NEC Home Electronics, Ltd. v. U.S., 94-1390

• Decision Date: 28 April 1995
• Docket Number: No. 94-1390,94-1390
• Citation: 54 F.3d 736
• Parties: NEC HOME ELECTRONICS, LTD. and NEC Technologies, Inc., Plaintiffs-Appellants, v. The UNITED STATES, Defendant-Appellee, and Zenith Electronics Corporation, Defendant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 736

54 F.3d 736

17 ITRD 1129

NEC HOME ELECTRONICS, LTD. and NEC Technologies, Inc., Plaintiffs-Appellants, v. The UNITED STATES, Defendant-Appellee, and Zenith Electronics Corporation, Defendant.

No. 94-1390.

United States Court of Appeals, Federal Circuit.

April 28, 1995.

Robert E. Montgomery, Jr., Paul, Weiss, Rifkind, Wharton & Garrison, Washington, DC, argued, for plaintiffs-appellants. With him on the brief was Robert P. Parker.

Velta A. Melnbrencis, Asst. Director, Commercial Litigation Branch, Dept. of Justice, Washington, DC, argued, for defendant-appellee. With her on the brief were Frank W. Hunger, Asst. Atty. Gen. and David M. Cohen, Director. Also on the brief were Stephen J. Powell, Chief Counsel for Import Admin., Berniece A. Browne, Sr. Counsel, Office of the Chief Counsel and Lucius B. Liu, Atty.-Advisor, Office of the Chief Counsel Before ARCHER, Chief Judge, LOURIE and SCHALL, Circuit Judges.

for Import Admin., U.S. Dept. of Commerce. Of counsel was Terrence J. McCartin.

SCHALL, Circuit Judge.

NEC Home Electronics, Ltd. (NECHE) and NEC Technologies, Inc. (NECT) (collectively "NEC") appeal from the May 2, 1994 final decision of the United States Court of International Trade in NEC Home Electronics, Ltd. v. United States, 16 I.T.R.D. (BNA) 1518, 1994 WL 176914 (1994). In its decision, the court affirmed the final results of four consolidated administrative reviews of the antidumping order for television receivers, monochrome and color, from Japan, 54 Fed.Reg. 35,517 (Aug. 28, 1989) (Final Results ). For the reasons set forth below, we affirm in part, vacate in part, and remand for further proceedings consistent with this opinion.

BACKGROUND

A. Summary of the Case

NECHE is a Japanese company that manufactures consumer electronics products, including color televisions; it markets these products in Japan, the United States, and various other countries. NECT is a company located in the United States that buys NEC-brand televisions from NECHE and sells them in the United States. Both NECHE and NECT are wholly-owned subsidiaries (NECHE directly, and NECT indirectly) of NEC Corporation, a Japanese Corporation. Zenith Electronics Corporation is a United States manufacturer of televisions. It provided comments during the administrative proceedings and was a defendant-intervenor in the proceedings in the Court of International Trade. It has not participated in this appeal.

On March 10, 1971, the Department of the Treasury issued an antidumping duty order covering television receivers, monochrome and color, from Japan. Television Receiving Sets, Monochrome and Color, From Japan, 36 Fed.Reg. 4597. In 1979, administration of the antidumping laws was transferred to the Department of Commerce, specifically, the United States International Trade Administration (ITA). The ITA's consolidated fifth through eighth reviews of the 1971 antidumping duty order, which are the reviews involved in this appeal, covered imports during the period from April, 1983 through February, 1987. Initiation of Antidumping and Countervailing Duty Administrative Reviews, 50 Fed.Reg. 44,825 (Nov. 27, 1985); 51 Fed.Reg. 13,273 (Apr. 18, 1986); 51 Fed.Reg. 24,883 (July 9, 1986); 52 Fed.Reg. 18,937 (May 20, 1987). These consolidated reviews resulted in the imposition of antidumping duties on NECHE's television receivers imported into the United States.

NEC challenges the method by which the ITA calculated NEC's antidumping duty margin. Statute provides that the antidumping duty margin equals "the amount by which the foreign market value exceeds the United States price for the merchandise." 19 U.S.C. Sec. 1673 (1988). In each of the four administrative reviews at issue, the ITA concluded that NEC had not sufficiently shown that certain related party sales in the home market of Japan "were made at arm's length." Final Results, 54 Fed.Reg. at 35,522. The effect of NEC's failure to make that showing was that the related-party sales--which allegedly were at the level of trade of NEC's sales in the United States market used in the calculation of United States price (USP)--were not used in the ITA's calculation of foreign market value (FMV). Instead, the first sale in the home market to an unrelated party was used. The ITA also concluded that NEC had not sufficiently quantified, and thus was not entitled to, a level-of-trade adjustment that NEC had sought in the alternative. Id. at 35,522-23. NEC contests both of these conclusions.

