Borden, Inc. v. United States

Slip Op. 99-50

UNITED STATES COURT OF INTERNATIONAL TRADE

________________________________________

:

BORDEN, INC., GOOCH FOODS, INC. and :

HERSHEY FOODS CORP., :

:

Plaintiffs, :

:

v. : Consol. Ct.

: No. 96-08-01970

UNITED STATES and :

UNITED STATES DEPARTMENT OF COMMERCE, :

:

Defendants, :

:

and :

:

DELVERDE, SrL and DELVERDE USA, INC., :

:

Defendant-Intervenors. :

:

________________________________________:

[Amended Final determination following remand sustained as to

plaintiffs Borden, Inc., Gooch Foods, Inc., and Hershey Foods

Corp. and defendant-intervenors Delverde, SrL and Delverde USA.]

Dated: June 4, 1999

Collier, Shannon, Rill & Scott, PLLC (Paul C. Rosenthal,

Kathleen W. Cannon, David C. Smith, Jr., and John B. Brew) for

plaintiffs Borden, Inc., Gooch Foods, Inc., and Hershey Foods

Corp.

Neville, Peterson & Williams (Lawrence J. Bogard), Mound,

Cotton & Wollan (Constantino P. Suriano) for defendant-

intervenors Delverde, SrL and Delverde USA.

David W. Ogden, Acting Assistant Attorney General, David M.

Cohen, Director, Commercial Litigation Branch, Civil Division,

United States Department of Justice (Erin E. Powell), Dean

Pinkert, Attorney Advisor, Office of the Chief Counsel for Import

Administration, United States Department of Commerce, of counsel,

for defendants

CONSOL. CT. NO. 96-08-01970 PAGE 2

OPINION

RESTANI, Judge: This matter is before the court following

remand to the United States Department of Commerce ("Commerce")

of Certain Pasta from Italy, 61 Fed. Reg. 30,326, 38,547-01,

42,231-02 (Dep't Commerce 1996) (final and amended final

determinations of sales at less than fair value). Familiarity

with the court's earlier decision in this case is presumed. See

Borden, Inc. v. United States, 4 F. Supp.2d 1221 (Ct. Int'l Trade

1998) [hereinafter "Borden I"]. Issues relating to respondent

DeCecco were resolved in Borden, Inc. v. United States, No. 98-

167, 1998 WL 895890 (Ct. Int'l Trade Dec. 16, 1998) (remand

determination affirmed as to De Cecco). As to the issues

remaining, following remand, the court sustains Commerce's

Redetermination on Remand [hereinafter "Remand Determination"].

I. Targeted Dumping

Background

Borden asked the court to find that Commerce erred in

failing to calculate dumping margins for Delverde by comparing

weighted-average normal values to transaction-specific export

prices, pursuant to 19 U.S.C. § 1677f-1(d)(1)(B) (1994), the

"targeted dumping" provision of the anti-dumping statute. The

court remanded to Commerce to continue its targeted dumping

CONSOL. CT. NO. 96-08-01970 PAGE 3

inquiry. Borden I, at 1248. On remand, the court required that

Commerce either articulate standards by which it would evaluate a

targeted dumping petition or, if not yet prepared to do so, that

Commerce conduct its own analysis of the data to determine

whether to calculate dumping margins for Delverde using

transaction-specific rather than weighted-average prices. Id. at

1229. The court further instructed that if Commerce chose to

articulate the standards by which a targeting petition would be

evaluated, the agency was also obliged to clarify the allocation

of the analytical burden between petitioners and Commerce. Id.

at 1230.

Commerce chose to articulate the standards by which it would

evaluate a targeted dumping petition, explicitly noting that the

methodology developed for this case might vary in the future.

Remand Determination, at 15. After receiving comments on its

proposed standards, Commerce released its final methodology by

letter on July 22, 1998. Id. at 17.

Commerce defined price difference as a separation in price,

defining price as gross unit prices less adjustments for movement

charges, discounts, rebates, and post-sale price adjustments.

