Alloy Piping Products, Inc. v. United States ( 2008 )

Slip Op. 08-30
UNITED STATES COURT OF INTERNATIONAL TRADE
____________________________________
:
ALLOY PIPING PRODUCTS, INC., et al., :
:
Plaintiffs, :
:
v. :
: Before: Judith M. Barzilay, Judge
UNITED STATES, : Court No. 06-00454
:
Defendant, : PUBLIC VERSION
:
and :
:
TA CHEN STAINLESS STEEL PIPE :
CO., LTD., :
:
Defendant-Intervenor. :
____________________________________:
OPINION
[Motion for Judgment upon the Agency Record is denied.]
Dated: March 13, 2008
Kelley Drye Collier Shannon, (Jeffrey S. Beckington) and David A. Hartquist for Plaintiffs.
Jeffrey S. Bucholtz, Acting Assistant Attorney General; Jeanne E. Davidson, Director, Patricia
M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice; (Stephen C. Tosini), Commercial Litigation Branch, Civil Division, U.S.
Department of Justice; Evangeline D. Keenan, Office of the Chief Counsel for Import
Administration, U.S. Department of Commerce, of counsel, for Defendant United States.
Miller & Chevalier Chartered, (Peter J. Koenig), David T. Hardin, Jr., and Elizabeth E. Puskar
for Defendant-Intervenor.
Court. No. 06-00454 Page 2
BARZILAY, JUDGE: Plaintiffs Alloy Piping Products, Inc., Flowline Division of
Markovitz Enterprises, Inc., Gerlin, Inc., and Taylor Forge Stainless, Inc. (collectively,
“Plaintiffs”), domestic producers of stainless steel butt-weld pipe fittings, move for judgment
upon the agency record and challenge the final results of a periodic annual review for the period
of June 1, 2004 through May 31, 2005. See Notice of Final Results and Final Rescission in Part
of Antidumping Duty Administrative Review: Certain Stainless Steel Butt-Weld Pipe Fittings
From Taiwan, 71 Fed. Reg. 67,098 (Dep’t Commerce Nov. 20, 2006) (“Final Results”); see also
Certain Stainless Steel Butt-Weld Pipe Fittings from Taiwan: Preliminary Results of
Antidumping Duty Administrative Review and Notice of Intent to Rescind in Part, 71 Fed. Reg.
39,663 (Dep’t Commerce July 13, 2006) (“Preliminary Results”). Foreign producer Ta Chen
Stainless Steel Pipe Co., Ltd. (“Ta Chen Taiwan”), and its wholly-owned U.S. subsidiary Ta
Chen International (CA) Corp. (“TCI”) (collectively “Ta Chen”), participated in the underlying
review and appear before the court as Defendant-Intervenor. Commerce issued its final
determination on November 13, 2006, upholding the constructed export price (“CEP”) offset
granted in the Preliminary Results. In finding that Ta Chen had cooperated in the review to the
best of its ability, Commerce also declined to apply available adverse facts in its antidumping
analysis.1 See Issues and Decision Memorandum for the Administrative Review of Certain
1
In the Preliminary Results, Commerce found that: (1) the evidence on the record did
not warrant a finding that it should disregard Ta Chen’s financial statements, and thus
contradicted Plaintiff’s allegation of undisclosed related parties; and, (2) the normal value
(“NV”) is established at a level of trade (“LOT”) that is at a more advanced stage of distribution
than the LOT of the CEP transactions. Preliminary Results, 71 Fed. Reg. at 39,664, 39,666.
Because Commerce was unable to quantify a LOT adjustment, it subsequently applied a CEP
offset to the NV-CEP comparisons in accordance with 19 U.S.C. § 1677b(a)(7)(B).
Court. No. 06-00454 Page 3
Stainless Steel Butt-Weld Pipe Fittings From Taiwan; Final Results of Antidumping Duty
Administrative Review (Dep’t Commerce Nov. 13, 2006) (“Decision Memorandum”), Pub. R.
Doc. (“P.R. Doc.”) 72 at 6, 8. The court finds that substantial evidence supports Commerce’s
negative affiliation findings, use of Ta Chen’s financial statements, and award of a CEP offset.
I. Procedural History
In 1993, Commerce issued an antidumping order on certain stainless steel butt-weld pipe
fittings from Taiwan. See Amended Final Determination and Antidumping Duty Order: Certain
Welded Stainless Steel Butt-Weld Pipe and Tube Fittings from Taiwan, 58 Fed. Reg. 33,250(Dep’t Commerce June 16, 1993) (“AD Order”). Subsequent to Ta Chen’s request in June 2005,
Commerce initiated an administrative review for the period of June 1, 2004 through May 31,
2005. Preliminary Results, 71 Fed. Reg. at 39,663; see 19 U.S.C. § 1675(a).
In response to Commerce’s antidumping questionnaire of August 1, 2005, Ta Chen
reported that it was affiliated with twelve companies. See Confidential R. Doc. (“C.R. Doc.”) 1,
Ex. 4 & 4A; Preliminary Results, 71 Fed. Reg. at 39,664. Plaintiffs, however, identified and
alleged that Ta Chen was affiliated with thirty-seven additional companies. See 19 U.S.C.
