Selivanoff v. United States Sec'y of Agriculture ( 2006 )

Slip Op. 06 - 114
UNITED STATES COURT OF INTERNATIONAL TRADE
________________________________________
:
DOUG SELIVANOFF, :
:
Plaintiff, :
:
v. : Before: MUSGRAVE, Judge
: Court No. 05-00374
UNITED STATES SEC’Y OF AGRICULTURE, :
:
Defendant. :
________________________________________:
[Despite sympathy for the plight of the plaintiff Alaska salmon fisherman, whose income was
apparently diminished due to foreign competition, the Court is compelled to accept the remand
results of the Department of Agriculture denying the plaintiff’s application for trade adjustment
assistance benefits, which remand results are sustained.]
Decided: July 25, 2006
Doug Selivanoff, plaintiff pro se.
Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director, Patricia M.
McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, United States
Department of Justice (David S. Silverbrand); Jeffrey Kahn, Office of the General Counsel, U.S.
Department of Agriculture, of counsel, for the defendant.
OPINION AND ORDER
Slip Op. 06-55 (April 18, 2006) remanded Doug Selivanoff’s application for trade adjustment
assistance cash benefits under 19 U.S.C. § 2401e to the U.S. Department of Agriculture, Foreign
Agricultural Service (FAS) for consideration of whether storm damage to Mr. Selivanoff’s fishing
vessel, reduction of crew, and significant difference in the amount of depreciation, as compared with
the pre-adjustment year figures, should be considered extraordinary items and therefore aberrant to
a proper determination of Mr. Selivanoff’s “net fishing income” for the claim year. Cf. 19 U.S.C.
Court No. 05-00374 Page 2
§ 2401e(a)(1)(C). Mr. Selivanoff did not offer additional new information to FAS upon remand.
Rather, he restated his argument that
it would seem that legally the issue is to use a simple analysis of one line item
to determine net income or to use a broader analysis to determine the actual
impact of imported salmon on me the Fisherman.
As you well know, life is complex and looking at just one factor would hardly
represent a true reality. Judge Musgrave opened the door to expand the
determination from a line item to a more accurate perspective of which I have
actually lived through. On page 6 of the Judge[’]s Opinion and Order there
is an appeal by myself for you to look at the bigger picture. “In 2003 we
worked harder, caught more fish but made less money than in 2001,” multiple
factors were at work.
I would have not pursed this action of appealing the previous denial of
benefits if I had figured that the original determination of denial was based
in fairness and fact. I feel the determination was simplistic and did not
represent reality on the fish grounds. I urge you to consider my whole
argument and ultimately award me the $10,000.00 and allow the program to
work as intended by Congress.
Letter of D. Selivanoff to FAS dated May 12, 2006, Administrative Remand Record 1.
On June 14, 2006, FAS again denied Mr. Selivanoff’s application. Reconsideration Upon
Remand of the Application of Doug Selivanoff (FAS, June 14, 2006) (“Reconsideration”). In
accordance with the Court’s order, the FAS considered whether Mr. Selivanoff’s claims involved
extraordinary income or expense items:
In . . . 2003, [Mr. Selivanoff] incurred $6,890 in repairs and
maintenance, which he deducted on line 9 on his 2003 income tax return.
Thus, in a year in which there was not a storm, he still incurred a significant
amount, approximately a third, in expenses for repairs and maintenance. We
find that a storm causing damage to a fishing vessel necessitating repairs
would not meet the criteria as an extraordinary item under the definition.
Such expenditures are clearly directly related to a fishing business and can be
expected to occur in the foreseeable future.
Court No. 05-00374 Page 3
In his complaint, which the Court quotes, [Mr. Selivanoff stated as
follows:] “In 2003 I reduced my crew by one, I increase my workload by
25%. Grub and Insurance cost dropped in 2003 because of the reduction of
crew. Increasing my profits but the workload increased.” Mr. Selivanoff
proferred no evidence of these statements; however, even assuming that this
was the case, we find that they would not meet the criteria [of] an
extraordinary item under the definition. Adjustments to the size of a boat’s
crew and resulting savings would be in the norm for a fishing business.
In his complaint, which the Court quotes, [Mr. Selivanoff stated as
follows:] “By 2003 my boat had pretty much depreciated out. In 2001 my
depreciation was $4,135.00 and in 2003 it was $812.” We find that
depreciation would not meet the criteria as an extraordinary item under the
definition. Depreciation of assets is annual and ordinary in any business.
Id. Cf. Financial Guidelines for Agricultural Producers (“Guidelines”) (FFSC, Dec. 1997) at 22.
This complies with the Court’s order, but as part of its rationale for rejecting Mr. Selivanoff’s
application, FAS distinguished the Guidelines as applicable only to the disposition of capital assets
and only with respect to those by farmers. Reconsideration at 1-2, referencing Miller GAAP Guide
(Aspen Law & Bus., Jan 2002) at ch. 41, p. 1. To the extent this requires clarification, FAS’s
distinguishment overlooks that FFSC considered arguments for and against excluding extraordinary
items from net farm income (“NFI”), not merely those related to capital gain or loss, that have
support in the accounting community (see infra). FFSC ultimately sided with
[t]hose who argue for calculation of NFI before the inclusion of gains or
losses on capital sales [because] the critical use for the NFI number is to
analyze the operating results of the business from “normal operations[ ]”
and . . . this number would logically not include one-time capital gains or
losses. Further, since it is so commonly used for analysis purposes, it should
be available directly from the earnings statement.
