Nec Corp. v. Department of Commerce

• Decision Date: 08 October 1999
• Docket Number: Court No. 99-07-00443.,Slip Op. 99-106.
• Citation: 74 F.Supp.2d 1302
• Parties: NEC CORPORATION and HNSX Supercomputers Inc., Plaintiffs, v. DEPARTMENT OF COMMERCE, Defendant, and Silicon Graphics, Inc., Defendant-Intervenor.
• Court: U.S. Court of International Trade

74 F.Supp.2d 1302

NEC CORPORATION and HNSX Supercomputers Inc., Plaintiffs, v. DEPARTMENT OF COMMERCE, Defendant and Silicon Graphics, Inc., Defendant-Intervenor.

Slip Op. 99-106.

Court No. 99-07-00443.

United States Court of International Trade.

October 8, 1999.

Paul, Weiss, Rifkind, Wharton & Garrison, (Robert E. Montgomery, Jr., Terence J. Fortune, Matthew Chavez, Heather Keele), for plaintiffs.

David W. Ogden, Acting Assistant Attorney General, David M. Cohen, Director, Commercial Litigation Branch, Civil Division, Department of Justice, (Lucius B. Lau), Patrick V. Gallagher, Office of Chief Counsel for Import Administration, Department of Commerce, of counsel, for defendant.

Wilmer, Cutler & Pickering, (John D. Greenwald, Charles S. Levy, Sophie Moonen), for defendant-intervenors.

OPINION

BARZILAY, Judge.

I. INTRODUCTION

This case was brought by Plaintiffs NEC and HNSX pursuant to 28 U.S.C § 1581(c) (1994) and 19 U.S.C. § 1516a(a)(2)(B)(vi) (1994), to contest a determination of the Department of Commerce ("Commerce") that their proposed importation of a SX-5 Series System supercomputer ("SX-5") was within the scope of an antidumping duty order issued on October 24, 1997. See Notice of Antidumping Duty Order in the Antidumping Investigation of Vector Supercomputers From Japan. 62 Fed.Reg. 55392 (Oct. 24, 1997) ("Order").

For the reasons set out in the opinion which follows, the Court holds that Commerce's scope determination is not supported by substantial evidence on the record and is not in accordance with applicable law. The Court further holds that Plaintiffs' proposed importation falls outside the scope of the antidumping duty order.

II. BACKGROUND

Plaintiff NEC, a Japanese corporation, sells vector supercomputer systems. HNSX is a wholly-owned United States subsidiary of NEC which markets NEC's products in the United States and Canada. In August 1996, in response to a petition by Cray Research, Inc.,¹ Commerce initiated an antidumping duty investigation to determine whether Japanese vector supercomputers were being sold at less than fair value in the United States. See Initiation of Antidumping Duty Investigation: Vector Supercomputers From Japan, 61 Fed. Reg. 43527 (Aug. 23, 1996) ("Initiation"). After the investigation and determination by the International Trade Commission ("ITC") that the import of vector supercomputers from Japan caused a threat of material injury, see Notice of Final Determination of Sales at Less Than Fair Value: Vector Supercomputers From Japan, 62 Fed.Reg. 45623 (Aug. 28, 1997) ("Final Determination"), Commerce issued the Order covering:

all vector supercomputers, whether new or used, and whether in assembled or unassembled form, as well as vector supercomputer spare parts, repair parts, upgrades, and system software, shipped to fulfill the requirements of a contract entered into on or after October 16, 1997, for the sale and, if included, maintenance of a vector supercomputer.

62 Fed.Reg. at 55392. In 1996 Plaintiffs and Digicon Geophysical Corp., now Veritas, entered into a contract ("contract") by which Veritas leased NEC manufactured supercomputer systems and equipment from HNSX, and was to receive support services and software from HNSX during a minimum lease period of 48 months. Pub.A.R.Doc. 1, Attachment. The contract provided that Veritas would have access to upgraded supercomputing systems that became available during the term of the lease. It stated specifically that Veritas had:

the option to substitute for an installed SX-4 Series hardware unit component ... new or improved NEC manufactured equipment having feature improvements and/or an announced lower price for equivalent performance or capacity.

Id. at 18. Following execution of the contract on June 12, 1996, NEC and HNSX installed the SX-4 Series System ("SX-4") at the Veritas facility. In March 1999, Veritas instructed HNSX to substitute the SX-5 for the SX-4. Veritas stated in its March 12, 1999 letter to HNSX that it was exercising its option under the original contract and that because the existing contract was not covered by the Order, "the SX-5 Series system can therefore be made available to use in the United States." Id. at 1. In May 1999, Plaintiffs filed a Scope Determination Request seeking confirmation that the projected importation of the SX-5 would be outside the scope of the Order. Pub.A.R.Doc. 2 at 1.

