Memorandum at 26. Defendant opposes this proposition, arguing that programs or benefits which are generally available within the exporting country are not eountervailable, and further that the applicable statute to look to for the clarification of “bounty or grant” is 19 U.S.C. § 1677(5) (1982). In response, plaintiff secondarily argues that the Mexican carbon black feedstock and natural gas programs are as a factual matter not generally available.

In reviewing the countervailing duty law, the Court determines that 19 U.S.C. § 1303 applies to this investigation. Section 1303 clearly delineates those elements that, if present, require the assessment of countervailing duties. The elements are:

(1)Any country, dependency, colony, province, or other political subdivision of government, person, partnership, association, cartel, or corporation that
(2) pays or bestows
(3) any bounty or grant
(4) upon the manufacture or production or export of any article or merchandise manufactured or produced in such country, and
(5) the importation of such article or merchandise into the United States.

The element of bounty or grant is further defined by the case law and Congress in 19 U.S.C. § 1677(5). First, a bounty or grant is a benefit which gives rise to a “competitive advantage”. See British Steel Corp. v. United States, 9 C.I.T.-, 605 F.Supp. 286, 294 (1985); ASG Industries, Inc. v. United States, 82 Cust.Ct. 101, 137 C.D. 4797, 467 F.Supp. 1200, 1230 (1979); Zenith Radio Corp. v. United States, 437 U.S. 443, 98 S.Ct. 2441, 57 L.Ed.2d 337 (1978).

Second, in the case of domestic subsidies, the benefit must be conferred upon “a specific enterprise or industry or group of enterprises or industries.” 19 U.S.C. § 1677(5); see also Downs v. United States, 187 U.S. 496, 501, 23 S.Ct. 222, 223, 47 L.Ed. 275 (1903) (bounty is conferred upon a “class of persons”).

Congress in enumerating some examples of eountervailable subsidies in section 1677(5) explicitly stated that the list is not inclusive. The determination of whether a bounty or grant has been bestowed must therefore be made upon the facts of each case. Since the enactment of section 1303 courts have recognized that they must examine the actual results or effects of assistance provided by foreign governments and not the purposes or intentions. E.g., British Steel Corp., 9 C.I.T. at —, 605 F.Supp. at 293-94; ASG Industries, Inc., 82 Cust.Ct. at 116-17, 467 F.Supp. at 1215. Nor is section 1303 concerned with the nominal availability of a governmental program. The question is what aid or advantage has actually been received “regardless of whatever name or in whatever manner or form or for whatever purpose” the aid was provided. Nicholas & Co. v. United States, 7 Cust.Ct.App. 97, 106 (1916), aff'd 249 U.S. 34, 39 S.Ct. 218, 63 L.Ed. 461 (1916).

The ITA applied the incorrect “generally available” test to the question of whether the provision of industrial inputs at government-set prices constitutes a countervailable bounty or grant; therefore the case must be remanded for further investigation. The ITA is directed to apply the test as set forth above to the facts of this case and accordingly investigate whether or not the provision of carbon black feedstock and natural gas in Mexico at government-set prices should be countervailed.

A. Applicable Law: The Interplay Between Section 1303 and Section 1671

As the “direct descendant” of earlier countervailing duty laws, Bethlehem Steel Corp. v. United States, 7 C.I.T. —, 590 F.Supp. 1237, 1239 (1984), section 1303 applies to countervailing duty investigations “[e]xcept in the case of an article or merchandise which is the product of a country under the Agreement.” 19 U.S.C. § 1303(a)(1). For articles from countries under the Agreement, however, section 1677(5) applies. Mexico was not a country under the Agreement during the period of this investigation, therefore section 1303 is the applicable statute. The ITA stated in its determination, nevertheless, that “[wjhile [the] investigation is governed procedurally by section 303 of the Act, the analysis of programs is based on Title VII of the Act and therefore applied § 1677(5)(B). 48 Fed.Reg. at 29,566. This position is not supported by a careful examination of the statutes and the decisions of this court.

Section 1677(5) states first that “subsidy” has the same meaning as “bounty or grant.” Thus there is “complete harmony and continuity between the two provisions.” Bethlehem Steel Corp. v. United States, 7 C.I.T. —, 590 F.Supp. 1237 (1984). In section 1677(5), added to the Tariff Act of 1930 by the Trade Agreements Act of 1979, Pub.L. No. 96-39, § 101, 93 Stat. 144, 151 (1979), Congress enumerated certain countervailable practices. This did not imply a repeal of section 1303 and its interpretation. Thus, the same analysis applies regardless of which statute controls, and the law defining the term bounty or grant informs the interpretation of the term subsidy. Section 1677(5) does not subsume “bounty or grant.”

In sum, section 1303 supplies the substantive law in this case. The administrative, legislative, and judicial pronouncements pertaining to section 1303 are accordingly apt. The Court may nevertheless refer to 19 U.S.C. § 1677(5) in interpreting section 1303. See Carlisle, 5 C.I.T. —, 564 F.Supp. 834; Bethlehem, 7 C.I.T. —, 590 F.Supp. 1237.

B. The Legal Standard: Countervaila-bility of Generally Available Benefits

The chief issue presented to the Court is whether benefits that are available on a nonpreferential basis — that is, benefits obtainable by any enterprise or industry — can be bounties or grants within the meaning of section 1303 and therefore countervaila-ble. Since any industrial user in Mexico could purchase carbon black feedstock and natural gas at the same price (disregarding the regional discount, see infra p. 728), the ITA viewed PEMEX’s provision of these inputs at well below world market prices as not constituting a countervailable practice. 48 Fed.Reg. at 29,566. The ITA view was based on the “generally available benefits rule,” which has evolved within the administrative agency and was adopted by the court in Carlisle Tire & Rubber Co. v. United States, 5 C.I.T. 229, 564 F.Supp. 834 (1983). Two other decisions of this court, however, have rejected the rule as contrary to the countervailing duty statutes, most specifically section 1303, and as therefore unlawful. Agrexco, Agricultural Export Co. v. United States, 9 CIT —, 604 F.Supp. 1238 (1985); Bethlehem Steel Corp. v. United States, 7 CIT —, 590 F.Supp. 1237 (1984). This Court thus faces considerable controversy regarding the rule that generally available benefits provided within the relevant jurisdiction are not countervailable.

The generally available benefits rule as articulated by the defendant is essentially that benefits available to all companies and industries within an economy are not coun-tervailable subsidies. Defendant’s conclusions are primarily drawn from 19 U.S.C. § 1677(5)(B), which refers to countervaila-ble domestic subsidies as being those provided to “a specific enterprise or industry, or group of enterprises or industries....” (emphasis added). Thus, argues defendant, benefits “generally available” to all enterprises or industries are not subsidies under section 1677(5)(B), and therefore do not fall within the meaning of “bounty or grant” as used in section 1303. Defendant bolsters its interpretation by citing Carlisle Tire & Rubber Co. v. United States, 5 C.I.T. 229, 564 F.Supp. 834.

In Carlisle, the court upheld the ITA’s interpretation of section 1303 as being reasonable. Id. at —, 564 F.Supp. at 838. The court relied in part on older case law which described a bounty or grant as a “special advantage,” citing Nicholas & Co. v. United States, 249 U.S. 34, 39 S.Ct. 218, 63 L.Ed. 461 (1919), or “an additional benefit” conferred upon a “class of persons,” citing Downs v. United States, 187 U.S. 496, 501, 23 S.Ct. 222, 223, 47 L.Ed. 275 (1903). Apparently the ITA and the court in Carlisle view the noncountervailability of generally available benefits as the opposite side of the coin from the countervaila-bility of benefits conferred upon a specific class. There is a distinction, however, which has not been clearly deciphered by the ITA or in prior judicial opinions, but which disrupts the apparent symmetry of the two sides of the coin.

The distinction that has evaded the ITA is that not all so-called generally available benefits are alike — some are benefits accruing generally to all citizens, while others are benefits that when actually conferred accrue to specific individuals or classes. Thus, while it is true that a generalized benefit provided by government, such as national defense, education or infrastructure, is not a countervailable bounty or grant, a generally available benefit— one that may be obtained by any and all enterprises or industries — may nevertheless accrue to specific recipients. General benefits are not conferred upon any specific individuals or classes, while generally available benefits, when actually bestowed, may constitute specific grants conferred upon specific identifiable entities, which would be subject to countervailing duties.

The court in Carlisle recognized the absurdity of a rule that would require the imposition of countervailing duties where producers or importers have benefited from general subsidies, as “almost every product which enters international commerce” would be subject to countervailing duties. See 5 C.I.T. at —, 564 F.Supp. at 838 (citing Barcelo, Subsidies and Countervailing Duties — Analysis and a Proposal, 9 L. & Pol’y in Int’l Bus. 779, 836 (1977)). Alternatively, the court in Bethlehem recognized the absurdity of a law that would transform an obvious subsidy into a non-countervailable benefit merely by extending the availability of the subsidy to the entire economy. 7 C.I.T. at —, 590 F.Supp. at 1242. Thus, although a bounty or grant is preferential in nature, bestowed upon an individual class, the generally available benefits rule as developed and applied by the ITA is not an acceptable legal standard for determining the counter-vailability of benefits under section 1303.

