Mitsubishi Heavy Industries, Ltd. v. U.S.

• Decision Date: 26 May 1999
• Docket Number: Slip Op. 99-46.,Court No. 96-10-02292.
• Citation: 54 F.Supp.2d 1183
• Parties: MITSUBISHI HEAVY INDUSTRIES, LTD. and Tokyo Kikai Seisakusho, Ltd., Plaintiffs, v. UNITED STATES, Defendant, and Goss Graphics, Inc., Defendant-Intervenor.
• Court: U.S. Court of International Trade

Page 1183

54 F.Supp.2d 1183

MITSUBISHI HEAVY INDUSTRIES, LTD. and Tokyo Kikai Seisakusho, Ltd., Plaintiffs, v. UNITED STATES, Defendant and Goss Graphics, Inc., Defendant-Intervenor.

Slip Op. 99-46.

Court No. 96-10-02292.

United States Court of International Trade.

May 26, 1999.

Steptoe & Johnson LLP (Anthony J. LaRocca, Richard O. Cunningham, Eric C. Emerson, Gregory S. McClure) for Plaintiff Mitsubishi Heavy Industries, Ltd., Perkins Coie LLP (Yoshihiro Saito, Mark T. Wasden), for Plaintiff Tokyo Kikai Seisakusho, Ltd.

David W. Ogden, Acting Assistant Attorney General, Civil Division, U.S. Department of Justice, David M. Cohen, Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, Randi Rimerman Serota, Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, Robert J. Heilferty, Senior Attorney, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, for Defendants.

Wiley, Rein & Fielding (Charles Owen Verrill, Jr., Alan H. Price, John R. Shane, Leslie Johnson Pujo), for Defendant-Intervenor.

OPINION

POGUE, Judge.

On June 23, 1998, this Court remanded certain aspects of the U.S. Department of Commerce's ("Commerce") determination in Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, From Japan, 61 Fed. Reg. 38,139 (Dep't Commerce, July 23, 1996)(final determ.)("Japan Final"), as amended by Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, From Japan, 61 Fed.Reg. 46,621 (Dep't Commerce, Sept. 4, 1996)(antidumping duty order and amend. to final determ.). See Mitsubishi Heavy Industries, Inc. v. United States, 22 CIT ___, 15 F.Supp.2d 807 (1998)("Mitsubishi").¹

Specifically, the Court directed Commerce: 1) to correct its error in allocating Plaintiffs' indirect selling costs incurred in Japan; 2) to explain its decision to adjust normal value for imputed credit expenses; 3) to reevaluate its decision to treat certain suppliers of MHI's as affiliated parties; 4) to reconsider its decision not to treat a trading company and MHI as affiliated parties; and 5) to reconsider its decision to treat LNPPs sold in the home market as foreign like product. See id. at ___, 15 F.Supp.2d at 834.

The Commission issued its final remand determination ("Remand Determ.") on December 21, 1998.

Standard of Review

The Court will uphold a Commerce determination in an antidumping investigation unless it is "unsupported by substantial evidence on the record, or otherwise not in accordance with law[.]" Section 516A(b)(1)(B)(i) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(b)(1)(B)(i)(1994).

Discussion

I. Plaintiffs' Indirect Selling Expenses Incurred in Japan

In the underlying proceeding, Commerce determined the U.S. price based on constructed export price ("CEP").² The CEP provision requires Commerce to reduce the price at which the subject merchandise is first sold to an unaffiliated customer in the United States by the amount of selling expenses "incurred by or for the account of the producer or exporter, or the affiliated seller in the United States, in selling the subject merchandise...." 19 U.S.C. § 1677a(d)(1)(1994). Indirect selling expenses are a component of selling expenses.³ See 19 U.S.C. § 1677a(d)(1)(D)(requiring Commerce to deduct from CEP any selling expenses not deducted as commissions, direct selling expenses, or selling expenses that the seller pays on behalf of the purchaser). The statute limits CEP deductions to "expenses ... associated with economic activities occurring in the United States." Statement of Administrative Action, H.R. Doc. No. 103-316, 103rd Cong., 2nd Sess. (1994), reprinted in URUGUAY ROUND AGREEMENTS ACT, LEGISLATIVE HISTORY, Vol. VI, at 823 ("SAA").⁴ This Court has held that "[e]xpenses incurred outside of the United States could still be `associated with' economic activities occurring in the United States." Mitsubishi, 22 CIT at ___, 15 F.Supp.2d at 818. Therefore, in the present matter, Commerce properly decided to deduct indirect selling expenses incurred by the Plaintiffs in their home market of Japan associated with their exports of LNPPs to the United States. See id.

