Cabot Corp. v. US

• Decision Date: 21 July 1988
• Docket Number: Court No. 86-09-01109.
• Citation: 694 F. Supp. 949
• Parties: CABOT CORPORATION, Plaintiff, v. UNITED STATES, Defendant, Hules Mexicanos, S.A., and Negromex, S.A., Defendant-Intervenors.
• Court: U.S. Court of International Trade

694 F. Supp. 949

CABOT CORPORATION, Plaintiff, v. UNITED STATES, Defendant, Hules Mexicanos, S.A., and Negromex, S.A., Defendant-Intervenors.

Court No. 86-09-01109.

United States Court of International Trade.

July 21, 1988.

Stewart and Stewart (Eugene L. Stewart, Terence P. Stewart, D. Scott Nance, Geert De Prest, and William A. Fennell, Washington, D.C., on the motion), for plaintiff.

Richard K. Willard, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civ. Div., Dept. of Justice (Sheila N. Ziff, Washington, D.C., on the motion), for defendant.

Rogers & Wells (Eugene T. Rossides, Washington, D.C., on the motion), for defendant-intervenors.

MEMORANDUM OPINION

CARMAN, Judge:

Plaintiff moves pursuant to Rule 56.1 of the rules of this Court for judgment on the agency record. Plaintiff challenges the final affirmative determination by the United States International Trade Administration (ITA) in the first administrative review in Carbon Black From Mexico, 51 Fed.Reg. 30385 (Aug. 26, 1986). The administrative review covered the period April 8, 1983 to September 30, 1983. It was completed pursuant to section 751 of the Tariff Act of 1930 the Act, as amended, 19 U.S.C. § 1675 (1986) 751 review.

Plaintiff contends the ITA's determination is unsupported by substantial evidence on the record or otherwise not in accordance with law within the meaning of section 516A of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(b)(1)(B) (1982). As its principal contention, plaintiff asserts the decision in Cabot Corp. v. United States, 9 CIT 489, 620 F.Supp. 722 (1985), appeal dismissed, 788 F.2d 1539 (Fed.Cir. 1986), vacated in part (CIT Nov. 20, 1986) Cabot I collaterally estops the ITA from arguing that the nonconforming approach taken by it was correct.

The defendant United States and the defendant-intervenors oppose the motion for judgment on the agency record. They urge that the decision in Cabot I has neither collateral estoppel nor stare decisis effect. The defendant and intervenors request a remand, however, solely for the purpose of recalculating the benefits conferred by the FOMEX and FONEI loans¹ with the use of effective rather than nominal interest rates.

The Court finds that while collateral estoppel does not apply against the government in this 751 review, the principles of Cabot I and PPG Industries, Inc. v. United States, ___ CIT ___, 662 F.Supp. 258 (1987), appeal docketed, No. 88-1175 (Fed. Cir. Dec. 28, 1987) apply perforce to the like facts of this case. As was held in the Cabot I and PPG decisions, "general availability" is not the prevailing standard under 19 U.S.C. § 1303 and 1677(5) (1982). To ensure that these statutory requirements are met, the Court directs a remand for a redetermination consistent with Cabot I and PPG.

FACTS

The countervailing duty investigation in this case culminated with the publication by the ITA of a final affirmative determination and order on carbon black² from Mexico. 48 Fed.Reg. 29564 (June 27, 1983). That determination was the subject of the Court's decision in Cabot I.

In Cabot I, the Court held that "the generally available benefits rule as developed and applied by the ITA is not an acceptable legal standard for determining the countervailability of benefits under section 1303." Cabot I, 9 CIT at 498, 620 F.Supp. at 732. The Court ordered a remand for further investigation and redetermination regarding Mexico's provision of carbon black feedstock CBFS and natural gas at government-set rates. 620 F.Supp. at 734.

At the time the Court issued the decision in Cabot I, the 751 review which is the subject of this action was proceeding. Following an appeal which was dismissed as premature, 788 F.2d 1539, the ITA moved for an extension of more than 150 days in which to file the remand redetermination.³ A few days before the final results of the 751 review were published in the Federal Register, the government moved to vacate the remand order in Cabot I and stay the proceedings pending the outcome of the motion to vacate. The Court granted the motion to vacate and affirmed final judgment except for those matters for which the action was remanded in Cabot I. See Order dated Nov. 20, 1986.

