AD HOC COMMITTEE OF AZ-NM-TX-FL PROD. v. US

• Decision Date: 26 September 1994
• Docket Number: Slip Op. 94-151,Court No. 93-05-00273.
• Citation: 18 CIT 906,865 F. Supp. 857
• Parties: The AD HOC COMMITTEE OF AZ-NM-TX-FL PRODUCERS OF GRAY PORTLAND CEMENT and National Cement Company of California, Plaintiffs, v. The UNITED STATES, Defendant, and Cemex, S.A., Defendant-Intervenor.
• Court: U.S. Court of International Trade

865 F. Supp. 857

18 CIT 906

The AD HOC COMMITTEE OF AZ-NM-TX-FL PRODUCERS OF GRAY PORTLAND CEMENT and National Cement Company of California, Plaintiffs, v. The UNITED STATES, Defendant and Cemex, S.A., Defendant-Intervenor.

Slip Op. 94-151, Court No. 93-05-00273.

United States Court of International Trade.

September 26, 1994.

King & Spalding, Joseph W. Dorn, Michael P. Mabile, Gregory C. Dorris and Martin McNerney, Washington, DC, for plaintiffs.

Frank W. Hunger, Asst. Atty. Gen., David M. Cohen, Dir., Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice, Robert E. Kirschman, Jr., Terrence J. McCartin, Atty. Advisor, Office of the Chief Counsel for Import Admin., U.S. Dept. of Commerce, Washington, DC, of counsel, for defendant.

Manatt Phelps & Phillips, Irwin P. Altschuler, David R. Amerine, Ronald M. Wisla and Claudia G. Pasche, Washington, DC, for defendant-intervenor.

OPINION

RESTANI, Judge:

This matter is before the court on cross-motions for judgment on the agency record pursuant to USCIT R. 56.2. Plaintiffs, the Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland Cement and National Cement Company of California (collectively "the Committee") and defendant-intervenor, CEMEX, S.A. ("CEMEX"), challenge the results of the first administrative review of the antidumping order in Gray Portland Cement and Clinker from Mexico, 58 Fed. Reg. 25,803 (Dep't Comm.1993) (final admin. review). The issues presented are whether pre-sale home market transportation costs should have been deducted in the calculation of foreign market value ("FMV"), whether the value-added tax ("VAT") adjustment was proper, whether best information available ("BIA") should have been applied to CEMEX, and whether the BIA rate chosen was proper.

Background

On August 30, 1990, the International Trade Administration of the United States Department of Commerce ("Commerce") issued an antidumping order covering entries of gray portland cement and clinker from Mexico. Gray Portland Cement and Clinker from Mexico, 55 Fed.Reg. 35,443 (Dep't Comm.1990) (antidumping duty order). A margin of 58.38 percent was applied to CEMEX. Id.

On September 18, 1991, Commerce initiated its first administrative review of the antidumping order, covering entries from April 12, 1990 through July 31, 1991. On March 6, 1992, the Committee filed a complaint with Commerce alleging that during the review period CEMEX created fictitious home market sales within the meaning of 19 U.S.C. §§ 1677b(a)(1), (5) (1988). See Pls.' Conf.App., App. B.

On April 28, 1993, Commerce issued the final determination of the first review, applying a revised dumping margin of 30.44 percent for CEMEX and reaching a negative determination on the fictitious market issue. 58 Fed.Reg. at 25,803-04, 25,810.¹ On May 13, 1993, CEMEX filed an action challenging the final determination. On May 19, 1994, the Committee filed a separate action challenging Commerce's final determination as to respondent CEMEX. These actions were consolidated on June 16, 1993.

On November 30, 1993, the Committee moved for judgment on the agency record pursuant to USCIT R. 56.2. See USCIT R. 56.2. On April 18, 1994, CEMEX cross-moved for judgment on the agency record.² On the same date, CEMEX also moved to strike certain sections of the Committee's brief relating to the Committee's fictitious market argument.

The Committee had initially raised four arguments in its motion for judgment on the agency record: a/ CEMEX created a fictitious market; b/ Commerce erred in calculating CEMEX's cost of production by offsetting CEMEX's interest expense with a hypothetical monetary position gain; c/ Commerce erred in calculating FMV by deducting CEMEX's pre-sale home market transportation expenses; and d/ Commerce erred in adjusting for VAT by adding an absolute tax to the United States price ("USP").³

The Committee has withdrawn its fictitious market and monetary position gain arguments as a result of Commerce's second review, Gray Portland Cement and Clinker from Mexico, 58 Fed.Reg. 47,253, 47,255 (Dep't Comm.1993) (final) (excluding CEMEX's home market sales of Type II cement from calculation of FMV because outside ordinary course of trade), and the Federal Circuit's holding in Ad Hoc Comm. of AZ-NM-TX-FL Producers of Gray Portland Cement v. United States, 13 F.3d 398 (Fed.Cir.1994) (finding no inherent authority for ITA to deduct pre-sale home market transportation expenses from FMV).⁴ Thus the remaining issues presented by the Committee are: a/ the limits on deduction of home market presale transportation costs following Ad Hoc, and b/ VAT adjustment.⁵

CEMEX raises two arguments in its motion for judgment on the agency record: a/ Commerce erred in applying adverse BIA to the reclassified ESP sales, and b/ Commerce improperly applied BIA in calculating added materials costs for further manufactured concrete products.

