Fabrique De Fer De Charleroi S.A. v. United States

Slip Op. 01-82

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS

________________________________________

:

FABRIQUE DE FER DE CHARLEROI S.A., :

:

Plaintiff, :

:

v. :

:

THE UNITED STATES, :

: Court No.

Defendant : 98-02-00359

:

and :

:

BETHLEHEM STEEL CORPORATION and :

U.S. STEEL GROUP A UNIT OF :

USX CORPORATION, :

:

Defendant-Intervenors. :

________________________________________:

Plaintiff, Fabrique de Fer de Charleroi S.A. (“FAFER”), moves

pursuant to USCIT R. 56.2 for judgment upon the agency record

challenging various aspects of the United States Department of

Commerce, International Trade Administration’s (“Commerce”) final

determination, entitled Final Results of Antidumping Duty

Administrative Review of Certain Cut-to-Length Carbon Steel Plate

From Belgium (“Final Results”), 63 Fed. Reg. 2959 (Jan. 20, 1998).

Specifically, FAFER disputes: (1) Commerce’s use of FAFER’s general

commission as a proxy for FAFER’s indirect selling expenses; and

(2) Commerce’s decision that FAFER’s antidumping duties have been

absorbed.

Held: FAFER’s USCIT R. 56.2 motion is granted in part and

denied in part. This case is remanded to Commerce to: (1) examine

the record for determination of what data should be used as a

substitute for FAFER’s indirect selling expenses; and (2) take

further actions not inconsistent with this opinion.

[FAFER’s motion is granted in part and denied in part. Case

remanded].

Court No. 98-02-00359 Page 2

Dated: July 3, 2001

Barnes, Richardson & Colburn (Gunter von Conrad, Michael J.

Chessler and Alyssa Chumnanvech) for plaintiff.

Stuart E. Schiffer, Acting Assistant Attorney General; David

M. Cohen, Director, Commercial Litigation Branch, Civil Division,

United States Department of Justice (Velta A. Melnbrencis,

Assistant Director); of counsel: Bernd G. Janzen, Office of the

Chief Counsel for Import Administration, United States Department

of Commerce, for the United States.

Dewey Ballantine LLP (Michael H. Stein, Bradford L. Ward and

Frank J. Schweitzer) for defendant-intervenors.

OPINION

TSOUCALAS, Senior Judge: Plaintiff, Fabrique de Fer de

Charleroi S.A. (“FAFER”), moves pursuant to USCIT R. 56.2 for

judgment upon the agency record challenging various aspects of the

United States Department of Commerce, International Trade

Administration’s (“Commerce”) final determination, entitled Final

Results of Antidumping Duty Administrative Review of Certain Cut-

to-Length Carbon Steel Plate From Belgium (“Final Results”), 63

Fed. Reg. 2959 (Jan. 20, 1998). Specifically, FAFER disputes: (1)

Commerce’s use of FAFER’s general commission as a proxy for FAFER’s

indirect selling expenses; and (2) Commerce’s decision that FAFER’s

antidumping duties have been absorbed.

Court No. 98-02-00359 Page 3

BACKGROUND

This case concerns the antidumping duty order on cut-to-length

carbon steel plate imported to the United States from Belgium

during the 1995-96 period of review (“POR”). See Antidumping Duty

Order and Amendment to Final Determination of Sales at Less Than

Fair Value: Certain Cut-to-Length Carbon Steel Plate From Belgium

(“Antidumping Duty Order”), 58 Fed. Reg. 44,164 (Aug. 19, 1993).

Commerce published the preliminary results of the subject review on

September 15, 1997. See Cut-to-Length Carbon Steel Plate From

Belgium: Preliminary Results of Antidumping Duty Administrative

Review, 62 Fed. Reg. 48,213. Commerce published the Final Results

on January 20, 1998. See 63 Fed. Reg. 2959. FAFER initiated the

case at bar against Commerce on February 18, 1998, and on April 30,

1998, this Court granted consent motion to Bethlehem Steel

Corporation and U.S. Steel Group A Unit of USX Corporation

(“Domestic Producers”) to enter as defendant-intervenors.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 19

U.S.C. § 1516a(a) (1994) and 28 U.S.C. § 1581(c) (1994).

STANDARD OF REVIEW

The Court will uphold Commerce’s final determination in an

Court No. 98-02-00359 Page 4

antidumping administrative review unless it is “unsupported by

substantial evidence on the record, or otherwise not in accordance

with law . . . .” 19 U.S.C. § 1516a(b)(1)(B)(i) (1994); see NTN

Bearing Corp. of Am. v. United States, 24 CIT ___, ___, 104 F.

