Sanyo Elec. Co., Ltd. v. U.S.

• Decision Date: 06 April 1998
• Docket Number: Slip Op. 98-41.,Court No. 87-04-00620.
• Citation: 9 F.Supp.2d 688
• Parties: SANYO ELECTRIC CO., LTD. and Sanyo Electric Inc., Plaintiffs, v. The UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

9 F.Supp.2d 688

SANYO ELECTRIC CO., LTD. and Sanyo Electric Inc., Plaintiffs, v. The UNITED STATES, Defendant.

Slip Op. 98-41.

Court No. 87-04-00620.

United States Court of International Trade.

April 6, 1998.

COPYRIGHT MATERIAL OMITTED

Sharretts, Paley, Carter & Blauvelt, P.C., Washington, DC (Gail T. Cumins and Ned H. Marshak), for Plaintiffs.

Frank W. Hunger, Assistant Attorney General; David M. Cohen, Director; Velta Melnbrencis, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, and Karen L. Bland, of counsel, Attorney-Adviser, Office of Chief Counsel for Import Administration, U.S. Department of Commerce, Washington, DC, for Defendant.

MEMORANDUM AND ORDER

WALLACH, Judge.

I INTRODUCTION

Plaintiffs, Sanyo Electric Co., Ltd. and Sanyo Electric Inc. (collectively "Sanyo"), bring this action pursuant to Rule 56.2 of the Rules of this Court for judgment on the agency record contesting certain aspects of the Department of Commerce, International Trade Administration's ("DOC" or "Commerce") final results of the administrative review entitled Television Receivers, Monochrome and Color, From Japan; Final Results of Antidumping Duty Administrative Review, 52 Fed.Reg. 8940 (March 20, 1987) ("Final Results"). The Final Results cover the Third and Fourth Administrative Reviews, but only the actions in the Fourth Review are at issue.

The Court has jurisdiction pursuant to 19 U.S.C. § 1516a(a)(2) (1988) and 28 U.S.C. § 1581(c)(1988).

II BACKGROUND

The administrative review at issue encompasses imports of television receivers, monochrome and color, from Japan covering the period April 1, 1982 to March 31, 1983. See Initiation of Antidumping and Countervailing Duty Administrative Reviews, 50 Fed. Reg. 48825 (Nov. 27, 1985). On November 7, 1986, Commerce published the preliminary results for the Third and Fourth Review Periods. Television Receivers, Monochrome and Color, from Japan; Preliminary Results of Antidumping Duty Administrative Review, 51 Fed.Reg. 40474. Commerce published the Final Results of the Third and Fourth Review Periods on March 20, 1987, and for the Fourth Period, calculated a weighted average margin of dumping of 2.86% for Sanyo. Final Results at 8947.

Sanyo argues that Commerce erred in its decision because Commerce's calculation of Sanyo's Foreign Market Value ("FMV") and United States Price ("USP") during the relevant period was unsupported by substantial evidence and otherwise not in accordance with law. Specifically, Sanyo maintains that Commerce erred in its: 1) determination to base statutory FMV on the price paid by Sanyo's dealers to its distributors, rather than on the price paid by Sanyo's distributors to Sanyo; 2) decision to reject Sanyo's level of trade adjustment after basing FMV on the price paid by Sanyo's dealers to its distributors; 3) calculation of Sanyo's home market advertising expenses; 4) refusal to adjust FMV to reflect home market warranty labor costs, and 5) decision to deduct the commodity tax from FMV, rather than adding the tax to USP.

For the reasons that follow, the Court holds valid plaintiffs' objections and remands to Commerce for reconsideration: 1) Commerce's determination of statutory FMV; 2) Sanyo's level of trade adjustment; 3) the calculation of home market advertising expenses and 4) the treatment of the commodity tax. Commerce's refusal to deduct Sanyo's home market warranty labor costs as a direct expense from FMV is sustained.

III DISCUSSION

A The Standard of Review for ITA Determinations Requires Affirmation Unless A Determination Is Unsupported by Substantial Record Evidence Or Otherwise Not In Accordance With Law

"The Court shall hold unlawful any determination, finding, or conclusion found ... to be unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1)(1988). Substantial evidence is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Consolidated Edison Co. v. N.L.R.B., 305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126 (1938). "This restricted standard of review is reflective of the legislative intent that courts afford considerable deference to Commerce's expertise in administering the antidumping law.... [T]he deference granted to the agency's interpretation of the statutes it administers extends to the methodology it applies to fulfill its statutory mandate." GMN Georg Muller Nurnberg AG v. U.S., 15 CIT 174, 178, 763 F.Supp. 607, 611 (1991).

