Kerr-McGee Chemical Corp. v. US, Court No. 89-05-00276.

• Decision Date: 28 June 1990
• Docket Number: Court No. 89-05-00276.
• Citation: 741 F. Supp. 947,14 CIT 422
• Parties: KERR-McGEE CHEMICAL CORPORATION, Plaintiff, and Chemetals, Inc., Plaintiff-Intervenor, v. UNITED STATES, Defendant, and Tosoh Hellas, A.I.C., Defendant-Intervenor.
• Court: U.S. Court of International Trade

741 F. Supp. 947

14 CIT 422

KERR-McGEE CHEMICAL CORPORATION, Plaintiff and Chemetals, Inc., Plaintiff-Intervenor, v. UNITED STATES, Defendant and Tosoh Hellas, A.I.C., Defendant-Intervenor.

Court No. 89-05-00276.

United States Court of International Trade.

June 28, 1990.

Drinker Biddle & Reath, W.N. Harrell Smith, IV, Aryeh S. Friedman, Cynthia M. Lighty, for plaintiff Kerr-McGee Chemical Corp.

Squire, Sanders & Dempsey, Ritchie T. Thomas, William D. Kramer, Dana M. Stein, Miriam A. Bishop, for plaintiff-intervenor.

Stuart M. Gerson, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice, Jane E. Meehan, Lloyd M. Green, Gregory Shorin, Atty.-Advisor, Office of the Chief Counsel for Import Admin., U.S. Dept. of Commerce, for defendant.

Weil, Gotshal & Manges, A. Paul Victor, Jeffrey P. Bialos, Ethan S. Naftalin, for defendant-intervenor.

OPINION AND ORDER

RESTANI, Judge:

Plaintiffs move for judgment on the administrative record of Final Determination of Sales at Less Than Fair Value; Electrolytic Manganese Dioxide EMD from Greece, 54 Fed.Reg. 8,771 (1989) (Final Determination). In the case at hand ITA found sufficient above cost home market sales of merchandise similar to that under investigation to form a basis for calculating foreign market value (FMV) under 19 U.S.C. § 1677b(a)(1) (1988), the standard method for computing FMV for comparison with United States price. Final Determination, 54 Fed.Reg. at 8,773-74. Plaintiffs ask the court to remand this case to the International Trade Administration (ITA or Commerce) for ITA to apply the special provisions for calculating FMV applicable to multinational corporations (MNC rule), 19 U.S.C. § 1677b(d) (1988). Plaintiffs assert that ITA, by applying 19 C.F.R. § 353.4(a) (1988), improperly ascertained the viability of defendant-intervenor Tosoh Hellas's Greek home market EMD sales for purposes of computing FMV. Plaintiffs also claim that ITA's analysis of which merchandise in the Greek market was "similar" to the products under investigation was improper, that the period of investigation should have been extended or other adjustments should have been made to avoid distortions from production bunching, and that ITA improperly calculated cost of production, and therefore below cost sales were erroneously accepted as viable home market sales.

Defendant-intervenor responds that ITA's application of the standards set forth in 19 C.F.R. § 353.4(a) for purposes of determining home market sales viability was proper. Defendant-intervenor further asserts that Commerce's determination that alkaline and zinc EMD are similar was correct, but that Commerce should have considered alkaline EMD sales as non-viable and utilized only zinc EMD sales in determining home market sales viability. Finally, defendant-intervenor maintains that Commerce's cost of production calculations were proper. The governmental defendant seeks affirmation of each of ITA's findings discussed here.

I. FACTS

A. ITA Proceedings

Plaintiffs, Chemetals and Kerr-McGee, filed their petition on May 31, 1988, whereupon ITA initiated its investigation, Initiation of Antidumping Duty Investigation; Electrolytic Manganese Dioxide From Greece, 53 Fed.Reg. 24,114 (1988), made a preliminary determination, Electrolytic Manganese Dioxide From Greece; Preliminary Determination of Sales at Less Than Fair Value, 53 Fed.Reg. 45,793 (1988), held hearings, and imposed dumping duty deposits of 36.72% following the final determination. The ITA investigation extended from December, 1987 through May, 1988 and covered EMD sales by Tosoh Hellas, a Japanese company's Greek affiliate created in a joint venture agreement under Greek law. At approximately the same time ITA also investigated EMD sales by Tosoh Hellas's Irish sister and by its parent company in Japan. See Initiation of Antidumping Investigation; Electrolytic Manganese Dioxide from Ireland, 53 Fed. Reg. 24,115 (1988); Initiation of Antidumping Investigation; Electrolytic Manganese Dioxide from Japan, 53 Fed. Reg. 24,116 (1988). See also Kerr-McGee v. United States, 739 F.Supp. 613 (1990) (Kerr-McGee I).

