Federal Mogul Corp. v. U.S., s. 94-1097

• Decision Date: 28 August 1995
• Docket Number: 94-1104,Nos. 94-1097,s. 94-1097
• Citation: 63 F.3d 1572
• Parties: FEDERAL MOGUL CORPORATION, Plaintiff-Appellee, and The Torrington Company, Plaintiff-Appellee, v. The UNITED STATES, Defendant, and Koyo Seiko Co., Ltd. and Koyo Corporation of U.S.A., Defendants-Appellants, and NSK LTD. and NSK Corporation, Defendants, and Peer Bearing Company, Caterpillar Inc., Minebea Co., Ltd. and NMB Corporation, Defendants.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1572

63 F.3d 1572

17 ITRD 1673

FEDERAL MOGUL CORPORATION, Plaintiff-Appellee, and The Torrington Company, Plaintiff-Appellee, v. The UNITED STATES, Defendant, and Koyo Seiko Co., Ltd. and Koyo Corporation of U.S.A.,

Defendants-Appellants,

and

NSK LTD. and NSK Corporation, Defendants,

and

Peer Bearing Company, Caterpillar Inc., Minebea Co., Ltd.

and NMB Corporation, Defendants.

Nos. 94-1097, 94-1104.

United States Court of Appeals,

Federal Circuit.

Aug. 28, 1995.

Frederick L. Ikenson, Frederick L. Ikenson, P.C., of Washington, DC, argued for plaintiff-appellee, Federal-Mogul Corp. Terence P. Stewart and James R. Cannon, Jr., Stewart & Stewart, of Washington, DC, represented plaintiff-appellee, The Torrington Co.

Neil R. Ellis, Powell, Goldstein, Frazer & Murphy, of Washington, DC, argued for defendants-appellants, Koyo Seiko Co., LTD. and Koyo Corp. of U.S.A. With him on the brief were Peter O. Suchman and Niall P. Meagher. Kazumune V. Kano, Barnes, Richardson & Colburn, of Chicago, IL, argued for defendants-appellants, NTN Bearing Corp. of America, American NTN Bearing Mfg Velta A. Melnbrencis and David M. Cohen, Attys., Commercial Litigation Branch, Dept. of Justice, of Washington, DC, represented defendant, The U.S.

Corp. and NTN Corp. With him on the brief was Donald J. Unger.

Robert A. Lipstein, Matthew P. Jaffe and Alice E.M. Aragones, Coudert Brothers, of Washington, DC, represented defendants, NSK LTD. and NSK Corp.

Noel Hemmendinger and William J. Clinton, Willkie Farr & Gallagher, of Washington, DC, were on the brief for amicus curiae, American Ass'n of Exporters and Importers.

Before MAYER, PLAGER, and CLEVENGER, Circuit Judges.

Opinion of the court filed by Circuit Judge PLAGER. Dissenting opinion filed by Circuit Judge MAYER.

PLAGER, Circuit Judge.

This case involves the manner in which the International Trade Administration, Department of Commerce (Commerce or Agency), in setting antidumping margins, accounts for taxes which are assessed on sales of foreign-manufactured merchandise. The taxes are assessed on merchandise sold in the country of origin, but are not assessed on similar merchandise when it is exported to and sold in the United States. Commerce, responding to a recent decision of this court, adopted a new methodology intended to create a tax-neutral result. The Court of International Trade took the position that, under the law, the new methodology was not a permissible one. Federal-Mogul Corp. v. United States, 834 F.Supp. 1391 (Ct. Int'l Trade 1993) (Federal-Mogul II ). For the reasons we shall explain, we think otherwise, and reverse the judgment of the Court of International Trade.

BACKGROUND

This case is on appeal from a judgment of the Court of International Trade. At an earlier stage in the proceedings, that court heard appeals from Commerce's determination in this antidumping matter. See Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From Japan: Final Results of Antidumping Duty Administrative Reviews, 56 Fed.Reg. 31754 (Dep't Commerce 1991) (Administrative Results); Federal-Mogul Corp. v. United States, 813 F.Supp. 856 (Ct. Int'l Trade 1993) (Federal-Mogul I ) and Torrington Co. v. United States, 818 F.Supp. 1563 (Ct. Int'l Trade 1993). In those appeals, the matter was remanded by the court with instructions to Commerce to reconsider its treatment of the tax issue. Commerce did so, and issued its redetermination decision. That decision was again appealed to the Court of International Trade. The cases were then consolidated for purposes of the review by the Court of International Trade; they remain consolidated here. The plaintiffs throughout these proceedings, challenging the decisions of the Agency, are two domestic companies, Federal-Mogul Corporation and The Torrington Company. (Torrington by petition to the Agency initiated the administrative proceedings in this matter.) Defendants are the United States and a group of foreign manufacturers, importers, and sellers of the merchandise in question.

