B-222656, APR 24, 1987, 66 COMP.GEN. 393

B-222656, APR 24, 1987, 66 COMP.GEN. 393

MISCELLANEOUS TOPICS - COMMERCE - IMPORTS - RESTRICTIONS OFFICE OF U.S. TRADE REPRESENTATIVE INTERPRETATION AND ADMINISTRATION OF COMPETITIVE NEED CEILINGS OF GENERALIZED SYSTEMS OF PREFERENCES TRADE PROGRAM, SECTION 504(C)(1) OF THE TRADE ACT OF 1974, 19 U.S.C. 2464(C)(1), ARE LEGALLY SUPPORTABLE. THE TERM "PRECEDING CALENDAR YEAR" REFERS TO THE YEAR IN WHICH EXPORTS ARRIVED IN THE UNITED STATES, AS WELL AS TO THE YEAR BEFORE THE PRESIDENT DETERMINES WHETHER THE EXPORTED ARTICLES EXCEEDED THE STATUTORY FORMULA IN THAT SECTION. MISCELLANEOUS TOPICS - COMMERCE - IMPORTS - RESTRICTION OFFICE OF U.S. TRADE REPRESENTATIVE NEED NOT CHANGE ITS APPLICATION OF COMPETITIVE NEED FORMULA IN FUTURE YEARS, SINCE INTERPRETATION AND ADMINISTRATION OF GENERALIZED SYSTEM OF PREFERENCE TRADE PROGRAM ARE LEGALLY SUPPORTABLE.

THE HONORABLE LLOYD M. BENTSEN, UNITED STATES SENATE:

THIS IS IN REPLY TO YOUR LETTER OF MARCH 7, 1986, IN WHICH YOU ASKED US TO DETERMINE WHETHER THE COMPETITIVE NEED CEILINGS OF THE TRADE PROGRAM KNOWN AS THE GENERALIZED SYSTEM OF PREFERENCES (GSP) HAVE BEEN ADMINISTERED IN ACCORDANCE WITH THE LAW SINCE ITS INCEPTION IN 1975. THIS END, YOU HAVE PROVIDED US WITH A MEMORANDUM PREPARED BY THE CONGRESSIONAL RESEARCH SERVICE (CRS) ASSERTING IMPROPER INTERPRETATION OF THE APPLICABLE STATUTE, THE RESPONSE TO THE CONTRARY PREPARED BY THE OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE (OUSTR), AND A LENGTHY CRS REBUTTAL (DATED MAY 2, 1986), AND HAVE ASKED US TO DETERMINE WHICH INTERPRETATION IS CORRECT.

YOU ALSO ASKED US TO COMMENT ON WHETHER THE CRS INTERPRETATION CAN BE APPLIED RETROACTIVELY, AND TO ADVISE YOU WHAT VALUE OF TRADE HAS BEEN AND POTENTIALLY WOULD BE AFFECTED BY THE CRS INTERPRETATION.

WE EXAMINED THE THREE MEMORANDA YOU SUPPLIED, AS WELL AS THE RELEVANT STATUTORY PROVISIONS AND LEGISLATIVE HISTORY. ON THE BASIS OF THIS ANALYSIS, WE CONCLUDE THAT THE INTERPRETATION ADOPTED BY OUSTR AT THE TIME THE PROGRAM WAS ENACTED, AND FOLLOWED SINCE THAT TIME, IS LEGALLY SUPPORTABLE.

SINCE WE CONCLUDE THAT THE BASIS FOR ITS ADMINISTRATION OF THE PROGRAM IS LEGALLY SUPPORTABLE, OUSTR NEED NOT ALTER THE WAY IT APPLIES THE COMPETITIVE NEED CEILINGS, AND FOR THIS REASON WE WILL NOT ADDRESS THE ISSUE OF THE RETROACTIVE APPLICATION OF THE CRS INTERPRETATION. WE ALSO REVIEWED THE QUESTION OF THE PAST AND POTENTIAL EFFECT ON THE VALUE OF TRADE IF THE CRS INTERPRETATION HAD BEEN USED. OUR CONCLUSIONS ARE ENCLOSED AS AN APPENDIX TO THIS OPINION. IN BRIEF, OUR ANALYSIS AGREES WITH THAT OF OUSTR THAT THE VALUE OF TRADE POTENTIALLY AFFECTED BY THE CRS INTERPRETATION IS ABOUT $1.7 BILLION OVER THE PERIOD 1978 THROUGH THE FIRST QUARTER OF 1985.

