Sensient Technologies Corp. v. United States , 28 Ct. Int'l Trade 1513 ( 2004 )

Slip Op. 04 - 115
UNITED STATES COURT OF INTERNATIONAL TRADE
____________________________________
:
SENSIENT TECHNOLOGIES CORP., :
:
Plaintiff, :
:
v. : Before: MUSGRAVE, JUDGE
:
UNITED STATES, : Court No. 03-00283
:
Defendant :
:
and :
: PUBLIC VERSION
ROHA DYECHEM LTD., and :
NEELIKON FOOD DYES & :
CHEMICALS, LTD. :
:
:
Defendant-Intervenors. :
____________________________________:
[Plaintiff brought this action challenging the negative preliminary injury determination of the
International Trade Commission (“ITC”) in its antidumping and countervailing duty investigations
of Allura Red Coloring from India, 68 Fed. Reg. 20,170 (Apr. 24, 2003). Plaintiff argued that there
was not a rational nexus, supported by record evidence, between the facts found and the decision to
issue a negative determination. Plaintiff also contended that the ITC violated its due process rights
by failing to release critical documents which it relied upon. The ITC argued that its negative
determination was supported by clear and convincing evidence and that all parties were afforded an
opportunity to participate fully in the proceedings. Held: Plaintiff’s motion is denied and the
determination of the ITC is sustained.]
Decided: September 10, 2004
Baker & McKenzie (Kevin M. O’Brian, Thomas Peele, and Lisa A. Murray) for Plaintiff.
Court No. 03-00283 Page 2
James M. Lyons, Acting General Counsel, United States International Trade Commission
(Laurent M. de Winter) for Defendant.
Garvey Schubert Barer (Lizbeth Levinson and Ronald M. Wilsa) for Defendant-Intervenors.
OPINION
Sensient Technologies Corp., a U.S. producer of allura red coloring, 1 brings this action
challenging the negative preliminary determination by the International Trade Commission (“ITC”
or “the Commission”) in its antidumping and countervailing duty investigations of Allura Red
Coloring from India, 68 Fed. Reg. 20,170 (Apr. 24, 2003). Sensient contends that the ITC’s
determination was arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with
law because there is not a rational nexus, supported by record evidence, between the facts found and
the decision to issue a negative determination. Furthermore, Sensient contends that the ITC violated
its due process rights by failing to release critical documents on which the Commission relied. For
these reasons, Sensient moves for judgment on the agency record asking the Court to vacate the
ITC’s determination and remand with instructions that the ITC either enter an affirmative
preliminary determination or permit the parties to submit comments on record documents that were
not released and reconsider its determination in light of those comments. The ITC argues that its
negative determination is supported by clear and convincing evidence and that all parties, including
1
Allura red is a synthetic food coloring used in food, drugs, and cosmetics. Each batch must
be certified by the Food and Drug Administration before it can be used in food, and once certified
it is also referred to as FD&C Red No. 40. Ninety percent of allura red is used to color food products
and there are no similar or substitute products for allura red.
Court No. 03-00283 Page 3
Sensient, were afforded an opportunity to participate fully in the proceedings. For the reasons that
follow, Sensient’s motion is denied and the determination of the ITC is sustained.
Background
In March 2003 Sensient filed a petition with the ITC and the Department of Commerce
alleging material injury or threat of material injury to the U.S. allura red industry due to subsidized
and less-than-fair-value imports of allura red from India. Imports from India comprised 100 percent
of all imports of allura red during the period of investigation. The ITC initiated antidumping and
countervailing duty investigations, but made a negative preliminary determination. See Views of the
Commission (Apr. 29, 2003) Confidential Record List 2, Doc 24 (“ITC Views”) at 2.
In making a preliminary determination the ITC examines whether “there is a reasonable
indication that an industry in the United States . . . is materially injured, . . . or is threatened with
material injury” by imports of the subject merchandise. 19 U.S.C. § 1673b(a)(1)(A)(i)-(ii).
