Heveafil Sdn. Bhd. v. United States , 25 Ct. Int'l Trade 147 ( 2001 )

Slip Op. 01-22
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: RICHARD W. GOLDBERG, JUDGE
))))))))))))))))))))))))))))))))))),
HEVEAFIL SDN. BHD., and *
FILATI LASTEX SDN. BHD., *
*
Plaintiffs, *
*
v. * Court No. 98-04-00908
*
THE UNITED STATES, *
*
Defendant. *
*
*
)))))))))))))))))))))))))))))))))))-
[Court sustains in part and remands in part.]
Dated: February 27, 2001
White & Case (Walter J. Spak, David E. Bond and Edward
Meyers) for plaintiffs Heveafil Sdn. Bhd. and Filmax Sdn. Bhd.
White & Case (Walter J. Spak and Richard G. King and Edward
Meyers) for plaintiff Filati Lastex Sdn. Bhd.
Stuart E. Shiffer Deputy Assistant Attorney General; David
M. Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice; (Lucius B. Lau), Attorney,
Commercial Litigation Branch, Civil Division, United States
Department of Justice; Office of the Chief Counsel for Import
Administration, United States Department of Commerce (Mildred E.
Steward), of counsel, for defendant.
Court No. 98-04-00908 Page 2
OPINION
GOLDBERG, Judge: In this action, the Court reviews a challenge to
the Department of Commerce’s ("Commerce") final results for the
fourth administrative review of the antidumping order covering
extruded rubber from Malaysia. See Extruded Rubber Thread from
Malaysia; Final Results of Antidumping Duty Administrative
Review, 63 Fed. Reg. 12,752 (March 16, 1998)("Final Results").
The Final Results covered entries during the period of review
("POR") October 1, 1995 through September 30, 1996.
Plaintiffs Heveafil Sdn. Bhd. and Filmax Sdn. Bhd.
("Heveafil") and Plaintiff Filati Lastex Sdn. Bhd.("Filati") both
argue that the Final Results were neither in accordance with law
nor supported by substantial evidence.
The Court exercises jurisdiction over this matter pursuant
to 28 U.S.C. § 1581(c)(1994). The Court sustains in part and
remands in part.
I.
BACKGROUND
On October 7, 1992, Commerce published an antidumping duty
order on extruded rubber thread from Malaysia. See Antidumping
Duty Order and Amendment of Final Determination of Sales at Less
Than Fair Value: Extruded Rubber Thread from Malaysia, 57 Fed.
Reg. 46,150 (October 7, 1992). Heveafil and Filati are Malaysian
producers of extruded rubber thread. At the request of Heveafil,
Commerce initiated the fourth administrative review on November
15, 1996. See Initiation of Antidumping and Countervailing Duty
Administrative Reviews and Requests for Revocation in Part, 61
Court No. 98-04-00908 Page 3
Fed. Reg. 58,513 (November 15, 1996).
On December 16, 1996, North American Extruded Rubber Thread,
a U.S. producer of extruded rubber thread, requested that
Commerce conduct a duty absorption study with regard to all
respondents in the administrative review. See Def.’s App. for
Def.’s Mem. in Opp’n to the Rule 56.2 Mot. for J. on the Agency
R. Filed by Filati Lastex Sdn. Bhd. ("Commerce’s Filati App.") at
3 (Letter of 12/16/96 from Peter Koenig to U.S. Sec. of
Commerce).
During the administrative review, Heveafil and Filati timely
responded to all of Commerce’s questionnaires and requests for
information. Commerce conducted verification on Heveafil’s and
Filati’s U.S. and Malaysian sales responses and both companies’
cost responses in July and August of 1997. On November 7, 1997,
Commerce published the preliminary determination for the fourth
review. See Notice of Preliminary Results of Antidumping Duty
Administrative Review: Extruded Rubber Thread From Malaysia, 62
Fed. Reg. 60,221 (November 7, 1997)("Preliminary Results"). In
the Preliminary Results, after finding that Heveafil failed
verification, Commerce assigned Filati a dumping margin of 36.36
percent and assigned Heveafil an adverse facts available dumping
margin of 54.13 percent. See id.Commerce issued the Final Results on March 16, 1998. See 63
Fed. Reg. at 12,752. In the Final Results Commerce maintained
its position with regard to the dumping margins. See id. at
12,753. Commerce further determined that Heveafil and Filati
Court No. 98-04-00908 Page 4
would absorb the antidumping duties assessed on entries during
the POR because they offered no evidence to rebut the presumption
of duty absorption that attaches to positive dumping
determinations. See id. at 12,757.
II.
STANDARD OF REVIEW
The Court will sustain Commerce’s Final Results if they are
supported by substantial evidence on the record and are otherwise
in accordance with law. See 19 U.S.C. § 1516(b)(1)(B)(1994).