BACKGROUND

THE GENERALIZED SYSTEM OF PREFERENCES PROGRAM WHICH WAS ENACTED AS PART OF THE TRADE ACT OF 1974, PUB.L. NO. 93-618, 88 STAT. 1978, 2066 (1975), CODIFIED AT 19 U.S.C. 2461 - 2465, PERMITS DUTY-FREE ENTRY FOR ELIGIBLE PRODUCTS IMPORTED INTO THE UNITED STATES FROM BENEFICIARY DEVELOPING COUNTRIES (AS DEFINED IN SECTION 502 OF THE ACT, 19 U.S.C. 2462). LIMITATIONS ON THIS PREFERENTIAL TREATMENT ARE SET FORTH IN SECTION 504 OF THE ACT, 19 U.S.C. 2464, INCLUDING EXCLUSION FROM DUTY FREE TREATMENT OF ANY PRODUCT IMPORTED INTO THE UNITED STATES FROM ANY DEVELOPING COUNTRY IF THESE IMPORTS EXCEED THE STATUTORY CEILINGS SET FORTH IN SECTION 504(C)(1).

OF PRIMARY IMPORTANCE TO THE ISSUE BEFORE US IS AN ESCALATOR PROVISION IN SECTION 504(C)(1)(A), CALLED "THE COMPETITIVE NEED FORMULA," WHICH PROVIDES FOR AN ANNUAL INCREASE OR DECREASE FROM A BASE OF $25 MILLION, BASED ON THE PERCENTAGE INCREASE OR DECREASE IN THE U.S. GROSS NATIONAL PRODUCT (GNP) OF THE "PRECEDING CALENDAR YEAR."

AS ENACTED, SECTION 504(C)(1)(A) PROVIDES:

"(C)(1) WHENEVER THE PRESIDENT DETERMINES THAT ANY COUNTRY -

(A) HAS EXPORTED (DIRECTLY OR INDIRECTLY) TO THE UNITED STATES DURING A CALENDAR YEAR A QUANTITY OF AN ELIGIBLE ARTICLE HAVING AN APPRAISED VALUE IN EXCESS OF AN AMOUNT WHICH BEARS THE SAME RATIO TO $25,000,000 AS THE GROSS NATIONAL PRODUCT OF THE UNITED STATES FOR THE PRECEDING CALENDAR YEAR, AS DETERMINED BY THE DEPARTMENT OF COMMERCE, BEARS TO THE GROSS NATIONAL PRODUCT OF THE UNITED STATES FOR CALENDAR YEAR 1974, ***

THEN, NOT LATER THAN 60 DAYS AFTER THE CLOSE OF SUCH CALENDAR YEAR, SUCH COUNTRY SHALL NOT BE TREATED AS A BENEFICIARY DEVELOPING COUNTRY WITH RESPECT TO TO SUCH ARTICLE ***." /1/

SPECIFICALLY, WE HAVE BEEN ASKED TO RESOLVE A DISPUTE CONCERNING THE YEAR TO WHICH THE TERM "PRECEDING CALENDAR YEAR" REFERS. THIS IS A CRITICAL DETERMINATION, SINCE IT ESTABLISHES WHICH YEAR'S GNP DATA PROVIDES THE NUMERATOR IN THE SECTION 504(C)(1)(A) INDEXATION RATIO, WHICH CAN BE ILLUSTRATED AS FOLLOWS, AS WAS DONE BY OUSTR IN ITS MEMORANDUM:

APPLICATION YEAR $25 MILLION X INDEXATION YEAR GNP

CEILING (1974 GNP)

OUSTR MEMORANDUM, P. 2

"APPLICATION YEAR" IS THE CRS TERM FOR THE YEAR IN WHICH THE PARTICULAR IMPORTED GOODS ARRIVE, AND "INDEXATION YEAR" IS ITS TERM FOR THE YEAR WHOSE GNP DATA ARE USED IN THE EQUATION TO DETERMINE THE INDEXATION CEILING FOR THE APPLICATION YEAR. OUSTR USES A THIRD TERM, "DETERMINATION YEAR," AS THE YEAR IN WHICH THE PRESIDENT ACTUALLY DETERMINES WHETHER IMPORTS DURING THE APPLICATION YEAR EXCEEDED THEIR STATUTORY CEILING. THE DETERMINATION YEAR HISTORICALLY HAS BEEN THE YEAR FOLLOWING THE APPLICATION YEAR. FOR CONVENIENCE, WE ALSO WILL USE THESE TERMS.

CRS TAKES THE POSITION THAT "THE PRECEDING CALENDAR YEAR" REFERS TO THE YEAR BEFORE THE CALENDAR YEAR IN WHICH EXPORTS ARRIVED IN THE UNITED STATES (THE APPLICATION YEAR), AND WHICH IS 2 YEARS BEFORE THE DETERMINATION YEAR. THUS, IN ITS VIEW, IF THE APPLICATION YEAR IS 1978, THEN THE INDEXATION YEAR MUST BE 1977, AND THE DETERMINATION YEAR IS 1979. UNDER CRS' POSITION, THE 1977 GNP WOULD BE APPLIED TO 1978 EXPORTS. OUSTR, ON THE OTHER HAND, TAKES THE POSITION THAT "THE PRECEDING CALENDAR YEAR" REFERS TO THE YEAR BEFORE THE PRESIDENT'S EXPORT DETERMINATION IS MADE, WHICH IS ALSO THE YEAR IN WHICH EXPORTS ARRIVED. THEREFORE, IN ITS VIEW, IF THE APPLICATION YEAR IS 1978, THEN THE INDEXATION YEAR ALSO IS 1978, AND THE DETERMINATION YEAR IS 1979, THUS APPLYING 1978 GNP TO 1978 EXPORTS.

AN EXAMINATION OF SECTION 504(C)(1) REVEALS SOME AMBIGUITY IN ITS TERMINOLOGY AND CONSTRUCTION. WE THEREFORE REVIEWED THE LEGISLATIVE HISTORY OF THE GSP INDEXATION PROVISION. SINCE THE LEGISLATIVE HISTORY CONTEMPORANEOUS WITH THE ENACTMENT OF THE PROVISION WAS THE ONLY FORMAL GUIDANCE AVAILABLE TO OUSTR IN INTERPRETING AND IMPLEMENTING THIS PROGRAM, WE HAVE RELIED PRIMARILY ON THESE DOCUMENTS IN ARRIVING AT OUR CONCLUSION ABOUT THE VALIDITY OF OUSTR'S ACTIONS AT THAT TIME. ALTHOUGH WE HAVE EXAMINED AND INCORPORATED INTO OUR ANALYSIS SOME SUBSEQUENT CONGRESSIONAL ACTIONS DEALING SPECIFICALLY WITH SECTION 504(C)(1), WE HAVE NOT ASSESSED THE ARGUMENTS PRESENTED IN THE CRS REBUTTAL, WHICH RELY PRIMARILY ON AN ANALYSIS OF LESS DIRECTLY APPLICABLE LEGISLATION AND LEGISLATIVE HISTORY PRODUCED IN YEARS SUBSEQUENT TO THE ENACTMENT OF SECTION 504.