Regarding material injury, the ITC found that:
The absolute volume and value of U.S. imports of allura red
from India fluctuated {significantly} during the period of
investigation . . . . The U.S. market share held by shipments of
subject imports increased on the basis of apparent domestic
consumption [ ]. On the basis of
value, subject imports’ market share followed similar trends . . . .
The domestic industry held more than [ ] percent of the U.S. market
for allura red coloring during the entire period of investigation. As
a share of domestic production, subject imports were [
].
ITC Views at 13 (citations omitted). Although “subject imports consistently undersold the domestic
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like product during the period of investigation” the margins became smaller and “{s}ubject import
prices reached their highest point at the end of the period of investigation when subject import
volume was at its highest.” Id. at 14 (footnote omitted). Prices of domestically produced allura red
“fluctuated without clear patterns,” but “trended downward somewhat over the period of
investigation.” Id. at 15. The ITC concluded that “{a}ny decline in prices for the domestic like
product cannot be attributed, to a significant degree, to the subject imports” because the volume was
very small and “domestic prices began declining during 2000, a year in which subject imports were
only {a minimal percentage} of consumption.” Id. at 15-16. Furthermore, “prices for subject
imports generally rose over the period of investigation such that underselling margins were generally
reduced.” Id. at 16. Thus there was “a lack of correlation between trends in the volume and prices
of the subject imports and the volume and prices of the domestic like product.” Id. (footnote
omitted).
The ITC also found that demand for allura red increased during the period of investigation.
Id. at 8. The domestic industry’s production levels, shipments, and capacity utilization all increased
from 2000 to 2002, and although “apparent domestic consumption volume decreased slightly . . . the
industry’s dominance over the market remained virtually unchallenged.” Id. at 19. Furthermore,
“{t}he domestic industry’s financial performance was robust” and “{g}ross profits, operating
income, operating income ratios and net income all increased from 2000 to 2002.” Id. (footnote
omitted). Therefore, the ITC concluded that “{t}he record indicates that the small increase in subject
import volumes and lower import prices has little, if any, adverse impact on the financial condition
or production operations of the domestic industry.” Id.
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The ITC also found no reasonable indication of threat of material injury to the domestic
industry from the Indian imports. This finding was based in part on the ITC’s observations that the
domestic industry was “robust,” that it maintained a dominant market share, and that the rate of
increase in volume and market share of the subject imports was small. Id. at 22. The ITC also found
no indication that “unused production capacity or any imminent increases in production capacity in
India will lead to substantially increased imports in the imminent future” because the “unused
capacity existed from the beginning of the period of investigation and did not result in significant
export volumes to the United States.” Id. Furthermore, exports to markets other than the United
States were growing and becoming increasingly important and “{i}nventories held by U.S. importers
and Indian producers remained modest in the context of the overall U.S. market.” Id. at 23 (footnote
omitted).
The ITC found that the potential for product shifting was limited due to the fact that dyes are
sold as a package which includes a range of colors. Thus it would be impractical to shift equipment
used to produce allura red to produce a different color dye since a customer would want both colors.
Additionally, the ITC disagreed with Sensient’s contention that an Indian producer, was poised to
take the supply contract of a large customer away from Sensient. The ITC found that this was “not
imminent, nor necessarily likely” because Sensient’s contract appeared to go to the end of 2003. Id.
at 24. Furthermore, the ITC concluded that the customer in question could secure prices lower than
what Sensient offered based on the volume of merchandise it purchased. The ITC also found it
unlikely that subject imports would have an adverse effect on domestic prices since the margin of
underselling decreased during the period of investigation. Likewise, it found no likelihood that the
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imports would negatively effect the domestic industry’s development and production efforts and
noted that capital expenditures had increased during the period of investigation even as the volume
and market share of subject imports rose. Finally, the ITC found that although several of the alleged
subsidies might be export subsidies in violation of a World Trade Organization agreement, these
would not likely increase the volume of subject imports because they had existed for years and had
not affected the volume of imports during the period of investigation. For the foregoing reasons,
and because the trends in the domestic industry’s performance were positive, the ITC found no
reasonable indication that the domestic industry was threatened with material injury.
