636 F.Supp. 961 (CIT. 1986), 84-3-00387, Ceramica Regiomontana, S.A. v. United States

Docket Nº:84-3-00387.
Citation:636 F.Supp. 961
Party Name:CERAMICA REGIOMONTANA, S.A., et al., Plaintiffs, and Internacional De Ceramica, Plaintiff-Intervenor, v. UNITED STATES, et al., Defendants, and Tile Council of America, Inc., Defendant-Intervenor.
Case Date:May 29, 1986
Court:Court of International Trade

Page 961

636 F.Supp. 961 (CIT. 1986)

CERAMICA REGIOMONTANA, S.A., et al., Plaintiffs,


Internacional De Ceramica, Plaintiff-Intervenor,


UNITED STATES, et al., Defendants,


Tile Council of America, Inc., Defendant-Intervenor.

No. 84-3-00387.

United States Court of International Trade.

May 29, 1986

Page 962

Brownstein Zeidman and Schomer (Irwin P. Altschuler, Steven P. Kersner, and David R. Amerine), Washington, D.C., for plaintiffs.

Wilkie Farr & Gallagher (Noel Hemmendinger, Walter J. Spak, and Jeffrey W. Carr), Washington, D.C., for plaintiff-intervenor.

Richard K. Willard, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch (A. David Lafer), Washington, D.C., for defendant.

Howrey & Simon (David C. Murchison, John F. Bruce, Kevin P. O'Rourke, and Rosemary Henry), Washington, D.C., for defendant-intervenor.


RE, Chief Judge:

Plaintiffs, Ceramica Regiomontana (Ceramica) and Industrias Intercontinental (Industrias), contest the final results of an administrative review by the International Trade Administration (ITA) of the Commerce Department of a countervailing duty order for ceramic tile from Mexico. 49 Fed.Reg. 9,919 (1984). The administrative review was conducted pursuant to section 751 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1675 (1982). Plaintiffs are joined in their motion by plaintiff-intervenor Internacional De Ceramica (Interceramica).

Plaintiffs have moved for judgment upon the agency record, pursuant to Rule 56.1 of the Rules of this Court. Defendant, United States, opposes this motion, and urges that the ITA's determination be upheld. Defendant-intervenor, Tile Council of America, also opposes the plaintiffs' motion.

Plaintiffs contend that the methodology used by the ITA to calculate the countervailing duty rates was improper and not supported by substantial evidence. After reviewing the administrative record, the pleadings and contentions of the parties, and the supporting papers, this Court holds that the determination made by the ITA is supported by substantial evidence on the

Page 963

record, and is in accordance with law. Consequently, plaintiffs' motion for judgment on the agency record is denied.

Administrative Proceedings

On May 10, 1982, the ITA issued its Final Affirmative Countervailing Duty Determination; Ceramic Tile from Mexico and Countervailing Duty Order, with respect to imports of ceramic tile manufactured, produced and exported from Mexico. 47 Fed.Reg. 20,012 (1982). The ceramic tile covered in the investigation included non-mosaic, glazed and unglazed ceramic floor and wall tile classifiable under items 532.24 and 532.27 of the Tariff Schedules of the United States (TSUS). In this investigation, commenced in response to a petition filed by the defendant-intervenor Tile Council of America, the ITA determined that three programs implemented by the Mexican Government constituted countervailable subsidies. These programs are CEDI, FOMEX, and CEPROFI.

Pursuant to the first program, Certificado de Devolucion de Impuesto (CEDI), a certificate is issued by the government of Mexico in an amount equal to a percentage of the value of exported merchandise. The CEDI certificates may be used to pay a variety of federal tax liabilities, such as payroll taxes, value added taxes, federal income taxes, and import duties. From January 1, 1982 through August 25, 1982, the CEDI rate was 15 percent of the value of exports, and zero for the remainder of 1982 because the Mexican Government suspended the CEDI program for all exports on or after August 26, 1982.

The Fund for the Promotion of Exports of Mexican Manufactured Products (FOMEX) is the second program found by the ITA to constitute a countervailable subsidy. FOMEX is a trust fund established by the Mexican Treasury Department, with the Bank of Mexico acting as trustee. Through financial institutions, the Bank of Mexico makes FOMEX loans available at preferential rates to manufacturers and exporters for pre-export production and export financing.

Certificates of Fiscal Promotion (CEPROFI), the third program, are tax certificates which are used to promote the goals of the National Industrial Development Plan. These certificates are granted in conjunction with investments in designated industrial activities and geographic regions, and may be used to pay a wide range of federal tax liabilities.

