Cliff Paper Co. v. United States ( 1913 )

Martin, Judge,

delivered the opinion of the court:

This case relates to an importation made on May 7, 1912, from Canada at the port of Niagara Falls, of 600 bundles of unbleached chemical wood pulp, which was manufactured in Canada from pulp wood cut on private lands.

The importation upon its exportation from Canada was free from any export charge or any prohibition or restriction of exportation and the right to like free exportation was possessed by the pulp wood from which the imported merchandise had been manufactured.

The entry was admitted free of duty by the collector in conformity with the interpretation which had been placed by the Treasury Department upon section 2 of the reciprocity act, which ruling of the department was published on July 26, 1911, as T. D. 31772. The act of Congress which is referred to is entitled “An act to promote reciprocal trade relations with the Dominion of Canada, and for other purposes.” (62d Cong., Sess-. I, ch. 3, July 26, 1911.)

The following is a copy of section 2 of the act just cited:

Sec. 2. Pulp of wood mechanically ground; pulp of wood, chemical, bleached, or unbleached; news print paper, and other paper, and paper board, manufactured from mechanical wood pulp or from chemical wood pulp, or of which such pulp is the component material of chief value, colored in the pulp, or not colored, and valued at not more than four cents per pound, not including printed or decorated wall paper, being the products of Canada, when imported therefrom directly into the United States, shall he admitted free of duty, on the condition precedent that no export duty, export license fee, or other export charge of any kind whatsoever (whether in the form of additional charge or license fee or otherwise), or any prohibition or restriction in any way of the exportation (whether by law, order, regulation, contractual relation, or otherwise, directly or indirectly), shall have been imposed upon such paper, board, or wood pulp, or the wood used in the manufacture of such paper, board, or wood pulp, or the wood pulp used in the manufacture of such paper or board.

The appellant protests against the action of the collector, and .contends that the merchandise was dutiable at one-sixth of 1 cent per pound under paragraph 406 of the tariff act of August 5, 1909.

It is conceded that the importation was liable to duty under that paragraph unless the same was exempted therefrom by the terms of section 2 of the reciprocity act as above copied. Therefore the entire issue in the present case is presented by the questions whether or not that section has become operative, and whether or not, if thus operative, the section comprehends within its purview such an importation as that at bar.

The appellant first maintains that section 1 of the reciprocity a,ct has not become operative, and can not become onerative until Canada shall enact the reciprocal legislation required by that section and the President shall make proclamation to that effect; and that section 2 of the same act was not intended by Congress to come into operation until section 1 should first become operative upon such reciprocal legislation and proclamation. Appellant contends that the two sections of the reciprocity act are but parts of a general scheme of reciprocity between the two countries; that the entire scheme has failed for lack of reciprocal action by Canada; and therefore that section 2, like the remainder of the act, is left without present effect or operation.

The answer to this contention is found in the fact that the several sections of the reciprocity act are separable both in form and character. This fact is made evident by the history and terms of the legislation. In the original bill as first introduced in Congress the paper and pulp provisions were items of a schedule of articles which were designated for reciprocal free admission into the respective countries. The provisions of the original bill governing that schedule were inseparable and were not to become operative until reciprocal action should be taken by Canada and the President of the United States should make proclamation to that effect. But afterwards the provisions for paper and pulp were withdrawn from the schedule to which they first belonged, and were enacted as a separate section of the act. It seems clear that this action was designed for the purpose of making the separated provisions independent of each other. The following statement, taken from appellant's brief, comes near to the foregoing view:

Subsequently the provisions in respect to paper and pulp were taken out of section 1 and put by themselves in section 2, because otherwise none of the reciprocal legislation could have taken effect until all the provincial restrictions upon the export of wood were removed which, as pointed out in the trade agreement, could not be controlled by Canada:

According to this statement from appellant's brief the paper and wood pulp provisions were taken from section 1 and enacted as section 2 in order to permit section 1 to become operative regardless of the operation of section 2.

If therefore Congress intended to permit section 1 to become operative independently of section 2, it is reasonable to conclude that section 2 might likewise become operative independently of section 1. The act as adopted contains no words which specifically or impliedly make the operation of either section dependent upon the operation of the other. The conditions upon which each section shall become operative are specifically set out in the section itself, and no requirement appears in either section for the concurrent operation of the other.