Supp. 2d 110, 115-16 (2000) (detailing Court’s standard of review

in antidumping proceedings).

A. Commerce’s Use of FAFER’s General Commissions as

a Proxy for FAFER’s Indirect Selling Expenses

1. Background

On August 19, 1993, Commerce published the Antidumping Duty

Order covering merchandise subject to the review. See 58 Fed. Reg.

44,164. On September 17, 1996, Commerce duly initiated the review

at issue. See Initiation of Antidumping and Countervailing Duty

Administrative Reviews, 61 Fed. Reg. 48,882. On September 19,

1996, Commerce issued to FAFER its standard questionnaire

instructing FAFER, among other things, to report various expenses

that FAFER incurred in its home market and the United States,

inclusive of FAFER’s indirect selling expenses related to the

United States sales. See Def.’s Mem. Opp. Pl.’s Mot. J. Agency R.

(“Def.’s Mem.”), Ex. 1. Later on, Commerce issued a supplemental

questionnaire seeking additional information and clarifications.

See Def.’s Mem., Ex. 3.

Court No. 98-02-00359 Page 5

Both questionnaires provided very specific instructions with

regard to the format in which Commerce expected FAFER to submit the

information sought. See id., Ex. 1, 3. Responding to the

questionnaires, FAFER did not identify FAFER’s indirect selling

expenses related to the United States sales in the way and with the

specificity that Commerce requested. See Pl.’s Br. Sup. Mot. Summ.

J. (“Pl.’s Br.”) at 10. FAFER, however, notified Commerce that the

submitted data: (a) was derived from FAFER’s internal “Cost of

Production Analysis System” (“COPAS”); (b) did not “distinguish

between direct and indirect labor costs” due to the structural

deficiencies of COPAS, Pl.’s Reply Br. Supp. Mot. Summ. J. (“Pl.’s

Reply”) at 5 and 6, n.7; and (c) provided the calculation of

FAFER’s general and administrative expenses (“G&A”) that included

employees wages and charges. See Pl.’s Br., App. 13.

Commerce was left unsatisfied with the information provided by

FAFER. See Preliminary Results, 62 Fed. Reg. 48,213-14. During

the review, Commerce determined that FAFER’s United States sale was

a constructed export price (“CEP”) sale, that is, a sale of the

subject merchandise to an unaffiliated purchaser through an

intermediary, the price for which had to be adjusted under

subsections (c) and (d) of 19 U.S.C. § 1677a (1994) to account for

FAFER’s various direct and indirect selling expenses. See

Preliminary Results, 62 Fed. Reg. at 48,214; 19 U.S.C. § 1677a(b)-

Court No. 98-02-00359 Page 6

(d) (1994). Missing the information on FAFER’s indirect selling

expenses, Commerce resorted to the facts available in reaching the

applicable determination. See Def.’s Mem. 33-38. Specifically,

Commerce used FAFER’s general policy commission rate as a proxy for

FAFER’s indirect selling expenses even though Commerce established

that “FAFER paid no commission upon its sole [United States] sale

to its subsidiary, Charleroi USA” (“Charleroi”). Id. at 37.

2. Exhaustion of Administrative Remedies

a. Contentions of the Parties

As a preliminary matter, Commerce contends that the issues of

whether Commerce properly: (a) “double-counted [indirect selling]

expenses”; and (b) refused to entertain the shortcomings of FAFER’s

accounting system, should not be examined by this Court because

FAFER failed to question these issues before Commerce and,

consequently, forfeited its right to judicial review. Def.’s Mem.

at 28.

FAFER alleges that the issues were sufficiently presented for

Commerce’s consideration when FAFER: (1) stated the deficiencies of

COPAS; and (2) pointed out that G&A calculation was made on the

basis of employees wages and charges that have already been taken

into account. See Pl.’s Reply at 6.

Court No. 98-02-00359 Page 7

b. Analysis

The exhaustion doctrine requires a party to present its claims

to the relevant administrative agency for the agency’s

consideration before raising these claims to the Court. See

Unemployment Compensation Comm’n of Alaska v. Aragon, 329 U.S. 143,

155 (1946) (“A reviewing court usurps the agency’s function when it

sets aside the administrative determination upon a ground not

theretofore presented and deprives the [agency] of an opportunity

to consider the matter, make its ruling, and state the reasons for

its action”).1

1

There is, however, no absolute requirement of exhaustion

in the Court of International Trade in non-classification cases.