Standard of Review

On a motion for judgment on the agency record, the scope of review of Commerce's determination is whether it is "unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1)(B) (1988). Substantial evidence is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Matsushita Elec. Indus. Co. v. United States, 750 F.2d 927, 933 (Fed.Cir.1984) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126 (1938)).

Discussion

A. Deduction of Pre-sale Home Market Transportation Expenses

As provided under 19 U.S.C. § 1677b(a)(4)(B),

in determining FMV, if it is established to the satisfaction of the administering authority that the amount of any difference between the USP and the FMV (or that the fact that the USP is the same as the FMV) is wholly or partly due to —

....

(B) other differences in circumstances of sale; ...

....

then due allowance shall be made therefor.

19 U.S.C. § 1677b(a)(4)(B) (1988). Commerce's implementing regulation generally requires a direct relationship between the expenses and the particular sales at issue before FMV may be adjusted. 19 C.F.R. § 353.56(a) (1993). For ESP comparisons, a circumstances of sale ("COS") adjustment is permitted for indirect expenses. Id. § 353.56(b)(2); see Consumer Prods. Div. v. Silver Reed America, Inc., 753 F.2d 1033, 1035-36 (Fed.Cir.1985).⁶ The regulation also provides for an ESP offset cap that, for ESP comparison purposes, caps the COS adjustment for indirect expenses at the level of indirect expenses incurred in the United States market. 19 C.F.R. § 353.56(b)(2).

The court first considers the Committee's claim that Commerce improperly deducted pre-sale home market transportation expenses⁷ in calculating FMV. The Committee argues that the Federal Circuit's holding in Ad Hoc precludes Commerce from deducting any pre-sale home market transportation costs in calculating FMV for PP or ESP comparisons. Commerce responds that a remand is required for it to conform its analysis to the holding of Ad Hoc, but also that Ad Hoc does not prohibit Commerce from invoking the COS provision contained in 19 U.S.C. § 1677b(a)(4) to deduct pre-sale home market transportation costs from FMV. CEMEX supports Commerce's view.

The Federal Circuit in Ad Hoc presented the issue on review as: "Whether the FMV provision of the antidumping statute, 19 U.S.C. § 1677b, authorizes a deduction from FMV of pre-sale transportation costs within the exporting country for goods sold within that country." Ad Hoc, 13 F.3d at 400. In Ad Hoc, Commerce had deducted pre-sale home market transportation costs from FMV in a purchase price ("PP") comparison pursuant to its "inherent authority" to fill "gaps" in the antidumping statute. Id. at 400-01. The Federal Circuit stated, "That Congress included a deduction for transportation costs from USP but not from FMV leads us to conclude that Congress did not intend pre-sale home-market transportation costs to be deducted from FMV." Id. at 402.

This is admittedly a broad statement, but recently in Torrington Co. v. United States, 850 F.Supp. 7 (Ct. Int'l Trade 1994), the court concluded that Ad Hoc only applies to calculation of FMV in PP comparisons (where the distinction between direct and indirect expenses is most relevant).⁸ 850 F.Supp. at 10. The Torrington court further stated that the Ad Hoc court "specifically noted that it was not ruling on whether the ITA has authority to adjust FMV for pre-sale inland freight pursuant to the COS provision." Id. The Torrington court, however, did not consider whether Commerce may make such a deduction for PP comparison purposes under the COS provision. In the present case, the Committee argues that the Torrington court misinterpreted the holding in Ad Hoc and that the COS provision is not applicable.

This court cannot accept so broad an interpretation of the Federal Circuit's holding in Ad Hoc as the Committee would have. As noted in Torrington, 850 F.Supp. at 10, the Federal Circuit in Ad Hoc stated that "although intervenors urge that we affirm the Court of International Trade judgment under the `circumstances of sale' provision, we decline the invitation. It is well settled that an agency's action may not be upheld on grounds other than those relied on by the agency." Ad Hoc, 13 F.3d at 401 n. 8 (citing SEC v. Chenery Corp., 332 U.S. 194, 196, 67 S.Ct. 1575, 1577, 91 L.Ed. 1995 (1947)). Thus, the Ad Hoc court did not address the applicability of the COS provision to home market transportation costs in the calculation of FMV.

Furthermore, to apply Ad Hoc more broadly, that is, to both ESP and PP COS adjustments and perhaps to post-sale transportation expenses, as full application of the Ad Hoc rationale might,⁹ would disregard Commerce's longstanding practice of deducting home market transportation costs under the COS provision.¹⁰ This is a practice to which Congress has apparently acquiesced.¹¹ If, despite prior practice and...