Far East Machinery Co., Ltd. v. US

• Citation: 688 F. Supp. 610,12 CIT 428
• Decision Date: 19 May 1988
• Docket Number: Court No. 87-01-00003.
• Parties: FAR EAST MACHINERY CO., LTD., Plaintiff, v. UNITED STATES, Defendant, Atcor, Inc., Sawhill Tubular Div., Cyclops Corp., and Wheatland Tube Corp., Defendant-Intervenors.
• Court: U.S. Court of International Trade

688 F. Supp. 610

12 CIT 428

FAR EAST MACHINERY CO., LTD., Plaintiff, v. UNITED STATES, Defendant, Atcor, Inc., Sawhill Tubular Div., Cyclops Corp., and Wheatland Tube Corp., Defendant-Intervenors.

Court No. 87-01-00003.

United States Court of International Trade.

May 19, 1988.

Davis, Wright & Jones, David Simon, Washington, D.C., for plaintiff.

John R. Bolton, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Jeanne E. Davidson, Washington, D.C., Civ. Div., U.S. Dept. of Justice, for defendant.

Schagrin Associates, Roger B. Schagrin, R. Alan Luberda and Paul W. Jameson, Washington, D.C., for defendant-intervenors.

OPINION AND ORDER

RESTANI, Judge:

Plaintiff, Far East Machinery Co. (FEMCO), challenges the final results of the first administrative review of an antidumping duty order conducted by the United States Department of Commerce, International Trade Administration (ITA). The primary issue raised by plaintiff's motion for judgment upon ITA's record is whether ITA erred in denying FEMCO's claimed adjustment to United States price for rebated Taiwanese import duties.

CASE HISTORY

When ITA conducted its original investigation of sales at less than fair value, FEMCO, a Taiwan producer of steel pipe, was not one of the investigated companies. Its imports were nevertheless subject to the antidumping duty deposit rate of 9.7 percent set for "All other manufacturers/producers/exporters" of the covered steel products from Taiwan. Certain Circular Welded Steel Pipes and Tubes from Taiwan, 49 Fed.Reg. 19,369 (May 7, 1984) (Antidumping Duty Order). Plaintiff confirmed its participation in ITA's first annual review on November 30, 1984. The review was deemed initiated a year later, 50 Fed.Reg. 48,825, 48,826 (Nov. 27, 1985), under ITA's new rules and at plaintiff's request.¹ Public Record Document (PR) 34.

ITA then published its preliminary results, finding a margin of 37.76 percent for plaintiff, and stating that "We disallowed a claim for an adjustment for import duty drawback because this claim was insufficiently substantiated." Certain Circular Welded Steel Pipes and Tubes from Taiwan, 51 Fed.Reg. 29,954 (Aug. 21, 1986). In the final results, this claim was again disallowed and a margin of 41.22 percent was found. Certain Circular Welded Steel Pipes and Tubes from Taiwan, 51 Fed.Reg. 43,946 (Dec. 5, 1986) (final determination). ITA noted that "a significant portion of the margin was due to the inadequacy of FEMCO's submission...." Id. at 43,948.

BACKGROUND

Under U.S. antidumping law generally, ITA may issue an antidumping duty order, after certain findings have been made, upon imported merchandise which is sold (or likely to be sold) in the United States for less than its fair value. 19 U.S.C. § 1673 (1982). Upon request, ITA will conduct an administrative review of its antidumping order, determining the "United States price" and "foreign market value" of each entry of merchandise subject to the antidumping order, and the amount, if any, by which foreign market value exceeds the United States price of entries. 19 U.S.C. §§ 1675, 1677a-1677b (1982 & Supp. IV 1986). That amount is then used as the basis for assessing duties on the examined entries, and collecting deposits of estimated duties on future entries. 19 U.S.C. § 1675.

In determining the United States price of merchandise, ITA begins with the price at which merchandise is exchanged, or agreed to be exchanged, between unrelated parties, and through various additions and reductions, arrives at an amount called "United States price."² PQ Corp. v. United States, 11 CIT ___, 652 F.Supp. 724, 730 (1987). See Smith-Corona Group v. United States, 713 F.2d 1568, 1571-72 (Fed.Cir. 1983) cert. denied, 465 U.S. 1022, 104 S.Ct. 1274, 79 L.Ed.2d 679 (1984). The statutory adjustments to United States price (and to foreign market value) are made "in an attempt to reconstruct the price at a specific, `common' point in the chain of commerce, so that value can be fairly compared on an equivalent basis." Smith-Corona, 713 F.2d at 1571-72.

This case is concerned with one of the adjustments to United States price, often referred to as a duty drawback adjustment, which provides for increasing United States price by

the amount of any import duties imposed by the country of exportation which have been rebated, or which have not been collected, by reason of the exportation of the merchandise to the United States;

Id.; 19 U.S.C. § 1677a(d)(1)(B) (1982). See 19 C.F.R. § 353.10(d)(1)(ii) (1987). As with any adjustment which increases United States price, a drawback adjustment can ultimately result in a lowering of dumping margins. This court has interpreted the purpose of a duty drawback adjustment as follows:

To prevent dumping margins from arising because the exporting country rebates import duties and taxes for raw materials used in exported merchandise, the antidumping law provides for an offsetting adjustment in the calculation of United States price.

