Petition — Smith-Corona Group, Consumer Products Division, SCM Corp. v. United States

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83-766 PILED

NOV %@ I993

No. 83-___ ALEXANDER L STEVag,

—

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1983

SMITH-CoroNA Group, CONSUMER Propucts Division, SCM

CORPORATION,

Petitioner,

THE UNITED STATES,

BROTHER INDUSTRIES, LTD., BROTHER INTERNATIONAL

CORPORATION, SILVER SEIKO, LTpD., and SILVER REED

AMERICA, INC.,

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF

APPEALS

FOR THE FEDERAL CIRCUIT

EUGENE L. STEWART

(Counsel of Record)

TERENCE P. STEWART

JAMES R. CANNON, JR.

STEWART AND STEWART

1001 Connecticut Avenue, N.W.

Washington, D.C. 20036

Telephone: (202) 785-4185

Of Counsel:

EDWIN SILVERSTONE

299 Park Avenue

New York, New York 10171

PRESS OF BYRON S. ADAMS PRINTING, INC.. WASHINGTON, LD \. (202) 347-8203

QUESTION PRESENTED

Did the new Court of Appeals for the Federal Circuit

err, as a matter of federal statutory law and as a matter of

constitutional separation of powers principles, in its hold-

ing that the Commerce Department’s promulgation and

use of a “special rule” to “offset” a statutorily mandated

deduction from “United States price”, and the agency’s

reliance on cost differences to “adjust” the statutorily

defined “foreign market value”, the effect of which is to

reduce or eliminate dumping margins in antidumping

proceedings, can be upheld as an exercise of “broad dis-

cretion” by the administrative agency—even though al-

lowing those rules to be applied is admittedly to permit

negation of one statutory provision, to disregard the re-

quirements of another statutory provision, and to create,

in effect, an administrative irrebuttable presumption in

favor of a standard that the Court acknowledged to be

“inherently unreliable”?

TABLE OF CONTENTS

Page

te, ls tee cesedbeues ovata 2

ee ee utah daccccctcceenbe 2

ee. wes ncbsceeced pn 2

Eo ccc velcewccecscosccncces 2

1. Statute and its purpose ............... 2

2. The finding that portable electric

typewriters were being dumped and the

domestic industry injured ............. 5

3. Proceedings in the Trial Court ........ 6

4. Decision of the Court of Appeals for the

tS AG cuvine'sabiaeee ess 8

REASONS FOR GRANTING THE PETITION ...............- 9

I. THE RATIONALE ADOPTED BY THE COURT OF APPEALS

WoULD RENDER THE STATUTE AN UNCONSTITUTIONAL

DELEGATION OF LEGISLATIVE AUTHORITY AND

VIOLATES THE CONSTITUTIONAL REQUIREMENT OF

SPOON OF POWERS ..ccvccccst cccccescocces 10

A. The Court Of Appeals Construed Section 773(a)

To Grant Limitless Discretion To The Com-

I os i siden o pb. alee velo.ceetie’s 10

1. The court below has eliminated the lan-

guage of the statute as the intelligible prin-

ciple for its application ............... 10

2. The court below has eliminated the direct

relationship standard ................. 11

3. The Court of Appeals has eliminated the

structure of the statute itself as a guide for

RT ee 14

4. As construed by the Court of A , the

statute lacks the requisite aries for

interpretation of its scope ............. 15

iii

Table of Contents Continued

Page

II. THe Decision BELow ConFLicts WITH THE DEcI-

GF THB CD |. kc id cect iecdackh ctakutese 19

A. The Interpretation Of The Statute By The

Court Of Appeals Creates An Invalid Irrebutt-

able Presumption Under /nterstate Commerce

Commission v. J-T Transport Co. ......... 19

B. The Court Of Appeals Upheld An [rrational

PINE 0:6 8 cuss xc thewanxeds besa ne aes 22

III. THE Decision BELow RAISES SIGNIFICANT AND

RECURRING PROBLEMS CONCERNING THE ADMINIS-

TRATION OF THIS NATION’S UNFAIR TRADE STATUTE 25

PN noe, ad | wg bw etal Riera ee ROE ob 29

TABLE OF AUTHORITIES

CASES: Page

A.L.A. Schechter Poultry Corporation v. U nited States,

AD OE CUE nina cian a dcawedadas tase’ doc 15

Anderson Co. v. United States, 447 F. 2d 41, (7th Cir.

EPUENT iiisla o°S Vial cad wiole d.nebeche’s Kiinawe-a's Oh: Whine ee 21

TO" aa eigen tat SYS CIEE np, TREE

phere Poe Ne oe Meena. sae Ob 2, 7, 14, 25

FO we: mene, 46 UE. ERG TD evin. cece s on'onp bens 16

Budd Co., Railway Division v. United States, 1 CIT 67,

507 F. Supp. SE» HORT mht ees cane wad neee ae 20

Carlisle Tire & Rubber Co. v. United States, 3 CIT —_,

Slip Op. 82-37 (May 12, 1982) ..............0000% 9

Dixon v. United States, 381 U.S. 68 (1965) .......... 17

Ernst & Ernst v. Hochfelder, 425 U.S. 185, reh'g denied

oie G7... ee eee 16

F.W. Myers & Co. v. United States, 72 Cust. Ct. 219, 376

PG A CRUE) bid die dn vine one ote pees 9, 13, 18

Hanover Shoe v. United Shoe eye orp., 392 U.S.

481, reh’g denied 393 U.S. 901 (1968) ............

Immigration and Naturalization Service v. Chadha, 103

NOE MAOEED dc ccsacccnvvavdacctdasenmanay 16

International Brotherhood of Teamsters v. Daniel, 439

EOE inavi.nc con ccad’ p0ae Oe cic keeaeee 17, 18

Interstate Commerce Commission v. J-T Transport

Company, 368 U.S. SF (1961) ............eeeee 19-21

J. W. aaa Jr. & Co. v. United States, 276 U.S. 394

SEU hv Gi Reds sn. one rd epanbara enced kemees 10

Leary v. United States, 395 U.S. 6 (1969) .......... 17, 22

Manhattan General Equipment Co. v. Commissioner,

297 U.S. 129 (1936) . sab ved re senkeainkadcniwes 17

wear “Sp Television v. United States, 415 U.S. 336 i

Securities and Exchange Commission v. Sloan, 436 U.S.

PN PER ney be tm aS phy 17

Table of Authorities Continued

Page

Small v. Immigration and Naturalization Service, 438

fA or Ys ~ fe Ry | RS iors 21

Smith-Corona Group, Consumer Products Division,

SCM C tion v. United States, 1 CIT 89, 507 F.

Se Ber Pry ree 7

Smith-Corona Group, Consumer Products Division,

SCM C tion v. United States, 713 F.2d 1568

8 ok ea 2, 11, 14, 15, 18, 19, 22, 26

Southeastern Community College v. Davis, 442 U.S. 397

GUNG AG Htta Givens £ u's cos con wmgmeteia aan 17, 18

Timken Company v. United States, Ct. No. 82-6-00890

Ce ee PUN, SOUND oc ina cocaciaccestucacs 9

Tot v. United States, 319 U.S. 463 (1943) ............ 22

United States v. Larionoff, 431 U.S. 864 (1977) ...... 17

United States v. McLean Trucking Co., 400 F.2d 889 (4th

Se BD i iS acines'scei coc bhuanhatdaberdy waweam

United States v. Powers, 307 U.S. 214 (1939) ........ 15

United States v. Romano, 382 U.S. 136 (1965) ....... 22

Usery v. Turner Elkhorn Mining Co., 428 U.S. 1

RE ib: a'h arn asin a'a k's 6 Aeneas too ane eae - > |

Vasquez-Mondragon v. Immigration and Naturaliza-

tion Service, 560 F.2d 1225 (5th Cir. 1977) ....... 21

Western & Atlantic R.R. v. Henderson, 279 U.S. 689

GE Sn cous a cececucce Jeabmeewas anneal

Zenith Radio Corporation v. United States, 710 F.2d 806

Ey SED nc nccsecadulastuseduengueukenae il 3, 28

STATUTES:

The Antidumping Act of 1921

ge RR eer eee 9

oe Eek | EO ee ee eer 9

The Tariff Act of 1930, as amended

Section 516A(a)(2)(A) [19 U.S.C. § 15l6a(aX(2)A)] .. 6

Section 516A(a)(2)(B)(iii) [19 U.S.C.

SC SERA. co a vo vd winwetace cebeberhdan

Table of Authorities Continued

Page

Section 516A(b) [19 U.S.C. § 1516a(b)] ............ 20

Section 731 [19 U.S.C. § 1678] .........ccccccceees 4

Section 736(c) [19 U.S.C. § 1673e(c)] .............. 6

Section 772 [19 U.S.C. § 1677a] 0... cc cccccccccce 2,4

Section 772(e) [19 U.S.C. § 1677a(e)] ................ 7

Section 772(e)(2) [19 U.S.C. § 1677a(e)(2)] ........... 14

Section 773 (19 U.S.C. § 1677b] ...........2.ccceee 2,4

Section 773(a) [19 U.S.C. § 1677b(a)] ...... 4, 10, 25, 27

Section 773(a)(4) [19 U.S.C. § 1677b(a)(4)] 9, 10, 11, 21, 27

Section 776 [19 U.S.C. § 1677(e)] ............0000- 20

Section 777 [19 U.S.C. § 1677(f)] ..............005- 20

TY SEED oss as gicantabe dene acdsike cogié aoa 2

Customs Courts Act of 1980, Pub. L. No. 96-417, § 101, 94

a So ee. ks ot csumbeeekoedaeeliabaeun

Pub. L. No. 85-630 § 2, 72 Stat. 583 (1958) .......... 12

REGULATIONS AND RULES:

T.D. 53,773, 90 Treas. Dec. 98 (1955) ............... 12

T.D. 55,118, 95 Treas. Dec. 229 (1960) .............. 12

Oe Se ED iy Sil ob aida cccsddpcvua’s expert 27

SAME ae, ee AED © oh pe ow coches 0 0d cp ikOne wee 2, 28

ye RK ener rarer Po: 27

19 C.F.R. § 353.15 (c) (1980) ................ 7, 11, 14, 25

19 C.F.R. § 353.15 (d) (1980) ................. 19, 25, 26

SRA es ee CAO on cic dccwictvepeaeadaeeekns 27

19 C.F.R. § 14.7(a) (1960) (1961) (1962) (1963) (1964)

CP EOP NADEED ois ncnckcdcancesveraresing as

19 C.F.R. § 53.8(a) (1968) (1969) (1970) .............. 13

19 C.F.R. § 153.8(a) (1971) (1972) (1973) (1974) (1975)

SEPICS Miv swine Cob dovd sncnnnghadads hen tneneeeas

vii

Table of Authorities Continued

Page

FEDERAL REGISTER:

FE Sy GUO CIDER) occ cc ccccencccschonctsays 13

PM, SUM, MP EEO OE) 0. occ cnsvcsbessvsccduess 5

De POG. RO, C4,GOE (ISTE) . 2.20.5. cc ccwcccvevcceses 5

Ss BOOR, SRE CABEO) vc csasscccscsacsoseshens 5

es Be CRUD Seve e cv cstuiectasesdcssaceebe 5

Os BES CUUEOD. oc ccccevnsccdcdavacdedeus 5

45 Fed. Reg. 30,618-619 (1980) .............eeeeeee 5-6

IP CEOOOD Sic cccrcscnescenecdenaves 6

T.D. 76-176, 41 Fed. Reg. 26,203 (1976) ............. 13

— Plan No. 3 of 1979, 44 Fed. Reg. 69,278

Exec. Order 12188, 45 Fed. Reg. 989 (1980) ......... 5

LEGISLATIVE HISTORIES:

H.R. Rep. No. 317, 96th Cong., 1st Sess. (1979) . 3, 13, 28

H.R. Rep. No. 1235, 96th Cong. 2d Sess. (1980) ..... 28

Hearings Before the Committee on hag Fa Means,

House of Representatives, on H.R. 6007, and

5120, 85th Cong. Ist Sess. (1957) ............... 12

S. Rep. No. 1298, 98rd Cong. 2nd Sess. (1974) .... 3-4, 28

S. Rep. No. 249, 96th Cong. Ist Sess. (1979) ......... 2, 28

OTHER:

“Agreement on Implementation of Article VI of the

General Agreement on Tariffs and Trade,” H.R.

