VZCZCXYZ0009
OO RUEHWEB

DE RUEHC #1288 2912141
ZNR UUUUU ZZH
O P 172134Z OCT 08
FM SECSTATE WASHDC
TO AMEMBASSY TOKYO IMMEDIATE 0000
INFO DEPT OF COMMERCE WASHINGTON DC PRIORITY

UNCLAS STATE 111288 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD JA
SUBJECT: DEMARCHE REQUEST: SEEKING JAPANESE ENGAGEMENT IN 
TKS/GOSS DISPUTE 
 
¶1. (U) This is an action request.  Please see paras 6-10. 
 
---------- 
BACKGROUND 
---------- 
 
¶2. (SBU) In 2003 Goss, a U.S. newspaper printing press 
manufacturer, was awarded $31.6 million in a suit filed in 
federal district court against its Japanese competitor, Tokyo 
Kikai Seisakusho (TKS), under the 1916 Antidumping Act.  This 
was the only instance in which a judgment was ever rendered 
under the antiquated law, which the World Trade Organization 
(WTO) had determined in 2000 to be inconsistent with U.S. WTO 
obligations.  In 2004, Congress repealed the 1916 Act, but 
made its repeal prospective, so as not to affect the outcome 
of the Goss case.  Goss's $31.6 million judgment was 
ultimately upheld on appeal in 2006. 
 
¶3. (SBU) Prior to the U.S. Congress's repeal of the 1916 
Antidumping Act, the Japanese Diet in 2004 enacted a statute 
known as the "Special Measures Law." The law, a so-called 
"claw-back statute," was designed to allow Japanese companies 
such as TKS to recover the damages they had lost to American 
competitors in lawsuits under the 1916 Antidumping Act by 
suing their competitors in Japanese courts.  In 2007, the 
U.S. Court of Appeals for the Eighth Circuit denied Goss's 
request for an injunction to prevent TKS from suing Goss in 
Japan under the Japanese claw-back statute.  Shortly 
thereafter, TKS initiated a lawsuit under the Japanese 
"Special Measures Law" against a Goss subsidiary in Japan, 
seeking to recover the $31.6 million it had lost to Goss in 
the United States.  Goss then petitioned the U.S. Supreme 
Court to overturn the Court of Appeals decision denying 
Goss's request for an injunction.  The Supreme Court 
solicited the opinion of the Solicitor General on whether it 
should consider the case, and the State Department 
participated in that process.  The USG brief recommended on 
balance that the Supreme Court should not hear the case 
because, given its unusual facts, the case would not have 
broad significance.  The Supreme Court in June 2008 rejected 
Goss's petition, effectively allowing the case in Japan under 
the Japanese claw-back statute to proceed. 
 
¶4. (SBU) Now that it has no further possibility of remedy in 
U.S. courts, Goss has renewed assertions raised in 2004 that 
Japan has violated its obligations under the 1953 U.S.-Japan 
Treaty of Friendship, Commerce and Navigation (FCN) because 
of the Special Measures Law.  Goss alleges violations of 
treaty obligations relating to national treatment, 
most-favored nation treatment, expropriation, and 
unreasonable/discriminatory treatment, and suggested that the 
Department consider taking the matter to the International 
Court of Justice as permitted (if consultations are 
unsuccessful) by the FCN Treaty.  In September, L, EEB, and 
EAP met with Goss to discuss its FCN claims; L is currently 
reviewing the issues. Goss has also urged the Department to 
use diplomatic pressure to convince Japan to persuade TKS 
into settlement talks with Goss. 
 
¶5. (SBU) There is Congressional support for Goss.  In August, 
Assistant Senate Majority Leader Durbin and Senators Sununu, 
Collins, and Gregg sent a joint letter to Secretary Rice 
supporting Goss's FCN Treaty claims and asking that we keep 
them informed of our actions.  (Note:  Goss's headquarters 
are in Illinois, and it has a manufacturing plant in New 
Hampshire.)  Also, on July 31, 2008 Senators Sununu and Gregg 
introduced legislation in the U.S. Senate that would allow 
Goss to sue TKS in U.S. courts to recover any damages that 
Goss or its subsidiary suffers in Japan under the Japanese 
claw-back statute.  Prospects for passage of similar 
legislation in the next session of Congress are unclear at 
this time. More recently, in October Senator Sununu expressed 
his strong interest in this case in a telephone conversation 
with Under Secretary Jeffery, and requested that the State 
Department do more to assist Goss. 
 
