Matsushita Elec. Indus. Co., Ltd. v. U.S.

Decision Date13 December 1984
Docket Number84-694,Nos. 84-693,s. 84-693
Citation750 F.2d 927
Parties, 3 Fed. Cir. (T) 44 MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD., et al., * Appellees, v. The UNITED STATES and Zenith Radio Corporation, Appellants. Appeal
CourtU.S. Court of Appeals — Federal Circuit

Jane K. Albrecht, Office of Gen. Counsel, U.S. International Trade Commission, Washington, D.C., argued for appellant United States. With her on the brief were Michael H. Stein, Gen. Counsel and Michael P. Mabile, Asst. Gen. Counsel, Washington, D.C., for Litigation.

Frederick L. Ikenson, Washington, D.C., argued for appellant Zenith Radio Corp. With him on the brief was J. Eric Nissley, Washington, D.C., of counsel.

Stuart M. Rosen, Weil, Gotshal & Manges and Gail Cumins, Sharretts, Paley, Carter & Blauvelt, P.C., of New York City, argued for appellees.

A. Paul Victor, New York City, and Carmen M. Shepard, Washington, D.C., Weil, Gotshal & Manges, New York City, of counsel.

Ned H. Marshak, Sharretts, Paley, Carter & Blauvelt, P.C., New York City, of counsel.

Paul D. Cullen, Collier, Shannon, Rill & Scott, Washington, D.C., was on the brief for amicus curiae.

Before NIES, Circuit Judge, NICHOLS, Senior Circuit Judge, and NEWMAN, Circuit Judge.

NIES, Circuit Judge.

Upon review under 19 U.S.C. Sec. 1675(b) (Supp. IV 1980), the International Trade Commission (Commission) determined that the U.S. television industry would be threatened with material injury if an existing antidumping order on television receivers from Japan, T.D. 71-76, were to be modified or revoked. 1 The Court of International Trade reversed, holding that the Commission's determination was not supported by substantial evidence. 2 The United States and Zenith Radio Corporation appeal that decision to this court under 28 U.S.C. Sec. 1295(a)(5) (1982). We reverse.

Background

In 1971, to protect the U.S. television industry from injury by sales of television receivers from Japan at less than fair value (LTFV), an antidumping duty order (T.D. 71-76) was issued imposing the assessment of dumping duties on such imports. 3 Even with the antidumping order in effect, the condition of the U.S. television industry deteriorated. In 1977, the Commission, pursuant to 19 U.S.C. Sec. 2251 (1976), recommended a restriction on the quantity of imports of color television receivers from Japan. The President, acting on that recommendation, implemented an orderly marketing agreement (OMA) with the Japanese. The OMA stayed in effect until May 1980, when it was allowed to expire following the Commission's review and determination, pursuant to 19 U.S.C. Sec. 2253(i) (1980), that a restriction on the quantity of imports was no longer necessary inasmuch as the "imports of Japanese [color] sets no longer pose a serious concern to the domestic industry." 4

Following the elimination of the OMA restriction, Matsushita Electric Industrial Co., Ltd., and the other appellees of this appeal (collectively "Matsushita"), pursuant to 19 U.S.C. Sec. 1675(b)(1) (Supp. IV 1980), 5 petitioned the Commission to review T.D. 71-76, contending that revocation of that order would not be injurious to the U.S. industry for the same reasons that the OMA was no longer necessary. The petitions were opposed by various U.S. interests, including appellant, Zenith Radio Corporation, which argued that circumstances had not changed sufficiently to warrant review. Nevertheless, an investigative review was undertaken pursuant to 19 C.F.R. Sec. 207.45 (1981) (implementing 19 U.S.C. Sec. 1675(b) (Supp. IV 1980)) to determine "whether an industry in the United States would be materially injured, or would be threatened with material injury ... if the antidumping order were to be modified or revoked." 6

In its review, the Commission compiled relevant data, sent out questionnaires to domestic producers, importers, and purchasers of television receivers, and held two days of hearings during which counsel for all parties and interested members of the public were allowed to testify, present witnesses, present oral argument, question opposing counsel and witnesses, and answer questions from the panel of Commissioners.

On June 4, 1981, the Commission determined by a vote of three to one that the U.S. industry would be threatened with material injury if T.D. 71-76 were to be modified or revoked.