The 751 review which is the subject of this action covered the period April 8, 1983 to September 30, 1983. One of the primary issues raised in the review concerned the provision of CBFS in Mexico. CBFS is provided by Petroleos Mexicanos PEMEX, the government-controlled petroleum monopoly in Mexico. It is sold to only two producers of Mexican carbon black at prices not offered to any non-Mexican companies and at prices substantially below those elsewhere in the world. During the period under review, Mexican CBFS was sold to Mexican carbon black companies for $16 a ton in the second quarter of 1983 and $27 a ton in the third quarter. During the same timeframe, CBFS sold for approximately $130 and $136 a ton respectively in the United States. Public Document at 823, Cabot Corp. v. United States (No. 86-09-01109) Pub.Doc.. The import price of CBFS to the European Community EC during the period of review was approximately $151 per ton while the export price from the EC was $156 per ton. Pub.Doc., supra, at 952. Plaintiff's Brief in Support of Motion for Judgment on Agency Record at 5, Cabot Corp. v. United States, (No. 86-09-01109) Plaintiff's Brief.

In the preliminary determination, the ITA determined that there were too few users of CBFS to find it was "generally available." Pub.Doc., supra, at 677-78. The ITA therefore proceeded to determine whether or not CBFS was preferentially priced to carbon black producers. Id. at 678.

Because CBFS was used by only one industry in Mexico, the ITA was unable to utilize its standard preferentiality test. In accordance with this test, the ITA would have examined the PEMEX price of CBFS to carbon black producers to determine if this price was more favorable than the PEMEX price to other purchasers of CBFS in Mexico. Id. The ITA instead compared the PEMEX price of CBFS to the price charged by PEMEX for a generally available "similar or related good."

Finding that No. 6 fuel oil and CBFS were related products, and that a correlation existed between the prices of these two products, id. at 679, the ITA selected No. 6 fuel oil as the most appropriate "similar or related good." Adjustments were made to reflect the differences in costs between the two products. Id. at 679-80.

After examining the price of No. 6 fuel oil, the ITA preliminarily determined that CBFS was not preferentially priced to carbon black producers and therefore did not confer a countervailable subsidy. Id. at 680. In the final determination, the ITA employed the same methodology used in the preliminary determination except that it used quarterly price differentials between CBFS and No. 6 fuel oil instead of average differentials for the entire period. See id. at 1413. The ITA found a subsidy of 1.90 percent ad valorem. Id.

Concerning the provision of natural gas, the ITA preliminarily determined that natural gas was available on a non-specific basis. Id. at 676. The ITA therefore found that the differential between high export prices and low domestic prices of natural gas did not constitute a domestic subsidy. Id. at 677. The ITA's conclusions regarding the non-countervailability of natural gas apparently remained unchanged in the final determination. The ITA also found that three FOMEX export loans had been inadvertently excluded from the preliminary results. Id. at 1405. After including these loans, the ITA found the total FOMEX benefit to be 0.52 percent ad valorem. Id. The ITA found the total bounty or grant during the period of review to be 3.18 percent ad valorem. Id. at 1415.

Plaintiff contends that since the agency failed to comply with the requirement of the countervailing duty law as articulated in Cabot I, the ITA's valuation of the extent of the benefit from the provision of CBFS to Mexican producers and its conclusions regarding natural gas are not supported by substantial evidence or are otherwise contrary to law. In the plaintiff's view, the Court's decision in Cabot I collaterally estops the agency from arguing that the non-conforming approach utilized by it to measure the subsidy from the provision of CBFS and to determine the existence of a subsidy from the provision of natural gas was correct.

In addition, plaintiff contends that the ITA erroneously limited its examination of CBFS pricing to a consideration of whether such pricing was "preferential" within the agency's interpretation of 19 U.S.C. § 1677(5)(B)(ii). Plaintiff urges that the ITA's interpretation of what constitutes a good or service at a preferential rate was unsupported by substantial evidence and was otherwise contrary to law.

Plaintiff argues that the ITA should have examined other alternatives for determining the extent of preferentiality. According to the plaintiff, the ITA should have utilized U.S. export prices of CBFS to Mexico during 1981-1983 or U.S. or world prices for CBFS as the best measure of preferentiality. Plaintiff's Brief, supra, at 15-16.

Plaintiff maintains the ITA incorrectly selected No. 6 fuel oil as a "similar or related" product. In the plaintiff's view, the ITA should have used substitute products for CBFS available within Mexico instead of "similar or related" products. Id. at 10-15.

Plaintiff contends the ITA improperly failed to obtain cost of production information from PEMEX for CBFS. Plaintiff urges this failure to obtain information amounts to the kind of failure to investigate that was held to be an abuse of discretion in Timken Co. v. United States, ___ CIT ___, ___, 630 F.Supp. 1327, 1336-39 (1986).

Plaintiff also maintains that the ITA incorrectly utilized nominal interest rates to compute the benefit to Mexican carbon black exporters from FOMEX and FONEI loans. Plaintiff asserts that "by using nominal rates, and not...