Zenith Electronics Corp. v. U.S.

• Decision Date: 12 February 1996
• Docket Number: No. 95-1139,95-1139
• Citation: 77 F.3d 426
• Parties: ZENITH ELECTRONICS CORPORATION, Plaintiff, v. The UNITED STATES, Defendant-Appellant, v. AOC INTERNATIONAL, INC., Fulet Electronic Industrial Co., Ltd., Sampo Corp., and Tatung Co., Defendants-Appellees, and Capetronic (BSR) Ltd., Defendant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 426

77 F.3d 426

17 ITRD 2441

ZENITH ELECTRONICS CORPORATION, Plaintiff, v. The UNITED STATES, Defendant-Appellant, v. AOC INTERNATIONAL, INC., Fulet Electronic Industrial Co., Ltd., Sampo Corp., and Tatung Co., Defendants-Appellees, and Capetronic (BSR) Ltd., Defendant.

No. 95-1139.

United States Court of Appeals Federal Circuit.

Feb. 12, 1996.

Rehearing Denied April 11, 1996.

Appealed from U.S. Court of International Trade; Judge Watson.

John K. Lapiana, Attorney, Department of Justice, Washington, DC, argued, for defendant-appellant, The United States. Frank W. Hunger, Assistant Attorney General and David M. Cohen, Director, Commercial Litigation Branch, Department of Justice, Washington, DC, were on the brief, for defendant-appellant. Of counsel was Velta A. Melnbrencis. Also on the brief was Rebecca Rejtman, Attorney-Advisor, Office of the General Counsel for Import Administration, U.S. Department of Commerce, of counsel.

Christopher M. Curran, White & Case, Washington, DC, argued, for defendants-appellees, AOC International, Inc., Fulet Electronics Industrial Co., Ltd., Sampo Corp., and Tatung Co. William J. Clinton, David E. Bond and Lisa L. Hubbard, White & Case, Washington, DC, were on the brief, for defendants-appellees.

Before MAYER, Circuit Judge, SKELTON, Senior Circuit Judge, and LOURIE, Circuit Judge.

MAYER, Circuit Judge.

The United States appeals the judgment of the United States Court of International Trade in AOC Int'l, Inc. v. United States, 721 F.Supp. 314 (Ct. Int'l Trade 1989), aff'd after remand sub nom. Zenith Elecs. Corp. v. United States, 865 F.Supp. 890 (Ct. Int'l Trade 1994), holding that the International Trade Administration of the United States Department of Commerce (Commerce), incorrectly calculated a circumstances-of-sale adjustment in determining antidumping duties to be imposed on color television receivers from Taiwan. Because the court did not defer to Commerce's reasonable interpretation and application of the statute at issue, we reverse and remand.

Background

Under antidumping laws, Commerce is required to impose additional duties on imported products being sold, or likely to be sold, at less than their fair value, to the harm of a domestic industry. 19 U.S.C. § 1673 (1982). ¹ The amount of such duties, known as the dumping margin, is equal to the "amount by which the foreign market value exceeds the United States price for the merchandise." Id. Commerce may calculate the United States price and the foreign market value on several alternative bases. United States price is calculated as either the United States "purchase price" or the "exporter's sales price," whichever is appropriate. Id. § 1677a (1982 & Supp.1984); see generally Sharp Corp. v. United States, 63 F.3d 1092, 1093-94 (Fed.Cir.1995); Koyo Seiko Co. v. United States, 36 F.3d 1565, 1567 (Fed.Cir.1994) (generally, if "the domestic importer is unrelated to, and independent of, the foreign producer, purchase price is used," otherwise exporter's sales price is used). Foreign market value, on the other hand, is computed on the basis of home market sales, third country sales, or constructed value, as appropriate. 19 U.S.C. § 1677b (1982 & Supp.1984); see Smith-Corona Group v. United States, 713 F.2d 1568, 1573 (Fed.Cir.1983) (home market sales are preferred; however, in the absence of adequate sales, third country sales or constructed value may be used).

"To ensure that the quantum of antidumping duties is calculated in a fair manner, both foreign market value and United States price are subject to certain adjustments in order to achieve a common point at which to perform the price comparison." Koyo Seiko, 36 F.3d at 1568; see also Torrington Co. v. United States, 68 F.3d 1347, 1352-53 (Fed.Cir.1995). After Commerce makes such adjustments, the two values are compared, and the amount by which foreign market value exceeds United States price is imposed as an additional antidumping duty. At issue in this appeal is Commerce's application of the "circumstances of sale" adjustment to foreign market value, set out at 19 U.S.C. § 1677b(a)(4)(B), in determining antidumping duties to be imposed on color television receivers from Taiwan.