The appropriate standard focuses on the de facto case by case effect of benefits provided to recipients rather than on the nominal availability of benefits. The case must therefore be remanded for further investigation and redetermination. The definition of “bounty or grant” under section 1303 as intended by Congress remains as it is embodied in the ease law and later affirmed by Congress in section 1677(5). This definition requires focusing only on whether a benefit or “competitive advantage” has been actually conferred on a “specific enterprise or industry, or group of enterprises or industries.” In the case before the Court, the availability of carbon black feedstock and natural gas at controlled prices does not determine whether the benefits actually received by these two carbon black producers are counter-vailable subsidies. The programs appear to effect specific quantifiable provisions of carbon black feedstock and natural gas to specific identifiable enterprises. That additional enterprises or industries can participate in the programs, whether theoretically or actually, does not destroy the programs as subsidies. The programs are apparently available to all Mexican enterprises, but in their actual implementation may result in special bestowals upon specific enterprises.

Once it has been determined that there has been a bestowal upon a specific class, the second aspect of the definition of bounty or grant requires looking at the bestowal and determining if it amounts to an additional benefit or competitive advantage. If so, the benefit might fit within one of the illustrative examples of 19 U.S.C. § 1677(5)(B). The ITA, however, prematurely concluded that “the provision of carbon black feedstock and natural gas clearly involves the provision of goods within the meaning of subsection (ii),” 48 Fed.Reg. at 29568, that is, the subsidy example of providing goods or services at preferential rates. The ITA asserted, “[t]he standard contained in subsection (ii) is ‘preferential,’ which normally means only more favorable to some within the relevant jurisdiction than to others within the jurisdiction.” 48 Fed.Reg. at 29,568. Thus, concluded the ITA, “even if carbon black feedstock and natural gas were not generally available, we would not find this rate to be a subsidy, because this rate is not preferential.... ” Id.

The ITA has engaged in a tautology, merely extending its generally available benefits rule into the illustrative example of subsection (ii). Although preferential pricing clearly is a countervailable subsidy, subsection (ii), as only one such example of a subsidy, does not include all pricing programs constituting subsidies. The ITA’s attention must therefore be directed to the broader question of whether the Mexican pricing programs for carbon black feedstock and natural gas are additional benefits or competitive advantages within the scope of section 1303.

II. Payment of All Applicable Taxes by Hules Mexicanos

Plaintiff contends that the ITA failed to fully investigate whether Hules Mexicanos received any tax exemptions for carbon black production. According to plaintiff, the existence of certain tax exemptions connected with the production of two synthetic rubber products as noted in the 1977 Hules Mexicanos Annual Report should have elicited further investigation into subsequent annual reports, as should have a statement from the 1977 report that the exemption petition regarding carbon black was under negotiation. The Court finds, however, that the ITA’s finding based on financial statements from 1977 through 1982 that Hules Mexicanos paid all applicable taxes is supported by substantial evidence on the record. Cf. American Spring Wire Corp. v. United States, 8 C.I.T. —, 590 F.Supp. 1273 (1984), aff'd sub nom. Armco, Inc. v. United States, 760 F.2d 249 (CAFC 1985).

III. FONEP Preferential Financing

The 1980 Negromex Annual Report indicated that a Mexican currency loan from Fondo Nacional de Estudios y Proyec-tos (FONEP) was granted through Nacional Financiera. Record at 555. Although there appears to be no further mention of the loan in the administrative record, defendant claims before this Court in this action that the ITA found no evidence of a FONEP loan to Negromex for carbon black production in reviewing all company loan documents. Intervenors state further that “the officials performing the verification at Negromex immediately became aware of the FONEP loans after requesting this debt information and, after reviewing the FONEP loan contract^] ... verified that it was exclusively for expenditures on synthetic rubber production and not for carbon black.” Intervenors’ Memorandum at 60. Neither defendant nor intervenors offer a citation to the record showing that the ITA considered the FONEP loan.

Plaintiff argues that the ITA was required to probe into the loan and make an explicit finding, while defendant contends that plaintiff’s failure to make the claim during the administrative proceeding places the issue outside the scope of judicial review. Although 19 U.S.C. § 1516a(b)(l)(B) limits the Court’s review to the administrative record, the existence of a FONEP loan is noted in the record. Since the circumstances regarding the ITA’s handling of this matter are unclear, the Court directs the ITA upon remand to make an explicit finding supported by substantial evidence regarding the FONEP loan to Negromex.

IV. Calculation of the Benefit for FO-NEI Loans to Negromex

Concerning the calculation of the value of FONEI loans to Negromex, defendant concedes that plaintiff’s calculations are correct and the error would be corrected in the section 751 (19 U.S.C. § 1675) review then in progress at the time of the filing of defendant’s cross-motion for review upon the agency record. Plaintiff has apparently acquiesced in this result.

CONCLUSION

The rule of not countervailing generally available benefits as developed by the ITA does not render a correct result in this case. The availability of carbon black feedstock at government-set rates is not the determinative factor regarding counter-vailability. Rather, the inquiry for the ITA is whether the rates in fact afford the carbon black producers a benefit or competitive advantage. The case must therefore be remanded for further investigation and redetermination consistent with the requirements set forth in this opinion to determine if countervailing duties should be assessed.

The ITA’s determination that Hules Mex-icanos paid all applicable taxes for the period under investigation is sustained. Because it is unclear what transpired regarding the FONEP loan to Negromex noted in the company’s 1980 Annual Report, the ITA is directed to make an explicit finding supported by substantial evidence regarding its investigation of the loan. The Court makes no ruling on plaintiff’s fourth claim since defendant has conceded its error in calculating the benefit for FONEI loans to Negromex.

ORDER

Upon reading and filing plaintiff’s motion for review of the administrative determination upon the agency record, defendant’s cross-motion, and upon all other papers and proceedings had herein, it is hereby

ORDERED, ADJUDGED and DECREED that:

Plaintiff’s motion for review upon the agency record is granted in part; Defendant’s motion for review upon the agency record is granted in part;
The case be remanded to the International Trade Administration for further investigation and redetermination regarding Mexico’s provision of carbon black feedstock and natural gas at government-set rates to Hules Mexicanos and Negromex;
The ITA determine, in accordance with the test outlined in the accompanying opinion, whether the provision of carbon black feedstock and natural gas at government-set rates constitutes a coun-tervailable bounty or grant and, if so, the valuation of any such bounty or grant; The ITA’s determination regarding payment of all applicable taxes by Hules Mexicanos is sustained; and The ITA make a finding supported by substantial evidence regarding FONEP loans to Negromex.
The Secretary of Commerce or his delegate shall report his findings and rede-terminations to this Court, and supplement the administrative record as provided above, within 90 days after the date of entry of this order.

      . The complexity arose out of Mexico's National Industrial Development Plan (NIDP), which, utilizing incentives such as tax rebates, low interest loans and favorable energy rates, sets investment priorities among industrial activities and geographic regions. Note, United States Coun

        tervailing Duty Law as Applied to Mexico: The Need for a Material Injury Test, 18 Geo.Wash.J. Int’l L. & Econ. 183, 184 n. 11 (1984). Following are brief descriptions of some of the programs which touch on this case:
      FOMEX (Fund for the Promotion of Exports of Mexican Manufactured Products) is a government trust which provides low-interest loans to Mexican companies to promote the manufacture and sale of exported products. See 47 Fed.Reg. 7867 (1982).
      FONEI (Fund for Industrial Development) is a specialized financial development fund, administered by the Bank of Mexico, which grants long-term credit at below-market rates for the creation, expansion or modernization of enterprises to foster industrial decentralization. See 48 Fed.Reg. 43,063 (1983).
      FOGAIN (Fund for the Guarantee of Development of Medium and Small Industry) provides financing at interest rates below prevailing commercial rates. See 50 Fed.Reg. 10,824 (1985).
      CEPROFIs (Certificates of Fiscal Promotion) are nontransferrable tax certificates used to promote the goals of NIDP. These tax credits are provided to Mexican companies for locating in certain regions, investing in certain infant industries, generating jobs, investing in new plants and equipment, and purchasing Mexican capital goods. See 48 Fed.Reg. 43,063 (1983).
      CEDI (Certificado de Devolución del Impues-to), suspended by the Mexican Government in August 1982, was also a tax rebate. The certificates were direct export subsidies with their value equal to a percentage of the value of qualifying exports.

      . Since Mexico was not a "country under the agreement” as set out in 19 U.S.C. § 1671(b) (1982), 19 U.S.C. § 1303 (1982) applied to the investigation. Section 1303(a)(2) provides that the International Trade Commission is not required to determine whether imports of the subject merchandise, which was nondutiable, cause or threaten material injury to a domestic industry as there were no international obligations requiring a determination of injury. Subsequent to the investigation, however, the United States Trade representative announced on April 23, 1985, that Mexico had become a "country under the agreement.” See, Portable Aluminum Ladders and Certain Components of Ladders from Mexico, 50 Fed.Reg. 21,480 (1985).

      . The NIDP is acknowledged, in part, as a response to Mexico's well-publicized economic plight. Record at p. While the Plan shifts emphasis in many areas of commercial growth, it has long been the policy of the Mexican Government to exercise strict control over the country’s economy. See Bacon, Peso Diplomacy, Mexico Hopes Exports Will Help Its Economy Out of the Doldrums, Wall St.J., Jan. 31, 1985, at 1, col. 6, 21, col. 1.