Doc. No. 153, Part I, 96th Cong., 1st Sess. (1979) 3

Davies and McGuinness, Dumping at Less Than Margin-

al Cost, 12 Int’l Economics 169 (1982) ...........

K. Davis, Administrative Law (1978) .............4. 16

Hendrick, The United States Antidumping Act, 58 Am. J.

Se Sis: CED 0's ods cv cbacheventas ieee 12-13

viii

Table of Authorities Continued

Page

“Options to Improve the Trade Remedy Laws,” Hearings

before the Subcommittee on Trade, Committee on

Ways and Means, House of Representatives, Serial

98-15, Part II (March 16, 17; April 12, 14, 19; and May

ee Wiad saa es ete ah aoe ehiae enn tain 28

USITC Pub. No. 732 QWune 1975) .........cccccccces 5

USITC Pub. No. 1062 (May 1980) .................. 5

J. Viner, Dumping: A Problem in International Trade

PEE eivccscnchedeadacten avasdeewbecetaleel 23-24

‘ IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1983

SMITH-CoroNnaA Group, CONSUMER Propucts Division, SCM

CORPORATION,

Petitioner,

Vv.

THE UNITED STATES,

BROTHER INDUSTRIES, LTD., BROTHER INTERNATIONAL

CORPORATION, SILVER SEIKO, LTD., and SILVER REED

' AMERICA, INC.,

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF

APPEALS

FOR THE FEDERAL CIRCUIT

The petitioner, the Smith-Corona Group of SCM

Corporation,' respectfully prays that a writ of certiorari

issue to review the judgment and opinion of the United

States Court of Appeals for the Federal Circuit entered in

this proceeding on August 9, 1983.

‘SCM Corporation is incorporated in the state of New York and is

not a subsidiary or affiliate of any other organization. SCM Corpora-

tion has many wholly owned subsidiaries and the following sub-

sidiaries owned only in part (amount of ownership indicated in

parentheses): Allied/Egry Business Systems, Inc. (99.85%); Com-

pania Envasadora Loreto, S.A. (95%); Galvanizadora Centro-

Americana S.A. (51%); Pinturas Centro-Americanas Costa Rica,

S.A. (79.6%).

OPINIONS BELOW

The opinion of the United States Court of Appeals for

the Federal Circuit is reported at 713 F.2d 1568 (App. A,

infra, p. la-27a). That opinion affirmed the order of the

United States Court of International Trade entered on

April 30, 1982 (App. B, infra, p. 28a-72a), and reported at

540 F. Supp. 1341.

JURISDICTION

The judgment of the Court of Appeals for the Federal

Circuit was entered on August 9, 1983. This petition for a

writ of certiorari was filed within 90 days of that date.

This Court’s jurisdiction is invoked under 28 U.S.C.

§ 1254(1).

STATUTES INVOLVED

Sections 772 and 773 of the Tariff Act of 1930, as

amended by the Trade Agreements Act of 1979, are set

forth in a statutory appendix (App. C, infra, p. 73a-80a).

The relevant provisions of the regulations of the U.S.

Department of Commerce, International Trade Adminis-

tration, are also set forth in an appendix (App. D, infra,

p. 8la-82a).

STATEMENT OF THE CASE

1. Statute And Its Purpose

Since 1916 the United States has had laws designed to

counteract price discrimination practiced by foreign pro-

ducers in selling their products to the United States. The

laws have always had as their object the protection of

domestic industries and the industries’ employees from

competition characterized by prices lower to the U.S.

than were available in the home market. Thus, the Senate

Report to the Trade Agreements Act stated that:

ey. iil

os “IN -

Subsidies and —* are two of the most perni-

cious practices which distort international trade to

the disadvantage of United States commerce... .

Dumping is the general term for selling in another

country’s market at prices less than “fair value.”

S. Rep. No. 249, 96th Cong., lst Sess. 37 (1979). See also

Zenith Radio Corporation v. United States, 710 F.2d

806, 811 (CAFC 1983). Price discrimination which results

in injury to a domestic industry is unlawful and subject to

offsetting duties (equal to the amount of price discrimina-

tion practiced) not only under U.S. law but also under

Article VI of the General Agreement on Tariffs and Trade

and under the Trade Agreement entered into by most

developed nations in 1979.’

Congress has long been concerned that the antidump-

ing law was not being administered in a manner to protect

domestic industries and has adopted new laws or amend-

ments to the old law in 1921, 1958, 1974 and 1979, all with

the specific purpose of providing greater protection for

domestic industries and their workers:

Congress has long been concerned that the adminis-

tration of the unfair trade practice laws has not

effectuated its intention to prevent such unfair trade

practices from placing domestic producers in jeopar-

A Through the changes ss law made by this

itle, the Committee re its intention that

these unfair trade statutes be administered in a man-

ner that will prevent such practices.

H.R. Rep. No. 317, 96th Cong., lst Sess. 45-46 (1979); see

also, e.g., S. Rep. No. 1298, 98rd Cong, 2d Sess. 169

? Subtitle B of Title VII of the Tariff Act of 1930, as amended,

contains the antidumping duty law of the United States. As added by

the Trade Agreements Act of 1979, that law conforms generally to

the internationally adopted “Agreement on Implementation of Arti-

cle VI of the General Agreement on Tariffs and Trade,” H.R. Doc.

No. 153 Part I, 96th Cong., 1st Sess. 309-337 (1979).

(1974) (“The Committee over the years has sought a more

vigorous enforcement of the unfair foreign trade practice

statutes, including the Antidumping Act of 1921, which

deals with injurious price discrimination.”).

The Congress has established a very detailed statutory

scheme for determining when offsetting dumping duties

will be assessed and how the duties owed will be calcu-

lated. To establish the dumping margin (amount of price

discrimination) of imported merchandise, the agency

must determine both the foreign producer’s price to the

United States [the “United States price” (defined as

either a price to an unrelated party, or, the resale price by

a related purchaser to an unrelated third party adjusted

for all expenses incurred in making the resale)] and the

producer’s price to customers in the foreign country of

production [the “foreign market value”].* Each resulting

price to be compared i is intended to be an f.o.b. foreign

port price.

Limited adjustments are permitted where evidence is

submitted to the agency demonstrating that some part of

the price difference is due to differences in circumstances

of sale or merchandise between the U.S. and foreign

markets. 19 U.S.C. § 1677b(a) (App. C, infra, p. 78a).

Once thus computed, Congress has defined the antidump-

ing duty to be assessed to be the difference between

United States price and the price in the home market

(“foreign market value”). 19 U.S.C. § 1673.

3 Section 73! of the Act instructs the administering authority to

compare foreign market value and United States price to determine

the margin of dumping. 19 U.S.C. § 1673. “United States price” and

“foreign market value” are defined in sections 772 and 773 of the

Tariff Act of 1930, as amended. 19 U.S.C. §§ 1677a and 1677b (App.

C, infra, p. 73a-80a).

Within the context of this carefully crafted statute,

with extensive definitions of the two key concepts, Con-

gress has assigned the administering authority‘ the task

of executing its intention that U.S. industries and their

workers be protected from price discrimination practiced

by their foreign competitors. It is within this framework

that SCM’s petition can best be understood.

2. The Finding that Portable Electric Typewriters Were

Being Dumped and the Domestic Industry Injured.

Nine years ago SCM Corporation (“SCM”), the only

remaining domestic producer of portable electric type-

writers, first petitioned for relief from dumping of these

typewriters in the United States by Japanese competi-

tors, including Brother Industries, Inc. (“Brother”) and

Silver Seiko, Ltd. (“Silver”). Despite the determination

by the administering authority that there were large

margins of price discrimination as early as 1974, it wasn’t

until six years later that SCM was able to secure the

issuance of an antidumping duty order.’

Specifically, on May 9, 1980, an antidumping duty

order was issued by the Commerce Department, 45 Fed.

‘Reorganization Plan No. 3 of 1979, 44 Fed. Reg. 69,273 (1979),

Exec. Order 12188, 45 Fed. Reg. 989 (1980), charged the Commerce

Department with enforcement of the antidumping duty law.

5 An antidumping investigation was begun in 1974, and the Treasu-

ry Department found margins of dumping. By a three-to-two vote,

the U.S. International Trade Commission (“ITC”), however, made a

determination of no injury to SCM. See, 39 Fed. Reg. 10,456 (1974);

39 Fed. Reg. 44,053 (1974); 40 Fed. Reg. 12,685 (1975); USITC Pub.

No. 732 (June 1975).

A second investigation was begun in 1979. After Commerce found

margins of dumping as large as 48.7%, the ITC made a determination

of material injury. See, 45 Fed. Reg. 1,220 (1980); 45 Fed. Reg.

18,416 (1980); USITC Pub. No. 1062 (May, 1980).

Keg. 30,618-19 (1980) (App. E, infra, p. 83a-85a). The

order formally announced the determinations of the Com-

merce Department and the U.S. International Trade

Commission that portable electric typewriters from

Japan were being dumped in the United States to the

material injury of SCM. The duty order found that Silver

and Brother were dumping at, respectively, 36.53% and

48.70% ad valorem, i.e., below their home market prices.

These margins were even larger than had been found in

1974.