§§ 1677(33), 1677a(b) & 1677a(d)(1); Memorandum from Dep’t of Commerce, Stainless Steel
Butt-Weld Pipe Fittings from Taiwan: Petitioners’ Allegations Regarding Ta Chen Stainless
Pipe Co., Ltd. And Ta Chen International Corporation Affiliations (Nov. 13, 2006) (“Allegations
Memorandum”), C.R. Doc. 32 at 2-3. Of the thirty-seven alleged Ta Chen affiliates named in the
Allegations Memorandum, Plaintiffs re-identified thirty companies from a previous
administrative review in which Commerce already had made negative affiliation determinations
Court. No. 06-00454 Page 4
for all alleged affiliates. See Allegations Memorandum, at 2; Memorandum from Dep’t of
Commerce, Stainless Steel Butt-Weld Pipe Fittings from Taiwan: Petitioners’ Allegations
Regarding Ta Chen Affiliations (June 30, 2005) (“Affiliations Memorandum”), C.R. Doc. 32.
Commerce found that Plaintiffs had “provided no new compelling evidence” that the thirty
companies from the previous review were affiliated with Ta Chen, thereby rendering an
affiliation analysis unnecessary. Allegations Memorandum, at 2. For the seven newly identified
companies, Commerce found that they were not involved with the subject merchandise and
therefore not affiliated with Ta Chen for purposes of evaluating dumping margins. Id. at 3-5.
Ta Chen also provided Commerce with its consolidated financial statements, as well as
the financial statements and annual reports of its subsidiary, TCI. P.R. Doc. 7 at A-18. Ta
Chen’s 2004 consolidated financial statements, prepared in accordance with the generally
accepted accounting principles (“GAAP”) of the Republic of China, contained financial
information from each of Ta Chen Taiwan’s subsidiaries, including TCI, and identified ten
related parties. C.R. Doc. 17 at Ex. A & B; P.R. Doc. 7 at Ex. 11 & 13. TCI’s 2003 financial
statements, prepared in accordance with U.S. GAAP, identified three related parties. C.R. Doc. 1
at Ex. 12.
Plaintiffs challenged the accuracy of Ta Chen’s submissions, claiming that TCI violated
U.S. GAAP by failing to disclose all of its related parties and significant related-party
transactions in its financial statements, and that by extension, Ta Chen’s consolidated financial
statements were an inaccurate and unreliable benchmark. Pl. Br. 8. Commerce ultimately found
that TCI did not have to disclose as “related parties” the companies that Plaintiffs identified, and
Court. No. 06-00454 Page 5
consequently accepted TCI’s financial statements as reliable benchmarks for Commerce’s
dumping calculations. Decision Memorandum, at 6-7.
In the Preliminary Results, Commerce assigned an antidumping duty margin of 0.79% ad
valorem on certain stainless steel butt-weld pipe fittings. See Preliminary Results, 71 Fed. Reg.
at 39,666. Following comments by the parties, Commerce published its Final Results and
affirmed its assignment of a 0.79% ad valorem dumping margin. See Final Results, 71 Fed. Reg.
at 67,099. Commerce found that Ta Chen’s home market sales were at a more advanced LOT
than its U.S. sales, based on Ta Chen’s narrative descriptions depicting its selling functions in its
home and U.S. market, and thus granted Ta Chen a CEP offset to NV. See § 1677b(a)(7)(B);
Decision Memorandum, at 10-11; Ta Chen Section A Resp. (September 21, 2005), C.R. Doc. 1
at A-13 to -14. In support of its conclusion, Commerce stated that Ta Chen: (1) “[had] more
market customers who purchase in smaller volumes than TCI and require more individual
contacts”; (2) had a “larger sales staff devoted to home market sales”; (3) “assumes credit risk
and provides technical services only for its home market sales”; and (4) provided “just-in-time
delivery requiring a higher level of inventory maintenance only for home market sales.” Id.
