477 F.Supp. 201 (Cust.Ct. 1979), C.D. 4823, Pasco Terminals, Inc. v. United States

Docket Nº:C.D. 4823; Court No. 74-5-01357.
Citation:477 F.Supp. 201
Party Name:PASCO TERMINALS, INC., Plaintiff, v. UNITED STATES, Defendant.
Case Date:September 26, 1979
Court:United States District Court, Federal Circuit

Page 201

477 F.Supp. 201 (Cust.Ct. 1979)

PASCO TERMINALS, INC., Plaintiff,

v.

UNITED STATES, Defendant.

C.D. 4823; Court No. 74-5-01357.

United States Customs Court.

Sept. 26, 1979

Page 202

[Copyrighted Material Omitted]

Page 203

Williams & Connolly, Washington, D. C. (J. Alan Galbraith, Washington, D. C., on the briefs), for plaintiff.

Alice Daniel, Acting Asst. Atty. Gen., U. S. Dept. of Justice, Civil Division, Washington, D. C., David M. Cohen, Director, Commercial Litigation Branch, New York City (Velta A. Melnbrencis, Asst. Director, Commercial Litigation Branch, New York City, on the briefs), for defendant.

Page 204

MALETZ, Judge:

This is an action to recover dumping duties that were assessed on four entries of crude or elemental sulphur which was exported from Mexico by the producer, Azufrera Panamericana, S.A. (Azufrera). Plaintiff, Pasco Terminals, Inc. (Pasco), was a wholly-owned subsidiary of Azufrera and paid the duties in question. 1 The case arises as follows:

On February 5, 1972, the Office of the Secretary of the Treasury published a determination that elemental sulphur from Mexico was being or was likely to be sold at less than fair value. Following this the United States Tariff Commission 2 instituted Investigation No. AA1921-92 to determine whether an industry in the United States was being or was likely to be injured, or was prevented from being established, by reason of the importation of such merchandise into the United States. Notice of the investigation and hearing was published on February 12, 1972, and a public hearing was held March 28-30, 1972. Azufrera participated in this investigation and appeared at the public hearing. Pasco did not enter an appearance as an interested party.

Thereafter, the Tariff Commission unanimously determined that an industry in the United States was being injured by reason of imports from Mexico of sulphur sold or likely to be sold at less than fair value (LTFV). 3 On May 4, 1972, the Commission notified the Secretary of the Treasury of its Determination of Injury (in Investigation No. AA1921-92) which was published in the Federal Register on May 10, 1972. See 37 F.R. 9417. Following this, on June 28, 1972, the Assistant Secretary of the Treasury published a finding of dumping with respect to sulphur exported from Mexico and subsequently the dumping duties in question were assessed and paid.

Plaintiff does not challenge the LTFV determination of the Secretary of the Treasury. Rather, it claims (1) that the Tariff Commission proceeding was procedurally defective in that (a) the Commission allegedly did not proceed in compliance with its own Rules of Practice and Procedure; (b) the Commission violated fundamental due process rights in the conduct of its hearing; and (2) that the Commission determination of injury was arbitrary, capricious, an abuse of discretion, and not according to law.

Each of these contentions will be considered later. But before that, it is important as background to set forth (1) those facts developed before the Commission as to which there is no genuine issue; (2) a summary of the evidence in the public record before the Commission supportive of its injury determination; and (3) the specific findings of the Commission.

Facts Not in Dispute

We observe first that the following facts as developed before the Tariff Commission are not in real dispute:

1. During 1970-1971, the Mexican elemental sulphur here in issue was sold in the United States at LTFV prices.

2. The demand for sulphur is very inelastic, i. e., unresponsive to changes in price in the short run.

Page 205

3. Elemental sulphur is a fungible commodity; the one distinction is price.

4. Most sulphur in the United States is sold under sulphur purchase contracts which contain a "meet-or-release clause," i. e., a provision which stipulates that if significant quantities of sulphur of a grade comparable to that being delivered by the supplier are offered to the purchaser at a price less than that being charged by the supplier, the supplier is obligated to either meet the lower price or to release that quantity of sulphur from the terms of the contract.

5. The United States Frasch sulphur producers during the relevant period were Freeport Minerals Co. (Freeport), Texas Gulf Sulphur Co. (TGS), Duval Corp. (Duval), Occidental Petroleum Corp. and Atlantic Richfield Co.

6. During all relevant times, the Mexican sulphur industry consisted of only two producers Azufrera, which has dominated the industry for many years, with 70 to 85 percent of the total production, and Cia. Exploradora del Istmo, S.A. (CEDI).