Plaintiffs do not contend that these programs are not countervailable subsidies. Instead, plaintiffs object to the methodology employed by the ITA in calculating a single countervailing duty rate for all Mexican exporters of ceramic tile to the United States who received benefits under any of the three programs. Specifically, plaintiffs challenge the ITA's calculation of the country-wide duty rate attributable to CEDI benefits.

On January 18, 1983, the ITA notified the Mexican Government that it was conducting its periodic administrative review of the countervailing duty order on ceramic tile from Mexico, pursuant to section 751 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1675(a). The ITA asked the Mexican government to complete a countervailing duty questionnaire pertaining to ceramic tile exports for 1982. The ITA requested information regarding the rate of CEDI benefits applicable to exports of ceramic tile in 1982. The ITA also requested a list of all firms that received CEDI benefits during 1982 and the amounts received by each firm. The ITA further requested a list of FOMEX loans and loan terms granted to ceramic tile firms during 1982. With respect to CEPROFI benefits, the ITA requested a listing of each ceramic tile firm receiving these benefits and the amount of benefit received in 1982. The ITA informed the Mexican government that firms that did not receive any subsidy benefits could avoid the countervailing duty deposit rate by applying for a zero deposit rate. To qualify for a zero deposit rate, firms were required to certify that they did not apply for or receive benefits under the CEDI, FOMEX or CEPROFI programs,

Page 964

and would not apply for these benefits in the future.

The Mexican government responded to the ITA's questionnaire on March 14, 1983. The Mexican government stated that it did not maintain consistent statistics on ceramic tile exports because these products were grouped with others in its export records. Nevertheless, it attempted to compile the requested data. The Mexican government reported that 29 firms exported ceramic tile to the United States in 1982. According to the Mexican government, six of these firms received CEDI benefits. CEDI benefits were provided, the Mexican government stated, at a rate of 15 percent of the export value. The government requested that 15 of the 29 firms receive the zero duty deposit rate because they did not receive benefits under any countervailable program.

From April 26, 1983 through May 6, 1983, ITA personnel conducted a verification investigation in Mexico of the information provided by the Mexican government. These officials met with representatives of the Mexican government and with officials of various ceramic tile firms to verify the countervailing duty questionnaire responses. The Mexican government confirmed that the CEDI rate for 1982 had been increased from 10 percent to 15 percent in March 1982, retroactive to January 1, 1982. The government also confirmed that the CEDI benefit program was suspended on August 25, 1982, and did not apply to any shipments exported on or after August 26, 1982.

At verification, ITA officials reviewed the records of the two largest exporters of ceramic tile to the United States, plaintiffs Ceramica and Industrias. During review of Industrias, a significant discrepancy was discovered between the amount of CEDI benefits reported by the Mexican government and the figures kept by Industrias. Officials at Industrias informed the ITA that the correct CEDI figure for exports to the United States was much higher than the figure the Mexican government had originally reported. Industrias then provided the ITA with a revised amount of CEDI benefits the firm received in 1982. In June 1983 the Mexican government provided the ITA with revised figures on the CEDI benefits received by Industrias. The ITA, however, was not able to verify these figures as accurate. Also at verification, officials at both Ceramica and Industrias indicated that their firms took full advantage of the CEDI program.

The ITA issued the preliminary results of the administrative review on September 26, 1983. 48 Fed.Reg. 43,705 (1983). The ITA determined that ten firms met the zero duty certification requirements. The ITA also determined that the net total subsidy for 1982 under the CEDI program was equal to 10.27 percent ad valorem. 48 Fed.Reg. at 43,706. An internal ITA memorandum, dated July 14, 1983, explained the methodology used to arrive at the 10.27 percentage rate:

CEDI. This is a subsidy available on all exports. The rate was 15% for exports from January 1--August 25, 1982. CEDI was suspended for all exports from Mexico on or after August 26, 1982. Rather than issuing two separate rates, I calculated a weighted average for the year. I took the IM 146 import statistics for January--August 1982 times 15 percent to get the theoretical maximum CEDI benefit for 1982, and divided that by the total IM 146 import figures for 1982 to get the weighted average of 10.27 percent.

A.R. 443-44. The effect of the weighted average, therefore, was to reduce the 15 percent benefit to 10.27 percent to account for the termination of CEDI benefits, effective August 26, 1982.

The final results of the 1982 administrative review were published on March 16, 1984. 49 Fed.Reg. 9,919 (1984). The ITA basically used the same methodology it utilized in its preliminary determination, with two exceptions. First, the ITA eliminated data covering...

To continue reading