Huffy Corp. v. United States

• Decision Date: 27 March 1986
• Docket Number: No. 83-8-01180.,83-8-01180.
• Citation: 10 CIT 214,632 F. Supp. 50
• Parties: HUFFY CORPORATION, et al., Plaintiffs, v. UNITED STATES, Defendant, and Taiwan Transportation Vehicle Manufacturers Association, Defendant-Intervenor.
• Court: U.S. Court of International Trade

632 F. Supp. 50

10 CIT 214

HUFFY CORPORATION, et al., Plaintiffs, v. UNITED STATES, Defendant and Taiwan Transportation Vehicle Manufacturers Association, Defendant-Intervenor.

No. 83-8-01180.

United States Court of International Trade.

March 27, 1986.

Collier, Shannon, Rill & Scott (Michael R. Kershow and Lauren R. Howard, Washington, D.C., on motion), for plaintiffs.

Richard K. Willard, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Washington, D.C. (Velta A. Melnbrencis, New York City, on motion), for defendant.

Plaia & Schaumberg, Chartered (Herbert C. Shelley, Joel D. Kaufman, and George W. Thompson, Washington, D.C., on motion), for defendant-intervenor.

MEMORANDUM OPINION

CARMAN, Judge:

Before the Court is plaintiffs' Rule 56.1 motion for judgment upon the agency record challenging the final determination of the United States Department of Commerce, International Trade Administration (ITA) of sales at less than fair value in Bicycles from Taiwan, 48 Fed.Reg. 31,688 (1983). Defendant opposes the motion, as does defendant-intervenor Taiwan Transportation Vehicle Manufacturers Association. All parties have submitted comprehensive briefs and the record is quite extensive.

The ITA investigated sixteen Taiwanese bicycle manufacturers and found that eleven of them either had no sales or de minimis sales at less than fair value. These eleven firms were thus excluded from the ITA's final determination. Plaintiffs argue that these eleven should not have been excluded, and that dumping margins should have been higher as to the remaining five. Plaintiffs claim that the ITA erred in four areas of its determination. Plaintiffs argue that: (1) the ITA improperly adjusted the United States price by adding a 4.71 percent import duty rebate; (2) the ITA improperly adjusted the United States price by adding a 4 percent harbor dues rebate; (3) the ITA should have conducted an investigation of below-cost sales in the home market; and (4) the ITA should have commenced a countervailing duty investigation based on information uncovered in the course of the antidumping investigation. For reasons given below, the agency determination is sustained.

I. Adjustment to United States Price for 4.71 Percent Import Duty Rebate

The Tariff Act of 1930 (Act), as amended, requires the assessment of an antidumping duty whenever it is determined that "foreign merchandise is being, or is likely to be, sold in the United States at less than its fair value," and such sales injure or threaten injury to an industry in the United States. 19 U.S.C. § 1673 (1982). To determine whether merchandise is sold in the United States at less than fair value, the statute calls for a comparison between the price of the merchandise in the United States and its price in a foreign market (either the home market or a third country, or a constructed price). The statute provides that a duty be assessed based upon that comparison:

There shall be imposed upon such merchandise an antidumping duty ... in an amount equal to the amount by which the foreign market value exceeds the United States price....

19 U.S.C. § 1673.

The comparison of the two prices must take into account different circumstances of sale involved in the United States and the foreign market. The Act provides for adjustments to the prices to reflect these differences, ensuring that the final comparison is as free as possible from costs or benefits specific to each market.

Section 772 of the Act, Pub.L. No. 96-39, Title 1, § 101, 93 Stat. 181 (1979) (codified at 19 U.S.C. § 1677a (1982)), describes the method by which the ITA is to arrive at the United States price. The section first describes United States price as "the purchase price, or the exporter's sales price, of the merchandise, whichever is appropriate." 19 U.S.C. § 1677a(a). The section then provides for certain adjustments to the United States price. Relevant here is the adjustment for import duty rebates:

The purchase price and the exporter's sale price shall be adjusted by being—

(1) increased by—

. . . . .

(B) the amount of any import duties imposed by the country of exportation which have been rebated, or which have not been collected, by reason of the exportation of the merchandise to the United States.

19 U.S.C. § 1677a(d)(1)(B). Congress allowed this adjustment because purchasers in the home market presumably must pay the passed on cost of import duties when they buy the merchandise. If the duties are rebated when the merchandise is exported, presumably no similar cost is passed on to purchasers in the United States. By adding the amount of the rebate to United States price this adjustment accommodates the difference in cost to the two different purchasers.