Arguments
Sensient argues that there is ample evidence indicating that the domestic industry was
materially injured by the subject imports. First, Sensient contends that lost sale and lost revenue
allegations were either confirmed, denied ambiguously, or uncontested. One customer disagreed
with a lost sale only with regard to the quantity, not the fact that it was a lost sale. In another
instance, one of Sensient’s customers awarded a contract to an Indian producer via an Internet
auction, but disagreed that Sensient lost this sale since it had no record of Sensient participating in
the auction. Sensient contends that it did participate, but that it is sometimes difficult to tell who the
participants are in an Internet auction. Sensient believes that these issues would be resolved if the
ITC moved forward and made a final determination.
Court No. 03-00283 Page 7
Sensient also argues that import volumes increased from “nonexistent to significant and
injurious levels.” Brief in Support of Plaintiff Sensient Technologies Corporation’s Motion for
Judgment on the Agency Record (“Pl.’s Br.”) at 6. Sensient cites an ITC staff report noting that a
national import specialist with the U.S. Customs Service believed that entries of allura red from India
were being incorrectly classified and that the total value entered under the proper tariff subheading
represented only a small percentage of the value India records in its export statistics. Moreover,
assuming the data supplied by the Indian producers is accurate, Sensient argues that this data shows
that market penetration increased steadily. For these reasons, the ITC should have continued its
investigation to a final determination and confirmed whether the Indian producers captured, or were
likely to capture, additional sales from U.S. producers.
Finally, with respect to actual material injury, Sensient argues that other evidence on the
record indicates that the domestic industry was harmed by imports of allura red. Sensient notes that
the domestic and imported merchandise are “interchangeable and highly substitutable.” Pl.’s Br. at
9-10. Sensient also notes that “the apparent dumping margins that led Commerce to initiate an
investigation were immense, ranging from 137.69 to 226.21%.” Id. at 10 citing 68 Fed. Reg. 15,433(emphasis in Pl.’s Br.). Sensient calls attention to the fact that deteriorating market conditions made
it unable to use production equipment it purchased from another domestic producer in early 2000,
and thus it has operated at [ ] percent of capacity. [
]. Furthermore, allura red
inventories grew considerably from 2000 to 2003 and the number of production-related employees
declined slightly.
Court No. 03-00283 Page 8
Regarding threat of material injury, Sensient argues that the Indian allura red producers
benefit from export subsidies, which it asserts is prima facie evidence of a threat to the U.S. market.
Sensient also argues that the import volumes have been steadily increasing and the conference
testimony of one Indian producer indicates that it “plans to squeeze out any industry player, other
than possibly Sensient, from the U.S. market.” Pl.’s Br. at 14. Finally, Sensient notes that market
prices were declining, Indian producers had the capacity to increase shipments to the U.S., which is
the only market for allura red, and even without increasing production they had significant
inventories on hand. Sensient asserts that the ITC’s conclusion that there is no threat of material
injury does not follow from this record evidence.
Finally, Sensient argues that it was denied due process of law because the ITC did not
provide it with copies of certain importer questionnaire responses, the ITC staff report, memoranda
of ex parte communications, and internal worksheets until after the ITC had issued its preliminary
determination. Sensient notes that “the meaningful opportunity to participate in the adjudicative
process before the agencies charged with administering the antidumping and {countervailing duty}
laws is a fundamental aspect of due process.” Pl.’s Br. at 23 citing Chung Ling Co., Ltd. v. United
States, 23 CIT 829, 837, 829 F. Supp. 1353, 1361 (1993). Sensient also asserts that the relevant
statute, 19 U.S.C. §§ 1677f(c)(1)(A) and (C), provides that the ITC was required to release all
business proprietary information to the parties within seven days of its submission. Reply Brief in
Support of Plaintiff Sensient Technologies Corporation’s Motion for Judgment on the Agency
Record (“Pl.’s Reply Br.”) at 15-16.