Brother and Silver immediately requested that Com-

merce make an “early determination of dumping duties”

pursuant to Section 736(c) of the Tariff Act of 1930 (the

“Early Determination”). After ninety days, the Depart-

ment issued its early determination of dumping duties on

August 13, 1980. 45 Fed. Reg. 53,853-56 (1980) (App. F,

infra, p. 86a-96a). Under the agency’s interpretation of

the statute, dumping margins for Silver and Brother

were found to be only 4.3 percent and 7.1 percent ad

valorem, respectively, during this review period. By vir-

tue of adjustments to foreign market value made by the

Department of Commerce, massive price discrimination

was simply explained away.

3. Proceedings in the Trial Court

On August 9, 1980, petitioner timely commenced an

action in the United States Customs Court’ contesting

the Department’s early determination of dumping pur-

suant to sections 516A(a)(2)(A) and (B)(iii) of the Act, 19

U.S.C. §§ 1516a(a)(2)(A) and (B)(iii). Petitioner asserted,

° The United States Customs Court officially changed its name to

the United States Court of International Trade on October 1, 1980,

pursuant to the Customs Courts Act of 1980, Pub. L. No. 96-417,

§ 101, 94 Stat. 1727 (1980).

inter alia, that the adjustments to foreign market value

permitted by the Commerce Department pursuant to 19

C.F.R. 353.15(c), the “Special Rule,” and the adjust-

ments to foreign market value for alleged “other differ-

ences in circumstances of sale” violated the express lan-

guage of the statute, nullified part of section 772(e) of the

Act, permitted adjustments where no differences were

alleged, permitted the ex post facto explaining away of

pricing differences on the presentation of alleged differ-

ences in cost where there was no evidence of any effect on

price, permitted adjustments which were admittedly not

directly related to the sales under consideration contrary

to the legislative intent and case law, and that such agen-

cy practices were neither longstanding nor entitled to

deference.’

In December 1980, having determined that petitioner

was likely to succeed on the merits, the lower court issued

a preliminary injunction which stayed the Department’s

early determination of dumping. Smith-Corona Group,

Consumer Products Division, SCM Corporation v.

United States, 1 CIT 89, 507 F. Supp. 1015 (1980) (App.

G, infra, p. 99a-114a).*

On April 30, 1982, however, the trial court denied

SCM’s motion for summary judgment and granted the

defendant’s cross-motion for summary judgment.

Brother Industries, Ltd. v. United States, 3 CIT —_,

540 F. Supp. 1341 (1982) (App. B, infra, p. 28a). That

’ See, e.g., Transcriot of Record filed in the Court of Appeals for

the Federal! Circuit, 408-417, a copy of which has been filed with this

Court.

* Smith-Corona Group, supra, was consolidated with Brother In-

dustries, Ltd. v. United States, on December 30, 1980, in an opinion

reported at 1 CIT 102 (1980) (App. H, infra, p. 115a-117a).

court held that the “Special Rule,” although not expressly

permitted by statute, was a longstanding practice,

impliedly endorsed by the Congress, was within the dis-

cretion permitted by the statute, and was entitled to

great deference.

The court also held that the agency’s practice with

respect to adjustments for differences in circumstances of

sale was lawful. Again citing the alleged longstanding

administrative practice, congressional acquiescence, and

heightened deference due that practice, the court upheld

the agency’s use of a presumption that differences in price

in the two markets were due to differences in costs.

4. Decision Of The Court Of Appeals For The Federal

Circuit

In its opinion of August 9, 1983, the Court of Appeals

held that the challenged practices were not longstanding,

and thus not entitled to heightened deference. The Court

of Appeals further held that the legislative history

showed no congressional approval of the Special Rule, or

of the agency’s reliance upon examination of costs in

dumping determinations. The court pointed out Con-

gressional rejection of cost as a computational basis for

dumping margins, and the statutory requirement to use

value and price figures, not cost. The court found that the

Special Rule actually negated a section of the Statute in

order to lower the dumping margin that the Statute re-

quires and noted that despite a statutory requirement

that adjustments be based on differences, the “Special

Rule” adjustment was based on “similarities”.

Despite a nearly point-by-point confirmation of the

position of the appellant (SCM), the court nonetheless

affirmed, reasoning that the statute provided a grant of

“broad discretion” to the agency and “authority to admi-

nister the Statute fairly” empowering the agency to ne-

gate one statutory provision, to ignore the strictures of

another, and to readjust under the banner of “fairness”

the furmula for calculating dumping margins laid down by

Congress.

REASONS FOR GRANTING THE PETITION

SCM Corporation is the first opinion of the Court of

Appeals for the Federal Circuit interpreting section

773(a)(4) of the Act and section 353.15 of the agency

regulations (19 C.F.R. § 353.15)*—sections which are cri-

tical to the proper administration of the antidumping law

in virtually every case brought before the agency. The

principles of statutory construction which are applied by

the Court of Appeals will guide the interpretation of the

statute by the Court of International Trade and the De-

partment of Commerce. It is crucial to the future adminis-

tration of the nation’s antidumping law that this first

judicial review of this important provision be in accord

with the Constitution and with long and well-established

principles of statutory construction.

*The Customs Court and the Court of International Trade have

considered the predecessor section in the Antidumping Act, 1921,

formerly 19 U.S.C. §§ 161(b) and (c), in F.W. Myers & Co. v. United

States, 72 Cust. Ct. 219, 376 F. Supp. 860 (1974) and Carlisle Tire &

Rubber Co. v. United States, 3 CIT —_, Slip Op. 82-37 (May 12,

1982). In addition, identical issues concerning the construction of

section 773(a)(4) of the Tariff Act of 1930 are presently before the

Court of International Trade in a number of cases, including Timken

Company v. United States, Ct. No. 82-6-00890 (filed June 25, 1982).

I. THE RATIONALE ADOPTED BY THE COURT OF

APPEALS WOULD RENDER THE STATUTE AN UN-

CONSTITUTIONAL DELEGATION OF LEGISLATIVE

AUTHORITY AND VIOLATES THE CON-

STITUTIONAL REQUIREMENT OF SEPARATION OF

POWERS.

A. The Court Of Appeals Construed Section 773(a) To Grant

Limitless Discretion To The Commerce Department.

It is a well-settled constitutional principle that Con-

gress cannot delegate power to an administrative agency

without establishing intelligible principles to be applied

by the agency. E.g., /.W. Hampton, Jr. & Co. v. United

States, 276 U.S. 394 (1928). This Court’s opinions teach

that in order to avoid holding a statute to be an unconsti-

tutional grant of legislative authority, the delegation of

authority should be limited in accordance with its lan-

guage, history, and purpose. The Court of Appeals in this

case, however, interpreted the statute to grant unlimited

discretion to the Department of Commerce, rendering

section 773(a) of the Tariff Act of 1930 constitutionally

infirm for overbroad delegation.

1. The court below has eliminated the language of the

statute as the intelligible principle for its application.

One might ascribe a host of meanings to the isolated

phrase “other differences in circumstances of sale.” But

the phrase is not metaphysical; it was not conceived in a

vacuum. Considered properly in the context of its legisla-

tive history and contemporaneous agency practice, the

phrase defines the parameters of agency discretion. At a

minimum, section 773(a)(4) of the Act permits adjust-

ments only for “differences” in circumstances of sale."

Section 773(a)(4) permits an adjustment to foreign market value

only “if it is established to the satisfaction of the administering

authority that the amount of any difference between United States

There is simply no way to justify the Special Rule by a

statutory provision permitting adjustment for differ-

ences in circumstances of sale, when the Special Rule

requires no differences whatsoever to bring it into play.

As the Court of Appeals noted, the Special Rule is not

based on differences in circumstances of sale but on “simi-

larities.” 713 F.2d at 1579 (App. A, infra, p. 20a-21a).

Under the holding of the Federal Circuit, the language

of the statute—permitting adjustment only for

“differences”—is subverted to the “broad discretion” of

the agency. It is a construction which grants the Com-

merce Department authority unlimited by the express

language of its enabling act.

2. The court below has eliminated the direct relationship

standard.

The legislative history and contemporaneous agency

action, in this case the regulations that the agency then

administering the statute, Treasury, promulgated in

1960, negate the Special Rule and the consideration of

indirect expenses that it sanctions. They mandate the

conclusion that direct expenses are the only proper ex-

penses to be considered as “other differences in circum-

stances of sale.”

price and the foreign market value. . . is wholly or partly due to. . .

other differences in circumstances of sale... .” 19 U.S.C.

§ 1677b(a)(4) (App. C, infra, p. 76a). While Congress permitted the

Commerce Department to determine to its “satisfaction” whether a

difference in price is due to x difference in circumstances of sale,

section 773(a)(4) cannot by definition apply where the circumstances

of sale do not differ. The regulation itself, as did the Court of Appeals,

concedes that the requirement stated in section 773(a)(4) of the Act

has been waived; thus, the regulation begins as follows:

“Notwithstanding the criteria for adjustments for differences in cir-

cumstances of sale... .” 19 C.F.R. § 353.15(c) (App. D, infra, p.

8la).

In 1957 the Treasury Department submitted recom-

mendations proposing that Congress amend the law to

provide for adjustments to foreign market value for “dif-

ferences in circumstances of sale.” Hearings Before the

Committee on Ways and Means, House of Representa-

tives, on H.R. 6006, 6007, and 5120, 85th Cong., Ist Sess.

11 (1957). In 1958, Congress so amended the statute, Pub.

L. No. 85-630 § 2. 72 Stat. 583, and in 1960, Treasury

promulgated regulations adopting the requirement that

differences in circumstances of sale must be “directly

related” to the sales under consideration in order to jus-

tify adjustment of foreign market value. T.D. 55,118, 95

Treas. Dec. 229, 232 (1960).

The impetus for limiting the scope of “other differences

in circumstances of sale” to only those circumstances

which were shown to be directly related to the sales under

consideration arose out of the Treasury Department’s

experience between 1955 and 1960. Importers during

that period claimed deductions from home market price

on account of all manner of “selling expenses” under the

banner “circumstances of sale.” Thus, the “direct rela-

'! In 1955, the Treasury Department had amended its regulations

to provide for an adjustment “for any difference in quantities and

circumstances of sale.” T.D. 53,773, 90 Treas. Dec. 93, 96 (1955).

Accorvling to the then Deputy Assistant Secretary of the Treasury,

however, foreign producers abused the provision.

In connection with selling expense they were claiming deduc-

tions for salesmen’s salaries, for rent of office space the salesmen

occupied or for depreciation on buildings or portions of buildings

devoted to their use, and for any other portion of their general

expense—salaries, maintenance, overhead, and so forth—which

could be distinguished from the production effort. The resultant

home market price calculations were claimed by them to be

reduced to a point where initial apparent disparities again and

in would, if the claims were allowed, completely disappear.

iven sufficient a lawyers and accountants can pro-

duce surprising results!

tionship” rule was promulgated to narrow the field of

potential adjustments.