DISCUSSION

THE TRADE ACT OF 1974 WAS ENACTED TO "PROVIDE FAIR AND REASONABLE ACCESS TO PRODUCTS OF LESS DEVELOPED COUNTRIES IN THE UNITED STATES MARKET." SECTION 2(6), 19 U.S.C. 2102(6). THIS CONCERN IS ADDRESSED IN TITLE V OF THE ACT WHICH ESTABLISHES THE GSP PROGRAM.

THE COMPETITIVE NEED LIMITATIONS IN SECTION 504 WERE DESIGNED TO PROVIDE FOR THE WITHDRAWAL OR SUSPENSION OF PREFERENTIAL TREATMENT WHEN IT COULD "NO LONGER BE JUSTIFIED ON GROUNDS OF PROMOTING THE DEVELOPMENT OF AN INDUSTRY IN A PARTICULAR DEVELOPING COUNTRY." H.R. REP. NO. 571, 93RD CONG., 1ST SESS. 88 (1973). AT THE TIME IT PASSED THE HOUSE THE BILL (H.R. 10710) PROVIDED A FLAT DOLLAR CEILING FOR TRIGGERING THE GSP LIMITATIONS. SECTION 504(C) THEN STATED IN PART:

"(C) WHENEVER THE PRESIDENT DETERMINES THAT ANY COUNTRY --

(1) AS EXPORTED (DIRECTLY OR INDIRECTLY) TO THE UNITED STATES A QUANTITY OF SUCH ARTICLE HAVING AN APPRAISED VALUE OF MORE THAN $25,000,000 DURING ANY CALENDAR YEAR ***

THEN, NOT LATER THAN 60 DAYS AFTER THE CLOSE OF SUCH CALENDAR YEAR, SUCH COUNTRY SHALL NOT BE TREATED AS A BENEFICIARY DEVELOPING COUNTRY WITH RESPECT TO SUCH ARTICLE ***."

ALTHOUGH LATER AMENDED BY THE SENATE, THE PURPOSE OF THE AMENDED PROVISION WAS DESCRIBED BY THE SENATE COMMITTEE ON FINANCE IN ALMOST THE SAME LANGUAGE AS THE HOUSE REPORT. S. REP. NO. 1298, 93RD CONG., 2D SESS. 227 (1974). THE PROVISION AS AMENDED INCLUDED THE COMPETITIVE NEED FORMULA QUOTED ON PAGE 2, ABOVE.

WE ARE AWARE OF NO STATEMENT IN THE RELEVANT LEGISLATIVE HISTORY OF THE PROVISION THAT EXPLAINS PRECISELY THE PURPOSE OR INTENDED APPLICATION OF THE PARTICULAR TERMINOLOGY OF THE COMPETITIVE NEEDS FORMULA, ALTHOUGH ONE PORTION OF THE LEGISLATIVE HISTORY SUPPLIES A SOMEWHAT EXPANDED EXPLANATION OF HOW SECTION 504(C)(1)(A) WAS EXPECTED TO OPERATE. THE REPORT OF THE SENATE COMMITTEE ON FINANCE, THE KEY COMMITTEE REPORT ISSUED AFTER THE INDEXATION PROVISION WAS ADDED, STATES, WITH RESPECT TO THE CALCULATION OF ANNUAL DOLLAR CEILINGS:

"THE DOLLAR CEILING WOULD BE SET AT $25 MILLION FOR CALENDAR YEAR 1975. EACH SUBSEQUENT YEAR THE CEILING WOULD INCREASE OR DECREASE BY THE SAME PERCENT AGE AS THE UNITED STATES GROSS NATIONAL PRODUCT INCREASED OR DECREASED IN THE PREVIOUS YEAR OVER THE BASE YEAR, 1974. FOR EXAMPLE, IF THE GROSS NATIONAL PRODUCT INCREASES BY 10 PERCENT IN 1975 THEN THE DOLLAR CEILING FOR 1976 WOULD BE $25 MILLION PLUS 10 PERCENT OF $25 MILLION OR $27.5 MILLION. ***

"IF IMPORTS OF AN ARTICLE ELIGIBLE FOR PREFERENCES FROM A BENEFICIARY COUNTRY REACH THE *** DOLLAR CEILING LEVEL IN ANY CALENDAR YEAR, THE PREFERENCE ON THAT ARTICLE FROM THAT COUNTRY WOULD TERMINATE NOT LATER THAN 60 DAYS AFTER THE CLOSE OF THE CALENDAR YEAR ***." S. REP. NO. 1298, 93RD CONG., 2D SESS. 226 (1974).