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Because the ITC stated that it relied on the importer questionnaires, see ITC Views at 13 and
n.60, Sensient contends this was not a harmless error. Specifically, it claims that it could have
clarified lost sale and lost revenue allegations if it had received the responses in a timely manner and
had an opportunity to comment. Moreover, Sensient argues that the ITC “is presumed to have
considered all of the evidence on the record in making its determination . . . {t}hus, all of the record
evidence was relevant to the Commission’s decision, and parties covered by the administrative
protective order were entitled to view all of it.” Pl.’s Reply Br. at 14. Sensient concludes that due
process considerations require that the ITC’s determination be vacated and that the ITC vote again
on the matter once it has comments from all interested parties.
The ITC counters the arguments raised by Sensient asserting that its determination is
supported by clear and convincing evidence and that all parties were afforded an opportunity to
participate fully in the proceedings. The ITC contends that Sensient’s arguments are premised on
a flawed understanding of the “reasonable indication” standard found in 19 U.S.C. § 1673b(a)(1).
The Commission argues that the Federal Circuit and this Court have “rejected the notion that the
‘reasonable inquiry’ standard is met if the record evidence in a preliminary investigation merely
raises the ‘possibility’ of injury.” Memorandum of Defendant United States International Trade
Commission in Opposition to Plaintiff’s Rule 56.2 Motion for Judgment on the Agency Record
(“Def.’s Br.”) at 7 citing American Lamb v. United States, 785 F.2d 994, 1001-02 (Fed. Cir. 1986)
and Texas Crushed Stone Co. v. United States, 23 CIT 428, 438, 822 F. Supp. 773, 781 (1993), aff’d,
35 F.3d 1535, 1543 (1994). Moreover, the Commission notes that “it is entirely appropriate for the
ITC to ‘weigh all the evidence before it and resolve conflicts in the evidence.’” Id. citing Ranchers-
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Cattlemen Action Legal Foundation v. United States, 23 CIT 861, 878, 74 F. Supp. 2d 1353, 1002-04
(1999). The ITC argues that Sensient’s arguments focus on “small pieces of the record data” and
that “Sensient has entirely failed to provide any persuasive evidence showing that contrary evidence
would likely arise with further investigation. Instead, most of its arguments on this score consist of
assertions that there is a possibility that further evidence may arise.” Id. at 8 (emphasis in the
original).
Substantively, the ITC argues that there was no reasonable indication of material injury from
the subject imports because the volume of imported allura red was very small and remained so
throughout the period of investigation. Furthermore, the ITC found no correlation between import
pricing trends and declines in domestic prices. Import prices “trended upward” while prices for
domestic allura red “fluctuated” but generally “trended downward.” Id. at 10. The ITC also noted
that “{t}he domestic industry’s gross profits, operating income, operating income ratios and net
income all increased, ‘with the industry enjoying strong operating income and positive income ratios
each of the three years’ examined.” Id. (emphasis in the original). The ITC found that the domestic
industry’s production levels also increased substantially during the period of investigation and
shipments and capacity utilization also increased during this period. Thus it concludes that, contrary
to Sensient’s assertions, the decision to issue a negative preliminary determination was neither
arbitrary nor capricious, but was in fact supported by clear and convincing evidence.
The ITC also addresses particular issues raised by Sensient. First, regarding the lost sales,
the ITC notes that “lost sales alone do not mandate a finding of injury; rather it is for the ITC to
determine whether lost sales, together with other factors, indicate a causal nexus between {less than
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fair value} imports and material injury to the domestic industry.” Id. at 12 quoting Lone Star Steel
Co. v. United States, 10 CIT 731, 734, 650 F. Supp. 183, 186 (1986). Thus lost sale allegations do
not offset the weight of other evidence showing that the subject imports did not have a significant
impact on the domestic industry. Furthermore, the ITC points out that the total volume of the alleged
lost sales that were not completely denied by purchasers was “only {a minimal percentage} of total
consumption in the allura red market in 2001 and . . . 2003.” Id. at 13. The corresponding lost
revenue attributable to these sales is “less than {one} percent of the industry’s total sales for 2002.”