      . PEMEX also owns 60 percent of the capital stock of one of the two carbon black producers, Hules Mexicanos. Record at 323e. (In addition, 10 percent of the shares of Negromex are held by the Nacional Financiera, also an agency of the federal government. Record at 323f.)

      . 19 U.S.C. § 1303(a)(1) states in full:
      Except in the case of an article or merchandise which is the product of a country under the Agreement (within the meaning of section 1671(b) of this title), whenever any country, dependency, colony, province, or other political subdivision of government, person, partnership, association, cartel, or corporation, shall pay or bestow, directly or indirectly, any bounty or grant upon the manufacture or production or export of any article or merchandise manufactured or produced in such country, dependency, colony, province, or other political subdivision of government, then upon the importation of such article or merchandise into the United States, whether the same shall be imported directly from the country of production or otherwise, and whether such article or merchandise is imported in the same condition as when exported from the country of production or has been changed in condition by remanufacture or otherwise, there shall be levied and paid, in all such cases, in addition to any duties otherwise imposed, a duty equal to the net amount of such bounty or grant, however the same be paid or bestowed.

      . 19 U.S.C. § 1677(5) provides:
      The term "subsidy” has the same meaning as the term "bounty or grant” as that term is used in section 1303 of this title, and includes, but is not limited to, the following:
      (A) Any export subsidy described in Annex A to the Agreement (relating to illustrative list of export subsidies).
      (B) The following domestic subsidies, if provided or required by government action to a specific enterprise or industry, or group of enterprises or industries, whether publicly or privately owned, and whether paid or bestowed directly or indirectly on the manufacture, production, or export of any class or kind of merchandise:
      (i) The provision of capital, loans, or loan guarantees on terms inconsistent with commercial considerations.
      (ii) The provision of goods or services at preferential rates.
      (iii) The grant of funds or forgiveness of debt to cover operating losses sustained by a specific industry.
      (iv) The assumption of any costs or expenses of manufacture, production, or distribution.

      . By leaving the § 1303 term “bounty or grant” undefined, Congress intended that the "metes and bounds of that term be staked out judicially and through administrative practice." Carlisle Tire & Rubber Co. v. United States, 5 C.I.T. 229, 233, 564 F.Supp. 834, 837 (1983) (citing United States v. Zenith Radio Corp., 64 CCPA 130, 140 & n. 14, 562 F.2d 1209, 1217 & n. 14 (1977), aff'd, 437 U.S. 443, 98 S.Ct. 2441, 57 L.Ed.2d 337 (1978).

      . A chief concern of the court in Carlisle was avoiding the absurd result of countervailing "such things as public highways and bridges, as well as a tax credit for expenditures on capital investment even if available to all industries and sectors.” Carlisle, 5 C.I.T. at —, 564 F.Supp. at 838. The court’s concern seemed directed toward "general subsidies that most governments confer such as national defense, government-subsidized education and infrastructure, and sufficient public health and agricultural extension programs.” G. Bryan, Taxing Unfair International Trade Practices 297 (1980). Such subsidies are distinguished from selective subsidies, examples of which are outlined in 19 U.S.C. § 1677(5). Id.

      "General subsidies” may also be looked at in economic terms as provisions of public goods. Governments provide many such goods and services because of the inability of the price system to effectively provide these goods, which tend to be indivisible and collectively consumable by all citizens whether they pay for them or not. E. Mansfield, Economics Principles, Problems, Decisions 68, 74-78 (4th ed. 1983). This public good analysis is in alignment with the analysis under § 1303. A public good provided by government benefits society in a collective manner. It is not conferred upon any specific enterprise or industry.
      With respect to the tax laws such as credits, accelerated methods of depreciation, and special depreciation recapture rules, issues may be more complicated. Each program must therefore be examined on a case by case basis to determine if the benefit accrues to specific beneficiaries or generally to society.

      . Plaintiff argues that a price below the world market price is a per se countervailable benefit. The matter is more complex. The availability of inputs at low prices to foreign producers may be the result of various non-countervailable factors such as comparative advantage. See T. Pugel, The Fundamentals of International Trade and Investment, in Handbook of International Business 1-2, 4 (I. Walter ed. 1982). The facts of this case indicate that the Mexican carbon black producers have located themselves (although perhaps pursuant to the NIDP) to take advantage of available carbon black feedstock with specific qualities. This arrangement might allow PEMEX to sell a byproduct which would otherwise go unsold. Thus, prices below the world market price or the export price may simply be the result of a symbiotic industrial relationship. Further, PEMEX’s refusal to sell carbon black feedstock abroad to plaintiff might be on account of limited Mexican domestic supply-
      On the other hand, "generally available” benefits are not necessarily the result of the exercise of comparative advantage. It cannot be concluded merely on the basis of nominal availability and absent further investigation that the prices for carbon black feedstock and natural gas as set by PEMEX are the result of factors such as excess supply and low production cost. See contra Note, Upstream Subsidies and U.S. Countervailing Duty Law: The Mexican Ammonia Decision and the Trade Remedies Reform Act of 1984, Law and Pol’y in Int’l Bus. 263, 291 & n. 126 (1985).


source: Caselaw Access Project

author: RE, Chief Judge:

license: Public Domain

text:
    SUNBURST FARMS, INC., Plaintiff, v. The UNITED STATES of America, Defendant.
    Court No. 82-12-01753.
    United States Court of International Trade.
    Oct. 10, 1985.
    Heron, Burchette, Ruckert & Rothwell, Washington, D.C., (Thomas A. Rothwell, Jr., Joseph A. Vicario, Jr. and Alfred G. Scholle, Washington, D.C., on brief), for plaintiff.
    Richard K. Willard, Acting Asst. Atty. Gen., Washington, D.C., Joseph I. Liebman, Attorney in Charge, International Trade Field Office, New York City, (Michael P. Maxwell, Washington, D.C., on brief), for defendant.
   Memorandum Opinion and Order

RE, Chief Judge:

In this action, plaintiff Sunburst Farms, Inc., challenges the Customs Service’s imposition of duties on cut flowers, item 192.-21, TSUS, imported from Colombia. The plaintiff contends that the imported merchandise was eligible for duty-free treatment under the Generalized System of Preferences (GSP), and that the President’s exclusion of cut flowers, item 192.21, imported from Colombia, from duty-free treatment under the GSP was ultra vires. Both parties have moved for summary judgment, and the defendant has also moved to dismiss on the grounds that plaintiff has failed to state a cause of action.

Since the President acted within his statutory authority in excluding the imported merchandise from the GSP, the defendant’s motion for summary judgment is granted, and the action is dismissed.

By Title V of the Trade Act of 1974, §§ 501-05, 88 Stat. 2066, 19 U.S.C. §§ 2461-65 (1982 & West Supp.1985), the President is authorized to establish a system of tariff preferences to aid the economic development of designated “beneficiary developing countries.” Pursuant to section 501 of the Act, the President is authorized to grant duty-free treatment for eligible articles from qualified countries. 19 U.S.C. § 2461. Under section 504(a), the President may withdraw, suspend, or limit duty-free treatment. 19 U.S.C. § 2464(a). However, under certain circumstances, the President must remove certain eligible articles from GSP treatment. See 19 U.S.C. § 2464(c). Specifically, by section 504(c)(1)(B) of the Trade Act, whenever the President determines that imports of an eligible article equal or exceed 50 percent of the total appraised value of annual imports of the article, he is required to terminate duty-free treatment for that article. 19 U.S.C. § 2464(c)(1)(B).

On March 27, 1980, pursuant to Title Y of the Trade Act of 1974, the President issued Executive Order 12204. 45 Fed. Reg. 20740 (1980). The order, which became effective March 30, 1980, divided item 192.19, TSUS, into two items: item 192.18, TSUS, “cut flowers, roses,” and item 192.-21, TSUS, “cut flowers, other.” Although cut flowers under item 192.21 were included on the list of articles eligible for GSP treatment, cut flowers, item 192.21, from Colombia were specifically excluded from eligibility. 45 Fed.Reg. 20740, 20763 (1980).

The plaintiff imported cut flowers from Colombia after the effective date of the order, and duties were imposed. The liquidated duties were paid, and protests were timely filed. When the protests were denied, the plaintiff filed this action. This Court has jurisdiction pursuant to 28 U.S.C. § 1581(a) (1982).

Plaintiff argues that the President’s denial of duty-free treatment for cut flowers was predicated solely upon section 504(c)(1)(B), and “was ultra vires because the President did not properly exercise the authority delegated to him by Congress.” In essence, the plaintiff contends that, since “cut flowers, other,” item 192.21, TSUS, was a newly created tariff classification, no data had been collected as to the total appraised value of imports. Thus, plaintiff argues that it was impossible for the President to make a proper determination whether imports of “other” cut flowers from Colombia exceeded the 50 percent threshold of section 504(c)(1)(B).

The plaintiffs argument is unconvincing. As authoirty for Executive Order 12204, the President expressly recited, in addition to the Constitution and statutes of the United States, Title V of the Trade Act, and section 504(c)(1)(B). Title V, of course, encompasses section 504(a). Although Executive Order 12204 does not specifically mention section 504(a), the pertinent judicial authority unequivocally holds that the President’s express reliance on Title V is sufficient to invoke his authority under section 504(a). See Florsheim Shoe Co. v. United States, 744 F.2d 787, 796 (Fed.Cir.1984). In addition, it is clear that the President’s exclusion of cut flowers from Colombia, under item 192.21, TSUS, was well within his discretionary authority under section 504(a). Id.