To determine whether Commerce’s interpretation of a statute
is in accordance with law, the Court applies the two-prong test
set forth in Chevron U.S.A., Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837 (1984). Chevron first directs the
Court to determine "whether Congress has directly spoken to the
precise question at issue." See id. at 842. To do so, the Court
must look to the statute’s text to ascertain "Congress’s purpose
and intent." Timex V.I., Inc. v. United States, ___ Fed. Cir.(T)
__, __, 157 F.3d 879, 881 (1998) (citing Chevron, 467 U.S. at842-43 & n.9). If the plain language of the statute is not
dispositive, the Court must then consider the statute’s
structure, canons of statutory interpretation, and legislative
history. See id. at 882 (citing Dunn v. Commodity Futures
Trading Comm’n, 519 U.S. 465, 470-80 (1997); Chevron, 467 U.S. at
859-63; Oshkosh Truck Corp. v. United States, 123 F.3d 1477, 1481
(Fed. Cir. 1997)). If, after this analysis, Congress’s intent is
unambiguous, the Court must give it effect. See id.Court No. 98-04-00908 Page 5
If the statute is either silent or ambiguous on the question
at issue, however, "the question for the court is whether the
agency’s answer is based on a permissible construction of the
statute." Chevron, 467 U.S. at 843 (footnote omitted). Thus,
the second prong of the Chevron test directs the Court to
consider the reasonableness of Commerce’s interpretation. See
id.With respect to Commerce’s factual findings, the Court will
uphold the agency’s factual findings if they are supported by
substantial evidence. "Substantial evidence is something more
than a ‘mere scintilla,’ and must be enough reasonably to support
a conclusion." Ceramica Regiomontana, S.A. v. United States, 10
CIT 399, 405, 636 F.Supp. 961, 966 (1986) (citations omitted),
aff’d, 5 Fed. Cir. (T) 77, 810 F.2d 1137 (1987). In applying
this standard, courts must sustain Commerce’s factual
determinations so long as they are reasonable and supported by
the record as a whole, even if there is some evidence that
detracts from the agency’s conclusions. See Atlantic Sugar, Ltd.
v. United States, 2 Fed. Cir. (T) 130, 137, 744 F.2d 1556, 1563
(1984).
III.
DISCUSSION
A. Commerce’s Determination to Assign Heveafil a Dumping Margin
Based on Facts Otherwise Available is Sustained.
During an administrative review, Commerce must conduct a
verification if it determines that "good cause" for verification
exists. See 19 C.F.R. § 353.36(a)(iv)(1994). After such
verification, Commerce may decline to consider cost information
Court No. 98-04-00908 Page 6
provided by a respondent and use facts otherwise available if the
respondent fails to provide evidence supporting its reported
information. See 19 U.S.C. §§ 1677e, 1677m(e), 1677m(i)(1994).
Here, in conjunction with the fourth administrative review,
Commerce required Heveafil to provide information on cost of
production ("COP") and constructed value ("CV"). See Def.’s App.
for Def.’s Mem. in Opp’n to the Rule 56.2 Mot. for J. upon the
Agency R. Filed by Heveafil Sdn. Bhd. and Filmax Bhd.
("Commerce’s Heveafil App.") at 4 (Letter of 12/18/96 from Thomas
F. Futtner to Walter J. Spak)("Futtner Letter"). This
information was necessary for Commerce to make a dumping
determination under the statute. See 19 U.S.C. §§ 1677b(b)(1),
1677b(b)(3)(A), 1677b(e)(1994). After examining the responses
and determining that verification was necessary, Commerce
conducted verification on site in Malaysia. See Preliminary
Results, 62 Fed. Reg. at 60,221.
Heveafil disputes Commerce’s determination that it failed
verification. See Br. of Pls. Heveafil Sdn. Bhd. and Filmax Sdn.
Bhd, in Supp. of Their Mot. for J. Upon the Agency R. ("Heveafil
Br.") at 12-15. Heveafil’s main challenge centers on Commerce’s
treatment of its bill of materials ("BOMs") evidence. See id. at
13-14.
At verification, Commerce sought to examine, among other
records, the BOMs that Heveafil claimed contained its cost
information. Heveafil maintains that its BOM system records the
combination of materials, and their corresponding per-unit costs,
Court No. 98-04-00908 Page 7
used in the production of particular types of rubber thread to
ensure that Heveafil products have a consistent quality. See
Heveafil’s Br. at 12-15. Heveafil alleges that it maintained all
of its BOMs in a computer database at its office in Malaysia.
See id.
In preparation for verification, Heveafil downloaded the
relevant BOM onto a computer disk which was provided to
Heveafil’s counsel in order to file a response to the antidumping
questionnaire. See Pls. Heveafil Sdn. And Filmax Sdn. Bhd.’s
App. Pursuant to USCIT R.56.2(c)(1)(3) for Br. in Supp. of its
Mot. for Summ. J. Upon the Agency R. ("Heveafil’s App.") at 3
(Verification of Cost of Production (COP) and Constructed Value
(CV) Data in the 1995-1996 Antidumping Duty Admin. Review of
Extruded Rubber Thread from Malaysia ("Cost Verification Mem.")).
During verification, Commerce refused to examine a copy of the
BOM that Heveafil had downloaded to a disk because it was not a
document "generated in the ordinary course of business during the
POR and located at the verification site." See Cost Verification
Memo. Heveafil first informed Commerce at the verification that
the original BOMs had been purged from the computer system. See
Final Results, 63 Fed. Reg. at 12,762.
The Court finds that Commerce acted within its discretion in
determining that Heveafil failed verification. "Congress has
implicitly delegated to Commerce the latitude to derive
verification procedures ad hoc." See Micron Tech. Inc. v. United
States, 117 F.3d 1386, 1396 (Fed. Cir. 1997); see also Floral
Court No. 98-04-00908 Page 8
Trade Council v. United States, 17 C.I.T. 392, 399, 822 F.Supp
766, 772 (1993)("The decision to select a particular method of
verification rests solely within the agency’s sound
discretion."). Further, the Court of International Trade has
already approved Commerce’s policy of rejecting verification
documentation that was not generated "in the ordinary course of
business." Koenig & Bauer-Albert AG v. United States, 22 C.I.T.
