SOUTHWEST FLA. WINTER VEG. GROWERS v. United States

• Decision Date: 21 March 1984
• Docket Number: Court No. 80-4-00577.
• Parties: SOUTHWEST FLORIDA WINTER VEGETABLE GROWERS ASSOCIATION, Palm Beach-Broward Farmers Committee for Legislative Action, Inc., and South Florida Tomato and Vegetable Growers, Inc., Plaintiffs, v. UNITED STATES, Defendant, and West Mexico Vegetable Distributors Association, Intervenor.
• Court: U.S. Court of International Trade

584 F. Supp. 10

SOUTHWEST FLORIDA WINTER VEGETABLE GROWERS ASSOCIATION, Palm Beach-Broward Farmers Committee for Legislative Action, Inc., and South Florida Tomato and Vegetable Growers, Inc., Plaintiffs, v. UNITED STATES, Defendant and West Mexico Vegetable Distributors Association, Intervenor.

Court No. 80-4-00577.

United States Court of International Trade.

March 21, 1984.

Van Ness, Feldman, Sutcliffe, Curtis & Levenberg, P.C., Washington, D.C. (Gerry Levenberg, P.C., Gary D. Bachman, and Jeffrey S. Christie, Washington, D.C., on the motion), for plaintiffs.

Richard K. Willard, Acting Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civ. Div. (Alexander Younger, Senior Trial Counsel, Washington, D.C., on the cross-motion); (William D. Hunter, Atty. Adviser, Office of the Gen. Counsel, Import Admin., U.S. Dept. of Commerce, Washington, D.C., of counsel, on the cross-motion), for defendant.

Arnold & Porter, Washington, D.C. (Patrick F.J. Macrory, Kenneth A. Letzler, Bijan Amini, and John M. Campbell, Washington, D.C., on the motion), for intervenor.

OPINION AND ORDER

CARMAN, Judge:

This matter is before me on plaintiffs' motion for review of administrative determinations upon an agency record filed pursuant to Rule 56.1 of the Rules of this court, challenging the Final Determination of Sales at Not Less Than Fair Value by the Department of Commerce (Commerce) in the antidumping investigation concerning certain fresh winter vegetables from Mexico, 45 Fed.Reg. 20,512 (March 28, 1980). Plaintiffs argue this determination by Commerce was unsupported by substantial evidence in the record and otherwise was not in accordance with law.

This case presents a novel issue of whether Commerce may disregard a substantial number of below cost sales, reflecting the perishable nature of produce, in determining whether sales were made at less than fair value under our antidumping laws. It is an important determination not only to the parties to this action but to the domestic and Mexican produce industries as a whole. The procedural history of the case is undisputed and follows here.

Plaintiffs filed a petition with the United States Treasury Department (Treasury) on September 12, 1978, alleging certain fresh winter vegetables—tomatoes, squash, eggplant, bell peppers and cucumbers— were imported from Mexico between November 1, 1977, and April 30, 1978, and were being sold in the United States at less than fair value within the purview of Section 201 of the Antidumping Act of 1921, as amended, ch. 14, § 201, 42 Stat. 9, 11 (repealed 1979). The petition of plaintiffs alleged that Southern Florida and the State of Sinaloa, Mexico, provided the source of virtually all fresh winter vegetables for markets in the United States and that Nogales, Arizona, was the point of importation for over 95 percent of all winter vegetables from Mexico.

After many extensions from the commencement of the antidumping investigation on October 19, 1978, Treasury issued on November 5, 1979, a Tentative Determination of Sales at Not Less Than Fair Value. 44 Fed.Reg. 63,588 (1979). Subsequently, the antidumping investigation was transferred to Commerce on January 1, 1980.¹ Commerce continued the investigation after having determined that the transition rules of the Trade Agreements Act of 1979, Pub.L. No. 96-39, §§ 102-107, 93 Stat. 189, covered investigations of less than fair value sales in which a tentative negative determination had been made by Treasury prior to the effective date of the 1979 Act.² Treasury's preliminary negative determination was treated as though it had been issued by Commerce on January 1, 1980, under Section 733 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1673b (1982).

On March 24, 1980, Commerce issued a Final Determination of Sales at Not Less Than Fair Value pursuant to Section 735 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1673d (1982). See 45 Fed.Reg. 20,512 (1980).