THE ABOVE QUOTATION FROM THE REPORT HAS BEEN CITED BY BOTH CRS AND OUSTR IN SUPPORT OF THEIR CONFLICTING OPINIONS, SO ITS RELIABILITY IS QUESTIONABLE. NEVERTHELESS, IT ARGUABLY LENDS SUPPORT TO THE OUSTR INTERPRETATION OF THE STATUTE, AS WILL BE DISCUSSED BELOW.

OUSTR INTERPRETATION

OUSTR, UNDER SECTION 8(A) OF EXECUTIVE ORDER 11846, MARCH 27, 1975, WAS CHARGED WITH THE RESPONSIBILITY FOR ADMINISTERING THE GSP PROGRAM. OUSTR READ THE STATUTE AND CONGRESSIONAL REPORTS REFERRED TO ABOVE IN THE CONTEXT OF WHAT IT PERCEIVED TO BE THE INTENT OF CONGRESS THAT THE PROGRAM BE IMPLEMENTED IN 1975, WITH A COMPETITIVE NEED DETERMINATION IN 1975 BASED ON 1974 FULL-YEAR DATA COMPARED TO THE INITIAL DOLLAR CEILING OF $25 MILLION.

IN ITS MEMORANDUM OUSTR DOES NOT REFER TO SPECIFIC CONGRESSIONAL STATEMENTS THAT THE PROGRAM HAD TO BE FULLY IMPLEMENTED AND A COMPETITIVE NEED DETERMINATION MADE IN 1975, AND WE FOUND NONE IN OUR REVIEW OF THE LEGISLATIVE HISTORY. OUSTR RELIES FOR SUPPORT INSTEAD ON THE DATE THE ACT BECAME EFFECTIVE, JANUARY 3, 1975, WHICH IN EFFECT MADE THE WHOLE CALENDAR YEAR AVAILABLE FOR IMPLEMENTATION OF THE PROGRAM, AND THE STATEMENT IN THE SENATE REPORT QUOTED ABOVE THAT THE DOLLAR CEILING FOR THE GSP PROGRAM WOULD BE "25 MILLION FOR 1975," WHICH IT BELIEVES MEANT THE PROGRAM WAS TO BE IMPLEMENTED IN 1975, USING THAT DOLLAR CEILING FOR 1974 IMPORTS. RELIES AS WELL ON ITS JUDGMENTAL DETERMINATION THAT CONGRESS DID NOT EXPECT IMPORTS "WOULD BE ALLOWED TO ARRIVE DUTY-FREE IN THE U.S. WITHOUT A COMPETITIVE NEED DETERMINATION ALREADY FIRMLY IN PLACE." OUSTR MEMO, P. 3. IT ALSO OBVIOUSLY WAS INFLUENCED BY ITS BELIEF THAT CONGRESS INTENDED IMPORTS IN 1 YEAR TO BE MEASURED AGAINST AN INDEX BASED ON THE GNP FOR THAT YEAR. ID., P. 6.