II. Standard of Review
A. Review of Determinations
This court must “sustain ‘any determination, finding or conclusion found’ by Commerce
unless it is ‘unsupported by substantial evidence on the record, or otherwise not in accordance
with law.’” Fujitsu Gen. Ltd. v. United States, 88 F.3d 1034, 1038 (Fed. Cir. 1996) (quoting
19 U.S.C. § 1516a(b)(1)(B)). Substantial evidence denotes “such relevant evidence that a
Court. No. 06-00454 Page 6
reasonable mind might accept as adequate to support the conclusion.” Consolo v. Fed. Mar.
Comm'n, 383 U.S. 607, 619-20 (1966) (quotations & citation omitted). Although “the possibility
of drawing two inconsistent conclusions from the evidence” may exist, that possibility, in itself
“does not prevent an administrative agency’s findings from being supported by substantial
evidence.” Id. at 620.
B. Review of Statutory Construction
In reviewing the lawfulness of an agency’s construction of a statute, the court “must first
carefully investigate the matter to determine whether Congress’s purpose and intent on the
question at issue is judicially ascertainable.” Timex V.I., Inc. v. United States, 157 F.3d 879, 881
(Fed. Cir. 1998) (citing Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837,
842-43 & n.9 (1984)). The court reaches the issue of Chevron deference only if it concludes,
after its investigation, that “Congress either had no intent on the matter, or that Congress’s
purpose and intent regarding the matter is ultimately unclear.”2 Id.The Federal Circuit has held that “statutory interpretations articulated by Commerce
during its antidumping proceedings are entitled to judicial deference under Chevron.” Pesquera
Mares Austales Ltda. v. United States, 266 F.3d 1372, 1382 (Fed. Cir. 2001). If Chevron
2
Chevron review consists of a two-part inquiry. See NTN Bearing Corp. of Am. v.
United States, 368 F.3d 1369, 1375 (Fed. Cir. 2004). First, the court determines “whether
Congress has directly spoken to the precise question at issue. If the intent of Congress is clear,
that is the end of the matter; for the court, as well as the agency, must give effect to the
unambiguously expressed intent of Congress.” Id. (quoting Chevron, 467 U.S. at 842-43). If,
however, “the statute is silent or ambiguous with respect to the specific issue, the question for the
court is whether the agency's answer is based on a permissible construction of the statute.” Id.“Where Congress has delegated authority to the agency to promulgate regulations elucidating
statutory provisions, the resulting regulations are given controlling weight unless they are
arbitrary, capricious, or manifestly contrary to the statute.” Id. (quotations & citation omitted).
Court. No. 06-00454 Page 7
deference is warranted, a court errs by substituting “its own construction of a statutory provision
for a reasonable interpretation made by [Commerce].” IPSCO, Inc. v. United States, 965 F.2d
1056, 1061 (Fed. Cir. 1992) (quoting Chevron U.S.A., Inc., 467 U.S. at 844)). Moreover,
“deference may vary with circumstances,” and thus, when granting Chevron deference, the court
looks to “the degree of the agency's care, its consistency, formality, and relative expertness, and
to the persuasiveness of the agency's position.” Crawfish Processors Alliance v. United States,
477 F.3d 1375, 1380 (Fed. Cir. 2007) (quotations and citations omitted).
III. Discussion
A. Affiliated Party Analysis
In making a CEP and CEP offset determinations during an antidumping duty
margin calculation, Commerce must take affiliated party transactions into account. See
§§ 1677(33), 1677a(b) & 1677a(d)(1). Section 1677(33) defines “affiliated” or “affiliated
persons” as those who are:
(A) Members of a family, including brothers and sisters (whether by whole or
half blood), spouse, ancestors, and lineal descendants;
(B) Any officer or director of an organization and such organization;
(C) Partners;
(D) Employer and employee;
(E) Any person directly or indirectly owning, controlling, or holding with
power to vote, 5 percent or more of the outstanding voting stock or shares
of any organization and such organization;
(F) Two or more persons directly or indirectly controlling, controlled by, or
under common control with, any person; and
(G) Any person who controls any other person and such other person.
Court. No. 06-00454 Page 8
Id. In addition, “a person shall be considered to control another person if the person is legally or
operationally in a position to exercise restraint or direction over the other person.” Id. The
regulations further provide that
in determining whether control over another person exists . . . , [Commerce] will
consider the following factors, among others: corporate or family groupings;
franchise or joint venture agreements; debt financing; and close supplier
relationships. [Commerce] will not find that control exists on the basis of these
factors unless the relationship has the potential to impact decisions concerning the
production, pricing, or cost of the subject merchandise or foreign like product.
Ta Chen Stainless Steel Pipe Co. v. United States, Slip Op. 07-87, 2007 WL 1573920, at *15
(May 30, 2007) (not reported in F. Supp.) (“Ta Chen II”) (quoting 19 C.F.R. § 351.102(b)).