On July 9, 1999, Commerce issued its final scope determination finding that the SX-5 was within the scope of the Order. Pub.A.R.Doc. 5. In response to NEC's position that Veritas exercised an option in the 1996 contract when it ordered the importation of the SX-5, the Department stated,

In determining whether the importation of the SX-5 is included within the scope of the order, the decisive factor is the date of sale, i.e. whether the date of sale is before or after October 16, 1997.... The contracts exemption in the scope of the order was intended to exempt only those entries of vector supercomputer systems or vector supercomputer parts, upgrades, and systems that were specifically provided for in contracts entered into prior to October 16, 1997. The contract between HNSX and Veritas included an option to upgrade the SX-4 at some point in the future. However, this contract did not establish the essential terms of sale for the SX-5. The terms of sale for the SX-5 were set by an exchange of letters on March 12, 1999. Therefore, for purposes of the antidumping duty order on vector supercomputers from Japan, the upgrade to the SX-5 constitutes the formation of a new contract entered into on March 12, 1999. Accordingly, the importation of the SX-5 is subject to the order.

Id. at 7-8. Accordingly, Plaintiffs brought this suit challenging as unlawful the scope determination holding the importation of the SX-5 subject to the Order. Plaintiffs claim that Commerce's date of sale analysis is contrary to law, and that the option contained in the 1996 contract is enforceable as part of the 1996 contract and thus outside the scope of the order. Commerce defends its decision that the SX-5 is included within the scope of the Order, claiming that, rather than changing its terms, it reasonably clarified the Order because: (1) in the Order Commerce specifically reserved for the future the question whether merchandise purchased pursuant to an option that existed in a contract entered into prior to October 16, 1997 but exercised after that date would be subject to antidumping duties; (2) in establishing the meaning of the word "contract" contained in the Order, Commerce properly resorted to its own body of law; and (3) Commerce properly interpreted the word "contract" to mean the date upon which the material terms of sale are set.

III. STANDARD OF REVIEW

"In reviewing injury, antidumping, and countervailing duty investigations and determinations, the Court of International Trade must sustain `any determination, finding or conclusion found' by Commerce unless it is `unsupported by substantial evidence on the record or otherwise not in accordance with law.'" Fujitsu General Ltd. v. United States, 88 F.3d 1034, 1038 (Fed.Cir.1996), (quoting 19 U.S.C. § 1516a(b)(1)(B)). Substantial evidence "is more than a mere scintilla," Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126 (1938); and "such relevant evidence as a reasonable mind might accept to support a conclusion." Universal Camera Corp. v. NLRB, 340 U.S. 474, 477, 71 S.Ct. 456, 95 L.Ed. 456 (1951). When deciding whether Commerce's scope determination is correct the court employs the substantial evidence standard as follows: "In actions challenging a determination as to whether a particular type of merchandise is covered in an existing antidumping duty order, ... this court must decide whether the challenged determination is supported by substantial evidence on the record and otherwise in accordance with the law." Mitsubishi v. United States, 16 CIT 730, 802 F.Supp. 455, 458 (1992) (citation omitted).

In reviewing the scope determination in this case, the Court's task is different from the one usually confronting a reviewing court. In the more typical scope determination review, such as in the Mitsubishi case cited above, the court reviews Commerce's application of a specific set of facts, usually the physical and technical specifications of the product at issue, with the terms of the antidumping duty order. That is not the task here. This dispute centers on Commerce's interpretation of the language "shipped to fulfill the requirements of a contract entered into on or after October 16, 1997...." 62 Fed.Reg. at 55392. The operative determination is whether the original contract required the shipment of the SX-5; therefore, this decision involves analysis of general contract law principles.

When a court reviews an issue within the special expertise of an agency, considerable deference is due. The Federal Circuit explained this principle as follows:

Antidumping and countervailing duty determinations involve complex economic and accounting decisions of a technical nature, for which agencies possess far greater expertise than courts. This deference is both greater than and distinct from that accorded the agency in interpreting the statutes it administers, because it is based on Commerce's technical expertise in identifying, selecting and applying methodologies to implement the dictates set forth in the governing statute, as opposed to interpreting the meaning of the statute itself where ambiguous.

Fujitsu, 88 F.3d at 1039 (citations omitted). The Court recognizes that Commerce has "broad authority to interpret its own antidumping duty orders...." INA Walzlager Schaeffler KG v. United States, 108 F.3d 301, 307 (Fed.Cir.1997). As a general rule, agencies are afforded deference in interpretation of their own orders, especially when the interpretation is of long standing and there are underlying policy reasons for the...