From 1960 until 1976, the only “differences in circum-

stances of sale” recognized by the antidumping regulation

promulgated contemporaneously with that statutory

phrase were those bearing “a direct relationship to the

sales which are under consideration.”” The language of

the 1960 regulations was not changed for twelve years, at

which time the prohibitions against consideration of in-

direct expenses were strengthened: In 1972 the circum-

stances of sale provision “was amended to delete the word

‘reasonably’ wherever it appears before the words ‘direct

relationship’ to make clear that only circumstances of sale

which are directly related to the sales of merchandise

under consideration will be taken into account.” 37 Fed.

Reg. 26,298 (1972). In 1976, however, a new “Special

Rule” was promulgated, permitting adjustments for

what are acknowledged to be indirect selling expenses.

T.D. 76-176, 41 Fed. Reg. 26,203-15 (1976).

The legislative history of the Trade Agreements Act of

1979 sanctions only adjustments which are “reasonably

identifiable, quantifiable, and directly related to the sales

under consideration.” H.R. Rep. No. 317, 96th Cong., 1st

Sess. 76 (1979) (emphasis supplied). /ndirect expenses

obvious!y fail to qualify. The “directly related” require-

ment, thus, was affirmed by the court below, affirmed by

the Customs Court, F.W. Myers & Co. v. United States,

It was these considerations which gave rise to the revision in the

puma under the Antidumping Act published on July 5,

1960.

Hendrick, The United States Antidumping Act, 58 Am. J. of Int’] L.

914, 922-23 (1964) (emphasis supplied).

219C.F.R. § 14.7(a) (1960-67); 19 C.F.R. § 53.8(a) (1968-1970); 19

C.F.R. § 153.8(a) (1971-76).

72 Cust. Ct. 219, 376 F. Supp. 860 (1974), and embraced

by Congress.

The Court of Appeals noted that, “(t]he main problem

with the offset is that it is not based on directly related

costs. .. .” 713 F.2d at 1579 (App. A, infra, p. 20a). Yet,

the court did not find that this limitation, imposed con-

temporaneously with the inception of the statutory provi-

sion, provided an intelligible principle against which sec-

tion 353.15(c) of the agency’s regulations might be

judged.

*” 3. TheCourt of Appeals has eliminated the structure of the

statute itself as a guide for interpretation.

Petitioner argued that the Special Rule rendered sec-

tion 772(e)(2) of the Act void and perverted the equation

for calculating the amount of dumping duty to be im-

posed. Section 772(e)(2) of the Act, 19 U.S.C

§ 1677a(e)(2), requires that general expense incurred by a

related-party importer in reselling the goods in the

United States must be deducted from the resale price of

the merchandise. (App. C, infra, p. 74a.) In this manner

the statute arrives at a netback price which approximates

what the f.o.b. origin price of the merchandise would

have been had the foreign manufacturer sold directly to

an unrelated U.S. importer. See Brother Industries Ltd.

v. United States, supra, 540 F. Supp. at 13857 (App. B,

infra, p. 49a-50a). Under the Special Rule, however, the

agency permits a deduction from foreign market value up

to the amount deducted from U.S. price under section

772(e)(2)." In effect, the Special Rule mathematically

‘3 The deduction from foreign market value permitted by section

353.15(c) of the agency’s regulations “offsets” the deduction from

exporter’s sales price required by section 772(e)(2) of the Act; thus

the name, “exporter’s sales price offset” or “ESP offset.”

eliminates the deduction from the exporter’s sales price,

or U.S., side of the dumping equation by permitting an

equal deduction from the foreign market value.

This Court has long held that, where possible, a

statutory construction which would render a portion of

the statute a nullity should be avoided. See, e.g., United

States v. Powers, 307 U.S. 214, 217 (1939). Conceding

that the Special Rule in effect negates another portion of

the statutory scheme, the Court of Appeals nevertheless

also discounted this guide for statutory construction. 713

F.2d at 1579 (App. A, infra, p. 20a).

4. As construed by the Court of Appeals, the statute lacks

the requisite boundaries for interpretation of its scope.

In the years since this Court’s decision in A.L.A.

Schechter Poultry Corporation v. United States, 295

U.S. 495 (1935), it has become well-established that when

faced with a potentially boundless grant of discretion by

the legislature to an administrative agency the judiciary

will preserve the constitutional dominion of Congress by

examining the statutory language, purpose, and legisla-

tive history to discern standards which mark the bounds

of agency discretion. E.g., National Cabie Television v.

United States, 415 U.S. 336, 342 (1974). To avoid a con-

struction which would render a statute unconstitutional,

the particular reguiation or practice in issue must then be

measured against the limits of agency discretion so re-

vealed.

In this case, however, the language and history of the

statute, recognized by the Court of Appeals to be directly

contrary to the operation of the Special Rule, were

deemed secondary to the authority of the agency under

the broad grant of discretion which the court found. 713

F.2d at 1579 (App. A, infra, p. 21a).

It is undisputed that the statute requires that there

first be “differences” before there can be an adjustment;

it is undisputed that the “special rule” permits adjust-

ments for circumstances not “directly related” to the

relevant transactions; and it is undisputed that section

772(e) of the statute is effectively negated by the “special

rule”. These factors, then, should limit the agency’s dis-

cretion. Professor Davis has aptly observed: “Vagueness

of law or enforcement policy is unconstitutional because it

permits or encourages arbitrary and discriminatory

enforcement of the law.” K. Davis, Administrative Law,

§ 3: 9 (1978). By eliminating the guideposts for the ex-

ercise of agency discretion from the language and struc-

ture of the statute an’ instead deferring to the agency’s

regulation “[{iJn view of the discretion accorded the Secre-

tary,” the Court of Appeals has ignored the teaching of

this Court to interpret statutory delegation narrowly to

avoid rendering the statute unconstitutional.

B. The Court Of Appeal’s Grant Of Authority To The Admin-

istrative Agency Elevates The Agency's Practice And

Regulations Above The Statute And Its Purposes In

Derogation Of Separation Of Powers.

Separation of powers is integral to our Constitutional

scheme; it is not just an abstract principle. Buckley v.

Valeo, 424 U.S. 1, 124 (1976). Although agency rulemak-

ing may sometimes resemble lawmaking, “administrative

activity cannot reach beyond the limits of the statute that

created it.” /mmigration and Naturalization Service v.

Chadha, 103 S. Ct. 2764 (1983). This Court has con-

sistently held that “(t]he rulemaking power granted to an

administrative agency charged with the administration of

a federal statute is not the power to make law [but], ‘the

power to adopt regulations to carry into effect the will of

Congress as expressed by the statute.’” Ernst & Ernst v.

Hochfelder, 425 U.S. 185, 214, reh’g denied 425 U.S. 986

(1976), citing Dixon v. United States, 381 U.S. 68, 74

(1965), quoting Manhattan General Equipment Co. v.

Commissioner, 297 U.S. 129, 134 (1936) (emphasis sup-

plied).

When administrators promulgate rules that contradict

the manifest intent of a statute, and thus exceed the scope

of delegated authority, this Court invalidates the rules

without hesitation." In short, the decisions of this Court

make it clear that administrative discretion ends where

rulemaking begins to encroach on the authority reserved

to Congress under our Constitutional scheme. See South-

eastern Community College v. Davis, 442 U.S. 397, 411

(1979); International Brotherhood of Teamsters v.

Daniel, 439 U.S. 551, 556 n. 20 (1979).

The meaning of a particular statute is determined

through a three-part analysis, comprising examination of

the language of the statute, the legislative history, and

the agency practice. See, e.g., Securities and Exchange

Commission v. Sloan, 436 U.S. 103 (1978). The Court of

Appeals began such an analysis but failed to measure the

challenged agency regulations against the language and

purpose of the statute with respect to at least two provi-

sions: (1) the requirement that adjustments for differ-

ences in circumstances of sale are limited to those circum-

stances of sale directly related to the sales under consid-

eration, and (2) the requirement that a difference be

shown before an adjustment may be permitted. See su-

pra, pp. 10-14.

4 See, e.g., United States v. Larionoff, 431 U.S. 864 (1977) (in-

validating agency regulations that determined Variable Re-

enlistment bonuses by reference to the award level in effect at the

time the serviceman began to serve the extension rather than at the

time he agreed to it); Leary v. United States, 395 U.S. 6, 26 (1969)

- (finding marihuana transfer tax regulation so out of keeping with the

statute as to be ultra vires).

Despite perceiving correctly the holding in F.W. Myers

and the legislative intent that differences in circum-

stances must be “directly related” to the relevant sale,

the Court of Appeals in this case upheld the Special Rule

which it found “somewhat anomalous” because it permits

an adjustment for circumstances which by definition are

not directly related to particular transactions. 713 F.2d at

1578 (App. A, infra, p. 19a).

Moreover, the court below noted that the ESP offset,

claimed to be lawful as an adjustment for “differences in

circumstances of sale,” in fact involved “similarities” be-

tween selling expenses in the home market and U.S.

market. 713 F.2d at 1579 (emphasis in original) (App. A,

infra, pp. 20a-21a). In addition, the Court of Appeals

conceded that the ESP offset effectively negates another

section of the statute. See, swpra, p. 14-15.

Notwithstanding these parameters of stat

thority, the Court of Appeals upheld the Commerce

Department regulation as a “proper and reasonable ex-

ercise of the Secretary’s authority to administer the stat-

ute fairly.” 713 F.2d at 1579 (App. A, infra, p. 21a). The

court thus sanctioned the usurpation of the congressional

function by the agency.

The opinions of this Court in the field of administrative

law teach well that the Commerce Department cannot

transgress the limits of the statute, limits which the

Court of Appeals frankly discerned in the language, pur-

pose, and history of the antidumping law. F.g., South-

eastern Community College v. Davis, 442 U.S. 397, 411

(1979); International Brotherhood of Teamsters v.

Daniel, 439 U.S. 551, 556, n.20 (1979).

This Court should exercise its jurisdiction to reverse

the unprincipled grant of absolute authority which the

gue

Court of Appeals has supplied to the Commerce Depart-

mgent. For Congress’ words to be so plainly stated, so well

understood, and yet ignored, usurps the legislative func-

tion. The agency, in effect, becomes legislature with the

imprimatur of judicial approval, and together agency and

court violate the separation of powers set forth in the

Constitution.

II. THE DECISION BELOW CONFLICTS WITH THE DE-

CISIONS OF THIS COURT.

A. The Interpretation Of The Statute By The Court Of

Appeals Creates An Invalid Irrebuttable Presumption

Under Interstate Commerce Commission v. J-T Transport

Co.

The Court of Appeals construed the Cost Rule, 19

C.F.R. § 353.15(d), which requires the agency to rely

primarily on costs to determine the existence and the

amount of differences in circumstances of sale, to con-

stitute a rebuttable presumption. Citing the “economic

logic of the assumption that cost is related to price,” the

court said, “We hold only that, absent evidence that costs

do not reflect value, the Secretary may reasonably con-

clude that cost and value are directly related. . . . [OJnce

that evidence is adduced, the ‘burden’ will be ‘shifted’ in

every case.” 713 F.2d at 1577 n. 26 (See App. A, infra, p.