In this case the ITA allowed an upward adjustment in United States price based upon an import duty rebate granted by Taiwan to bicycle producers. The import duty rebate was 4.71 percent of the "domestic value added;" that is, "the difference between the f.o.b. value of the finished bicycle and the c.i.f. value of the components imported directly by the bicycle manufacturers themselves." 48 Fed. Reg. at 31,689. The rebate's purpose was to refund, upon exportation, the import duties that domestic parts manufacturers paid on imported raw materials and passed on to bicycle manufacturers. To arrive at the 4.71 percent rebate, the Taiwanese authority first analyzed the amount of specific imported raw materials in an average bicycle. Referring to the duty rate record for those materials, it calculated the duty paid by Taiwanese parts producers, and presumably passed on to bicycle manufacturers, on an average bicycle. The Taiwanese authority then compared the amount of duty paid on the raw materials in an average bicycle to the domestic value of an average bicycle to arrive at the 4.71 percent rebate amount.

The Taiwanese program is essentially an allocation scheme in which the cost of import duties on raw materials is allocated to each bicycle, based upon that bicycle's domestic content. An allocation of import duties may give rise to an adjustment to United States price provided import duties are actually paid and rebated, and there is a sufficient link between the cost to the manufacturer (import duties paid) and the claimed adjustment (rebate granted).

This court first established the two-part requirement of actual cost to the manufacturer and sufficient link between that cost and the claimed adjustment in F.W. Myers & Co. v. United States, 72 Cust.Ct. 219, C.D. 4544, 376 F.Supp. 860 (1974). In that case, this court sustained the ITA's denial of an adjustment to foreign market value for overhead costs under a provision for adjustments for "differences in circumstances of sale." 19 U.S.C. § 161(b)(2) (1976) (repealed). The manufacturer sought an adjustment for overhead expenses relating to sales in the home market but not the United States market. The court first noted that the manufacturer could not lump overhead costs together with selling expenses in "a stewpot labeled `differences in circumstances of sale.'" 72 Cust.Ct. at 233, 376 F.Supp. at 872. Instead, the court ruled, a manufacturer must show "that each claimed expense had a reasonably direct effect upon the sales in the market under consideration." Id.

The court found further that even had the manufacturers established a link between the alleged costs and the home market sales, it had failed to prove that the costs were actually incurred. The court stated that

a basic concept of all value determinations by the court is that they must be based upon proof of actual costs or prices—not estimates, approximations or averages. Thus, use of percentages in calculating expenses or profits will be rejected if they are not based upon actual amounts of expenses incurred or profits added.

Id. at 234, 376 F.Supp. at 873 (citations omitted).

This court again considered an adjustment to foreign market value for differences in circumstances of sale in Brother Industries, Ltd. v. United States, 3 CIT 125, 540 F.Supp. 1341 (1982), aff'd sub nom. Smith-Corona Group v. United States, 713 F.2d 1568 (Fed.Cir.1983), cert. denied, 465 U.S. 1022, 104 S.Ct. 1274, 79 L.Ed.2d 679 (1984). The court there upheld an adjustment based upon an incentive rebate that the typewriter manufacturers gave to retailers in the foreign market but not the United States market. The manufacturers based the rebate amounts on total sales, which included merchandise other than the typewriters under investigation, and various models of the typewriters under investigation. Based on the percentage of sales of typewriters under investigation to total sales, and the percentage of each model to the total sales of typewriters, the ITA allocated a cost to the manufacturers for each typewriter sold. The court approved the ITA's method of allocating costs to arrive at the adjustment, stating:

F.W. Myers teaching does not preclude the administering authority from allocating or apportioning actual costs among the various items to which they are attributable.

3 CIT at 149, 540 F.Supp. at 1363.

These cases involved adjustments to foreign market value for differences in circumstances of sale.¹ In Roquette Freres v. United States, 7 CIT ___, 583 F.Supp. 599 (1984), this court applied the same rule to a case specifically involving an adjustment to United States price based on import duty rebates. In that case, the European Economic Community (EEC) levied a duty on corn imports, and granted an "export restitution payment" on exported products containing corn. The ITA determined that this payment was not allowable as an adjustment under 19 U.S.C. § 1677a(d)(1)(B):

The "import levy" and the "export restitution payments" are not directly linked to, or dependent upon, one another within the context of EC regulations. The exporters may receive these payments regardless of whether or not they imported corn and paid the "import levy."

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