__, __, 15 F.Supp.2d 834, 845 (1998); see also AK Steel Corp. v.
United States, 21 C.I.T. __, __, 988 F.Supp. 594, 601 (1997).
Here, the BOM offered by Heveafil was not generated within the
ordinary course of business. See id. At best, it was an
unauthenticated duplicate of a database which may have been
generated within the ordinary course of business. Heveafil also
offers no evidence demonstrating that it could not have
maintained the BOM in its original state pending verification.
See Heveafil Br., at 12-15.
Commerce, moreover, did not base its verification decision
solely upon the BOM evidence. See Final Results, 63 Fed. Reg. at
12,762-63. Despite Heveafil’s claims to the contrary,1 the
record supports Commerce’s assertion that during verification it
made an effort to verify Heveafil’s responses using alternative
1
See Pls. Heveafil Sdn Bhd.’s and Filmax Sdn. Bhd.’s Reply
to Def.’s Mem. in Opp’n to Their Rule 56.2 Mot. for J. Upon the
Agency’s R. ("Heveafil’s Reply Br.") at 4. Heveafil argues that
Commerce refused to utilize underlying production records to
substantiate the BOM. See id. Yet Heveafil fails to offer any
evidentiary support for this claim. See id. Commerce, however,
presented evidence that it attempted to complete verification
using alternative documentation, but was unable to do so. See
Cost Verification Mem.
Court No. 98-04-00908 Page 9
sources of documentation. See Cost Verification Mem.; Final
Results, 62 Fed. Reg. at 12,762 (describing that the 1996
Budgeting Report was not presented in its entirety and that the
partial Budgeting Report and inventory records could not be
reconciled).
Heveafil also challenges Commerce’s decision to reject the
cost responses in toto, after Heveafil failed verification of
"product specific direct material costs." See Heveafil Br. at
15. Although there are circumstances in which Commerce must
utilize "partial facts available," there is no clear statutory
guidance regulating such utilization. See Rautaruuki Oy v.
United States, Slip Op. 98-112, 1998 WL 465219,*7 (CIT Aug. 4,
1998)(finding that a Commerce determination to reject a
respondent’s responses in their entirety is valid if decision is
reasoned and supported by the evidence). In the Final Results,
Commerce reasoned that its practice is "to reject a respondent’s
submitted information in toto when flawed and unverifiable cost
data renders all price-to-price comparisons impossible." 63 Fed.
Reg. at 12,763.
Heveafil argues that the unverified data was only one
portion of the cost calculations. See Heveafil’s Br. at 15.
Hypothetically accepting Heveafil’s argument does not carry the
issue.2 The costs that Heveafil argues could have been
2
Heveafil’s argument that Commerce should have used partial
facts available only with respect to direct material costs, see
Heveafil Br. at 15, also fails because Heveafil did not exhaust
administrative remedies. See 28 U.S.C. § 2637(d)(1994);
Asociacion Colombiana de Exportadores de Flores v. United States,
Court No. 98-04-00908 Page 10
independently verified3 make up only a portion of the COP and CV
calculation. It is clear to the Court that unverifiable product-
specific direct material costs would prevent any meaningful
accurate cost calculation.
B. Commerce’s Determination to Assign Heveafil a Dumping Margin
Using Adverse Inferences is Sustained.
Heveafil challenges Commerce’s decision to utilize "adverse
inferences" in assigning Heveafil a dumping margin. See
Heveafil’s Br. at 15-26. Commerce may only assign a dumping
margin using adverse inferences if Commerce is unable to verify
submitted data and the respondent fails to cooperate by "not
acting to the best of its ability." See 19 U.S.C. § 1677e(b)
(1994). In the Final Results, Commerce explained that Heveafil
had not cooperated in the verification and failed to act to the
best of its ability because (1) it had previous experience with
antidumping reviews, (2) it possessed the data Commerce was
unable to verify, and (3) it would benefit from its own lack of
cooperation.4 See 63 Fed. Reg. at 12,762.
22 C.I.T., __,__,6 F.Supp.2d 865, 890 (1998). Here, Heveafil
failed to argue the point in its administrative case brief. See
Commerce’s Heveafil App. at 12 (Letter of 12/17/1997 from Walter
J. Spak and David E. Bond to William M. Daley ("Heveafil’s Adm.
Case Br.")).
3
The costs Heveafil claims could have been verified
include "direct labor costs, variable and fixed overhead costs,
general and administrative expenses, and financing expenses."
See Heveafil Br. at 15.
4
While the Court considers that benefiting from a lack of
cooperation may be a valid indicator that a respondent failed to
cooperate to the best of its ability, here there is no reliable
direct evidence that Heveafil would, or intended to, benefit from
not cooperating. See Final Results, 63 Fed. Reg. 12,752;
Court No. 98-04-00908 Page 11
The Court finds that Commerce’s determination concerning
Heveafil’s cooperation was in accordance with law and supported
by substantial evidence. Although Heveafil personnel may have
experienced some confusion as to whether the BOM would satisfy
Commerce’s inquiry, such potential confusion does not excuse
Heveafil’s improper preparation for the verification. Commerce
informed Heveafil, far in advance of verification, that it wished
to review all "source documents." See Futtner Letter at G-5
("Identify any source documents maintained in the normal course
of business you have relied on in preparing your response, and
specify the locations where such documents are maintained.").
Because the proffered BOM was at best a duplication of an
original document, the Court finds that it is not a source
document as it was never maintained in the ordinary course of
business.