-------------- 
ACTION REQUEST 
-------------- 
 
¶6. (SBU) Embassy is requested to deliver a demarche to the 
Ministry of Economy, Trade, and Industry (METI) at the 
highest appropriate level no earlier than Wednesday, October 
22 and no later than Friday, October 24 emphasizing the 
following objectives: 
 
-- Stress the seriousness of U.S. Government concerns with 
respect to the implications of the on-going case under the 
Special Measures Law for Japan's obligations under the 1953 
Treaty of Friendship, Commerce and Navigation between the 
United States and Japan. 
 
-- Discuss the strong level of Congressional interest in this 
issue, noting the potential for further litigation should 
legislation similar to S.3394 pass in the U.S. Congress. 
 
-- Emphasize the U.S. Government's interest in avoiding an 
international dispute over this matter. 
 
-- Noting Goss's desire to negotiate a settlement with TKS, 
request the Government of Japan's assistance in encouraging 
TKS to enter into settlement discussions with Goss. 
 
(NOTE: The same message will be delivered by Under Secretary 
Jeffery to Japanese Ambassador to the United States Ichiro 
Fujisaki in Washington on Tuesday, October 21, 2008.) 
 
¶7. (SBU) In delivering this message, Ambassador or DCM may 
draw from the following talking points (NOTE: Embassy is 
requested NOT to leave behind a hard copy of these points 
with the Government of Japan; a version of points that may be 
delivered in hard copy is provided in para 8): 
 
BACKGROUND POINTS: 
 
-- In 2004, the U.S. Government urged the Japanese government 
at senior levels not to proceed with approval of Law No. 162 
on Special Measures Concerning the Obligation to Return 
Profits Obtained Pursuant to the United States Anti-Dumping 
Act of 1916. 
 
-- Nonetheless, the Japanese government enacted the law in 
¶2004.  The text of that law, and statements made by the 
Japanese government at the time, demonstrate that it was 
specifically intended to benefit Japanese firm Tokyo Kikai 
Seisakusho (TKS), which was involved in a dispute with its 
U.S. competitor, Goss International. 
 
-- TKS is currently pursuing a claim under this law in 
Japanese court against Goss International and Goss Japan, a 
subsidiary of Goss International.  TKS seeks to "claw back," 
under the Special Measures Law, in excess of $30 million that 
was awarded to Goss International in 2003 by a U.S. court in 
a case against TKS under the 1916 Act. 
 
-- The court proceedings in the United States established 
that TKS engaged in dumping of printing press machinery with 
the intent of destroying or injuring Goss International.  A 
jury concluded that TKS had violated the 1916 Act and awarded 
damages of $32 million to Goss International.  That verdict 
was upheld on appeal.  Because of the intentional dumping 
activity of TKS, which was found to have included a 
fraudulent price increase, secret anti-competitive rebates, 
and intentional destruction of evidence, Goss International 
suffered considerable injury. 
 
-- ONLY IF RAISED:  Our concern over the injury suffered by 
Goss is in no way diminished by the World Trade Organization 
(WTO) ruling in 2000 that the 1916 Act was inconsistent with 
certain provisions of the WTO Agreement. The United States 
repealed the 1916 Act in 2004, and it is the position of the 
U.S. Government that this action brought the United States 
into conformity with the recommendations and rulings of the 
WTO Dispute Settlement Body in this dispute. 
 
U.S. CONCERNS WITH RESPECT TO JAPAN'S TREATY OBLIGATIONS: 
 
-- The Special Measures Law raises serious concerns under the 
1953 Treaty of Friendship, Commerce and Navigation between 
the United States and Japan.  We hope that the Government of 
Japan shares the interest of the U.S. Government in ensuring 
that our respective companies receive the protections to 
which they are entitled under that agreement.  It would be in 
our governments' mutual interest to avoid international 
dispute settlement regarding this matter. 
 
