Agro Dutch Industries, Ltd. v. United States

Slip Op. 06 - 96
UNITED STATES COURT OF INTERNATIONAL TRADE
:
AGRO DUTCH INDUSTRIES, LTD., :
:
Plaintiff, :
:
v. : Before: MUSGRAVE, Judge
: Court No. 04-00493
UNITED STATES, :
:
Defendant, :
:
and :
:
COALITION FOR FAIR MUSHROOM TRADE, :
:
Defendant-Intervenor. :
:
[Further clarification ordered regarding antidumping duty administrative review.]
Dated: June 23, 2006
Garvey Schubert Barer (Lizbeth R. Levinson, Ronald M. Wisla), for the plaintiff.
Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director, Patricia M.
McCarthy, Assistant Director, Civil Division, Commercial Litigation Branch, United States
Department of Justice (Richard Schroeder); and Office of Chief Counsel for Import Administration,
U.S. Department of Commerce (Matthew D. Walden), of counsel, for the defendant.
Kelley Drye Collier Shannon (Michael J. Coursey, Adam H. Gordon), for the defendant-
intervenor.
OPINION AND ORDER
Without concluding whether substantial evidence supported the administrative finding that
the expenses of transporting recalled merchandise from the United States to India constitute indirect
selling expenses associated with U.S. sales, the Court remanded for reconsideration and clarification
Court No. 04-00493 Page 2
of Commerce’s antidumping duty calculus on the matter. See Slip Op. 06-40 (CIT Mar. 28, 2006);
Certain Preserved Mushrooms From India: Final Results of Antidumping Duty Administrative
Review, 69 Fed. Reg. 51630 (Aug. 20, 2004) & accompanying Issues and Decision Memorandum
for the Final Results of the Antidumping Duty Administrative Review on Certain Preserved
Mushrooms from India – February 1, 2002, through January 31, 2003 (Aug. 20, 2004) (“Decision
Memorandum”), as amended by Notice of Amended Final Results of Antidumping Duty
Administrative Review: Certain Preserved Mushrooms From India, 69 Fed. Reg. 55405 (Sep. 14,
2004). The Department of Commerce, International Trade Administration (“Commerce” or “DOC”)
was also asked to consider whether the entire movement of the merchandise from India to the United
States and back should be treated as an extraordinary expense that would distort the dumping
calculation if included therein. Draft administrative remand results went to the parties on April 28,
2006 and Commerce submitted the same to the Court after time passed without comment. See
Results of Redetermination Pursuant to Remand (May 11, 2006) (“Redetermination”). The Clerk
of the Court recently confirmed that neither Agro Dutch nor the Coalition for Fair (Preserved)
Mushroom Trade (CFMT) intend to comment on the remand results.
As mentioned, the Court deferred discussion of Agro Dutch’s argument that the recall of the
merchandise to India involved direct expense to subsequent third country sale(s), that the recall was
strictly a business decision that ultimately proved correct, and that therefore Commerce wrongly
included the movement costs in U.S. indirect selling expenses. See Pl.’s Rule 56.2 Mot. for J. Upon
the Agency Rec. (“Pl.’s Br.”) at 8-9 . The government’s response was that Commerce’s practice is
to treat expenses related to returned or rejected merchandise as indirect selling expenses in the
Court No. 04-00493 Page 3
market for which the expenses were incurred. Def.’s Mem. in Opp’n to Pl.’s Mot. (“Def.’s Br.”) at
9 (referencing Decision Memorandum at 3; Notice of Final Determination of Sales at Not Less Than
Fair Value: Certain Color Televisions From Malaysia, 69 Fed. Reg. 20592, and attached Issues and
Decision Memorandum at comment 2 (April 16, 2004) (freight expenses associated with returns of
subject merchandise should be included in indirect selling expense calculation of the entity that
incurred the expenses); Notice of Final Determination of Sales at Less Than Fair Value: Foam
Extruded PVC and Polystyrene Framing Stock From the United Kingdom, 61 Fed. Reg. 51411,
51416-17 (Oct. 2, 1996) (regarding return freight charges, “[w]here an expense cannot be tied to a
sale within the POI, the expense is considered indirect”)). The government argued that Commerce’s
inclusion of the return expenses in Agro Dutch’s U.S. indirect selling expense calculation was
consistent with this practice and that only if the rejected merchandise at issue had been shipped
directly to such other country or countries without being returned to inventory in India might Agro
Dutch have a viable argument. Id. at 9-10 (referencing Certain Porcelain-on-Steel Cookware From
Mexico: Final Results of Antidumping Duty Administrative Review, 62 Fed. Reg. 42496, 42502
(Aug. 7, 1997) (noting that “freight charges for later sales would begin at the point of shipment
associated with the later sale”)). In light of Commerce’s Redetermination and the absence of further
comment thereon, it is now appropriate to address Agro Dutch’s claim.