1. Subject Merchandise Requirement
Plaintiffs argue that Commerce must follow a “three step protocol” to examine a
respondent’s affiliated parties, the first of which requires a respondent to “disclose all of its
affiliated parties at the outset of the investigation or review, regardless of their level of
involvement or not with the subject merchandise or foreign like product.” Pl. Br. 15. However,
the Trade Act of 1930, as amended 19 U.S.C. §§ 1671-1677n (2000 & Supp. 2005) (“the Act”),
is silent with respect to the methods and procedures that Commerce must employ in obtaining
information about potential affiliates and therefore does not require Commerce to undertake the
“three step protocol” suggested by Plaintiffs. Moreover, because the statute does not require
specific methods and procedures, the court must defer to Commerce’s methods for obtaining
affiliated party information so long as they are consistent with a permissible construction of the
statute. See Chevron U.S.A., Inc., 467 U.S. at 843-44.
Court. No. 06-00454 Page 9
Furthermore, there is an inherent “subject merchandise” requirement throughout the
antidumping statute and accompanying regulations that limits Commerce’s affiliation
determinations to only those companies that deal with, or have an effect on, the subject
merchandise at issue in the antidumping investigation. See §§ 1673-1673(i) & 1677(33);
19 C.F.R. § 351.102(b). For example, when determining injury, Commerce examines whether
there is a reasonable indication that a domestic industry is materially injured or threatened with
material injury “by reason of imports of the subject merchandise . . . .” § 1673b(a)(1) (emphasis
added).3 Commerce must also limit its NV calculations to those transactions in which the foreign
producer and its affiliates engaged in sales of the subject merchandise. See § 1677b. Indeed, the
statute specifies the manner in which Commerce must calculate the “normal value of the subject
merchandise,” and requires that Commerce address whether the “subject merchandise is being,
or is likely to be, sold at less than fair value . . . .” § 1677b(a) & (a)(1)(A).
Similarly, the regulations applicable to § 1677(33) also require that an affiliated party
deal in the subject merchandise at issue. Specifically, § 351.102(b) states that “[t]he Secretary
will not find that control exists on the basis of these factors unless the relationship has the
potential to impact decisions concerning the production, pricing, or cost of the subject
merchandise or foreign like product.” § 351.102(b) (emphasis added). This Court has found
that § 351.102(b) is a
3
Likewise, determinations of NV address whether “subject merchandise is being, or is
likely to be, sold at less than fair value . . . .” § 1677b(a) (emphasis added).
Court. No. 06-00454 Page 10
“reasonable [agency] interpretation” of section 1677(33)'s requirement that
control exists only when a person considered to control another person be “legally
or operationally in a position to exercise restraint or direction over the other
person” whereby control over another exists only when “the relationship has the
potential to impact decisions concerning the production, pricing, or cost of the
subject merchandise or foreign like product.”
Ta Chen II, Slip Op. 07-87, 2007 WL 1573920, at *16 (quoting TIJID, Inc. v. United States, 29
CIT ___, ___, 366 F. Supp. 2d 1286, 1298 (2005)).
As the language of the Act and the regulations restrict antidumping reviews to cases
where the foreign producer or affiliated parties deal in the subject merchandise, Commerce need
not make a finding of affiliation for each company that does not actually sell the subject
merchandise.4
2. Commerce’s Affiliation Analysis
Plaintiffs claim that Commerce erred by concluding that petitioners must first show an
alleged affiliate’s involvement with the subject merchandise prior to an affiliation determination.
Pl. Br. 17-18. Based on the Act’s subject merchandise requirement, the court finds that
Commerce did not err in its application of § 1677(33).
During the administrative review, Commerce reviewed and made determinations
regarding the affiliation status of the thirty-seven companies which Plaintiffs alleged were Ta
Chen affiliates. See Allegations Memorandum, at 2-3; Affiliations Memorandum, C.R. Doc. 32.
Commerce found that the seven companies newly identified by Plaintiffs did not meet the criteria
4
Logic dictates that Commerce need only include those affiliates who deal in the subject
merchandise in their antidumping determination, as a company’s lack of involvement in the
production of the subject merchandise inherently precludes them from harming the domestic
industry.
Court. No. 06-00454 Page 11
of an affiliated party as set forth in § 1677(33), and gave the following reasons for each finding
of non-affiliation. First, South Star Real Estate and Nirosteel, LLC, which allegedly shared a
corporate officer with AMS North Carolina, are not affiliated with Ta Chen because AMS North
Carolina was not a Ta Chen affiliate. Second, Ta Chen Enterprises is not an affiliate because
familial ties between the management of the two companies are “unclear,” and because there is
no evidence that Ta Chen Enterprise’s involvement in real estate development affected the
pricing or cost of either the subject merchandise or foreign like product. Third, G.M.T.S.