The Court of Appeals for the Federal Circuit had occasion to consider the question presented in this case in Florsheim Shoe Co. v. United States, 744 F.2d 787 (Fed.Cir.1984). In Florsheim Shoe, the President had excluded certain buffalo, goat and kid leather imports from India from GSP treatment pursuant to Executive Orders 11974, 12204 (the same order involved in this case), and 12302. Each order specifically invoked the President’s authority under Title V of the Trade Act and section 504(c). The plaintiff, who imported leather from India, challenged the Customs Service’s imposition of duties on the imported products covered by the orders. On the defendant’s motion, the Court of International Trade dismissed the complaint, and held that the President had acted within his statutory authority in restricting duty-free treatment. Florsheim Shoe Co v. United States, 6 C.I.T. —, 570 F.Supp. 734, 747 (1983), aff'd, 744 F.2d 787 (Fed.Cir.1984). The court also held that the court could review neither the factual foundation nor the motivations for the President’s action. Id. at —, 570 F.Supp. at 743. On appeal, the court of appeals affirmed.

The court of appeals noted that section 504(a) is “an explicit grant to the President of plenary authority — just as the statutory text indicates — to ‘withdraw, suspend, or limit’ GSP duty-free treatment after consideration of the factors listed in Sections 501 and 502(c)....” Florsheim, supra, 744 F.2d at 793. The Federal Circuit’s broad interpretation of section 504(a) is amply supported by the legislative history which states that, upon considering “the factors taken into account in granting preferential treatment initially and in designating beneficiary countries,” the President has the authority to terminate duty-free treatment “at any time,” H.R.Rep. No. 571, S.Rep. No. 93-1298, 93d Cong., 2d Sess. (1974), reprinted in 1974 U.S. Code Cong.Ad. News 7186, 7355-56. Moreover, since section 504 “is intimately involved with foreign affairs,” the President’s exercise of lawfully delegated authority should be given a broad intérpretation and not “hemmed in or ‘cabined, cribbed, confined’ by anxious judicial blinders.” Florsheim, supra, 744 F.2d at 793 (quoting South Puerto Rico Sugar Co. Trading Corp. v. United States, 334 F.2d 622, 632 (Ct.Cl.1964), cert. denied, 379 U.S. 964, 85 S.Ct. 654, 13 L.Ed.2d 558 (1965)); see United States v. Curtiss-Wright Export Corp., 299 U.S. 304, 320, 57 S.Ct. 216, 221, 81 L.Ed. 255 (1936); Miranda v. Secretary of Treasury, 766 F.2d 1, 3 (1st Cir.1985).

Sunburst argues that, regardless of the foregoing statements and principles, the authority granted by section 504(a) was not the “actual” basis for the President’s action. In support of this proposition, Sunburst cites West Bend Co. v. United States, 6 C.I.T. —, 576 F.Supp. 630 (1983).

In West Bend, the plaintiff challenged the removal of certain imported “hot-air corn poppers” from duty-free treatment under the GSP pursuant to Executive Order 12204. The West Bend court held that the President’s action in Executive Order 12204 was not taken pursuant to section 504(a) “because he did not specifically refer to that provision.” Id. at -, 576 F.Supp. at 633. Although the court conceded that section 504(a) alone is sufficient to deny preferential treatment, it refused to presume that the President acted under section 504(a) when Executive Order 12204 specifically recited only section 504(c). Id. at —, 576 F.Supp. at 634.

In view of the decision in Florsheim, 744 F.2d 787 (Fed.Cir.1984), the reasoning employed by the West Bend court cannot be applied. Executive Order 12204 was also before the court in Florsheim, and the court of appeals considered this precise issue. The Federal Circuit concluded in unmistakable terms that: “It is sufficient, in order to show that Section 504(a) was invoked, that the pertinent Executive Orders cited that particular provision or ... the portion of the Act that encompassed that provision.” Florsheim, supra, 744 F.2d at 796. Thus, the Florsheim court found that Executive Order 12204, by citing Title V of the Trade Act, invoked the President’s authority under section 504(a). In light of the broad scope of the President’s discretion under Title V of the Trade Act, the court refused to conduct any inquiry into the “real purpose” or “actual” basis of the President’s decision. 744 F.2d at 796-97.

The predecessor to the Court of Appeals for the Federal Circuit, the Court of Customs and Patent Appeals, had previously articulated this principle as follows: “In sum, let the President’s action be authorized, and let his action be within the authorizing provisions of the law he cites, and the role of judiciary is at an end.” United States Cane Sugar Refiners’ Ass’n v. Block, 69 CCPA 172, 178, 683 F.2d 399, 404 (1982); see also United States v. Yoshida Int’l, Inc., 63 CCPA 15, 30, C.A.D. 1160, 526 F.2d 560, 580 (1975) (upholding the President’s imposition of an import surcharge pursuant to the Trading With the Enemy Act); Alcan Sales v. United States, 63 CCPA 83, 84, C.A.D. 1170, 534 F.2d 920, cert. denied, 429 U.S. 986, 97 S.Ct. 506, 50 L.Ed.2d 598 (1976); Teter Floral Products Co. v. United States, 7 C.I.T. —, 586 F.Supp. 960, 963 (1984).

The conclusion that the President acted within the plenary authority found in section 504(a) is more than sufficient to negate any contention that he acted ultra vires. Florsheim, 744 F.2d at 795. Judicial examination of the President’s decision to extend duty-free treatment under the GSP pursuant to section 504(a) is permitted only to determine whether “the statutory language has been properly construed, and whether the President’s action conforms with the relevant procedural requirements.” Id.; see also United States v. George S. Bush & Co., 310 U.S. 371, 379-80, 60 S.Ct. 944, 946, 84 L.Ed. 1259 (1940). Judicial authority teaches that, if the President’s action is properly authorized, his motives, reasons, and judgment are immune from judicial scrutiny. United States Cane Sugar Refiners’ Ass’n v. Block, 69 CCPA 172, 178, 683 F.2d 399, 404 (1982). When, as here, the President is authorized to exercise discretion and judgment, based upon his evaluation of a variety of factors and policy considerations, the court on judicial review will not attempt to examine his mental process. See, e.g., United States v. Morgan, 313 U.S. 409, 421-22, 61 S.Ct. 999, 1004, 85 L.Ed. 1429 (1941); Montgomery Ward & Co. v. Zenith Radio Corp., 69 CCPA 96, 110, 673 F.2d 1254, 1262, cert. denied, 459 U.S. 943, 103 S.Ct. 256, 74 L.Ed.2d 200 (1982); cf. Heckler v. Chaney, — U.S. —, 105 S.Ct. 1649, 1658, 84 L.Ed.2d 714 (1985). Indeed, the court of appeals has held that the Presidential determination to limit GSP treatment pursuant to section 504(a) is a discretionary decision for which there is “no law to apply.” Florsheim, supra, 744 F.2d at 796; see Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 410, 91 S.Ct. 814, 820, 28 L.Ed.2d 136 (1971). Since there was adequate statutory authority for the President’s action, this Court may not inquire into the “actual” or specific basis for the President’s refusal to extend duty-free treatment to cut flowers from Colombia in Executive Order 12204.

It is undisputed that Executive Order 12204, by its terms, invokes Title V of the Trade Act of 1974, which encompasses section 504(a). Pursuant to that statutory authority, after considering certain information, the President may, in his discretion, exclude an item from duty-free treatment under the GSP. When the President has been delegated such broad discretionary authority, the Court will not examine his motives or judgment. Thus, it is the conclusion of this Court that the President’s action in Executive Order 12204 was properly authorized by statute, and, therefore, lawful.

Since the court holds that the action of the President had its basis in the authority granted in section 504(a), the question of the proper methodology necessary for action under the competitive need limitation of section 504(c)(1)(B) need not be reached.

In view of the foregoing, the plaintiffs motion for summary judgment is denied. The defendant’s motion for summary judgment is granted, and the action dismissed.


author: DiCARLO, Judge:

text:
    SAN FRANCISCO NEWSPAPER PRINTING CO., Plaintiff, v. The UNITED STATES, Defendant.
    Court No. 83-9-01374.
    United States Court of International Trade.
    Oct. 18, 1985.

      George R. Tuttle, P.C. (Stephen S. Sprait-zar), San Francisco, Cal., for plaintiff.
    Richard K. Willard, Asst. Atty. Gen.; Washington, D.C., Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office, Commercial Litigation Branch (Kenneth N. Wolf), New York City, for defendant.
   Memorandum Opinion and Order

DiCARLO, Judge:

Defendant moves to sever and dismiss a part of this action for lack of jurisdiction. Considering the relevant facts in the light most favorable to plaintiff, the Court grants the motion.

Plaintiff entered merchandise invoiced as “standard letterpress printing” paper from Finland, on April 19, 1979 (first entry) and May 14, 1979 (second entry).

On April 10,1980, plaintiff filed a protest (April protest) against the classification of the second entry, and requested that the protest be forwarded to the Regional Office of the United States Customs Service (Customs) for further review and disposition. On April 30, 1980, the protest was denied without further review.

