Fundicao Tupy SA v. US

• Decision Date: 12 January 1988
• Docket Number: Court No. 86-06-00765.
• Citation: 678 F. Supp. 898
• Parties: FUNDICAO TUPY S.A., and Tupy American Foundry Corporation, Plaintiffs, v. The UNITED STATES, Defendant, and Cast Iron Pipe Fittings Committee, Defendant-Intervenor.
• Court: U.S. Court of International Trade

678 F. Supp. 898

FUNDICAO TUPY S.A., and Tupy American Foundry Corporation, Plaintiffs, v. The UNITED STATES, Defendant and Cast Iron Pipe Fittings Committee, Defendant-Intervenor.

Court No. 86-06-00765.

United States Court of International Trade.

January 12, 1988.

Freeman, Wasserman & Schneider, Patrick C. Reed and Jerry Wiskin, New York City, for plaintiffs.

Richard K. Willard, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice, J. Kevin Horgan, Edwin J. Madaj, U.S. International Trade Commission, Washington, D.C., for defendant.

Rose, Schmidt, Hasley & DiSalle, Peter Buck Feller and Lawrence J. Bogard, Washington, D.C., for defendant-intervenor.

Before WATSON, DiCARLO and TSOUCALAS, JJ.

WATSON, Judge.

Plaintiffs commenced this action challenging the final determinations of the International Trade Administration (ITA) and International Trade Commission (ITC) which resulted in an antidumping order on malleable cast iron pipe fittings from Brazil. Plaintiffs challenge the ITA's decision to disallow "an adjustment to the home market price for a level of trade difference between the United States and the home market sales claimed by plaintiffs because they failed to demonstrate that they had incurred different costs in selling at different levels of trade in the home market." Malleable Cast Iron Pipe Fittings, Other Than Grooved, from Brazil, 51 Fed.Reg. 10,898 (Mar. 31, 1986) (final dumping determination). Plaintiffs also contest the ITC's decision to cumulatively assess the volume and impact of Brazilian, Korean, and Taiwanese imports of the subject merchandise in finding that material injury was resulting to an industry in the United States.

The final determination by ITA of sales at less than fair value was issued on March 31, 1986. 51 Fed.Reg. 10,897. The final determination of material injury by the ITC appears in Certain Cast-Iron Pipe Fittings from Brazil, the Republic of Korea and Taiwan, Invs. Nos. 731-TA-278 through 280 (Final), USITC Pub. 1845 (May 1986); 51 Fed.Reg. 18,670 (May 21, 1986).

In Fundicao Tupy S.A. v. United States, 11 CIT ___, 652 F.Supp. 1538 (1987), Chief Judge Re assigned this action to a three-judge panel pursuant to 28 U.S.C. § 255(a) (1982) and Rule 77(d)(2) of the Rules of this Court.

Plaintiffs' first claim is that ITA erred in the determination that the cast iron pipe fittings were being sold here at less than fair value, by failing to make an adjustment downward of the foreign market value to account for asserted higher costs arising from the fact that these products are sold to retailers in the foreign market as opposed to distributors in the United States market. According to plaintiffs, this adjustment should have been made pursuant to 19 C.F.R. § 353.19, a regulation which sets out the authority of the ITA to make appropriate adjustments for difference in the level of trade from which the prices being compared are derived. The government takes the position that it cannot assume that the costs associated with selling to distributors in the United States would have been the same had this product been sold through distributors in Brazil; that it is reasonable to place a burden on the party seeking the benefit of those assertedly lower selling costs, of proving by credible evidence what such costs would have been, and that the burden was not satisfied in this proceeding.

Plaintiffs claim that their proof of the higher costs of retail sales in Brazil as opposed to the lower costs of sales to distributors in the United States satisfied that burden; that the burden proposed by the ITA would be impossible to satisfy and further, would conflict with the terms of the law governing the adjustments that should be made to foreign market value when sales in the foreign market and the United States market are in different commercial levels of trade. Plaintiffs assert that under Section 773(a)(4)(B) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1677b(a)(4)(B), as well as the relevant regulation, 19 C.F.R. § 353.19 the ITA is required to adjust foreign market value whenever United States sales and home market sales occur in different commercial levels of trade, regardless of whether the party claiming the adjustment has demonstrated a basis for quantifying the adjustment.

The Court finds that the plaintiffs have overstated the difficulties of the burden placed on them and have proposed an excessively confined role for ITA in its decision on whether to adjust foreign market value.

The ITA's rejection of the United States costs of distributors sales as evidence of what the costs of distributors sales in Brazil would have been cannot be characterized as unreasonable or an abuse of discretion in the absence of proof that such costs are internationally uniform. It was open to plaintiffs to demonstrate the costs of such a distribution operation in Brazil by means of expert testimony and proof directly relating to the establishment of such a distribution network. Contrary to plaintiffs' assertion, this would not have violated the statutory ban on the use of pretended sales or fictitious markets in arriving at foreign market value, a prohibition expressed in 19 U.S.C. § 1677b(a)(1) and 19 C.F.R. § 353.18. Those provisions are plainly intended to bar the use of falsified information and do not present an obstacle to the offering of evidence as to what costs might be in certain hypothetical situations.

It may be a fact of economic life that the costs of selling to a distributor in Brazil must be lower than the costs of selling to retailers for the simple reason that the distributor must be able to turn around and sell the articles to the retailers. However, it is a legal and administrative fact of life that the measurement of this lower cost is a duty of ITA which has the authority to impose such reasonable burdens of proof on the parties to the investigation as may be necessary to reach a final determination. The ITA was not bound to accept proof of the costs of sales to distributors in the United States as applicable to Brazil. This was not the holding of the court in Silver Reed America, Inc. v. United States, 7 CIT 23, 581 F.Supp. 1290 (1984), rev'd on other grounds sub. nom. Consumer Products Div., SCM Corp. v. Silver Reed America, Inc., 3 Fed.Cir. (T) 83, 753 F.2d 1033 (1985), CIT remand order vacated, Silver Reed America, Inc. v. United States, 9 CIT 221 (1985). In that action the court held that the ITA could not deny a level of trade cost adjustment solely because both the United States and home market purchasers of portable electric typewriters were made in large wholesale quantities. The court did not hold that the cost data provided by the plaintiff with respect to the cost expenses of wholesale transactions in the United States (as opposed to home market retail sales of typewriters) was sufficient for making of a determination as to the level of trade cost adjustment. Instead, the court remanded the case to the ITA in order for it to determine whether the plaintiff had adequately quantified its claimed adjustment. The remand order was never implemented because it was vacated by the court.

To summarize, the ITA acted within the limits of its discretion in refusing to accept the costs of...