Aimcor v. U.S., Slip Op. 99-37.

• Decision Date: 17 December 1999
• Docket Number: Court No. 96-12-02868.,Slip Op. 99-37.
• Citation: 86 F.Supp.2d 1248
• Parties: AIMCOR and SKW Metals & Alloys, Inc., Plaintiffs, v. UNITED STATES, Defendant, and Companhia de Ferro Ligas da Bahia, Defendant-Intervenor.
• Court: U.S. Court of International Trade

86 F.Supp.2d 1248

AIMCOR and SKW Metals & Alloys, Inc., Plaintiffs, v. UNITED STATES, Defendant and Companhia de Ferro Ligas da Bahia, Defendant-Intervenor.

Slip Op. 99-37.

Court No. 96-12-02868.

United States Court of International Trade.

December 17, 1999.

Baker & Botts, L.L.P., Washington, DC (William D. Kramer and Martin Schaefermeier), for plaintiffs.

David W. Ogden, Acting Assistant Attorney General; David M. Cohen, Director; U.S. Department of Justice, Civil Division, Commercial Litigation Branch, (Kenneth S. Kessler); Peter Kirchgraber, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of counsel, for defendant.

OPINION

WALLACH, Judge.

I INTRODUCTION

This case comes before the Court on Plaintiffs' Motion For Judgment Upon The Agency Record ("Plaintiffs' Motion"). Plaintiffs challenge the decision of the International Trade Administration of the U.S. Department of Commerce ("Commerce" or "the Department") not to apply its methodology for hyperinflationary economies or otherwise adjust the direct cost-of-materials reported by Defendant-Intervenor, Companhia de Ferro Ligas da Bahia ("Ferbasa"), to account for hyperinflation. For the reasons below, the Court finds Commerce's decision not to be supported by substantial record evidence, since (a) Commerce failed to explain why, in contrast to previous examinations, it would not examine whether hyperinflation distorted costs incurred before the relevant reporting period; (b) Commerce appears to have erred in its assumptions concerning hyperinflation in Brazil and Ferbasa's inventory turnover period; and (c) Commerce failed to address certain record evidence which indicates that Ferbasa's costs were distorted by hyperinflation. Accordingly, a further remand is necessary to allow Commerce to remedy its apparent errors or, where appropriate, provide further explanations.

II BACKGROUND

Underlying Plaintiffs' Motion is Commerce's administrative review in Ferrosilicon From Brazil; Final Results of Antidumping Duty Administrative Review ("Final Results"), 61 Fed.Reg. 59,407 (1996), which covered exports of ferrosilicon by Ferbasa for the period August 16, 1993, through February 28, 1995. In this review, AIMCOR and SKW Metals & Alloys, Inc. requested that Commerce use its hyperinflationary methodology in measuring the cost-of-production of Ferbasa's home-market sales. Application of this methodology would have entailed using the replacement cost of Ferbasa's raw materials in inventory, as opposed to the historic or "normal inventory value" of such materials, in valuing Ferbasa's cost-of-production. Final Results, 61 Fed.Reg. at 59,408. According to Plaintiffs, such action was necessary to keep Ferbasa's reported cost-of-materials from being distorted by hyperinflation, since the materials in Ferbasa's inventory were valued at the time of purchase, but not used in production until a later time. Id. at 59,407.

In the Final Results, Commerce rejected Plaintiffs' suggestion, finding that, although Brazil experienced hyperinflation during the review period as a whole, it did not experience hyperinflation during the six months of the period of review (September 1, 1994, through February 28, 1995) in which the home-market sales at issue took place. Id. at 59,408. Further, Commerce found Plaintiffs' argument that Ferbasa's material costs were distorted by inventory bought during a period of hyperinflation to be "speculative and not supported by facts on the record." Id. Commerce noted that because the home market sales in question occurred fully two months after the period of hyperinflation ended (in June 1994), and because Ferbasa had an inventory turnover rate of approximately one month, it could reasonably conclude that Ferbasa's "costs were not distorted by inflation." Id.

Despite this initial rejection of Plaintiffs' requested adjustments, on June 18, 1998, Commerce asked that the Court remand this action so that it could reconsider using its hyperinflationary methodology. See Defendant's Motion For A Remand of June 18, 1998. Commerce requested this remand because, upon review of the record, it found that Brazil's economy had experienced hyperinflation through at least the beginning of August 1994, and not, as it initially found in the Final Results, through June 1994. Id. at 5. Separately, Commerce also requested a remand so that it could correct and review its treatment of certain kinds of interest income. Id. at 6. By Order dated June 24, 1998, the Court granted Defendant's Motion and remanded this case for further consideration of these issues.