The Court also agrees with Commerce that inasmuch as
Heveafil has undergone verification in the past, it should have
understood that a copy of the BOM was unacceptable as a source
document. See Final Results, 63 Fed. Reg. at 12,762 ("Heveafil
has participated in each of the prior reviews, as well as the
original less than fair value (LTFV) investigation."); Gourmet
Equipment (Taiwan) Corp. v. United States, Slip Op. 00-78, 2000
WL 977369, *4 (CIT)("Past participation may be relevant to
notice, knowledge and reliance issues."); accord Antifriction
Heveafil’s Br. at 20; Def.’s Mem. in Opp’n to the R. 56.2 Mot.
for J. Upon the Agency R. Filed by Heveafil Sdn. Bhd. and Filmax
Bhd. ("Commerce’s Heveafil Br.") at 37.
Court No. 98-04-00908 Page 12
Bearings (Other Than Tapered Roller Bearings) and Parts Thereof
from France, et al.; Final Results of Antidumping Duty
Administrative Reviews, 62 Fed. Reg. 2,081, 2088 (January 15,
1997)(considering past experience of a petitioner to be relevant
to its capacity to understand verification requirements in a
subsequent review).
Additional evidence of Heveafil’s failure to act to the best
of its ability is the fact that a full six months after Heveafil
received notice about maintaining its source documents, it
deleted the relevant BOM data from its computer system. See
Heveafil Adm. Case Br. This evidence supports the determination
that Heveafil did not cooperate to the best of its ability
because after receiving notice from Commerce, it knew or should
have known to maintain the source document. The Court finds that
the foregoing evidence is substantial evidence in support of
Commerce’s determination.
C. Commerce’s Selection of Heveafil’s Adverse Facts Available
Dumping Margin is Sustained.
In the Final Results Commerce assigned Heveafil a dumping
margin of 54.31 percent. In assigning this dumping margin,
Commerce reasoned that the selected dumping margin is appropriate
because, being the highest rate calculated in a prior
administrative review, it "reflects the business practice
occurring in the rubber thread industry." See Final Results, 63
Fed. Reg. at 12,763.
Heveafil challenges Commerce’s selection of the 54.31
percent dumping margin on three grounds: (1) that Commerce failed
Court No. 98-04-00908 Page 13
to give Heveafil credit for its cooperation; (2) that the dumping
margin was not applied in conformance with past practice; and (3)
that Commerce failed to corroborate its evidence; See Heveafil’s
Br. at 22-27. All of Heveafil’s arguments fail.
Once it determines that it is appropriate to assign adverse
facts available, Commerce has discretion in choosing a specific
dumping margin. See 19 U.S.C. §§ 1677e(b)(1)-(4)(1994);
Statement of Administrative Action, P.L. 103-465, 103d Cong., 2d
sess. 870, reprinted in 1994 U.S.C.C.A.N. 3773 ("SAA"). Commerce
may use information from the petition, the original
investigation, a previous review, or any other information on the
record. See 19 U.S.C. §§ 1677e(b)(1)-(4). This discretion is
not without limit, however, as Commerce must corroborate the
dumping margin that it selects. See id. at 870.
Heveafil is correct that Commerce has assigned less adverse
facts available in circumstances where it has determined that a
respondent has been sufficiently "cooperative." See e.g., Roller
Chain, Other Than Bicycle From Japan: Preliminary Results and
Partial Rescission of Antidumping Duty Administrative Review, 63
Fed. Reg. 25,450, 25,453 (May 8, 1998)("Roller Chain"). The
Court is of the opinion, however, that these previous policy
choices do not legally constrain Commerce to assign Heveafil a
more advantageous dumping margin here.
Most importantly, Commerce did not conclude that Heveafil
offered sufficient cooperation. See Final Results, 63 Fed. Reg.
at 12,763; cf. Roller Chain, 63 Fed. Reg. at 25,454. Although
Court No. 98-04-00908 Page 14
Heveafil may be able to offer some evidence supporting the
contention that it cooperated,5 Commerce has provided sufficient
evidence demonstrating that Heveafil did not cooperate in
verification. See Final Results, 63 Fed. Reg. at 12,763; see
supra, § B.
Heveafil next argues that Commerce applied its adverse
inference methodology in an inconsistent manner vis á vis
Heveafil and a respondent in the third review, Rubberflex. See
Heveafil Br., at 23-24. Assuming arguendo that this is true,
Heveafil offers no legal rule informing how Commerce is
constrained in applying adverse facts available to respondents
that may be similarly situated. See id. Without such guidance,
the Court declines the invitation to make new law.
Finally, Commerce has corroborated the dumping margin within
the meaning of the statute. The SAA states that corroboration
"means that the agencies will satisfy themselves that the
secondary information to be used has probative value." SAA at
870. Here, Commerce reasoned that the 54.31 percent dumping
margin is appropriate, as the highest rate calculated in a prior
administrative review of this proceeding, because it "reflects
the business practices occurring in the rubber thread industry."
See Final Results, 63 Fed. Reg. at 12,763. Although the Court
considers this reasoning to be less than comprehensive, past
5
Heveafil claims that it "substantially cooperated in this
review and has a history of cooperating in the original
antidumping investigation and the last three administrative
reviews." See Heveafil Br. at 22. Yet Heveafil offers no
evidence or citation to support its contention. See id.
Court No. 98-04-00908 Page 15
industry dumping margins do have probative value as indicators of
present industry practices.6 See, e.g., D&L Supply Co. v. United
States, 113 F.3d 1,220, 1,223 (Fed. Cir. 1997). Therefore the
Court concludes that Commerce has successfully corroborated the
dumping margin.
D. Commerce’s Determination Regarding Heveafil and Filati’s
Duty Absorption is Remanded.