Carlisle Tire & Rubber Co. v. United States, 10 CIT ___, 634 F.Supp. 419, 424 (1986) (Carlisle II). See S.Rep. No. 16, 67th Cong., 1st Sess. 12 (1921).³

DISCUSSION

ITA claims to apply the following two prong test in determining whether to make a drawback adjustment to United States price:

First, that the import duty and rebate are directly linked to, and dependent upon, one another.

Second, that the company claiming the adjustment can demonstrate that there were sufficient imports of imported raw materials to account for the duty drawback received on the exports of the manufactured product.

ITA, Study of Antidumping Adjustments Methodology and Recommendations for Statutory Change 26-27 (Nov. 1985); Carlisle Tire & Rubber Co. v. United States, 11 CIT ___, 657 F.Supp. 1287, 1289 (1987) (Carlisle III). This court has recently found ITA's application of this test to be in accordance with law. Carlisle III, 657 F.Supp. at 1290-91.

The focus of the first part of this test, establishing a link between an import duty and a rebate, is on the drawback program itself, and requires a showing that entitlement to rebates is dependent upon the payment of duties. See Sorbitol from France, 47 Fed.Reg. 6,459, 6,460 (Feb. 12, 1982), aff'd, Roquette Freres v. United States, 7 CIT 88, 583 F.Supp. 599 (1984) and Certain Tapered Journal Roller Bearings and Parts Thereof from Italy, 49 Fed.Reg. 2,278, 2,280 (comment 5) (Jan. 19, 1984) (where rebates may be received absent payments of duties, the fact that the firm under investigation actually paid duties and received a rebate is irrelevant). The second part of the test, demonstrating sufficient imports of imported raw materials to account for the duty drawback received on the exports of the manufactured product, is by its very terms concerned with the specific application of the drawback program to the firm claiming an adjustment. See Carlisle II, 634 F.Supp. at 424 and Carlisle III, 657 F.Supp. at 1289-90 (ITA must limit duty rebate adjustments to the actual amount of duties imposed). Under this part of the test, ITA has applied "substitution principles" to relieve it of the difficult, if not impossible, task of determining whether the raw materials used in producing the exported merchandise actually came from imported or domestic sources. Acrylic Film, Strips and Sheets, at Least 0.030 Inch in Thickness from Taiwan, 49 Fed.Reg. 10,968, 10,972 (Mar. 23, 1984); Color Television Receivers from Taiwan, 49 Fed.Reg. 7,628, 7,632 (Mar. 1, 1984) (comment 3); Steel Wire Rope from the Republic of Korea, 48 Fed.Reg. 41,615, 41,616 (Sep. 16, 1983) (comment 1).

In this particular case, ITA explained its denial of FEMCO's claimed adjustment in terms of the second part of its test, with the additional requirement that the imported raw materials "must have been appropriate for incorporation into the exported subject merchandise." 51 Fed.Reg. at 43,947.⁴

Initially, plaintiff raised several challenges to ITA's denial of its claimed adjustment, and specifically to ITA's adoption and application of an appropriateness standard, arguing that ITA erred in requiring it to match the exact specifications of its imported coils to those of the exported pipes at issue. Defendant responds that FEMCO failed to meet its burdens of satisfying both prongs of ITA's test, as applied in this case, and that ITA's "assessment of the limited documentation submitted by FEMCO in support of its claimed adjustment is entitled to deference." Defendant's Brief at 30. None of the parties have cited any instance in which ITA directly addressed the situation presented in this case — either a specific inquiry by ITA into the appropriateness of imported inputs for incorporation into exported merchandise, or an actual dispute as to whether imported inputs were appropriate for incorporation into any exported merchandise at issue. But see Stainless Steel Cooking Ware from Taiwan, 51 Fed.Reg. 42,882 (Nov. 26, 1986) (decided days before ITA's final results in this case and concerning ITA's allowance of a drawback adjustment based upon aggregate, rather than segregated, data on various inputs, each of which was used in manufacturing some, but not all, of the various types of investigated cookware).

At oral argument plaintiff expressed clearly, apparently for the first time, its contention that one of the documents it had submitted to ITA (Attachment F) satisfied the second prong of ITA's test, even if the second prong is construed to include the requirement that imported coil inputs must have been appropriate for incorporation into the exported pipe. Until that time plaintiff had concentrated its arguments on ITA's proof requirements which plaintiff argued were not legally permissible and were inconsistent with ITA's practice in other cases. As it became apparent at oral argument that defendant-intervenors sought application of legal principles which ITA has not expressly adopted here or elsewhere, the court...