Zenith Electronics Corp. v. US

Citation755 F. Supp. 397
Decision Date19 December 1990
Docket NumberCourt No. 88-02-00122.
PartiesZENITH ELECTRONICS CORPORATION, et al., Plaintiffs, v. The UNITED STATES, Defendant.
CourtU.S. Court of International Trade

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Frederick L. Ikenson, P.C. (Frederick L. Ikenson and J. Eric Nissley, of counsel), for plaintiff Zenith Electronics Corp.

Paul, Weiss, Rifkind, Wharton & Garrison (Robert E. Montgomery, Jr., of counsel), for plaintiffs NEC Corp. and NEC Home Electronics (U.S.A.), Inc.

Baker & McKenzie (Thomas P. Ondeck and Arthur L. George, of counsel), for plaintiffs Mitsubishi Elec. Corp. and Mitsubishi Elec. Sales America, Inc.

Siegel Mandell & Davidson, P.C. (Brian S. Goldstein, Judith M. Barzilay and David Newman, of counsel), for plaintiff Fujitsu General Ltd.

Stuart M. Gerson, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civ. Div., Velta A. Melnbrencis, attorney, for defendant.

Weil, Gotshal & Manges (Stuart M. Rosen, A. Paul Victor and Charles H. Bayar of counsel), for amici curiae Matsushita Elec. Indus. Co., Ltd., et al.

MEMORANDUM OPINION AND ORDER

WATSON, Judge:

This consolidated action covers challenges to antidumping duty determinations and involves Zenith Electronics Corporation ("Zenith"), an American manufacturer of television sets, and three Japanese manufacturers, who are Fujitsu General, Ltd. ("Fujitsu"), Mitsubishi Electric Corporation ("Mitsubishi"), and NEC Corporation and the related subsidiaries of the Japanese manufacturers. The Court has also permitted the participation of Amici Curiae.1

The parties contest the final determination of the United States Department of Commerce ("Commerce"), International Trade Administration ("ITA"), in Television Receivers, Monochrome and Color, from Japan: Final Results of Antidumping Duty Administrative Review, 53 Fed. Reg. 4050 (February 11, 1988). Commerce's determination stems from an administrative review of alleged dumping of television receivers, monochrome and color, from Japan, covering five manufacturers and/or exporters, and the periods between April 1, 1982 through March 31, 1983 and March 1, 1985 through February 28, 1986. Commerce identified a dumping margin, and assessed antidumping duties. A cash deposit was required of the manufacturers, pursuant to Commerce Department regulations. 19 C.F.R. § 353.48 (1988).

Presently before the Court are motions by Zenith, Fujitsu, NEC and Mitsubishi for judgment upon the agency record in Case No. 88-02-00122. A variety of issues are involved, related to ITA's manner of calculating and determining the antidumping duty.

Zenith asserts that Commerce must adhere to this court's ruling in Zenith Elecs. Corp. v. United States, 10 C.I.T. 268, 633 F.Supp. 1382 (1986) ("Zenith I"), which provides that under 19 U.S.C. § 1677a(d)(1)(C) (1980), the adjustments for a Japanese commodity tax must be calculated by (1) increasing the United States Price ("USP") by the amount of foreign taxes forgiven upon exports rather than decreasing the Foreign Market Value ("FMV") by that amount, and by (2) "capping" or limiting the adjustment to the amount of such taxes that are actually included in the home market price of the comparison merchandise, or "passed through" to the consumer in the home market.2 Claiming that the Department of Commerce ignored the court's ruling in Zenith I, Zenith asserts that Commerce erred by (1) using a circumstances of sale adjustment to neutralize the effect of the tax adjustment, and (2) by failing to cap the tax adjustment to USP at the amount of tax added to, included in, or actually "passed through" in the home market price.

Fujitsu claims that Commerce correctly made the circumstances of sale adjustment for commodity tax in the home market, and that it should also have done so in calculating the cash deposit rate for estimated dumping duties.3

Fujitsu and NEC argue that Commerce erred in failing to adhere to a settlement agreement entered into with twenty-three importers of Japanese color television receivers4 on April 28, 1980 ("Settlement Agreement"). In particular, they claim that in calculating the dumping margin in this case, Commerce departed from the "traditional methodology" for such calculations to which it was bound by the Settlement Agreement.5 The defendant, United States, opposes this argument, claiming that the "traditional methodology" referred to a departure from the commodity tax method for deriving the FMV, and a return to the previously used method of adjusting U.S. and Japanese prices pursuant to the statute. NEC also argues that Commerce applied fixed rules to some of its determinations without complying with the Administrative Procedure Act.