***
It is important to note that to be considered an extraordinary item, the
transaction or event must meet both of the criteria. The accounting literature
also provides examples and additional guidance in this area. Write-downs of
receivables, intangible assets, or inventories and gains or losses from sale or
Court No. 05-00374 Page 4
abandonment of property or equipment used in the business are not
extraordinary items because they are usual in nature and may be expected to
recur. The accounting literature also identifies three specific items that
should be reported as extraordinary items even though they may not exactly
meet the criteria specified above. The only one of those items applicable to
farm statements would be gains or losses from extinguishment of debt.
Guidelines at 22 (italics added). Notwithstanding FAS’s distinguishment, the impact of the rationale
of the foregoing speaks for itself. Cf. Miller GAAP Guide: Level A (CCH 2006) (“GAAP Guide”):
For many years, there were differences of opinion in the accounting
profession as to what should be included in net income. Proponents of the
all-inclusive concept (sometimes called “clean surplus”) believed that all
items affecting net increases in owners’ equity, except dividends and capital
transactions, should be included in computing net income. Alternatively,
proponents of the current operating performance concept (sometimes called
“dirty surplus”) advocated limiting the determination of net income to
normal, recurring items of profit and loss that relate only to the current period
and recognizing other items directly in retained earnings. Differences
between the two concepts are seen most clearly in the treatment of the
following items:
* Unusual or infrequent items
* Extraordinary items
* Changes in accounting principles
* Discounted operations
* Prior period adjustments
* Certain items that are required by GAAP to be recognized directly in
stockholders’ equity rather than in net income
Current GAAP (primarily APB-9, APB30, FAS-16) require the
presentation of income in a manner that generally is consistent with the all-
inclusive concept. Net income includes all items of revenue, expense, gain,
and loss during a reporting period, except for prior period adjustments,
dividends, and capital transactions, and a limited number of items that are
required to be recognized directly in equity. Examples of items treated in this
manner are certain foreign currency adjustments and certain changes in the
value of debt and equity investments.
The FASB first introduced the term “comprehensive income” in its
conceptual framework, CON-3 (Elements of Financial Statements), which
Court No. 05-00374 Page 5
was replaced subsequently by CON-6 of the same title. According to CON-6,
comprehensive income is the change in equity of a business enterprise from
transactions, other events, and circumstances from nonowner sources during
a period. It includes all changes in equity during a period except those
resulting from investments by owners and distributions to owners. CON-5
(Recognition and Measurement in Financial Statements of Business
Enterprises) concluded that comprehensive income and its components
should be reported as part of a full set of financial statements for a period and
that earnings (i.e. net income) was a more narrow measurement of
performance and, therefore, was a part of comprehensive income. FAS-130
(Reporting Comprehensive Income) requires the presentation of
comprehensive income and its components in the financial statements.
GAAP Guide at 41.02 (italics in original). Further, to conclude that the rationale of the Guidelines
is relevant only to land-based agricultural operations is to ignore any similarities between farming
and fishing operations, not to mention congressional intent to extend trade adjustment assistance for
farmers to fishermen and the fact that benefits for either are conditioned upon loss of income from
an “adversely affected agricultural commodity.” See 19 U.S.C. § 2401e(a)(1).
Previously, the Court drew attention to the fact that the Guidelines, and now here the GAAP
Guide, considers a concept of “net income” (whether defined as net profit or loss or otherwise–see
7 C.F.R. § 1580.102) that excludes extraordinary and other items depending upon the perspective
sought. Cf. Slip Op. 06-55 at 9 (“what is a ‘normal’ year [of net fishing income]?”). Given the
tautology inherent in “net fishing income means net profit or loss,”1 the Court was unclear as to
FAS’s perspective on the matter, although it was and is clear that FAS must make a determination
in a particular instance with the “utmost regard” for the interests of applicants such as Mr.
Selivanoff. See, e.g., Trinh v. United States Secretary of Agriculture, 395 F.Supp.2d 1259 (CIT
2005). It was therefore appropriate to remand the matter for reconsideration.
1
See 7 C.F.R. § 1580.102; see also Slip Op. 06-55 at 11.
Court No. 05-00374 Page 6
FAS has again reached a negative decision upon reconsideration, and its filing implies its
perspective that “net fishing income” is to be equated with the GAAP all-inclusive concept of net
income. Cf. Reconsideration at 1 (“GAAP requires that net income include extraordinary items”)
(citation omitted). Whether or not that is in accordance with congressional intent, Mr. Selivanoff
has elected not to submit comments thereon to the Court and has therefore failed to argue
persuasively or demonstrate that the repairs/maintenance to his boat, the reduction of crew, and/or
the difference in depreciation from year to year were not extraordinary items, that FAS’s conclusions
are unreasonable, or that his net fishing income for the claim year 2003 was less than his net fishing
income for the pre-adjustment year figure for 2001. Accordingly, FAS’s remand results are
conclusive upon this Court. See 19 U.S.C. § 2395(b). There may indeed be a “more accurate
perspective” of what Mr. Selivanoff actually lived through, but the Court can neither deduce it from
the evidence and arguments presented for consideration nor speculate as to its legal impact on FAS’s
determination, in contravention of section 2395(b).
Judgment will enter accordingly.
/s/ R. Kenton Musgrave
R. KENTON MUSGRAVE, JUDGE
Dated: July 25, 2006
New York, New York