Id. at 16. Accordingly, if targeting had occurred, the allegedly

targeted purchaser would receive a lower average price than each

CONSOL. CT. NO. 96-08-01970 PAGE 4

allegedly non-targeted purchaser, and that price difference would

not be attributable to non-targeting factors such as product

type, level of trade, time of sale, or terms/conditions of sale.

Id.

Commerce defined two ways it would identify price

differences significant enough to trigger a targeted dumping

investigation. First, to avoid the illogical conclusion that the

majority of purchasers were targeted,1 the price to the allegedly

targeted purchaser must be in the lowest 20 percent of all

average transaction prices. Id. Second, to determine what

magnitude of price differences is significant for the market at

hand, Commerce requires that the price separation between

allegedly targeted and non-targeted customers must be equal to or

greater than the maximum price separation within the non-targeted

group, unless a party shows the exporter's data to be non-

representative of the industry as a whole. Id.

Commerce also defined which significant price differences

would qualify as a pattern. Specifically, the department would

recognize a pattern of significant price differences if i) they

1

By definition, if a petition alleges that the price charged

the majority of purchasers is less than fair value, that petition

effectively does not allege targeting. Likewise, if the majority

of purchasers are sold goods at less than fair value, the risk

that weighted-average price comparisons will mask dumping

evaporates.

CONSOL. CT. NO. 96-08-01970 PAGE 5

existed, on average, over all relevant time periods and for all

products sold by the exporter to the allegedly targeted customer

or customers, and ii) average transaction prices exhibited a

"downward skewness" with respect to allegedly targeted customers.

Id. Commerce noted, in response to comments from the parties,

that the department would relax its standards if a party could

show that the allegedly targeted purchasers comprised a well-

defined group, such as those who buy for a niche market or those

who recently changed suppliers due to price-undercutting. Id. at

16-17.

Following Commerce's detailed instructions for identifying

customers frequently "at the bottom," Letter from Commerce (July

22, 1998), Attachment, at 1, Borden filed a targeted dumping

petition against Delverde on July 27, 1998. Remand

Determination, at 17. On the basis of this application, Commerce

decided to pursue a targeted dumping investigation of Delverde.

Id. In its July 27, 1998 petition, Borden had alleged that all

customers "frequently at the bottom" were being targeted by

Delverde. Draft Remand Determination on Targeted Dumping (Aug.

20, 1998), at 2 [hereinafter "Draft Redetermination"].

Commenting that this might have been the result of a

misunderstanding by Borden, Commerce modified its targeting

CONSOL. CT. NO. 96-08-01970 PAGE 6

inquiry for this single occasion. Id. at 2-3. Commerce

considered that the set of purchasers proposed by Borden might be

over-inclusive and might mask actual targeting. Id. at 3.

Commerce announced that in addition to its targeting analysis of

Borden's data, it therefore also would perform this analysis on a

subset of Borden's purchaser group: those found at the lower end

of that set. Id. at 3.

On the basis of these calculations, Commerce concluded that

the data did not reveal targeted dumping by respondent Delverde.

Remand Determination, at 17. Borden here challenges five aspects

of Commerce's Remand Determination.

Discussion

a. Motion to Amend and Exhaustion of Administrative Remedies

Borden makes three arguments which pertain to the targeted

dumping petition it filed under Commerce's methodology announced

during remand. The court addresses two of these at this point

and the third in a separate section below. First, Borden alleges

that Commerce erred in its targeted dumping analysis when it

deviated from its normal calculation methodology for determining

net prices by including selling expenses incurred by Delverde.

Second, Borden argues that Commerce incorrectly included customer

category as a control factor in its targeted dumping analysis,

CONSOL. CT. NO. 96-08-01970 PAGE 7

despite a prior finding that all sales were made at the same

level of trade. Plaintiffs' Comments on Redetermination on

Remand (Sept. 28, 1998), at 9-10 [hereinafter "Plaintiffs'

Comments"].