CONGRESSIONAL ACTION IN RESPONSE TO THE CLAWBACK: 
 
-- Unless this matter is resolved, the U.S. Congress may act. 
 As you may know, a bill (S.3394) has recently been 
introduced in the U.S. Senate that would authorize Goss 
International to recover, in U.S. court, damages from TKS in 
an amount commensurate with any judgment that might be 
rendered against Goss International and Goss Japan under the 
Special Measures Law.  The result could be more litigation in 
U.S. courts.  This legislation is motivated by the belief 
that it is fundamentally unfair to deprive Goss International 
of the damages that it was awarded by a U.S. court for the 
injury it suffered because of the intentional acts of TKS. 
 
U.S. SUPPORT FOR PRIVATE SETTLEMENT OF THE DISPUTE: 
 
-- Goss International has advised the U.S. Government that it 
continues to be interested in discussing with TKS a 
settlement of this matter.  We hope that the Government of 
Japan shares the view of the United States that settlement of 
this matter would be in the best interests of all concerned. 
It would spare the time and expense of current and 
prospective litigation and would remove an irritant in our 
bilateral relations at a sensitive time, as a new U.S. 
administration will soon take office. 
 
-- We therefore request the assistance of the Government of 
Japan in urging TKS to take action now to engage with Goss 
International to discuss these matters.  We stand ready to 
work with your government to facilitate that process. 
 
¶8. (SBU) In delivering the demarche, Embassy is requested to 
leave behind a copy of the following points as a non-paper: 
 
-- In 2004, the U.S. Government urged the Japanese government 
at senior levels not to proceed with approval of Law No. 162 
on Special Measures Concerning the Obligation to Return 
Profits Obtained Pursuant to the United States Anti-Dumping 
Act of 1916. 
 
-- Nonetheless, the Japanese government enacted the law in 
¶2004.  The text of that law, and statements made by the 
Japanese government at the time, demonstrate that it was 
specifically intended to benefit Japanese firm Tokyo Kikai 
Seisakusho (TKS), which was involved in a dispute with its 
U.S. competitor, Goss International. 
 
-- TKS is currently pursuing a claim under this law in 
Japanese court against Goss International and Goss Japan, a 
subsidiary of Goss International.  TKS seeks to "claw back", 
under the Special Measures Law, in excess of $30 million that 
was awarded to Goss International in 2003 by a U.S. court in 
a case against TKS under the 1916 Act. 
 
-- The court proceedings in the United States established 
that TKS engaged in dumping of printing press machinery with 
the intent of destroying or injuring Goss International.  A 
jury concluded that TKS had violated the 1916 Act and awarded 
damages of $32 million to Goss International.  That verdict 
was upheld on appeal. 
 
-- In considering this matter, including equitable 
considerations of fairness, it is important to keep certain 
factors in mind. 
 
-- In upholding the jury verdict against TKS and denying 
TKS's motion for a new trial, the U.S. District Court for the 
Northern District of Iowa stated in its decision (copy 
attached), among other things, the following regarding the 
conduct of TKS: 
 
"The jury further heard evidence at trial that TKS agreed to 
a fraudulent price increase and secret $2.2 million rebate to 
keep the DMN (Dallas Morning News) from purchasing the two 
towers from Goss in 1996." 
 
"The jury was also presented with evidence that TKS and its 
counsel engaged in a concerted effort to conceal the secret 
rebates." 
 
" . . . Mr. Saito (TKS's counsel) . . . urged TKS (USA) to 
falsify its business records . . ." 
 
"There was also evidence presented at trial that TKS and its 
counsel attempted to destroy documents to conceal the secret 
rebates." 
 
"When TKS employees committed the secret rebate agreement 
with the DMN to a signed, written agreement, TKS executives 
Mr. Morimoto and Takehiro Fukuyama stated that 'there should 
not be such a document' and ordered that copies of the 
document 'must be collected and destroyed.'" 
 
-- On the basis of information that was presented during the 
trial, the U.S. Department of Commerce reconsidered its prior 
administrative review determination of an antidumping duty 
order wherein TKS presented false information to the agency. 
The Commerce Department presently is reconsidering its prior 
"sunset" review determination, which resulted in revocation 
of the antidumping duty order. 
 
