Mitsubishi Heavy Industries, Ltd. v. U.S., Slip Op. 98-82.

• Citation: 15 F.Supp.2d 807
• Decision Date: 23 June 1998
• Docket Number: Court No. 96-10-02292.,Slip Op. 98-82.
• Parties: MITSUBISHI HEAVY INDUSTRIES, LTD., Plaintiff, v. UNITED STATES, Defendant, and Goss Graphics, Inc., Defendant-Intervenor.
• Court: U.S. Court of International Trade

15 F.Supp.2d 807

MITSUBISHI HEAVY INDUSTRIES, LTD., Plaintiff, v. UNITED STATES, Defendant and Goss Graphics, Inc., Defendant-Intervenor.

Slip Op. 98-82.

Court No. 96-10-02292.

United States Court of International Trade.

June 23, 1998.

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Steptoe & Johnson, Washington, DC (Anthony J. LaRocca, Carol A. Mitchell, Eric C. Emerson, Duncan B. Hollis and Richard O. Cunningham); Gibson Dunn & Crutcher LLP, Washington, DC (Daniel J. Plaine) Attorneys for Mitsubishi Heavy Industries, Ltd.; Perkins Coie LLP, Washington, DC (Yoshihiro Saito and Mark T. Wasden), for Tokyo Kikai Seisakusho, Ltd., for Plaintiffs.

Frank W. Hunger, Assistant Attorney General of the United States, David M. Cohen, Director, Commercial Litigation Branch, Civil Division, United States Department of Justice; Of Counsel, Robert J. Heilferty, Attorney, Office of the Chief Counsel for Import Administration, Department of Commerce, and Randi-Sue Rimerman, Attorney, Department of Justice, Civil Division, Commercial Litigation Branch, Washington, DC, for Defendants.

Wiley, Rein & Fielding, Washington, DC (Charles Owen Verrill, Jr., Alan H. Price, and Willis S. Martyn III), for Defendant-Intervenors.

OPINION

POGUE, Judge:

Plaintiffs Mitsubishi Heavy Industries, Ltd. ("MHI") and Tokyo Kikai Seisakusho, Ltd. ("TKS"), respondents in the underlying investigation, and Plaintiff Goss Graphic Systems, Inc. ("Goss"), petitioner in the underlying investigation, filed separate motions challenging various aspects of the final determination of the International Trade Administration of the United States Department of Commerce ("Commerce" or "ITA") regarding imports of large newspaper printing presses ("LNPPs") from Japan. Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, from Japan, 61 Fed.Reg. 38,139 (Dep't Commerce 1996) (final det.)("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 1996) (antidumping duty ord. and amendment to final det.). The motions were consolidated.

The antidumping investigation of LNPPs from Japan was conducted simultaneously with Commerce's investigation of sales of LNPPs from Germany. Issues common to both investigations were discussed in Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, from Germany, 61 Fed.Reg. 38,166 (Dep't Commerce 1996) (final det.) ("Germany Final"). The Court affirmed Commerce's determinations with respect to common issues of scope and standing. Mitsubishi Heavy Indus. Ltd. v. United States, 21 CIT ___, 986 F.Supp. 1428 (1997). Familiarity with the Court's opinion on scope and standing issues is assumed.

DISCUSSION

I. CONSTRUCTED EXPORT PRICE

In calculating a dumping margin, Commerce compares United States price to the normal value of the subject merchandise. United States price is calculated using either an export price ("EP") methodology or a constructed export price ("CEP") methodology.¹ Typically, Commerce relies on EP when the foreign exporter sells directly to an unrelated U.S. purchaser. CEP is used when the foreign exporter makes sales through a related party in the United States. See Sharp Corp. v. United States, 63 F.3d 1092, 1093-94 (Fed.Cir.1995) ("The statute defines [U.S. price], ... as either the United States purchase price [now EP] or the exporter's sales price [now CEP], whichever is appropriate.... Commerce uses the [CEP] if the foreign manufacturer imports through a related company in the United States.") (citations omitted).

For each of the relevant LNPP sales by MHI and TKS to the United States, Commerce calculated U.S. price based on a CEP methodology. TKS had reported its sales as CEP sales and therefore does not object to Commerce's methodology. However, MHI reported its sales as EP sales. MHI objects to Commerce's decision to reclassify all of its sales as CEP sales. MHI also objects to Commerce's decision to treat its installation costs as further manufacturing, Commerce's methodology for allocating general and administrative ("G & A") expenses for MHI's U.S. subsidiary, and Commerce's decision to deduct from U.S. price, indirect selling expenses incurred in Japan. Both TKS and MHI object to Commerce's refusal to grant a level-of-trade ("LOT") adjustment or CEP offset.