7. Azufrera and CEDI are partly owned by the Mexican Government.

8. During all relevant times, Azufrera's export sales policies and prices were controlled by the Mexican Government.

9. Of the two Mexican producers, only Azufrera sells in the Tampa market. Mexican sulphur is not sold in the inland waterways and rail-truck markets (which would include markets in the North Central States). Logistical considerations have prevented imports from Canada from entering the Tampa market.

10. The Tampa market is different from any other sulphur market in the United States and possibly in the world because 25 percent of all sulphur consumed in the United States is consumed in that market; the market is highly concentrated; and access is principally by liquid sulphur tankers. The customers in that market are for the most part large-scale sulphur consumers; they are shrewd; they generally have more than one supplier; they play the field to obtain the best terms; they are in vigorous competition with each other; and their number is relatively small.

11. The East Coast market is separate and distinct from the Tampa market except that price activity in one market has an impact on other market areas.

12. Major producers, such as Freeport and TGS sell sulphur in both the East Coast and the Tampa markets and in some instances to the same customers in both areas.

13. In the Tampa market, the shipments in long tons of sulphur from Tampa terminals of the sulphur producers to Tampa area customers were as follows:

AZUFRERA FREEPORT TGS DUVAL


----------
1963 340,161 408,723 296,704
1964 390,826 469,805 385,600
1965 332,487 727,350 516,960
1966 223,974 1,242,892 600,420
1967 131,915 1,318,239 694,425
1968 135,293 1,237,498 536,264
1969 11,397 1,219,595 480,996 35,277
1970 130,962 1,123,778 616,446 238,821
1971 119,073 1,134,283 609,858 350,139
1972 * 829 201,650 118,676 66,068
FN * For January and February only. 14. In late 1969, Duval opened its Culbertson Mine in west Texas. It then became a significant factor in the Tampa and East Coast markets. 15. During all relevant times, Duval's Culbertson Mine was not producing at capacity. In 1972 it was producing about 1.4 million tons but had an estimated capacity of 2 million tons a year. 16. Prices in the Tampa market declined from about $45 per ton at the beginning of 1969 to about $25 per ton in 1971. 17. In 1969, when sulphur prices decreased rapidly, Azufrera shipped only 11,397 tons of sulphur in the Tampa area. Thus, in 1969, Azufrera was for all practical purposes out of the Tampa market. 18. Azufrera was out of the Tampa market in 1969 as a result of its decision, during a period of sulphur shortage in the years 1964 to 1968, to divert its sulphur to other markets where higher prices prevailed and not to renew existing contracts in the United States when they came up for renewal. Page 206 19. As a result of Azufrera's decision, during the period of sulphur shortage in the years 1964 to 1968, to divert its sulphur to other markets where higher prices prevailed, some of its existing customers in the United States were able to obtain only "pro-rated" amounts, while others were unable either to obtain any sulphur at all or were able to obtain sulphur only at prices higher than those which their competitors were paying for domestic supplies. 20. In 1970, Azufrera vigorously pursued sulphur contract negotiations with ten United States purchasers. Six of these ten United States purchasers (C. F. Chemicals, Agrico Chemical Co., American Cyanamid, W. R. Grace & Co., USS Agri-Chemicals, and Standard Spray & Chem. Co.) were also customers of Freeport and most of these six were Azufrera customers in previous years. 21. In 1970, Azufrera re-entered the Tampa sulphur market, increasing its sales in that market from 11,397 tons in 1969 to 130,962 tons. Of these 130,962 tons, 98,868 tons were sold to one customer, C. F. Chemicals. 22. The Tampa market increased by approximately 362,000 tons from 1969 to 1970 and by approximately 466,000 tons from 1969 to 1971. 23. In 1970, Duval increased its sales in the Tampa market by 203,000 tons over 1969. TGS increased its sales by 145,000 tons. Freeport lost 95,000 tons. Azufrera increased its sales by about 120,000 tons. 24. In 1971, Duval again made a strong gain, increasing its sales by 111,000 tons over 1970. Freeport, TGS and Azufrera remained at essentially the same level as in 1970. 25. Sometime in 1971, Freeport lowered its price to $25 per ton. 26. The initiation of the antidumping investigation in 1971 had a strong deterrent effect on Azufrera's sales. On October 6, 1971, Azufrera notified all customers of a $3 per ton increase. 27. In February 1972, Freeport announced an increase in its offering price of $3 per ton. Duval and TGS followed suit. In March 1972, Freeport rescinded its announced price increase. Freeport satisfied itself that the "increase wasn't sticking." Azufrera was not selling in the Tampa market at that time. 28. As of the date of the Tariff Commission hearing in March 1972, some nine Frasch mines out of a total of 21 had been shut down. 29. While each geographical sulphur market has its own price, a drastic price cut in one market has a...

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