TOHO TITANIUM CO., LTD. v. US

• Decision Date: 30 September 1987
• Docket Number: Court No. 85-1-00024.
• Citation: 11 CIT 680,670 F. Supp. 1019
• Parties: TOHO TITANIUM COMPANY, LTD., Plaintiff, v. The UNITED STATES, the United States Department of Commerce, and the United States International Trade Commission, Defendants, and RMI Company and Titanium Metals Corporation of America, Intervenors.
• Court: U.S. Court of International Trade

670 F. Supp. 1019

11 CIT 680

TOHO TITANIUM COMPANY, LTD., Plaintiff, v. The UNITED STATES, the United States Department of Commerce, and the United States International Trade Commission, Defendants and RMI Company and Titanium Metals Corporation of America, Intervenors.

Court No. 85-1-00024.

United States Court of International Trade.

September 30, 1987.

Graham & James (Denis H. Oyakawa, James H. Broderick, Jr. and Patrick J. Fields), Los Angeles, Cal., for plaintiff.

Richard K. Willard, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civ. Div., Dept. of Justice (Sheila N. Ziff), Lisa B. Koteen, Office of the Deputy Chief Counsel for Import Admin., Washington, D.C., for defendants.

Wilmer, Cutler & Pickering (A. Douglas Melamed, John D. Greenwald and Deborah M. Levy), Washington, D.C., John F. Hornbostel, Jr., RMI Company, for intervenor RMI Co.

Pillsbury, Madison & Sutro (Donald E. deKieffer and Francis J. Sailer), Washington, D.C., Frederick W. Steinberg, Pittsburgh, Pa., Titanium Metals Corp. of America, for intervenor Titanium Metals Corp. of America.

MEMORANDUM OPINION AND ORDER

DiCARLO, Judge:

Plaintiff, Toho Titanium Company, Ltd. (Toho), a Japanese exporter of titanium sponge, brought this action challenging the final determination by the United States Department of Commerce, International Trade Administration (Commerce) that titanium sponge from Japan is being sold in the United States at less than fair value. Titanium Sponge From Japan: Final Determination of Sales at Less Than Fair Value, 49 Fed.Reg. 38,687 (Oct. 1, 1984). Toho contested Commerce's decision to use constructed value rather than sales of titanium sponge in Japan as the basis for determining foreign market value. Pursuant to section 773(b) of the Tariff Act of 1930 (Act), as amended, 19 U.S.C. § 1677b(b) (1982), Commerce must use sales in the home market to calculate foreign market value unless it determines that home market sales have been made at a price less than the cost of production over an extended period of time in substantial quantities and at prices which will not permit recovery of all costs within a reasonable period of time in the normal course of trade.

In its opinion on Toho's motion for a judgment upon the agency record under Rule 56.1, this Court held that "there is substantial evidence on the record supporting Commerce's determination that below cost of production sales were made over an extended period of time and in substantial quantities for the Japanese titanium sponge industry." Toho Titanium Co. v. United States, 11 CIT ___, 657 F.Supp 1280, 1285 (1987). The Court remanded the action to Commerce, however, for an explanation on the record as to why Toho will not be able to recoup its costs over a reasonable period of time in the normal course of trade from sales at prices charged during the investigatory period. Id., 657 F.Supp. at 1286.

The Court found such an explanation was required before it could evaluate whether the data gathered by Commerce during its investigation provided substantial evidence to support the determination that sales at the prices charged below cost will not permit recovery of all costs within a reasonable period of time in the normal course of trade. The Court stated that Commerce "may rely on data covering only a six-month period" as long as such data provided substantial evidence to support Commerce's determination on this issue. Id.

If Commerce's determination on this issue is found not to be supported by substantial evidence, the Court must hold it unlawful pursuant to the standard of review provided under section 516A(a)(2) of the Act, as amended, 19 U.S.C. § 1516a(a)(2) (1982). Commerce then would be required to use sales of titanium sponge in Japan to determine foreign market value rather than constructed value. On remand, therefore, Commerce was directed to show the Court that the determination that Toho will not be able to recover all costs within a reasonable period of time in the normal course of trade from sales at the prices charged during the investigation period is supported by substantial evidence on the record.

In its remand results, Commerce first states: "One hundred percent of Toho's home market sales were made at prices below its cost of production during the period of investigation. It is the Department's practice reasonably to assume that when 100 percent of sales are at prices below the cost of production, those prices will not permit recovery of all costs within a reasonable period of time in the normal course of trade." Results of Remand Proceeding, Toho Titanium Company, Ltd. v. United States, Court No. 85-1-00024 (April 16, 1987) (Results of Remand) at 2.

As noted in the Court's earlier opinion, the legislative history pertinent to 19 U.S. C. § 1677b(b) advises Commerce to be careful in reaching its determinations under this section. Toho Titanium, 657 F.Supp. at 1285-86. When discussing section 321 of the Trade Act of 1974, the section which added subsection (b) to section 205 of the Antidumping Act of 1921 (the predecessor to section 1677b(b)), Congress indicated that sales of certain products, such as commercial aircraft, should be carefully evaluated because such products "typically require large research and development costs which could not reasonably be recovered in the first year or two of sales." S.Rep. No. 1298, 93rd Cong., 2d Sess. 173 (1974), reprinted in 1974 U.S.Code Cong. & Admin. News 7186, 7310; see also H.R.Rep. No. 571, 93rd Cong., 1st Sess. 71 (1973).

Commerce should not assume as a matter of department practice, therefore, that a company cannot recoup its costs in a reasonable period of time in the normal course of trade even where 100% of home market sales over a six-month investigatory period are made at prices below the cost of production. A company may be justified in taking a loss over an even greater period of time if it expects sales to increase and production costs to decrease, perhaps due to more efficient production and the averaging of initial investment costs over time. The Court does not find the assumption drawn...