Garofalo v. the United States

• Decision Date: 08 June 2011
• Docket Number: Slip Op. 11–65.,Consol. Court No. 10–00095.
• Citation: 783 F.Supp.2d 1230,33 ITRD 1531
• Parties: PASTIFICIO LUCIO GAROFALO, S.P.A., Plaintiff,v.The UNITED STATES, Defendant,andAmerican Italian Pasta Company, Dakota Growers Pasta Company, and New World Pasta Company, Defendant–Intervenors.
• Court: U.S. Court of International Trade

783 F.Supp.2d 1230

33 ITRD 1531

PASTIFICIO LUCIO GAROFALO, S.P.A., Plaintiff,

v.The UNITED STATES, Defendant,andAmerican Italian Pasta Company, Dakota Growers Pasta Company, and New World Pasta Company, Defendant–Intervenors.

United States Court of International Trade.

Slip Op. 11–65.Consol.1 Court No. 10–00095.

June 8, 2011.

Drinker Biddle & Reath LLP (William Silverman, Douglas J. Heffner, and Richard P. Ferrin), Washington, DC, for Plaintiff and Defendant–Intervenor Pastificio Lucio Garofalo, S.p.A.Kelley Drye & Warren LLC (Paul C. Rosenthal and David C. Smith), Washington, DC, for Plaintiffs and Defendant–Intervenors American Italian Pasta Company, Dakota Growers Pasta Company, and New World Pasta Company.Tony West, Assistant Attorney General; Jeanne E. Davidson, Director; Reginald T. Blades, Jr., Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, (Jane C. Dempsey and Carrie A. Dunsmore), and, of counsel, Shana Hofstetter, Attorney, Office of the Chief Counsel for Import Administration, Department of Commerce, for Defendant United States.

OPINION

POGUE, Chief Judge:

This consolidated action challenges four determinations made by the United States Department of Commerce (“Commerce” or the “Department”) in the final results of the twelfth administrative review of an antidumping (“AD”) duty order on pasta from Italy.²

Plaintiff Pastificio Lucio Garofalo, S.p.A. (“Garofalo”), a mandatory respondent in this review,³ challenges Commerce's use of quarterly cost averaging periods in evaluating whether certain of Garofalo's home market sales were made below the cost of production, and the Department's decision to compare Garofalo's U.S. sales solely to home market sales made within the same quarterly period.

Plaintiffs American Italian Pasta Company, Dakota Growers Pasta Company, and New World Pasta Company (collectively the “Petitioner Plaintiffs”), the petitioners,⁴ challenge Commerce's intention, expressed in the Final Results of this review, to employ new industry-wide model match criteria when making foreign like product determinations in future reviews of this AD duty order. The Petitioner Plaintiffs also challenge the Department's acceptance, in this review, of company-specific model match criteria for each mandatory respondent.

The court has jurisdiction pursuant to Section 516A(a)(2) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(a)(2) (2006) ⁵ and 28 U.S.C. § 1581(c).

As explained in detail below, the court rejects both of Garofalo's challenges, concluding that the Department reasonably interpreted its statutory authority to measure costs of production and select appropriate time frames for sales comparisons, and that the agency decisions in this regard were supported by substantial evidence on the record of this review.

With regard to the challenges brought by the Petitioner Plaintiffs, the court concludes that Commerce's intention to apply new model match criteria in future administrative reviews is not ripe for judicial review, and that Commerce's determinations regarding the model match criteria used in this review were based on a permissible interpretation of the statute and supported by substantial evidence.

Accordingly, the Department's Final Results in this review are affirmed.

STANDARD OF REVIEW

The court shall uphold the determinations challenged in this case unless they are found to be unsupported by substantial evidence on the record or otherwise not in accordance with law. 19 U.S.C. § 1516a(b)(1)(B)(i).

Substantial evidence is “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion,” Consol. Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126 (1938). Though reasonable minds may differ, if a reasonable mind could accept the connection presented between the facts found and the conclusion reached, an alternative judgment may not be substituted for that of the agency. FCC v. Fox Television Stations, Inc., 556 U.S. 502, 129 S.Ct. 1800, 1810, 173 L.Ed.2d 738 (2009) (“[A] court is not to substitute its judgment for that of the agency ....” (quotation marks and citation omitted)); Siderca S.A.I.C. v. United States, 29 CIT 1030, 1048, 391 F.Supp.2d 1353, 1369 (2005) (“Reasonable minds may differ, but a determination does not fail for lack of substantial evidence on that account.”).

