E.I. Du Pont De Nemours & Company v. U.S., Slip. Op. 98-46.

Decision Date15 April 1998
Docket NumberCourt No. 97-01-00055.,Slip. Op. 98-46.
PartiesE.I. DU PONT DE NEMOURS & COMPANY, Plaintiff, v. UNITED STATES of America, Defendant, Air Products and Chemicals, Inc., Defendant-Intervenor.
CourtU.S. Court of International Trade

Crowell & Moring LLP (Barry E. Cohen, Matthew Tuchband), Washington, DC, for Plaintiff.

Frank W. Hunger, Assistant Attorney General of the United States, David M. Cohen, Director, Commercial Litigation Branch, Civil Division, United States Department of Justice; Velta A. Melnbrencis, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice; Of Counsel, Linda A. Andros, Attorney-Advisor, Office of Chief Counsel for Import Administration, United States Department of Commerce, Washington, DC, for Defendant.

Ellis & Aeschliman (David R. Busam) and Wickens & Lebow (Edward M. Lebow), Washington, DC, for Defendant-Intervenor.

OPINION

POGUE, Judge.

This case is before the Court on Plaintiff's, E.I. DuPont de Nemours & Company ("DuPont"), motion for judgment upon the agency record pursuant to USCIT R. 56.2. The Plaintiff challenges the Department of Commerce ("Commerce") determination that polyvinyl alcohol ("PVA") produced in Taiwan from DuPont's own U.S.-origin materials is foreign merchandise within the scope of the antidumping duty order, entitled Polyvinyl Alcohol From Japan, the People's Republic of China, and Taiwan, 61 Fed.Reg. 24,286 (Dep't Commerce 1996)(antidumping duty ord.)("Order"). This Court has jurisdiction over this matter under 19 U.S.C. § 1516a(a)(2)(B)(vi)(1994) and 28 U.S.C. § 1581(c)(1994).

Background

In March 1995, Air Products and Chemicals, Inc. ("Air Products"), a domestic producer of PVA, filed a petition requesting that Commerce initiate an antidumping investigation of certain PVA from Taiwan.1 In April 1995, Commerce initiated the requested investigation to determine whether imports of PVA from Taiwan, were being, or were likely to be sold in the United States at less than fair value. Polyvinyl Alcohol From Japan, the Republic of Korea, the People's Republic of China, and Taiwan, 60 Fed.Reg. 17,053 (Dep't Commerce 1995)(init. antidumping duty investigation). The period of investigation ("POI") was April 4, 1994, through March 31, 1995. Polyvinyl Alcohol From Taiwan, 61 Fed.Reg. 14,064, 14,065 (Dep't Commerce 1996)(final det.).

As a result of its investigation, Commerce determined that the subject merchandise was being sold in the United States at less than fair value. Chang Chun Petrochemical Co., Ltd. ("Chang Chun"), the sole Taiwan producer of the subject merchandise was assigned an ad valorem weighted-average dumping margin of 19.21%. Id. at 14,073.

On May 14, 1996, Commerce published the Order covering PVA imported from Taiwan. The scope of the Order was defined as follows:

The merchandise covered by these orders is polyvinyl alcohol. Polyvinyl alcohol is a dry, white to cream-colored, water-soluble synthetic polymer. This product consists of polyvinyl alcohols hydrolyzed in excess of 85 percent, whether or not mixed or diluted with defoamer or boric acid. Excluded from this investigation are polyvinyl alcohols covalently bonded with acetoacetylate, carboxylic acid, or sulfonic acid uniformly present on all polymer chains in a concentration equal to or greater than two mole percent, and polyvinyl alcohols covalently bonded with silane uniformly present on all polymer chains in a concentration equal to or greater than one-tenth of one mole percent. Polyvinyl alcohol in fiber form is not included in the scope of these orders.

61 Fed.Reg. at 24,287.

On October 1, 1996, DuPont requested a scope ruling from Commerce pursuant to 19 C.F.R. § 353.29. See C.R. Doc. No. 1 (Application for Scope Determination: Polyvinvyl Alcohol From Taiwan, No. A-583-824, Oct. 1, 1996) ("Application"). Through this process, Commerce determines whether certain products fall within the scope of an order.2 See 19 C.F.R. § 353.29; Ericsson GE Mobile Communications, Inc. v. United States, 60 F.3d 778, 783 (Fed.Cir.1995).

Plaintiff's Application sought a ruling from Commerce excluding "PVA produced by" Chang Chun from DuPont's U.S.-origin vinyl acetate monomer ("VAM") pursuant to a contractual relationship with DuPont, from coverage under the Order. Application at 2-3. DuPont described its relationship with Chang Chun as "a tolling relationship, in which one party (the toll producer or toller) performs a manufacturing process on the goods of another party (the owner)." Id. at 3.

