Olympic Adhesives, Inc. v. U.S.

• Decision Date: 28 March 1990
• Docket Number: No. 89-1367,89-1367
• Citation: 899 F.2d 1565
• Parties: OLYMPIC ADHESIVES, INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1565

899 F.2d 1565

12 ITRD 1006

OLYMPIC ADHESIVES, INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

No. 89-1367.

United States Court of Appeals, Federal Circuit.

March 28, 1990.

Gail T. Cumins, Sharretts, Paley, Carter & Blauvelt, P.C., of New York City, argued for plaintiff-appellant. With her on the brief was Ned H. Marshak.

Platte B. Moring, III, Atty., Commercial Litigation Branch, Dept. of Justice, Washington, D.C., argued for defendant-appellee. With him on the brief were Stuart E. Schiffer, Acting Asst. Atty. Gen. and David M. Cohen, Director. Also on the brief were Stephen J. Powell, Chief Counsel for Import Admin. and Gregory D. Shorin, Atty.-Advisor, Office of the Chief Counsel for Import Admin., of counsel.

Before NIES and MICHEL, Circuit Judges, and BALDWIN, Senior Circuit Judge.

NIES, Circuit Judge.

This appeal is from the final judgment of the Court of International Trade in Olympic Adhesives, Inc. v. United States, 708 F.Supp. 344 (Ct.Int'l Trade 1989) (Musgrave, J.). Animal glue imported from Sweden has been subject to an antidumping order imposed by the Treasury Department on August 3, 1977. ¹ The original investigation found that the dumping margin for Swedish glues was 92.72%. In the first review of the amount of duties following the order which covered the period August 3, 1977, through May 31, 1978, Treasury found that there were no sales at less than fair value and, thus, no dumping duties were due. This appeal concerns the next review period for which the International Trade Administration (ITA), now responsible for conducting such reviews, reimposed the original 92.72% duty rate. The ITA did not base this rate on sales data during the review period. Rather, the ITA found that the Swedish manufacturer, Extraco Geltec AB, failed to supply certain requested information. In reliance on that finding, the ITA resorted to its authority, under 19 U.S.C. Sec. 1677e(b) (1982) (redesignated in 1988 as Sec. 1677e(c) ²) as implemented by 19 C.F.R. 353.51(b) (1988), to use the "best information available" to determine the amount of the duty. In the ITA's judgment, the "best information" on the dumping margin for the review period was the 92.72% margin found in the original investigation. The United States importer of Swedish glue, who must pay the duty, is appellant Olympic Adhesives, Inc. Olympic brought suit in the Court of International Trade challenging the ITA's resort to the "best information" rule on the record of this case, and asserting that, in any event, the ITA did not use the "best information available." Rejecting both of these positions, the Court of International Trade affirmed the ITA's determination of the duty rate. Because we agree with the first of Olympic's arguments, we reverse and remand with instructions.

I Background

The 1977 antidumping duty investigation into animal glue and inedible gelatin imported from Sweden involved only one Swedish producer, Extraco Geltec AB, and only one U.S. importer, Olympic Adhesives. At that time, Extraco was selling animal glue to Olympic primarily in grades 12, 16, and 20, which grades Extraco also sold to unrelated purchasers in Sweden. A comparison of U.S. and Swedish prices on these grades yielded the initial dumping margin of 92.72%. 42 Fed.Reg. 39288-89 (1977).

The first administrative review was conducted by the Treasury Department and covered the period from August 3, 1977 to May 31, 1978. For that review period, Extraco reported no sales to Olympic of animal glue grades 12, 16, and 20. It did report sales to Olympic and to one Swedish customer of grades 14, 18, and 22. The comparison of the respective prices for these grades resulted in a determination that grades 14, 18, and 22 glues were not being sold at less than fair value (LTFV) during this review period. Olympic Adhesives, 708 F.Supp. at 346.

Before the second review was completed by Treasury, responsibility for conducting the review was transferred to the ITA. Treasury had been reviewing the period June 1, 1978 to December 31, 1978. The ITA expanded this review through November 30, 1980, but treated it as two periods divided at January 1, 1979. In response to the ITA's request for information regarding Extraco's sales subject to the dumping order for the extended period, Extraco again supplied information on sales of 14, 18, and 22 grade glues to Olympic in the United States and to the same single company in Sweden. On May 19, 1981, the ITA verified Extraco's responses by an investigation in Sweden. Based on the information supplied by Extraco and verified by the ITA, the ITA published its preliminary determination that the dumping margin on sales to Olympic during the period from June 1, 1978 through December 31, 1978, was 8.95%, and that the margin on sales during the period January 1, 1979 through November 30, 1980, was 1.93%. See 46 Fed.Reg. 41540-41 (August 17, 1981).

