Diamond Tool Research Co. v. United States

RichaRdson, Judge: This is a protest proceeding which was filed by the plaintiff as an alleged American manufacturer, producer, or wholesaler under the provisions of 19 U.S.C.A., section 1516 (section 516, Tariff Act of 1930, as amended), to review the collector’s classification of merchandise imported at Denver, Colo., from Ireland by the party in interest. The merchandise of the involved importation consists of 30 carats of synthetically produced diamond particles in the size ranges of 60/80, 80/100, and 100/120 mesh. The merchandise was classified in liquidation under 19 U.S.C.A., section 1001, paragraph 214 (paragraph 214, Tariff Act of 1930), as modified by T.D. 51802, as an earthy or mineral substance, wholly or partly manufactured, and assessed with duty at the rate of 15 per centum ad valorem. It is claimed by the plaintiff that the merchandise should be classified under the duty-free provision for “diamond dust” in 19 U.S.C.A., section 1201, paragraph 1668 (paragraph 1668, Tariff Act of 1930), or, alternatively, under the dutiable provision for “artificial abrasives” in 19 U.S.C.A., section 1001, paragraph 1514 (paragraph 1514, Tariff Act of 1930), as modified by T.D. 52739. Defendant attacks plaintiff’s status as an American manufacturer, producer, or wholesaler of merchandise of a class or kind as that imported, in consequence of which, plaintiff is put to its proof on the jurisdictional issue that it is such an American manufacturer, producer, or wholesaler. The Manufacturers and Producers of Goat, Sheep and Cabretta Leathers, etc. v. United States, and Pellis, Inc., et al., parties in interest, 21 CCPA 591, T.D. 46996. And the evidence presented at the trial addresses itself to the issue of whether plaintiff is an American manufacturer, producer, or wholesaler of diamond dust. One Charles Baumgold testified on behalf of the plaintiff. He testified that he has been president of the plaintiff company, which was incorporated under the laws of the State of New York in 1951, since about 1941; that the company’s principal place of business on August 30, 1963 (the date of filing of the protest), was and is now, 580 Fifth Avenue, New York City; that other places of business are located at 380 Second Avenue, New York City, and in Los Angeles; and that as president he is in charge of purchasing, sales, and “manufacturing” activities of the corporation (R. 18-19). Mr. Baumgold stated that during the period January 1, 1963, through August 30, 1963, his firm “dealt” in natural diamond “dust” in the sense that it imported or purchased bort and crushed it, graded, and shaped the diamond particles and sold them “in the various sizes” in the sense that it reclaimed used diamonds “which then would be processed”; and in the sense that it purchased “powder” and reground and resold it “in the form we purchased it” (R. 17). The witness — 39 — also stated that his firm resold the natural diamond “dust” which it obtained from crushing bort to “other manufacturers of diamond tools,” and that it also used such material “in diamond products, such as grinding wheels” and in diamond compounds, dressing tools, and mining bits made by his firm, which were in turn sold to plants which use them (E. 22-23,29). Mr. Baumgold testified that his firm purchased synthetic diamond particles of domestic origin (General Electric Co.), and imported synthetic particles (English and Swedish); and that his firm used both natural and synthetic particles in grit and micron sizes in its “manufacture of industrial diamond products” at its facilities at 380 Second Avenue in New York City (E. 23-24, 29-30, 32-33). He stated that his firm sold natural and synthetic diamond particles of grit and micron sizes to “customers,” who, in turn, incorporated them into industrial diamond products such as grinding wheels and compounds for resale to industrial users (E. 26-29, 33). He also stated that his firm obtained bort “from foreign and domestic sources” (E. 33), and that it purchased its synthetic diamond particles from the General Electric Co.’s distributor, the Van Itallie Corp.; and from Engelhard Hanovia, who deals in imported products. On cross-examination, Mr. Baumgold testified that his firm carries on sales and purchasing activities through subsidiary or “affiliated” companies in Belgium, England, and Japan, and specifically that it has an “affiliate” in Belgium which purchases rough diamonds, polished diamonds, diamond powder, bort, and other diamond materials (E. 38-39, 46); that the stock of the plaintiff is wholly owned by a corporation known as “Baumgold Brothers,” which is