See Alhambra Foundry Co. v. United States, 12 CIT 343, 346-47, 685

F. Supp. 1252, 1255-56 (1988). Section 2637(d) of Title 28 (1994)

directs that “the Court of International Trade shall, where

appropriate, require the exhaustion of administrative remedies.”

By its use of the phrase “where appropriate,” Congress vested

discretion in the Court to determine the circumstances under which

it shall require the exhaustion of administrative remedies. See

CEMEX, S.A. v. United States, 133 F.3d 897, 905 (Fed. Cir. 1998).

Therefore, because “each exercise of judicial discretion in not

requiring litigants to exhaust administrative remedies,” the Court

is authorized to determine proper exceptions to the doctrine of

exhaustion. Alhambra Foundry, 12 CIT at 347, 685 F. Supp. at 1256

(citing Timken Co. v. United States, 10 CIT 86, 93, 630 F. Supp.

1327, 1334 (1986), rev’d in part on other grounds, Koyo Seiko Co.

v. United States, 20 F.3d 1156 (Fed. Cir. 1994)).

In the past, the Court has exercised its discretion to obviate

exhaustion where: (1) requiring “it would be futile,” see Rhone

Poulenc, S.A. v. United States, 7 CIT 133, 135, 583 F. Supp. 607,

610 (1984) (“it appears that it would have been futile for

plaintiffs to argue that the agency should not apply its own

regulation”), or would be “inequitable and an insistence of a

useless formality” as in the case where “there is no relief which

Court No. 98-02-00359 Page 8

The purpose behind the doctrine of exhaustion is to prevent

courts from premature involvement in administrative proceedings,

and to protect agencies "from judicial interference until an

administrative decision has been formalized and its effects felt in

a concrete way by the challenging parties." Abbott Lab. v.

Gardner, 387 U.S. 136, 148-49 (1967); see also Public Citizen

Health Research Group v. Commissioner, FDA, 740 F.2d 21, 29 (D.C.

Cir. 1984) (pointing out that the exhaustion doctrine serves “four

primary purposes: [(1)] it ensures that persons do not flout

established administrative processes”; (2) “it protects the

autonomy of agency decisionmaking”; (3) it aids judicial review by

permitting factual development of issues relevant to the dispute;

and (4) “it serves judicial economy by avoiding repetitious

administrative and judicial factfinding” and by resolving sole

claims without judicial intervention.)

plaintiff may be granted at the administrative level,” United

States Cane Sugar Refiners’ Ass’n v. Block, 3 CIT 196, 201, 544 F.

Supp. 883, 887 (1982); (2) a subsequent court decision has

interpreted existing law after the administrative determination at

issue was published, and the new decision might have materially

affected the agency’s actions, see Timken, 10 CIT at 93, 630 F.

Supp. at 1334; (3) the question is one of law and does not require

further factual development and, therefore, the court does not

invade the province of the agency by considering the question, see

id.; R.R. Yardmasters of Am. v. Harris, 721 F.2d 1332, 1337-39

(D.C. Cir. 1983); and (4) the plaintiff had no reason to suspect

that the agency would refuse to adhere to clearly applicable

precedent. See Philipp Bros., Inc. v. United States, 10 CIT 76,

79-80, 630 F. Supp. 1317, 1321 (1986).

Court No. 98-02-00359 Page 9

While a plaintiff cannot circumvent the requirements of the

doctrine of exhaustion by merely mentioning a broad issue without

raising a particular argument, plaintiff’s brief statement of the

argument is sufficient if it alerts the agency to the argument with

reasonable clarity and avails the agency with an opportunity to

address it. See generally, Hormel v. Helvering, 312 U.S. 552

(1941); see also Rhone Poulenc, Inc. v. United States, 899 F.2d

1185, 1191 (Fed. Cir. 1990). The sole fact of agency’s failure to

address plaintiff’s challenge does not invoke the exhaustion

doctrine and shall not result in forfeiture of plaintiff’s judicial

remedies. See generally, B-West Imports, Inc. v. United States, 19

CIT 303, 880 F. Supp. 853 (1995). An administrative decision not

to address the issue cannot be dispositive of the question whether

or not the issue was properly brought to the agency’s attention.

See, e.g., Allnutt v. United States DOJ, 2000 U.S. Dist. LEXIS 4060

(D. Md. 2000).