"The proper role of this court, then, is `to determine whether the methodology used by the ITA is in accordance with law,' and as `long as the agency's methodology and procedures are reasonable means of effectuating the statutory purpose, and there is substantial evidence in the record supporting the agency's conclusions, the court will not impose its own views as to the sufficiency of the agency's investigation or question the agency's methodology.'" Id. (quoting Ceramica Regiomontana, S.A. v. U.S., 10 CIT 399, 404-05, 636 F.Supp. 961, 965-66 (1986)).

B Commerce's Decision To Base Statutory FMV On The Price Paid By Sanyo's Dealers To Its Distributors Is Remanded To Commerce Because Commerce Failed To Articulate A Rationale For Diverging From Its Methodology Used In The Prior Three Administrative Reviews

Pursuant to 19 U.S.C. § 1673 (1988), Commerce is required to impose antidumping duties "in an amount equal to the amount by which the foreign market value ["FMV"] exceeds the United States price for the merchandise." FMV is ordinarily the price at which the exporter sells the subject merchandise in its home market or to third countries other than the United States. 19 U.S.C. § 1677b(a)(1)(1988).

However, when such sales in the home market are made to related parties, the statute does not require that those sales be used in determining FMV. 19 U.S.C. § 1677b(a)(3)(1988). See Connors Steel Co. v. United States, 2 CIT 242, 245, 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."). "As the statute does not specify the circumstances under which related party sales are to be used to calculate FMV, Commerce must necessarily be accorded deference." SSAB Svenskt Stal AB, v. United States, 976 F.Supp. 1027 (CIT 1997); see Usinor Sacilor, Sollac, and GTS v. United States, 18 CIT 1155, 1158, 872 F.Supp. 1000, 1004 (1994).

The implementing regulation in effect during the Fourth Review Period provided that the ITA would not use the home-market, related party sale in computing FMV unless it was "demonstrated to the satisfaction of the Secretary to be at prices comparable to those at which such or similar merchandise is sold to a person unrelated to the seller." 19 C.F.R. 353.22(b) (1988). The burden is placed on the manufacturer to demonstrate that its prices to the related parties are at arm's length. Mitsubishi Heavy Indus., Ltd. v. United States, 17 CIT 1024, 1029, 833 F.Supp. 919, 924 (1993); NTN Bearing Corp. of America v. United States, 905 F.Supp. 1083, 1100 (CIT 1995). When the manufacturer is able to demonstrate that the sales to its related party were made at arm's length, Commerce will use these sales to calculate FMV. See Sugiyama Chain Co., Ltd. v. United States, 18 CIT 423, 435, 852 F.Supp. 1103, 1113 (1994). When the importer is unable to bear this burden, Commerce will calculate FMV based on sales of such or similar merchandise at the most comparable commercial level of trade. See 19 C.F.R. § 353.19 (1988). For example, Commerce may calculate FMV based upon the sales by the related party to the first unrelated party. See 19 C.F.R. § 353.22(a)(1988).

To make its arm's length determination, Commerce normally compares information obtained on the manufacturer's sales to related parties and to unrelated parties, net of discounts, rebates, and commissions. Galvanized Carbon Steel Sheet From Australia; Final Determination Of Sales At Less Than Fair Value, 49 Fed.Reg. 49134 (Dec. 18, 1984). If the prices are comparable, Commerce will use the related party sales price as a basis for FMV. See Usinor Sacilor, Sollac, and GTS, 18 CIT at 1157, 872 F.Supp. at 1002 (Commerce compares the weighted average price of total sales to the related customer with the same to the unrelated customer).

In the Final Results, Commerce based FMV on the sales price paid by Sanyo's related distributors to its unrelated dealers. Commerce's explanation for its decision to base FMV on Sanyo's distributors' resale prices to Sanyo's dealers is found in Comment 31 in the Final Results:

Comment 31: Sanyo argues that for the fourth period the Department erred in basing FMV on prices from Sanyo's related and unrelated distributors, and should base FMV instead on prices from Sanyo to its distributors.

Department's Position: We disagree. Of all sales to distributors in the fourth period, Sanyo had only one sale of one unit to an unrelated distributor at a price equal to its prices to related distributors. That sale was less than one percent of all such sales. We do not consider this sufficient to determine that sales to related distributors were made at arm's length and, accordingly, we base FMV on sales made by the related distributors to unrelated dealers.

Final Results at 8943. Commerce added without further explanation in Comment 33 that its decision did not constitute an improper retroactive decision, and that it was consistent with 19 C.F.R. § 353.22(b) which had been in effect since 1980. Id.

Sanyo contends that Commerce erred by rejecting an FMV calculation based on Sanyo's sales prices to its related distributors. Sanyo asserts that it sufficiently demonstrated that its sales price to its related distributor represented an arm's length transaction since the record indicates that Sanyo sold one television at an identical price to its...