The standard for judicial review of an administrative review of an outstanding antidumping
duty order is whether the agency’s determination is supported by substantial evidence on the record.
19 U.S.C. § 1516a(b)(1)(B)(i). That requires review of the record as a whole: that which supports
as well as that which “fairly detracts from the substantiality of the evidence.” Atlantic Sugar, Ltd.
Court No. 04-00493 Page 4
v. United States, 744 F.2d 1556, 1562 (Fed. Cir. 1984). But, where the record may lead to inapposite
findings, if Commerce’s conclusion is not unreasonable the Court must refrain from substituting its
own conclusion thereon. See American Silicon Technologies v. United States, 261 F.3d 1371, 1376
(Fed. Cir. 2001) (determination may be supported by substantial evidence of record “[e]ven if it is
possible to draw two inconsistent conclusions from evidence in the record”) (citation omitted); Thai
Pineapple Public Co. v. United States, 187 F.3d 1362, 1365 (Fed. Cir. 1999) (same). Cf. Luciano
Pisoni Fabbrica Accessori Instrumenti Musicali v. United States, 837 F.2d 465, 467 (Fed. Cir. 1988)
(“[w]hen the court said Commerce’s merchandise comparison methodology was ‘unreasonable,’ it
was using a shorthand word for unsupported by substantial evidence on the record”).
Agro Dutch attempts to persuade that Commerce’s conclusion is unreasonable, but arguing
that the movement expenses resulted from a legitimate business decision and are direct rather than
indirect does not persuade, a fortiori, to the extent that it would be unreasonable to treat these
expenses as indirect selling expenses associated with U.S. sales during the period of review. That
is to say, it is not apparent from the evidence of record that the U.S.-to-India movement cost must
be treated as direct expenses attributable to the ultimate foreign market sale. It may be true, as Agro
Dutch argues, that its situation differed from the administrative determinations cited by the
government and CFMT to support the notion that these expenses are indirect, selling, and associated
with U.S. sales, and that certain aspects of the referenced determinations might be interpreted as
supportive of Agro Dutch’s rather than the government’s position,1 but without more, Agro Dutch’s
1
See Pl.’s Br. at 8-9; Def.’s Resp. at 9-10; Resp. Br. of Def.-Int. The Coalition for Fair
Preserved Mushroom Trade at 6; Pl.’s Reply at 3-4 (distinguishing Certain Porcelain-on-Steel
Cookware From Mexico, supra, 62 Fed. Reg. at 42502; Certain Color Television Receivers From
(continued...)
Court No. 04-00493 Page 5
arguments reduce to a difference of opinion with Commerce. For example, if there is a precise
generally accepted accounting principle that would require that these moving expenses be accounted
a direct cost of the foreign sale to which the recalled merchandise was ultimately delivered, taking
into account their intermediate return to inventory in India, Agro Dutch does not elaborate. It does
not, therefore, successfully attack Commerce’s general cost methodology, with which the instant
administrative determination appears consistent.2 Cf. 19 U.S.C. § 1677b(f) (requiring consideration
of all available evidence on proper allocation of costs); Hynix Semiconductor, Inc. v. United States,
424 F.3d 1363 (Fed. Cir. 2005) (respondent’s methodology insufficient to undermine agency’s
preferred method so long as agency method supported by substantial evidence on the record); Thai
Pineapple, supra, 187 F.3d at 1365 (methodologies relied upon by Commerce in making its
determinations are presumptively correct) (citation omitted). In short, Agro Dutch’s arguments do
1
(...continued)
Malaysia, supra, 69 Fed. Reg. 20952 at comment 2; Foam Extruded PVC and Polystyrene Framing
Stock From the United Kingdom, supra, 61 Fed. Reg. at 51416-17).
2
According to the Oxford English Dictionary, “direct” means “6. a. Effected or existing
without intermediation or intervening agency; immediate . . . f. Of or pertaining to the work and
expenses actually incurred during production as distinct from subsidiary work and overhead charges,
i.e., to prime or initial costs or charges” while “indirect” means “1 a. Of a way, path, or course: Not
straight; . . . 5. Of or pertaining to the work and expenses which cannot be apportioned to any
particular job or undertaking[;] pertaining to overhead charges and subsidiary work. (Cf. [‘direct’]
a. 6[.] f.)” Oxford English Dictionary, vol. IV, pp. 702-03, vol. VII p. 872 (2d ed. 1989). Cf. 19
C.F.R. § 351.410(c) (“‘[d]irect selling expenses’ are expenses, such as commissions, credit expenses,
guarantees, and warranties, that result from, and bear a direct relationship to, the particular sale in
question”) & § 351.412(f)(2) (“[i]n making the constructed export price offset, ‘indirect selling
expenses’ means expenses, other than direct selling expenses or assumed selling expenses (see §
351.410), that the seller would incur regardless of whether particular sales were made, but that
reasonably may be attributed, in whole or in part, to such sales”). See also Slip Op. 06-40 at 6. On
a close call as to accounting treatment, the apportionment of a charge or expense would appear to
be in the eye of the beholder.