A duty absorption inquiry evaluates whether a respondent, or
U.S. affiliate, internalizes an assessed duty instead of passing
it on to the first unaffiliated U.S. purchaser as a higher price.
See 19 U.S.C. § 1675(a)(4)(1994). The statute mandates that
Commerce conduct a duty absorption inquiry upon request and
report its findings to the International Trade Commission. See
id. Filati and Heveafil argue that in evaluating duty absorption
in this case, Commerce applied an erroneous methodology, and that
the determination is therefore not supported by substantial
6
Heveafil argues that Rubfil’s rate is not probative
because Rubfil is a much smaller company than Heveafil, with
fewer sales in the United States. See Heveafil’s Br. at 27-28.
The Court, however, does not agree with Heveafil that the size of
a particular respondent or the size of its U.S. sales, alone, are
dispositive as to the probative nature of a selected dumping
margin. Likewise, despite Heveafil’s protestations to the
contrary, Borden, Inc., v. United States, 22 C.I.T. __, __, 4
F.Supp.2d 1,221, 1,247 (1998) does not control the corroboration
analysis here. After stating that Commerce cannot apply a
dumping margin using "information which has been thoroughly
discredited," the Borden court found that the margin selected by
Commerce was not shown to be reliable. See id. Here, the
plaintiff has not presented any evidence demonstrating that the
selected dumping margin was "thoroughly discredited."
Furthermore, in Borden the court made a point of distinguishing
rates which might be probative to high end versus low end
producers. See id. at 1,247. Here, there is no evidence that
supports such a distinction.
Court No. 98-04-00908 Page 16
evidence. See Br. of Pl. Filati Lastex Sdn. Bhd. in Support of
its Mot. for J. Upon the Agency R. ("Filati Br.") at 13-16;
Heveafil Br. at 29-32.
The Court declines to reach the question of the legality of
Commerce’s duty absorption methodology. Rather, the Court finds
that Commerce did not have the statutory authority to conduct a
duty absorption inquiry. The Court of International Trade has
previously addressed the issue of whether Commerce may conduct
duty absorption inquiries of antidumping orders issued before
January 1, 1995. See SKF USA Inc. v. United States, 24 C.I.T.
__, __, 94 F.Supp.2d 1351, 1357-59 (2000); FAG Italia S.P.A. v.
United States, Slip. Op. 00-82, 2000 WL 978462, * 4 (CIT 2000).
The Court has determined that any antidumping duty order
published before January 1, 1995,7 is a "transition order" under
the statue. See 19 U.S.C. 1675(c)(6)(D)(1994); SKF, 94 F.Supp.2d
at 1357. The court in SKF, however, also held that the January
1, 1995 issue date deemed by § 1675(c)(6)(D) was inapplicable to
the transition order at issue because § 1675(c)(6)(D)
"specifically applies such a date ‘[f]or purposes of sunset
reviews, rather than for duty absorption inquires under
subsection (a).’" See SKF, 94 F.Supp.2d at 1357.
In this case, the antidumping order was published on October
7, 1992. Because the order was published before January 1, 1995,
7
January 1, 1995 is the date that the World Trade
Organization Agreement entered into force in the United States
See 19 U.S.C. § 3511(b) & n. (1994)(Proclamation No. 6780 para. 2
(March 23, 1995), in 60 Fed. Reg. 15,845).
Court No. 98-04-00908 Page 17
and because the duty absorption inquiry in this case is
substantially identical to that at issue in SKF, the Court
adheres to the reasoning of SKF. 94 F.Supp.2d at 1,357-59.
Therefore, the issue is remanded to Commerce for action in
conformance with the holding of SKF. See id.E. Commerce’s Determination of Filati’s Constructed Export
Price Sales is Sustained.
Filati claims that Commerce improperly considered sales it
made to unaffiliated U.S. customers as constructed export price
("CEP") sales when it should have treated them as export price
("EP") sales. See Filati Br. at 7-12.
Commerce’s policy has been to consider sales to be EP sales
if:
(1) The merchandise in question was shipped directly from
the manufacturer to the unrelated buyer, without being
introduced into the inventory of the related shipping
agent; (2) direct shipment from the manufacturer to the
unrelated buyers was the customary commercial channel for
sales of this merchandise between the parties involved;
and (3) the related selling agent in the United States
acted only as a processor of sales-related documentation
and a communication link with the unrelated U.S. buyers.
Certain Corrosion-Resistant Carbon Flat Products From Korea, 61
Fed. Reg. 18,547, 18,551 (April 26, 1996). Filati claims that
its sales met these requirements. See Filati Br. at 7-12.
Commerce claims that they did not. See Def.’s Mem. in Opp’n to
the Rule 56.2 Mot. for J. Upon the Agency R. Filed by Filati
Lastex Sdn. Bhd. ("Commerce’s Filati Br.") at 19-25.
The Court agrees with Commerce. The record evidence is
sufficient to support Commerce’s determination. Filati does
Court No. 98-04-00908 Page 18
point to some evidence that supports its position that Filati’s
U.S. affiliate operated as no more than a "paper pusher." See
Filati Br. at 9 (citing Pl. Filati Lastex Sdn. Bhd.’s App.
Pursuant to USCIT 56.2(c)(1)(3) for Br. in Supp. of its Mot. for
Summ. J. Upon the Agency R. ("Filati App.") at 8 (Letter of
12/22/97 from Walter J. Spak and Richard G. King to William M.
Daley). Any single piece of evidence, however, does not control
Commerce’s inquiry. See Atlantic Sugar, 744 F.2d at 1563.