THERE IS EVIDENCE IN THE HOUSE REPORT THAT CONGRESS EXPECTED FULL YEAR IMPORT DATA TO BE USED IN MAKING COMPETITIVE NEED DETERMINATIONS (GSP LIMITATIONS APPLY TO IMPORTS "DURING THE LATEST YEAR FOR WHICH COMPLETE DATA ARE AVAILABLE." H. REP. NO. 571, SUPRA, AT 87), AND OUSTR CONCLUDED THAT THIS REQUIRED A FULL-YEAR REVIEW OF 1974 IMPORTS (THE "PREVIOUS YEAR"), WITH REFERENCE TO A $25 MILLION CEILING AND A PRESIDENTIAL DETERMINATION IN 1975. OUSTR MEMO, PP. 4-5. (WE NOTE THAT CRS ALSO USES "FULL-YEAR IMPORT DATA" IN ITS DIFFERING APPLICATION OF THE COMPETITIVE NEED FORMULA.) OUSTR BELIEVES THAT THE DETERMINATION YEAR WAS THE INTENDED REFERENCE POINT FOR THE TERM "PRECEDING CALENDAR YEAR," AND THAT THE INDEXATION YEAR MUST BE THE SAME AS THE APPLICATION YEAR (THE YEAR THE GOODS WERE IMPORTED). THE EVIDENCE RELIED ON BY OUSTR IN DEVELOPING ITS INTERPRETATION IS NOT EXPLICITLY SUPPORTED BY THE SOMEWHAT MEAGER CONTEMPORANEOUS LEGISLATIVE HISTORY, BUT WE BELIEVE THAT IT ACTED REASONABLY UNDER RATHER SEVERE TIME CONSTRAINTS TO DEVELOP AN ADMINISTRATIVE PLAN IT BELIEVED TO BE CONSISTENT WITH PERCEIVED CONGRESSIONAL INTENT TO IMPLEMENT THE PROGRAM IN 1975.

CRS INTERPRETATION

CRS HAS PREPARED A DETAILED ARGUMENT IN SUPPORT OF ITS INTERPRETATION OF SECTION 504(C)(1)(A), AND ITS POSITION THAT THE INDEXATION YEAR FOR COMPUTING THE COMPETITIVE NEED FOR MULA WAS INTENDED BY CONGRESS TO BE THE YEAR PRECEDING THE APPLICATION YEAR, AND NOT THE APPLICATION YEAR ITSELF, AS DETERMINED BY OUSTR.

CRS ASSERTS THAT ON ITS FACE, AND AS A MATTER OF PRACTICAL APPLICATION, THE TERM "THE PRECEDING CALENDAR YEAR" LOGICALLY AND GRAMMATICALLY REFERS TO THE TERM "HAS EXPORTED *** DURING A CALENDAR YEAR" WHICH PRECEDES IT IN SECTION 504(C)(1)(A). THUS, IN CRS' VIEW, THE PRECEDING CALENDAR YEAR MUST BE THE YEAR BEFORE THE CALENDAR YEAR IN WHICH THE GOODS WERE EXPORTED. THIS MEANS THAT THE INDEXATION YEAR, WHICH IS THE SOURCE OF THE GNP NUMERATOR IN THE COMPETITIVE NEED FORMULA, WAS 1973 IN THE FIRST YEAR OF THE PROGRAM, AND NOT 1974 AS APPLIED BY OUSTR (CRS REBUTTAL MEMO, PP. 20-24), AND IT ARGUES THAT ALL THE INDEXATION CALCULATIONS HAVE BEEN WRONG SINCE THIS INITIAL ERROR BY OUSTR, RESULTING IN MORE DUTY-FREE GOODS ARRIVING IN THE UNITED STATES THAN CONGRESS INTENDED. CRS MEMO, PP. 10- 11. IT IS TRUE THAT, AS OUSTR STATED, "THIS CRS READING OF THE STATUTE APPEARS PLAUSIBLE." IT IS ALSO TRUE, WITHOUT ATTEMPTING TO ADDRESS THE MANY SPECIFIC CONTEXTUAL AND GRAMMATICAL ARGUMENTS RAISED BY CRS, THAT THE RELEVANT LEGISLATIVE HISTORY CITED BY CRS CAN BE INTERPRETED AS SUPPORTING ITS CONCLUSION THAT THE "PRECEDING YEAR" IS THE YEAR BEFORE THE GOODS WERE IMPORTED. THUS, IT CITES THE QUOTED PASSAGE AT PAGE 226 OF THE SENATE REPORT TO SUPPORT ITS INTERPRETATION THAT THE "DOLLAR CEILING" OF $25 MILLION FOR CALENDAR YEAR 1975 REFERS TO A DOLLAR CEILING ON MEASURED EXPORTS IN THAT YEAR, AND NOT TO A DOLLAR CEILING USED IN 1975 TO DETERMINE WHETHER 1974 EXPORTS EXCEEDED THE STATUTORY LIMITATION, AS OUSTR CONTENDS. CRS REBUTTAL MEMO, P. 15. THIS IS A RATIONAL INTERPRETATION OF THE STATEMENT, BUT AS SHOWN ABOVE, IT IS NOT THE ONLY POSSIBLE INTERPRETATION OF THE REPORT, WHICH IS THE ONLY LEGISLATIVE HISTORY THAT ATTEMPTS TO EXPLAIN HOW TO APPLY THE INDEXATION FORMULA. S. REP. NO. 1298, SUPRA, AT 226.