In the case at bar, Commerce advised FAFER that common

examples of indirect selling expenses are “inventory carrying

costs, salesmen’s salaries, . . . product liability insurance[,] .

. . technical services [and] warranty repairs.” See Def.’s Mem. at

27 (emphasis supplied). FAFER stated that its G&A costs included

“employees wages [that have already been taken into account,] . .

. [i]nsurance costs [and] . . . research costs.” Pl.’s Br. App. 13

Court No. 98-02-00359 Page 10

(emphasis supplied). FAFER also notified Commerce that its

accounting system did not “distinguish between direct and indirect”

expenses. Pl.’s Reply at 6, n.7, accord Def.’s Mem. Ex. 5. While

Commerce chose to read these two statements as asserting neither

that FAFER’s “G&A costs . . . included [FAFER’s] indirect selling

expenses,” nor that FAFER’s “financial accounting system precluded

the identification of indirect selling expenses,” Def.’s Mem. at

30, FAFER’s responses sufficiently provided Commerce with an

opportunity to address the issues. The Court, therefore, concludes

that FAFER properly exhausted its administrative remedies and has

the right to raise these issues to the Court.

3. Commerce’s Resort to Facts Available

a. Contentions of the Parties

Commerce contends that “FAFER’s failure to[:] (1) report

[FAFER’s United States] indirect selling expenses[;] and (2)

explain why Commerce should [assume] . . . that there simply were

no such expenses, . . . warranted an adjustment based upon the

facts available.” Def.’s Mem. at 36 (citing to Final Results, 63

Fed. Reg. at 2963). Domestic Producers similarly assert that

Commerce’s resort to facts available was justified in view of the

shortcomings of the information submitted by FAFER. See Domestic

Producers’ Resp. Pl.’s R. 56.2 Mot. J. Agency R. (“Domestic

Court No. 98-02-00359 Page 11

Producers’ Resp.”) at 10-11.

FAFER argues that Commerce was not entitled to resort to the

facts available because: (1) FAFER included its home market

indirect selling expenses in its cost responses; and (2) Commerce

verified all the data submitted by FAFER. See Pl.’s Br. at 9-19.

b. Analysis

When Commerce cannot obtain the information in a timely manner

or receives incomplete information, the appropriate statute allows

and, in certain circumstances, requires Commerce to use facts

available. See 19 U.S.C. § 1677e(a), (b) (1994). Specifically,

section 1677e(a) of Title 19 provides that “if . . . necessary

information is not available on the record, or . . . any . . .

person . . . fails to provide such information by the deadlines for

submission of the information or in the form and manner

requested[,] . . .[Commerce] shall . . . use the facts otherwise

available in reaching the applicable determination . . . .” 19

U.S.C. § 1677e(a) (emphasis supplied). Furthermore, if “an

interested party . . . fail[s] to cooperate by not acting to the

best of its ability to comply with a request for information from

[Commerce, Commerce], in reaching the applicable determination . .

., may use an inference that is adverse to the interests of that

party [and is] . . . derived from . . . any . . . information

Court No. 98-02-00359 Page 12

placed on the record.” 19 U.S.C. § 1677e(b).

The legislative goal behind Commerce’s right to use facts

available is to "induce respondents to provide Commerce with

requested information in a timely, complete, and accurate manner .

. . .” National Steel Corp. v. United States, 18 CIT 1126, 1129,

870 F. Supp. 1130, 1134 (1994) (citation omitted). Consequently,

Commerce enjoys very broad, although not unlimited, discretion with

regard to the propriety of its use of facts available. See

generally, Olympic Adhesives, Inc. v. United States, 899 F.2d 1565

(Fed. Cir. 1990) (acknowledging Commerce’s broad discretion with

regard to the use of facts available but pointing out that

Commerce's resort to facts available is an abuse of discretion

where the information Commerce requests does not and could not

exist).

If a party, however,

promptly . . . notifies [Commerce] that such party is

unable to submit the information requested in the

requested form and manner [and provides Commerce] with a

full explanation and suggested alternative forms in which

such party is able to submit the information, [Commerce]

shall consider the ability of the . . . party to submit

the information in the requested form and manner and may

modify [Commerce’s] requirements to the extent necessary

to avoid imposing an unreasonable burden on that party.

19 U.S.C. § 1677m(c)(1) (1994) (emphasis supplied).

Furthermore, Commerce

Court No. 98-02-00359 Page 13

shall not decline to consider information that is

submitted . . . and is necessary to the determination but

does not meet all the applicable requirements . . . if--

. . . the information is not so incomplete that it cannot

serve as a reliable basis for reaching the applicable

determination, . . . and . . . the information can be

used without undue difficulties.