In the Final Results Commerce presented substantial evidence
supporting its determination that Filati’s U.S. affiliate
performed functions that went beyond a simple processor of sales
related documentation and as a communication link with the
unrelated U.S. buyers. See Final Results, 63 Fed. Reg. at
12,759. Most importantly, Commerce established that Filati
admitted that its U.S. affiliate negotiated the terms of sale.
See id. ("[Filati’s] U.S. affiliate makes the initial contact
with the U.S. customer, negotiates terms of sale, contacts Filati
to arrange for production and shipment of the container to the
United States, and issues the final invoice to, and collects
payment from, the customer." (citing Def.’s App. for Def.’s Mem.
in Opp’n to the R. 56.2 Mot. for J. upon the Agency R. Filed by
Filati Lastex Sdn. Bhd. ("Commerce’s Filati App.") at 4 (Letter
of 2/20/97 from Walter J. Spak, William J. Clinton and Richard G.
King to William Daley ("Letter of 2/20/97") at A-9, A-10). All of
these sales-related activities, most importantly the evidence of
price negotiation, go beyond mere paper pushing. See U.S. Steel
Court No. 98-04-00908 Page 19
Group B A Unit of USX Corp. v. United States, 22 C.I.T. __, __,
15 F.Supp.2d 892, 903 (1998) rev’d on other grounds, 225 F.3d
1284) (Fed. Cir. 2000) (U.S. affiliate’s role in negotiating
prices pushed the "sale over the edge into the CEP rather than
the EP category.").
In challenging Commerce’s determination, Filati claims that
Commerce should not be allowed to change its position regarding
EP sales from prior review periods when it relies on a factual
record that is substantially the same. See Filati Br. at 9-11.
Filati fails to recognize, however, that this is a record filled
with contradictions. For example, there is record evidence that
Filati’s U.S. affiliate did negotiate for price, see Letter of
2/20/97, at A-9, A-10, and there is record evidence that Filati’s
affiliate did not negotiate for price. See Filati’s App. at 5
(U.S. Sales Verification, Exh. 5, Fiche 131, Frames 1-15). In
such a situation, the Court finds it reasonable that Commerce
might treat conflicting information differently during different
periods of review.8
F. Commerce’s Determination to Deny Filati a CEP Offset is
Sustained.
In the Final Results Commerce refused to grant Filati a CEP
offset based upon Filati (USA)’s selling functions. See 63 Fed.
Reg. at 12,754. Commerce reasoned that Filati’s CEP sales were
at the same level of trade as Filati’s home market sales. See
8
Filati has also failed to supply any support for its
contention that Commerce is prohibited from changing a position
based on the same evidence. See Filati Br. at 7-12; Filati’s R.
Br. at 1-4.
Court No. 98-04-00908 Page 20
id. Filati challenges this decision, arguing that in denying
Filati an EP classification, see supra § E., Commerce found that
Filati (USA) performed "significant" selling functions yet
incompatibly failed to find a difference in the level of trade
between Filati’s home market and CEP channels. See Filati Br. at
12. Commerce claims that the Court should not reach the merits
of this issue because Filati failed to exhaust administrative
remedies. See Commerce’s Filati Br. at 26-27. The Court agrees
with Commerce.
It is a basic tenet of administrative law, and the
jurisprudence of the Court of International Trade, that courts
have the power to require exhaustion of administrative remedies.
See 28 U.S.C. § 2637(d)(1994); Unemployment Compensation
Commission of Territory of Alaska v. Aragan, 329 U.S. 143, 155
(1946); Wirth Limited v. United States, 22 C.I.T. __, __, 5 F.
Supp.2d 968, 983 (1998); Bethlehem Steel Corp. v. United States,
22 C.I.T., __, __, 27 F.Supp.2d 201, 208 (1998).
In this case, after Commerce determined in the Preliminary
Results not to grant Filati a CEP offset, Filati failed to object
to Commerce’s determination within the contemplated
administrative structure. See e.g., Commerce’s Filati App. at 9
(Letter of 12/17/97 from Walter J. Spak and Richard G. King to
William M. Daley (attaching Filati’s case brief)).
It is true that the Court may proceed to the merits even if
a party has failed to exhaust administrative remedies. See,
e.g., Manifattura Emmepi S.p.A. v. United States, 16 C.I.T. 619,
Court No. 98-04-00908 Page 21
621 & n.3, 799 F.Supp. 110, 113 & n.3 (1992). Here, however, the
Court does not see cause for taking exception.9
G. Commerce’s Comparison of Filati’s U.S. Sales to First
Quality Home Market Sales is Sustained.
Filati challenges Commerce’s decision to exclude Filati’s
second-quality home market sales for purposes of cost comparison.
See Filati’s Br. at 16-18. Filati argues that such a decision
impermissibly leads to a comparison of Filati’s first and second
quality U.S. sales to only Filati’s first quality normal value
("NV") sales. See id.Under the statute, Commerce bases NV on "the price at which
the foreign like product is first sold (or in the absence of
sale, offered for sale) for consumption in the exporting country,
in the usual commercial qualities, and in the ordinary course of
trade and, at the same level of trade as the export price or
constructed export price . . . . " 19 U.S.C. §
1677b(a)(1)(B)(i)(1994)(emphasis added). The statute expressly
considers two types of sales to be outside the ordinary course of
trade: sales below the cost of production, and sales between
affiliated persons where the value does not fairly reflect the
9
Filati argues that the Court should proceed to the merits
despite its failure to exhaust administrative remedies because
"it would have been futile for Filati to have raised the issue in
its case brief," and because the issue is purely legal. See Pl.
