Citations
- 622 F. Supp. 1071
Full opinion text
Memorandum Opinion and Order
DiCARLO, Judge:
Plaintiffs, domestic producers of tire tubes, challenge a final determination by the United States Department of Commerce, International Trade Administration (Commerce) that tubes for tires, other than bicycle tires, (inner tubes) from Korea are not being sold in the United States at less than fair value. Tubes For Tires, Other Than Bicycle Tires, From the Republic of Korea (Final), Antidumping Investigation No. A-580-009, 49 Fed.Reg. 26,780 (1984).
I. BACKGROUND
In July, 1983 seven domestic producers (petitioners) petitioned Commerce on behalf of the domestic inner tube industry alleging that inner tubes from Korea were, or were likely to be, sold in the United States at less than fair value, that these imports were materially injuring, or threatening to injure, an industry in the United States, and that an antidumping duty should be imposed under 19 U.S.C. § 1673 (1982).
Commerce published notice of its determination to begin an investigation on August 12, 1983. 48 Fed.Reg. 36,637 (1983). The International Trade Commission found reasonable indication that imports of inner tubes were materially injuring, or threatening to materially injure, a United States industry. Tubes for Tires, Other Than For Bicycle Tires, From The Republic of Korea, Investigation No. 731-TA-137 (Preliminary), USITC Public. No. 1416, 48 Fed. Reg. 39,519 (1983).
Commerce sent sales price and production cost questionnaires to two Korean producers, Heung-Ah Tire Ind. Co., Ltd. (Heung-Ah) and Dong Ah Tire Ind. Co., Ltd. (Dong-Ah), who together produce about 90 percent of the inner tubes exported from Korea to the United States. On February 10, 1984, Commerce published a preliminary determination that the Korean producers were not selling at less than fair value. 49 Fed.Reg. 5155.
Commerce published its final negative determination on June 29, 1984, finding de minimus weighted-average dumping margins of 0.03% for Heung-Ah and 0.01% for Dong-Ah. 49 Fed.Reg. 26,780, 26,784.
On July 25, 1984, six of the petitioners (plaintiffs) sought review of Commerce’s determination, pursuant to 19 U.S.C. § 1516a(a)(2) (1982). On October 31, 1984, the administrative record was filed in the Court. Dong-Ah and Heung-Ah were granted leave to intervene on November 14,1984 and December 27,1984, respectively-
On January 9, 1985, plaintiffs moved to compel the filing of a newly certified and supplemented administrative record. Following a hearing held on February 25, 1985, plaintiffs’ motion was granted in part and denied in part. A newly certified record was filed in the Court on May 17, 1985. Plaintiffs now move for judgment on the agency record pursuant to Rule 56.1 of the Rules of this Court.
Plaintiffs claim Commerce made several errors in determining and adjusting the foreign market value of intervenors’ inner tubes. Foreign market value is defined at 19 U.S.C. § 1677b(a)(l) (1982). Our appellate court has summarized the central role of foreign market value in the antidumping laws:
if foreign merchandise is sold or is likely to be sold in the United States at less than its fair value to the material injury of a United States industry, then an additional antidumping duty shall be imposed. The amount of the duty shall equal the amount by which the foreign market value exceeds the United States price for the merchandise.
Foreign market value and United States price represent prices in different markets affected by a variety of differences in the chain of commerce by v/hich the merchandise reached the export or domestic market. Both values are subject to adjustment in an attempt to reconstruct the price at a specific, “common” point in the chain of commerce, so that value can be fairly compared on an equivalent basis.