The conclusion just stated leads next to a consideration of the condition precedent contained in section 2, in order to determine its effect with relation to the present importation.

Appellant contends that the condition precedent of section 2 was adopted by Congress with reference to the fact that certain Canadian Provinces were prohibiting or restricting the exportation to this country of pulp wood growing upon Crown lands, and that Congress intended that the section should not become operative until all such prohibitions or restrictions should first be rescinded or repealed by those Provinces. Appellant furthermore contends that section 2, if it becomes operative, would continue in operation only so long as the enumerated paper, wood pulp and pulp wood are each and all allowed free and unrestricted exportation into the United States from all parts of Canada; and that the section if once operative would become inoperative so soon as any Province of Canada restricts in any manner the exportation into this country of any one of the enumerated articles, wholly regardless of the action of the other Provinces respecting any or all of those articles, and also regardless of the action of the given Province respecting the other enumerated articles. According to this construction the entire section would be inoperative or would become so if New Brunswick, for example, should restrict in any maimer the exportation to this country of any part of the pulp wood growing in that Province, or the wood pulp manufactured therefrom, even though at the same time all other Canadian Provinces, in reliance upon section 2, should permit the free exportation into this country of all pulp wood growing in such Provinces, and also of all wood pulp manufactured therefrom. Furthermore, according to appellant's contention, if Canada and all of the Provinces, in reliance upon section 2, should permit the free exportation into the United States of pulp wood and wood pulp from every part of the Dominion, but if the Province of New Brunswick, for example, at the same time should restrict in any manner the exportation from that Province into the United States of the kind of paper named in the section, the entire section would be inoperative, or would become inoperative, if already in effect. This proposition is stated by appellant in the following words.

Therefore, if the export of any paper, pulp or board of the kinds specified is prohibited or restricted in any way by Canada, no paper, pulp or board can be admitted to this country free. If any prohibition or restriction is put by Canada upon the export of any pulp of any of the kinds specified, no paper can be admitted free. If any prohibition or restriction is put by Canada upon the export of any paper of any of the kinds specified, no other paper and no pulp can be admitted free.

The references to Canada which appear in the foregoing quotation are of course intended to include the Canadian Provinces.

Accordingly appellant contends that the present importation is not entitled to free entry into this country under section 2, because the section, thus construed, is totally inoperative, since some of the Provinces of Canada continue to prohibit or restrict the exportation into this country of pulp wood cut from Crown lands.

This contention of appellant, like that first considered, leads to a review of the legislative history of the enactment. This history begins with the trade agreement which was concluded between the Secretary of State and the Canadian ministers. That agreement contemplated reciprocal legislation by the two countries, whereby certain articles should reciprocally be admitted into both countries free of duty, and other articles should reciprocally be admitted into both countries at the same rates of duty, and yet other articles should reciprocally be admitted into each country at certain prescribed rates of duty.

As proposed by the agreement certain lands of paper and wood pulp were included within the schedule of articles designated for reciprocal free entry. It was stipulated upon the part of the United States that such paper and wood pulp should have free entry into this country from Canada, subject to the condition precedent that no charge, prohibition, or restriction shall have been imposed upon the exportation of such paper or wood pulp, or upon the wood used in the manufacture of such paper or wood pulp; and subject also to the condition precedent that Canada should reciprocally give free entry to such paper and wood pulp from the United States. Upon the part of Canada, however, it was stipulated that such paper and wood pulp should be admitted free of duty from the United States into Canada only when such paper and wood pulp are admitted free of duty into the United States from all farts of Canada.

The reciprocity act as first introduced in the Sixty-first Congress conformed in the foregoing particulars to the terms of the diplomatic agreement. . The paper and wood pulp provisions appeared in the schedule of articles which were to be reciprocally free of duty. The paper and wood pulp were to be admitted without duty from Canada into the United States upon condition that no charge, prohibition, or restriction of exportation shall have been imposed upon such paper and wood pulp, or upon the pulp wood used in the manufacture of such paper or wood pulp. And in common with the other items of the free schedule the paper and wood pulp provisions were not to become operative until the President of the United States should have satisfactory evidence and make proclamation that the same articles had reciprocally been granted free entry from the United States into Canada.

