714 F.Supp. 1211 (CIT. 1989), 86-06-00753, Ipsco, Inc. v. United States

Docket Nº:Court No. 86-06-00753.
Citation:714 F.Supp. 1211
Party Name:IPSCO, INC. and Ipsco Steel, Inc., Plaintiffs, and The Algoma Steel Corp., Ltd. and Sonco Steel Tube Div. Ferrum, Inc., Plaintiff-Intervenors, v. The UNITED STATES, Defendant, and Lone Star Steel Company, Defendant-Intervenor.
Case Date:May 18, 1989
Court:Court of International Trade

Page 1211

714 F.Supp. 1211 (CIT. 1989)

IPSCO, INC. and Ipsco Steel, Inc., Plaintiffs,

and

The Algoma Steel Corp., Ltd. and Sonco Steel Tube Div. Ferrum, Inc., Plaintiff-Intervenors,

v.

The UNITED STATES, Defendant,

and

Lone Star Steel Company, Defendant-Intervenor.

Court No. 86-06-00753.

United States Court of International Trade.

May 18, 1989

Page 1212

Barnes, Richardson & Colburn, Rufus E. Jarman, Jr., Karin M. Burke, Josephine N. Belli, New York City, for plaintiffs.

Dow, Lohnes & Albertson, William Silverman, Carrie A. Simon, Douglas J. Heffner, Washington, D.C., for plaintiff-intervenor Sonco Steel.

John R. Bolton, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Platte B. Moring, III, Civil Div., U.S. Dept. of Justice, Craig L. Jackson Atty.-Advisor, Office of the Chief Counsel for Import Admin., U.S. Dept. of Commerce, Washington, D.C., for defendant.

Dewey, Ballantine, Bushby, Palmer & Wood, Michael H. Stein, Audrey Winter and Akin, Gump, Strauss, Hauer & Feld, Warren E. Connelly, Valerie A. Slater, and Angela J. Paolini, Washington, D.C., for defendant-intervenor.

OPINION

RESTANI, Judge:

Plaintiffs, Ipsco, Inc. and Ipsco Steel, Inc. (Ipsco) bring this action challenging the final determination by the United States Department of Commerce, International Trade Administration (ITA) that oil country tubular goods (OCTG) from Canada are being sold in the United States at less than fair value. Oil Country Tubular Goods from Canada, 51 Fed.Reg. 15,029 (Apr. 22, 1986), as amended 51 Fed.Reg. 29,579. In its opinion of May 6, 1988, Ipsco, Inc. v. United States, 12 CIT 384, 687 F.Supp. 633, the court remanded this action to ITA for reconsideration and a fuller explanation of the agency's reasons for treating limited service OCTG as a fully costed co-product of prime OCTG in its calculations of constructed value 1 and for a clarification of the agency's treatment of certain experimental merchandise exported to the United States. In its Remand Determination of September 2, 1988 (Remand Determination), ITA upheld its previous determination with regard to these two issues. Plaintiffs presently challenge these remand results.

DISCUSSION

I. ITA'S TREATMENT OF LIMITED SERVICE OCTG

In the previous opinion, the court ordered ITA to reconsider and explain why it had chosen to treat limited service OCTG as a fully costed co-product of prime quality OCTG in its calculations of constructed value rather than as a by-product of prime as requested by plaintiffs in their submissions to the agency. In the remand determination, after considering the use of the product

Page 1213

and "whether the costs of production and sales value of the product are treated under Generally Accepted Accounting Principles ("GAAP") as co-products or by-products of the chief product," ITA determined that limited service OCTG is properly classified as a co-product of prime OCTG. 2 Remand Determination at 3.

In analyzing cost of production and sales value, ITA relied considerably on its finding that Ipsco treated its limited service pipe as a co-product of prime OCTG in certain financial statements which it claims are based on GAAP. In those statements, Ipsco did not accord limited service pipe by-product accounting treatment. Instead, the financial statements relied upon assign limited service pipe significant sales value and costs, both of which are reported along with the costs and sales value of the chief product. Such reporting, ITA concludes, is consistent with GAAP treatment of co-products. ITA acknowledges that Ipsco does not treat limited service OCTG as a co-product in its cost accounting system, but disregards this information because "Ipsco is not required to employ GAAP for its internal accounting." Remand Determination at 6 n. 7.

Ipsco contests ITA's findings on this issue and claims that it did not treat limited service OCTG as a co-product for purposes of its financial statements. Ipsco claims that its cost accounting system, which was disregarded by ITA and which treats limited service pipe as a by-product, is prepared in accordance with GAAP. Furthermore, Ipsco contends that the financial statement relied on by ITA was an internal document for use by Ipsco for its own purposes and was not prepared in accordance with GAAP. Specifically, Ipsco claims that the cost figures would have to be adjusted downwards in order for the figures contained in this statement to comply with GAAP.

Briefing and argument following remand, however, have demonstrated that answering the question of whether limited service OCTG is properly categorized as a by-product or co-product of prime OCTG does not resolve the pertinent issue before the court, that is, how cost of production and constructed value should be calculated for purposes of the antidumping laws if two differently valued and priced products are produced by the same production process. Before GAAP or any other ordinary costing methodology is used, ITA must determine if the statute, either expressly or impliedly, directs ITA to calculate cost of production and constructed value in some other way.

Plaintiffs do not contest the fact that limited service OCTG is subject to this investigation. In order for ITA to make the fair value comparisons required by law, ITA is obligated to arrive at a foreign market value for such limited service OCTG. Both the GAAP by-product accounting methodology proposed by plaintiffs and the equal allocation accounting methodology employed by ITA lead to a number of problems in this regard.

A. Plaintiffs' proposed by-product accounting methodology

Throughout these proceedings, plaintiffs have suggested two alternative methods for calculating constructed value. Plaintiffs proposed that ITA value limited service OCTG at either the uniform accounting cost utilized by Ipsco for purposes of its cost accounting system (an amount equal to the estimated market value of limited service OCTG) or alternatively, that such OCTG be valued at its actual net realizable value. Either method, plaintiffs argue, would yield an amount to be credited against prime cost, consistent with GAAP and prior ITA practice. Plaintiffs further argue that the values which the by-product methodology yields should serve as the basis for...

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