Zenith Radio Corp. v. United States

437 U.S. 443 (1978)

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Zenith Radio Corp. v. United States

United States Supreme Court
437 U.S. 443 (1978)

Facts

The Tariff Act of 1930 (act) provided that the United States had to levy a duty on sales of foreign products in the United States if the foreign state paid a “bounty or grant” on its exports of the product. Japan levied a tax on consumer goods manufactured in Japan and imported into Japan. Exported goods were exempt, and if the producer had paid tax on products destined for export, the tax was refunded when the goods were shipped. Zenith Radio Corporation (Zenith) (plaintiff) petitioned the United States customs agency to assess duties on Japanese consumer electronics sold in the United States, arguing that the remission of the tax on these goods was a bounty or grant. The agency rejected Zenith’s request. On appeal in the Customs Court, the United States Treasury (Treasury) (defendant) explained that remission of tax was not a bounty because it was not excessive, that is, the amount remitted was no more than the amount the Japanese producer would have paid had the goods been sold in Japan. The Treasury had taken this position since 1898. However, the court ruled in favor of Zenith because of a United States Supreme Court decision classifying a complex Russian sugar program as a bounty. The Court of Customs and Patent Appeals reversed, finding that the Supreme Court’s ruling did not determine how the Treasury should characterize a nonexcessive tax standing alone. The court examined the economic result of the Japanese tax and affirmed that the Treasury’s policy was permissible. Throughout the proceedings, the Treasury argued that international consensus established that remission of indirect taxes did not give foreign exporters an unfair competitive advantage and was not a subsidy. A legislative study found that foreign countries’ purpose in exempting exported goods from tax was to avoid double taxation of the goods, which were also subject to taxation by the United States. Zenith argued that modern economic theory showed that remission of taxes could encourage exports.

Rule of Law

Issue

Holding and Reasoning (Marshall, J.)

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