The reciprocity act, however, was not adopted in the form in which it was thus first introduced. At the Sixty-first Congress the paper and wood pulp provisions were amended in the House; the bill as thus amended was adopted by the House, but failed of enactment in the Senate. At the special session of the Sixty-second Congress, which was thereupon called by the President for the express purpose of considering the reciprocity agreement, the act was finally adopted in the form in which it had passed the House at the preceding session. In the act as thus adopted Congress separated paper and wood pulp from the other items of the free schedule, and enacted the provisions relating to them as an independent section of the act. The operation of that section was not made dependent upon reciprocal free admission by Canada of such paper and wood pulp when imported from the United States, nor was it required that the President of the United States should ascertain or make proclamation of any action on the part of Canada or the Canadian Provinces as a condition precedent to the operation of the section. Congress thus struck out all conditions preliminary to the free admission into this country of the enumerated paper and wood pulp except only the’ express condition precedent contained in the section.

This radical departure from the terms of the trade agreement certainly evinces a legislative intention to depart in some particular from, the purposes set out in that agreement and in the act as first introduced in Congress. It is well therefore to consider the terms of the agreement, together with the changes therefrom which appear in the present act.

If the reciprocity act had been adopted in its original form, and if Canada had enacted reciprocal legislation in the terms proposed by the diplomatic agreemént, four provisions would have obtained relating to paper and wood pulp: Hirst, a provision for the free entry of such paper and wood pulp from Canada into this country; second, a condition making the former provision applicable only in case no export charge, prohibition, or restriction of exportation shall have been imposed upon such paper or wood pulp, or upon the wood used in the manufacture of such paper and wood pulp; third, a condition that the preceding provisions should not become operative until Canada reciprocally should give free entry to such paper and wood pulp when imported from the United States; and fourth, a provision that such paper and wood pulp should be admitted free from the United States into Canada only when such paper and wood pulp should be admitted.free into the United States from all'parts of Canada.

A comparison of these four provisions discloses the fact that if adopted as thus proposed the effect would have been to deny free entry into this country of any such Canadian paper or wood pulp until all such paper arid wood pulp from all parts of Canada should be entitled to like free entry. For our provisions relating to paper and wood pulp were all to be inoperative until Canada should admit paper and wood pulp from the United States to free entry, and Canada declined to do this until such Canadian paper and wood pulp should be admitted free into the United States from all parts of Canada. Therefore, if Congress intended to grant free entry to certain paper and wood pulp from Canada, upon conditions which obtained in some parts of Canada, but not in all parts, it was necessary to make one of two changes in the proposed reciprocity scheme: Either, upon the one hand, Canada must recede from the requirement that such paper and wood pulp must first be admitted free into this country from all parts of Canada, or, upon the other hand, the provisions of the reciprocity act relating to paper and wood pulp must be given operation regardless of any reciprocal legislation by Canada. But if Congress intended the paper and wood pulp provisions to remain inoperative until all such Canadian paper or wood pulp, and also all Canadian pulp wood, should become export-free, then no change at all was required in the terms of the original act, for that result would follow from its original terms when construed together with the proposed Canadian legislation.

It is most significant that Congress thereupon struck -out the condition which required reciprocal legislation by Canada in order to make the paper and wood pulp provisions operative, and thus avoided the result which otherwise would have followed. That action was taken for the unmistakable purpose of admitting into this country free of duty certain Canadian paper and wood pulp, without requiring any precedent legislation upon the part of Canada. In this construction the condition precedent of section 2 simply serves to describe and define the paper and wood pulp which became thereby entitled to free entry into this country under the section. Thus in order to give section 2 immediate operation for the free admission into this country of the paper and wood pulp therein described, Congress abandoned that provision of the preliminary agreement which promised to this country a conditional free entry of our paper and wood pulp into Canada. That provision would not have been abandoned except that such a course was necessary in order to give immediate operation to section 2.