In 1984 Commerce published an antidumping duty order on color television receivers, other than video monitors, from Taiwan. Color Television Receivers, other than Video Monitors, from Taiwan, 49 Fed.Reg. 18,337 (Dep't Comm.1984) (final determination). Thereafter, it published the final results of its first administrative review of that order, covering the period October 19, 1983, through March 31, 1985. Color Television Receivers, other than Video Monitors, from Taiwan, 51 Fed.Reg. 46,895 (Dep't Comm.1986) (final admin. review). In determining the dumping margins for that period, Commerce allowed the claims of AOC International, Inc.; Fulet Electronic Industrial Co., Ltd.; and Sampo Corp. ² (collectively "the CTV companies") for circumstances-of-sale adjustments to their respective foreign market values, ³ to account for differences between warranty expenses in their home market and those in the United States. ⁴ Id. at 46,898-900. However, Commerce limited the adjustments to the cost of parts used in performing the warranty repairs. It denied the CTV companies' claims for adjustments for the salaries and benefits they paid to in-house technicians who serviced the warranties. See id. (comments 11, 22, and 25). Commerce determined that the salaries and benefits of in-house warranty service personnel are indirect selling expenses that would have been incurred regardless of the sales under consideration. See, e.g., id. at 46,898 (comment 11). Consequently, it concluded that the CTV companies were not entitled to an adjustment for those expenses under section 1677b(a)(4)(B).

By contrast, in adjusting the United States prices of the CTV companies for warranty expenses, Commerce included the cost of labor incurred in servicing warranties through outside contractors. Color Television Receivers, other than Video Monitors, from Taiwan, 51 Fed.Reg. 37,317 (Dep't Comm.1986) (prelim. admin. review); AOC Int'l, 721 F.Supp. at 316. As a result, the adjustments for warranty expenses in the United States exceeded those in the home market, resulting in corresponding increases in the CTV companies' dumping margins. 721 F.Supp. at 316.

The CTV companies filed suit in the Court of International Trade, alleging that Commerce had abused its discretion in limiting the circumstances-of-sale adjustments to the cost of parts used in servicing the warranties. The CTV companies argued that all warranty-related costs are directly-related selling expenses subject to adjustment, including in-house labor costs in the home market. In response, the United States argued that "the overall eligibility of warranty expenses for an adjustment as directly-related selling expense [sic] does not per se qualify every component of warranty expenses to be included" in the adjustment. Id. Rather, each component of an adjustment must independently qualify as a directly-related selling expense.

The Court of International Trade agreed with the CTV companies. In granting the companies' motion for judgment on the administrative record, it held that there is no requirement in statute or regulation that "each individual component of a directly-related selling expense" independently qualify as such. Id. at 317. The court said that in-house labor costs incurred in servicing warranty repairs are not "fixed" costs incurred regardless of the sales under consideration. Id. at 316. Therefore, it remanded the case to Commerce for reconsideration. The court subsequently affirmed the remand results, Zenith Elecs. Corp., 865 F.Supp. 890, and this appeal followed.

Commerce argues that the Court of International Trade "erred in concluding that Commerce must accept all identifiable and quantifiable cost components contained in a claimed adjustment--regardless of whether all such components affect price." It claims that such an approach "is baldly at odds" with statutory and regulatory requirements, as well as legislative history and its longstanding practice that only costs directly related to the sales under consideration be included in the adjustment. Commerce also contends that the court was wrong in substituting its conclusion that in-house warranty labor expenses are direct expenses for Commerce's determination that they are not.

Discussion

The two issues before us are: whether the Court of International Trade erred in concluding that Commerce must include all cost components comprising a claimed circumstances-of-sale adjustment in making such an adjustment; and whether the court erred in holding that in-house warranty labor costs are direct expenses, and must be included in any such adjustment. On the first issue, we decide the proper interpretation of the governing statutes de novo. Koyo Seiko, 36 F.3d at 1570. We are guided, however, by Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), which says:

When a court reviews an agency's construction of the statute which it administers, it is confronted with two questions. First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute.

Id. at 842-43, 104 S.Ct. at 2781-82 (...