16a, note 26).

In upholding such a presumption, the court ignored a

critical fact: the evidence necessary to rebut such a

presumption is in the hands of the foreign

manufacturers."* An injured domestic industry has no

‘5 In fact, there was evidence of record that differences in circum-

stances of sales had no effect on the price of the merchandise. For

example, there was evidence that the selling expenses claimed by

Brother with respect to sales in the home market had no effect upon

statutory means to obtain discovery," so that the

presumption is, for all practical purposes, irrebuttable.

Domestic producers will rarely be able to present any

evidence at all showing that differences in costs do not

reflect differences in valve, much less meet the sub-

stantial evidence standard for judicial review." The ab-

sence of evidence rebutting the agency’s presumption of a

cost-value relationship will nearly always be fatal to the

domestic industry’s case. Such a Catch-22 presumption

cannot withstand scrutiny under the principle of law

enunciated by this Court in /nterstate Commerce Com-

mission v. J-T Transport Company, 368 U.S. 81 (1961).

In J-T Transport, this Court considered a presumption

created by the Interstate Commerce Commission that

the loss of “potential” traffic to new applicants for con-

tract carrier permits, would adversely affect existing

carriers—even where the existing carriers had never

Brother's home market prices. The nexus between increased selling

expenses and increased prices in the home market which was pre-

sumed by the Court of Appeals was destroyed by the inverse rela-

tionship between actual costs and prices. Still, the presumption of a

cost/value relationship could not be overcome. Transcript of Record

filed in the Court of Appeals for the Federal Circuit, 39, a copy of

which has been filed separately in this Court; see also id. at 932

(prices in the home market did not vary even though freight costs

were different).

'6 See, e.g., 19 U.S.C. §§ 1677e, 1677f. In Budd Co., Railway

Division vy. United States, 1 CIT 67, 72, 507 F. Supp. 997, 1001

(1980), the Court of International Trade observed:

Congress has recognized that the administrative proceedings

under Title VII of the Tariff Act of 1930 are investigatory, not

judicatory. . . . Accordingly, no procedure has been estab-

lished + Nana nor by regulation promulgated thereto provid-

ing for discovery of an opposing party prior to or at the time of an

investigation.

'719 U.S.C. § 1516a(b) (1983).

handled such traffic. The applicant bore the burden of

showing inadequacy of existing service, but the relevant

evidence was peculiarly within the knowledge of the ex-

isting carriers. By operation of the presumption, the

existing carriers would not be required to come forward

with the evidence. The Court therefore struck down the

agency’s procedure, in favor of a procedure requiring

existing carriers to show their ability to meet the needs of

the shippers the new applicant would potentially serve.

368 U.S. at 90.

The language of the statute requires that a price differ-

ence “due to” differences in circumstances of sale be

established to the “satisfaction of the Secretary.” 19

U.S.C. § 1677b(a)(4) (App. C, infra, p. 76a). The Federal

Circuit, however, instead of requiring the agency to

obtain proof that price differences were “due to” differ-

ences in selling to the two markets, permitted the agency

to substitute a presumption. “Establish to the satisfac-

tion” has a settled meaning: that the party bearing the

burden must come forward with evidence.” It does not

mean that mere inferences like those of the challeriged

regulation will suffice.

Here, the Court of Appeals has approved an adminis-

trative presumption that an ex post facto presentation by

the foreign respondent of the costs incurred in selling to

different purchasers equates with a showing that differ-

ences in prices to different purchasers are due to differ-

ences in circumstances of sale. The burden then shifts to

8 See, e.g., Anderson Co. v. United States, 447 F.2d 41, 47 (7th

Cir. 1971); Vasquez-Mondragon v. Immigration and Naturalization

Service, 560 F.2d 1225, 1226 (5th Cir. 1977); Small v. Immigration

and Naturalization Service, 438 F.2d 1125, 1127 (2nd Cir. 1971);

United States v. McLean Trucking Co., 400 F.2d 889, 891 (4th Cir.

1968).

the domestic industry to establish that costs do not reflect

value. 713 F.2d at 1577 n. 26 (App. A, infra, p. 16a-17a

note 26). Yet evidence of this relationship is contained in

inaccessible pricing and cost data controlled by the for-

eign manufacturers.

Moreover, the Court of Appeals freely acknowledged

that cost is a suspect factor, and that the legislative

history contained “a long felt and understandable con-

gressional distrust of cost as a basis for the computation of

dumping margins. . . . [C]Jost is subject to manipulation

and Congress has recognized its inherent unreliability.”

713 F.2d at 1576 (App. A, infra, p. 14a, emphasis in

original). Hence, “({vjalue must be considered under the

statute.” 713 F.2d at 1575 (App. A, infra, p. 13a, empha-

sis in original).

Use of cost data is particularly pernicious, because the

injured domestic industry cannot discover the records

supposedly substantiating foreign producers’ claims, nor,

through discovery, identify a full range of “costs” in-

curred in selling to the U.S. but possibly not reported.

See, supra, p. 20 note 16. Foreign manufacturers control

the supporting documentation for costs, free from

adversarial scrutiny. Congress has expressed its distrust

of these suspect and unverified cost figures. Yet, by

creating an administrative presumption, the Court of

Appeals permitted this suspect factor, cost, to be the

determinative factor.

B. The Court Of App vals Upheld An Irrational Presumption.

In Usery v. Turner Elkhorn Mining Co.," this Court

held that for a statutory presumption to be valid, there

9428 U.S. 1, 28 (1976); see, also, Tot v. United States, 219 U.S.

463, 467-68 (1943); Leary v. United States, 395 U.S. 6, 32-36 (1969);

United States v. Romano, 382 U.S. 136, 139 (1965); Western &

Atlantic R.R. v. Henderson, 279 U.S. 639 (1929).

—

must be a rational connection between the fact proved

and the conclusion presumed therefrom. The Court of

Appeals simply ignored this settled rule of law and upheld

an administrative presumption that the existence of dif-

ferences in selling costs implies the existence of differ-

ences in the value of the merchandise in the marketplace.

713 F.2d at 1577 (App. A, infra, pp. 16a-17a). In so doing,

the court below ignored its own interpretation of the

legislative history of the Act—that costs were an unreli-

able basis for the determination of dumping margins.

Prices do not behave with sufficient predictability for

the presumption to be valid. This Court noted the difficul-

ties in correlating pricing policies with specific economic

considerations in Hanover Shoe v. United Shoe Machine-

ry Corp.:

A wide range of factors influence a company’s pricing

policies. Normally the impact of a single change in

the relevant conditions cannot be measured after the

fact; indeed, a businessman may be unable to state

whether, had one fact been different (a single supply

less expensive, general economic conditions more

buoyant, or the labor market tighter, for example),

he would have chosen a different price.

392 U.S. 481, 492-493, reh’g denied 393 U.S. 901 (1968).

Particularly in the context of international trade and

dumping, considerations other than costs often affect

prices.” If situations exist, then, where a producer would

*In his classic treatise Dumping: A Problem in International

Trade 23-29 (1923), Jacob Viner explained how pricing decisions

would be based on considerations other than cost:

D. A producer may for a time sell at reduced thse in a

market in which he is endeavoring newly to establish his trade in

order to develop therein a demand for his products which will

subsequently make possible their sale in that market at prices as

high as those current elsewhere.

E. Aconcern may sell at dumping prices in a given market or

to bring them to terms. Such dumping may be Eoovted against

the domestic producers of the market dumped on, or against

competing exporters from the dumper’s own country, or against

competing exporters from a third country. It may be intended

wholly to crush competitors, or it may have the more modest

objective of inducing competitors by the threat of destructive

competition to follow the prices quoted by the dumping concern,

to share the market with it on specified terms, or otherwise to

make their operations in the given market conform to the wishes

of the dumping concern.

H. If a manufacturer can sell each year in his domestic

market a part, but only a part, of his maximum possible output at

higher prices than those ruling in outside markets, he may

decide to maintain his domestic prices at this higher level and to

seek foreign orders at reduced prices for the balance of his

potential output in preference to reducing his domestic prices

and in preference to operating only to part capacity. By resort-

ing to dumping he may obtain the economies of operation at full

pe a | without surrendering the profits to be derived from the

e of part of his output in the domestic market at prices above

the foreign level. A reduction in the domestic prices may be

unprofitable, especially if the domestic demand for his products

is inelastic, even in the absence of the possibility of resort to

dumping. .. .

It is probable that in most actual instances of dumping no single

motive is dominant but that some combination of the ones liste '

above, all of them concerned with private profit and not national

policy are operative.

J. Viner, Dumping: A Problem in International Trade 26-29 (1923).

Not only are there reasons for dumping below full cost, but in many

cases companies will price even below marginal cost. Davies and

McGuinness, Dumping at Less Than Marginal Cost, 12 Int'l Eco-

nomics 169 (1982). Dumping below marginal cost can occur in several

situations: (1) Dumping under uncertainty—at the time of his output

decision, the producer is faced by an uncertain net export price,

perhaps because of floating exchange rates; (2) Dumping by the sales

maximizing firm-—the producer acts so as to maximize sales revenue

rather than profits, perhaps due to a divorce of control from own-

ership; (3) Dumping as an entry deterrent—if a foreign monopolist is

not able to enjoy monopoly prices in his home market without attract-

ing competition from abroad, it may engage in loss-making dumping

to discourage new entry.

set prices without regard to costs, no valid presumption

can exist based upon the premise that prices will vary

with costs.

The irrationality of the presumption is shown by its

conflict with the logical assumptions underlying the stat-

ute. Congress enacted the statute to combat price dis-

crimination. The evil it attacks is the dumping of foreign

merchandise in the United States at less than its fair

value. Thus the Statute itself preswpposes that the for-

eign producer found to be dumping establishes its price,

not by reference to its own costs, but by reference to

prices in the United States.

But, the presumption created by the agency’s in-

terpretation of section 353.15(d) of its regulations is

precisely that differences in selling expenses incurred by

a manufacturer result in differences in price. And, the

Court of Appeals upheld this presumption as a rational

and reasonable exercise of discretion.

Ill. THE DECISION BELOW RAISES SIGNIFICANT AND

RECURRING PROBLEMS CONCERNING THE AD-

MINISTRATION OF THIS NATION’S UNFAIR

TRADE STATUTES.

The Customs Court and the Court of International

Trade have had few opportunities to date to construe

section 773(a) of the Tariff Act of 1930 and its predecessor

statute. See, supra, p. 9 note 9. As noted by the trial court

below: “We are faced in this consolidated action with a

number of highly complex issues which are of novel im-

pression, and undoubtedly are of great significance in the

administration of the nation’s antidumping laws.” 540 F.