In their response to Borden's comments on the Remand

Determination, defendants noted that Borden's argument regarding

the inclusion of selling expenses was not raised before the

agency. Defendants' Response (Oct. 2, 1998), at 1. Defendants

now seek leave to amend their response to raise the same concern

with respect to Borden's customer category claim, proposing to

argue that Borden failed to exhaust its administrative remedies

in failing to raise this question during the administrative

stages of the remand.2 Defendants' Amended Response (Oct. 9,

1998), at 1.

Borden responds with an equitable argument that Commerce

should not be permitted to amend its response. Plaintiffs'

Opposition to Defendants' Amended Response (Oct. 26, 1998), at 2-

3. Borden complains that after the agency had received an

2

In its response to Borden's and defendants' comments after

the Remand Determination, Delverde raised the issue of Borden's

failure to exhaust its administrative remedies as to both the

selling expense and customer category issues. Thus, the court

would be required to address the exhaustion issue, whether

Commerce raised it or not. One might argue, however, that

Commerce has a more direct interest in the procedural issue.

CONSOL. CT. NO. 96-08-01970 PAGE 8

extension of time amounting to three additional months to submit

its remand analysis to the Court, the agency permitted Borden

only a few days to respond to each of three statistically-complex

stages during the remand. In particular, the agency required

Borden to comment upon its draft redetermination dated Thursday,

August 20, 1998, by close of business Monday, August 24, 1998.

Id. at 2. Given this tight schedule, Borden finds unfair

Commerce's attempt here to preclude arguments Borden failed to

raise in that short period. Accordingly, Borden specifically

requests that the court deny Commerce leave to amend its response

to Plaintiffs' Comments to make this preclusion argument in light

of the relatively long time Commerce had (11 days) to respond in

the first place.

Borden's response to Commerce's motion compounds the

exhaustion issue. Borden did not make a due process objection

or any other kind - to Commerce's response schedule in either

its response to Commerce's Draft Redetermination or in

Plaintiffs' Comments. Nor, strictly speaking, does Borden make

such an argument here, relying only on its persuasive value in

CONSOL. CT. NO. 96-08-01970 PAGE 9

equity.3 The court notes that Commerce has not promulgated

regulations specifying certain procedures or timing on remand.

The court is satisfied from the record that as a factual

matter, Borden failed to raise either the selling expense or the

customer category issue during the administrative phase of the

remand. To the extent they are divisible, the court addresses

the motion to amend and the exhaustion issue in turn.

The court considers Commerce's October 9, 1998 motion to

amend its response to Plaintiffs' Comments analogous to a motion

to amend a pleading. A party may amend its pleading by leave of

court. USCIT Rule 15(a). The court has the discretion to grant

or deny a motion to amend. See Saarstahl AG v. United States,

949 F. Supp. 863, 866 (Ct. Int'l Trade 1996), aff'd in part,

rev'd in part, 1999 WL 203323 (Fed. Cir. Apr. 12, 1999). The

3

Even if the court should consider that Borden unwittingly

has raised a due process issue at this belated stage, and even if

the court deemed such a due process claim to be viable in an

antidumping context, the claim likely would be unavailing to

Borden. The court applies a rule of reason in evaluating

administrative due process claims. See United States v. Islip,

18 F. Supp.2d 1047, 1064-66 (Ct. Int'l Trade 1998) (Customs fraud

defendant given seven rather than the required 30 days to respond

was not deprived of due process such as would preclude

jurisdiction on review because "[d]efendant was ultimately given

sufficient opportunity to be heard at the administrative level.")

Borden's thoughtful responses to Commerce's proposed methodology

and draft redetermination, and Commerce's responses to those

detailed remarks in the Remand Determination clearly show that,

as a practical matter, Borden was not substantially deprived of

an opportunity to be heard before the agency.

CONSOL. CT. NO. 96-08-01970 PAGE 10

Rule provides, in relevant part, that "a party may amend the

party's pleading . . . by leave of court," and that "leave shall

be freely given when justice so requires." USCIT Rule 15(a).