Smith-Corona Group v. United States, 713 F.2d 1568, 1571-72 (Fed.Cir.1983) (emphasis in original) (footnote omitted), cert. denied, 465 U.S. 1022, 104 S.Ct. 1274, 79 L.Ed.2d 679 (1984). The foreign market value of intervenors’ inner tubes was determined on the basis of home market sales, in accordance with 19 U.S.C. § 1677b(a)(l). Specifically, plaintiffs claim that:
(1) Commerce incorrectly paired the sizes of inner tubes Heung-Ah sold in the home market and in the United States as “such or similar merchandise”;
(2) Commerce should have allocated all or part of Dong-Ah’s labor cost at the rubber mixing stage of production on the basis of tube weights, rather than time, in determining Dong-Ah’s cost of production for disregarding below cost of production home market sales;
(3) Commerce should have used a six-month weighted average rather than quarterly data in determining Dong-Ah’s cost of manufacture for making merchandise adjustments to Dong-Ah’s foreign market value;
(4) Commerce should have made a circumstances of sale adjustment to HeungAh’s foreign market value to include product liability insurance expenses for exported tubes;
(5) Commerce should have made a level of trade adjustment to Heung-Ah’s foreign market value to include unloading charges in sales to original equipment manufacturers;
(6) Commerce insufficiently investigated respondent’s home market sales prices; and
(7) in adjusting foreign market value to account for differences in physical characteristics of the exported and home market inner tubes, Commerce improperly determined and insufficiently verified the weights of intervenors’ exported inner tubes.
The Court finds, with respect to each contention except verification of the weights of Dong-Ah’s exported inner tubes, that Commerce’s determination is supported by substantial evidence or otherwise in accordance with law.
II. THE STANDARD FOR JUDICIAL REVIEW
Judicial review of final determinations in antidumping investigations is provided under 19 U.S.C. § 1516a(b)(l)(B) (1982), which states: “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.”
“Substantial evidence is more than a mere' scintilla. It means 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), quoted in Matsushita Electric Industrial Co. Ltd. v. United States, 750 F.2d 927, 933 (Fed.Cir.1984). It is “enough [evidence] to justify, if the trial were to a jury, a refusal to direct a verdict when the conclusion sought to be drawn from it is one of fact for the jury,” NLRB v. Columbian Enameling & Stamping Co., 306 U.S. 292, 300, 59 S.Ct. 501, 505, 83 L.Ed. 660 (1939), and “something less than the weight of the evidence ... [T]he possiblity of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency’s finding from being supported by substantial evidence,” Consolo v. Federal Maritime Commission, 383 U.S. 607, 620, 86 S.Ct. 1018, 1026, 16 L.Ed.2d 131 (1966). See Universal Camera Corp. v. NLRB, 340 U.S. 474, 477, 71 S.Ct. 456, 459, 95 L.Ed. 456 (1951); Matsushita Electric Industrial Co. Ltd. v. United States, 750 F.2d 927, 936 (Fed.Cir.1984) (substantial evidence a “limited standard of review”).
The substantial evidence standard “frees the reviewing courts of the time-consuming and difficult task of weighing the evidence, it gives proper respect to the expertise of the administrative tribunal and it helps promote the uniform application of the statute.” Consolo v. Federal Maritime Commission, 383 U.S. 607, 620, 86 S.Ct. 1018, 1027, 16 L.Ed.2d 131 (1966) (footnote omitted). But the Court must consider the record as a whole; evidence on the record which detracts from the substantiality of the evidence relied on by the agency in making its determination must be considered. See Atlantic Sugar, Ltd. v. United States, 744 F.2d 1556, 1563 (Fed.Cir.1984).
With respect to the administration and enforcement of the antidumping laws, our appellate court has said:
The Tariff Act of 1930, as amended by the Trade Agreements Act of 1979, establishes an intricate framework for the imposition of antidumping duties in appropriate circumstances. The number of factors involved, complicated by the difficulty in quantification of these factors and the foreign policy repercussions of a dumping determination, makes the enforcement of the antidumping law a difficult and supremely delicate endeavor. The Secretary of Commerce (Secretary) has been entrusted with responsibility for implementing the antidumping law. The Secretary has broad discretion in executing the law.
Smith-Corona Group v. United States, 713 F.2d 1568, 1571 (Fed.Cir.1983) (footnotes omitted). “Our review of the statute reveals tremendous deference to the expertise of the Secretary of Commerce in administering the antidumping law.” Id., at 1582; see Consumer Products Division, SCM Corp. v. Silver Reed America, Inc., 753 F.2d 1033, 1039-40 (Fed.Cir.1985).