It may be argued that the right to free admission into Canada of our paper and wood pulp would be barren of real advantage to our people, since such articles are produced in Canada at less cost than in the United States; and accordingly that the right in question was abandoned by this action of Congress for that reason alone. Such an explanation might be satisfactory had Congress simply refrained from a contest for the free admission of our paper and wood pulp into Canada, or had Congress declined to concede an extra reciprocal consideration for such a right. But according to appellant's claim Congress actually refused the offer of free admission of our paper and wood pulp into Canada, notwithstanding the fact that no extra concession on our part was demanded as a consideration for that right. For according to appellant’s construction section 2 as enacted conforms to the diplomatic agreement in all things except the provision for the free admission of our paper and wood pulp into Canada.

One fact, however, may confidently be stated. Congress did not act inadvertently in striking out of the provisions for paper and wood pulp the requirement for reciprocal legislation by Canada; for amendments were afterwards offered and urged for the purpose of restoring the rejected provision to the act. Confirmation is thereby added to the belief that Congress rejected the requirement for reciprocal free entry of our paper and wood pulp into Canada as a condition precedent to the operation of section 2, because Congress intended to give immediate free entry into this country to such Canadian paper and wood pulp as were described in that section, and did not intend to postpone the operation of the section until after Canada and the Provinces had first taken reciprocal action in the matter.

A consideration of the language of section 2, as adopted, lends support to this view. Taking wood p&p alone as the subject, the section is most susceptible to the following interpretation: Wood pulp, being the product of Canada, when imported therefrom directly into the United'States, shall be admitted free of duty on the condition precedent that no export charge or prohibition or restriction of exportation shall have been imposed upon such wood pulp thus imported, nor upon the pulp wood from which the imported wood pulp was manufactured. This construction makes the words, “such wood pulp,” refer to the wood pulp composing the given importation seeking free entry under the section.

Appellant contends that the foregoing construction is made inadmissible by the presence in the condition precedent of the terms, “prohibition * * * of exportation,” claiming that if the terms of the condition precedent are applied in each case to the merchandise composing the particular importation, the absurd result will follow that in each case it must be asked whether any prohibition of exportation had been imposed by Canada upon merchandise already obviously exported. It is claimed by appellant that the real result of such a construction is to eliminate the words, “prohibition * * * of exportation,” from the condition precedent by thus denying them any real force or effect therein.

This objection, however, is met by the fact that the condition precedent provides in the case of each entry of paper or wood pulp that not only the imported articles themselves but also the pulp wood from which they were manufactured must have been entitled to exportation free of export charge, or prohibition or restriction of exportation, in order that the importation shall be allowed free entry into this country. In this construction the words “prohibition * * * of exportation” are applied to the material from which the actual importation was manufactured, being the component wood pulp if the importation be paper, or pulp wood if the importation be wood pulp. It is thus provided by the condition precedent that free entry into this country shall be had by Canadain paper or wood pulp only when the given paper and wood pulp, and the wood from which they were manufactured, are entitled to exportation from Canada free of any export charge or prohibition or restriction of exportation.

It is contended by appellant that the foregoing construction opens the door to flagrant abuse and evasion of the section in practice. This objection is answered by a reference to the very comprehensive provisions of the section itself, which deny free entry to the enumerated articles if they, or the wood from which they were manufactured, are subject upon exportation to any export duty, export license fee, or other export charge whatsoever, whether in the form of additional charge or license fee or otherwise, or any prohibition or restriction in any way of exportation, whether by law, order, regulation, contractual relation, or otherwise, directly or indirectly.

The terms and language of section 2 are not altogether new in tariff legislation, as will appear by the following copy of paragraph 406 of the tariff revision of 1909. The first proviso1 of-that-paragraph resembles in some particulars the provisions of section 2, although differing therefrom in other particulars.