Plaintiffs argue the determination by Commerce that the subject merchandise was not being, and was not likely to be, sold in the United States at less than fair value is unsupported by substantial evidence in the record and is not in accordance with the law. Plaintiffs' contentions in essence are: (1) Commerce erred in using the third country sales methodology rather than the constructed value methodology in determining foreign market value because a substantial number of third country sales at below cost existed making the valuation inaccurate; (2) Commerce improperly refused to disregard a substantial amount of below cost sales in contravention of 19 U.S.C. § 1677b(b); (3) Commerce made "adjustments" directly to the price differentials produced by the third country sales comparisons that were not authorized by 19 U.S.C. § 1677b(a)(4), nor was there substantial evidence to support the "adjustments"; and, (4) Commerce's use of "regression analysis" to determine whether sales in the United States were at prices less than the established foreign market value is not authorized by 19 U.S.C. § 1677b(f).

Defendant has responded to plaintiffs' arguments, noting: (1) the 1979 Act establishes a general preference for the use of third country sales over constructed value; (2) the decision to include up to 50 percent below cost sales is supported by uncontroverted evidence and is authorized by statute; (3) "adjustments" were not made to the dumping margins or to any other figures for either quality, ripeness or time of day of sale; and, (4) regression analysis is a widely accepted statistical test and was appropriate in this case.

With respect to the regression analysis issue, intervenor built a record on this issue by submitting the views of four eminent authorities in statistics and econometrics. Intervenor supported the use of regression analysis arguing at the administrative level, as well as before this court, that it is the best tool to analyze the enormous number of individual transactions in fresh vegetables in light of extremely rapid price fluctuations and the variations in price caused by differences in ripeness and quality.

Plaintiffs have the burden of establishing that the administering authority's determinations are unsupported by substantial evidence or otherwise not in accordance with law. 19 U.S.C. § 1516a(b)(1)(B) (1982). "Substantial evidence" has been characterized by the Supreme Court as "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126 (1938). A discussion of each of plaintiffs' contentions follows here.

I. Methodology Employed

To determine whether sales at less than fair value occurred, Commerce had to calculate the "fair value"³ of the subject merchandise pursuant to the procedures specified for determining foreign market value. See 19 U.S.C. § 1677b (1982). Three methods are available for this calculation: (1) the sales price of the merchandise in the country of export (home market sales), id. § 1677b(a)(1)(A); (2) the sales price of the merchandise in a country other than the United States (third country sales), id. § 1677b(a)(1)(B); or, (3) the "constructed value" of the merchandise (sum of costs for material, fabrication, general expenses and profit), id. § 1677b(a)(2).

Before 1979, the third country sales methodology instead of constructed value methodology was required by statute where the home market sales methodology was not available. See Antidumping Act of 1921, ch. 14, § 205, 42 Stat. 9, 13 (repealed 1979). Although the mandatory preference for third country sales is no longer required, the legislative history and relevant regulations indicate, nevertheless, a preference for third country sales where there is adequate confirmation subject to timely verification. See H.R.Rep. No. 317, 96th Cong., 1st Sess. 76; S.Rep. No. 249, 96th Cong., 1st Sess. 76, reprinted in 1979 U.S. Code Cong. & Ad.News 381, 488; 19 C.F.R. § 353.4(b) (1983). The criteria employed in selecting the third country sales methodology are in order of significance: similarity of product, volume of sales, and similarity of market from an organizational and development point of view. 19 C.F.R. § 353.5(c).

If Commerce is unable to establish foreign market value based on home market prices (e.g., where there is no home market) or upon third country sales (e.g., where there is inadequate information that can be verified within the time required), then the constructed value methodology may be employed. 19 U.S.C. § 1677b(a)(2).⁴

In this case, the home market sales methodology was not employed because an insufficient domestic Mexican market existed for fresh winter vegetables. Commerce utilized the third country (Canada) sales method of comparison instead of the constructed value method noting the general preference for third country sales and its greater accuracy in the case at hand. Furthermore, as noted by Commerce, use of constructed value would be wholly unsuitable to the economic realities presented in this case. A principal characteristic of the fresh winter vegetable market is wide price fluctuations, both within a day and over the season. As the Commerce determination reflects, it is a necessary practice for many individual sales to be below the average cost of production. Profitability depends on sales over the course of a season. The use of a price arrived at by constructed value would necessarily give the appearance of dumping even though sellers would be acting in a normal, indeed in a necessary, manner in light of industry demands. Thus, the constructed value methodology is inappropriate because it would require finding that an economically necessary business practice is unfair. As the Senate Report noted: "Third country prices will normally be preferred over constructed value if presented in a timely manner and if adequate to establish foreign market value." S.Rep. No....