On May 1, 1980, plaintiff filed a protest (May protest) which contested the classifiction of the first entry and requested further review.

On September 8, 1980, plaintiff petitioned Customs pursuant to 19 U.S.C. § 1520(c) (1982), to rescind the denial of the April protest and suspend any further action on it pending final review of the May protest. Customs did not respond in writing to the petition.

Plaintiff’s attorney states in an affidavit that: 1) he discussed the petition with a Customs official who said that the denial of the April protest could be rescinded; 2) the Customs official rescinded the denial on or before October 6, 1980; and 3) counsel for plaintiff did not file a summons within 180 days of April 30, 1980 because it relied on Customs’ recission of the denial of the April protest.

On March 30, 1983, Customs denied the May protest and determined that the April protest should have been denied only in part. Plaintiff brought this action on September 23, 1983, contesting the denial of both protests pursuant to section 515 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1515 (1982). Jurisdiction is asserted under 28 U.S.C. § 1581(a) (1982). .

Defendant now moves to sever the part of the action which contests the denial of the April protest, and dismiss it for lack of jurisdiction on the grounds that it is untimely.

The timeliness of this action is governed by 28 U.S.C. § 2636(a)(1) (1982), which states:

(a) A civil action contesting the denial, in whole or in part, of a protest under section 515 of the Tariff Act of 1930 is barred unless commenced in accordance with the rules of the Court of International Trade—
(1) within one hundred and eighty days after the date of mailing of notice of denial of a protest under section 515(a) of such Act ....

The act which triggers the running of the 180-day period prescribed by section 2636, the mailing of the denial, occured on April 30, 1980. Plaintiff contends, however, that the denial was rescinded, and that the time for filing an action did not begin to run until March 30, 1983. The question presented is whether Customs may rescind the denial of a protest after it has been mailed.

Plaintiff argues that rescission is authorized by 19 U.S.C. § 1515(a) (1982), which allows Customs two years in which to review and approve or deny a protest in whole or in part. Because the alleged rescission occurred within two years of the filing of the April protest, and section 1515(a) does not specifically prohibit Customs from modifying or rescinding a decision on a protest within the two-year period, plaintiff contends the rescission was proper.

“It is, of course, fundamental that timely . filing of a summons is a jurisdictional condition for bringing a civil action in this court, and such a condition must be strictly observed.” Texas Mex Brick & Import Co. v. United States, 72 Cust.Ct. 291, 292, 371 F.Supp. 579, 581 (1974) (footnote omitted); see F.W. Myers & Co. v. United States, 6 C.I.T. —, Slip Op. 83-132 (Dec. 16, 1983). Although section 1515 limits to two years the time in which Customs must grant or deny a protest, it does not authorize Customs to exercise jurisdiction over a protest after it has been denied. Once Customs mailed the denial of the April protest, plaintiff had but two courses it could pursue: to abandon the protest, or to bring an action in this Court. See Raphael Weill & Co. v. United States, 21 CCPA 152, 157, T.D. 46479 (1933).

Plaintiff also argues that recission of the denial of a protest is authorized by 19 U.S.C. § 1520(c) (1982). Under that section, Customs may be petitioned to “reliqui-date an entry to correct — (1) a clerical error, mistake of fact, or other inadvertence ... adverse to the importer and manifest from the record ... in any entry, liquidation, or other customs transaction .... ” Id. Plaintiff argues that Customs’ failure to grant further review of the April protest is an inadvertence correctable by the section 1520(c) petition.

Section 1520(c) authorizes Customs to “reliquidate an entry” under the circumstances set forth therein. Plaintiff did not seek to have an entry reliquidated by its petition. The recission of a denial of a protest is neither contemplated nor authorized by section 1520(c). Customs’ actions could not extend the time for filing an action in this Court, since Customs is powerless to expand the Court’s jurisdiction. See Audiovox Corp. v. United States, 8 C.I.T. —, 598 F.Supp. 387, 389-90 (1984), aff'd, 764 F.2d 848 (Fed.Cir.1985).

Finally, plaintiff contends that defendant is estopped from raising the timeliness defense because the purported recission was carried out by Customs officials and relied upon by plaintiff.

Estoppel is inapplicable in this case. A time limitation that is a jurisdictional prerequisite is not subject to waiver or estop-pel. See Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 392-93, 102 S.Ct. 1127, 1131-32, 71 L.Ed.2d 234 (1982); Sims v. Heckler, 725 F.2d 1143, 1145 (7th Cir.1984); United States v. Reliable Chemical Co., 66 CCPA 123, 128, 605 F.2d 1179, 1184 (1979).

Plaintiff’s action contesting Customs’ denial of the April protest was not timely commenced and the Court is without jurisdiction to consider that claim.

IT IS HEREBY ORDERED that defendant’s motion to sever and dismiss is granted.

JUDGEMENT

This case having been duly submitted for decision and the Court, after due deliberation, having rendered a decision herein; now, in conformity with said decision,

IT IS ORDERED, ADJUDGED, and DECREED that Protest No. 28090 000466 and Entry No. 147522 are severed from this action and this action is dismissed as to that protest and entry.

      . On a motion under Rule 12(b)(1) of the Rules of this Court, where a jurisdictional defect is not apparent on the face of the complaint, the Court may dismiss on the basis of the complaint, supplemented by undisputed facts in the record, plus the Court’s resolution of disputed facts.

        See Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir.1981). The Court makes no factual findings on this motion, since the jurisdictional question may be resolved on the basis of plaintiffs factual allegations.


author: JOYCE HENS GREEN, District Judge.

text:
    Michael L. SWANN, Plaintiff, v. Harry N. WALTERS, et al., Defendants.
    Civ. A. No. 83-3493.
    United States District Court, District of Columbia.
    July 27, 1984.

      Francis R. Ridley, Jr., Washington, D.C., for plaintiff.
    Stuart H. Newberger, Asst. U.S. Atty., Washington, D.C., for defendants.
   MEMORANDUM OPINION

JOYCE HENS GREEN, District Judge.

In this action, plaintiff seeks reversal of his demotion by the Veterans Administration (VA).

Plaintiff was first employed by the VA in 1972 as a computer operator in one of its Medical Centers (VAMC), and was promoted to the job of Shift Supervisor in 1976. In this position, plaintiff had access to computerized medical records of VAMC patients. Specifically, he was responsible for the operation and monitoring of the central processing unit and all patient ward terminals; this gave him the ability to enter or change data in the computer system. Hence, plaintiff had access to confidential medical information — information often critical to a patient’s well-being. For these reasons, and in accordance with an Office of Management and Budget (0MB) directive issued in 1978, plaintiffs position was designated as a “critical-sensitive ADP-I” for which a security clearance is required. Following the appropriate investigation, clearance was issued in 1980.

In May, 1982, plaintiff was convicted on a felony charge of sexual child abuse in a Maryland state court. He received a five-year suspended sentence and was placed on probation for five years with a requirement to undergo psychiatric treatment. Plaintiff did not report his conviction to the VA. When the Director of the VAMC learned of the conviction, in January 1983, he referred the matter to the Office of the Inspector General for review of plaintiffs security clearance. That office, in applying Federal Personnel Manual guidelines, determined that plaintiff was no longer able to hold a critical-sensitive ADP-I position. In particular, it was felt that plaintiffs crime reflected too adversely upon his honesty, integrity, and character to permit him to hold a position which requires a high degree of trustworthiness and stability.

Accordingly, in March, 1983, plaintiffs security clearance was revoked, and, following a hearing, he was advised that he would be removed from his position. After negotiations with plaintiffs attorney, the VA agreed to offer plaintiff a position which did not require a security clearance. At the time, the only such job available was that of Housekeeping Aide. Consequently, in May, 1983, plaintiff was demoted from Shift Supervisor for the Computer System to Housekeeping Aide.

Plaintiff appealed his demotion to the Merit Systems Protection Board (MSPB), which affirmed the VA’s action. The MSPB found that plaintiff’s criminal misconduct was sufficiently serious and indicative of aberrant behavior to justify the VA’s concern about his character and trustworthiness. Besides challenging the propriety of demotion following his conviction, plaintiff claimed the VA’s action constituted discrimination on the basis of his handicap of paranoid schizophrenia. The MSPB found no evidence of such discrimination.

Now before the Court are the parties’ cross motions for summary judgment. At issue are plaintiff’s claims that (1) his position did not require a security clearance and, even if it did, the clearance was improperly revoked, in violation of the Civil Service Reform Act of 1978, 5 U.S.C. § 1101 et seq., and (2) his demotion represented discrimination on the basis of his psychiatric handicap in violation of the Rehabilitation Act of 1978, 29 U.S.C. § 791 et seq.

While appeals of MSPB decisions are generally heard in the Court of Appeals for the Federal Circuit, 5 U.S.C. § 7703(b)(1) (1982), those which combine claims of discrimination and claims on other bases, are heard in the federal district court. See Hayes v. U.S. Gov’t Printing Office, 684 F.2d 137, 140 (D.C.Cir.1982); 5 U.S.C. § 7703(b)(2). The district court reviews the discrimination claims de novo and the other claims on the administrative record. Id. at 141; Mayo v. Edwards, 562 F.Supp. 907 (D.D.C.1983) (federal employee challenged dismissal on procedural grounds and discrimination grounds, and procedural claim reviewed on the administrative record). As to the latter, the Court may set aside only those agency actions which are arbitrary, capricious, an abuse of discretion, not in accordance with law or procedure, or unsupported by substantial evidence. 5 U.S.C. § 7703(c); Hayes, 684 F.2d at 138.

