Zenith Radio Corp. v. United States, Court No. 81-06-00734.

• Decision Date: 13 March 1985
• Docket Number: Court No. 81-06-00734.
• Citation: 606 F. Supp. 695,9 CIT 110
• Parties: ZENITH RADIO CORPORATION, et al., Plaintiffs, v. UNITED STATES, et al., Defendants.
• Court: U.S. Court of International Trade

606 F. Supp. 695

9 CIT 110

ZENITH RADIO CORPORATION, et al., Plaintiffs, v. UNITED STATES, et al., Defendants.

Court No. 81-06-00734.

United States Court of International Trade.

March 13, 1985.

Frederick L. Ikenson, P.C., Washington, D.C. (Frederick L. Ikenson and J. Eric Nissley, Washington, D.C., of counsel), for plaintiff Zenith Radio Corporation.

Collier, Shannon, Rill & Scott, Washington, D.C. (Paul D. Cullen and Paul C. Rosenthal, Washington, D.C., of counsel), for plaintiffs International Brotherhood of Electrical Workers, et al.

Richard K. Willard, Acting Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch (Sheila N. Ziff, Washington, D.C., attorney), for defendants.

Weil, Gotshal & Manges, New York City, (A. Paul Victor, Stuart M. Rosen, Charles H. Bayar, and Bret E. Suval, New York City, of counsel), for defendant-intervenors, Matsushita Electric Industrial Co., Ltd., et al.

Tanaka Walders & Ritger, Washington, D.C. (H. William Tanaka, Lawrence R. Walders, Patrick O'Leary, Washington, D.C., of counsel), for defendant-intervenors, Hitachi Ltd., et al.

Sharretts, Paley, Carter & Blauvelt, P.C., New York City (Gail T. Cumins and Ned H. Marshak, New York City, of counsel), for defendant-intervenor Sanyo Electric, Inc. Arent, Fox, Kintner, Plotkin & Kahn, Washington, D.C. (Robert H. Huey and Rodney F. Page, Washington, D.C., of counsel), for defendant-intervenors, Toshiba Corporation, et al.

Wender, Murase & White, New York City (Peter J. Gartland and Robert D. Piliero, New York City, of counsel), for defendant-intervenor Sharp Electronics Corporation.

Baker & McKenzie, Washington, D.C. (Thomas P. Ondeck, Washington, D.C., of counsel), for defendant-intervenors Mitsubishi Electric Corporation, et al.

Siegel, Mandell & Davidson, P.C., New York City (Brian S. Goldstein and Edward Ackerman, New York City, of counsel), for defendant-intervenor The General Corporation of Japan.

Memorandum Opinion and Order

WATSON, Judge:

This consolidated action is a judicial review of a determination by the International Trade Administration of the Department of Commerce (ITA). It is before the Court on cross-motions for summary judgment.

The determination in dispute¹ fixed the antidumping duties due on television sets from Japan that were entered or withdrawn from warehouse for consumption between April 1, 1979 and March 31, 1980.

Under the law, if the United States Price is less than the Foreign Market Value the difference between the two is a margin of dumping in the United States and antidumping duties must be paid to eliminate it. 19 U.S.C. § 1673.²

The determination of Foreign Market Value starts with the price in the producer's home market. 19 U.S.C. § 1677b(a)(1)(A)³ Certain costs (such as containers and coverings) are then added to the price. Finally, "adjustments" may be made to the price for those elements in the price which are "differences in circumstances of sale." 19 U.S.C. § 1677b(a)(4).⁴

If the price method cannot be applied with information from home market sources, the Foreign Market Value can be determined from a price method using sales to third countries other than the United States (19 U.S.C. § 1677b(a)(1)(B)) or from a non-price method known as Constructed Value, in which the value is built up from the elements of costs of materials, cost of production and general expenses and profit. 19 U.S.C. § 1677b(a)(2)⁵ and 19 U.S.C. § 1677b(e).⁶

The plaintiffs claim that the ITA committed errors of law in its determination of the Foreign Market Value of the television sets under investigation.

I

Plaintiffs first argue that the ITA erred when it used constructed value to find the Foreign Market Value of television sets produced by Sharp Corporation (Sharp). They contend that, after the ITA declined to use the prices submitted by Sharp, it should have used the evidence of the declared amounts on which Sharp paid the Japanese Commodity Tax on the television sets it sold in Japan.

The Court is of the opinion that, although the use of the commodity tax information would have been lawful and had much to recommend it,⁷ the ITA was under no statutory obligation to use it.