The legislative history of the Trade Agreements Act of 1979 discloses that Congress intended to give Commerce “greater flexibility” in conducting antidumping investigations. See Melamine Chemicals, Inc. v. United States, 732 F.2d 924, 930-31 (1984). This flexibility was accompanied by statutory deadlines which require Commerce to complete these investigations promptly.
The appellate court has not hesitated to reverse this Court when insufficient deference was given to the agency.
To summarize, the substantial evidence on the record test permits only a limited review of the agency determination; our appellate court has found that Congress requires the Court to give Commerce’s determination of foreign market value “tremendous deference.” Under present law it is not for the Court to impose its preferred choices on Commerce with respect to the sufficiency of its investigation or the wisdom of its methods so long as there is support in the record as a whole for its determination and its methods are in accordance with law.
With these considerations in mind, the Court now considers plaintiffs’ challenges to Commerce’s determination. Most of plaintiffs’ arguments challenge methods used by Commerce in determining and adjusting foreign market value. The final two arguments — that Commerce erred in determining home market prices and the rubber weight of exported inner tubes— challenge the sufficiency of the evidence Commerce relied on making its determination.
III. COMMERCE’S METHODS IN CALCULATING FOREIGN MARKET VALUE
A. Such or Similar Merchandise
To determine foreign market value, Commerce is required to determine, for merchandise exported to the United States, the price charged for “such or similar merchandise” in the home market. 19 U.S.C. § 1677b(a)(l)(A) (1982). In its investigation, Commerce compared home market inner tubes and inner tubes exported to the United States on the basis of product category and weight.
Plaintiffs claim that the weights of the tubes should be the only basis of comparison. They point to a memorandum written by Commerce investigators advising that Commerce should compare the tubes solely on that basis.
Commerce’s determination and the supplemental corrected computer runs indicate the method chosen by Commerce to compare the home market tubes and tubes exported to the United States. In comparing tube models within the same product category, Commerce compared merchandise which is “like ... in the purposes for which [it is] used,” according to 19 U.S.C. § 1677(16)(C)(ii) (1982). For example, tubes for passenger cars were compared only with tubes for other passenger cars and not with tubes for trucks or farm vehicles.
As this Court recently held, failure to use a discretionary alternative method does not constitute error when the agency uses a lawful second method. Zenith Corp. v. United States, 9 CIT —, —, 606 F.Supp. 695, 698 (1985), appeals docketed, No. 85-2246, (Fed.Cir. April 10, 1985), No. 85-2286 (Fed.Cir. April 26, 1985). The Court holds that Commerce’s determination to compare inner tubes according to product category was reasonable and in accordance with law. B. Dong-Ah’s Allocation of Labor Costs
Home market sales at less than cost of production must be disregarded in determining foreign market value. 19 U.S.C. § 1677b(b) (1982). Cost of production is the cost of making and selling the merchandise. See 19 C.F.R. § 353.7(b) (1984). In determining Dong-Ah’s cost of production, Commerce accepted Dong-Ah’s time-based allocation of labor costs for the rubber mixing stage of production.
Plaintiffs argue that the labor costs at the mixing stage should be allocated according to the weight of the finished tubes, rather than by the employee time expended mixing the rubber. Plaintiffs claim that Dong-Ah began to allocate its labor costs at the rubber mixing stage according to time in December, 1983, after plaintiffs argued to Commerce that Dong-Ah’s cost of production exceeded its sales prices for larger tube sizes. Plaintiffs say that prior to that time Dong-Ah allocated the rubber mixing stage cost according to weight, and by shifting its allocation basis Dong-Ah moved labor costs away from larger tubes and towards smaller ones.
Commerce determined that either weight or time is acceptable as a basis for allocating labor costs at the mixing stage. Commerce explained that Dong-Ah’s records are maintained on a time basis, and that there was no justification for changing Dong-Ah’s allocation method since “any such adjustments would have an immaterial effect on the total cost of production.” 49 Fed.Reg. at 26,783. Plaintiffs’ arguments were considered by a Commerce accountant who determined that Dong-Ah’s time-based allocation was reasonable. Heung-Ah allocates its labor costs at the mixing stage by time, as does plaintiff Car-lisle Tire & Rubber Company.
