Shikoku Chemicals Corp. v. US, Court No. 91-05-00389.
| Decision Date | 18 May 1992 |
| Docket Number | Court No. 91-05-00389. |
| Citation | 16 CIT 382,795 F. Supp. 417 |
| Parties | SHIKOKU CHEMICALS CORPORATION, Mitsubishi Corporation, and Mitsubishi International Corporation, Plaintiffs, v. The UNITED STATES, Defendant. |
| Court | U.S. Court of International Trade |
Weil, Gotshal & Manges, A. Paul Victor, Douglas A. Nave and David W. Oliver, New York City, for plaintiffs.
Stuart M. Gerson, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice, Washington, D.C. (Vanessa P. Sciarra, Jeffrey C. Lowe, Office of Chief Counsel for Import Admin., U.S. Dept. of Commerce, of counsel), for defendant.
The plaintiffs in this action, Shikoku Chemicals Corporation ("Shikoku"), Mitsubishi Corporation, and Mitsubishi International Corporation,1 challenge the final results of the Department of Commerce ("Commerce") in the antidumping administrative reviews for cyanuric acid and its chlorinated derivatives from Japan as set forth in Cyanuric Acid and its Chlorinated Derivatives from Japan, 56 Fed.Reg. 19,338 (Dep't Comm. Apr. 26, 1991) ("Final Det."). This determination covered cyanuric acid and its chlorinated derivatives, dichloro isocyanurates ("DCA") and trichloro isocyanuric acid ("TCA").2 Plaintiffs are not appealing Commerce's determination regarding cyanuric acid; for reasons which will explained infra, the only merchandise involved in the present appeal is DCA.
On February 29, 1984, Commerce published a notice of final determination in the Federal Register that cyanuric acid, DCA and TCA from Japan were being sold at less than fair value in the United States. Cyanuric Acid and its Chlorinated Derivatives from Japan Used in the Swimming Pool Trade, 49 Fed.Reg. 7,424 (Dep't Comm.1984). An antidumping duty order covering the subject merchandise was published on April 27, 1984. Cyanuric Acid and its Chlorinated Derivatives from Japan Used in the Swimming Pool Trade, 49 Fed.Reg. 18,148 (Dep't Comm.1984).
Over a period of almost five years, Commerce conducted four administrative reviews of cyanuric acid, DCA and TCA.3 In the determination at issue in this appeal, Commerce published the results of its fifth and sixth administrative reviews. Final Det. at 19,338.
Although Commerce established a margin of .66 percent for plaintiffs' sales of TCA in the first administrative review, no dumping margins above a de minimis level were found in the second, third and fourth administrative reviews. After finding a de minimis dumping margin in the fifth and sixth administrative reviews, Commerce revoked the antidumping duty order covering TCA. Final Det. at 19,342. Plaintiffs do not challenge Commerce's determination regarding TCA.
For plaintiffs' sales of DCA, Commerce established a dumping margin of 9.66 percent in the first administrative review. The dumping margin was found to be de minimis in the second administrative review. In the third and fourth administrative reviews, Commerce assigned DCA a margin of zero. In the fifth and sixth administrative reviews, however, Commerce established a dumping margin of .81 and .91 percent, respectively, for plaintiffs' DCA sales. Accordingly, Commerce refused plaintiffs' request to revoke the anti-dumping duty order covering DCA.4
Plaintiffs appeal Commerce's decision, and request the court to issue a judgment on the administrative record. Briefs were submitted by the parties, and oral argument was held on February 27, 1992. At oral argument, the court requested the parties file supplemental briefs regarding Commerce's calculation of plaintiffs' adjustment for home market packing expenses.
In the original LTFV investigation and the first four administrative reviews, Commerce permitted Shikoku to adjust home market prices to reflect charges paid by Shikoku to its subcontractor for repacking DCA from exportable granular merchandise to a form suitable for home market sale. Commerce calculated the amount of the home market price adjustment by dividing Shikoku's total expenses for repackaging by the total volume of repackaged granular and tablet merchandise. In the final determination, however, Commerce altered its method of allocation by excluding from the repacking costs identifiable costs of making tablets. Under this approach, the home market repacking expenses were diminished, and a more than de minimis margin resulted.