engaged in the “diamond business” (E. 40-41); that the material purchased abroad by the plaintiff included bort, although, during the period January 1, 1963, through August 30, 1963, plaintiff had purchased all its bort from Engelhard Hanovia rather than directly importing it; and that all the bort used by the plaintiff was of foreign origin (E. 47-49). Mr. Baumgold described “compounds” as a grease-like substance acting as a carrier for synthetic or natural diamond particles of carefully graded sizes, the compound being used for various polishing purposes. He stated that the process involved in making such compounds consisted of the careful grading of the diamond particles, homogenous mixing of the particles with the carrier, coloring, and packaging; and that at the conclusion of these steps the compound was ready for its ultimate use. When asked how his firm converted bort into grit and micron-size particles, Mr. Baumgold stated that the details of the process were “secret” but acknowledged that the “traditional equipment” for such crushing was simply a mortar and pestle, that the equipment used in such crushing was not similar to the presses — 40 — used in the synthesis of diamond particles, and that some of the diamond grinding wheel manufacturers do their own crushing of bort. Mr. Baumgold acknowledged that he had referred to the sales records of his firm just prior to the trial, and that those records were located at the firm’s places of business in New York City. He stated that, during the period January 1, 1963, through August 30, 1963, his firm purchased 4,825 carats of General Electric synthetic diamond particles from the Yan Itallie Corp. The witness acknowledged that “some” of the material was used by his firm in diamond grinding wheels and other products. He stated that it “would be difficult, almost impossible” to ascertain how much (R. 59). Mr. Baumgold also testified that during the same period he had purchased 3,970 carats of synthetic diamond particles from Engelhard Hanovia (R. 65). He was unable to cite any data from his firm’s records as to the amount of sales of natural, domestically produced synthetic, or imported synthetic diamond particles (R. 61-67). There was also received in evidence during Mr. Baumgold’s testimony a publication (plaintiff’s exhibit 1) which Mr. Baumgold described as a catalog describing the diamond wheels which were produced by the plaintiff (R. 36-38). Before the court also is the record in Christensen Diamond Products Co. v. United States, 54 Cust. Ct. 221, C.D. 2537, decided June 3,1965, which was incorporated in the record of this protest proceeding. Defendant called upon two witnesses to give testimony. One John D. Yan Itallie, president of the Van Itallie Corp. of New York City, testified that his firm is a Avholesaler of natural and synthetic industrial diamonds, and is a distributor of the synthetic diamond particles manufactured by the General Electric Co. He stated that he is engaged in the buying and selling of the products in which the firm deals. Through the witness, there was received in evidence as defendant’s exhibit B, a catalog of specifications for the General Electric synthetic diamond particles. Mr. Van Itallie stated that the catalog had been distributed to the trade, including manufacturers of diamond grinding wheels. He further testified that all sales of the firm during the period January 1,1963, through August 30, 1963, had been made in accordance with the catalog provisions. One Warren M. Colehamer, a sales and administrative assistant with Engelhard Hanovia, Inc., of Newark, N.J., also testified on behalf of the defendant, and produced, pursuant to subpoena, records of his company pertaining to sales transactions between his company and the plaintiff. It was brought out during the court’s examination of Mr. Colehamer that, in August 1963, Engelhard Hanovia shipped to the plaintiff 480 carats of diamond dust in three size categories, and that this shipment was based upon a contract entered into by the two firms — 41 — in October 1962, wherein plaintiff placed a 10,000 carat order with Engelhard Hanovia (E. 101). Objection was taken by plaintiff’s counsel to testimony of the witness pertaining to sales prices to other customers of Engelhard Hanovia during the period July 15, 1963, and August 30, 1963 (E. 106), and the court reserved decision on its ruling for disposition with the decision in the case. The foregoing comprises the substance of the evidence before the court. The objection of plaintiff’s counsel to testimony given by Mr. Cole-hamer regarding sales prices to customers of Englehard Hanovia other than