19 U.S.C. § 1677m(e)(3) and (5) (1994) (emphasis supplied).

During the review at issue, Commerce requested FAFER to submit

a per-unit G&A rate, to which selling expenses had to be added to

arrive at a selling, general and administrative (“SG&A”) rate. See

Def.’s Mem. at 31. FAFER, however, failed to report indirect

selling expenses in the manner required by Commerce. See Pl.’s Br.

at 9-14. While Commerce should have considered the shortcomings of

FAFER’s accounting system, Commerce had discretion in determining

whether: (1) Commerce was satisfied with “suggested alternative

forms in which [FAFER was] able to submit the information”; (2)

Commerce was “imposing an unreasonable burden” on FAFER by

requesting the information to be submitted in particular form, 19

U.S.C. § 1677m(c)(1); (3) the “information [supplied by FAFER was]

not so incomplete that it [could not] serve as a reliable basis for

reaching the applicable determination”; and (4) “the information

[could have been used by Commerce] without undue difficulties.”

19 U.S.C. § 1677m(e). Commerce, therefore, had the right to

determine that FAFER’s mere statements that: (a) FAFER’s G&A

expenses did include employees wages and charges that “have already

Court No. 98-02-00359 Page 14

been taken into account,” Pl.’s Br. App. 13; and (b) FAFER’s

accounting system does not “distinguish between direct and indirect

labor costs” due to its structural deficiencies, Pl.’s Reply at 6,

n.7, were insufficient under the requirements posed by 19 U.S.C. §§

1677m(c)(1) and (e). Consequently, Commerce was justified in

resorting to facts available2 under the mandate of 19 U.S.C. §§

1677e(a) and (b).3

2

Commerce asserted that in reaching its determination,

Commerce had the right to rely and actually relied on 19 U.S.C. §

1677e(b), the subsection allowing the use of adverse facts

available, in addition to relying on 19 U.S.C. § 1677e(a). See

Def.’s Mem. at 34. Commerce fails to make a distinction between

the use of facts available provided for in 19 U.S.C. § 1677e(a) and

the use of adverse facts available reserved for the determinations

concerning those parties that “fail to cooperate by not acting to

the best of [their] abilit[ies].” 19 U.S.C. § 1677e(b). While

the shortcomings contained in FAFER’s data empowered Commerce to

resort to 19 U.S.C. § 1677e(a), FAFER was sufficiently cooperative,

thus precluding Commerce’s reliance on 19 U.S.C. § 1677e(b).

Compare Transcom, Inc. v. United States, 24 CIT ___, ___, 121 F.

Supp. 2d 690, 704-05 (2000).

3

FAFER argues that because: (1) FAFER explained FAFER’s

cost of production analysis system to Commerce in great detail; and

(2) Commerce verified the reported costs, such verification

constitutes an implied admission by Commerce that Commerce found

FAFER’s statements with regard to indirect selling expenses

satisfactory. See Pl.’s Br. at 9-20. Commerce’s verification,

however, is nothing more that the act of reconciling FAFER’s

reported costs to the information contained in financial statements

of consolidated companies. See Def.’s Mem. at 32 and Ex. 9. The

process of verification does not imply Commerce’s endorsement of

each expense item. See id. As Commerce correctly points out,

“FAFER’s lengthy analysis of the cost verification cannot alter the

fact that FAFER did not report its indirect selling expenses as

specifically requested by Commerce.” Id. at 33 (emphasis

supplied).

Court No. 98-02-00359 Page 15

4. Commerce’s Use of the Imputed Commission

as a Proxy for FAFER’s Indirect Selling Expenses

a. Contentions of the Parties

Commerce contends that because “in calculating [FAFER’s] CEP,

Commerce must deduct from the price to an unaffiliated purchaser

various expenses, including indirect selling expenses,” Commerce

acted reasonably by using the “commission amount derived from

FAFER’s . . . response” as a proxy for the missing data on FAFER’s

indirect selling expenses. Def.’s Mem. at 34-35 (citing to Final

Results, 63 Fed. Reg. at 2963). Domestic Producers: (1) support

Commerce’s contention, see Domestic Producers’ Resp. at 12-38; and

(2) point out that Commerce’s action was reasonable because FAFER’s

indirect selling expenses would be an amount near the amount to

which Commerce arrived on the basis of facts available. See id. at

26.