406. Mechanically ground wood pulp, one-twelfth of one cent per pound, dry weight: Provided, however, That mechanically ground wood pulp shall be admitted free of duty from any country, dependency, province, or other subdivision of government (being the product thereof) which does not forbid or restrict in any way the exportation of (whether by law, order, regulation, contractual relation, or otherwise, directly or indirectly) or impose any export duty, export license fee, or other export charge of any kind whatsoever, either directly or indirectly (whether in the form of additional charge or license fee or otherwise) upon printing paper, mechanically ground wood pulp, or wood for use in the manufacture of wood pulp: Provided further, That if any country, dependency, province, or other subdivision of government shall impose an export duty or other export charge of any kind whatsoever, either directly or indirectly (whether in the form of additional charge, or license fee, or otherwise) upon printing paper, mechanically ground wood pulp, or wood for use in the manufacture of wood pulp, the amount of such export duty or other export charge shall be added as an additional duty to the duty herein imposed upon mechanically ground wood pulp when imported directly or indirectly from such country, dependency, province, or other subdivision of government. Chemical wood pulp, unbleached, one-sixth of one cent per pound, dry weight; bleached, one-fourth of one cent per pound, dry weight: Provided, That if any country, dependency, province, or other subdivision of government shall impose an export duty, or other export charge of any kind whatsoever, either directly or indirectly (whether in the form of additional charge or license fee or otherwise) upon printing paper, chemical wood pulp, or wood for use in the manufacture of wood pulp, the amount of such export duty, or other export charge, shall be added as an additional duty to the duties herein imposed upon chemical wood pulp when imported directly or indirectly from such country, dependency, province. or other subdivision of government.

It is important to note that the foregoing paragraph had’been in operation for almost two years preceding the adoption of the reciprocity act. During that period the first proviso to the paragraph had received an official interpretation by the Treasury Department which was promulgated as T. D. 30045. According to that interpretation the terms of the proviso in question were held by the department to refer to the individual importation in each case and not to the entire class of similar articles in Canada. The cognate provisions of the second proviso of the paragraph, which impose a cumulative duty upon importations of mechanical wood pulp equal to the export charge imposed by the country of exportation, were likewise interpreted to apply to the circumstances of each particular importation. Accordingly, if a particular importation of mechanical wood pulp was given free exportation by the country of exportation, and if the pulp wood from which it was manufactured was entitled to like free exportation, the importation was given free entry into this country under the terms of the proviso; and if, on the other hand, the country of exportation had iipposed an export charge upon the particular importation, a cumulative charge of equal amount was added to the primary duty provided by the paragraph. This official action of the department was of course well known to Congress at the adoption of the reciprocity act. It may therefore be assumed that if Congress had intended in that enactment to depart from or forbid the application of the foregoing interpretation, apt words would be found in the section for the accomplishment of that purpose. A bare inspection, however, of the two provisions, namely, the first proviso of paragraph 406 and the condition precedent of section 2, discloses the fact that the language of the latter enactment is much more susceptible to the interpretation in question than is the language of the former one. It is not important hi this connection to determine whether or not the interpretation placed by the department upon the proviso was a correct interpretation. The important fact is that such an official interpretation had been promulgated by the department as was well known to Congress, and that nevertheless the present legislation in pari materia does not forbid but rather invites a similar interpretation.

On the other hand, if Congress had intended that section 2 should not become operative until certain reciprocal action should first be taken by the Canadian Provinces respecting the exportation into this country of Canadian wood pulp and pulp wood, that intention would probably have been expressed in terms similar to those which serve a similar purpose in the several schedules of section 1 of the reciprocity act. Instead of this, however, such terms were expressly stricken out of the paper and wood pulp provisions as enacted in section 2, and a continuance of the department’s interpretation was approved by that action.

Another consideration which weighs against appellant’s contention appears from a comparison of the first proviso of paragraph 406, above copied, with the terms of section 2, as construed by appellant. For convenience the following parts of paragraph 406 are again copied.

406. Mechanically ground wood pulp, one-twelfth of one cent per pound, dry weight: Provided, however, That mechanically ground wood pulp shall be admitted free of duty from any country, dependency, province, or other subdivision of government (being the product thereof) which does not forbid or restrict in any way the exportation of (whether by law, order, regulation, contractual relation, or otherwise, directly or indirectly) or impose any export duty, export license fee, or other export charge of any kind whatsoever, either directly or indirectly (whether in the form of additional charge or license fee or otherwise) upon printing paper, mechanically ground wood pulp, or wood for use in the manufacture of wood pulp. * * *

By force of the foregoing proviso Congress provides that mechanical wood pulp shall be admitted into this country free of duty from any country or province which does not forbid or restrict the exportation of printing paper, mechanical wood pulp, or wood used in the manufacture of wood pulp. This provision applies to all countries alike and is concededly in force unless modified by the provisions of section 2 of the reciprocity act.