Fujitsu and NEC further argue that in its calculation of the FMV to be compared to the USP, Commerce wrongfully considered all markets in Japan, rather than "principal markets," which compose the "ordinary course of trade." Fujitsu claims that farmers' cooperatives as well as small retail stores in rural areas of Japan should have been excluded from the calculations because they are not principal markets, and operate outside of the ordinary course of trade.

Remaining issues for which the parties seek relief are:

-Fujitsu claims that imputed finance costs in the home market should be calculated, and FMV adjusted appropriately.
-Fujitsu claims that Commerce should have included indirect selling expenses (attributable to its Domestic Marketing Group) in the exporter's sales price (ESP) offset claim.
-NEC claims that Commerce erred in disallowing its claimed adjustment for advertising and sales promotional expenses; in refusing to make "level of trade" adjustments; and, in failing to deduct the full amount of NEC's home market warranty and inland freight expenses from the FMV.
-Mitsubishi claims that Commerce misinterpreted Japanese commodity law, and based its calculation on transfer prices to related sales subsidiaries rather than sales by a related company to an unrelated customer; incorrectly used a time period for calculating advertising expense other than the fiscal year to which this review pertains; incorrectly calculated home market freight expense; erred in not adjusting for differences in circumstances of sale as mandated by Timken Co. v. United States, 11 C.I.T. 786, 673 F.Supp. 495 (1987); incorrectly deemed warranty labor payments to a related warranty service company indirect expenses; and made several technical errors.
BACKGROUND

The Antidumping Act6 provides relief to a domestic industry which is materially injured or threatened with material injury by the sale of foreign goods in this country at less than fair value ("LTFV"), or below the market value of those goods in the country of exportation. The Act authorizes the Secretary of the Treasury to determine when such dumping occurs, or is likely to occur, and to impose a duty in such circumstances to eliminate the margin of dumping. 19 U.S.C. § 1673 (1980). The Act is not intended to penalize the foreign industry, but to protect the domestic industry which is likely to be injured or prevented from being established by the sale of foreign goods in the United States market at LTFV.7

An antidumping duty investigation is commenced when the administering authority determines that it is warranted. 19 U.S.C. § 1673a. Except where there is a negative finding and review is dismissed, there is a preliminary determination, 19 U.S.C. § 1673b, generally followed by a final determination. 19 U.S.C. § 1673d. An antidumping duty is then assessed and imposed, and the deposit of estimated duties is required pending liquidation of the entries of merchandise. 19 U.S.C. § 1673e.

The amount of antidumping duty, imposed to correct the "dumping margin," is determined by comparing the FMV to the USP. 19 U.S.C. § 1677b. In making this comparison, various adjustments are made for certain costs, expenses and duties, pursuant to statute.8 The "absolute dumping margin" for a sale is the amount by which FMV exceeds USP after the appropriate upward and downward adjustments are made, pursuant to statutory provisions and Commerce Department regulations.

The dumping margin should not be increased as a result of taxes assessed on the home market but forgiven on export sales by the country of exportation. Thus, the statute provides that an offset adjustment should be used in calculating USP to compensate for such a home market tax, stating that the purchase price and exporter's sales price shall be increased by:

The amount of any taxes imposed in the country of exportation directly upon the exported merchandise or components thereof, which have been rebated, or which have not been collected, by reason of the exportation of the merchandise to the United States, but only to the extent that such taxes are added to or included in the price of such or similar merchandise when sold in the country of exportation.

19 U.S.C. § 1677a(d)(1)(C).

In Zenith I, this Court discussed that issue at length, recognizing that the above adjustment consists of two components. First, the USP "is to be increased by the amount of foreign taxes imposed directly upon the exported merchandise ... which have been forgiven (rebated or not collected) because the merchandise was exported to the United States." Zenith I, 10 C.I.T. at 272, 633 F.Supp. at 1385. In other words, the statute does not provide for the FMV to be reduced by the amount in question, but for the USP to be increased. "Second, the adjustment is to be limited or `capped' by the amount that such taxes are added to or included in the price of comparison merchandise sold in the home market." Id. This means that when the foreign manufacturer absorbs some or all of the tax imposed, the increase to USP is not to exceed the amount of the tax which is actually "passed through" to the foreign market consumer.

In part, this case is concerned with Commerce's...

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