LMI-La Metalli Industriale, SpA v. US

• Decision Date: 11 April 1989
• Docket Number: Court No. 87-03-00560.
• Citation: 13 CIT 305,712 F. Supp. 959
• Parties: LMI-LA METALLI INDUSTRIALE, S.p.A., Plaintiff, v. UNITED STATES, Defendant, and American Brass, et al., Defendants-Intervenors.
• Court: U.S. Court of International Trade

712 F. Supp. 959

13 CIT 305

LMI-LA METALLI INDUSTRIALE, S.p.A., Plaintiff, v. UNITED STATES, Defendant and American Brass, et al., Defendants-Intervenors.

Court No. 87-03-00560.

United States Court of International Trade.

April 11, 1989.

Barnes, Richardson & Colburn, James H. Lundquist, David O. Elliott, New York City, and Matthew J. Clark, Los Angeles, Cal., and Sandra Liss Friedman, of counsel, for plaintiff.

John R. Bolton, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, U.S. Dept. of Justice, Washington, D.C., M. Martha Ries; U.S. Dept. of Commerce Robert E. Nielsen, and Lyn M. Schlitt, General Counsel, James A. Toupin, Asst. Gen. Counsel, Calvin H. Cobb, III, of counsel, Washington, D.C., for defendant.

Collier, Shannon, Rill & Scott, David A. Hartquist, Jeffrey S. Beckington, Carol A. Mitchell, and Kathleen Weaver Cannon, Washington, D.C., for defendants-intervenors.

DiCARLO, Judge:

An Italian manufacturer of brass sheet and strip, LMI—La Metalli Industriale, S.p. A. (IMI), moves under Rule 56.1 of the Rules of this Court to challenge the final determination of the International Trade Administration of the United States Department of Commerce (Commerce) that brass sheet and strip from Italy is being sold in the United States at less than fair value, Final Determination of Sales at Less Than Fair Value: Brass Sheet and Strip from Italy, 52 Fed.Reg. 816 (Jan. 9, 1987), amended, 52 Fed.Reg. 11,299 (Apr. 8, 1987), and also the final determination of the United States International Trade Commission (Commission) that a domestic industry in the United States is being materially injured by reason of less than fair value imports of brass sheet and strip from Italy, as cumulated with dumped and subsidized imports from other countries, Certain Brass Sheet and Strip from France, Italy, Sweden and West Germany, Inv. Nos. 701-TA-270 and 731-TA-313, 314, 316 and 317 (Final), USITC Pub. No. 1951 (Feb. 1987), 52 Fed.Reg. 5839 (Feb. 22, 1987).

The Court has jurisdiction under 28 U.S. C. § 1581(c) (1982). The Court affirms the denial of circumstance of sale adjustments for home market sales commissions, presale inventory expenses, currency hedging expenses, and technical personnel salaries. The Court also finds that plaintiffs did not raise timely objections concerning credit rates under Italian law, and affirms Commerce's construction of a cost of credit based on a lira borrowing rate rather than a dollar borrowing rate. The Court also finds that the Commission need not distinguish between imports of large and small magnitude in applying the cumulation statute, and finds that the Commission's material injury determination is supported by substantial evidence on the record as a whole and is according to law.

DISCUSSION

I. COMMERCE'S LESS THAN FAIR VALUE DETERMINATION

A. Denials of Circumstance of Sales Adjustments

LMI claims that Commerce erred in denying circumstance of sales adjustments for (1) home market selling commissions; (2) technical service salaries; (3) pre-sale inventory costs; and (4) currency hedging expenses.

Commerce is directed to make circumstance of sale adjustments to foreign market value where it is established "to the satisfaction of the administering authority" that the difference between United States price and foreign market value is wholly or partly due to differences in circumstances of sale. 19 U.S.C. § 1677b(a)(4)(B) (1982 & Supp. V 1987). As stated in Smith-Corona Group, Consumer Prods. Div., SCM Corp. v. United States, 1 Fed.Cir. (T) 130, 137, 713 F.2d 1568, 1575 (1983), cert. denied, 465 U.S. 1022, 104 S.Ct. 1274, 79 L.Ed.2d 679 (1984):

The statute does not expressly limit the exercise of the Secretary's authority to determine adjustments, nor does it include precise standards or guidelines to govern the exercise of that authority. Additionally, the statute does not define the term "circumstances of sale" nor does it prescribe any method for determining allowances. Congress has deferred to the Secretary's expertise in this matter.

Accord Hercules, Inc. v. United States, 11 CIT ___, 673 F.Supp. 454, 488 (1987); Sawhill Tubular Div. Cyclops Corp. v. United States, 11 CIT ___, 666 F.Supp. 1550, 1555 (1987).