An agency acts contrary to law when it acts arbitrarily or based on an impermissible construction of its statutory authority. See Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984) (an agency acts contrary to law if it acts based on an impermissible construction of its statutory authority); Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 167–68, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962) (agencies act contrary to law if decision-making is not adequately reasoned).

The court will discuss, in turn, each challenge to the Department's determinations in this review.

DISCUSSION

I. Garofalo's ChallengesA. Cost of Production

1. Background

In order to calculate a dumping margin for the pasta at issue here, Commerce calculates the normal value for which that pasta is sold in Italy.⁶ In calculating normal value, the Department considers only those sales in the comparison market that were made in the “ordinary course of trade.” 19 U.S.C. § 1677b(a)(1)(B)(i). The “ordinary course of trade” is defined as “the conditions and practices which, for a reasonable time prior to the exportation of the subject merchandise, have been normal in the trade under consideration with respect to the merchandise of the same class or kind,” id. at § 1677(15), disregarding sales that the Department “has reasonable grounds to believe or suspect ... have been made at prices which represent less than the cost of production of that product.” Id. at § 1677b(b)(1). ⁷

Garofalo challenges the time periods used by the Department to average Garofalo's costs of production in order to make the requisite comparison under Section 1677b(b). (Mem. Supp. Pl.'s Mot. for J. on Agency R. under Rule 56.2 (“Garofalo's Br.”) 8–16.)

The statute does not define the time period over which cost of production is to be calculated, see 19 U.S.C. at § 1677b(b), and over which a respondent's various costs must therefor be averaged. Consequently, Commerce must select an appropriate time period for averaging the costs involved.

Commerce avers that it has “adopted a consistent and predictable approach in using [ ] POR-average costs—the result being a normalized, average production cost to be compared to sales prices covering the same extended period of time.” I & D Mem. Cmt. 5 at 13.⁸ The Department also contends, however, that it “has articulated in several past proceedings that the use of an alternative cost averaging period may be appropriate in situations where a reliance on [its] normal annual weighted average cost method would distort the dumping analysis due to significant cost changes.” Id. at 14.⁹ Commerce explains that its practice in such cases is to use quarterly cost averages, provided that the average quarterly cost changes can be linked with changes in concurrent average quarterly sales prices. Id. at 19.

The Department used this alternative quarterly averaging approach in this case. Accordingly,¹⁰ having found that significant cost changes throughout the POR made POR-wide cost averaging inappropriate, Commerce verified that quarterly comparisons would fairly reflect actual pricing behavior by finding “linkage within each quarter between sales prices and changes in [costs].” Id. at 18.¹¹

Garofalo does not challenge Commerce's determination that the use of shorter-than-POR cost-averaging periods was justified in this case.¹² Rather, Garofalo challenges the Department's use of quarterly periods as the alternative cost-averaging period. (Garofalo's Br. 9 (arguing that Commerce should have used semi-annual rather than quarterly periods).)

2. Analysis

The Department's use of quarterly comparison periods when determining whether a given sale should be excluded from the normal value calculation under Section 1677b(b)(1) in this case was a reasonable interpretation of the statute, and it was supported by substantial evidence on the record.

As the Department correctly observes, see I & D Mem. Cmt. 5 at 13, the statute does not prescribe a specific time period over which cost of production must be calculated. See 19 U.S.C. § 1677b(b)(1); SeAH Steel Corp. v. United States, ––– CIT ––––, 704 F.Supp.2d 1353, 1363 (2010) (“The statute does not dictate the method by which Commerce may calculate costs of production, nor define the [time period over which the calculation is to be made], and Commerce is afforded considerable discretion in formulating its practices in this regard.” (internal quotation and alteration marks and citation omitted)). Because Commerce's gap-filling methodology—that POR-wide cost averaging is the preferred norm, but where significant cost changes are evident, quarterly cost averages may be used if sales can be accurately linked with the concurrent quarterly costs—is not unreasonable, it is therefore not contrary to law. See Chevron, 467 U.S. at 843, 104 S.Ct. 2778 (an agency acts contrary to law if it acts based on an unreasonable construction of its statutory authority); Burlington Truck Lines, 371 U.S. at 167–68, 83 S.Ct. 239 (agencies act contrary to law if decision-making is not reasoned); SeAH Steel, ––– CIT at ––––, 704 F.Supp.2d at 1364 (holding that using quarterly comparisons in cases of significant cost changes comports with a reasonable interpretation of the AD statute).

In accordance with this methodology, Commerce determined that using quarterly cost averages was appropriate in this review because significant cost changes made POR-wide averaging distortive, and evidence on the record established a linkage between Garofalo's quarterly costs...