Filati Lastex Sdn Bhd.’s Reply Br. to Def.’s Mem. in Opp’n to the
Mot. of Pl. Filati Lastex Sdn. Bhd. for J. Upon the Agency R.
("Filati Reply Br.") at 4, 5. There is, however, nothing to
suggest, besides Filati’s bare words, that an argument Filati
made during the administrative process would have been futile.
Further, the inquiry is not purely legal since the CEP offset may
have been granted if Filati was able to point to record evidence
that the selling functions were different.
Court No. 98-04-00908 Page 22
amount usually reflected in sales of merchandise under
consideration. See 19 U.S.C. §§ 1677(15)(A),(B)(1994).
In the Final Results, after Commerce determined that the
subject home market sales were both below the cost of production
and in small quantity, it complied with the law in refusing to
consider such sales in a cost analysis because they were outside
the ordinary course of trade. See 19 U.S.C. § 1677b(a)(1)(B)(i);
Final Results, 63 Fed. Reg. at 12,757.
Filati does not challenge Commerce’s determination that the
sales were made below the cost of production. See Filati Br. at
16-18. Rather, Filati argues that although Commerce may
disregard below-cost sales, it should not do so if such sales
represent obsolete or end-of-model-year merchandise. See id. at
17 (citing SAA at 833).10 Filati’s argument fails, however,
because Commerce did not conclude, and the Court does not now
find, that the sales at issue represented obsolete or end-of-
model year merchandise. See Final Results, 63 Fed. Reg. at
12,755, 12,757. Filati’s claim that the merchandise was of
limited quantity does not make it obsolete or end-of-model year,
or worthy of some analogous classification. See SAA at 833. The
only evidence Filati offers -- that three of the four invoices
10
"[I]n some cases, below-cost sales may be used to
determine normal value if those sales are obsolete or end-of-
model-year merchandise. Such merchandise is often sold at less
than cost as was recognized in the legislative history of the
Trade Act of 1974. It is appropriate to use these sales as the
basis of normal value when the merchandise exported to the United
States is similarly obsolete or end-of-model year." SAA at 833
(citation omitted).
Court No. 98-04-00908 Page 23
were created during end of year stock inventory, see Filati Br.
at 17 -- certainly does not control Commerce’s classification.
See Atlantic Sugar, 744 F.2d at 1,563 (explaining that courts
examine evidentiary record as a whole, not just isolated
evidence). Further, the SAA provision cited by Filati is clearly
discretionary. See SAA 833 ("[I]n some cases, below-cost sales
may be used . . .."). Accordingly, the Court sustains Commerce’s
determination in this regard.
H. Commerce’s Determination Regarding Filati’s Second Quality
Below Cost Sales and Constructed Value Calculation is
Sustained.
In the Final Results, Commerce declined to consider Filati’s
second quality below-cost sales in its calculation of CV profit.
See 63 Fed. Reg. at 12,752. Commerce reasoned that these sales
failed the cost test, and thus were outside the ordinary course
of trade. See id. Filati challenges the decision, claiming that
the sales should not be considered outside the ordinary course of
trade, because they are analogous to obsolete or year-end sales.
See Filati Br. at 18, (citing 19 U.S.C. § 1677b(b)(1)(1994)
("[S]uch sales may be disregarded in the determination of normal
value.")(emphasis added).
The Court sustains Commerce’s determination as to the
treatment of second-quality below-cost sales in the calculation
of CV profit. Commerce’s decision is based on its determination
that the sales in question were outside the ordinary course of
trade. As with NV calculation, described in detail supra, § G.,
Commerce has the discretion to decide whether it will use sales
Court No. 98-04-00908 Page 24
outside the ordinary course of trade in a CV calculation. See 19
U.S.C. §§ 1677b(b)(1), 1677b(e)(2)(A)(1994). Filati has not
offered any evidence that Commerce abused its discretion in not
considering the below cost sales here. See Filati Br. at 18-19;
Filati Reply Br. at 11-12. Therefore, Commerce’s determination
in this respect is sustained.
I. Commerce’s Determination Not to Utilize Filati’s Reported
Cost Data is Sustained.
Filati challenges Commerce’s determination not to accept the
cost data it originally offered. See Filati Br. at 19-26.
Instead of accepting Filati’s reported numbers, Commerce required
Filati to provide its average per-unit standard costs for each
product, its POR production (first and second quarter) for each
product, and variances. See Final Results, 63 Fed. Reg. at
12,760-61; Filati’s Br. at 19, 20. Filati argues that Commerce
erred by rejecting its reported data because Commerce must accept
data that is in accordance with accounting norms, reasonable and
not distortive. See Filati Br. at 24.
It is established Commerce practice to accept a respondent’s
cost data when it represents a respondent’s normal records, is
consistent with accounting norms, and is not distortive. See 19
U.S.C. 1677b(f)(1)(A)(1994);11 see, e.g., Final Determination of
Sales at Less Than Fair Value: Furfuryl Alcohol from South
11
The SAA requires that Commerce "consider whether the
producer historically used its submitted cost allocation methods
to compute the cost of the subject merchandise prior to the
investigation or review and in the normal course of its business
operation." SAA at 835 (emphasis added).
Court No. 98-04-00908 Page 25
Africa, 60 Fed. Reg. 22,550, 22,556 (May 8, 1995); SAA 834-35.
Here, Commerce accepts that the data was consistent with
accounting norms and was not distortive, but Commerce refuses to
accept that the reported data was part of Filati’s "normal
records." See Final Results, 63 Fed. Reg. at 12,760-61;
Commerce’s Filati Br. at 39.