I. Plaintiffs Security Clearance

Plaintiff challenges the application of security clearance considerations on grounds that (a) his position did not require a security clearance and (b) his clearance was improperly revoked. The Court rejects both claims.

Plaintiff first argues that, since his position had no relation to matters of national security, a security clearance should not have been required. However, the guidelines for computer security do not depend upon national security considerations. Rather, they were promulgated under Transmittal Memorandum No. 1 to OMB Circular A-71 (1978) which requires federal agencies to develop and implement computer security programs.

OMB Circular A-71 itself was issued under the authority of 5 C.F.R. § 1310.1 (1984) (OMB and Federal Management Circulars) which provides:

In carrying out its responsibilities, the Office of Management and Budget issues policy guidelines to Federal agencies to promote efficiency and uniformity in Government action. These guidelines are normally in the form of circulars.

The responsibility for computer security was delegated to OMB through the Reorganization Plan No. 2 of 1970, 3 C.F.R. 1070 (1966-1970 Comp.) reprinted in 31 U.S.C. § 501 note (1982) (“Improvement of ... information ... systems will be a major function of the Office of Management and Budget”) and Executive Order 11,541, 3 C.F.R. 939 (1966-1970 Comp.) reprinted in 31 U.S.C. § 501 note (1982) (Executive authority to carry out the Reorganization Plan No. 2 of 1970 assigned to OMB). Finally, the authority for the Reorganization Plan is 5 U.S.C. § 903 (1982):

“Whenever the President, after investigation, finds that changes in the organization of agencies are necessary ..., he shall prepare a reorganization plan....”

5 U.S.C. § 903(a).

OMB’s computer security regulations are valid provided they are not arbitrary or capricious within the meaning of the Administrative Procedure Act, 5 U.S.C. § 706(2)(A) (1982), See, e.g., United States v. Wall, 670 F.2d 469, 471 (4th Cir.1982). The standard of review is a narrow one: the Court’s role is to ensure that OMB’s regulations are based on a consideration of relevant factors and that no clear error of judgment has been made. United States v. Wall, 670 F.2d at 471; Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971). The Court is not free to substitute its judgment for OMB’s; rather, OMB’s regulations must be upheld if supported by a rational basis. See Loyola University v. FCC, 670 F.2d 1222, 1226 (D.C.Cir.1982); Ethyl Corp. v. EPA, 541 F.2d 1, 34 (D.C.Cir.) (en banc) cert. denied, 426 U.S. 941, 96 S.Ct. 2662, 49 L.Ed.2d 394 (1976).

Applying these guidelines, the Court upholds OMB’s computer security program. The need to control access to computer data is obvious. Large amounts of important and sensitive information are concentrated on government computer disks. A computer operator can cause substantial harm by destruction, alteration, or disclosure of the data.

The Court also affirms the security classification of plaintiff’s position, Shift Supervisor for the Computer System, as critical-sensitive ADP-I. Critical-Sensitive refers to positions

in which the incumbent ... can access a system during the operation or maintenance in such a way, and with relatively high risk for causing grave damage or realize a significant personal gain. Federal Personnel Manual, Chapter 732, subchapter l-9(c)(l) (May 16, 1979) (revised January 6, 1984; quoted provision remains in effect).

Such portions may involve:

...—Significant involvement in life-critical or mission-critical systems. —Positions involving major responsibility for the ... operation, monitoring, and/or management of systems hardware and software.
Federal Personnel Manual, Chapter 732, Appendix A-2 (May 16, 1979) (revised January 6, 1984; quoted provision remains in effect).

Plaintiff’s position fits well within these criteria. Since a Shift Supervisor has access to highly sensitive medical records of patients, with the ability to alter those records, the position involves a “relatively high risk for effecting grave damage to the system.” Moreover, access to medical records, particularly where, as here, the records belong to active patients, represents a “significant involvement in [a] life critical ... system.” Finally, a Shift Supervisor has “major responsibility” for the “operation” and “monitoring” of the patient records system.

In addition to properly classifying plaintiffs position for security purposes, the VA acted reasonably in revoking his security clearance. Under 5 U.S.C. § 7513(a) (1982), an agency may take adverse action against an employee “only for such cause as will promote the efficiency of the service.” Among the reasons which may be considered as a basis for such adverse action are “criminal, dishonest, infamous or notoriously disgraceful conduct.” (Emphasis added.) Federal Personnel Manual, Supplement 731-1, subchapter S2-3 (November, 1975).

In acting under Section 7513, an agency must find that (1) the employee actually committed misconduct and (2) a nexus exists between the misconduct and the efficiency of the service. Hoska v. U.S. Dep’t of the Army, 677 F.2d 131, 136-37 (D.C.Cir.1982); McClelland v. Andrus, 606 F.2d 1278, 1291 (D.C.Cir.1979). Without evidence of a nexus, “the adverse action must be condemned as arbitrary and capricious for want of a discernible rational basis.” Doe v. Hampton, 566 F.2d 265, 272 (D.C.Cir.1977); Hoska v. U.S. Dep’t of the Army, 677 F.2d at 137; McClelland v. Andrus, 606 F.2d at 1291. That plaintiff committed criminal misconduct is not disputed here. Rather plaintiff claims there was an inadequate demonstration of a nexus by defendant.

While in general an agency must explicitly demonstrate a nexus, Norton v. Macy, 417 F.2d 1161, 1164-65 (D.C.Cir.1969); Yacovone v. Bailar, 455 F.Supp. 287, 290 (D.D.C.1978), there are circumstances in which the seriousness of the misconduct and the nature of the employee’s duties justify a presumption that a nexus exists. In such cases, the agency need not make a particular showing that the efficiency of the service is impaired. Gloster v. General Services Admin., 720 F.2d 700, 703 (D.C.Cir.1983); Yacovone v. Bolger, 645 F.2d 1028, 1032 (D.C.Cir.), cert. denied, 454 U.S. 844, 102 S.Ct. 159, 70 L.Ed.2d 130 (1981); Gueory v. Hampton, 510 F.2d 1222, 1226 (D.C.Cir.1974) (maintenance worker at Post Office fired following conviction for manslaughter). As the court in Moffer v. Watt, 690 F.2d 1037, 1040 n. 12 (D.C.Cir.1982), pointed out, there are cases where the connection between the misconduct and employment responsibilities “speaks for itself.” This is one of those cases. It cannot be said to be unreasonable for defendant to conclude that plaintiffs conviction of sexual child abuse casts grave doubt on his reliability, trustworthiness, and ethical conduct. See Gueory v. Hampton, 510 F.2d at 1226. Moreover, the requirement that plaintiff have a security clearance follows directly from the importance of trustworthiness and reliability to his position.

This case, because it involves an employee who was convicted of serious criminal misconduct and was employed in a position requiring security clearance, is readily distinguishable from those cases where a nexus could not be presumed. See e.g., Bonet v. U.S. Postal Service, 661 F.2d 1071 (5th Cir.1981) (postal worker in non-sensitive position); Hoska v. U.S. Dep’t of the Army, 677 F.2d 131 (security clearance revoked on the basis of unsubstantiated evidence of minor acts of (indiscretion); D.E. v. Dep’t of the Navy, MSPB, 721 F.2d 1165 (9th Cir.1983) (civilian employee of Navy convicted of sexual child abuse with security not an issue).

Plaintiff’s claim that he was denied due process must also fail. Under 5 U.S.C. § 7513 an employee against whom dismissal is proposed is entitled to (1) 30 days advance written notice stating the specific reasons for the dismissal; (2) a reasonable time to respond (not less than 7 days); (3) representation by an attorney; and (4) appeal before the MSPB. Moreover, an agency may provide for a hearing. These procedural safeguards have been found by the Supreme Court to satisfy the requirements of due process. See Arnett v. Kennedy, 416 U.S. 134, 94 S.Ct. 1633, 40 L.Ed.2d 15 (1974). Furthermore, they were correctly observed by the VAMC. Plaintiff was (a) provided with 30 days advance written notice of the proposed dismissal on April 8, 1983, (b) told that the action was based on his conviction, (c) allowed two weeks to respond, and (d) granted a conference with officers of the VAMC to which he was accompanied by his attorney. During the conference, on April 29, 1983, an agreement was reached whereby plaintiff would be retained in a non-sensitive position. Three weeks later plaintiff made his appeal to the MSPB; on September 16, 1983, his demotion was affirmed.

II. Handicap Discrimination

Plaintiff’s second major claim, that his demotion constituted handicap discrimination, in violation of the Rehabilitation Act of 1973, Sections 501, 504, as amended, 29 U.S.C. §§ 791, 794 (1982), is equally untenable. The handicap alleged is mental disability from a chronic condition of paranoid schizophrenia, for which plaintiff has received psychiatric treatment since the 1960’s.

29 U.S.C. § 794 provides that No otherwise qualified handicapped individual in the United States, as defined in section 706(7) of this title, shall, solely by reason of his handicap, be ... subjected to discrimination under any program or activity ... conducted by an Executive agency....