International Co., Ltd. had no involvement with the subject merchandise because the company
had been suspended since 1983. Fourth, J.K. Industries WH., Inc. did not share an officer with
TCI and therefore was not affiliated with Ta Chen. Fifth, QDII and QFII were not in fact
companies, but rather classes of investors under Taiwanese law entitled to invest directly in
Taiwanese securities. As these two classes hold less than five percent of Ta Chen’s shares, they
are not affiliates under the statute. See § 1677(33)(E); Allegations Memorandum, at 5.
Instead of reviewing the affiliation status of the remaining thirty companies, Commerce
incorporated its previous conclusions by reference because Plaintiffs failed to provide new
evidence that would require Commerce to change its previous determination. Specifically,
Commerce found no affiliation because: (1) certain companies were inactive,5 defunct,6
5
Stainless Express, Inc., Stainless Express Prods., Inc., and South Coast Stainless, Inc.
6
SouthStar Steel Corp.
Court. No. 06-00454 Page 12
dissolved,7 or suspended8; (2) Ta Chen’s interest was divested before the period of review;9
(3) there was a lack of familial relationship as specified in § 1677(33)(A);10 (4) there was lack of
any relationship specified under § 1677(33);11 and (5) Ta Chen’s relationship with the companies
lacked the potential to affect the production pricing, or cost of the subject merchandise.12
Affiliations Memorandum, at 3-10, 12-16. Because substantial evidence supports the conclusion
that the thirty-seven companies named by Plaintiffs are not affiliated with Ta Chen, the court
must defer to Commerce’s determination.
B. TCI’s Financial Statements
1. U.S. GAAP Related Party Disclosures
Plaintiffs contend that Commerce incorrectly concluded that Ta Chen’s consolidated
financial statements were reliable benchmarks for use in the antidumping analysis. Furthermore,
Plaintiffs argue that U.S. GAAP requires two disclosures: (a) all significant related-party
7
Billion Stainless, Inc., Estrela Int’l, Inc., and Estrela Int’l Corp.
8
Estrela Int’l Co., Ltd.
9
AMS Specialty Steel, Inc., AMS Specialty Steel, LLC, and AMS Steel Corp.
10
DNC Metal, Inc.
11
Becmen Special Steels, Inc., Becmen LLC, Becmen Corporation, and Becmen Trading
Int’l, Inc.
12
Emerdex Stainless Flat Roll Products, Inc., Emerdex Stainless Steel Inc., Emerdex
Group, Inc., Emerdex-Shutters, Dragon Stainless, Inc., Millenium Stainless Inc., DNC Metal,
Inc., PFP Taiwan Co., Stainless Express, Inc., Stainless Express Products, Inc., Estrela Int’l Inc.,
Estrela Int’l Corp., Estrela International Co., Ltd., LHPJ Int’l Inc., LPJR Investment, LLC, KSI
Steel, Inc., K. Sabert, Inc., Sabert Investments Inc., and one other company whose identity is
confidential.
Court. No. 06-00454 Page 13
transactions, and (b) all related parties, regardless of whether there have been any related-party
transactions during the reporting period. Pl. Br. 22-23. Based on this interpretation of the
disclosure requirements, Plaintiffs argue that Commerce “wrongly took license and created new
accounting standards for related-party disclosures” by focusing on “whether the domestic
industry demonstrated ‘an indisputable control relationship’ that ‘clearly could have resulted in
significantly different financial results of the companies.’” Pl. Br. 23. The court disagrees.
Pursuant to the Statement of Financial Accounting Standards explaining U.S. GAAP for
related party disclosures (SFAS No. 57), “financial statements shall include disclosure of
material related party transactions.” See Related Party Disclosures, Statement of Financial
Accounting Standards No. 57 ¶ 2 (Fin. Accounting Standards Bd. 2006), P.R. Doc. 20 Ex. 1.
SFAS No. 57 defines “related parties” as those with which “the enterprise may deal if one party
controls or can significantly influence the management or operating policies of the other”; those
which “significantly influence the management or operating policies of the transacting parties”;
and those who have “an ownership interest in one of the transacting parties and can significantly
influence the other to an extent that one or more of the transacting parties might be prevented
from fully pursuing its own interests.” Id. app. B(f) (emphasis added). SFAS No. 57 also states
that:
If the reporting enterprise and one or more other enterprises are under common
ownership or management control and the existence of that control could result in
operating results or financial position of the reporting enterprise significantly
different from those that would have been obtained if the enterprise were
autonomous, the nature of the control relationship shall be disclosed even though
there are no transactions between the enterprises.
Id. ¶ 4 (emphasis added).
