Washington Red Raspberry Com'n v. US

• Citation: 657 F. Supp. 537
• Decision Date: 17 March 1987
• Docket Number: Consolidated Court No. 85-06-00789.
• Parties: WASHINGTON RED RASPBERRY COMMISSION, Red Raspberry Committee of the Oregon Caneberry Commission, Red Raspberry Committee of the Northwest Food Processors Association, Red Raspberry Member Group of the American Frozen Food Institute, Washington Red Raspberry Growers Association, North Willamette Horticultural Society, Rader Farms, Ron Roberts, and Shuksan Frozen Foods, Inc., Plaintiffs, v. UNITED STATES, United States Department of Commerce, and Malcolm Baldrige, In His Official Capacity as Secretary of Commerce, Defendants, and Abbotsford Growers Co-Operative Union, Jesse Processing Ltd., Mukhtiar & Sons Packers, Ltd. and East Chilliwack Fruit Growers Co-Operative, Intervenor-Defendants.
• Court: U.S. Court of International Trade

657 F. Supp. 537

WASHINGTON RED RASPBERRY COMMISSION, Red Raspberry Committee of the Oregon Caneberry Commission, Red Raspberry Committee of the Northwest Food Processors Association, Red Raspberry Member Group of the American Frozen Food Institute, Washington Red Raspberry Growers Association, North Willamette Horticultural Society, Rader Farms, Ron Roberts, and Shuksan Frozen Foods, Inc., Plaintiffs, v. UNITED STATES, United States Department of Commerce, and Malcolm Baldrige, In His Official Capacity as Secretary of Commerce, Defendants, and Abbotsford Growers Co-Operative Union, Jesse Processing Ltd., Mukhtiar & Sons Packers, Ltd. and East Chilliwack Fruit Growers Co-Operative, Intervenor-Defendants.

Consolidated Court No. 85-06-00789.

United States Court of International Trade.

March 17, 1987.

Kilpatrick & Cody (Joseph W. Dorn and Anthony H. Anikeeff), Washington, D.C., for plaintiffs.

Richard K. Willard, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice (J. Kevin Horgan); and Office of Asst. General Counsel for Import Administration, U.S. Dept. of Commerce (Eileen P. Shannon), Washington, D.C., for defendants.

Cameron, Hornbostel & Butterman (William K. Ince and Caren Z. Turner), Washington, D.C., for intervenor-defendants Abbotsford Growers Co-op. Union, Jesse Processing Ltd. and Mukhtiar & Sons Packers, Ltd.

Bogle & Gates (Joel R. Junker and Christopher N. Weiss), Seattle, Wash., for intervenor-defendant East Chilliwack Fruit Growers Co-op.

Opinion & Order

AQUILINO, Judge:

This consolidated case encompasses complaints by the plaintiff red raspberry growers, packers and associations (1) that the International Trade Administration, U.S. Department of Commerce ("ITA") unlawfully excluded the Abbotsford Growers' Co-operative Union from its final affirmative determination of sales at less than fair value in Red Raspberries from Canada, 50 Fed.Reg. 19,768 (May 10, 1985), and (2) that that determination contains erroneous weighted-average dumping margins.

The plaintiffs press some eight "methodological errors"¹ in support of their position that the dumping margins are incorrect. As to three of those specifications, counsel for the defendants state:

... The Department concedes that certain mathematical errors were committed in the process of calculating the antidumping duty rates in the final determination of this investigation. Additionally, it is the Department's belief that there may have been other mathematical errors committed, to which plaintiffs have not alluded.

Consequently, the Department requests a remand of this determination after disposition of the other, disputed issues....²

A

The first of the disputed issues is whether the ITA erred in disregarding actual transaction prices paid by packers to growers for their raspberries.

Four processor/packers were investigated by the ITA. Intervenor-defendant Abbotsford Growers Co-operative Union ("Abbotsford Co-op") is an association of growers of fruits and vegetables in British Columbia who agree to deliver their produce to the cooperative for processing and marketing. The same is true of intervenor-defendant East Chilliwack Fruit Growers Co-operative ("EC Co-op"). These two cooperatives accounted for most of the exports to the United States of the merchandise investigated, namely, "fresh and frozen red raspberries packed in bulk containers and suitable for further processing"³, for the period July 1, 1983 to June 30, 1984.

The other two packers, Jesse Processing Ltd. ("Jesse") and Mukhtiar & Sons Packers Ltd. ("Mukhtiar"), processed and exported raspberries grown, for the most part, on associated corporate farms sub nom. Jesse Farms Ltd. and Mukhtiar Growers Ltd., respectively. The remainder of the fruit in question was sold to Jesse and Mukhtiar by independent growers. See Confidential Document ("ConfDoc") 3.

