Nec Corp. v. Department of Commerce, Slip Op. 98-164.

Citation36 F.Supp.2d 380
Decision Date15 December 1998
Docket NumberSlip Op. 98-164.,Court No. 97-11-01967.
PartiesNEC CORPORATION and HSNX Supercomputers, Inc., and Fujitsu Limited and Fujitsu America, Inc., Plaintiffs, v. DEPARTMENT OF COMMERCE & U.S. International Trade Commission, Defendants, Cray Research, Inc., Defendant-Intervenor.
CourtU.S. Court of International Trade

Akin, Gump, Strauss, Hauer & Feld, L.L.P. (Warren E. Connelly and James E. Mendenhall) for Plaintiffs Fujitsu Limited and Fujitsu America, Inc.

Paul, Weiss, Rifkind, Wharton & Garrison (Robert E. Montgomery, Jr., Terence J. Fortune, Robert P. Parker, David J. Weiler, and Swati Agrawal) for Plaintiffs NEC Corporation and HNSX Supercomputers Inc.

Lyn M. Schlitt, General Counsel; James A. Toupin, Deputy General Counsel; Cynthia P. Johnson, Office of the General Counsel, U.S. International Trade Commission, Counsel for Defendant.

Wilmer, Cutler & Pickering (John D. Greenwald, Ronald I. Meltzer, Juan Millan) for Defendant-Intervenor Cray Research, Inc.

OPINION

POGUE, Judge.

This action is before the Court on the motions of Plaintiff Fujitsu Limited and Fujitsu America ("Fujitsu"), Inc., and NEC Corporation and HNSX Supercomputers Inc. ("NEC"), ("collectively Plaintiffs") for judgment on the agency record pursuant to USCIT Rule 56.2. The Plaintiffs, respondents in the underlying investigation, filed separate actions challenging certain aspects of the final determination of the U.S. International Trade Commission ("ITC" or "Commission"), in Vector Supercomputers From Japan, USITC Pub. No. 3062, Inv. Nos. 731-TA-750)(Oct. 1997)("Views"). The actions were consolidated. The Court has jurisdiction pursuant to 28 U.S.C. § 1581(c)(1994).

Specifically, the parties challenge the Commission's determination that vector supercomputers are a separate like product and that the industry in the United States producing "vector supercomputers" is threatened with material injury by reason of imports from Japan that are sold at less than fair value ("LTFV").

Background

On July 29, 1996, Cray Research, Inc., filed a petition with the Department of Commerce ("Commerce") alleging that vector supercomputers from Japan are being, or are likely to be sold in the United States at less than fair value, and that such imports are materially injuring, or threatening material injury to an industry in the United States. Vector Supercomputers From Japan, 61 Fed.Reg. 43,527 (Dep't Commerce 1996)(initiation antidumping duty investig.).

Commerce published a preliminary determination, Vector Supercomputers From Japan, 62 Fed.Reg. 16,544 (Dep't Commerce 1997)(prel.determination), and a final determination, Vector Supercomputers From Japan, 62 Fed.Reg. 45,623 (Dep't Commerce 1997)(final determination), concluding that imports of vector supercomputers from Japan were being sold at LTFV in the United States.

On October 16, 1997, the ITC promulgated its final injury determination, concluding that the domestic industry is threatened with material injury by reason of LTFV imports from Japan of vector supercomputers. Vector Supercomputers From Japan, 62 Fed. Reg. 53,801 (Int'l Trade Commission 1997). The Commission, however, found no present material injury. Id.

Commerce published an antidumping duty order covering the subject merchandise on October 24, 1997. Vector Supercomputers From Japan, 62 Fed.Reg. 55,392 (Dep't Commerce 1997)(notice antidumping duty ord.). The margin found for Fujitsu was 173.08%. The margin found for NEC was 454%. Id. at 55,393.

Standard of Review

The Court will uphold a determination by the Commission unless it is not supported by substantial evidence in the administrative record or is otherwise not in accordance with law. See Section 516a(b)(1)(B)(i) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(b)(1)(B)(i)(1994).

Discussion
I. Like Product

To determine whether an industry in the United States is materially injured or threatened with material injury by reason of imports of the subject merchandise, the ITC must first define the "domestic like product" and the "industry" producing the product. See 19 U.S.C. §§ 1673(2), 1677(4) & 1677(10)(1994).1

Section 1677 defines "domestic like product" as "a product which is like, or in the absence of like, most similar in characteristics and uses with, the article subject to an investigation." 19 U.S.C. § 1677(10). In turn, the relevant "industry" is defined as the "producers as a whole of a domestic like product, or those producers whose collective output of a domestic like product constitutes a major proportion of the total domestic production of the product." 19 U.S.C. § 1677(4)(A).