Court. No. 06-00454 Page 14
2. Commerce’s Related Party Determination
In its November 13, 2006 Memorandum on Ta Chen’s related parties, Commerce
analyzed twelve parties which Plaintiffs had identified as alleged related parties. See
Memorandum from Dep’t of Commerce, Stainless Steel Butt-Weld Pipe Fittings from Taiwan:
Petitioners’ Allegations Regarding Ta Chen Stainless Pipe Co., Ltd., and Ta Chen International
(CA) Corporation Related Parties (Nov. 13, 2006) (“Related Parties Memorandum”), P.R.
Doc. 69. Commerce evaluated two companies in a narrative format and found that Plaintiffs had
not demonstrated that “a control relationship existed between the companies that could have
resulted in significantly different financial results during the [period of review].” Id. at 3
(emphasis added). Of the remaining ten companies, Commerce concluded that none satisfied the
criteria of “related parties” under U.S. GAAP. Id. at 5-7. For seven companies in particular,
Commerce noted that “[a]n indisputable control relationship has not been demonstrated to exist
such that the existence of that control clearly could have resulted in significantly different
financial results of the companies.” Id. at 4-7 (emphasis added). In using phrases like
“significantly different” and “control relationship,” Commerce’s memorandum closely parallels
the language in SFAS No. 57, and as such, the court finds that Commerce did not create
“unauthorized new standards” as Plaintiffs allege, but rather, that Commerce applied U.S. GAAP
in its analysis of Ta Chen’s related party disclosures. Id.; see SFAS No. 57 ¶¶ 2, 4.13
13
Notwithstanding Commerce’s application of U.S. GAAP in this case, the court has
held that because “the antidumping laws, along with agency implementing regulations, alone
establish the criteria for determining whether parties are affiliated, their resemblance to, or
possible overlap with, U.S. or foreign GAAP standards are not of conclusive moment.” Ta Chen
II, Slip Op. 07-87, 2007 WL 1573920, at *14. Therefore, even if the court had concluded that
Commerce diverged somewhat from the language in SFAS No. 57, such a finding would not
Court. No. 06-00454 Page 15
Plaintiffs also question Commerce’s reliance upon the auditor’s opinion, which
concluded that TCI’s financial statements properly disclosed all related parties and all significant
related party transactions. Pl. Br. 28. In this case, independent auditors reviewed TCI’s 2004
financial statements and issued an “unqualified opinion” that the financial statements “present
fairly in all material respects the financial position of TCI as of December 31, 2004, . . . in
conformity with accounting principles generally accepted by the United States of America.”14
Decision Memorandum, at 6. Citing paragraphs one, four, and twenty-one, Commerce concluded
that “inherent in SFAS [No.] 57 is a judgment element and the company does not need to
disclose every relationship.” Id. at 7. Commerce also explained that:
in the context of assessing disclosures of affiliated parties in a financial statement
prepared in accordance with financial accounting standards, a judgement as to
whether or not a relationship should have been disclosed does not depend upon a
factual finding, but rather opinions as to whether the auditors’ decisions about
disclosure were reasonable. This factor alone requires that there be very strong
record evidence for [Commerce] to overturn the independent auditor’s opinion.
Id. (emphasis added). Because the record did not provide “compelling evidence” to “reject the
independent auditors’ opinion and discredit the financial statements,” Commerce properly relied
on TCI’s financial statements. Id. at 6.
automatically render Commerce’s reliance on the financial statements erroneous. Rather, the
court would weigh the record evidence and determine whether substantial evidence supported
Commerce’s reliance. See 19 U.S.C. § 1516a(b)(1)(B)(i).
14
Plaintiffs concede that “an auditor’s responsibility is limited to issuing an opinion on a
company’s financial statements.” Pl. Br. 27. Here, the auditor did not exceed his competency,
and opined solely on the accuracy of TCI’s financial statements. It is therefore futile for
Plaintiffs to claim that Commerce may not rely on the very statements which an independent
review found to be accurate representations of the company’s finances.
Court. No. 06-00454 Page 16
This Court “has consistently upheld Commerce's reliance on a firm's expenses as
recorded in the firm's financial statements, as long as those statements were prepared in
accordance with the home country's GAAP and do not significantly distort the firm's actual
costs.”15 Ta Chen II, Slip Op. 07-87, 2007 WL 1573920, at *15 (citing FAG U.K. Ltd. v. United
States, 20 CIT 1277, 1290, 945 F. Supp. 260, 271 (1996)). Moreover, “Commerce is generally
given the benefit of wide latitude in the verification procedure it chooses to implement.” Id.(quotations & citation omitted). Accordingly, based on the record evidence, the court defers to
Commerce’s determination and holds that TCI’s financial statements were accurate and reliable
benchmarks for use in the antidumping analysis.