Section 2, however, according to appellant’s contention, offers free admission into this country to Canadian mechanical wood pulp, upon tbe condition precedent tbat the Canadian Provinces shall first repeal their existing restrictions upon the exportation to this country of such wood pulp and of pulp wood. But if section 2 offers free entry to Canadian mechanical wood pulp upon the foregoing condition precedent, it must follow that the same section impliedly forbids the free entry of the same article into this country until the condition precedent is complied with. The appellant’s construction thus results in an actual discrimination by section 2 against Canada, because of its effect upon the application of the proviso in paragraph 400; for by that construction all other countries may import mechanical wood pulp into this country free of duty upon compliance with certain specified conditions, whereas Canada may import such mechanical wood pulp into this country free of duty only upon compliance with more onerous conditions. The practical result of this would be an exclusion of Canada from the proviso in question, which certainly was not intended by Congress.

It may be argued that Congress intended that the proviso of paragraph 406 should remain in full force and effect until the entire reciprocity scheme should become operative by reciprocal action upon the part of Canada. Such an argument, however, places Congress in the attitude of tendering to Canada by the reciprocity act the free entry into this country of mechanical wood pulp upon condition that Canada should comply with certain requirements, which tender was made as a part consideration and inducement for action by Canada granting free exportation of pulp wood into this country; whereas at the time of offering the consideration and inducement Congress knew that Canada in common with other countries already enjoyed, and would nevertheless continue to enjoy, the right of free entry into this country for mechanical wood-pulp upon more favorable terms and conditions than those offered in the tender. This anomalous result impeaches the correctness of the proposed construction.

It is contended by appellant that section 2 was adopted by Congress in order to induce the provincial authorities of Canada to' remove the existing restrictions and prohibitions upon the exportation of pulp wood cut from the Crown lands in the Provinces, and that free entry into this country of Canadian paper and wood pulp was .offered as a consideration for the removal of those restrictions and prohibitions. It is furthermore contended that it will work an-utter miscarriage of the section if it be so construed as to allow free entry into this country of the enumerated paper and wood pulp manufactured in Canada from lee-land wood, which was always entitled to free exportation from Canada, leaving the Crown-land wood still subject to the export restrictions and prohibitions in question. Appellant contends that the legislative purpose can be accomplished. only by denying free entry to the enumerated commodities, until all restrictions and prohibitions are removed from the exportation of the Crown-land wood throughout all the Fro vinces.

In opposition to this contention it is claimed by appellee that Congress could not have intended to postpone the operation of section 2 until every Frovince of Canada had removed all existing restrictions and prohibitions of exportation from all the pulp wood situate thereon. It is argued that such a construction would require that every piece of pulp wood standing in Canada must first be made free of all restrictions and prohibitions of exportation before section 2 would become operative for any purpose whatever, and that Congress could not have intended a requirement so remotely probable of fulfillment and so liable to interruption.

It must be apparent that these considerations are doubtful aids in the solution of the present question. Nevertheless, appellant’s claim is made improbable by the fact that it makes the section in question totally inoperative if any Canadian Province imposes any restriction upon the exportation to this country of any one of the enumerated articles, regardless of the action of the other Provinces upon the same subject.

In accordance, therefore, with the foregoing conclusions the court is of the opinion that inasmuch as the present importation consists of chemical wood pulp, the product of Canada, imported therefrom directly into the I nited States, and inasmuch as the imported wood pulp, and likewise the pulp wood from which it was manufactured, were entitled to exportation from Canada into the United States free of any export charge or prohibition or restriction of exportation, the importation is within the provisions of section 2 and is entitled thereby to admission free of duty.

The decision of the board to that effect is therefore affirmed.

Montgomery, Presiding Judge, and Smith and Barber, Judges., concur.