the plaintiff during the period between July 15, 1963, when he joined the company, and August 30, 1963, is well taken. Mr. Colehamer admitted, on cross-examination, that the first 2 months were spent by him in an orientation program, and that during this period he was not concerned with sales and did not know about prices. Hence, his prior testimony to the effect that, for the period between July 15, 1963, and August 30, 1963, discounts were not allowed to large purchasers over small purchasers, is without any foundation based upon the witness’ personal knowledge, and is not reflected in the records of the company which the witness produced under subpoena. We, therefore, grant plaintiff’s motion to strike such testimony. This is all that plaintiff seeks in its motion. The issue to be resolved in the instant case is whether the imported merchandise is of the same class or kind of merchandise that is manufactured, produced, or sold at wholesale by the plaintiff within the meaning of section 1516. Stated 'another way the issue is, is plaintiff an American manufacturer, producer, or wholesaler of merchandise of the same class or kind as the imported merchandise ? Section 1516(b) does not undertake to define the meaning of the words American manufacturer, producer, or wholesaler, as used in the statute, and the plaintiff has not produced evidentiary facts to establish their meaning in the trade and commerce of the diamond industry in the United States. To ascertain the intention of the legislature in enacting this statute, it is necessary to examine its legislative history. The statute was first enacted as section 516 of the Tariff Act of 1922. It had been introduced and passed in the House in 1921 as section 529 of H.R. 7456,* and sent to the Senate in language, reading as follows: Sec. 529. APPEAL OR PROTEST BY AMERICAN PRODUCERS. Whenever it shall appear to the satisfaction of a board of three General Appraisers that it is impracticable for a manufacturer or producer in the United States to make, in his own name, or by agent, an importation of merchandise for the purpose of having determined the dutiable value or classification thereof, such manufacturer or producer shall have the right to appear and to be heard as a party in any case involving the disputed question of fact or law; or, in the — 42 — absence of sucb a case, tbe manufacturer or producer, or tbe Assistant Attorney General in charge of customs litigation for tbe Government, may state in a written notice to tbe appraiser or tbe collector wbat be claims to be tbe proper value or classification, as tbe case may be, of sucb merchandise, and if tbe appraiser or tbe collector shall not accept such valuation or classification as correct, such manufacturer, producer, or Assistant Attorney General shall have tbe right to appeal for reappraisement or to make a protest, and to be heard as a party, tbe same as tbe importer would have, in any subsequent appraisal or classification involving tbe same question of fact or law. No manufacturer or producer shall have tbe right to inspect any documents or papers disclosing any information which the General Appraiser or the board of three General Appraisers shall deem improper to be disclosed to him. In every such proceeding the importer or his agent shall be notified by the manufacturer, producer, or Assistant Attorney General, whichever is the moving party, of his intention to appear and shall be apprised of all hearings in accordance with the rules of procedure. In reporting the bill out of committee, the majority report of the House Ways and Means Committee stated the purposes of the changes contemplated by the general tariff revision proposed in the bill. Among other things, the report states (p. 21)**: The necessity for this remedial legislation is accentuated by after-war conditions which have resulted in the depreciation in the value of tbe currency of tbe nations of Europe in general. Tbe effect of depreciated currency has been to reduce production costs in many countries with whose products American goods must compete. It is against these countries that protection is most needed. [Italics added.] In commenting upon the language of section 529 of the bill in particular, the report goes on to say (p.26): The right of protest against the rate or amount of duty as being too low, which was in the law prior to 1913, has been restored and extended to give American manufacturers and producers an opportunity to be beard upon matters of value and classification of imported merchandise directly affecting their interests. Section 529 of H.R. 1456 as drafted by the House and sent to the Senate was amended by the Senate which substituted its own version of the statute for the House version under a new section 516. In proposing the amendment, the Senate had no quarrel with the House concerning reasons for and objectives underlying the proposed legislation. The Senate took the position that the provisions of the House section 529 were susceptible of doubtful interpretation, and that its own section 516 provided a more detailed and practical method of getting the facts before the appraising officers, and assured a proper notice to opposing parties and the privacy of documents and papers.