FAFER argues that Commerce was not entitled to rely on FAFER’s

commission rate because the “rate [is] known not to be applicable”

in view of the particular facts of the case. Pl.’s Reply at 18-20.

b. Analysis

Making a determination based on facts available, Commerce

should: (1) strive to arrive to “the most reasonable estimate,” see

Def.’s Mem. at 34; and (2) rely on the data that has a “rational

Court No. 98-02-00359 Page 16

relationship . . . [to] the matter . . . .” National Steel, 18 CIT

at 1132, 870 F. Supp. at 1136 (quoting Manifattura Emmepi S.p.A. v.

United States, 16 CIT 619, 624, 799 F. Supp. 110, 115 (1992)).

The sale at issue was made by FAFER with the assistance of

Charleroi, and it was the only sale of subject merchandise that

FAFER made during the POR. While there is no evidence on the

record showing that Charleroi received any form of compensation

under FAFER’s general policy commission rate, there is conflicting

data on record suggesting that FAFER might have incurred specific

indirect selling expenses in the course of the transaction. See

Pl.’s Reply at 19-22; Def.’s Mem. at 35-36 and Ex. 6, 12.

Commerce has the practice of using qualified data as a proxy

for the data missing from the record. See, e.g., Final Results of

Antidumping Administrative Review of Tapered Roller Bearings and

Parts Thereof, Finished and Unfinished, From the People’s Republic

of China, 62 Fed. Reg. 61,276, 61,277 (Nov. 17, 1997); Preliminary

Results of New Shipper Antidumping Duty Administrative Review of

Certain Stainless Steel Wire Rod From India, 62 Fed. Reg. 6171

(Feb. 11, 1977). Commerce, however, may neither use the substitute

data out of context, see Manifattura Emmepi, 16 CIT 619, 799 F.

Supp. 110, nor “resort to [the facts available] as an easy method

Court No. 98-02-00359 Page 17

to dispose of a case.” NTN Bearing Corp. of Am. v. United States,

17 CIT 713, 720, 826 F. Supp. 1435, 1441 (1993). While Commerce’s

resort to the facts available was justified, the Court shares

FAFER’s bewilderment about Commerce’s choice to use the only piece

of data admittedly unrelated to the transaction at issue as a proxy

for FAFER’s indirect selling expenses. See Pl.’s Reply at 19-22;

Def.’s Mem. at 35-36 and Ex. 6, 12. There could be no rational

relationship between a matter and a data that expressly does not

apply to that matter under the particular facts of the case.

Compare National Steel, 18 CIT at 1132, 870 F. Supp. at 1136;

Consolidated Bearings Co. v. United States, 2001 Ct. Intl. Trade

LEXIS 74 at *29-30, Slip Op. 2001-66 at 24 (2001) (quoting Madison

Metro. Sch. Dist. v. School Dist. Boundary Appeal Bd., 1998 Wisc.

App. LEXIS 1200 (Wis. Ct. App. 1998), quoting in turn Kammes v.

Mining Inv. & Local Impact Fund Bd., 340 N.W. 2d 206, 213 (Wis. Ct.

App. 1983), and stating that “a rational course of conduct requires

[that] . . . [t]he gap between the facts and the conclusion must be

filled”). Considering that there is no dispute about the

inapplicability of FAFER’s actual general commission to the sale at

issue, Commerce’s use of such commission as a proxy for FAFER’s

indirect selling expenses is unreasonable.4

4

The mere possibility that FAFER’s indirect selling expenses

could be an amount near the amount to which Commerce arrived on the

basis of facts available, see Domestic Producers’ Resp. at 26,

Court No. 98-02-00359 Page 18

B. Commerce’s Determination that FAFER’s

Antidumping Duties Have Been Absorbed

1. Background

During the review, Commerce provided FAFER with an opportunity

to submit relevant evidence and considered all submited evidence

in reaching its final determination. See Final Results, 63 Fed.

Reg. at 2964.

In the Preliminary Results, Commerce determined that

antidumping duties have been absorbed by FAFER on one hundred

percent of its United States sales because Commerce: (1) had

preliminarily determined that there was a dumping margin on one

hundred percent of FAFER's sales; and (2) could not conclude from

the record that an unaffiliated purchaser in the United States

would pay the ultimately assessed duty. See 62 Fed. Reg. at

48,217. Commerce, however, allowed FAFER to submit (within 15 days

after publication of the Preliminary Results) evidence that

unaffiliated purchasers in the United States would pay the

ultimately assessed duty charged to affiliated importers. See id.