The protection of Section 794, since it extends only to those handicapped employees “otherwise qualified” for their positions, cannot be invoked by plaintiff. To be “otherwise qualified,” he must be able to meet all of his job’s requirements “in spite of” his handicap. See Southeastern Community College v. Davis, 442 U.S. 397, 406, 99 S.Ct. 2361, 2367, 60 L.Ed.2d 980 (1979); Walker v. Attorney General of the U.S., 572 F.Supp. 100, 102 (D.D.C.1983); Treadwell v. Alexander, 707 F.2d 473, 477 (11th Cir.1983). However, as discussed above, plaintiffs criminal misconduct made him unsuitable to hold a security clearance, a fundamental requirement of his position. Moreover, the appraisals by 'plaintiffs own psychiatric witnesses indicate that the schizophrenia undermines his stability to an extent that he is not suitable for a security clearance. According to the affidavit of Dr. Lawrence Y. Kline, exacer-bations of plaintiffs illness “render him a definite threat to others.” Dr. Ronald D. Wynne also found that stress makes plaintiff dangerous to others.

Plaintiff cannot sustain his Section 794 claim for the further reason that he was not demoted “solely because of his handicap.” Rather, the VA acted because plaintiffs criminal misconduct reflected adversely on his trustworthiness and stability. There is no evidence that his psychiatric condition was taken into account. See Guerriero v. Schultz, 557 F.Supp. 511, 513 (D.D.C.1983) (foreign service officer with schizoid personality disorder dismissed after engaging in sexual acts in a public bar). Indeed, plaintiff did not disclose the existence of his schizophrenia until his appeal to the MSPB.

The other potential basis for plaintiffs discrimination claim, 29 U.S.C. § 791, fails as well. Section 791 requires federal agencies to go beyond the nondiscrimination of Section 794 and take affirmative steps in its hiring, placement, and advancement of handicapped individuals. See Southeastern Community College v. Davis, 442 U.S. at 410-11, 99 S.Ct. at 2369; Prewitt v. U.S. Postal Service, 662 F.2d 292, 306 (5th Cir.1981). Regulations to implement Section 791 have been promulgated by the Equal Employment Opportunity Commission and require that

An agency shall make reasonable accommodation to the known physical or mental limitations of a qualified handicapped applicant or employee unless the agency can demonstrate that the accommodation would impose an undue hardship on the operation of its program.

29 C.F.R. § 1613.704(a) (1984).

The purpose of Section 791 is to ensure that handicapped individuals are not excluded from jobs whose essential requirements they can meet. See 29 C.F.R. § 1613.702(f); Prewitt v. U.S. Postal Service, 662 F.2d at 307. Plaintiff, however, asks the Court to use his schizophrenia as a basis for exempting him from a critical criterion of his job, the security clearance. Since plaintiffs claim is outside the protection of the Rehabilitation Act, it is rejected. An appropriate Order accompanies this Memorandum Opinion.

ORDER AND FINAL JUDGMENT In accordance with the Memorandum Opinion issued this date, it is, by the Court, this 27th day of July, 1984

ORDERED that plaintiffs motion for judgment on the pleadings be and it hereby is denied; and it is further

ORDERED that defendants’ motion for summary judgment be and it hereby is granted; and it is further

ORDERED that judgment be and it hereby is entered in favor of defendants, Harry N. Walters, Administrator, Veterans Administration, Frank S. Sato and A.A. Ga-vazzi, and against plaintiff, Michael L. Swann.

       Automatic Data Processing-I.

      . Plaintiff also claimed that, since blacks are more likely to be convicted of crimes than whites, demotion on the basis of a criminal conviction represents racial discrimination. It is true that employment requirements which operate to exclude blacks disproportionately and which are unrelated to job performance are prohibited. Griggs v. Duke Power Co., 401 U.S. 424, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971). However, as explained in this opinion, plaintiffs criminal misconduct was directly related to his job performance.

      . Technically, plaintiff filed a motion for judgment on the pleadings. Since he relies, in his motion, upon matters outside the pleadings (e.g., affidavits) contrary to Fed.R.Civ.P. 12(c), this Court has treated the motion as one for summary judgment.

      . Since the medical records of patients are protected by the Privacy Act, 5 U.S.C. § 552(e)(10) (1982), these computer security guidelines could also have been promulgated under 38 C.F.R. § 1.578(j) (1983) ("The Veterans Administration will establish appropriate ... safeguards to insure the security and confidentiality of records ..."). Section 1.578(j) was issued under, and with the same language, as the Privacy Act.

      . The classification terminology has been modified since the parties' briefs were filed. Hence, ADP-I has become Level 3. With this change, there has been no alteration in the definition of "critical-sensitive."

      . At that time, the only position which was both available and suitable was Housekeeping Aide. Plaintiff was offered that position on May 5, 1983.


author: ALAIMO, Chief Judge.

text:
    Cecil JOHNSON, Plaintiff, v. KUT KWICK CORPORATION, Defendant.
    Civ. A. No. 284-143.
    United States District Court, S.D. Georgia, Brunswick Division.
    Oct. 5, 1984.
    On Motion For Reconsideration Nov. 1, 1984.
    On Application For Fee Dec. 28, 1984.
    Evelyn H. Johnson, Brunswick, Ga., for plaintiff.
    Carol A. Eller, Atlanta, Ga., for defendant.
   ORDER

ALAIMO, Chief Judge.

Presently before the Court are two motions by the defendant: (1) a motion to dismiss the pendent state claims and (2) a motion to impose sanctions against plaintiff and his counsel for violation of Fed.R. Civ.P. 11.

I. Motion to Dismiss

This action, originally erroneously brought pursuant to 42 U.S.C. § 2000e et seq., and pendent state claims based on alleged discrimination against handicapped persons, in violation of O.C.G.A. § 34-6A-I, breach of a public duty, and common law fraud and deceit, was met by motion to dismiss the entire action for lack of jurisdiction because there was no allegation showing a violation of any federal right.

The complaint has now been amended to show a violation of the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. § 623 et seq., thus properly invoking federal jurisdiction founded upon 28 U.S.C. §§ 1331, 1337(a) and 1343(a)(3), (4).

Presently before the Court is defendant’s motion to dismiss the state law claims upon the ground that they predominate and are presently the subject matter of a complaint filed in Glynn Superior Court on October II, 1983.

In view of the pending state action and in consideration of judicial economy, convenience and fairness to the litigants, and the fact that the state issues substantially predominate, the Court is of the opinion that said motion to dismiss should be granted.

Accordingly, the state claims for violation of O.C.G.A. § 34-6A-1 et seq., breach of public duty and fraud are DISMISSED WITHOUT PREJUDICE.

II. Motion to Impose Sanctions

As previously stated, federal jurisdiction in this case was originally posited on a violation of Title VII, 42 U.S.C. § 2000e et seq. The complaint, however, was devoid of any claim of discrimination encompassed by Title VII, thus having no foundation for federal jurisdiction. This fatal omission spawned defendant’s motion to dismiss the entire action, as well as a motion for the imposition of sanctions for violating Fed.R.Civ.P. 11.

Promptly thereafter, plaintiff and his counsel confessed error and amended the complaint to show a violation of ADEA, 29 U.S.C. § 623 et seq.

Defendant’s motion has merit. Here, the original complaint was verified by plaintiff and signed by plaintiff’s counsel. Unquestionably, they either did not read the complaint before signing it or they failed to make a reasonable inquiry of the facts and the statute, 42 U.S.C. § 2000e et seq.

Rule 11 of the Federal Rules of Civil Procedure provides, in pertinent part:

The signature of an attorney or party constitutes a certificate by him that he has read the pleading ...; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such, as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

Plaintiff and his counsel have obviously violated Rule 11.

Rule 11 provides further that:

If a pleading ... is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading ..., including a reasonable attorney’s fee.

(Emphasis added.) This Court, thus, has no alternative but to impose sanctions.

Accordingly, plaintiff and his counsel shall pay reasonable attorney's fees to defendant’s counsel for the time expended in prosecuting defendant’s motion to dismiss.

If the parties cannot agree on the amount of such reasonable attorney’s fees, the Court, upon appropriate showing by defendant, shall assess a reasonable fee.

ON MOTION FOR RECONSIDERATION

Now before the Court is plaintiff’s motion for reconsideration of the Court’s Order of October 5, 1984, which dismissed all of plaintiff’s pendent state claims without prejudice and awarded defendant “a reasonable attorney’s fee for the time expended in prosecuting defendant’s motion to dismiss.” Plaintiff challenges the Court’s Order on the following grounds.

Plaintiffs Abstention Defense

First, plaintiff argues that this Court’s dismissal of his pendent state claims causes a bifurcation of plaintiff’s case and “requires him to pursue two lawsuits against the defendant arising out of the same transaction.” Plaintiff’s Motion for Reconsideration, filed October 15, 1984, at 1. Plaintiff relies on abstention cases for the proposition that federal district courts should avoid piecemeal litigation and exercise its discretionary power to abstain only in “exceptional circumstances.” See Moses H. Cone Memorial Hospital v. Mercury Construction Co., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983); Colorado River Water Conservation District, et al v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483, reh’g denied, 426 U.S. 912, 96 S.Ct. 2239, 48 L.Ed.2d 839 (1976); Forehand v. First Alabama Bank of Dothan, 727 F.2d 1033 (11th Cir.1984). Finally, plaintiff asserts that the concurrent state court action in this case is “inadequate to protect the litigant’s rights as there is a federal question to be resolved.”

