Letter to Secretary of State Condoleezza Rice

Letter

GREGG, SUNUNU JOIN COLLEAGUES IN URGING STATE DEPARTMENT TO TAKE ACTION TO PROTECT GOSS IN TRADE DISPUTE

United States Senators Judd Gregg and John Sununu (R-NH) have joined Susan Collins (R-ME) and Dick Durbin (D-IL) in urging Secretary of State Condoleezza Rice to take action to protect Goss International Corporation in its ongoing antidumping trade dispute with a Japanese competitor, Tokyo Kikai Seiskusho (TKS). The Senators asked that State Department report back to them in 30 days on any actions the agency has taken on this matter affecting Goss International, which employs nearly 1,000 at its Dover and Durham, New Hampshire locations.

In their letter to Rice, the Senators told the Secretary that a compelling case exists that the Japanese government violated its Friendship, Commerce and Navigation Treaty (FCN Treaty) with the U.S. when it instituted a "clawback" provision in reaction to a 2003 court judgment against TKS. Under the clawback provision, Goss's Japanese subsidiary would have to repay a $31.6 million court judgment against TKS in an anti-dumping lawsuit. Moreover, use of the clawback statute in this case would be an extremely harmful precedent.

The full text of the Senators' letter to Rice follows:

We write to express our serious concern about a violation by Japan of its international treaty obligations, and we ask what steps the State Department intends to take to protect our nation's interests in this case. In response to a final U.S. federal court judgment obtained by a U.S. company, Goss International Corporation, against a Japanese company that engaged in unlawful conduct in the United States, Japan's legislature has enacted a retaliatory statute that nullifies this judgment. Further, the Japanese law authorizes the expropriation of Goss International's investments in Japan for the private benefit of that law-breaking Japanese company. The Eighth Circuit Court of Appeals issued a decision holding that any response by the United States on this issue must not come through the Judicial branch, and the Supreme Court recently denied certiorari in this case. Therefore, it is incumbent upon the State Department to take aggressive action to protect U.S. interests and rights.

Goss International Corporation, the only U.S. manufacturer of large newspaper printing presses, obtained a judgment in U.S. District Court for damages under the Antidumping Act of 1916 ("The Act"). A jury found that TKS, a Japanese competitor, had violated the Act by dumping printing presses in the U.S. market with the express intent of destroying the U.S. industry. The District Court also found that TKS attempted to conceal its dumping by agreeing to a fraudulent price increase, providing a secret rebate, and destroying documents. The District Court's judgment in favor of Goss International was affirmed by the Eighth Circuit Court of Appeals, and the Supreme Court denied review.

Japan retaliated by passing a "clawback" statute, which allows TKS to recover in Japan the full amount of the U.S. judgment from Goss International or a wholly-owned Japanese subsidiary of Goss International. Although the District Court ordered TKS not to file a clawback suit in Japan, the Eighth Circuit Court of Appeals reversed, finding that federal courts do not have jurisdiction to prevent the clawback of monetary judgments that have been paid. The Supreme Court recently denied Goss International's petition for writ of certiorari.

In vacating the District Court injunction, the Eighth Circuit explicitly noted that "any response by the United States, such as a blocking statute for protection against a judgment awarded under [Japan's clawback statute] or trade sanctions against Japan, must come through authorized representatives of the United States Executive or Legislative Branches, not the Judiciary." (Emphasis added.) In view of the Court's opinion that it lacks jurisdiction to remedy the threat to Goss' investment in Japan, there are avenues that we believe the State Department should consider in order to ensure that treaty obligations are met and U.S. foreign investments are protected.

For example, the Japanese law explicitly targets Japanese subsidiaries of U.S. companies, and imposes potential liability on those entities solely because of the U.S. nationality of their parent corporation. In fact, the legislative history makes clear that Japan's statute is directed at only one company, Goss International. And, the Japanese subsidiary of Goss International had no involvement in the litigation or claims brought under the Act. There is, therefore, a compelling case that the Japanese legislation violates provisions of the Friendship, Commerce and Navigation Treaty between the United States and Japan ("FCN Treaty"), including both the national treatment and most-favored nation treatment provisions of Article VII.

Further, we understand there is also a strong case that the Japanese law violates Article V.1 of the Treaty, which prohibits measures that unreasonably impair investment, and Article VI.3, which prohibits expropriation for a private purpose. If TKS is allowed to recover in the Japanese litigation, it, not the government, will be the beneficiary. Moreover, implementation of the Japanese clawback statute could in fact result in a windfall to TKS.

This case has far-reaching implications for all U.S. business investments abroad, by creating instability in our rules-based trading system and undermining progress toward an open investment climate in markets around the world. If the United States fails to enforce its rights, Goss International could be forced to hand over the keys to its Japanese factory to the same competitor that violated U.S. laws - a competitor who engaged in document destruction, fraud, and misrepresentation.

Considering the significant U.S. interests at stake we ask that you inform us of actions that you intend to take within the next thirty days.