CRS ALSO DISPUTES OUSTR'S CONCLUSION THAT THE CONGRESS INTENDED THE FIRST PRESIDENTIAL COMPETITIVE NEED DETERMINATION TO BE MADE IN 1975. IT RELIES FOR ITS POSITION ON ITS READING OF THE STATUTE, AND ON ITS ASSESSMENT OF THE TIME FRAME CONGRESS "ANTICIPATED" FOR IMPLEMENTATION OF THE PROGRAM, AS WELL AS ON THE TIMING OF THE EVENTS THAT ACTUALLY OCCURRED IN THE ADMINISTRATION OF THE PROGRAM. CRS REBUTTAL MEMO, PP. 16-18. HERE AGAIN, THIS IS A PLAUSIBLE INTERPRETATION, GIVEN THE MANY ACTIONS NECESSARY TO DEVELOP AND IMPLEMENT THE GSP PROGRAM, BUT IT HAS NO DEFINITIVE SUPPORT IN THE LEGISLATIVE HISTORY.

GAO POSITION

WE DO NOT DENY THAT THE CRS INTERPRETATION OF THE GSP PROVISION IS PLAUSIBLE, LOGICAL, AND HAS SOME SUPPORT IN THE LIMITED LEGISLATIVE HISTORY. NEVERTHELESS, OUSTR, AS THE AGENCY CHARGED WITH IMPLEMENTING THE GSP PROVISIONS, IS ENTITLED TO DEFERENCE FOR ITS INTERPRETATIONS OF THE LAW, UNLESS THESE CAN BE SHOWN TO BE CLEARLY WRONG. IN OUR VIEW, SECTION 504(C)(1)(A) WILL SUPPORT THE INTERPRETATION ADOPTED BY OUSTR, WHICH IS THE ONLY INTERPRETATION THAT SATISFIES OUSTR'S CONCLUSION THAT THE CONGRESS INTENDED THE INITIAL COMPETITIVE NEED DETERMINATIONS TO BE MADE IN 1975.

OUSTR'S INTERPRETATION RESTS ON ITS READING OF THE RELATION SHIP BETWEEN THE TIME PERIOD FOR WHICH THE COMPETITIVE NEED DETERMINATION IS MADE, AND THE TIME PERIOD WHEN THIS DETERMINATION IS MADE AND APPLIED. FOR EXAMPLE, WITH RESPECT TO THE LEVEL OF IMPORTS FOR THE CALENDAR YEAR 1986, ALL 1986 DATA ON GNP AND IMPORTS REQUIRED FOR A DETERMINATION WILL BE AVAILABLE IN FEBRUARY AND MARCH 1987, AND THE PRESIDENT WILL MAKE HIS DETERMINATION AS TO WHETHER ANY IMPORT CEILINGS WERE EXCEEDED ON OR ABOUT APRIL 1, 1987.