Plaintiffs argue that they have been unfairly penalized because Commerce has applied a new methodology retroactively in spite of Shikoku's reliance over the years on the old formula. In addition, plaintiffs argue the new method is rife with inconsistencies and errors.
In response, Commerce argues that the method of calculation employed in the final determination is reasonable because the foreign market value adjustment should reflect only the percentage of repackaging expenses that is directly attributable to granular merchandise since this is the only form sold in the United States. The crux of Commerce's argument is that the revised calculation is in fact more accurate and reliable than the undifferentiated expense data used in the first four administrative reviews. Commerce submits that this is not a change in methodology, but rather a utilization of more accurate data. Alternatively, Commerce contends that even if the court finds this to be a change in methodology, the final determination should still be sustained because Commerce adequately explained its decision, and the decision is supported by substantial evidence on the record.
Plaintiffs raise several arguments concerning the accuracy of the new calculation. Commerce's new approach was an attempt to eliminate expenses that were directly attributable to making tablets and tablet repackaging, because chlorinated derivative ("CD") products in tablet form were not exported to the United States during the period of investigation. The change was made as a result of information requested and obtained during the last verification. Assuming no other distorting factors were present, elimination of these irrelevant expenses would produce a more accurate calculation of the labor expenses incurred in packing granular CD merchandise. Plaintiffs contend, however, that the new approach continues to use allocations, not actual expenses and the result is not an improvement.
In their initial briefs, plaintiffs argued that Commerce reduced Shikoku's repacking costs by subtracting certain costs of making tablets, and then allocating the remaining packing expenses over both granular and tablet merchandise resulting in an unreasonably small expense adjustment. The government responded by contending that the denominator of the equation contains a typographical error; in fact, Shikoku's tablet production was not included in the results. The court finds that Commerce is correct on this point and the denominator does not reflect tablet production. Although a number representing tablet merchandise appears in the denominator, the equation works out to the stated answer only if tablet merchandise is omitted from the denominator. See Verification Report ( ) at 17.
At oral argument, plaintiffs raised two additional points regarding packing costs in Commerce's calculation from Shikoku's fixed rate for labor expenses, which they claimed indicated that the new calculation was not more accurate. The first point concerned the inclusion of cyanuric acid. Plaintiffs argue that since Shikoku sold only granular chlorinated derivatives (DCA and TCA) in the United States market during the relevant time period, under Commerce's new approach packing data related to cyanuric acid should have been excluded.
Shikoku's wholly-owned subcontractor, Shikoku Kosan performed all drum packing and repacking functions for both cyanuric acid and CD products. Specifically, Shikoku Kosan packed the merchandise into drums, changed the granular product into tablet form, repackaged granular products sold in the home market, and delivered the products from the packaging area to the loading area.5 Verif.Rep. at 14. Shikoku paid Shikoku Kosan a gross fixed monthly payment for the aforementioned services in addition to a piece rate for repackaging CD products. Id. The fixed monthly rate encompasses costs of repackaging of cyanuric acid as well as CD products.
There appears to be no dispute regarding the first two services performed by Shikoku Kosan: drum packaging and making tablets. Commerce was able to exclude expenses related to cyanuric acid production from its calculation of such costs because Shikoku distinguished between the two kinds of merchandise in its calculations. Thus, such expenses related to cyanuric acid production are separable from the expenses pertaining to CD products. Case repacking expenses, however, were not segregated by Commerce.
Case repacking involved the repackaging of cyanuric acid and CD products sold in the home market from drums to bags or boxes. Shikoku used a single figure for case repacking expenses in the calculation of the fixed labor rate. Commerce alleges that it did not differentiate between CD products and cyanuric acid with respect to repacking expenses because it lacked sufficient data for allocation of these expenses between cyanuric acid and CD products. It is unclear whether Commerce could have refined its calculation by obtaining more information at verification. It certainly did not request this type of information prior to verification or in any earlier administrative review.
At oral argument, plaintiffs also argued that Commerce incorrectly included small quantities of powders in the calculation of Shikoku's total granular CD production. Plaintiffs contend that the resulting figure is inaccurate because only granular CD merchandise was sold in the United States during the applicable time period, and under Commerce's new approach...
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