Court No. 04-00493 Page 6
not lead to the inevitable conclusion that the administrative treatment of the movement expenses of
the recalled sales from the United States to India, as indirect expenses associated with United States
sales, was unreasonable.
Commerce was also asked upon remand whether the expense of recalling the merchandise
was extraordinary or otherwise distortive of Agro Dutch’s experience. The Redetermination reports
that there is no information on the record indicating that these expenses are extraordinary or
otherwise distortive to Ago Dutch’s margin because Commerce has
no benchmark for establishing Agro Dutch’s normal experience. No party
raised this issue during the course of the review. Commerce has stated in a
previous segment of this proceeding that “it is incumbent upon the
respondent, as the party knowledgeable about the industry and country, to
provide evidence supporting” a claim that a cost or expense is extraordinary
or distortive. See Notice of Final Determination of Sales at Less Than Fair
Value: Certain Preserved Mushrooms from India, 63 FR 72246, 72251
(December 31. 1998). Agro Dutch did not provide any evidence that
incurring expenses for recalling rejected merchandise is an extraordinary
event. Accordingly, we do not find these expense to be extraordinary or
otherwise distortive. See id. (finding the death of an employee, flooding and
crop disease not to be extraordinary).
Redetermination at 4-5.
Arguably, declaring that there is no benchmark ignores or even undermines determinations
of “normal” value for Agro Dutch. See, e.g., Certain Preserved Mushrooms From India, 68 Fed.
Reg. 41303 (Jul. 11, 2003) (final review results). Also, to conclude that the U.S.-to-India movement
costs are not attributable to third country sales is restating that such expenses would be considered
extraordinary to such sales. But, since Agro Dutch chose not to comment or provide Commerce with
a reason to conclude otherwise, the determination that the expenses at issue were not extraordinary,
relative to sales during the period of review, is supported by substantial evidence on the record.
Court No. 04-00493 Page 7
As mentioned, the Court remanded for clarification of the impact of the movement expenses
on Commerce’s dumping calculation. Commerce’s response is that the movement expenses affected
Agro Dutch’s margin through the calculation of the commission offset, which is a circumstance-of-
sale adjustment to normal value pursuant to 19 U.S.C. § 1677b(a)(6)(C)(iii). The commission offset
regulation is as follows:
(e) Commissions paid in one market. The Secretary normally will make a
reasonable allowance for other selling expenses if the Secretary makes a
reasonable allowance for commissions in one of the markets under
considerations [sic], and no commission is paid in the other market under
consideration. The Secretary will limit the amount of such allowance to the
amount of the other selling expenses incurred in the one market or the
commissions allowed in the other market, whichever is less.
19 C.F.R. § 351.410(e).
The Redetermination explains that the commission offset entailed upward adjustment of
normal value3 because most U.S. export price sales did not involve payment of a commission,
whereas the surrogate foreign market selling expense data for Agro Dutch (i.e., the weighted average
selling expense data for Premier and Weikfield) showed positive ratios for commissions in the home
market, viz:
The statute instructs Commerce to include selling expenses in the calculation
of [constructed value (“CV”)] that are “. . . in connection with the production
and sale of a foreign like product, in the ordinary course of trade, for
consumption in the foreign country.” See section 773(e)(2)(B)(ii) of the Act.
3
The Court earlier noted that the offset had been explicitly applied to Premier and Weikfield
but not to Agro Dutch and wondered whether, if such were applicable to Agro Dutch’s situation, it
might actually have been to Agro Dutch’s benefit. See Slip Op. 06-40 n.3. The impact in this
instance, however, was upward adjustment of normal value by approximately 1.26 percent, according
to Commerce’s “Hypothetical Recalculation of Agro Dutch’s Amended Final Results.” Cf.
Redetermination at 4 (referencing Remand Conf. Doc. 1).
Court No. 04-00493 Page 8
To calculate these selling expenses, Commerce used the weighted-
average comparison market selling expenses derived from the data of the
other respondents in the review. These calculations, expressed as ratios to be
applied in the CV calculation, appear at Attachment 1 to the August 13, 2004,
Memorandum to the File entitled “Agro Dutch Final Results Notes and
Margin Calculation” (Proprietary Document 50) (Final Results Calculation
Memorandum). The attachment shows a positive ratio for home market
commissions. Agro Dutch incurred commissions on some, but not most, U.S.
sales in this review (see May 21, 2003, Questionnaire Response at pages C-
28-29 (Public Document 29)). Therefore, for comparisons to U.S. sales where
no commission expenses were incurred, 19 CFR 351.410(e) applies and
Commerce made a circumstance-of-sale adjustment to Agro Dutch's CV-
based [normal value (“NV”)] up to, or capped by, the amount of other selling
expenses incurred in the U.S. market, i.e. the U.S. indirect selling expenses,
including the expenses at issue. . . .