B. EMD Production

According to Tosoh Hellas' submission to ITA the production process for the two different grades of EMD at issue, zinc and alkaline, differ only in the neutralization and grinding of the manganese oxide base. Confidential Record Appendix (CRA) Vol. II, Doc. 14 at 446A. The record reflects that manganese ore is ground, reduced, then leached and filtered to remove impurities. CRA Vol. I, Doc. 8 at 266A. It is next treated in an electrolytic process, washed in water, and dried in a furnace. Id. The manganese flakes are then ground and their PH is adjusted to produce different EMD grades. Id. Further filtration and drying precedes final packaging. Id. The different grades of EMD are used generally in different types of dry cell batteries; that is, alkaline EMD is used in alkaline batteries and zinc EMD is used in zinc batteries. See CRA Vol. II, Doc. 31 at 877A. In addition, alkaline batteries have a longer life than zinc batteries. Id.

II. DISCUSSION

A. Background

The court will uphold an ITA determination under the unfair trade laws unless it is "unsupported by substantial evidence on the record, or otherwise not in accordance with law" under 19 U.S.C. § 1516a(b)(1)(B) (1988). The court "will affirm the agency's findings if they are supported in the record by such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Alhambra Foundry Co., Ltd. v. United States, 12 CIT ___, 685 F.Supp. 1252, 1255 (1988) (citations omitted).

ITA's less than fair value determination is dependent on a three step inquiry: (1) ascertaining FMV of the imported merchandise, 19 U.S.C. § 1677b (1988), (2) calculating United States price of such merchandise, 19 U.S.C. § 1677a(a) (1988), and (3) determining the dumping margin, e.g. the difference between FMV and U.S. price, 19 U.S.C. § 1673 (1988). The focus in the present case is on the first step of the inquiry, namely calculating FMV. The key issue here is whether EMD sales in the Greek home market were inadequate so as to warrant calculation of FMV on the basis of Tosoh Hellas's parent's Japanese market sales pursuant to the MNC Rule.

Section 1677b instructs ITA to determine FMV by calculating "the price ... at which such or similar merchandise is sold or, in the absence of sales, offered for sale in the principal markets of the country from which exported." 19 U.S.C. § 1677b(a)(1)(A). If home market sales of the merchandise are not adequate as a basis for comparison with United States sales, ITA normally would turn to third country sales to determine FMV. 19 U.S.C. § 1677b(a)(1)(B). Alternatively, ITA may use, in certain circumstances, cost of production based "constructed value" under § 1677b(e). 19 U.S.C. § 1677b(a)(2). Special rules apply to nonmarket economy countries and, as indicated, to multinational corporations. 19 U.S.C. §§ 1677b(c) & (d). The MNC rule discussed here is intended to prevent multinational corporations from circumventing the antidumping laws by exporting merchandise from a foreign subsidiary with a low FMV, if FMV were calculated on one of the standard bases. S.Rep. No. 1298, 93d Cong., 2d Sess. 174, reprinted in 1974 U.S.Code Cong. & Admin.News 7186, 7311. See also Powell & McInerney, Globalization of the Production Process and the Unfair Trade Laws 22-23 (1989) in The Commerce Department Speaks: 1990 at 9 (1990).

The MNC rule requires that FMV be calculated "by reference to the foreign market value at which such or similar merchandise is sold in substantial quantities by one or more facilities outside the country of production," whenever (1) the facility under investigation is jointly owned by a foreign national, (2) the sales of the merchandise at issue or similar merchandise are "non-existent or inadequate as a basis for comparison with sales of the merchandise to the United States," and (3) FMV of the merchandise of facilities outside the country of exportation is higher than the FMV of merchandise produced in the facility under investigation. 19 U.S.C. § 1677b(d).¹ With regard to the second of the three requirements for application of the MNC rule, ITA found sales of the merchandise, or similar merchandise, in the Greek home market "adequate." Final Determination, 54 Fed.Reg. at 8,773.² Plaintiffs assert that ITA erred in so finding.

B. Similarity Analysis under 19 U.S.C. § 1677(16)

To determine whether sales in the exporting country's home market are "non-existent or inadequate" under the second prong of 19 U.S.C. § 1677b(d), ITA must ascertain the category or categories of merchandise, identical or similar to that under investigation, which it will examine to determine adequacy of home market sales. The product under investigation, that is the merchandise at issue, is EMD generally. It is obvious that ITA believes that a "class or kind of merchandise" under investigation, see 19 U.S.C. § 1673, in some cases may consist of several categories of merchandise which are not "similar" to each other under the language of 19 U.S.C. § 1677(16) (1988).³ For example, Color Television Receivers From Korea; Final Results of Antidumping Duty Administrative Review, 53 Fed.Reg. 24,975, 24,981 (1988), states:

Section 353.4 of our Regulations instructs us to determine that the total sales of such or similar merchandise is 5 percent or more of the sales of that merchandise to third countries. In making this determination, we established separate `such or similar' categories based on CTV screen size. All home market models generally within two screen sizes and containing the same tuning system as a given U.S. model were grouped in the same category. The 5% viability test described was then applied to each category found to be viable. We do not consider sales of one model to constitute the universe of

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