-- As you may know, the U.S. Supreme Court recently declined 
to hear an appeal by Goss International of a ruling by the 
U.S. Court of Appeals for the Eighth Circuit that invalidated 
an antisuit injunction against TKS that had been issued by 
the district court.  That injunction prevented TKS from 
proceeding with its lawsuit in Japan under the Special 
Measures Law. 
 
-- In its amicus curiae brief to the Supreme Court (copy 
attached), the U.S. Department of Justice cited numerous 
errors by the court of appeals, including the deference that 
the court of appeals gave to the Special Measures Law under 
principles of comity: 
"As a law specifically designed to overturn a final judgment 
entered by a court that clearly possessed jurisdiction and 
was implementing the law of its nation with respect to 
conduct and harm occurring within the territorial 
jurisdiction of that nation, the Special Measures Law is 
itself in considerable tension with general notions of 
international comity, and thus should not have received full 
weight in the comity analysis." 
 
-- However, the Justice Department advised the Supreme Court 
that, on balance, in light of the unusual facts of the case, 
the likelihood that they would never recur, and the absence 
of a serious split among the circuits, further review of the 
case by the Supreme Court was not warranted. 
 
-- The Government of Japan should not misunderstand the 
recommendation made in that brief, however.  It does not 
signify that the U.S. Government has acquiesced to the 
Special Measures Law or the ongoing litigation in Japanese 
court against Goss International and its Japanese subsidiary. 
 
-- The Special Measures Law raises serious concerns under the 
1953 Treaty of Friendship, Commerce and Navigation between 
the United States and Japan, including provisions that 
guarantee that the Government of Japan will treat U.S. 
investors in a reasonable and non-discriminatory fashion, and 
that require that the GOJ refrain from expropriation of the 
property of U.S. companies without just compensation.  We 
hope that the Government of Japan shares the interest of the 
U.S. Government in ensuring that our respective companies 
receive the protections to which they are entitled under that 
agreement.  It would be in our governments' mutual interest 
to avoid international dispute settlement regarding this 
matter. 
 
-- Unless this matter is resolved, the U.S. Congress may act. 
 As you may know, a bill (S.3394) has recently been 
introduced in the U.S. Senate that would authorize Goss 
International to seek to recover, in U.S. court, damages from 
TKS in an amount commensurate with any judgment that might be 
rendered against Goss International and Goss Japan under the 
Special Measures Law.  The result could be more litigation in 
U.S. courts.  This legislation is motivated by the belief 
that it is fundamentally unfair to deprive Goss International 
of the damages that it was awarded by a U.S. court for the 
injury it suffered because of the intentional acts of TKS. 
 
-- Goss International has advised the U.S. Government that it 
is prepared to discuss with TKS a settlement of this matter. 
 
-- A settlement would be in the best interests of all 
concerned.  For one thing, we are worried about the 
implications of this case for our economic relationship at a 
sensitive time for both our governments.  As you well know, a 
new President will take office in the United States next 
year; in order to maximize our bilateral engagement under the 
new administration, we would be well served to preemptively 
address irritants such as this case.  In addition, a 
settlement would preclude the need for further litigation in 
domestic courts or international tribunals. 
 
-- We therefore request the assistance of the Government of 
Japan in urging TKS to take action now to engage with Goss 
International to discuss these matters.  We stand ready to 
work with your government to facilitate that process. 
 
-- The first few months under our new U.S. President will be 
crucial in setting the tone for our bilateral economic 
engagement in the years ahead.  We would like to keep 
relations on as positive a trajectory as possible. 
 
¶9. (U) Embassy is also requested to provide, along with the 
non-paper points provided in para 8, the following documents, 
which have been sent via unclassified e-mail to Robert 
Cekuta, David DiGiovanna, and Chin Han-Quinlan: a) the 
District Court's decision in the case of Goss vs. TKS; and b) 
the brief of the U.S. Government to the Supreme Court 
concerning the case of Goss vs. TKS. 
 
¶10. (U) Please report back the results of the demarche via 
front-channel cable no later than Monday, October 27. 
 
¶11. (U) Department appreciates Embassy's assistance in this 
matter. 
RICE