The Court agrees with Commerce. The record demonstrates
that Filati admitted that its original cost response was
"adapted" or altered for purposes of responding to Commerce’s
questionnaire. See Commerce’s Filati App. at D-24 (Letter of
04/12/97 from Walter J. Spak and Richard G. King to William M.
Daley)("For purposes of this response, we have adapted this
standard cost accounting system to calculate the reported cost of
manufacture."). Moreover, Filati concedes this point in its
brief. See Filati’s Br. at 19, 21. As such, Commerce acted in
accordance with law when it decided that such data did not
represent Filati’s normal records. See Furfuryl, 60 Fed. Reg. at
22,556. Thus, Commerce’s determination in this regard is
sustained.
J. Commerce’s Determination to Deny Filati an Offset to
Indirect Selling Expenses Related to Cash Deposits is
Sustained.
Filati challenges Commerce’s decision to deny an offset to
U.S. indirect selling expenses to account for the opportunity
cost associated with financing cash deposits of antidumping and
countervailing duties. See Filati Br. at 26-30. Filati claims
that in the past Commerce allowed such an offset and that
Commerce has recently changed its position without adequate
Court No. 98-04-00908 Page 26
explanation. See id.
Filati is correct that in the past Commerce has allowed such
offsets. See Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof from France, et al., 62 Fed. Reg.
54,043, 54,079 (October 17, 1997)(detailing past practice).
Commerce changed its position, however, in 1997. See id.(explaining change in policy).
The Court is satisfied that Commerce has adequately
explained its change in position,12 and that the current position
is reasonable under the statute. See 19 U.S.C. §
1677a(d)(1)(1994); SAA at 823; Final Results, 63 Fed. Reg. at
12,758. The statute does not define "indirect selling expenses."
See 19 U.S.C. § 1677a(d)(1). Thus, the Court reviews Commerce’s
interpretation of this term with appropriate Chevron deference.
See 467 U.S. at 843.
It is reasonable for Commerce to take the position, in
conformance with the Court of International Trade’s decision in
NTN Bearing, that "financing expenses incurred on antidumping
duty cash deposits are not the inevitable consequence of the
antidumping duty order." NTN Bearing, 104 F.Supp.2d at 138.
Such a position is reasonable because the finance expense
associated with cash deposits is truly not an inevitable
consequence of an antidumping order. Cf. Daewoo Elecs. Co., Ltd.
12
It is well established that Commerce may change its
position as long as it provides adequate explanation for such a
change. See NTN Bearing Corp. of America v. United States, 24
C.I.T. __, __, 104 F.Supp.2d 110, 138 (2000)(citing Timken Co. v.
United States, 21 C.I.T. __, __, 989 F.Supp. 234, 250 (1997)).
Court No. 98-04-00908 Page 27
v. United States, 13 C.I.T. 253, 270, 712 F.Supp. 931, 947-48
(1989) (legal fees were inevitable consequence of antidumping
order); rev’d on other grounds, 6 F.3d 1511 (Fed. Cir. 1993),
cert. denied, 512 U.S. 1204 (1994). A finance expense is not
inevitable because a respondent may choose to pay the cash
deposit through a variety of means. Just as a consumer can
decide not to incur credit card finance charges by paying cash, a
respondent has the choice to fund the cash deposits through
various means.
K. Commerce’s Determination Regarding Filati’s Normal Value
Calculation is Sustained.
Filati claims that Commerce acted outside of the law in
applying the novel NV calculation method set forth by the Federal
Circuit to the review after the closure of the agency briefing
period. See Filati’s Br. at 30-33. The Federal Circuit opinion
at issue is Cemex v. United States, 133 F.3d 897 (Fed. Cir.
1998). In Cemex, the Federal Circuit instructed Commerce to base
NV on home market sales of similar merchandise rather than
proceeding to CV. See id. Filati does not dispute Commerce’s
duty to apply the NV methodology outlined in Cemex. See Filati
Br. at 30-33; Filati’s Reply. Br. at 17-18. Rather, Filati
argues that it was never given notice or opportunity to comment
on the new methodology. See Filati Br. at 30.
It is the Court’s opinion that Commerce did proceed
improperly. In the interest of fairness Commerce should have
allowed Filati the opportunity to comment on the application of
the Cemex methodology. See, e.g., Sigma Corp. v. United States,
Court No. 98-04-00908 Page 28
17 CIT 1,288, 1,308, 841 F.Supp. 1,255, 1,267 (1993)("[I]t goes
against all fairness for Commerce to say one thing in the
preliminary results and then to have plaintiffs rely on this fact
and not argue its case any further.").
Such an error, however, is harmless. See Intercargo Ins.
Co. v. United States, 83 F.3d 391, 394 (Fed. Cir. 1996)(applying
harmless error principle to review of agency action). The Court,
on the record before it, does not see that Commerce could have
applied the Cemex methodology any differently than it did. Cemex
compelled Commerce to calculate NV using similar merchandise.
See 133 F.3d at 902-04. Filati does not now claim that Commerce
applied the methodology incorrectly, or that Commerce did not
have the benefit of relevant evidence. See Filati’s Br. at 30-
33; Filati’s Reply Br. at 17-18. Thus, the Court deems the error
to be harmless and sustains Commerce’s determination on this
issue. See Intercargo, 83 F.3d at 394.
IV.
CONCLUSION
For the foregoing reasons, The Court sustains in part and
remands in part. A separate Order will be entered accordingly.
___________________
Richard W. Goldberg
JUDGE
Date: February 27, 2001
New York, New York