In response, FAFER submitted a very brief letter by an unaffiliated

purchaser stating that the purchaser "irrevocably" committed itself

cannot serve as a valid argument in view of Commerce’s admitted

obligation to arrive at “the most reasonable estimate,” see Def.’s

Mem. at 34 (emphasis supplied), that is, the estimate most rational

under the circumstances rather than the most similar.

Court No. 98-02-00359 Page 19

to pay any antidumping duty on merchandise acquired from FAFER "if

such duty is assessed upon final determination by . . . Commerce."

Def.’s Mem., Ex. 11. Unsatisfied with the deficiencies of this

promise,5 Commerce made further inquiries of whether there has been

a modification to the existing sales contract other than this very

brief letter. See id., Ex. 6, 14. FAFER responded that "[t]here

has been no modification to the existing contract" and did not

explain why its customer would agree unilaterally to pay an

unspecified amount at an unspecified time without apparent

consideration. Id., Ex. 14. Consequently, Commerce concluded

that: (1) the evidence on the record did not demonstrate the

existence of an enforceable agreement to pay the full amount of the

assessed duties; and (2) “antidumping duties have been absorbed by

FAFER on one hundred percent of its [United States] sales." Final

Results, 63 Fed. Reg. at 2964.

2. Commerce’s Right to Conduct an Ad Hoc Determination

Without Promulgating a Definite Criteria

a. Contentions of the Parties

FAFER contends that Commerce's finding that FAFER absorbed

antidumping duties through its United States sales affiliate,

5

The contractual agreement failed to state, among other

things, the consideration and the time of performance. See Final

Results, 63 Fed. Reg. at 2964.

Court No. 98-02-00359 Page 20

Charleroi, was "contrary to the facts on the record" and is

premised on "faulty logic" because Commerce provided "no

substantive criteria . . . for trade participants or even counsel

to follow in establishing non-absorption." Pl.’s Br. at 28

(emphasis in original).

Commerce maintains that its determination that FAFER absorbed

antidumping duties was reasonable, and “[t]he fact that FAFER’s

evidence was found to be insufficient . . . does not mean that

there were no substantive criteria to follow.” Def.’s Mem. at 40.

Domestic Producers support Commerce’s contentions. See Domestic

Producers’ Resp. at 39-44.

b. Analysis

The duty absorption inquiry is a relatively new feature of

Commerce’s antidumping investigation. See Notice of Proposed

Rulemaking and Request for Public Comments on Antidumping Duties;

Countervailing Duties, 61 Fed. Reg. 7308, 7313 (Feb. 27, 1996)

(giving notice that such inquiries are to be conducted by

Commerce). Commerce clarified that such inquiries have little

precedent and, therefore, Commerce indicated that it would proceed

on an ad hoc basis until sufficient experience is collected. See

Final Rule on Antidumping Duties; Countervailing Duties, 62 Fed.

Reg. 27,296, 27,318 (May 19, 1997). Commerce specifically stated

Court No. 98-02-00359 Page 21

that Commerce “ha[s] not adopted . . . substantive duty absorption

criteria [because Commerce] will need experience with absorption

inquiries before it is able to promulgate such criteria.” Id.

Commerce’s right to conduct the absorption inquiry is provided

for in 19 U.S.C. § 1675(a)(4) (1994). The statute clarifies that

[d]uring any review [duly initiated, Commerce], if

requested, shall determine whether antidumping duties

have been absorbed by a foreign producer or exporter

subject to the order if the subject merchandise is sold

in the United States through an importer who is

affiliated with such foreign producer or exporter.

19 U.S.C. § 1675(a)(4).

There is nothing in the language of section 1675(a)(4)

requiring Commerce to specifically articulate the standard of what

constitutes duty absorption prior to conducting a duty absorption

inquiry. Conversely, the statutory language that Commerce “shall

determine whether antidumping duties have been absorbed”

demonstrates clear congressional mandate allowing Commerce to

engage in the rulemaking processes traditionally used by an agency,

including reaching a determination after examining the particular

circumstances of the case without formally promulgating an all-

inclusive standard. In aspiring to create a detailed standard, an

agency is expected to accumulate technical expertise and draw from

the monitoring of the regulated industry. See, e.g., Natural

Court No. 98-02-00359 Page 22

Resources Defense Council, Inc. v. U.S. EPA, 859 F.2d 156, 210

(D.C. Cir. 1988).