The detailed history of this litigation, and of the underlying administrative proceedings that led to it, is set out in the cases cited. As the issue to be decided is a pure question of law, we need only summarize the salient facts.

The matter began in 1990 when Commerce undertook an antidumping administrative review of various imported antifriction bearings, including the bearings at issue in this case. It came to a head when, in June 1993, Commerce filed with the Court of International Trade its "Final Results of Redetermination Pursuant to Court Remand" (Remand Results). In the Remand Results, Commerce detailed its use of the methodology challenged before this court. The issue on appeal is whether the Court of International Trade correctly concluded that Commerce's methodology is impermissible as a matter of law.

This is not the first time the process by which adjustment for Home Market (HM) taxes is made in antidumping cases has been In order to put the issue in context, we provide, as we did in Zenith II and borrowing from that case, a brief overview of the antidumping law and its method of administration. To protect domestic industries from unfair competition by imported products, United States law imposes a duty on dumped goods, that is, goods sold in this country at a price lower than they sell for in their home market. ¹ The duty is equal to the excess of the "Foreign Market Value" (FMV) of the imported merchandise over its "United States Price" (USP). This excess is known as the dumping margin; in effect, the duty corrects for the dumping margin. See "Imposition of antidumping duties," 19 U.S.C. Sec. 1673 (1988); see generally Pattison, supra n. 1.

                before this court.  Two recent cases have dealt with related aspects of the problem:  Zenith Electronics Corp. v. United States, 988 F.2d 1573, --- Fed.Cir.  (T) ---- (1993) (Zenith II ), and Daewoo Electronics Co., Ltd., v. International Union of Electronic, Electrical, Technical, Salaried & Mach. Workers, AFL-CIO, 6 F.3d 1511, --- Fed.Cir.  (T) ---- (1993) (Daewoo ).   These cases and their significance to the matter before us will be considered below
                

Commerce determines whether dumping has occurred and, if so, how wide the margin is, and therefore how much the duty, by comparing FMV with USP. The key issue, then, in a dumping dispute is the calculation of FMV and USP. If identical or similar goods are sold in the home country by the manufacturer in the ordinary course of trade, establishing FMV is relatively straightforward. If not, Commerce may construct FMV based on available information. See 19 U.S.C. Sec. 1677b(a)(2), 1677b(e).

The United States Price, USP, is based on either the purchase price or the exporter's sales price, as the case may be. The statute defines the term "purchase price" to mean "the price at which merchandise is purchased, or agreed to be purchased, prior to the date of importation, from a reseller or the manufacturer or producer of the merchandise for exportation to the United States." 19 U.S.C. 1677a(b) (1988). The term "exporter's sales price" is defined as "the price at which merchandise is sold or agreed to be sold in the United States, before or after the time of importation...." 19 U.S.C. Sec. 1677a(c). In either case, various adjustments may be made in order to determine USP, and therein hangs the tale.

In this case, involving bearings made in Japan and imported into and sold in the United States, the Japanese government imposes value added taxes (VAT) on antifriction bearings that are manufactured and sold in Japan, but does not impose VAT on such bearings when they are exported to the United States. Thus Japanese goods sold in Japan are more expensive, by the amount of the VAT, than the same goods sold for export to the United States. Assuming the HM price absent the tax was identical to the export price, with the tax the bearings sell for less on import into this country than they sell for (with the tax added) in their home market. Unless adjustment is made for the tax, this difference in price creates a dumping margin. Furthermore, if a dumping margin exists independent of the tax, for reasons we shall explain, the tax can cause a disproportionate increase in the size of the dumping margin.

In principle, however, a difference in sales price due to taxes imposed in the foreign market but not on exports does not constitute unfair pricing behavior. It is a difference created by forces outside the control of the competitor, and does not involve the idea behind the antidumping act: "to prevent foreigners from 'dumping' on this country their surplus products at a price lower than they sell in their country, so as to unfairly compete with us." Anti-Dumping Legislation: Hearings on H.R. 9983 and H.R. 10071 Before the House Committee on Ways and Means, 66th Cong., 1st Sess. at 16 (1919) (statement of Congressman Kitchin).

Consequently, Congress provided that when Commerce calculates dumping margins, the Agency shall take into account the impact of such taxes. Section 772 of the Tariff Act of 1930 (the Act), codified as amended at 19 U.S.C. Sec. 1677a(d) (1988), specifically provides:

(d) Adjustments to purchase price and exporter's sales price

The purchase price and the exporter's sales price shall be adjusted by being--

(1) increased by--

(A) [the cost of containers and other expenses incident to packing the goods for shipment to the U.S.]

(B) [import duties imposed but rebated by the country of exportation]

(C) the amount of any taxes imposed in the country of exportation directly upon the exported merchandise or components thereof, which have been rebated, or which have not been collected, by reason of the exportation of the merchandise to the United States, but only to the extent that such taxes are added to or included in the price of such or similar merchandise when sold in the country of exportation[.]

Subparagraph (C) is...