Id. The ITC states that it weighed the evidence of lost revenue in its pricing analysis.
Turning to the issue of the allegedly flawed import data, the ITC asserts that it did not rely
on the data from Customs that the national import specialist considered erroneous. Instead, the ITC
relied on importer questionnaire responses which covered all of the subject imports. The ITC states
that “{n}othing in the record indicated that the importers had misrepresented their import data in
their questionnaire responses.” Id. at 15. Contrary to Sensient’s allegation, “the export volumes
reported by the Indian producers closely track the import data reported by importers of the subject
merchandise.” Id. at 16. The ITC contends that there was no more accurate source of data and
asserts that it properly considered the volume of imports and their effect on the U.S. market.
The ITC also disagrees with the information Sensient cites as other evidence of material
injury. The ITC claims that the record showed that the allura red industry was able to increase its
aggregate capacity levels and capacity utilization rates during the period of investigation. While the
number of workers decreased slightly, wages paid and hours worked increased. Although Sensient
claims it was unable to use the equipment it acquired when another domestic allura red producer
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exited the business, the ITC contends that Sensient actually acquired the producer to obtain patented
technology to produce an extruded form of allura red and that it continued to produce the extruded
allura red even after it shut down the facility. For all of these reasons, the ITC maintains its position
that the domestic industry was not materially injured by imports of allura red from India.
The ITC also counters Sensient’s arguments that the domestic industry was threatened with
material injury. The ITC points out that it considered the Indian export subsidies and found no
indication that they would lead to increased exports to the U.S. in the imminent future since several
of the subsidies had existed since the early 1980's, but had not resulted in significant exports of allura
red. As discussed previously, the ITC also disagrees with Sensient’s contentions that the record
showed a significant increase in market penetration, suggesting a threat of a significant increase in
import volumes; that importers were causing domestic prices to decline; that it failed to take into
consideration the excess capacity of the Indian producers; and that an Indian producer was likely to
win the allura red contract from one of Sensient’s largest customers.
Finally, the ITC argues that it complied with the governing statute and regulations and
Sensient’s rights to participate in the investigation were not curtailed.
Sensient provided questionnaire responses, participated in an
evidentiary conference before the ITC staff, presented witness
testimony, legal argument, and documentary evidence, and submitted
briefs (petition and post-conference) to the ITC “containing
information and arguments pertinent to the investigation.”
Id. at 23. The Commission notes that this Court has held that “parties to antidumping and
countervailing duty investigations do not have a right to review and comment on all information
relied on by the agency in its determination.” Id. at 24 citing General Motors Corp. v. United States,
Court No. 03-00283 Page 13
17 CIT 697, 827 F. Supp. 774 (1993); Acciai Speciali Terni, S.P.A. v. United States, 19 CIT 1051(1995); Gulf States Tube Division of Quanix Corp. v. United States, 21 CIT 1013, 1039, 981 F.
Supp. 630, 652 (1997); Avesta AB v. United States, 12 CIT 493, 510-11, 698 F. Supp. 1173, 1188
(1988). Moreover, Sensient was served with questionnaire responses from three out of the four
importers, who accounted for the largest percentage of the subject imports, the week before Sensient
filed its brief with the ITC. Id. at 25. Thus it was able to comment on the questionnaire responses
of the importers who accounted for most of the subject merchandise before the ITC issued its
preliminary determination. The ITC notes that Sensient has not made any argument before this
Court that they did not make at the administrative level; thus demonstrating that they had sufficient
information to comment fully. Transcript of Oral Argument (Mar. 2, 2004) at 19.
Finally, the ITC argues that Sensient misinterprets the statutes and regulations pertaining to
the Commission’s release of business proprietary information. First, 19 U.S.C. §§ 1677f(c)(1)(A)
and 19 C.F.R. §§ 207.7(a)(1) provide only that the ITC “shall” make the information available, but
does not guarantee parties the right to comment on that information before the ITC votes. Id. at 21.