The Supreme Court has described the parameters of this

discretion.4 Foman v. Davis, 371 U.S. 178, 182 (1962). In

Saarstahl, 949 F. Supp. at 866, this court denied a motion to

amend the complaint because of undue delay and unfair prejudice

to the other parties. By contrast, defendants' motion to amend

here cannot be said to be unduly delayed, as it followed almost

directly the procedural event (the filing of defendants' response

to Borden) it seeks to revise. None of the other factors listed

in Foman suggest that the court must deny defendants' motion.

4

In Foman, the Supreme Court discussed Fed. R. Civ. Proc.

15(a), which contains the same language and is parallel to USCIT

Rule 15(a). See also Earth Island Institute v. Christopher, No.

95-169, 1995 WL 604708, at *1 (Ct. Int'l Trade Oct. 12, 1995).

The Court in Foman stated,

If the underlying facts or circumstances relied upon by

a plaintiff may be a proper subject of relief, he ought

to be afforded an opportunity to test his claim on the

merits. In the absence of any apparent or declared

reason - such as undue delay, bad faith or dilatory

motive on the part of the movant, repeated failure to

cure deficiencies by amendments previously allowed,

undue prejudice to the opposing party by virtue of

allowance of the amendment, futility of amendment, etc.

- the leave sought should, as the rules require, be

'freely given.'

Foman, 371 U.S. at 182.

CONSOL. CT. NO. 96-08-01970 PAGE 11

That the argument therein may be damaging to Borden does not

render the amendment unduly prejudicial. The court therefore

grants defendants' motion and allows the proposed amendment.

The court now turns to the question of exhaustion of

administrative remedies as to both the selling expense and the

customer category issues. In the Court of International Trade,

the doctrine of the exhaustion of administrative remedies is

statutorily based. 28 U.S.C. § 2637 (1994). With certain

enumerated exceptions, the court is instructed that it "shall,

where appropriate, require the exhaustion of administrative

remedies." 28 U.S.C. § 2637(d).

The exhaustion requirement of § 2637(d) is discretionary

rather than strictly jurisdictional. United States v. Priority

Products, Inc., 793 F.2d 296, 300 (Fed. Cir. 1986). The court

may decide to waive the requirement and reach an issue not raised

before the agency. Id. (emphasizing the discretionary language

in 28 U.S.C. § 2637(d)).

When the court bases its review of an administrative

decision on grounds not before the agency, it "deprives the

[agency] of an opportunity to consider the matter, make its

ruling, and state the reasons for its action." Budd Co., Wheel &

Brake Div. v. United States, 15 CIT 446, 452, 773 F. Supp. 1549,

CONSOL. CT. NO. 96-08-01970 PAGE 12

1554 (1991) (citing Unemployment Compensation Comm'n of Alaska v.

Aragon, 329 U.S. 143, 155 (1946)). Accordingly, the court will

not hear an issue a party failed to raise during the

administrative process where that issue does not fall within one

of the recognized exceptions to the exhaustion doctrine. See

Federal-Mogul Corp. v. United States, 18 CIT 785, 803-04, 862 F.

Supp. 384, 402 (1994) (issue excluded for failure to exhaust

where no exception to exhaustion requirement permits the court to

entertain the argument).

One aim of the exhaustion doctrine is to give the agency a

chance to address the issue before the court considers it.5

McKart v. United States, 395 U.S. 185, 194 (1969); see also

Mitsubishi Heavy Indus., Ltd. v. United States, 15 F. Supp.2d

807, 821 n.6 (Ct. Int'l Trade 1998) (permitting party to raise

issue despite failure to exhaust where agency had "ample

opportunity to respond to th[e] question at the administrative

level").

The majority of the cases collected in Budd, 15 CIT at 452

n.2, illustrating exceptions to the exhaustion doctrine,

5

Other purposes include giving effect to the agency's

governing statute, permitting the agency to make a record,

respect for agency expertise and discretion, administrative

efficiency in discouraging parties from seeking interlocutory

review, and respect for administrative autonomy. McKart, 395

U.S. at 193-95.