Supp. at 1346 (App. B, infra, p. 28a). Under the holding

of the Court of Appeals, the Commerce Department now

has the authority under section 353.15(c) to reduce or

eliminate entirely dumping margins in any case where a

foreign manufacturer sells in the United States through a

related-party importer. In addition, the Department has

the ability under section 353.15(d) to permit significant

reduction or elimination of dumping margins in every

case in which a foreign manufacturer submits cost data

showing differences between direct selling costs at home

and in the United States.“ The effect of this decision

reaches to every domestic industry and every American

worker that is materially injured by unfair price dis-

crimination from abroad.

In the case of the exporter’s sales price offset, the grant

of “broad discretion” to the agency to adjust foreign mar-

ket value is unfettered by the general rule adopted by the

Congress that circumstances of sale should be directly

related to the sales under consideration. Free of the

general rule, apparently free to negate other sections of

the statute, and bounded only by the amorphous require-

ment that it be “fair and efficient,” virtually any regula-

tion promulgated by the agency to redress whatever it

considers to be “skewed” in the statute would be upheld

by the courts below were the rationale of SCM Corp. to

remain undisturbed.

Similarly, with respect to the practice of relying on

costs in determining the existence of differences in cir-

cumstances of sale, the agency is apparently free to deter-

mine that adjustments for differences in quantities or for

differences in merchandise can now be established by a

2! Moreover, the agency permits the foreign manufacturer to de-

cide which “differences” to report and permits that manufacturer to

report cost data which are the result of allocations performed by the

foreign manufacturer notwithstanding that the foreign exporter has

an incentive to report “differences” only to the extent that they

reduce foreign market value and thereby reduce the dumping mar-

gins. See 713 F.2d. at 1580 (App. A, infra, pp. 22a-23a).

showing that costs differ.” The interpretation of the lan-

guage “to the satisfaction of the administering author-

ity,” found in section 773(a) and relied upon by the Court

of Appeals, would permit the agency to ignore elementa-

ry economics and to create presumptions which not only

are irrational but are virtually impossible for the domes-

tic industry to overcome.

In short, the opinion below poses significant problems

for the administration of the antidumping law by strip-

ping the statute of the very fundamental principles for

application by the agency which the court below per-

ceived to exist. That is, the court stated quite clearly that

guidance was to come from the statutory language and

scheme, yet its rule of the case renders the letter and

spirit of the law insignificant in the face of the agency’s

discretion.

In terms of dollars and cents the annual effect of this

holding on United States commerce is immense.” Virtual-

ly every antidumping case involves the application of

section 773(a)(4) of the Act and section 353. 15(a) and (d) of

2 Subsections (A) and (C) of Section 773(a)(4) of the Act, 19 U.S.C.

1677b(a)(4), permit the administering authority to make adjustments

for differences in wholesale quantities and for differences in mer-

chandise (App. C, infra, p. 76a). Presently, under section 353.14 of

its regulations, the Commerce Department considers not only

whether differences in quantities are shown by cost differences, but

whether the usual practice of the industry in the country of exporta-

tion is to afford quantity discounts. 19 C.F.R. § 353.14. Presently,

under section 353.16 of its regulations, the Department will not

permit an adjustment for differences in production costs associated

with particular merchandise absent a showing that the differences in

production costs stem from a difference in the physical characteris-

ties of the merchandise. 19 C.F.R. § 353.16.

%In this case alone over $100 million in imports annually are

subject to the antidumping duty order.

the regulations.“ And, in the majority of antidumping

investigations, transactions with related parties and the

use of the ESP offset are involved.”

These regulations have a substantial impact on margins

of dumping in all antidumping cases. The failure of the

courts below to apply properly this Court’s well-

established teachings in the fields of constitutional and

administrative law can be expected to adversely affect

the scores of domestic industries subject to import

competition.

The Congress recently extended the right to judicial

review on an administrative record to domestic industry

to ensure that its purpose to protect that industry from

unfair foreign price discrimination would not be sub-

verted.” This first case involving this important section of

* A list of 1982 and 1983 administrative cases in which section

773(a)(4) of the Act and section 353. 15 of the regulations were direct-

ly applied is included in App. I, infra, p. 118a-125a.

% See, e.g., “Options to Improve the Trade Remedy Laws,” Hear-

ings before the Subcommittee on Trade, Committee on Ways and

Means, House of Representatives, Serial 98-15, Part II at 678 (March -

16, 17; April 13, 14, 19; and May 4, 11, 1983).

* The Trade Agreements Act of 1979 was promulgated precisely

because the Congress continued to be dissatisfied with the adminis-

tration of the predecessor Act by the Treasury Department. See,

e.g., H.R. Rep. No. 317, 96th Cong., Ist Sess. 45-46 (1979); S. Rep.

No. 1298, 93rd Cong, 2d Sess. 169 (1974) (quoted supra pp. 3-4). An

important part of the corrective scheme was intended to be resort to

judicial review to ensure Congress’ purpose was carried out by the

agency. See, e.g., S. Rep. No. 249, 96th Cong. Ist Sess. 252-253

(1979); Zenith Radio Corporation v. United States, 710 F.2d 806, 811

(CAFC 1983). The Customs Courts Act of 1980 furthered this pur-

pose, conferring broader powers of equity on the Court of Interna-

tional Trade in order to ensure effective review of the administration

of the antidumping law. See, e.g., H.R. Rep. No. 1235, 96th Cong., 2d

Sess. 20, 28-29 (1980).

the statute will not only guide the Commerce Department

and the Court of International Trade for years to come,

but wil] seriously impact the right of domestic industry to

meaningful judicial review. This Court should, therefore,

take the opportunity to guide the Court of Appeals for the

Federal Circuit in applying settled principles of statutory

construction to preserve Congress’ mandate ‘ nat Amer-

ican industry be protected from unfair foreign price dis-

crimination and to avoid constitutional problems where

none exist in the statute.

CONCLUSION

For the reasons stated, the petition for a writ of cer-

tiorari should be granted.

Respectfully submitted,

EUGENE L. STEWART

(Counsel of Record)

TERENCE P. STEWART

JAMES R. CANNON, JR.

STEWART AND STEWART

1001 Connecticut Ayenue, N.W.

Washington, D.C. 20036

Telephone: (202) 785-4185

Of Counsel:

EDWIN SILVERSTONE

299 Park Avenue

New York, New York 10171

APPENDIX

APPENDIX A

United States Court of Appeals,

Federal Circuit.

Aug. 9, 1983.

Appeal No. 82-24.

SMITH-Corona Group, Consumer

Products Division, SCM Corporation, Appellant,

The UNITED STATES, Appellee,

and

Brother Industries, Ltd., Brother International

Corporation, Silver Seiko, Ltd., and

Silver Reed America, Inc., Parties-in-Interest.

Eugene L. Stewart, Washington, D.C., argued for appel-

lant; with him on brief was Terence P. Stewart, Washington,

D.C.; Richard J. Sexton and Edwin Silverstone, New York

City, of counsel.

Velta A. Melnbrencis, Washington, D.C., argued for appel-

iee. With her on brief were J. Paul McGrath, Asst. Atty. Gen.,

David M. Cohen, Director and Francis J. Sailer, Washington,

D.C.

Wesley K. Caine, Washington, D.C., argued for Brother

Industries, Ltd. and Brother Intern. Corp. With him on brief

were H. William Tanaka and Donald L.E. Ritger, Washing-

ton, D.C.

William H. Barringer, Washington, D.C., argued for Silver

Seiko Ltd. and Silver Reed America, Inc. With him on brief

were Noel Hemmendinger and Christopher Dunn, Washing-

ton, D.C.

Frederick L. Ikenson and J. Eric Nissley, Washington, D.C.

and Philip J. Curtis, Glenview, IIl., were on brief for Zenith

Radio Corp., amicus curiae.

Before RICH, Circuit Judge, SKELTON, Senior Circuit

Judge, and SMITH, Circuit Judge.

EDWARD S. SMITH, Circuit Judge.

This appeal presents a challenge to various price adjust-

ments granted to the foreign manufacturers and importers of

the subject merchandise by the U.S. International Trade Ad-

ministration (ITA) in determining antidumping duties under

19 U.S.C. §§ 1673 et seq. (Supp. V 1981). Appellant, a domestic

manufacturer, appeals the April 30, 1982, decision and order of

the U.S. Court of International Trade! (CIT) denying appel-

lant’s motion for summary judgment, granting the Govern-

ment’s motion for summary judgment, and dissolving the pre-

liminary injunction that had previously been issued.* We

affirm.

Appellant, Smith-Corona Group, Consumer Products Divi-

sion, SCM Corporati »n (Smith-Corona), is the last remaining

domestic manufacturer of portable electric typewriters.

Brother Industries, Ltd., and Brother International Corp.

(collectively Brother) are, respectively, a Japanese manufac-

turer and an importer of portable electric typewriters from

Japan. Intervenors, Silver Seiko, Ltd., and Silver Reed Amer-

ica, Inc. (collectively Silver), also are, respectively, aJapanese

manufacturer and an importer of the subject merchandise from

Japan.

'\ Brother Indus., Ltd. v. United States, 540 F.Supp. 1341 (CIT

1982).

* Smith-Corona Group, Consumer Prods. Div., SCM Corp. v.

United States, 1 CIT 89, 507 F.Supp. 1015 (CIT 1980).

On August 13, 1980, Commerce published in the Federal

This determination concerns certain portable electric typewri-

ters from Japan manufactured and imported by Brother and

Silver and entered or withdrawn from warehouse on or after

January 4, 1980, through May 7, 1980. As part of the early

determination, certain adjustments were made to foreign mar-

ket value, reducing substantially the estimated dumping

margins.‘ Smith-Corona appealed to the CIT. On April 30,

1982, the CIT filed a memorandum and order affirming the

August 13, 1980, Early Determination of Antidumping Duties

in all respects. The instant appeal by Smith-Corona is from

that judgment.

II.

The Tariff Act of 1930, as amended by the Trade Agree-

ments Act of 1979,° establishes an intricate framework for the

imposition of antidumping duties in appropriate circum-

stances. 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 supre nely

’ Early Determination of Antidumping Duties, 45 Fed.Reg.

53,853 (1986). On January 4, 1980. the Treasury Department pub-

lished its tentative determination that certain portable electric type-

writers from Japan were being sold in the United States at less than

fair value. Withholding of Appraisement, 45 Fed. Reg. 1,220 (1980).

The International Trade Administration, U.S. Department of Com-

merce (ITA), on May 9, 1980, published an “Antidumping Duty

Order.” 45 Fed. Reg. 30,618 (1980). Pursuant to that order, Brother

and Silver were required to deposit estimated antidumping duties,

pending liquidation of entries.

+ The dumping margins were reduced from 48.70% ad valorem for

Brother and 36.53% ad valorem for Silver to 5.31% ad valorem and

14.91% ad valorem, respectively.