The Court has read and reviewed the above-cited authority and finds it to be inapposite to the instant action. These abstention cases focus on the question of whether a federal district court should decline to exercise jurisdiction when the subject of the federal suit is simultaneously subject to litigation in state court. Usually, this issue arises in those cases where state and federal courts possess concurrent jurisdiction. See M. Redish, Federal Jurisdiction: Tensions in the Allocation of Judicial Power, 249-55 (1980). In order to avoid possible harassment or the duplication of effort, a federal court may wish to defer to the state proceeding. But, as specifically mentioned by Justice Brennan in Colorado River, supra, “the circumstances permitting the dismissal of federal suit due to the presence of a concurrent state proceeding for reasons of wise judicial administration are considerably more limited than the circumstances appropriate for abstention.” 424 U.S. at 818, 96 S.Ct. at 1246, 47 L.Ed.2d at 498.

In the case sub judice, plaintiff has brought a claim showing a violation of the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. § 623 et seq., and has invoked this Court’s jurisdiction pursuant to 23 U.S.C. §§ 1331, 1337(a) and 1343(a)(3), (a)(4). Plaintiff also has attempted to invoke the Court’s jurisdiction over pendent state claims for the violation of O.C.G.A. § 34-6A-1 et seq., breach of public duty and fraud. In its Order of October 5, 1984, dismissing plaintiff’s pendent state claims, this Court held that “[i]n view of the pending state action and in consideration of judicial economy, convenience and fairness to the litigants, and the fact that the state issues substantially predominate, the Court is of the opinion that [defendant’s] motion to dismiss [plaintiff’s state claims] should be granted.”

In the seminal case, United Mine Workers of America v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966), the Supreme Court established a two-prong test for determining the propriety of pendent jurisdiction. These consist of (1) the existence of power to hear the state claims and (2) the proper use of the discretion to exercise that power in the instant case. To satisfy the first prong:

[t]he federal claim must have substance sufficient to confer subject matter jurisdiction on the court. The state and federal claims must derive from a common nucleus of operative fact. But if, considered without regard to their federal or state character, a plaintiff’s claims are such that he would ordinarily be expected to try them all in one judicial proceeding, then, assuming substantialty of the federal issues there is power in federal courts to hear the whole.

383 U.S. at 725, 86 S.Ct. at 1138, 16 L.Ed.2d at 227-28 (citation omitted) (footnote omitted) (emphasis in original). As to the second prong, the proper exercise of discretion, the Court must keep in mind that the justification for pendent jurisdiction:

lies in consideration of judicial economy, convenience and fairness to litigants; if these are not present a federal court should hesitate to exercise jurisdiction over state claims, even though bound to apply state law to them. Needless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer-footed reading of applicable law.
[I]f it appears that the state issues substantially predominate, whether in terms of proof, of the scope of the issues raised, or of the comprehensiveness of the remedy sought, the state claims may be dismissed without prejudice and left for resolution to state tribunals.

383 U.S. at 726-27, 86 S.Ct. at 1139, 16 L.Ed.2d at 228 (citation omitted); see Rosado v. Wyman, 397 U.S. 397, 90 S.Ct. 1207, 25 L.Ed.2d 442 (1970). These lengthy passages clearly illustrate that the Supreme Court in Gibbs intended to make pendent jurisdiction a doctrine of discretion, not of plaintiff’s right. See Weissinger v. White, 733 F.2d 802 (11th Cir.1984); Williams v. Bennett, 689 F.2d 1370 (11th Cir.1982), cert. denied, 464 U.S. 932, 104 S.Ct. 335, 78 L.Ed.2d 305 (1983); see also Ray v. Tennessee Valley Authority, 677 F.2d 818 (11th Cir.1982), cert. denied, 459 U.S. 1147, 103 S.Ct. 788, 74 L.Ed.2d 994 (1983). Accordingly, district courts have been vested with substantial discretion with regard to exercising pendent jurisdiction. See Phillips v. Smalley Maintenance Services, Inc., 711 F.2d 1524 (11th Cir.1983); L.A. Draper and Son v. Wheelabrator-Frye, 560 F.Supp. 1138 (N.D.Ala.1983).

This Court has reread the record in this case and has come to the same conclusion. The Court is of the opinion, therefore, that plaintiff’s motion to reconsider the Court’s dismissal without prejudice of the pending state claims to this lawsuit should be denied.

Plaintiffs Rule 11 Defense

Plaintiff also challenges the Court’s award of sanctions against plaintiff and his counsel. Plaintiff contends that, although his counsel incorrectly cited a federal statute in pursuing his claims, this “technical” error should not give rise to an award of sanctions under Fed.R.Civ.P. 11. Plaintiff relies on particular passages from Wright & Miller and Moore in asserting the proposition that sanctions under Rule 11 may not be levied unless the offender has acted in bad faith.

This argument is wholly without merit. Just recently, the United States District Court for the Central District of California addressed this argument in Zaldivar v. City of Los Angeles, 590 F.Supp. 852 (C.D. Cal.1984). There, Judge Williams stated that:

The willfulness requirement was deleted when Rule 11 was amended...
A subjective bad faith finding would ,be difficult to make and thus makes it more difficult for courts to impose sanctions for Rule 11 violations. Furthermore, bad faith is not necessarily a prerequisite to the filing of a lawsuit which has no basis in law or fact. Attorneys may well file suits without first considering the plausibility of the claim. Such conduct may not be in bad faith, but it should not be condoned. The purpose of sanctions is to “discourage dilatory or abusive tactics and help to streamline the litigation process by lessening frivolous claims or defenses.” Fed.R.Civ.P. 11 Advisory Committee Note. A subjective bad faith requirement would not fully serve that purpose.

590 F.Supp. at 856 (footnote omitted). Thus, in determining whether sanctions under Rule 11 are appropriate, the Central District of California adopted a “less rigid standard” — “whether the plaintiff’s action was so without factual and legal foundation that it can be considered frivolous or unreasonable.” Id. Cf. Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421, 98 S.Ct. 694, 700, 74 L.Ed.2d 648 (1978) (district court has discretion to award attorney’s fees in a Title YII case upon finding that plaintiff’s action was frivolous, unreasonable or without foundation).

Upon filing the original complaint with this Court, plaintiff and counsel had an affirmative obligation to read the document and make certain, after reasonable inquiry, that it was well grounded in fact and warranted by existing law. By signing the original complaint, plaintiff’s counsel certified that this case would be tried to this Court as a Title VII case and to a jury involving pendent state claims. Even a cursory review of the Title VII statutes reveals to any licensed attorney that plaintiff’s injuries could not be remedied under those provisions. Had plaintiff or counsel corrected this error shortly after filing the complaint, this Court might have looked upon this matter with greater leniency. But it was not until defendant brought its motion to dismiss for failure to state a claim, Fed.R.Civ.P. 12(b)(6), nearly six weeks later that plaintiff did amend his original complaint.

Pursuant to Fed.R.Civ.P. 11, therefore, this Court feels compelled to impose sanctions on plaintiff and his counsel. Accordingly, plaintiffs motion for reconsideration of the Court’s award of attorney’s fees will be denied.

CONCLUSION

In accordance with the foregoing, the plaintiff’s motion for reconsideration of the Court’s Order of October 5, 1984, is hereby DENIED.

ON APPLICATION FOR FEE

By Order of October 5, 1984, the Court granted defendant’s motion for sanctions pursuant to Fed.R.Civ.P. 11, holding that “plaintiff and his counsel shall pay reasonable attorney’s fees to defendant’s counsel for the time expended in prosecuting defendant’s motion to dismiss.” The parties have failed to agree on the amount of such reasonable fee and defendant’s counsel, Carol A. Eller, has submitted a fee application requesting $2,574.50 (27.1 hours expended at $95 per hour).

On consideration of Eller’s affidavit in support of her fee application, the Court cannot accede to such request. In view of “the number of years [Eller] has practiced [and her] experience and expertise in the area of labor and employment law,” Affidavit at 3, Eller should have realized after only a cursory reading of the complaint that no federal cause of action arose under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq.

The Court is of the opinion that Eller should have been able to prepare defendant’s motion to dismiss in no more than five hours. Adjusting counsel’s hourly rate to $75, a rate more commonly found among counsel in this District, therefore, the Court hereby instructs plaintiff and his counsel to pay Eller a reasonable attorney’s fee in the amount of $375.00.

Also pending is plaintiff’s motion for a revision of the Court’s Order of October 5, 1984, in which plaintiff’s pendent state law claims were dismissed from this action. Plaintiff requests the Court’s permission to pursue an interlocutory appeal because that Order “involves controlling questions of law as to which there is substantial ground for difference of opinion, and an immediate appeal from said order ... may materially advance the ultimate termination of this litigation.” Plaintiff’s Motion at 1 (filed October 15, 1984).

Upon consideration thereof, said motion is DENIED.

      . Plaintiff filed his original complaint on July 10, 1984. Defendant brought its motion to dismiss on August 27, 1984, and plaintiffs complaint was amended on September 7, 1984.