C. The Constructed Export Price Offset
1. Legal Framework
Commerce calculates an antidumping duty rate by comparing the NV, i.e., home market
price, of the subject merchandise in the foreign market and the “export price” (“EP”) or CEP.
See Mittal Steel Galled S.A. v. United States, 31 CIT __, __, 502 F. Supp. 2d 1295, 1297 (2007);
Fla. Citrus Mut. v. United States, 31 CIT __, __, 515 F. Supp. 2d 1324, 1327 (2007). To
calculate NV Commerce uses “the exporting market price (i.e., the market where the goods are
produced), an appropriate third country market price, or the cost of production of the goods.” Ta
15
This Court has also found that Commerce’s “decision to rely upon audited,
home-country GAAP-compliant financial statements in gathering cost-of-production data [is] in
accordance with the law and agency practice.” Ta Chen II, Slip Op. 07-87, 2007 WL 1573920, at
*15 n.16 (citing 19 U.S.C. § 1677b(f)(1)(A) (stating that Commerce may use a records if they are
kept in accordance with the firm’s home country GAAP and reasonably reflect production and
sale costs.); Id. n.17 (citing ITA Final Determination of Sales at Less Than Fair Value: Canned
Pineapple Fruit From Thailand, 60 Fed. Reg. 29,553, 29,559 (Dep’t Commerce, June 5, 1995)).
Court. No. 06-00454 Page 17
Chen Stainless Steel Pipe, Ltd. v. United States, 28 CIT 627, 630, 342 F. Supp. 2d 1191, 1194
(2004) (“Ta Chen I”). Commerce establishes a NV “to the extent practicable, at the same level
of trade as the [EP] or [CEP].” 19 U.S.C. § 1677b(a)(1)(B)(i).
LOT are defined as “marketing stages (or their equivalent),” 19 C.F.R. § 351.412(c)(2),
whereas EP or CEP reflect “the price at which the subject merchandise is first sold, or agreed to
be sold, in the United States . . . to a purchaser not affiliated with the producer or exporter . . .”
19 U.S.C. § 1677a(b); see Fla. Citrus Mut., 31 CIT at __, 515 F. Supp. 2d at 1327. Commerce
may make a LOT adjustment if it determines that “sales in the two markets were not made at the
same [LOT], and that the difference has an effect on the comparability of the prices.”
§ 351.412(a); see § 1677b(a)(7)(A).
Where Commerce calculates NV at a different LOT from the LOT of EP or the CEP
(whichever applies), it may adjust NV to compensate for the difference. See § 351.412(b); see
also Mittal Steel USA, Inc. v. United States, Slip Op. 07-117, 2007 WL 2701369, at *7 n.12
(2007) (stating that the level of trade adjustment is designed to ensure the NV and U.S. price are
being compared at the same marketing stage.). Furthermore, Commerce makes a LOT
adjustment to the NV if the difference in LOTs “involves the performance of different selling
activities” and “is demonstrated to affect price comparability, based on a pattern of consistent
price differences between sales at different levels of trade in the country in which normal value is
determined.” § 1677b(a)(7)(A); Mittal Steel USA, Inc., Slip Op. 07-117, 2007 WL 2701369,
at *8.
Court. No. 06-00454 Page 18
When Commerce compares the NV to the CEP, however, it must also adjust the CEP
figure “in accordance with the statutory provisions set out in § 19 U.S.C. 1677a(c)-(d) to achieve
a fair ‘apples-to-apples’ comparison between U.S. price and foreign market value ‘at a similar
point in the chain of commerce.’” Fla. Citrus Mut., 31 CIT at __, 515 F. Supp. 2d at 1328 (citing
Torrington Co. v. United States, 68 F.3d 1347, 1352 (Fed. Cir. 1995)). Where the NV is at a
more advanced LOT than the CEP, and the available data do not permit a determination on
whether the difference affects price comparability, Commerce may also make a CEP offset using
indirect selling expenses in the home market. See 19 C.F.R. § 351.412(f). In such cases,
normal value shall be reduced by the amount of indirect selling expenses incurred
in the country in which normal value is determined on sales of the foreign like
product but not more than the amount of such expenses for which a deduction is
made under section 1766a(d)(1)(D) of this title.
§ 1677b(a)(7)(B).