519 U.S.C. §§ 1673 et seg. (Supp. V 1981).

delicate endeavor. The Secretary of Commerce (Secretary)

has been entrusted with responsibility for implementing the

antidumping law.* The Secretary has broad discretion in ex-

ecuting the law. While the law does not expressly limit the

exercice of that discretion with precise standards or guide-

lines, some general standards are apparent and these must be

followed. The Secretary cannot, under the mantle of discre-

tion, violate these standards or interpret them out of ex-

istence.

The Antidumping Act provides that 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

* The Secretary of the Treasury was originally named as

administering authority of the antidumping law. 19 U.S.C. § 1677(1)

(Supp. V 1981). As noted by the CIT below, 540 F.Supp. at 1347 n. 4,

almost all of Treasury’s responsibilities were transferred to the De-

partment of Commerce on January 2, 1980, pursuant to Reorganiza-

tion Plan No. 3 of 1979, 44 Fed. Reg. 69,273 (1979). This appeal arose

out of the Early Determination of Antidumping Duties by Com-

merce. See supra note 3.

*19 U.S.C. § 1673 (Supp. V 1981) provides:

“§$ 1673. Imposition of antidumping duties

ad | a

“(1) the administering authority determines that a class or kind

of foreign merchandise is being, or is likely to be, sold in the

United States at less than its fair value, and

“(2) the Commission determines that—

“(A) an industry in the United States—

“(i) is materially injured, or

“(ii) is threatened with material injury, or

“(B) the establishment of an industry in the United States is

materially retarded, by reason of imports of that merchan-

amount of the duty shal! equal the amount by which the foreign

market value exceeds the United States price for the merchan-

dise.

Foreign market value and United States price represent

prices in different markets affected by a variety of differences

in the chain of commerce by which 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. While the statute does

not specify where in the chain of commerce price is constructed

the specific statutory adjustments appear to indicate an “f.o.b.

foreign port” price.

United States price, as defined in section 1677a,* is com-

puted by one of two methods: purchase price or exporter’s

dise, then there shall be imposed upon such merchandise an

antidumping duty, in addition to any other duty imposed, in an

amount equal to the amount by which the foreign market value

exceeds the United States price for the merchandise.”

* 19 U.S.C. § 1677a provides:

“(a) United States price

“For purposes of this subtitle, the term ‘United States price’

means the purchase price, or the exporter’s sales price, of the

merchandise, whichever is appropriate.

“(b) Purchase price

“For purposes of this section, the term ‘purchase price’ means

the price at which merchandise is purchased, or agreed to be ~

purchased, prior to the date of importation, from the manufac-

turer or producer of the merchandise for exportation to the

United States. Appropriate adjustments for costs and expenses

under subsection (d) of this section shall be made if they are not

reflected in the price paid by the person by whom, or for whose

account, the merchandise is imported.

“(c) Exporter’s sales price

“For purposes of this section, the term ‘exporter’s sales price’

means the price at which merchandise is sold or agreed to be sold

in the United States, before or after the time of importation, by

or for the account of the exporter, as adjusted under subsections

(d) and (e) of this section.”

sales price. The antidumping law attempts to construct value

on the basis of arm’s length transactions. The arm’s length sale

takes place at different points in the chain of commerce

depending on whether the goods traveled through a related

importer or through an independent, unrelated importer.

Thus, different methods of computation of United States price

are required depending on the relationship of the importer to

the foreign producer. |

Where the importer is an unrelated, independent party,

purchase price is used. Purchase price is the actual or agreed-

to price between the foreign producer and the independent

importer, prior to the time of importation. Where the importer

is related, an arm’s length transaction does not occur until the

goods are resold to 2 retailer or to the public. In that case,

“exporter’s sales price” is used. Exporter’s sales price is the

price at which the goods are eventually transferred in an arm’s

length transaction, whether from the importer to an indepen-

dent retailer or directly to the public.

Both purchase price and exporter’s sales price are subject to

adjustment in order to derive a “fair” United States price for

comparison with foreign market value. The adjustments pro-

vided in section 1677a(d) are applicable to both purchase price

and exporter’s sales price. The additional adjustments pro-

vided in section 1677a(e) are applicable only to exporter’s sales

price.’

On the other side of the scale, foreign market value is also

computed on the basis of arm’s length transactions by one of

*19 U.S.C. § 1677a(e)(2) provides:

“(e) Additional adjustments to exporter’s sales price

Aspe! moe ar of this section, the exporter’s sales price shall also

be adjusted by being reduced by the amount, if any, of—

« « * * « *

“(2) expenses generally incurred by or for the account of the

exporter in the United States in a tical or substantial-

ly identical merchandise, * * * [.)” (Emphasis supplied.)

three methods:”’ (1) home market sales; (2) third country sales;

or (3) constructed value. The home market sales method is

preferred. In the absence of such home market sales, the

' 19 U.S.C. § 1677b provides:

“§ 1677b. Foreign market value

“(a) Determination; fictitious market; sales agencies

= Saal « = od “

“(1) In general

“The foreign market value of imported merchandise shall be

the price, at the time of exportation of such merchandise to the

United States—

“(A) at which such or similar merchandise is sold or, in the

absence of sales, offered for sale in the principal markets of the

country from which exported, in the usual wholesale quanti-

ties and in the ordinary course of trade for home consumption,

“(B) if not so sold or offered for sale for home consumption, or

if the administering authority determines that the quantity

sold for home consumption is so small in relation to the quanti-

ty sold for exportation to countries other than the United

tates as to form an inadequate basis for comparison, then the

price at which so sold or offered for sale for exportation to

countries other than the United States.

x x € * « «

“(2) Use of constructed value

“Ifthe administering authority determines that the foreign mar-

ket value of imported merchandise cannot be determined under

ph (1)(A), then, notwithstanding paragraph (1)(B), the

a market value of the merchandise may be the constructed

value of that merchandise, as determined under subsection (e) of

this section.

= taal ~ al coal *

“\e) Constructed value

“(1) Determination P

“For the purposes of this subtitle, the constructed value of

imported merchandise shall be the sum of—

“(A) the cost of materials * « * and of fabrication * * *;

statute provides that either third country sales or constructed

value may be used. Foreign market value, computed on the

basis of home market sales or third country sales, is subject to

adjustment as provided in section 1677b(a)(4) to generate an

f.o.b. foreign port value."

Thus, the ITA, using either purchase price or exporter’s

sales price, computes and adjusts the United States price of

the merchandise. Additionally, the ITA, on the basis of either

home market sales, or third country sales, or constructed

value, computes and adjusts the foreign market value of the

merchandise. These values, which should be on an equivalent

basis after adjustment, are then compared and the amount by

which foreign market value exceeds United States price is

imposed as an additional antidumping duty.

The ITA determined that the United States prices of port-

able electric typewriters from Japan, produced by Brother and

Silver, are less than the foreign market values of such or

similar typewriters. United States price was based on pur-

“(B) an amount for general expenses and profit * * *; and

“(C) the cost of « * * placing the merchandise under considera-

= in condition, packed ready for shipment to the United

tates.”

19 U.S.C. § 1677b(a)(4) provides, in pertinent part:

“(4) Other adjustments

“In determining foreign market value, if it is established to the

satisfaction of the administering authority that the amount of

any difference between the United States price and the forei

market value (or that the fact that the United States price is the

same as the foreign market value) is wholly or partly due to—

« x “ * - «

“(B) other differences in circumstances of sale; * * *

* * « * * il

then due allowance shall be made therefor.” (Emphasis supplied.)

chase price or exporter’s sale price, as appropriate for any

particular sale. Foreign market value was computed on the

basis of home market sales by Brother and Silver of similar

models for all of the entries subject to the antidumping duty.

Brother and Silver received the benefit of a panoply of adjust-

ments to foreign market value,” several of which are chal-

lenged by Smith-Corona.

All of the adjustments challenged by Smith-Corona are ad-

justments to foreign market value. Specifically, Smith-Corona

attacks the validity of two regulations under which several of

‘2 Home market sales were used to compute foreign market value

for both Japanese producers. In the case of Silver, with respect to

sales for which United States price was computed on the basis of

purchase price, adjustments to foreign market value were made for

differences in inland freight, packing costs, physical characteristics

of the merchandise, and cost of production. With respect to sales for

which United States price was based on exporter’s sales price, for-

eign market value was adjusted for differences in inland freight, in

the circumstances of sale (advertising, warranty and after sales

service, packing costs, and after sales rebates), in commission ex-

penses, in the physical characteristics of the goods, and for the

exporter’s sales price offset (selling expenses in home market up to

amount of selling expenses in United States market). In the case of

Brother, with respect to sales for which United States price was

computed on the basis of purchase price, adjustments to foreign

market value were made for differences in inland freight, in the

circumstances of sale (advertising and selling expenses, warranty,

rebates, packing costs, and certain direct advertising expenses), and

in the physical characteristics of the merchandise. With respect to

comparisons based on exporter’s sales price, foreign market value

was adjusted for differences in inland freight, in the circumstances of

sale (after sales rebates, advertising expenses, packing and warran-

ty expenses), in commissions, in the physical characteristics of the

merchandise, and for the exporter’s sales price offset. 45 Fed. Reg.

53,853 (1980).

10a

the adjustments were made as well as the amounts of three of

the specific adjustments granted to Brother and Silver.

In 1980, Commerce promulgated the antidumping duty

regulations” at issue in this appeal. In order to facilitate ad-

justments for “other differences in circumstances of sale,”

under section 1677b(a)(4)(B), Commerce promulgated 19

C.F.R. § 353.15. That regulation sets out specific classes of

adjustments" and provides criteria for determining the

amount of allowances under section 1677b(a)(4)(B). 19 C.F.R.

§ 353. 15(d) (1980) provides:

in determining the amount of the reasonable allowances

for any differences in circumstances of sale, the Secretary

will be guided primarily by the cost of such differences to

the seller, but, where appropriate, he may also consider

the effect of such differences upon the market value of the

merchandise.

Smith-Corona attacks 19 C.F.R. § 353.15(d) on the ground

that the regulation establishes a preference for cost that is

inconsistent with the express requirement of section

1677b(a)(4) that differences in price or value must be due to

differences in circumstances of sale."

The regulation also provides a special adjustment not pro-

vided in the statute, the so-called “special rule’—the ez-

porter’s sales price offset.’

justments for differences in circumstances of sale set forth

in paragraphs (a) and (b) of this section, * * * [iJn neues

comparisons using exporter’s sales price, reasonable al-

lowance will be made for all actual selling expenses in-

19 C.F.R. §§ 353.13-.23 (1980).

19C.F.R. §§ 353. 15(a), (b) (1980). Among those adjustments are

advertising and selling expenses.

'S. See supra note 11.

19 C.F.R. § 353.15(c) (1980).

EC Le Ee te eo

lla

curred in the home market up to the amount of the selling

expenses incurred in the United States market.