Following the preliminary determinations of the above rates, the U.S. glue industry objected to the ITA, asserting that the data supplied by Extraco was questionable and might not reflect sales made in the ordinary course of trade, as required for the ITA's determination of the amount of the duty. It suggested that Extraco was in fact selling grades 12, 16, and 20 but designating them as "new grades" 14, 18, and 22; that these "new grades" were not known in Europe; and that because there was only one home market purchaser of the "new grades", the Swedish sales could have been contrived. It also noted the great drop in volume of Extraco's reported total sales compared to its capacity and surmised that all sales had not been reported.

The above assertions by the U.S. glue industry concerning the alleged identity of the "old" and "new" grades and the possibility of contrived sales were not supported by any direct evidence either before or at a hearing held by the ITA to consider the objections. Counsel for the U.S. glue industry simply posited the theory that there could have been an agreement or arrangement between Extraco and Olympic to denominate the grades of the initial investigation (12, 16 and 20) as different grades in the annual review (14, 18 and 22) and between Extraco and its single Swedish customer to make enough purchases of these "new" grades to establish a home market price. Counsel pointed to the tremendous reduction in the dumping margin as, in itself, raising a suspicion of falsification.

If the domestic industry's theory were true, the reported Swedish sales could not be used to determine the foreign market value under 19 U.S.C. Sec. 1677b(a) (1982) which then read: ³

(a) Determination; fictitious market; sales agencies

For the purposes of this subtitle--

(1) In general

The foreign market value of imported merchandise shall be the price, at the time of exportation of such merchandise to the United States--

(A) at which such or similar merchandise is sold or, in the absence of sales, offered for sale in the principal markets of the country from which exported, in the usual wholesale quantities and in the ordinary course of trade for home consumption, ...

. . . . .

In the ascertainment of foreign market value for the purposes of this subtitle no pretended sale or offer for sale, and no sale or offer for sale intended to establish a fictitious market, shall be taken into account. [Emphasis added.]

The applicable implementing regulation, 19 C.F.R. Sec. 353.18 (1988) similarly provides:

In determining foreign market value, no pretended sale or offer for sale, and no sale or offer for sale intended to establish a fictitious market, will be taken into account.

In response to the objections, the ITA initially defended its preliminary determinations of 8.95% for the 1978 period and 1.93% for 1979-1980. It found nothing suspect in the drop in margin inasmuch as the imposition of antidumping duties is intended to achieve precisely that effect. However, it reopened its investigation to look into the specific assertions of the U.S. glue industry.

The assertion that the glue grades purchased by Olympic had merely been redesignated turned out to be baseless. Extraco had, in fact, sold two other grades of glue (17 and 25-S) to Olympic even during the original investigation period, albeit in small amounts. Further, information supplied by Olympic established, without contradiction, that the three suspect grades (14, 18 and 22) were standard grades of glue which Olympic had been purchasing from other sources prior to the publication of the initial antidumping duty finding. Finally, test reports proved that the glues were in fact 14, 18 and 22 grades, not 12, 16 and 20. ⁴ That asserted basis for the U.S. industry's theory of fictitious sales was wholly unsupported.

Extraco's drop in overall production and decreased sales to the United States also were proved to be genuine. The record showed that because of a decline in the production of English bone china to which Extraco sold processed bones, Extraco began to limit its production of glue and, before the renewed investigation was over, Extraco had gone out of the glue business entirely.

The remaining allegation of the U.S. industry was that the information on Swedish sales was falsified or incomplete. As indicated, the reported transactions had been investigated prior to the preliminary determinations and were found to be in order. Even minor discrepancies in Extraco's records, e.g., a failure to deduct a 2% discount on a few sales, were resolved after the ITA's investigative trip.

The ITA pursued the matter of Swedish sales by first contacting Olympic to obtain more information from Extraco with respect to Extraco's sales of grades 14, 18 and 22. On November 11, 1981, Olympic forwarded telexes from Extraco which provided the answers to all of these questions. Specifically, Extraco answered that (1) it had continuously offered grades 14, 18 and 22 to Swedish customers since January 1978; (2) its single...