*** In addition, the Senate amendment also extended the privilege of intervention in customs litigation to American wholesalers. The House acquiesced in the Senate amendment and the pro — 43 — visions thereof became law as written into the Tariff Act of 1922. The pertitnent provisions of section 516 of that act read as follows: (b) Tbe Secretary of tbe Treasury shall, upon written request by an American manufacturer, producer, or wholesaler, furnish the classification of and the rate of duty, if any, imposed upon designated imported merchandise of a class or kind manufactured, produced, or sold at wholesale by him. If such manufacturer, producer, or wholesaler believes that the proper rate of duty is not being assessed, he may file a complaint with the Secretary of the Treasury setting forth a description of the merchandise, the classification, and the rate or rates of duty he believes proper, and the reasons for his belief. If the Secretary believes that the classification of or rate of duty assessed upon the merchandise is not correct, he shall notify the collectors as to the proper classification and rate of duty and shall so inform such manufacturer, producer, or wholesaler, and such rate of duty shall be assessed upon all merchandise imported or withdrawn from warehouse after thirty days after the date of such notice to the collectors. If the Secretary believes that the classification and rate of duty are correct, he shall so inform such manufacturer, producer, or wholesaler. If dissatisfied with the action of the Secretary, such manufacturer, producer, or wholesaler may file with him a notice that he desires to protest the classification or the rate of duty imposed upon the merchandise, and upon receipt of such notice the Secretary shall furnish him with such information as to the entry, the consignee, and the port of entry as will enable him to protest the classification of or the rate of duty imposed upon the merchandise when liquidated at any port of entry. Upon written request therefor by such manufacturer, producer, or wholesaler, the collector of such port of entry shall notify him immediately of the date of liquidation. Such manufacturer, producer, or wholesaler may file, within sixty days after the date of liquidation, with tbe collector of such port a protest in writing setting forth a description of the merchandise and the classification and the rate of duty he believes proper, with the same effect as a protest of a consignee filed under the provisions of sections 514 and 515 of this Act. (e) A copy of * * * every protest filed by an American manufacturer, producer, or wholesaler under the provisions of this section shall be mailed by the collector to the consignee or his agent within five days after the filing thereof, and such consignee or his agent shall have the right to appear and to be heard as a party in interest before the Board of General Appraisers. The collector shall transmit the entry and all papers and exhibits accompanying or connected therewith to the Board of General Appraisers for due assignment and determination of * * * the proper classification and rate of duty. The decision of the Board of General Appraisers upon any such * * * protests shall be final and conclusive upon all parties unless an appeal is taken by either party to the Court of Customs Appeals, as provided in section * * * 515 of this Act. (d) In proceedings instituted under the provisions of this section an American manufacturer, producer, or wholesaler shall not have the right to inspect any documents or papers of the consignee or importer disclosing any information which * * » the Board of General Appraisers shall deem unnecessary or improper to be disclosed to him. Section 516 of the Tariff Act of 1922 was superseded by similar provisions of section 516 of the Tariff Act of 1930, and repealed by section 651(a) (1) of the 1930 act. It is the provisions of 19 U.S.C.A., section — 44 — 1516 (section 516, Tariff Act of 1930, as amended), as previously indicated herein, which govern the instant protest