Federal-Mogul Corp. v. US, 91-07-00530

• Decision Date: 07 October 1993
• Docket Number: No. 91-07-00530,91-08-00569.,91-07-00530
• Citation: 834 F. Supp. 1391,17 CIT 1093
• Parties: FEDERAL-MOGUL CORPORATION, Plaintiff and Plaintiff-Intervenor, The Torrington Company, Plaintiff and Plaintiff-Intervenor, v. UNITED STATES, Defendant, NTN Bearing Corporation of America, American NTN Bearing Manufacturing Corporation and NTN Corporation; Koyo Seiko Co., Ltd. and Koyo Corporation of U.S.A.; Peer Bearing Company; NSK Ltd. and NSK Corporation; Caterpillar Inc.; Minebea Co., Ltd. and NMB Corporation, Defendant-Intervenors.
• Court: U.S. Court of International Trade

834 F. Supp. 1391

17 CIT 1093

FEDERAL-MOGUL CORPORATION, Plaintiff and Plaintiff-Intervenor, The Torrington Company, Plaintiff and Plaintiff-Intervenor, v. UNITED STATES, Defendant, NTN Bearing Corporation of America, American NTN Bearing Manufacturing Corporation and NTN Corporation; Koyo Seiko Co., Ltd. and Koyo Corporation of U.S.A.; Peer Bearing Company; NSK Ltd. and NSK Corporation; Caterpillar Inc.; Minebea Co., Ltd. and NMB Corporation, Defendant-Intervenors.

Nos. 91-07-00530, 91-08-00569.

United States Court of International Trade.

October 7, 1993.

Frederick L. Ikenson, P.C., Frederick L. Ikenson, J. Eric Nissley, Joseph A. Perna, V and Larry Hampel, Washington, DC, for plaintiff and plaintiff-intervenor Federal-Mogul Corp.

Stewart and Stewart, Eugene L. Stewart, Terence P. Stewart, James R. Cannon, Jr., Wesley K. Caine, Christopher J. Callahan, John M. Breen, Geert De Prest, Margaret E.O. Edozien, Lane S. Hurewitz, Patrick J. McDonough, Robert A. Weaver and Amy S. Dwyer, Washington, DC, for plaintiff and plaintiff-intervenor The Torrington Co.

Frank W. Hunger, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice, Velta A. Melnbrencis and Jane E. Meehan, of counsel: John D. McInerney, Acting Deputy Chief Counsel for Import Admin., Dean A. Pinkert, Stephen J. Claeys and Craig R. Giesze, Attorney-Advisors, Office of the Chief Counsel for Import Admin., U.S. Dept. of Commerce, Washington, DC, for defendant.

Powell, Goldstein, Frazer & Murphy, Peter O. Suchman, Neil R. Ellis, Susan E. Silver and Niall P. Meagher, Washington, DC, for defendant-intervenors Koyo Seiko Co., Ltd. and Koyo Corp. of U.S.A.

Barnes, Richardson & Colburn, Robert E. Burke, Donald J. Unger, Kazumune V. Kano and Diane A. MacDonald, Chicago, IL, for defendant-intervenors NTN Bearing Corp. of America, American NTN Bearing Mfg. Corp. and NTN Corp.

Coudert Brothers, Robert A. Lipstein, Matthew P. Jaffe and Nathan V. Holt, Washington, DC, for defendant-intervenors NSK Ltd. and NSK Corp.

Venable, Baetjer, Howard & Civiletti, John M. Gurley, John C. Dibble and Lindsay B. Meyer, Washington, DC, for defendant-intervenor Peer Bearing Co.

Powell, Goldstein, Frazer & Murphy, Richard M. Belanger, Neil R. Ellis and D. Christine Wood, Washington, DC, for defendant-intervenor Caterpillar Inc.

Tanaka Ritger & Middleton, H. William Tanaka, Michele N. Tanaka and Michael J. Brown, Washington, DC, for defendant-intervenor Minebea Co., Ltd. and NMB Corp.

OPINION

TSOUCALAS, Judge:

Plaintiffs, Federal-Mogul Corporation ("Federal-Mogul") and The Torrington Company ("Torrington"), commenced this consolidated action to challenge certain aspects of the Department of Commerce, International Trade Administration's ("ITA") final results in the first administrative review of imports of antifriction bearings from Japan. Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From Japan; Final Results of Antidumping Duty Administrative Reviews, 56 Fed.Reg. 31,754 (1991). Substantive issues raised by the parties in the underlying administrative proceeding were addressed by the ITA in the issues appendix to Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From the Federal Republic of Germany; Final Results of Antidumping Duty Administrative Review ("Issues Appendix"), 56 Fed.Reg. 31,692 (1991).

Background

In Federal-Mogul Corp. v. United States, 17 CIT ___, 813 F.Supp. 856, 873 (1993), this Court remanded this case to the ITA to

examine the administrative record to determine the exact monetary amount of value added tax paid on each sale in the home market and make sure that the amount added to the comparable United States price sale pursuant to 19 U.S.C. § 1677a(d)(1)(C) is less than or equal to this amount, to add the full amount of value added tax paid in the home market to foreign market value without adjustment and to explain why any savings resulting from deferred payment of sales expenses should or should not be factored into the calculation of each type of circumstance of sale adjustment made to foreign market value in this review.