Based on the information reported by the Plaintiffs at verification, however, Commerce was "unable ... to quantify the portion of the [Plaintiffs'] total indirect selling expenses [incurred in Japan that] were associated with the U.S. sales." Germany Final at 38,174. Therefore, Commerce derived a methodology to accomplish the deduction as non-adverse facts available. See id. Commerce multiplied the total indirect expenses incurred in Japan by the ratio of all other CEP deductions made under 19 U.S.C. § 1677a(d)(1) to the contract price net of the total indirect selling expenses incurred in Japan. See id.

Commerce subsequently concluded, however, that in applying this methodology, Commerce inadvertently overstated the amount of indirect selling expenses to be deducted from CEP. Specifically, Commerce explained that the pool of indirect selling expenses incurred in the home market and allocated to MHI's U.S. sales included "various office and planning expenses ... [that were] not the type of expenses that ordinarily would be associated with United States economic activity." Response Court's Apr. 21, 1998 Ord. Regarding Treatment Indirect Selling Expenses at 2. Because Commerce's determination was based on a factual error, this Court remanded the matter to Commerce to evaluate whether its allocation methodology either understated or overstated MHI's indirect selling expenses and to correct the error. See Mitsubishi, 22 CIT at ___, 15 F.Supp.2d at 819.

On remand, Commerce "concluded that the ratio should [have been] applied to a smaller pool of indirect selling expenses incurred in Japan than [had been] used in the Final Determination." Remand Determ. at 3. Specifically, Commerce removed the following types of expenses incurred in Japan from the indirect selling expense pool: salaries and related expenses, office expenses, planning expenses, consumable stationary expenses, book and printing expenses, insurance, employee education, and department, section, and other charges. See id. Commerce concluded, "In the absence of record evidence to the contrary, it would be unduly punitive to presume that such expenses were incurred on the sale to the unaffiliated customer in the United States." Id.

The SAA states that "[CEP] is now calculated to be, as closely as possible, a price corresponding to an export price between non-affiliated exporters and importers." SAA at 823. MHI now argues that Commerce's methodology is "arbitrary" because it does not ensure that "indirect selling expenses consistent with an EP transaction [will] not be deducted." Cmts. of Pl. MHI on Remand Determ. at 3-4. MHI maintains that, while Commerce's methodology may properly allocate a portion of the indirect selling expenses incurred in Japan to the economic activities occurring in the United States, "the objective of the allocation is to identify only those expenses that are inconsistent with an EP transaction." Id. at 4. Because Commerce did not explain how its methodology fulfilled this objective, MHI argues, its methodology should be rejected. See id.

Regarding this matter, however, the Court has already held that "[19 U.S.C. § 1677a(d)(1)] does not require ... Commerce [to] examine every potential CEP deduction to determine whether the activity generating the expense would be inconsistent with an EP transaction." Mitsubishi, 22 CIT at ___, 15 F.Supp.2d at 818. Under the statute, Commerce has the authority to deduct indirect selling expenses that are associated with the sales of exports in the United States from CEP, whether incurred in the United States or the home market. See id.

Here, as noted, Commerce was able to confirm that certain of the home-market indirect selling expenses were associated with U.S. activity, but was unable to quantify the exact portion of such expenses attributable to U.S. sales based on the information reported. See Germany Final at 38,174. Therefore, as non-adverse facts available, Commerce multiplied the total indirect selling expenses incurred in Japan by the ratio of all other CEP deductions made under 19 U.S.C. § 1677a(d)(1) to the contract price net of the total indirect selling expenses incurred in Japan. See id. Because it was reasonable, under the circumstances here, for Commerce to assume that the percentage of the home-market indirect selling expenses associated with U.S. economic activity would correspond with the remaining 19 U.S.C. § 1677a(d)(1) CEP deductions' percent share of the contract price, Commerce's methodology was in accordance with law.

In addition, both MHI and Goss argue that Commerce's calculation of home-market indirect selling expenses was unreasoned because the agency failed to articulate a standard for determining which expenses should have been included in the pool of home-market indirect selling expenses to which the ratio was applied. See Cmts. of Pl. MHI on Remand Determ. at 4; Rebuttal of Goss to Cmts. of MHI at 4.

The Court disagrees. Commerce reasonably interpreted the statute as requiring it to deduct from CEP indirect selling expenses that were associated with economic activities occurring in the United States. See Mitsubishi, 22 CIT at ___, 15 F.Supp.2d at 818; see also SAA at 823 ("[CEP] will be calculated by reducing the price of the first sale to an unaffiliated customer in the United States by the amount of the [statutory] expenses ... associated with economic activities occurring in the United States [.]")(emphasis added).

Therefore, the standard Commerce applied was self-evident: Commerce excluded from the pool of indirect selling expenses incurred in Japan those expenses that were not generally associated with the sales of LNPP exports in the United States (i.e., salaries, office...