CONSOL. CT. NO. 96-08-01970 PAGE 13

represent instances where this purpose would not be effected by

strict application of the doctrine. See, e.g., Rhone Poulenc,

S.A. v. United States, 7 CIT 133, 136, 583 F. Supp. 607, 611

(1984) (recognizing that plaintiff raised new, purely legal

argument requiring no further agency involvement); Timkin Co. v.

United States, 10 CIT 86, 92-93, 630 F. Supp. 1327, 1334 (1986)

(reasoning that an intervening judicial interpretation following

remand changed the result); Rhone Poulenc, 7 CIT at 135, 583 F.

Supp. at 610-11 (considering that an administrative challenge

asking the agency not to apply its regulation would have been

futile); Philipp Bros., Inc. v. United States, 10 CIT 76, 80, 630

F. Supp. 1317, 1321 (1986) (finding plaintiff lacked timely

access to administrative record).

Though the court has recognized exceptions to the doctrine,

there are established limits, especially as to the issue now

before the court. In Bethlehem Steel Corp. v. United States,

1988 WL 731602, *5 (Ct. Int'l Trade Oct. 14, 1998), where

Commerce was required by statute, under 19 U.S.C. § 1677m(g), to

permit the parties a "reasonable time" to respond to a

submission, and the agency allowed a party only two days to

respond, the court concluded that, "[b]y failing to protest at

the time of its response, [the party] failed to exhaust its

CONSOL. CT. NO. 96-08-01970 PAGE 14

administrative remedies within the meaning of 28 U.S.C. § 2637(d)

(1994). Thus it cannot now claim that it had an inadequate

opportunity to comment on the supplemental information."

Bethlehem Steel, 1988 WL 731602, *5. Where a party did express

difficulty with the time permitted by the agency for response,

the court has been more flexible in allowing non-exhausted

claims. See Al Tech Specialty Steel Corp. v. United States, 11

CIT 372, 378, 661 F. Supp. 1206, 1211 (1987) (allowing claims

where request to agency for additional time went unanswered).

Thus, it can be seen that failure to protest time limits before

the agency is crucial to the survival of related claims.

As noted, Borden did not request additional time from the

agency or raise a protest about the time Commerce allowed for

comments from the parties either to the agency itself or in its

initial response to the Remand Determination submitted to the

court. The court concludes that Borden has foregone its

opportunity to protest the time allowed it. To the extent Borden

makes it, the court disallows that claim for failure to have

exhausted administrative remedies.

Likewise, the court rejects Borden's defense, by way of

reference to the short time period, of its failure to have

exhausted its administrative remedies as to its selling expense

CONSOL. CT. NO. 96-08-01970 PAGE 15

and customer category claims. Borden does not, and on this

record could not, argue that the selling expense or customer

category issue was considered by the agency. The court therefore

declines to hear those claims and proceeds to consider Borden's

remaining arguments.

b. Price Mean Comparisons

In its effort to establish whether the data showed a pattern

of significant price differences, Commerce conducted a "skewness

test," stating that "average transaction prices must exhibit a

downward skewness with respect to allegedly targeted customers."

Remand Determination, at 16. Where the difference between the

highest price among non-targeted customers and the median price

for all customers exceeded the difference between the highest

price among the set of customers defined as "frequently at the

bottom" and the median price, Commerce concluded that no

targeting had occurred. Plaintiffs' Comments, at 7-8.

Borden objects that this methodology is "inappropriate"

because it

relies heavily on the differences in distances between

the comparison points (highest price to non-targeted

and targeted customers) to the median, and therefore

distorts the Department's analysis of Delverde's

pricing practice for purposes of [the] skewness test.

The results of such a "skewness test" will, in turn,

CONSOL. CT. NO. 96-08-01970 PAGE 16

defeat any attempt to prove the existence of targeted

dumping.