In Torrington Co. v. United States, 17 CIT ___, 818 F.Supp. 1563, 1580-81 (1993), this Court remanded this case to the ITA to

add the full amount of value added tax paid on each sale in the home market to foreign market value without adjustment and to develop a methodology which removes post sale price adjustments and rebates paid on sales of out of scope merchandise from any adjustment made to foreign market value for post sale price adjustments and rebates, or to deny an adjustment if a viable method cannot be found.

On June 28, 1993, the ITA filed with this Court its Final Results of Redetermination Pursuant to Court Remand, Federal-Mogul Corporation v. United States Slip Op. 93-17 (February 4, 1993) and The Torrington Company v. United States Slip Op. 93-44 (March 29, 1993) ("Remand Results"). In its Remand Results, the ITA: (1) added to foreign market value ("FMV") the amount of value added tax ("VAT") paid on sales of the subject merchandise in the home market without adjustment and also added the exact same amount to United States price ("USP"); explained in greater detail why savings realized from delayed payment of home market sales expenses should not be factored into the calculation of circumstance of sale ("COS") adjustments to FMV; and disallowed adjustments for post sale price adjustments ("PSPAs") for Koyo Seiko Co., Ltd. and Koyo Corporation of U.S.A. ("Koyo"), NSK Ltd. and NSK Corporation ("NSK"), and NTN Bearing Corporation of America, American NTN Bearing Manufacturing Corporation and NTN Corporation ("NTN"). Remand Results at 3-15.

Discussion

ITA's final results filed pursuant to a remand will be sustained unless that determination is "unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1)(B) (1988). Substantial evidence is "relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126 (1938); Alhambra Foundry Co. v. United States, 12 CIT 343, 345, 685 F.Supp. 1252, 1255 (1988).

1. Value Added Tax

Federal-Mogul and Torrington challenge the ITA's treatment of the Japanese VAT. Federal-Mogul Corporation's Comments Concerning Defendant's Final Results of Redetermination Pursuant to Court Remand ("Federal-Mogul's Comments") at 3-22; Memorandum of The Torrington Company in Support of its Motion for a Second Remand ("Torrington's Memorandum") at 2-10. In addition, Federal-Mogul has filed a motion for an order holding certain Department of Commerce officials in contempt of court and for the imposition of sanctions, arguing that the ITA has willfully disobeyed the orders of this Court by pursuing a goal of tax neutrality in its treatment of VATs. Motion of Plaintiff Federal-Mogul Corporation for an Order Holding Certain Commerce Department Officials in Contempt of Court and Imposing Sanctions. Torrington takes no position on Federal-Mogul's motion for contempt of court and sanctions.

Response of The Torrington Company to Federal-Mogul's Motion for Sanctions.

In its Remand Results, as instructed by this Court, the ITA added the amount of VAT paid on each sale in the home market without making a COS adjustment to this amount. In addition and on its own initiative, the ITA added the exact same amount to USP instead of following its usual practice of applying the ad valorem VAT rate to the net USP after all adjustments had been made and adding this amount to USP. Remand Results at 3; see Issues Appendix, 56 Fed.Reg. at 31,729. ITA's rationale for its new approach is based on its interpretation of the United States Court of Appeals for the Federal Circuit's recent opinion on the VAT issue in Zenith Elecs. Corp. v. United States, 988 F.2d 1573, 1580-82 (1993). Remand Results at 3.

Defendant argues that the ITA's new VAT methodology is responsive to this Court's remand order. Specifically, the defendant argues that this new methodology adds the full amount of VAT to FMV, ensures that the tax adjustment made to USP is not greater than the amount of VAT added to FMV and does not make a COS adjustment to the amount of VAT added to FMV. Remand Results at 3-4; Defendant's Rebuttal Comments to Comments filed with Respect to Remand Results ("Defendant's Comments") at 3-6.

In addition, defendant argues that the ITA's new methodology is in accord with Zenith, 988 F.2d at 1580-82. The court in Zenith held that the ITA was not allowed to make a COS adjustment to FMV to achieve tax neutrality by eliminating the so-called multiplier effect of 19 U.S.C. § 1677a(d)(1)(C) (1988).¹ The court reasoned that 19 U.S.C. § 1677a(d)(1)(C) is the sole provision of the anti-dumping duty statute that deals with the treatment of VATs. As a result, 19 U.S.C. § 1677b(a)(4)(B) (1988), which allows adjustments to FMV for differences in circumstances of sale, does not apply and cannot be used to achieve tax neutrality. Zenith, 988 F.2d at 1580-82.

The court also stated that:

By engaging in dumping, the exporters themselves are responsible for the multiplier effect. The multiplier effect does not create a dumping margin where one does not already exist. Only when pre-tax FMV exceeds USP and a foreign nation assesses an ad valorem domestic commodity tax does section 1677a(d)(1)(C) operate to accentuate the dumping margin. Without a dumping margin (when pre-tax FMV equals or is less than USP), even assessment of an ad valorem tax creates no multiplier effect. The multiplier effect thus occurs only when a dumping margin already exists. If a foreign manufacturer does not export its wares at less than fair value, it will not suffer disadvantage from the operation of section 1677a(d)(1)(C).

Moreover, the enactment history of section 1677a(d)(1)(C) does not suggest

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