LMI-La Metalli Industriale, S.p.A. v. U.S., LMI--LA

• Decision Date: 17 August 1990
• Docket Number: No. 89-1532,LMI--LA,AFL-CIO,89-1532
• Citation: 912 F.2d 455
• Parties: METALLI INDUSTRIALE, S.p.A., Plaintiff-Appellant, v. The UNITED STATES, American Brass, Chase Brass & Copper Company, Hussey Copper Ltd., The Miller Company, Olin Corporation--Brass Group, Revere Copper Products, Inc., The International Association of Machinists & Aerospace Workers, The International Union, Allied Industrial Workers of America (), The Mechanics Educational Society of America (Local 56), and The United Steelworkers of America (/CLC), Defendants-Appellees.
• Court: U.S. Court of Appeals — Federal Circuit

Page 455

912 F.2d 455

12 ITRD 1627

LMI--LA METALLI INDUSTRIALE, S.p.A., Plaintiff-Appellant, v. The UNITED STATES, American Brass, Chase Brass & Copper Company, Hussey Copper Ltd., The Miller Company, Olin Corporation--Brass Group, Revere Copper Products, Inc., The International Association of Machinists & Aerospace Workers The International Union, Allied Industrial Workers of America (AFL-CIO), The Mechanics Educational Society of America (Local 56), and The United Steelworkers of America (AFL-CIO/CLC), Defendants-Appellees.

No. 89-1532.

United States Court of Appeals Federal Circuit.

Aug. 17, 1990.

David O. Elliott, Barnes, Richardson & Colburn, New York City, argued, for plaintiff-appellant. With him on brief, was Josephine Belli.

M. Martha Ries, Commercial Litigation Branch, Dept. of Justice, Washington, D.C., argued, for defendant-appellee, U.S. With her on brief, were Stuart E. Schiffer, Acting Asst. Atty. Gen. and David M. Cohen, Director. Also on brief, were Wendell L. Willkie, II, Gen. Counsel, Stephen J. Powell, Chief Counsel for Import Admin. and Robert E. Nielsen, Atty. Advisor, Office of Chief Counsel, U.S. Dept. of Commerce, Washington, D.C., of counsel.

Jeffrey S. Beckington, Collier, Shannon & Scott, Washington, D.C., argued, for defendants-appellees. With him on brief, were David A. Hartquist and Carol A. Mitchell.

Before NIES, Chief Judge, ^* NEWMAN and MICHEL, Circuit Judges.

PAULINE NEWMAN, Circuit Judge.

LMI-La Metalli Industriale, S.p.A. (hereinafter "LMI") appeals the judgment of the United States Court of International Trade, LMI-La Metalli Industriale, S.p.A. v. United States, 712 F.Supp. 959 (Ct. Int'l Trade), motion denied, 720 F.Supp. 176 (1989) (motion to enjoin liquidation of entries pending appeal denied), which affirmed the determination of the Department of Commerce International Trade Administration ("ITA") that sales of brass sheet and strip from Italy were at less than fair value. Brass Sheet and Strip from Italy, 52 Fed.Reg. 816 (Dep't Comm.) (final determination), amended, 52 Fed.Reg. 11,299 (1987). LMI challenges four of the rulings on which the determination was based, viz., the rate of the imputed cost of credit and the denial of circumstances of sale adjustments for home market selling commissions, pre-sale inventory expenses, and currency hedging expenses.

OPINION

We review the decision of the Court of International Trade for the correctness of that court's review of the findings and holdings made by the ITA in the course of its administrative determinations. Atlantic Sugar, Ltd. v. United States, 744 F.2d 1556, 1559 n. 10 (Fed.Cir.1984). By statute, 19 U.S.C. Sec. 1516a(b)(1)(B), the Court of International Trade shall hold unlawful any determination, finding, or conclusion of the ITA that is unsupported by substantial evidence on the record or otherwise not in accordance with law.

The ITA's determinations of foreign market value and United States price are governed by statute and regulation. The part here pertinent of 19 U.S.C. Sec. 1677b(a)(4)(B) states:

(4) Other Adjustments--In determining foreign market value, if it is established to the satisfaction of the administering authority that the amount of any difference between the United States price and the foreign market value (or that the fact that the United States price is the same as the foreign market value) is wholly or partly due to--

* * * * * *

(B) other differences in circumstances of sale;

* * * * * *

then due allowance shall be made therefor.

Implementing this section, 19 C.F.R. Sec. 353.15 (1988) provides:

(a) In general. In comparing the United States price with the sales, or other criteria applicable, on which a determination of foreign market value is to be based, reasonable allowances will be made for bona fide differences in the circumstances of the sales compared to the extent that it is established to the satisfaction of the Secretary that the amount of any price differential is wholly or partly due to such differences. Differences in circumstances of sale for which such allowances will be made are limited, in general, to those circumstances which bear a direct relationship to the sales which are under consideration.