As an example of this, 19 C.F.R. § 207.17 provides that the ITC staff report, which Sensient claims
was wrongfully withheld, is to be released after the preliminary determination. Id. at 21-22.
Furthermore, the ITC contends that the seven day period provided by 19 U.S.C. §§ 1677f(c)(1)(C)
is only for determining whether to grant an application submitted by an interested party for access
to business proprietary information. Id. at 33-34. For these reasons, the ITC concludes that
Sensient’s due process rights were not violated.
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Discussion
The Court reviews decisions by the ITC to determine whether they are “arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(A). In
Ranchers-Cattlemen Action Legal Foundation v. United States, 23 CIT 861, 878, 74 F. Supp. 2d
1353, 1369 (1999), the court noted that it “may only reverse the ITC’s determination if there is a
‘clear error’ of judgment and . . . ‘no rational nexus between the facts found and the choices made.’”
The ITC is charged to examine whether “there is a reasonable indication that an industry in the
United States . . . is materially injured, . . . or is threatened with material injury” by imports of the
subject merchandise, 19 U.S.C. § 1673b(a)(1)(A)(i)-(ii), and it may only make a negative preliminary
determination when “(1) the record as a whole contains clear and convincing evidence that there is
no material injury or threat of such injury; and (2) no likelihood exists that contrary evidence will
arise in a final investigation,” American Lamb Co. v. United States, 785 F.2d 994, 1001 (Fed. Cir.
1986). Nevertheless, “in applying the statutory standard for making a preliminary determination
. . . the Commission may weigh all evidence before it and resolve conflicts in the evidence.”
Ranchers-Cattlemen, 23 CIT at 878, 74 F. Supp. at 1368 citing American Lamb 785 F.2d at 1002-04.
In the present case, the Court is satisfied with the explanation set forth by the ITC and, taking
the record as a whole, finds clear and convincing evidence to support the ITC’s conclusion that the
domestic industry was neither materially injured nor threatened with material injury by the imports
of allura red from India. Of particular, but not exclusive, significance to this determination is the
fact that the domestic industry retained dominance over the U.S. market throughout the period of
investigation. Although Sensient argued extensively that the information the ITC based this on was
Court No. 03-00283 Page 15
flawed, the Court cannot re-weigh the evidence that was before the Commission, nor can it speculate
that contrary evidence would have likely arisen had the investigation continued.
The Court also finds that Sensient was afforded due process during the ITC’s investigation
and preliminary determination. It is undisputed that Sensient received copies of the questionnaire
responses covering the vast majority of the subject imports prior to submitting its brief to the ITC,
see Pl.’s Reply Br. at 13, and at oral argument Sensient’s counsel did not deny in its rebuttal the
ITC’s assertion that Sensient was able to make the same arguments before the Commission that it
raised before the Court, see Tr. at 31-32. Furthermore, the Court agrees with the ITC’s construction
of 19 U.S.C. §§ 1677f(c)(1)(A) and (C) and holds that the 7 day period provided by subpart (C) is
not a time limit for releasing individual documents to the parties, but is a time limit for making a
determination on whether to grant or deny a party’s application for access to business proprietary
information. In light of this, the ITC’s regulations and established practice for releasing information
are not at odds with the statute. Accordingly, the Court finds that Sensient was afforded a
meaningful opportunity to participate in the proceedings before the ITC. See Chung Ling Co., Ltd.
v. United States, 23 CIT 829, 837, 829 F. Supp. 1353, 1361 (1993) (“{n}otice and an opportunity
to be heard are the foundations of due process of law”).
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Conclusion
For the foregoing reasons, the Court holds that the ITC’s negative preliminary determination
in Allura Red Coloring from India, 68 Fed. Reg. 20,170 (Apr. 24, 2003) was not arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with law, but was instead
supported by clear and convincing evidence. Therefore, Sensient’s motion for judgment on the
agency record is denied and the ITC’s preliminary determination is sustained.
/s/ R. Kenton Musgrave
R. KENTON MUSGRAVE, JUDGE
Dated: September 10, 2004
New York, New York