Elkem Metals Co. v. U.S., 06-1043.

• Decision Date: 27 October 2006
• Docket Number: No. 06-1141.,No. 06-1092.,No. 06-1043.,06-1043.,06-1092.,06-1141.
• Citation: 468 F.3d 795
• Parties: ELKEM METALS COMPANY and Globe Metallurgical, Inc., Plaintiffs-Appellants, v. UNITED STATES, Defendant-Cross Appellant, and Rima Industrial S/A, Defendant-Cross Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 795

468 F.3d 795

ELKEM METALS COMPANY and Globe Metallurgical, Inc., Plaintiffs-Appellants, v. UNITED STATES, Defendant-Cross Appellant, and Rima Industrial S/A, Defendant-Cross Appellant.

No. 06-1043.

No. 06-1092.

No. 06-1141.

United States Court of Appeals, Federal Circuit.

October 27, 2006.

Clifford E. Stevens, Jr., DLA Piper Rudnick Gray Cary U.S. LLP, of Washington, DC, argued for plaintiffs-appellants. With him on the brief were William D. Kramer and Martin Schaefermeier.

Reginald T. Blades, Jr., Senior Trial Counsel, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-cross appellant United States. With him on the brief were Peter D. Keisler, Assistant Attorney General, and David M. Cohen, Director. Of counsel on the brief was Quentin M. Baird, Attorney, Office of Chief Counsel for Import Administration, United States Department of Commerce, of Washington, DC. Of counsel were Berniece A. Browne and John D. McInerney, Attorneys. Office of Chief Counsel for Import Administration, United States Department of Commerce, of Washington, DC.

Rosa S. Jeong, Greenberg Traurig, LLP, of Washington, DC, argued for defendant-cross appellant Rima Industrial S/A. With her on the brief was Philippe M. Bruno.

Before NEWMAN, MAYER, and LINN, Circuit Judges.

LINN, Circuit Judge.

In this antidumping action, Elkem Metals Company and Globe Metallurgical, Inc. (collectively "Elkem") appeal the decision of the United States Court of International Trade ("Court of International Trade") sustaining a determination by the United States Department of Commerce ("Commerce"), in which Commerce recalculated, pursuant to a prior remand from the Court of International Trade, the constructed value of silicon metal produced in Brazil by Rima Industrial S/A ("Rima"). Elkem Metals Co. v. United States, No. 02-00232, 2005 WL 2077086 (Ct. Int'l Trade Aug. 26, 2005) ("Elkem II"). Rima and the United States cross-appeal, seeking reversal of the prior decision and remand order, Elkem Metals Co. v. United States, 350 F.Supp.2d 1270 (Ct. Int'l Trade 2004) ("Elkem I"), in which the Court of International Trade remanded the case to Commerce with instructions to include in constructed value the value-added tax ("VAT") paid by Rima on its production inputs. Because Commerce's conclusion that the VAT paid by Rima should be excluded from constructed value is based on a permissible construction of the statute at issue, we reverse and remand as to the cross-appeal, and we dismiss Elkem's appeal as moot.

I. BACKGROUND

A. The Antidumping Laws

Through the antidumping statutes, Commerce has been delegated the task of protecting United States manufacturers from the sale of foreign goods in the United States at prices below the fair market value in their country of origin. See 19 U.S.C. § 1673; AIMCOR v. United States, 141 F.3d 1098, 1101 (Fed.Cir.1998). To effect this goal, Commerce imposes duties on imported goods that correspond to the amount by which the foreign market value of the goods exceeds their domestic sales price. AIMCOR, 141 F.3d at 1101.

Commerce determines the foreign market value of goods by one of three methods prescribed by statute. The first and preferred method is to determine the price at which a product is sold in its country of origin "in the usual commercial quantities and in the ordinary course of trade and, to the extent practicable, at the same level of trade as the export price or constructed export price." 19 U.S.C. § 1677b(a)(1)(B)(i). When, in Commerce's determination, this is not possible, Commerce either may look to the price in a third country, id. § 1677b(a)(1)(C), or may use a "constructed value" determined by a statutory formula, id. § 1677b(a)(4).

The statutory formula by which constructed value is calculated provides that constructed value shall include

the cost of materials and fabrication or other processing of any kind employed in producing the merchandise, during a period which would ordinarily permit the production of the merchandise in the ordinary course of business[.]

Id. § 1677b(e)(1). The statute further provides that

the cost of materials shall be determined without regard to any internal tax in the exporting country imposed on such materials or their disposition which are remitted or refunded upon exportation of the subject merchandise produced from such materials.

Id. § 1677b(e).

This appeal concerns Commerce's interpretation of these statutory requirements and presents the question of whether the VAT that Rima incurred on its purchases of raw materials should be included in the constructed value of its exports of silicon metal from Brazil.

