291 F.3d 806 (Fed. Cir. 2002), 01-1212, FAG Italia S.p.A. v. U.S.

Docket Nº:01-1212
Citation:291 F.3d 806
Party Name:FAG Italia S.p.A. v. U.S.
Case Date:May 24, 2002
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit

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291 F.3d 806 (Fed. Cir. 2002)

FAG ITALIA S.p.A. and Fag Bearings Corporation, Plaintiffs-Appellants,


SKF USA Inc. and SKF Industries S.p.A., Plaintiffs-Appellants,


UNITED STATES, Defendant-Cross Appellant,


The Torrington Company, Defendant-Cross Appellant.

Nos. 01-1212, 01-1215, 01-1213, 01-1214.

United States Court of Appeals, Federal Circuit

May 24, 2002

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[Copyrighted Material Omitted]

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Max F. Schutzman, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of New York, New York, argued for plaintiff-appellant FAG Bearings Corporation and FAG Italia S.p.A. With him on the brief were Andrew B. Schroth, Mark E. Pardo, and Adam M. Dambrov. Of counsel was Jeffrey S. Grimson.

Herbert C. Shelley, Steptoe & Johnson LLP, of Washington, DC, argued for plaintiff-appellant SKF USA Inc. and SKF Industrie S.p.A. With him on the brief was Alice A. Kipel.

Reginald T. Blades, Jr., Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for defendant-cross appellant United States. On the brief were Stuart E. Schiffer, Acting Assistant Attorney General: David M. Cohen, Director; Velta A. Melnbrencis, Assistant Director. Of counsel on the brief were David R. Mason and John F. Koeppen, Attorneys, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of Washington, DC.

Geert De Prest, Stewart and Stewart, of Washington, DC, argued for defendant-cross appellant the Torrington Company. With him on the brief were Terence P. Stewart and Lane S. Hurewitz.

Before MICHEL, DYK, and PROST, Circuit Judges.

DYK, Circuit Judge.

This case presents two issues. First, it involves the question whether the Department of Commerce ("Commerce") properly defined "foreign like product" for purposes of 19 U.S.C. §§ 1677b(a)(1) and 1677b(e). In SKF USA Inc. v. United States, 263 F.3d 1369 (Fed.Cir. 2001), we vacated the Court of International Trade's decision on that identical issue and remanded for Commerce to explain why it uses a different definition of "foreign like product" for price-based calculations for normal value than it does for calculations of constructed value. The parties agree that SKF USA governs here, and that we should likewise remand this case to Commerce for further consideration of that issue. Accordingly, we will not discuss the "foreign like product" issue further in this opinion. We vacate the decision of the Court of International Trade on this issue and remand for further proceedings consistent with our opinion in SKF USA.

Second, this case involves the question whether Commerce can properly conduct a duty absorption inquiry pursuant to 19 U.S.C. § 1675(a)(4) for "transition orders" 1 in 1996 and 1998, the second and fourth years after the deemed issuance date of transition orders under section 1675(c)(6)(D). We hold that Commerce's action in conducting such inquiries is not authorized by the statute and affirm the judgment of the Court of International Trade in this respect. The opinion that follows addresses that issue. 2

Statutory Background

The antidumping statute is designed to prevent foreign goods from being sold at

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unfairly low prices in the United States to the injury of United States producers. Antidumping orders are issued as a result of a process that involves both Commerce and the ITC.

Commerce decides whether dumping exists by determining whether foreign merchandise has been sold or is likely to be sold in the United States at "less than its fair value." 19 U.S.C. § 1673(1) (2000). Commerce first makes a preliminary determination whether there is a reasonable indication that foreign merchandise is being sold at less than fair value, 19 U.S.C. § 1673b(b)(1)(A) (2000), then establishes dumping margin 3 rates reflecting that amount. 19 U.S.C. §§ 1673d(a)(1), 1673d(c)(1)(B) (2000). The ITC determines whether a domestic industry is "materially injured" or is "threatened with material injury," or whether "the establishment of an industry in the United States is materially retarded" by dumping. 19 U.S.C. § 1673d(b)(1) (2000). If the determinations of Commerce and ITC are both affirmative, Commerce issues an antidumping order assessing duties on the foreign exporter. 19 U.S.C. § 1673d(c)(2) (2000).