Again, the Court must defer to Commerce’s expertise and judgment. The Court holds that Commerce’s acceptance of Dong-Ah’s time-based labor cost allocation was reasonable and in accordance with law.
C. Calculation of Dong-Ah’s Cost of Manufacture
Adjustments must be made in foreign market value to the extent that physical differences in the home market and export merchandise being compared result in differences in cost of production of the merchandise. 19 U.S.C. § 1677b(a)(4) (1982), 19 C.F.R. § 353.16 (1984). Intervenors’ inner tubes manufactured for export to the United States have more rubber content than tubes sold in the home market. In order to adjust foreign market value to account for this physical difference in home market and exported tubes, Commerce calculated the cost of manufacturing, or making, the tubes. To determine the cost of manufacture, Commerce used costs in the quarter in which the sale occurred, rather than six-month weighted average costs, which were used to calculate cost of production in order to disregard below cost of production home market sales in determining foreign market value.
Plaintiffs argue that since Commerce determined Dong-Ah’s cost of production by six-month weighted average, it was required to use six-month weighted average to determine cost of manufacture, which is an element of cost of production. Plaintiffs say that Commerce could not reasonably use a six-month weighted average to calculate the entire cost of production for one purpose and another method to calculate part of that cost for another purpose.
The Court disagrees. Defendant says Commerce used quarterly data in calculating the cost of manufacture because it believed that method would reflect those particular costs more accurately than would a six-month weighted average. Plaintiff does not dispute this. Commerce’s determination that quarterly data are more accurate for making merchandise adjustments is entitled to deference, and the Court finds it reasonable and in accordance with law.
D. Circumstances of Sale Adjustments
1. Product Liability Insurance
19 U.S.C. § 1677b(a)(4) provides that “if it is established to the satisfaction of [Commerce] that the amount of any difference between the United States price and the foreign market value ... is wholly or partly due to ... differences in the circumstances of sale ... then due allowance shall be made therefor.” Differences in circumstances of sale generally will be limited “to those circumstances which bear a direct relationship to the sales which are under consideration.” 19 C.F.R. § 353.15(a) (1984).
Plaintiffs assert that the cost of HeungAh’s product liability insurance for foreign sales is a difference in circumstances of sale between the United States and home market that Commerce was required to consider in adjusting Heung-Ah’s foreign market value. Plaintiffs say the cost of product liability insurance is an “assumption by a seller of a purchaser’s ... other selling costs” within the scope of 19 C.F.R. § 353.15(b). Plaintiffs argue that since the cost of product liability insurance is incurred only for export sales, and not for sales in Korea, it is a selling expense directly related to export sales.
Commerce’s notice of its determination states:
In our preliminary determination, we also made adjustments to both HeungAh’s and Dong-Ah’s home market prices for costs relating to product liability insurance. Further analysis reveals that these costs are general in nature and not directly related to specific sales. Therefore, we have not made the adjustments for the final determination.
49 Fed.Reg. at 26,781.
Congress has given Commerce broad discretion to determine whether a factor or condition of sale warrants an adjustment in foreign market value for circumstances of sale. In Brother Industries Ltd. v. United States, 3 CIT 125, 540 F.Supp. 1341 (1982), this Court held that
it must be stressed that the statute requires only that a causal link be established to the satisfaction of the administering authority____ Manifestly, then, since the statute sets forth no definitive criterion, Congress intended to rely upon the expertise and judgment of the administering authority to determine the criterion which will establish the existence of the necessary causal link between the difference in prices and differences in circumstances of sale.
3 CIT at 130, 540 F.Supp. at 1349 (emphasis in original). See Smith-Corona Group v. United States, 713 F.2d 1568, 1580 (Fed.Cir.1983).