B. Brazilian VAT

At issue in this appeal are two types of VAT that Brazil levies on domestic (Brazilian) purchases of certain goods and services: Imposto sobre a Circulaçã de Mercadorias e Serviços ("ICMS") and Imposto sobre Produtos Industrialzados ("IPI"). The distinction between the two is not relevant, and they are referred to throughout this opinion jointly as "VAT." The way Brazil collects¹ VAT is that a company such as Rima tallies, but does not pay immediately, the VAT it incurs on its purchases of inputs. Final Results of Redetermination Pursuant to Court Remand, Elkem Metals Co. & Globe Metallurgical Inc. v. United States, Court No. 02-00232, at 3 (Dep't of Commerce June 8, 2004) ("First Remand Results"). At the end of each month, the VAT incurred on purchases of inputs is offset against the VAT paid by domestic customers on sales of the finished products. If the amount of VAT collected from a company's domestic customers exceeds the VAT that the company incurred on its inputs, the company remits VAT payments to the Brazilian government. Id. If the VAT incurred on inputs exceeds the VAT collected, however—as may frequently occur when products that are exported are not subject to VAT—the company pays the VAT incurred, but it also receives an offsetting VAT credit for the difference between the VAT paid on purchases of its inputs and the VAT collected on domestic sales of its products. Id. at 2-3.

Before the Brazilian tax laws were amended in 1996, VAT credits could only be redeemed to the government in payment of taxes owed. Id. at 3-4. Thus, a company's ability to use all of its credits was contingent on its tax liabilities; if it accrued credits faster than it incurred additional taxes, it would have insufficient tax liability to put all of its credits to use. See Camargo Correa Metais, S.A. v. United States, 200 F.3d 771, 774 (Fed.Cir.1999). Under the amended law, however, credits are fungible and may be traded to other companies in lieu of cash when making purchases. First Remand Results at 3-4; see also Silicon Metal from Brazil, 63 Fed.Reg. 42,001, 42,004 (Dep't of Commerce Aug. 6, 1998) (prelim.admin.review) (observing that "Brazil's new ICMS tax law allows companies to use ICMS tax credits ... for the reduction in payment of electricity costs").

In part because of this change in the law, Commerce has developed a policy, via notice-and-comment rulemaking, of making a case-by-case inquiry as to whether an exporter/producer is able to fully offset its VAT liability by using its VAT credits. 63 Fed.Reg. at 42,004. Under this policy, VAT is included as a "cost" for purposes of calculating constructed value under 19 U.S.C. § 1677b(e) only to the extent that an exporter/producer does not fully use the VAT credits generated by export sales. Id.

C. Procedural History

This appeal arises from Commerce's administrative review of the antidumping duty order it imposed on Rima's sales in the United States of silicon metal from Brazil between July 1, 1999, and June 30, 2000. After reviewing the answers to questionnaires it sent to Rima and conducting a verification of the questionnaire answers at Rima's headquarters in Brazil, Commerce published preliminary results of its review and solicited comments from the interested public. Silicon Metal from Brazil, 66 Fed.Reg. 40,980 (Dep't of Commerce Aug. 6, 2001) (prelim.admin.review) ("Preliminary Results"). After receiving comments from parties including Elkem, Commerce published final results of its review. Silicon Metal from Brazil, 67 Fed.Reg. 6488 (Dep't of Commerce Feb. 12, 2002) (final admin. review) ("Final Results").

During these proceedings, Commerce determined that Rima had fully recovered its outlays for VAT on inputs corresponding to exported goods. Issues and Decision Memorandum for the Administrative Review of Silicon Metal from Brazil— 7/1/1999 through 6/30/2000; Final Results, at 36-37 cmt. 23 (U.S. Dep't Commerce Feb. 4, 2002) ("Final Results Memorandum"), adopted by Final Results, 67 Fed. Reg. at 6488. Therefore, in accordance with its policy, Commerce excluded the VAT on Rima's inputs from the constructed value of Rima's exported silicon. Id. Based on the resulting constructed value, Commerce then concluded that Rima's dumping margin was de minimis, meaning that no antidumping duties would be assessed on the silicon Rima imported to the United States. Final Results, 67 Fed. Reg. at 6489.

In response, Elkem filed suit in the Court of International Trade to challenge the Final Results. Complaint, Elkem Metals Co. v. United States, No. 02-00232 (Ct. Int'l Trade Apr. 15, 2002). After its initial motion to dismiss was denied, the United States moved for a remand to recalculate Rima's dumping margin with VAT on Rima's inputs included in constructed value; the Court of International Trade granted the motion. Order, Elkem Metals Co. v. United States, No. 02-00232 (Ct. Int'l Trade Feb. 25, 2004). However, on remand, Commerce concluded that between the VAT that Rima collected on Brazilian sales and the VAT credits that Rima used in lieu of cash, Rima had indeed recovered all of the VAT it incurred on inputs that corresponded to United States sales. First Remand Results at 2-3. Commerce adjusted its constructed value...