THE GSP PROGRAM WAS ORIGINALLY AUTHORIZED FOR 10 YEARS, AND WAS THUS SCHEDULED TO EXPIRE IN JANUARY 1985. IN 1984 THE CONGRESS REAUTHORIZED THE PROGRAM FOR AN ADDITIONAL 5 YEARS. PUB.L. NO. 98-573, 98 STAT. 2948, 3020. AT THAT TIME THE CONGRESS EXAMINED SECTION 504(C)(1), PRESUMABLY WITH KNOWLEDGE OF THE MANNER IN WHICH OUSTR HAD INTERPRETED AND ADMINISTERED THE STATUTE FOR 10 YEARS. THAT THE CONGRESS DID NOT CHANGE THE SECTION 504(C)(1) FORMULA OR EVEN ADDRESS IT IN LEGISLATIVE HISTORY INDICATES THAT THE CONGRESS WAS SATISFIED WITH OUSTR'S INTERPRETATION.

ON THE BASIS OF THE FOREGOING, OUSTR'S POSITION CANNOT BE SHOWN TO BE CLEARLY WRONG, AND WE FIND THAT ITS INTERPRETATION AND APPLICATION OF THE COMPETITIVE NEED FORMULA IS LEGALLY SUPPORTABLE AND APPROPRIATE. FOR THIS REASON, OUSTR NEED NOT CHANGE THE WAY IT APPLIES THE COMPETITIVE NEED CEILINGS. IN VIEW OF OUR CONCLUSION WE HAVE NOT ADDRESSED THE QUESTION OF WHETHER THE CRS APPLICATION CAN BE APPLIED RETROACTIVELY, AND, ALTHOUGH IT MAY NO LONGER BE NECESSARY, WE HAVE ENCLOSED OUR ANALYSIS OF THE VALUE OF TRADE WHICH WOULD BE AFFECTED IF CRS' POSITION WERE TO BE ADOPTED BY THE CONGRESS.

IN ACCORDANCE WITH OUR USUAL PROCEDURES, AND WITH THE AGREEMENT OF MR. JEFF LANG, COPIES OF THIS OPINION WILL BE MADE AVAILABLE UPON REQUEST TO INTERESTED PARTIES 10 DAYS AFTER IT IS ISSUED.

WE HOPE THIS INFORMATION IS USEFUL TO YOU.

/1/ THE DATE FOR EFFECTING CHANGES UNDER THIS PROVISION WAS AMENDED FROM 60 TO 90 DAYS AFTER THE CLOSE OF THE CALENDAR YEAR BY SEC. 1106(G)(3) OF PUB.L. NO. 96-39, 93 STAT. 144, 313 (1979). CURRENTLY, THE EFFECTIVE DATE OF CHANGES UNDER THIS PROVISION IS JULY 1 OF THE YEAR FOLLOWING THE CALENDAR YEAR FOR WHICH A DETERMINATION HAS BEEN MADE, AND NOT 90 DAYS AFTER THE CLOSE OF THE CALENDAR YEAR. PUB.L. NO. 98-573, SEC. 505(C)(1), 98 STAT. 2948, 3020 (1984).

/2/ THE CONGRESS DID AMEND SECTION 504(C)(1) TO PROVIDE THAT THE PRESIDENT'S DETERMINATION WAS NOT TO TAKE EFFECT UNTIL JULY 1 OF THE YEAR FOLLOWING THE CALENDAR YEAR FOR WHICH DETERMINATION WAS MADE. THE CHANGE WAS DESIGNED TO AVOID ANY HARDSHIP IN CONNECTION WITH GOODS THAT WERE ALREADY CONTRACTED FOR AND IN TRANSIT TO THE UNITED STATES. SEE H.R. REP. NO. 1090, 98TH CONG., 2D SESS. 22 (1984). THIS CHANGE WAS NOT INTENDED TO EXTEND THE PERIOD FOR THE PRESIDENT TO MAKE AND ANNOUNCE HIS DETERMINATION, BUT TO ALLOW AN ADDITIONAL 3-MONTH PREPARATION PERIOD. ID.