proceeding. It is palpably clear from the legislative history of the statute in question that in its enactment into law Congress was concerned with domestic merchandise in channels of commerce in this coimtry, and with the competition such merchandise faced from like merchandise imported into this country from foreign countries. And for the benefit of persons who placed such merchandise in domestic channels of commerce, namely, manufacturers, producers, and wholesalers, Congress undertook to open and extend to them the judicial forum as a means of enabling them to protect their own interests. Viewed in such light, the statute make the character of the merchandise placed by the plaintiff in domestic channels of commerce the controlling factor in determining whether plaintiff is an American manufacturer, producer, or wholesaler. Does plaintiff make or produce diamond dust in commercially available quantities in this country, or sell at wholesale here such domestically made or produced diamond dust? Is the diamond dust handled by the plaintiff of the same class or kind as the imported diamond dust? The resolutions of these key questions are, in our opinion, determinative of the application of section 1516 in the instant protest proceeding. The court has a responsibility to interpret the statute in a manner which gives full expression to the legislative intent behind the statute and avoids the frustration of that intent. The evidence discloses that the manufacture and selling of diamond tools is clearly the business of the plaintiff. Among other things, plaintiff claims, on the basis of such evidence, that it is deemed to be a manufacturer or producer of diamond dust because it uses diamond dust in the manufacture of tools. This argument is untenable. The designing and creation of tools and the orientation of the diamond edge to such tools is an undertaking apart from the business of the handling of the abrasive diamond particles themselves. One who acquires an article and converts it into something else cannot be regarded as a dealer in the article as it existed prior to the conversion. See Florida Packing & Ice Co. v. Carney, 51 Fla. 190, 41 So. 190, holding that fresh meat is not the same as smoked and salted meat (citing the example where one who buys lumber and converts it into furniture cannot be regarded as a dealer in “lumber”). Consequently, one whose business activities earns him a reputation as a diamond tool designer and maker would not, by virtue of such activities, be known or regarded as being a maker or producer of diamond dust because the dust is a component of the tool. Section 1516 as applied to the facts of this case is concerned with the commodity diamond dust. All that the court knows about plaintiff’s business activities insofar as its dealing's in diamond dust are concerned is what it says about — 45 — itself, and this is very little, and is confined to general statements, appellations, and broad conclusions. The mere declaration of an essential ultimate fact in issue, unsupported by evidentiary facts, is not substantial evidence of the fact to be proved. Brooks Paper Company v. United States, 40 CCPA 38, C.A.D. 495. There is nothing in the record to establish what the trade regards as a manufacturer, producer, or wholesaler of diamond dust in terms of the volume of merchandise created, handled, and distributed, and the manner in which such merchandise is handled and distributed in the trade. There is no demonstrative evidence such as the volume of plaintiff’s business, its stocks, inventories, catalogs, advertising matter, what it sells, to whom it sells, how often, and in what units of quantity. It is impossible to show domestic merchandise moving in channels of commerce in this country without disclosing evidence of such things. The record in the incorporated case of Christensen Diamond Products Co. v. United States, supra, does not support plaintiff’s claim that it is a producer of diamond dust within the requirements of section 1516. On direct examination, three sentences from a speech delivered by Charles Baumgold were admitted into evidence (R. 82). On redirect examination, plaintiff put a copy of the speech into evidence as exhibit 16 (R. 95). The title of exhibit 16 is “Diamond Abrasives,” by Charles Baumgold and Matthew Safferson. Just who Matthew Safferson is or what contribution he made to the speech is not indicated. In next to the last paragraph on page 5 of exhibit 16, it is stated that “We make eight standard grades of micron powder this way * * The last paragraph states “We also custom grade ten or more sizes to suit the specific needs of our