The ITA apparently thought that if it had no direct evidence of prices in transactions for sale in the Japanese market, the statute would obligate it to turn immediately to sales to third countries or to constructed value. This belief was expressed at 42 Fed.Reg. 30164 ¶ 4. Although this understanding was wrong, it did not amount to harmful error in the administration of the law.

In reality, the ITA has the authority to go beyond direct evidence of relevant matters in appropriate situations. This is part of its inherent power to make these determinations so long as they are lawful and based on substantial evidence. Substantial evidence does not have to be perfect evidence. The ITA is even empowered to utilize information which might be less than satisfactory in normal situations. Thus, in 19 U.S.C. § 1677e(b)⁸ the agencies are allowed to base their determinations on "the best information otherwise available" when a party refuses or is unable to produce information. By a fortiori reasoning they are certainly authorized to use secondary evidence of price (such as the commodity tax information) when direct evidence is not sufficient or usable.

Consequently, it is puzzling that the ITA did not utilize its authority to rely on good secondary evidence of price. It is even more bewildering to note that by turning to the complicated use of constructed value the ITA lost an opportunity to promote its administrative efficiency, a point which has recently been stressed as an important factor in the administration of this law. Consumer Products Division, SCM Corp. v. Silver Reed America, Inc., 753 F.2d 1033 (Fed.Cir.1985). The use of the commodity tax information would have been markedly simpler than the use of constructed value.

Nevertheless, the failure to use a discretionary alternative form of proof for one type of valuation does not amount to error when the agency uses a lawful second means of valuation.

In short, if the ITA had seen fit to use the commodity tax information in the case of Sharp, its action would have been unassailable. Even though it displayed a curious restraint in the use of its discretion, it did not violate a requirement of the law by failing to use secondary evidence of price.

In sum, it can be said that the authority to use secondary sources of information is part of the power of the agency to use all reasonable ways and means to accomplish its task. 19 U.S.C. § 1673h⁹ This authority does not create an obligation to turn to secondary sources before using an alternative statutory method of valuation.

For the producers other than Sharp, alternative information would not come into play if their actual prices were being properly used. For those producers the dispute centers on the use of their prices in sales to related parties in Japan and the general question of whether the relationship between parties was adequately investigated.

II

Plaintiffs next turn to the foreign market value determinations made for the remaining Japanese producers of television sets. For those producers, direct proof of prices in the home market was found to be satisfactory.

Plaintiffs claim that the ITA did not eliminate the taint of relationship from the information used to determine Foreign Market Value. Plaintiffs argue that limiting the investigation of relationships to financial connections was improper. Zenith presented a scholarly argument that Japanese business relationships are governed by a tradition of conduct known as keiretsu, which produces coordinated action and the practical effects of relationship without the presence of equity connections.

The Court is of the opinion that the requirements of our law are satisfied when the ITA investigates whether there is any financial relationship between the producer and the purchaser in the home market. This goes to the essence of those relationships which the law details in 19 U.S.C. § 1677(13)¹⁰ and which would obviously tend to undermine the acceptability of a sale price. The question posed by the ITA was adequate to explore the full range of possible financial relationships involved in the enforcement of the law.

The discernment of relationships which do not find expression in concrete financial terms is not something which can be posited as a mandatory duty, and is not required of the ITA by law. In this case the ITA's determinations on the question of relationship were supported by substantial evidence and were in accordance with the law.

The plaintiffs have also challenged the validation of prices between related parties by means of prices to unrelated parties, claiming that the ITA did not determine that the volume of sales to unrelated parties was sufficient to serve as validation. However, this process of validation is not dependent on any fixed relative volume of sales. In the absence of any indication that the unrelated sales are arranged solely to validate the price to related parties, the ITA is within its authority to use such sales as are commercially significant.

The record shows that for Hitachi, Matsushita, and Mitsubishi, sales to unrelated parties were at prices identical to the prices to related purchasers. In the case of Sanyo, whose prices to unrelated purchasers were higher, the ITA used the higher prices and did not use the prices to related purchasers. For Toshiba, which sold only to related purchasers in Japan, the ITA compared its prices to those of manufacturers selling comparable television sets in arms-length transactions. This manner of proceeding accords with the law and its results are supported by substantial evidence.

As a final point on the subject of related parties, the plaintiffs claim that special verification should have been undertaken by the ITA after the matter became an issue in the proceeding. The...