According to the Application, DuPont produces VAM in the United States and ships it to Chang Chun. Chang Chun performs a chemical process in which the VAM is polymerized into polyvinyl acetate. Id. at 2. The polyvinyl acetate is then converted to PVA in a second chemical process. A solvent aids the process, and certain other chemicals are used as processing aids. Id. "On completion of the conversion process, [most] of the PVA produced by Chang Chun is shipped by DuPont back to the United States. Sales of PVA are made by DuPont to customers in the United States and elsewhere." Id. at 3.

While DuPont recognizes that its PVA was imported from Taiwan, the company claims that "PVA toll-produced in Taiwan from DuPont's U.S.-origin raw materials and re-exported to the United States" is not within the scope of the Order because the imported PVA "is a [U.S.] product for antidumping purposes."3 Id. at 2, 5.

DuPont concedes that its PVA is Taiwanese for Customs' country-of-origin purposes; nonetheless, DuPont argues, it controls the entire production process; it manufactures PVA from U.S.-origin materials, and it controls the selling price of the final product. Pl.'s Brief at 22-23. Therefore, DuPont claims, Chang Chun is merely a "final processor" and Chang Chun's processing does not give the merchandise its national character. Id. at 22.

After determining that no formal scope inquiry was warranted, 19 C.F.R § 353.29(b), Commerce decided that "the product imported by DuPont falls within the antidumping order on PVA from Taiwan, unless [Commerce] conclude[s] that the U.S.-origin input provided by DuPont, VAM[,] is not substantially transformed in Taiwan (i.e., the processing of VAM into PVA does not constitute substantial transformation)." P.R. Doc. No. 5 at 3 (Final Scope Ruling on Antidumping Duty Order on Polyvinyl Alcohol from Taiwan, Dec. 19, 1996) ("Scope Determination").

Substantial transformation generally refers to a degree of processing or manufacturing resulting in a new and different article. See e.g., Cold-Rolled Carbon Steel Flat Products From Argentina, 58 Fed.Reg. 37,062, 37,066 (Dep't Commerce 1993)(final det.)(finding that galvanizing is a bonding process which changes the character and use of the sheet, therefore, a cold-rolled sheet that is galvanized in a subject country is substantially transformed into a product of that country); Limousines From Canada, 55 Fed.Reg. 11,036, 11,040 (Dep't Commerce 1990)(final det.)("The Department considers limousine conversion to be a sophisticated process which transforms the base vehicle into a new and different article of merchandise."). Using this standard, Commerce "examined whether the degree of processing or manufacturing" necessary to convert VAM into PVA "resulted in a new and different article," and determined that the processing by Chang Chun constituted substantial transformation. Scope Determination at 3. Commerce, therefore, concluded that "the imported PVA must be considered Taiwanese PVA that is subject to the order." Id.

Standard of Review

The Court of International Trade reviews Commerce's scope determination to decide whether it is in accordance with law and supported by substantial evidence. See Section 516A(b)(1)(B)(i) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(b)(1)(B)(i)(1994).

In determining whether Commerce's interpretation and application of the antidumping statute is in accordance with law, this court applies the two-step analysis articulated in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), as applied and refined by the Federal Circuit. The first task is "to determine whether Congress has `directly spoken to the precise question at issue.'" Id. If the statute unambiguously deals with the subject matter in issue, the court, as well as the agency, must give effect to the intent of Congress. Id.; see, e.g., Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland Cement v. United States, 13 F.3d 398, 402-403 (Fed. Cir.1994), cert. denied, 513 U.S. 813, 115 S.Ct. 67, 130 L.Ed.2d 23 (1994); Zenith Electronics Corp. v. United States, 988 F.2d 1573, 1582 (Fed.Cir.1993).

"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." Chevron, 467 U.S. at 843, 104 S.Ct. 2778. Considerable weight is accorded Commerce's construction of the antidumping laws, whether that construction manifests itself in the application of the statute, see, e.g., Daewoo Electronics Co. v. Int'l Union of Electronic, Elec., Technical, Salaried and Mach. Workers, 6 F.3d 1511, 1516 (Fed.Cir.1993), cert. denied, 512 U.S. 1204, 114 S.Ct. 2672, 129 L.Ed.2d 808 (1994); Fujitsu Gen. Ltd. v. United States, 88 F.3d 1034, 1039 (Fed.Cir.1996), or in the promulgation of a regulation, see, e.g., Smith-Corona Group v. United States, 713 F.2d 1568, 1575 (Fed.Cir.1983), cert. denied, 465 U.S. 1022, 104 S.Ct. 1274, 79 L.Ed.2d 679 (1984).

When examining Commerce's factual determinations to decide whether they are supported by substantial evidence, the court must determine whether the record contains "such relevant evidence as a reasonable mind might accept as adequate to support [Commerce's] conclusion." Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, ...

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