[An] administrative implementation of a particular

statutory provision [is valid and] qualifies for Chevron

[U.S.A. Inc. v. National Resources Defense Council, Inc.,

(“Chevron”), 467 U.S. 837, 842-43 (1984)] deference when

it appears that Congress delegated authority to the

agency generally to make rules carrying the force of law,

and that the agency interpretation claiming deference was

promulgated in the exercise of that authority.

Delegation of such authority may be shown in a variety of

ways, as by an agency's power to engage in adjudication

or notice-and-comment rulemaking, or by some other

indication of a comparable congressional intent.

United States v. Mead Corp., 121 S. Ct. 2164, 2171 (2001).

Commerce is correct in asserting that demarcated guidelines

are not an indispensable part of the criteria that an agency uses

in reaching a determination. Accord Def.’s Mem. at 40. Commerce

was entitled to make a determination on an ad hoc basis by applying

Commerce’s expertise to the particular facts of the case at bar,

see Natural Resources Defense Council, Inc., 859 F.2d at 210, and

postpone the promulgation of a substantive duty absorption criteria

until sufficient information is gathered.

2. Reasonableness of Commerce’s Determination

1. Contentions of the Parties

FAFER alleges that Commerce’s determination that FAFER’s

antidumping duties have been absorbed on one hundred percent of

Court No. 98-02-00359 Page 23

FAFER’s United States sales is an “unacceptable exercise of

arbitrary” judgment. Pl.’s Br. at 29. FAFER maintains that the

letter by an unaffiliated purchaser supplied by FAFER to Commerce

contained an “unqualified commitment to pay the antidumping duties”

and constituted sufficient evidence that FAFER’s antidumping duties

have not been absorbed. See id.

Commerce asserts that FAFER’s antidumping duties have been

absorbed because Commerce determined that “there was no [valid]

contract for the unaffiliated customer to pay the ultimately

assessed duties.” Def.’s Mem. at 42. Commerce contends that it

reasonably refused to accept the commitment letter as sufficient

evidence to the contrary because the letter: (1) was an

unenforceable promise “to pay an uncertain amount, at an uncertain

time, under uncertain circumstances;” and (2) failed to provide for

a proper contractual consideration. See id.

2. Analysis

In the Preliminary Results, 62 Fed. Reg. at 48,217-18,

Commerce stated that it would consider evidence that unaffiliated

purchasers in the United States would pay the ultimately assessed

duty charged to affiliated importers. Upon FAFER’s submission of

the record information, Commerce examined the terms of sale, first,

Court No. 98-02-00359 Page 24

between FAFER and Charleroi, and then between Charleroi and its

unaffiliated United States customer, and arrived at the conclusion

that the only relevant piece of evidence provided by FAFER, that

is, the agreement letter, was unenforceable due to the lack of

either consideration or certainty of amount, time, or conditions.

See Def.’s Mem. at 42.

The Court holds that Commerce’s conclusion was reasonable. It

is axiomatic that while the uncertainty of amount, time and

conditions could be sometimes cured by particular circumstances of

the case, the lack of consideration makes a contract unenforceable.

See, e.g., Johnson v. Johnson, 614 N.E.2d 348 (Ill. App. Ct. 1993);

Appolonio v. Baxter, 217 F.2d 267 (6th Cir. 1954); Robertson v.

Miller, 286 F. 503 (2nd Cir. 1922). FAFER’s failure to cure this

defect in the agreement letter left Commerce no choice but to

arrive at the decision Commerce made. The mere fact that FAFER’s

evidence was deemed by Commerce insufficient to establish that an

unrelated purchaser would, in fact, pay the duties ultimately

assessed, means neither that Commerce’s conclusion was faulty, nor

does it mean that Commerce’s determination that FAFER’s antidumping

duties have been absorbed on one hundred percent of FAFER’s United

States sales was unreasonable. See Chevron, 467 U.S. 837. In view

of the foregoing, Commerce properly determined that FAFER’s

antidumping duties have been absorbed on one hundred percent of

Court No. 98-02-00359 Page 25

FAFER’s United States sales.

CONCLUSION

This case is remanded to Commerce to: (1) examine the record

to determine what data should be used as a substitute for FAFER’s

indirect selling expenses; and (2) take further actions not

inconsistent with this opinion.

_________________________

NICHOLAS TSOUCALAS

SENIOR JUDGE

Dated: July 3, 2001

New York, New York