Plaintiffs' Comments, at 8-9.

The court finds no actual argument within this conclusory

statement. Borden provides no basis upon which the court could

evaluate its claim. Borden simply argues that the test is

"inappropriate" because it does what it purports to do, because

it makes comparisons it purports to make. Borden has not argued

that the skewness test, as developed and implemented by Commerce,

would not in fact measure downward skewness. Nor has Borden

argued that a test for downward skewness would or could not

establish the "pattern" required by the statute. Most

significantly, Borden has made no attempt to show how Commerce's

methodology would preclude a finding of targeted dumping

altogether.

c. Other Methodological Arguments

Borden's also makes two arguments based on hypotheticals in

response to Commerce's Remand Determination. Borden argues that

Commerce's methodology i) would preclude a targeted dumping

allegation against a single large customer and ii) would fail to

account for customers who purchase only in certain months within

the period of inquiry. Although Borden refers to its data set in

making these arguments, Borden itself casts these arguments as

CONSOL. CT. NO. 96-08-01970 PAGE 17

hypothetical.6 Plaintiffs' Comments, at 3-7. Borden has alleged

neither that Delverde has targeted a single large customer nor

that targeting has been overlooked in the group of allegedly

targeted customers due to high sales concentration within a few

months. Moreover, Borden concedes that petitioners might have

alleged targeting against a single customer, Plaintiffs'

Comments, at 5, which the court reads as a concession that it has

not done so.

Because the court may not engage in abstract review, it

requires an actual case or controversy to hear any issue, U.S.

Const. art. III, § 2. Here, the court would likely require an

allegation of targeting against a single, large customer or

against customers who purchase only in certain months in order to

determine whether the methodology is legal in such situations.

Even if no constitutional standing problem exists, the court

declines to reject a methodology based solely on hypothetical

applications beyond the administrative record. Commerce might

welcome Borden's arguments as suggestions for improvement or

refinement of its targeted dumping methodology as applied in

6

The abstract nature of these arguments is highlighted by

Borden's use of conditionals and the subjunctive. See

Plaintiffs' Comments, at 5-6.

CONSOL. CT. NO. 96-08-01970 PAGE 18

future cases,7 but these do not provide a basis upon which the

court could order a remand or any other relief on this record.

II. Level of Trade

Before remand, Delverde argued that Commerce, during

Delverde's level of trade inquiry, unlawfully denied its request

for a constructed export price ("CEP") offset, an adjustment to

normal value which Delverde claimed would have led to a de

minimis dumping margin. The court remanded to Commerce to revise

its level of trade analysis without recalculating constructed

export price. Borden I, at 1242.

No party contends that Commerce did not comply with the

court's directions with regard to the level of trade adjustments.

Commerce does complain that it could not recalculate CEP under

the court's direction. That is true. The court found that it

was improper to order a remand on that aspect of the original

determination which was not challenged by the parties, where

remand was opposed by both the domestic and foreign interests and

Commerce asked for a remand at the last minute and did not

explain its "error." Id.

7

Commerce has not only "reserved the discretion to alter

[its] methodology in future cases," Remand Determination, at 15,

but, in response to comments by the parties at earlier stages of

this inquiry, has also expressed a good faith willingness to do

so as appropriate in future cases, see id. at 17-20.

CONSOL. CT. NO. 96-08-01970 PAGE 19

The CEP calculation itself was final, and the court did not

permit its reworking. It is not appropriate for Commerce to seek

reconsideration by means of new arguments in a remand

determination; respondent must live with the results of its

choices as well. There are rules which govern both the issuance

of final determinations and the litigation of cases, and the

court and parties must abide by them. Finality is an important

aspect of the unfair trade laws. It is served by both exhaustion

rules and limitations on remand.

Accordingly, the court affirms all aspects of the Remand

Determination addressed herein.

____________________________

Jane A. Restani

Judge

Dated: New York, New York

This 4th day of June, 1999.