customers.” Just who is meant by the word “We” is not indicated. Does “We” refer to Baum-gold and Safferson, Diamond Tool Research Co., Inc., or one of Baum-gold’s subsidiaries in this country or in Europe, or the trade itself ? The tenor of exhibit 16 is objective and general. Also, it is submitted that the word “make” in next to the last paragraph on page 5 has the same meaning as the expression “custom grade” in the last paragraph on page 5, as what is described immediately above these two paragraphs and to which they relate, are methods of separation, sizing, grading, and controlling the sedimentation of diamond dust particles for use in the manufacture of diamond wheels. There is no showing that plaintiff produced the diamond dust particles with which the process of separation, sizing, grading, and controlled sedimentation was begun. If “We” in exhibit 16 refers to Diamond Tool Research Co., Inc., the statement that “We also custom grade ten or more sizes to suit the specific needs of our customers” is at variance, at least in part, with Mr. Baumgold’s statement, in the incorporated case, that “* * * our purchases [of diamond grit] are very large and in bulk, * * *” [and] — 46 — “we don’t grade it, we put tlie same letters oil that the one who sold it to us does.” (R. 76.) No one questions Mr. Baumgold’s knowledge of the diamond industry. The plaintiff just has not made a record upon which a decision can be made for the plaintiff without saturating it with assumptions. Plaintiff is not entitled to invoke the trade secrets doctrine to obviate the giving of evidence on matters directly in issue. The mere fact that information is communicated to a witness in confidence or under a promise of secrecy does not create a privilege. Richardson, Evidence (9th ed.), section 470. “No pledge or privacy, nor oath of secrecy, can avail against demand for the truth in a court of justice.” Wig-more, Evidence, section 2286. Either plaintiff is doing a business which it claims to be doing, or it is not. And the offering of broad, general, and conclusory statements is not convincing, if indeed it is evidence, that plaintiff is doing such a business. Mr. Baumgold and his counsel were advised by the court that Mr. Baumgold’s testimony had not satisfactorily informed the court of who is a “producer, manufacturer, or wholesaler” in the diamond dust trade; and inquiry was made as to just how his company qualified in one or more of the three categories (R. 70-72). The plaintiff’s counsel replied that it expected to dispel the question in its brief. (The “Yellow Pages” for Manhattan in New York City are not in evidence and any listings in such pages are not before the court. Furthermore, such paid advertisements cannot be relied upon to the extent that they are to be accorded the credence given to proof adduced in the course of a trial.) The evidence does indicate that, in 1963, plaintiff acquired some 4,825 carats of synthetic diamond particles from one source of supply, and some 3,970 carats of synthetic diamond particles from Engelhard Hanovia, Inc., which admittedly deals in imported diamond dust. “Such * * * purchasing * * * does not show the wholesaling of goods— which means selling at wholesale.” Board of Railroad Commissioners v. Sawyers’ Stores, 114 Mont. 562, 138 P. 2d 964. As to how this purchased merchandise was handled or distributed does not clearly appear in the record. Mr. Baumgold testified that the merchandise was commingled from the various sources of supply, some of it was sold to other firms in the industry, and some of it was consumed in the manufacture of its tools. How much of this material from whatever source gathered was redistributed by plaintiff in the industry, in what units of quantity and with what frequency, and how much of this material was utilized by plaintiff for its own needs, plaintiff was unable to establish by evidence. On the record before the court, plaintiff is not entitled to invoke so far reaching a remedy as is provided for in section 1516 on such — 47 — a meager showing. In our opinion, plaintiff has not established by competent evidence that it is an American manufacturer, producer, or wholesaler within the meaning of section 1516. In view of the conclusion reached herein, it becomes unnecessary to discuss or pass upon other issues presented in this protest proceeding pertaining to jurisdiction and classification. For the reasons stated, the protest is overruled. Judgment will be entered accordingly. Footnotes [*] S. Doc. 187. 67th Cong., 2d sess., p. 151. [**] H. Rept. 248, 67th Cong., 1st sess., pt. 1. [***] H. Repts. 1207, 1223, 67th Cong., 2d sess., p. 157.