2. Ta Chen’s Selling Activities
In its Decision Memorandum, Commerce found that “the LOT of home market sales is
different from the LOT for Ta Chen’s CEP sales, and that on balance the LOT is more advanced
in the home market.”16 Decision Memorandum, at 10. Because Commerce was also unable to
16
Ta Chen’s reported selling functions in the home market include: “meeting and
entertaining customers, maintaining inventory and providing just-in-time delivery, assuming
credit risk of nonpayment, addressing customer complaints, scheduling customer pickups of
merchandise at the factory in their own trucks, providing technical assistance, and research and
development.” Decision Memorandum, at 10. TCI’s selling activities include “accepting orders,
scheduling production, and making arrangements for inland freight to the port, brokerage,
containerization and Taiwan customs clearance, including payment of harbor tax.” Id. Ta Chen
also characterized TCI as a “master distributor” which “handles all the selling functions for sales
to the first unaffiliated customer in the United States, including all communications with
customers, U.S. customs duties, U.S. brokerage, U.S. inland freight, U.S. warehousing, inventory
maintenance and assumption of risk of nonpayment.” Id.
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quantify the effect of the difference in LOT on prices, it ultimately decided to continue granting
Ta Chen a CEP offset. Id.
Plaintiffs challenge Commerce’s CEP analysis and argue that the underlying review
showed Ta Chen “did not actually perform activities related to addressing customer complaints
and providing assistance.” Pl. Br. 34 (emphasis in original). Plaintiffs, however, misinterpret the
record evidence, as the very document cited states that: “[a]s to home market sales, Ta Chen
Taiwan technical services include . . . reviewing customer complaints as to fittings, including
testing of the particular fitting’s performance characteristics.” Ta Chen Section B and C Resp.
(Sep. 26, 2005), P.R. Doc. at B27-B28. In addition, Ta Chen Taiwan specified that “[its]
employees themselves perform these technical service functions. No outside workers are used,”
and that it “does not do these technical services for the United States.” Id. at B-28. Thus, the
record evidence supports Commerce’s finding that the LOT of home market sales is more
advanced than the LOT of the CEP sales.
Alternatively, Plaintiffs claim that the CEP offset analysis must consider all selling
activities performed for unaffiliated U.S. customers up to the time of U.S. entry, and thus
Commerce failed to consider “Taiwanese insurance, Taiwanese inventory carrying costs,
Taiwanese brokerage, marine insurance, Taiwanese banking expenses and packaging.” Pl.
Br. 33; see § 351.412(c)(1)(ii). Commerce however, explicitly states that it “examined the
selling activities reported for each channel of distribution and organized the reported selling
activities into the following four selling functions: sales process and marketing support, freight
and delivery, inventory maintenance and warehousing, and warranty and technical services.”
Court. No. 06-00454 Page 20
Preliminary Results, 71 Fed. Reg. at 39,666. Therefore, even if Commerce did not specifically
mention each and every selling function it analyzed, the selling activities specifically detailed in
the Decision Memorandum correspond to one of the four categories enumerated in its July 2006
memorandum and indicate that Commerce did consider all major types of selling functions in its
CEP offset analysis. See supra note 16.
Next, Plaintiffs claim that Commerce improperly compared the number of home market
customers and United States customers, and that Commerce “should have considered the selling
activities that were provided by Ta Chen Taiwan to the first unaffiliated U.S. Customer – not to
Ta Chen Taiwan’s U.S. affiliate, TCI . . . .” Pl. Br. 35. Nevertheless, Plaintiff’s own submission
cites to § 1677a(d), which requires that Commerce disregard certain U.S. selling expenses, such
as U.S. commissions, credit expenses, guarantees, warranties, and generally, all expenses
incurred in the U.S. by selling the subject merchandise, i.e., TCI’s selling activities. See
§ 1677a(d)(1). In calculating the LOT of the CEP, Commerce considers only the selling
activities reflected in the adjusted CEP. Although the CEP generally represents the price at
which the subject goods are sold to the first unaffiliated purchaser, Commerce may, as it did
here, reduce the CEP in accordance with § 1677a(c)-(d) to ensure an “apples-to-apples
comparison.” See Fla. Citrus Mut., 31 CIT at __, 515 F. Supp. 2d at 1328. Section 1677a(d)(1)
requires Commerce to reduce the CEP by the amount of any of various expenses “incurred by or
for the account of the producer or exporter, or the affiliated seller in the United States, in selling
the subject merchandise.” See § 1677a(d)(1). As a result, the adjusted CEP does not reflect
certain expenses and profit relating to sales to unaffiliated U.S. purchasers. Therefore, contrary
to Plaintiffs’ claim, the adjusted CEP cannot, and does not, include TCI’s selling activities.
Court. No. 06-00454 Page 21
IV. Conclusion
For the foregoing reasons, the court holds that substantial evidence supports the final
results of Commerce’s antidumping determination. Accordingly, Plaintiff’s motion for judgment
upon the agency record is DENIED.
Dated: March 13, 2008 /s/ Judith M. Barzilay
New York, NY Judith M. Barzilay, Judge