The Commission's Determination

The Commission began its analysis by noting that the results of the investigation into continuation of the 1977 OMA did not dispose of the issues faced here for three principal reasons:

(1) The two investigations, according to the Commission, are fundamentally different, an OMA investigation involving, for example, a much more rigorous standard of injury than that in an anti-dumping investigation;

(2) Since the 1980 OMA review was made, imports from Japan had bottomed out and had started to climb again; and most importantly,

(3) The 1980 OMA review assumed the continuation of T.D. 71-76.

The Commission noted that while the statute sets forth no specific standard for conducting an antidumping review under 19 U.S.C. Sec. 1675(b), the implementing regulation, 19 C.F.R. Sec. 207.45(a), according to the Commission, required it to:

consider the relevant facts and circumstances as they currently exist, assess the intentions of the exporters and importers as to the prospective revocation or modification of the order, and project those factors into the future, to determine whether an industry in the United States would suffer material injury, or the threat thereof, or whether the establishment of an industry would be materially retarded, as a result of the changed behavior of the exporters and importers upon being freed from the pricing constraints of the order.

The Commission premised its determination on the assumption that LTFV sales would resume or continue upon revocation of the antidumping order. This premise was seen to follow from the alternative routes available to a party seeking relief from an outstanding antidumping order. Under 19 C.F.R. Sec. 353.54 (1981), an importer may seek exemption from or revocation of a dumping order through the Commerce Department by showing dumping has ceased (ordinarily for a period of two years) and, most significantly, by agreeing not to dump in the future. The importers in this case did not utilize this relief provision. 7 Moreover, the importers introduced no direct testimony with respect to how removal of the order would or would not alter their pricing and volume decisions. In the absence of satisfactory evidence with respect to the importers' intentions, the Commission found itself forced to rely on the capabilities of the Japanese producers and on general economic factors to assess their future behavior. Though evidence on Japanese production capacity was also difficult to obtain, the indications, according to the Commission, were that the Japanese had adequate flexibility to supply any market on relatively short notice. Given the strong price competition in the U.S. market, the Commission concluded it had no basis to believe that dumping would not resume or margins increase upon revocation of the order.

The question remained, however, whether dumping would occur to such an extent as to be materially injurious. The Commission then set forth three scenarios which led it to conclude that imports were likely to increase to the material injury of U.S. industry.

First, the Commission noted that its investigation disclosed that the domestic market, despite dramatic change in the past ten years, remained highly competitive with relatively low profitability. The Commission reasoned that, if demand for televisions continued to rise in the United States (as predicted), renewed or increased dumping could keep prices artifically depressed, allowing the Japanese to increase market share for both imports and domestic production through LTFV sales, which had been found to be injurious in 1971.

Second, the Commission reasoned that the Japanese could be expected to use dumped imports to increase their market share for any short-term, cyclical increases in demand, while gradually increasing production capacity of their U.S. subsidiaries to maintain it. The Commission pointed out that the phenomenon appeared to be occurring even with the antidumping order in place, a recent surge in demand for 13-inch televisions having spurred a 400% increase in Japanese imports within a few months' period. According to the Commission, that increase in imports confirmed the supply flexibility available to Japanese companies.

Third, the Commission expressed a concern over a recent softening in demand for Japanese picture tubes, the most expensive component of a television receiver, in other overseas markets. Excess Japanese tube production capacity and lower U.S. duty rates on complete sets, as compared to tubes, were seen as incentives for the production of more sets for the United States market. Further, the possibility of major import restraints in other countries on tubes or sets would, in the absence of an antidumping order, encourage increased imports into the U.S.

Based on the above considerations, the Commission found that the U.S. television industry would be threatened with material injury if T.D. 71-76 were modified or revoked.

The Decision of the Court of International Trade

Reviewing the threatened injury determination on the administrative record, the Court of International Trade held that there was "no substantial evidence to support the conclusion that the level of importations from Japan would be injurious if the antidumping order were to be revoked."

As an initial matter, the Court agreed with the premise utilized by the Commission that it must be presumed that future imports from Japan would be made at less than fair value. Further, the Court held that substantial evidence supported the Commission's finding that the U.S. industry was still in a delicate state of health....

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