In the final determination, Commerce defined the products under investigation as:

[A]ll vector supercomputers, whether new or used, and whether in assembled or unassembled form, as well as vector supercomputer spare parts, repair parts, upgrades, and system software, shipped to fulfill the requirements of a contract entered into on or after April 7, 1997, for the sale, and, if included, maintenance of a vector supercomputer. A vector supercomputer is any computer with a vector hardware unit as an integral part of it central processing unit boards.

62 Fed.Reg. at 45,624.

The Commission's decision regarding the appropriate domestic like product is a factual determination, where the Commission applies the statutory standard of "like" or "most similar in characteristics and uses" on a case-by-case basis. See e.g., Torrington Co. v. United States, 14 CIT 648, 652, 747 F.Supp. 744, 749 n. 3 (1990), aff'd, 938 F.2d 1278, (Fed.Cir.1991); Asociacion Colombiana de Exportadores de Flores v. United States, 12 CIT 634, 638, 693 F.Supp. 1165, 1169 n. 5 (1988). Although the Commission must accept the determination of Commerce as to the scope of the imported merchandise sold at less than fair value, the Commission determines what domestic product is like the imported articles Commerce has identified. See Makita Corp. v. United States, 21 CIT ___, ___, 974 F.Supp. 770, 783 (1997).

The ITC has generally sought "clear dividing lines" between product groups. See e.g., Aramide Maatschappij V.O.F. v. United States, 19 CIT 884, 885 (1995); Nippon Steel Corp. v. United States, 19 CIT 450, 455 (1995). Factors that the ITC typically considers in defining "like product" include: (1) physical appearance, (2) interchangeability, (3) channels of distribution, (4) customer perceptions, (5) common manufacturing facilities and production employees, and where appropriate, (6) price. See Torrington Co., 14 CIT at 652, 747 F.Supp. at 749.

As a preliminary matter, Plaintiffs argue that the Commission erred in failing to apply its own "clear dividing line" standard in this case. Fujitsu Mem. Supp. Mot. J. Agency R. ("Fujitsu Brief") at 13; NEC Mem. Supp. Mot. J. Agency R. ("NEC Brief") at 14. Alternatively, Fujitsu maintains that even if the ITC applied its "clear dividing line" standard here, the Commission was required to focus on the characteristics and uses of imports that serve the mid-range market because differences between products at either end of a continuum are not enough to create a bright line between them. Fujitsu Brief at 13. The Court does not agree.

First, the Commission specifically noted that it looks for "clear dividing lines" among "possible like products and disregards minor variations." Views at 4. The Commission recognized that "the constant evolution of all computers in general and supercomputers in particular makes a concrete, measurable differentiation" between various products difficult. Id. at 6. Nevertheless, it concluded that, "[b]ased on the differing physical characteristics and end uses, lack of or limited interchangeability for many applications, and producer and customer perceptions, we find that there is a clear dividing line between vector supercomputers and all other supercomputers, and therefore, we define the domestic like product as vector supercomputers." Id. at 21.

Second, section 1677(10) provides that the term "domestic like product" means a product which is "like, or in the absence of like, most similar in characteristics and uses with, the article subject to an investigation." 19 U.S.C. § 1677(10). Further, the legislative history states that, "[t]he requirement that a product be `like' the imported article should not be interpreted in such a narrow fashion as to permit minor differences ... to lead to the conclusion that the [domestic] products and [the imported] article are not `like' each other ...." S.Rep. No. 249, 96th Cong. 1st Sess. 90-91 (1979). The focus here is on the product produced in the United States that is most similar to the imports under investigation. See 19 U.S.C. § 1677(10) (emphasis provided). Accordingly, in this case the Commission appropriately focused its investigation on the continuum of domestic products most like the subject Japanese imports.

The Commission's determination, however, must also be supported by substantial evidence. Plaintiffs argue that the record does not support the Commission's findings. Fujitsu Brief at 14; NEC Brief at 2.

The ITC concluded that the domestic like product was vector supercomputers only rather than all supercomputers as argued by the Plaintiffs in the underlying administrative proceeding. Views at 21. The Commission based its decision primarily on: (1) the differences in physical characteristics between vector supercomputers and non-vector supercomputers; (2) the difficulty in modifying software applications "optimized" for vector supercomputers for similarly optimal use in non-vector supercomputers; (3) customer and producer perceptions; and, (4) price differences. Id. at 18-19, 21.

In reviewing the Commission's like product findings under the substantial evidence test, it is not the province of the courts to change the priority of the relevant like product factors or to reweigh or judge the credibility of conflicting evidence. See Iwatsu Elec. Co. v....

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