On December 7, 1998, Commerce issued its Final Results Of Redetermination Pursuant To Court Remand ("Redetermination"). In the Redetermination, Commerce again found that, although the Brazilian economy (on average) experienced hyperinflation over the period of review, application of its hyperinflationary methodology was inappropriate for valuing Ferbasa's cost-of-production. Specifically, Commerce stated as follows:

During the administrative proceeding, Ferbasa notified the Department at an early stage of this review that it made only one U.S. sale of ferrosilicon during the POR [period of review] (i.e., that sale took place in December 1994). Given this single sale, Ferbasa requested the Department's permission to report cost and sales information for only those home market sales of subject merchandise that were made contemporaneously with the reported U.S. sale. Because under our matching methodology we would analyze only home market sales made during the window of contemporaneity [sales within 90 days before and 60 days after the month of the U.S. sale], we allowed Ferbasa to report only six months worth of cost and home market sales data.

We agree with AIMCOR that the annual inflation rate in Brazil during the entire 18-month POR was hyperinflationary. However, for purposes of our analysis, we must consider the particular circumstances of this case, namely, that we decided to allow Ferbasa to report home market sales and cost data for a limited six-month period covering September 1994 through February 1995. Thus, our analysis must focus on this limited period, as opposed to the entire POR. The record evidence in this case demonstrates, and AIMCOR does not dispute this fact, that the inflation rate for the six-month period for which Ferbasa reported its costs is only 9.9 percent, or 21 percent per annum. We thus determine that the six-month reporting period in this case is not hyperinflationary.

Redetermination at 4-5 (citations and footnotes omitted). Because Commerce found that the six-month reporting period was not hyperinflationary (and, accordingly, that application of its hyperinflationary methodology was not necessary), it continued to rely upon Ferbasa's historical cost data in calculating its cost-of-production. Id. at 19.

In the Redetermination, Commerce also rejected Plaintiffs' argument that, notwithstanding the lack of hyperinflation during the six-month reporting period, Ferbasa's reported costs should be adjusted to account for hyperinflation prior to the reporting period. First, Commerce noted that its practice is to look to the relevant reporting period to determine whether an economy is hyperinflationary, and not to shift the reporting period to adjust for inflation in a prior period. Id. at 19. Even if Commerce had accepted Plaintiffs' argument that it should take into account Ferbasa's 37-day inventory turnover period, however, Commerce noted that "the rate of inflation during this period would not exceed 50 percent, and therefore, would not be considered hyperinflationary." Id. at 20. In this regard, Commerce also observed that "[a]lthough the actual inventory turnover period is 37 days, the month of August covers 31 of the 37 days. It is therefore reasonable to state that the September costs are based on August prices." Id. at 20 n. 5.

Second, Commerce disagreed with the conclusions Plaintiffs drew from the evidence at hand. Examining Plaintiffs' argument that Ferbasa's input purchase prices for the six-month reporting period greatly exceeded the cost of its material inputs consumed during this period, Commerce stated:

We do not agree with AIMCOR's implied conclusion since it is already clear from the record that inflation in Brazil during the six-month reporting period was not hyperinflationary. Moreover, the values cited by AIMCOR appear to reflect total consumption value and total purchases value without regard to quantities. Therefore, these figures are irrelevant to any analysis of distortion of cost data resorting from inflation.

Id. at 20 (citation omitted).

In addition to its findings concerning hyperinflation, and in accordance with the Court's Order of June 24, 1998, in the Redetermination Commerce deducted from Ferbasa's claimed offset to financial expenses both the interest income it collected for late payments on outstanding accounts receivables and the income Ferbasa derived from currency fluctuations that positively affected its accounts receivables. Id. at 9-11, 15.¹ Also per the Court's instruction, Commerce reexamined the other categories of interest income reported by Ferbasa and found that, in all instances, Ferbasa failed to adequately demonstrate that the income at issue was short-term interest income that should be used to offset its financial expenses in the calculation of cost-of-production and constructed value. Id. at 11-15, 24-32. In so finding, Commerce reversed the position it had taken in the Final Results. See id. at 8 (citing Final Results, 61 Fed.Reg. at 59,412-13).

Because Plaintiffs claim that Commerce has now "correctly made no offset to Ferbasa's financial expenses," and no longer challenges this aspect of the Final Results, the Court does not address this issue in the analysis below. See Supplemental Brief In Support Of Plaintiffs' Motion For Judgment Upon The Agency Record ("Supplemental Brief") at 16...