(b) Examples. Examples of differences in circumstances of sale for which reasonable allowances generally will be made are those involving differences in credit terms.... Reasonable allowances also generally will be made for differences in commissions.

Home Market Inventory Carrying Costs

The Court of International Trade affirmed the ITA's denial of a circumstances of sale adjustment for LMI's pre-sale inventory expenses.

The ITA found that LMI's inventory carrying costs did not "bear a direct relationship to the sales which are under consideration," 19 C.F.R. Sec. 353.15(a), in that the warehousing costs were incurred before sale and thus were deemed not directly related to domestic sales, and further that LMI, in providing only its average cost of carrying its entire inventory, did not relate that cost directly to domestic sales of brass sheet and strip.

The facts on which the ITA's findings were based were disputed, LMI asserting that its inventory of finished products is maintained solely to service the requirements of its customers in Italy, that no warehousing is required for exported products, which are made to order, and therefore that the entire warehousing cost is directly related to domestic sales. In Asahi Chemical Industry Co. v. United States, 692 F.Supp. 1376 (Ct. Int'l Trade 1988), reh'g granted, dismissed as moot, 727 F.Supp. 625 (1989) the court applied the principle that warehousing expenses that were shown to be related solely to products for home market customers were allowable as a circumstances of sale adjustment.

However, LMI directs us to insufficient evidentiary support for its position that only products for home market sales were carried in inventory, as distinguished from the facts in Asahi. The ITA's findings are in accord with the analysis stated in Malleable Cast Iron Pipe Fittings, Other Than Grooved, From Brazil, 51 Fed.Reg. 10,897, 10,900 (Dep't Comm.1986) (final determination of sales at less than fair value):

Maintaining an inventory is a general cost of doing business and, therefore, is not considered directly related to particular sales. Moreover, [respondent's] inventory warehousing costs are figured based on the average inventory turnover for merchandise sold in the home market. These costs may vary on a sale by sale basis depending on the products requested by [respondent's] home market customers. Therefore, average inventory costs are not necessarily [a]n accurate measure of possible post-sale inventory costs incurred while out-of-stock fittings are produced.

We conclude that substantial evidence supports the ITA's determination that warehousing costs were not attributable solely to home market sales of the goods under investigation. The ruling on this point is affirmed.

Currency Hedging Expenses

The Court of International Trade affirmed the ITA's denial of a circumstances of sale adjustment for hedging expenses, on the basis that these costs were a general expense and not sufficiently related to sales in Italy of brass sheet and strip. LMI states that these expenses were incurred solely in connection with home market sales, and that they satisfy the congressional intent that circumstances of sale adjustments "should be permitted if they are reasonably identifiable, quantifiable, and directly related to the sales under consideration." H.R.Rep. No. 317, 96th Cong., 1st Sess. 76 (1979). See 19 U.S.C. Sec. 1677b(a)(4)(B).

LMI buys copper and zinc and other raw materials used in the manufacture of brass, on the world market. These purchases are required to be made in hard currency. LMI hedges the dollar cost of these materials by purchasing forward currency contracts. LMI explains that these hedging contracts assure that the payment it ultimately receives in lire, on its home market sales, will not decline in value relative to the dollar cost of the raw materials, by guaranteeing the availability of dollars at the rate of exchange in effect when the home market sale price is set.

The ITA, holding that the currency hedging costs were general operating expenses, argues that there was no segregation of the hedging expense for raw materials used in brass sheet and strip sold in the home market, and that for materials used for exported products. LMI responds that there is no need for dollar hedging for products intended for sale in the United States, for the sales value is not subject to erosion by changes in the relative values of the dollar and the lira; that the sole reason for incurring the cost of hedging is because of sales in the home market, and thus that the hedging expense should fairly be allocated to home market sales.

Although LMI argues that only the goods sold in Italy reflect these expenses, the ITA requirement was reasonable that LMI show a direct relation between its dollar hedging costs and sales in Italy of the products under investigation. On reviewing the record and argument, we conclude that substantial evidence supports the ITA's conclusion that this showing was not made. See Ipsco, Inc. v. United States, 687 F.Supp. 633, 642 (Ct. Int'l Trade 1988) (requiring that each expense be related to sales of the products under investigation).

The ruling denying allowance of currency hedging expenses is affirmed.

Home Market Selling Commissions

Allowances for differences in commissions are specifically contemplated in 19 C.F.R. Sec. 353.15, supra. However, the ITA denied any adjustment for commissions paid by LMI to Pontinox Metallitalia S.R.L. ("Pontinox"), a wholly owned Italian subsidiary of LMI. LMI claims that Pontinox is a bona fide sales agent, established and operating in full accord with agency principles.

The ITA stated that its policy is to deny adjustment for commissions paid to a related...