B. Statutory and Regulatory Background

As just stated, statute provides that the antidumping duty margin equals "the amount by which the foreign market value exceeds the United States price for the merchandise." 19 U.S.C. Sec. 1673. Although the ITA is given broad authority to determine the degree of, and indeed the existence of, a margin, there should be the proverbial "apples-to-apples" A difficulty arises, however, where the home-market sale that corresponds to the level of trade of the United States market sale used in the calculation of USP was made between related parties. See Connors Steel Co. v. United States, 2 CIT 242, 527 F.Supp. 350, 354 (1981) ("Common sense, of course, would indicate that strictly by themselves sales to a related purchaser would be a questionable guarantee of a fair home market price."). There is a perceived danger that a foreign manufacturer will sell to related companies in the home market at artificially low prices, thereby camouflaging true FMV and achieving a lower antidumping duty margin. See Ansaldo Componenti, S.p.A. v. United States, 10 CIT 28, 628 F.Supp. 198, 204 (1986) ("Related party home-market sales tend to be lower in price because related companies generally decrease prices to each other to the advantage of the principal entity."). Thus, regulation provides that the ITA will use the home-market, related-party sale in computing FMV "only if satisfied that the price is comparable to the price at which the [seller] sold such or similar merchandise to a person not related to the seller." 19 C.F.R. Sec. 353.45(a) (1994); see 19 C.F.R. Sec. 353.22(b) (1988) (same in substance); Sugiyama Chain Co. v. United States, 852 F.Supp. 1103, 1113 (Ct.Int'l Trade 1994) ("While the Court agrees [that 19 U.S.C. Sec. 1677b(a)(3) (1988) ] allows Commerce to use related party prices which pass a comparability test, there must be sufficient information submitted by a respondent for Commerce to conduct such a test."). In other words, the ITA will not utilize the home-market, related-party sale unless the importer demonstrates that the transaction was made at arm's length. Mitsubishi Heavy Indus., Ltd. v. United States, 833 F.Supp. 919, 923 (Ct.Int'l Trade 1993) ("Commerce must ascertain, among other things, whether sales to related parties are at arm's length."). Where the importer is unable to so demonstrate, the ITA "will calculate foreign market value based on sales of such or similar merchandise at the most comparable commercial level of trade." 19 C.F.R. Sec. 353.58 (1994); see also 19 C.F.R. Sec. 353.19 (1988) (same in substance). For example, the ITA is permitted to base FMV upon the sales by the related party to the first unrelated party. 19 U.S.C. Sec. 1677b(a)(3) (1988); 19 C.F.R. Sec. 353.45(b) (1994); see also 19 C.F.R. Sec. 353.22(a) (1988).

comparison between sales in the United States and the home market. Torrington Co. v. United States, 44 F.3d 1572, 1580 (Fed.Cir.1995); Smith-Corona Group v. United States, 713 F.2d 1568, 1571-73, 1 Fed.Cir. (T) 130, 132-34 (1983), cert. denied, 465 U.S. 1022, 104 S.Ct. 1274, 79 L.Ed.2d 679 (1984). Under this principle, the ITA "normally will calculate foreign market value and United States price based on sales at the same commercial level of trade." 19 C.F.R. Sec. 353.58 (1994). ¹

Finally, regulation provides that, where sales from different levels of trade are used in the calculations of FMV and USP, the ITA will "make appropriate adjustments for [the level-of-trade] differences affecting price comparability." 19 C.F.R. Sec. 353.58 (1994); see also 19 U.S.C. Sec. 1677b(a)(4)(B) (1988); 19 C.F.R. Sec. 353.19 (1988) (same in substance).

C. NEC's Distribution in the Japanese Market Vis-a-Vis the United States Market

The following facts regarding distribution of NECHE's televisions are taken from NEC's submissions in the administrative proceedings. Since the ITA did not take issue with any of these facts, we assume them to be undisputed.

During the review period (April 1, 1983, through February 28, 1987), all of the televisions NECHE sold in the Japanese market were sold to affiliated sales companies (NECSCs). NEC, 16 I.T.R.D. at 1519. According to NEC, NECHE established its prices to the NECSCs based upon the "current local market prices" of the televisions. The NECSCs then sold the televisions to The imports at issue in this case involved sales to unrelated parties. ² In the case of these unrelated-party, or "purchase price," sales, televisions were shipped from NECHE's plant directly to one of a small number of very large, unrelated original equipment manufacturers (OEMs) residing in the United States.

unrelated Japanese-market retailers who, in turn, sold to end users.

D. Administrative Proceedings and Proceedings in the Court of International Trade

NEC timely responded to the ITA's standard questionnaires used in the administrative reviews. In its submissions, for the FMV side of the calculation, NEC submitted a list of sales made by the NECSCs to the unrelated retailers in Japan. In making its data submissions, NEC argued that, because 19 C.F.R. Sec. 353.19 (1988) required that the ITA compare sales prices at the same commercial level of trade, FMV for "purchase price" sales had to be based on the prices that NECHE charged the NECSCs. To get past the related-party difficulty, NEC stated that "[u]nder Japanese tax law, NECHE's prices to [the NECSCs] are considered to be at 'arms length.' " ³ NEC was referring to...