The petitioners below alleged that home market sales were below the respective costs of production of the merchandise. However, the ITA's final determination states that sufficient such sales of the Abbotsford Co-op and of Mukhtiar were found to be above their costs of production to enable the agency to use those sales for foreign market value. See 50 Fed.Reg. at 19,769 and 19,770. On the other hand, the ITA found that "all" or "substantial" home market sales of the EC Co-op and of Jesse were below their costs of production, and it therefore used constructed value for the foreign market value of the raspberries exported by those two packers. Compare 50 Fed.Reg. at 19,769 with id. at 19,770.

In determining whether sales in Canada were below the cost of production, the ITA necessarily attempted to verify each packer's cost in this regard. "This verification included the cost of growing the raspberries by the growers". Id. at 19,769. Cf. 19 C.F.R. § 353.7(b). Apparently, Abbotsford Co-op and EC Co-op each has hundreds of grower members, more than 100 of whom delivered red raspberries to the former during the period under review; more than 300 growers delivered their fruit to the EC Co-op. See ConfDoc 3. A number of the farmers delivered berries to both co-ops, implying thereby membership and thus shareholding in each. The ITA's final determination states that a "sample of ten growers was selected scientifically to represent the cost of raspberries supplied by Canadian growers" to the two cooperatives. 50 Fed.Reg. at 19,769. This sample was chosen to achieve a "95 percent confidence level that the information derived from it was representative of the population particularly regarding cost of production, its relation to price, and other anti-dumping investigation considerations". ConfDoc 25, p. 2. The ITA further stated that Jesse and Mukhtiar "purchase nearly all raspberries from their own farms. For them, we treated the cost of production of the farm as representative of the processor's cost of raspberries." 50 Fed.Reg. at 19,769.

Comment 4 of the petitioners below was to the effect that, if a grower's transaction price were higher than its cost of production, that price "should be used regardless of whether it includes profit and regardless of whether the grower is related to the processor." 50 Fed.Reg. at 19,770. The ITA responded to this comment as follows:

... Verification showed that all growers in the sample were related to processors. In accordance with § 353.6(b) of the Commerce Regulations, in our final analysis we cannot use transaction price because all growers are related to the processors. Therefore we used the average cost of production of the growers as the material cost for the processors where the sample was used. For JP and M & S the actual cost of production of Jesse Farms Ltd. and Mukhtiar and Sons Growers Ltd. were used for the respective processor's material cost. Id.

The regulation referred to, 19 C.F.R. § 353.6(b), provides, in pertinent part:

Transactions with related parties. Direct or indirect transactions between related parties (as defined in section 773(e)(3) of the Act) may be disregarded if, in the case of any element of value required to be considered pursuant to paragraphs (a)(1), (a)(2) and (a)(3) of this section, the amount representing that element does not fairly reflect the amount usually reflected in sales in the market under consideration of the merchandise subject to the investigation.

It is premised by the provision of the Trade Agreements Act of 1979 that related-party transactions "may be disregarded", 19 U.S.C. § 1677b(e)(2).

Counsel for the defendants state that the regulation "unmistakably conveys discretion to the administering authority with respect to whether related party transactions should be disregarded",⁴ but the ITA representation quoted above that it "cannot" use transaction price is clearly a misstatement of the law. See, e.g., Connors Steel Company v. United States, 2 CIT 242, 244-45, 527 F.Supp. 350, 354 (1981). Furthermore, while evidence in the record shows that Jesse and Jesse Farms Ltd. and Mukhtiar and Mukhtiar Growers Ltd. are "related parties" within the meaning of 19 U.S.C. § 1677b(e)(3), the same cannot be said of the cooperatives and those member growers selected by the ITA as determinative of the cost of the raspberries.

The statutory definitions of related parties arguably relevant to this action, to wit, subparagraphs (E) and (F) of the foregoing subsection (3), are as follows:

(E) Any person directly or indirectly owning, controlling, or holding with power to vote, 5 percent or more of the outstanding voting stock or shares of any organization and such organization.

(F) Two or more persons directly or indirectly controlling, controlled by, or under common control with, any person.⁵

It is unclear from the record before the court whether membership in the cooperatives entails unequal shares therein. Whether unequal or equal however, there is no indication that any one of the sample growers who delivered raspberries to either (or both) of the cooperatives holds five percent or more of the outstanding shares. Indeed, it is not likely that the stock of those growers aggregates five percent in either cooperative. Furthermore, with regard to subparagraph (F), there is no showing that those growers control, are controlled by, or are under common control with, the cooperatives, which apparently are nothing more than convenient regimes for the marketing of farm produce.⁶

Thus, the court concludes that it was not in accordance with law within the meaning of 19 U.S.C. § 1516a(b)(1)(B) for the ITA to have disregarded the transactions between the cooperatives and their growers. The purpose of the law is to permit disregard of transactions where common control of the parties thereto distorts prices paid, but the record does not establish the existence of this phenomenon herein.

The fact that the Jesse corporations and the Mukhtiar corporations are related parties may permit disregard of their internal...