The report of the House Committee on Ways and Means indicates that circumstance of sale adjustments "should be permitted if they are reasonably identifiable, quantifiable, and directly related to the sales under consideration and if there is clear and reasonable evidence of their existence and amount." H.R.Rep. No. 317, 96th Cong., 1st Sess. 76 (1979) (emphasis added); see Consumer Prods. Div., SCM Corp. v. Silver Reed Am., Inc., 3 Fed.Cir. (T) 83, 89, 753 F.2d 1033, 1038 (1985). Commerce's regulations implementing 19 U.S.C. § 1677b(a)(4)(B) provide in relevant part:

(a) In comparing the United States price with the sales, or other criteria applicable, on which a determination of foreign market value is to be based, reasonable allowances will be made for bona fide differences in the circumstances of the sales compared to the extent that it is established to the satisfaction of the Secretary that the amount of any price differential is wholly or partly due to such differences. Differences in circumstances of sale for which such allowances will be made are limited, in general, to those circumstances which bear a direct relationship to the sales which are under consideration.

(b) Examples of differences in circumstances of sale for which reasonable allowances generally will be made are those involving differences in credit terms, guarantees, warranties, technical assistance, servicing, and assumption by a seller of a purchaser's advertising or other selling costs. Reasonable allowances also generally will be made for differences in commissions. Allowances generally will not be made for differences in advertising and other selling costs of a seller, unless such costs are attributable to a later sale of the merchandise by a purchaser.

19 C.F.R. § 353.15 (1988) (emphasis added). To claim a circumstance of sale adjustment to foreign market value, expenses must be related to the sales of the products under investigation, rather than to sales generally. See Ipsco, Inc. v. United States, 12 CIT ___, 687 F.Supp. 633, 642 (1988). Adjustments for indirect expenses are allowed where the exporter's sales price is the basis of the United States price. Consumer Prods. Div., SCM Corp., 3 Fed.Cir. (T) at 86-87, 753 F.2d at 1036.

1. Home Market Selling Commissions

LMI contends Commerce should have allowed a circumstance of sale adjustment for home market selling commissions that LMI pays to its exclusive home-market sales agent and wholly-owned subsidiary, Pontinox Metallitalia S.R.L. (Pontinox). In denying the claimed adjustment, Commerce stated that it

does not allow circumstances-of-sale adjustments for commissions paid to related parties. The principal sic behind denying such an adjustment is that such payments are merely intracompany transfers of funds. We have accepted commissions to related parties only when we have determined that those commissions were arm's length or where the commissions are directly related to particular sales under review. Drycleaning Machinery from West Germany; Final Results of Administrative Review of Antidumping Finding, 50 Fed.Reg. 32,154 (Aug. 8, 1985); Egg Filler Flats from Canada; Final Determination of Sales at Less Than Fair Value, 50 Fed. Reg. 24,009 (June 7, 1985). LMI has not met these prerequisites for a circumstance-of-sale adjustment for home market commissions.

52 Fed.Reg. at 818 (Comment 3).

LMI argues that Commerce's reliance on a "policy" should not be a lawful substitute for analyzing the record, and, in any event, there is no "positive evidence of record" to support Commerce's conclusion that LMI's commission payments were neither at arm's length nor directly related. Memorandum in Support of Plaintiff's Motion for Judgment on the Agency Record, at 25-27. LMI argues that for Commerce to begin from a standpoint that related party commissions are generally invalid is inconsistent with 19 C.F.R. § 353.15(b), which provides that "reasonable allowances also generally will be made for differences in commissions." LMI argues that this regulation "contains no qualifications regarding the relationship between the payor and the payee of the commission." Plaintiff's Reply to Defendant's and Defendant-Intervenors' Responses in Opposition, at 13. LMI argues that its relationship with Pontinox is at arm's length because it is based upon a registered agreement that specifies independent rights, duties, and restrictions. Conf.R. 473-80.

Commerce does not dispute the existence of a contractual selling arrangement between LMI and its wholly-owned subsidiary Pontinox, but states that "such an arrangement by itself does not negate the relationship between the two parties nor does it demonstrate that the commission payments to Pontinox were anything more than an intracompany transfer of funds." Defendant's Memorandum in Opposition to Plaintiffs' Motion for Judgment Upon the Agency Record, at 17-18. Commerce states that since LMI owns 100 percent of Pontinox, there can be no question but that the two parties are related. See 19 U.S.C. § 1677b(e)(3)(E) (1982) ("related party" includes anyone owning five percent or more of the outstanding voting stock or shares of any organization). Consistent with a long-standing practice, Commerce determined that LMI's commission payments to Pontinox constituted nothing more than an intracompany transfer of funds and disallowed the claimed adjustment. See, e.g., Final Determination of Sales at Less Than Fair Value; Bicycle Tires and Tubes from Taiwan, 48 Fed.Reg. 19,437, 19,438 (Apr. 29, 1983); Prestressed Concrete Steel Wire Strand from the United Kingdom; Final Determination of Sales at Less Than Fair Value, 47 Fed.Reg. 56,690, 56,692 (Dec. 20, 1982).

LMI claims that its commission payments...