1. Commerce's Decision to Base MHI's U.S. Price on CEP

The antidumping statute defines EP as follows:

the price at which the subject merchandise is first sold (or agreed to be sold) before the date of importation by the producer or exporter of the subject merchandise outside of the United States to an unaffiliated purchaser in the United States or to an unaffiliated purchaser for exportation to the United States....

19 U.S.C. § 1677a(a) (1994). Constructed export price is defined as follows:

the price at which the subject merchandise is first sold (or agreed to be sold) in the United States before or after the date of importation by or for the account of the producer or exporter of such merchandise or by a seller affiliated with the producer or exporter, to a purchaser not affiliated with the producer or exporter....

19 U.S.C. § 1677a(b).

When U.S. price is based on CEP, Commerce bases its calculations on the price charged to the first unaffiliated purchaser. This is the starting price. Commerce then makes certain adjustments including several that are not required for EP sales. The CEP adjustments "are made for certain amounts associated with the sale of merchandise in the United States, typically, commissions for selling the merchandise ... and sales expenses generally incurred in selling the same type of merchandise in the United States." PQ Corp. v. United States, 11 CIT 53, 59, 652 F.Supp. 724, 730 (1987). The purpose of these adjustments is to prevent foreign producers from competing unfairly in the United States market "by spending amounts on marketing and selling their products that are in excess of what they spend in their home markets." Id. According to the Statement of Administrative Action to the URAA,² "constructed export price is ... calculated to be, as closely as possible, a price corresponding to an export price between non-affiliated exporters and importers." H.R. Doc. No. 103-316 at 823 (1994) ("SAA").

The statute does not specify the circumstances under which Commerce is to choose EP or CEP. However, according to the SAA,

[i]f the first sale to an unaffiliated purchaser in the United States, or to an unaffiliated purchaser for export to the United States, is made by the producer or exporter in the home market prior to the date of importation, then Commerce will base its calculation on export price. If, before or after the time of importation, the first sale to an unaffiliated person is made by (or for the account of) the producer or exporter or by a seller in the United States who is affiliated with the producer or exporter, then Commerce will base its calculation on constructed export price....

Id. at 822-23.

Thus, a sale to an unaffiliated party made prior to importation and involving an importer affiliated with the producer or exporter could be either an EP or a CEP sale. In such a situation, "the determination of whether [EP] or [CEP] applies must be based upon additional circumstances." PQ Corp. at 60, 652 F.Supp. at 731. In Certain Stainless Steel Wire Rods from France, 58 Fed.Reg. 68,865 (Dep't Commerce 1993) (final det.), Commerce described the additional criteria it examines in deciding whether to use an EP or CEP methodology as follows:

The first criterion is that the merchandise in question is shipped directly from the manufacturer to the unrelated buyer, without being introduced into the inventory of the related selling agent. The second criterion is that this arrangement is the customary commercial channel for sales of this merchandise between the parties involved....

The third criterion is that the related selling agent located in the United States acts only as a processor of sales-related documentation and a communication link with the unrelated U.S. buyer.

Id. at 68,868-69. Commerce will apply the EP methodology only if all three criteria apply to the sales at issue. Id. This test has been approved by this court. See Independent Radionic Workers v. United States, 19 CIT 375, 375 (1995)(describing Commerce's three criteria as "the judicially approved test").

At oral argument, counsel for MHI argued that Commerce's three-part test is incomplete because it does not focus on the key statutory distinction between EP and CEP.

The statute describes EP as "the price at which the subject merchandise is first sold (or agreed to be sold) before the date of importation by the producer or exporter of the subject merchandise outside of the United States to an unaffiliated purchaser in the United States...." 19 U.S.C. § 1677a(a)(emphasis added). CEP is described as "the price at which the subject merchandise is first sold (or agreed to be sold) in the United States ...." 19 U.S.C § 1677a(b)(emphasis added). The inside/outside distinction between the two sections is critical, counsel argued, and therefore, Commerce's analysis must focus on the nature of the activities performed by MHI's U.S. subsidiary to determine whether the sales at issue occurred in the United States or in Japan.

Commerce's three-part test was created before the enactment of the URAA. Under the pre-URAA version of the statute, purchase price (now EP) was described as follows: "the price at which merchandise is purchased, or agreed to be purchased, prior to the date of importation, from a reseller or the manufacturer or producer of the merchandise for exportation to the United States." 19 U.S.C. § 1677a(b) (1988). Exporter's sales price (now CEP) was described as, "the price at which merchandise is sold or agreed to be sold in the United States, before...