Commerce found that Heung-Ah’s product liability costs covered all products sold by that firm world wide, and did not relate just to specific sales of inner tubes in the United States. Commerce’s decision not to make a circumstance of sale adjustment for the cost of product liability insurance is reasonable and in accordance with law.
2. Level of Trade Adjustment for Sales to Original Equipment Manufacturers
19 C.F.R. § 353.19 (1984) requires Commerce to disregard home market sales to different levels of trade than United States sales or make “appropriate adjustments ... for differences affecting price comparability.” Such adjustments may be required where purchasers perform different functions in the distribution network which result in different costs. A level of trade adjustment is appropriate where, for example, sales are made in one market to wholesalers who do their own warehousing, invoicing and marketing and in the other market to retailers who do not.
Plaintiffs claim that Commerce erred in failing to adjust Heung-Ah’s foreign market value for home market sales to two “original equipment manufacturers” that resell the tubes with automobiles. Plaintiffs allege that sales to original equipment manufacturers in Korea are sales at a different level of trade, and that the unloading charge absorbed by Heung-Ah in such sales should be added to the sale price as a difference in the circumstances of sale under 19 U.S.C. § 1677b(a)(4)(B) (1982).
In the Federal Register notice announcing its determination, Commerce stated that:
We have examined Heung-Ah’s home market sales and have found (1) no correlation between price and class of customer, (2) no evidence indicating that pricing differentials are due to differences in selling costs at different levels of trade, and (3) no significant differences in quantities sold between “OEM’s” [sic] [original equipment manufacturers] in the home market and “wholesalers” in the U.S. market. Our verification indicates that Heung-Ah’s prices to each of its home market customers were established through negotiation with the customer. Rebates and the payment of unloading charges are not provided to every OEM customer, but only to the one that happens to be Heung-Ah’s largest customer. Petitioners argument is inconsistent. While they would have us exclude sales to OEM customers, they do not argue that we should exclude sales to HeungAh’s other customers that are not called wholesalers. Therefore, we have determined that a level of trade adjustment is not warranted, and we have based the weighted-average home market prices on sales to all classes of customers, including OEM’s.
49 Fed.Reg. at 26,781-82.
Both the quantities of inner tubes sold to original equipment manufacturers and the prices charged such customers were considered by Commerce in its investigation. Cf. Silver Reed America, Inc. v. United States, 7 CIT —, —, 581 F.Supp. 1290, 1295-96 (1984), rev’d on other grounds sub nom. Consumer Products Div., SCM Corp. v. Silver Reed America, Inc., 753 F.2d 1033 (Fed.Cir.1985) (level of trade issue remanded since Commerce compared only quantities sold, not prices). Plaintiffs do not dispute Commerce’s factual findings, but argue that Commerce erred in not finding that the facts warranted a level of trade adjustment.
As noted previously, 19 U.S.C. § 1677b(a)(4)(B) grants Commerce broad discretion in determining whether a circumstances of sale warrants an adjustment in foreign market value. Brother Industries, Ltd. v. United States, 3 CIT 125, 540 F.Supp. 1341 (1982).
The Court holds that Commerce’s finding that Heung-Ah’s sales to original equipment manufacturers were not at a sufficiently different level of trade to require that the unloading charge absorbed by Heung-Ah in such sales should be added to the sale price as a circumstance of sale adjustment is reasonable and in accordance with law.
IV. THE ADEQUACY OF COMMERCE’S INVESTIGATION
A. Intervenors’ Home Market Sales Prices
Plaintiffs argue that Commerce’s findings of home market prices are not supported by substantial evidence because Commerce insufficiently investigated home market prices in view of information submitted by plaintiffs that intervenors understated those prices. Plaintiffs submitted alleged price lists of Heung-Ah and two price surveys indicating lower home market prices than those claimed by intervenors and found by Commerce.
In its final determination, Commerce stated that no further investigation of the intervenors’ Korean sales prices was warranted because (1) Commerce verified the prices claimed by intervenors and was satisfied that they were accurate; (2) Commerce did not find “any evidence of concealment” by the intervenors; and (3) petitioners did not submit “any documentation (