***
Net Effect: The reduction in NV for the comparison market
commissions is offset by the addition of an amount equal to the total of U.S.
indirect selling expenses, which includes the expenses for the rejected sales.
Redetermination at 2-4. That being the case, the following lines of program, to which the
Redetermination refers in part, appeared relevant:
line 1992: DINDIR3U and DINSIR4U are added to other indirect selling
expenses to create the aggregate variable XPTINDSU.
line 2458: XPTINDSU (U.S. indirect selling expense variable) is
renamed MUSOTHIS, which is used in the calculation to
determine the offset amount to the home market commission
amount.
line 2488: Comparison market commissions (CMCOMMIS) are set
equal to “HMCOMM”. The explanatory note defines this
process as the comparison market commission in U.S. dollars.
lines 2493-94: These lines appear to test whether comparison market
commissions (CMCOMMIS) are equal to zero; if so then
“CMINCOMM” is defined as constructed value comparison
market indirect selling expenses, plus certain additions
(CMINDSEL), otherwise CMINCOMM is set to zero;
lines 2573, 2577, 2588:
According to the Redetermination, this is where the
comparison market commissions are calculated (referenced
Court No. 04-00493 Page 9
in the Redetermination as CMCOMMIS) and net constructed
value is calculated exclusive of these commissions.
line 2612: The weighted average selling expense and profit ratios for
constructed value from Premier and Weikfield are calculated,
CMINCOMM is apparently redefined to the relevant
comparison market indirect selling expenses (ISELCV) plus
certain additions (INVCVR * COPCV) and converted into
dollars (MUSXRATE).
line 2691: (1) If the amount of comparison market commissions
(CMCOMMIS) is greater than the amount of U.S.
commissions (MUSCOMM), the commission offset is the
lesser of either (a) the U.S. indirect selling expenses
(MUSOTHIS), or (b) the difference between the comparison
market commissions and U.S. commissions.
(2) If the amount of U.S. commissions (MUSCOMM) is
greater than the amount of comparison market commissions
(CMCOMMIS), the commission offset is the lesser of either
(a) CMINCOMM or (b) the difference between the U.S.
commissions and the comparison market commissions.
(3) If there are no U.S. commissions (i.e., MUSCOMM = 0),
the commission offset is equal to the lesser of U.S. indirect
selling expenses (MUSOTHIS) or comparison market
commissions (CMCOMMIS).
line 2700: Calculation of the NV in this EP situation, which subtracts the
offset amount from comparison market net price in U.S.
dollars (FUPDOL). (Since OFFSET is a negative value, it is
actually added to FUPDOL.)
See Conf. Doc. 53 at 145-152.
The foregoing is too convoluted. First, if CMCOMMIS is defined by lines 2573, 2577 and
2588, it is intelligible. There is, however, a definition of COMMCV at line 2573. Also, the
commission offset regulation supposedly applies only when commissions in one of the markets
under consideration obtains a reasonable allowance “and no commission is paid in the other market
under consideration.” 19 C.F.R. § 351.410(e) (italics added). By contrast, the computer program
appears to calculate a commission offset under any circumstance, not only when “no commission
Court No. 04-00493 Page 10
is paid in the other market under consideration.” Condition (2) should never occur, given that the
concern in this instance is supposedly over “a positive ratio for home market commissions,” and, in
accordance with 19 C.F.R. § 351.410(e), condition (1) should only apply so long as there are no U.S.
commissions (MUSCOMM = 0), in which case condition (3) would also apply. But it is unclear
whether the data should only trigger such conditionality, given that the Redetermination explains that
some sales to the U.S. involved commissions and some did not.
Some, apparently, involved both. Referencing the ten highest and five lowest margins for
each type of comparison for Agro Dutch, the Redetermination undertakes a walk-through of the
effect of the programming using the first observation of output as representative, but examination
of observations six and seven indicates that a commission offset was calculated despite positive
amounts of commissions for both the U.S. and the comparison market sales. Cf. Redetermination
at 4 with Conf. Doc 50 at 167-172.
With Commerce’s indulgence, it is therefore necessary to obtain a fuller picture before the
matter may be sustained. Commerce shall provide a brief explanation of why its computer program
comports with 19 U.S.C. § 351.410(e) within ten days from the date hereof.
SO ORDERED.
/s/ R. Kenton Musgrave
R. KENTON MUSGRAVE, JUDGE
Dated: June 23, 2006
New York, New York