Before the amendments to the antidumping statute under the Uruguay Round Agreements Act ("URAA"), Pub.L. No. 103-465, 108 Stat. 4809 (1994), the only statutorily authorized review of antidumping orders after they were issued was Commerce's annual administrative review, in which Commerce reviewed the amount of antidumping duty, and recalculated the dumping margin as necessary to reflect actual competitive conditions. 19 U.S.C. § 1675(a)(1) (1988). These annual reviews were continued in the URAA amendments. See 19 U.S.C. § 1675(a)(1) (2000). Under the URAA amendments, Congress additionally: (1) authorized Commerce to conduct so-called duty absorption inquiries in conjunction with its second and fourth annual administrative reviews of antidumping orders, upon request by an interested domestic party; and (2) provided for a completely new kind of review of antidumping duty orders: sunset reviews, to be jointly conducted by ITC and Commerce five years after the issuance of an order. Sunset reviews eliminate needless antidumping orders by terminating orders after five years, unless ITC and Commerce both determine that revocation of the orders would lead to recurrence of dumping and material injury. Subsection (a) of section 1675 governs duty absorption inquiries. Subsection (c) governs sunset reviews.

Duty Absorption

The purpose of a duty absorption inquiry is to ensure that foreign exporters identified by Commerce as dumping goods in the United States do not undermine the purpose of the antidumping laws by "absorbing" the duty rather than passing the duty on to United States purchasers in the form of higher prices. In such circumstances, dumping continues despite the assessment of the duty, and, as a result, "the remedial effect of an antidumping order may be undermined...." Joint Report of the Committee on Finance, Committee on Agriculture, Nutrition, and Forestry, Committee on Governmental Affairs of the United States Senate to accompany S. 2467, S.Rep. No. 103-412, at 44 (1994).

Congress provided that:

During any [annual] review ... initiated 2 years or 4 years after the publication

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of an antidumping duty order, [Commerce], if requested, shall determine whether antidumping duties have been absorbed by a foreign producer or exporter subject to the order if the subject merchandise is sold in the United States through an importer who is affiliated with such foreign producer or exporter.

19 U.S.C. § 1675(a)(4) (2000). 4 Section 1675(a)(4) further provides that Commerce "shall notify the [ITC] of its findings regarding such duty absorption for the [ITC] to consider in conducting a [sunset review]."

The consequence of a finding of duty absorption by Commerce is that the anti-dumping order is less likely to be revoked as a result of a sunset review. The Statement of Administrative Action recognized that "[d]uty absorption may indicate that the [foreign] producer or exporter would be able to market more aggressively should the order be revoked as a result of a sunset review." Uruguay Round Agreements Act: Statement of Administrative Action ("SAA "), H.R. Doc. No. 103-316, at 886 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4211. It was further understood:

Duty absorption is a strong indicator that the current dumping margins calculated by Commerce in reviews may not be indicative of the margins that would exist in the absence of an order. Once an order is revoked, the importer could achieve the same pre-revocation return on its sales by lowering its prices in the U.S. in the amount of the duty that previously was being absorbed....

An affirmative finding of absorption in an administrative review initiatedtwo years after the issuance of an order is intended to have a deterrent effect on continued absorption of duties by affiliated importers; if they engage in duty absorption, they will know that they will face an additional hurdle that will make it more difficult to obtain revocation or termination. If, in the four-year review, Commerce finds that absorption has taken place, it will take that into account in its determination regarding the dumping margins likely to prevail if an order were revoked.

Id. at 885-86, reprinted in 1994 U.S.C.C.A.N. at 4210 (emphases added).

Sunset Reviews

The purpose of the sunset review is to eliminate needless orders by terminating antidumping orders after five years unless Commerce determines that revocation of the duty "would be likely to lead to continuation or recurrence of dumping," and ITC determines that revocation of the duty "would be likely to lead to ... material injury." 19 U.S.C. § 1675(c)(1) (2000). Unless both agencies make affirmative determinations, the order must be revoked. The sunset review is held "5 years after the date of publication of ... an antidumping duty order," and every five years thereafter. 19 U.S.C. § 1675(c)(1)(A) (2000); S.Rep. No. 103-412, at 45.

ITC considers several factors in deciding whether revocation would likely lead to material injury. 19 U.S.C. § 1675a(a)(1) (2000). 5 Among other things, the statute

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provides that in sunset reviews ITC "shall" consider Commerce's two and four-year duty absorption determinations. 19 U.S.C. § 1675a(a)(1)(D) (2000).

Transition Orders

There is no issue in this case as to the operation of these duty absorption inquiry or sunset review provisions with respect to antidumping orders issued after January 1, 1995, the date the URAA amendments came into effect in the United States. The controversy concerns orders issued before that date--so called "transition orders." A "transition...

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