Smith-Corona challenges the exporter’s sales price offset as

being wholly inconsistent with the adjustments provided in the

statute. Smith-Corona argues that the exporter’s sales price

offset is invalid because it contravenes certain adjustments to

exporter’s sales price provided in section 1677a(e)(2).

The remaining three challenges are to the amounts of three

specific adjustments. With respect to these three specific ad-

justments to foreign market value, two were based on section

1677b(a)(4) providing adjustments for circumstances of sale.

The third challenge is to the amount of adjustments to foreign

market value under 19 C.F.R. § 353.16 (1980) for differences in

the physical characteristics of the merchandise. Smith-Corona

does not attack the validity of either section 1677b(a)(4) or 19

C.F.R. § 353.16 but, rather, it attacks the amount of each

adjustment. Brother, Silver, and the United States all support

the correctness of the amounts of these three specific adjust-

ments as well as the validity of 19 C.F.R. §§ 353. 15(¢) and (d)."”

Thus, to summarize, the issues presented in this appeal are

(1) whether 19 C.F.R. § 353.15(d), which allows the

administering authority to compute allowances for

differences in the circumstances of sale on the basis of

cost, is valid (part IV.A of this opinion);

(2) whether 19 C.F.R. § 353.15(c), the exporter’s sales

price offset, is valid (part IV.B of this opinion);

‘7 The court is assisted, in its consideration of this appeal, by

several amici curiae who have also submitted briefs: (1) Zenith Radio

Corp.; and (2) several Japanese manufacturers and importers (Mat-

sushita, Victor, USJVC, Sanyo, Hitachi, Toshiba, Sharp, Mitsu-

bishi, and General). Zenith has adopted a position that substantially

supports that taken by the domestic manufacturer, Smith-Corona.

Similarly, the Japanese amici curiae substantially support the posi-

tion taken by Brother, Silver, and the United States.

12a

(3) whether it was error to adjust foreign market value

for after sales rebates as differences in the circum-

stances of sale (part V.A of this opinion);

(4) whether it was error to adjust foreign market value

for advertising expenses as differences in the circum-

stances of sale (part V.B of this opinion); and

(5) whether it was error to adjust foreign market value

for accessories and printed materials as differences

in the physical characteristics of the merchandise

(part V.C of this opinion).

IV.

With respect to the validity of the challenged regulations,

the relevant inquiries are whether the regulations are a proper

exercise of the Secretary’s authority and are reasonable." In

determining the reasonableness of the reguiations, we are

guided by the normal aids of statutory construction: statutory

language, legislative history; and legislative purpose.

In making adjustments to foreign market value for differ-

ences in circumstances of sale, 19 C.F.R. } 353.15(d) provides

that the Secretary shall be guided primarily by the cost of such

differences. Smith-Corona argues that reliance on cost, with-

out any evidence of the effect of cost on price, violates the

statute’s explicit requirement that price or value differences

be caused by differences in the circumstances of sale. The CIT,

in a thoughtful and comprehensive opinion, heid the regulation

valid. In doing so, Judge Newman, writing for the court, relied

on the Secretary’s wide discretion under section 1677b(a)(4),

the economic logic of the assumption that cost is related to

price, and the long-standing administrative practice of using

cost.

'8 See 5 U.S.C. § 706 (1976); Zenith Radio Corp. v. United States,

437 U.S. 443, 451, 98 S.Ct. 2441, 2445-2446, 57 L. Ed.2d 337 (1978).

13a

The express language of section 1677b(a)(4) provides that

allowances will be made if it is established to the satisfaction of

the Secretary that the amount of any difference between the

United States price and the foreign market value of the mer-

chandise is wholly or partly due to differences in circumstances

of sale.'* The statute does not expressly limit the exercise of the

Secretary’s authority to determine adjustments, nor does it

include precise standards or guidelines to govern the exercise

of that authority. Additionally, the statute does not define the

term “circumstances of sale” nor does it prescribe any method

for determining allowances. Congress has deferred to the Sec-

retary’s expertise in this matter.

The language of the statute, as Smith-Corona and Zenith

correctly point out, specifies that adjustments are to be made

on the basis of differences in price or value. This approach is

followed consistently throughout the antidumping law. Cost is

generally relied upon only when value cannot readily be deter-

mined from price.

Antidumping duties are imposed on the basis of differences

in value, not differences in cost. This importation of foreign

merchandise can occur at a price greater than cost, yet still

generate liability for an antidumping duty. The language of the

statute would impose a duty on a foreign producer who “eats”

either costs or profits in the American market relative to the

home market. Thus, cost criteria alone will not redress the full

margin of dumping to which Congress sought to attach an

antidumping duty. Value must be considered under the stat-

ute.

Yet, the statute does not explicitly forbid reliance on cost. It

even encourages the use of cost to fix foreign market value in

some limited circumstances.” Additionally, the statute does

1% See supra note 11.

*®. Constructed value is one such cost-based criterion. 19 U.S.C.

§ 1677b(a)(2). The Government seems to rely on this provision as

legislative endorsement of the use of cost. We do not believe that it is.

l4a

not vest broad discretion in the Secretary. Absent a specific

provision forbidding cost-based adjustments, we cannot say

that the express language of the statute clearly invalidates the

challenged regulation, though it does cast shadows upon it.

The legislative history of the Trade Agreements Act of 1979,

unfortunately, nowhere expressly addresses the use of cost to

establish adjustments for differences in circumstances of

sale.” The legislative history does, however, reflect general

theoretical conflicts in legislative purpose.

Congress sought to afford the domestic manufacturer strong

protection against dumping, seeming to indicate that the Sec-

retary should err in favor of protectionism. The legislative

history reflects a long felt and understandable congressional

distrust of cost as a basis for the computation of dumping

margins. Dumping is a prime example of unfair competition in

which a foreign manufacturer ignores the normal market rela-

tionships of cost to price. Hence, cost is subject to manipulation

and Congress has recognized its inherent unreliability. The

legislative reports on the act also reflect a general dissatisfac-

tion with administration of the prior antidumping law. ~

On the other hand, the Secretary is directed to make a fair

and equitable valuation, which may reduce the antidumping

margin as a result of downward adjustments to foreign market

value. The 1979 act also shortened the time limits governing

dumping determinations, mandating greater speed and, con-

Constructed value is merely an attempt to reconstruct foreign mar-

ket value by any suitable means from the available reliable evidence,

not a blanket endorsement of the use of cost. Under § 1677b, al-

though constructed value may be used without regard to the availa-

bility of a third country sales price, home market sales are clearly the

preferred basis.

21.$.Rep. No. 249, 96th Cong., Ist Sess. 1, reprinted in 1979

U.S.Code Cong. & Ad. News 381; H.R.Rep. No. 317, 96th Cong., Ist

Sess. 1.

15a

sequently, the necessity for using readily available, reliable

information in the computation of duties.

No clear legislative intent or purpose emerges from the

legislative history with respect to the use of cost. Thus, legisla-

tive history and purpose offer little aid in resolving this issue.

Some degree of deference is due the interpretation of the

expert authority charged with the enforcement of the statute.

The CIT felt that deference should be heightened by the Secre-

tary’s long-standing interpretation of the statute and by

legislative acquiescence in that interpretation. We are not

convinced, however, that the degree of deference accorded the

Secretary’s interpretation by the CIT was proper.

The Senate report expressly provides that Congress did not

intend to express either approval or disapproval of the current

regulations or administrative practice.~ Thus, in terms of

acquiescence, the most that can be said is that the Secretary’s

interpretation is cloaked with the diaphanous veil of a legisla-

tive “no comment.”

Similarly weak is the argument that the regulation is long

standing. The regulation was published in 1976,” and thus was

hardly contemporaneous with the 1979 enactment of the

implementing legislation, section 1677b(a)(4), 3 years later.*

The regulation prior to 1976 did not articulate a preference for

2 S.Rep. No. 249, 96th Cong., Ist Sess. 96, reprinted in 1979

U.S.Code Cong. & Ad. News 381,482.

%.The regulation was originally promulgated at 41 Fed.Reg.

26,204 (1976) and was codified at 19 C.F.R. § 153.10 (1976).

*. Cf. Zenith Radio Corp., 437 U.S. at 451, 98 S.Ct. at 2445-2446

(an administrative practice has peculiar weight when it involves a

contemporaneous construction of a statute by an agency with respon-

sibility for implementing the statute—deference given 80-year-old

interpretation first promulgated within 1 year of passage of the

countervailing duty statute).

16a

cost. It differs from the regulation in effect after 1976 in

precisely the area which is in dispute.”

This issue distills to the question whether a “causal link”

must be established between the differences in circumstances

of sale and the differential between United States price and

foreign market value. The implicit assumption of 19 C.F.R.

§ 353.15(d) is that such differences very likely exist where

there exist differences in cost. Judge Newman’s well-reasoned

opinion handles the “causal link” issue well. With the exception

of his carrying back the date of the administrative practice

reflected in the regulations we agree with his handling of this

and all of the issues in this appeal.

Although the statutory language places primary reliance on

the use of value and price, it gives the Secretary broad discre-

tion in making adjustments. We conclude that the Secretary

did not abuse that discretion by relying on the use of cost to

make circumstances of sales adjustments.” The statute’s pri-

*. Prior to 1976, the regulation was based primarily on value (in

accordance with the statutory preference for value), cost being relied

on only where appropriate—a transposition of those terms in the

present form of the regulation:

“(c) Relation to market value. In determining the amount of

the reasonable allowances for any differences in circumstances

of sale, the Secretary will be guided primarily by the effect of

such differences upon the market value of the merchandise but,

where appropriate, may also consider the cost of such differ-

ences to the seller, as contributing to an estimate of market

value.” (Emphasis supplied.) 19 C.F.R. § 153.8(¢)(1972).

See 540 F.Supp. at 1351.

6. We do not hold that the Secretary may blindly rely on cost to the

exclusion of its effect on value. Such would clearly violate the stat-

ute’s primary reliance on value in the computation of antidumping

duties, as well as its requirement of a direct relationship. We hold

only that, absent evidence that costs do not reflect value, the Secre-

tary may reasonably conclude that cost and value are directly re-

lated. Smith-Corona also argues that this would upset the burden of

proof on the importer to establish entitlement to adjustments. We

17a

mary reliance on value is not carried forward by language that

would explicitly limit the discretion expressly granted the

Secretary or would countermand the manner in which that

discretion has been exercised in 19 C.F.R. § 353.15(d). The

Secretary may not, however, rely on cost to the exclusion of its

effect on value. The regulation does not prohibit reliance on

value, but merely expresses a preference for cost; value may

be considered, where appropriate. The Secretary must com-

plete the determination within rigid time limits. The use of cost

data may be the only reliable indicia of value.” We hold, there-

fore, that 19 C.F.R. § 353.15(d) is a proper exercise of the

Secretary’s authority and is reasonable. Thus, 19 C.F.R.

§ 353.15(d), insofar as it is challenged here, is valid.

The exporter’s sales price offset™ is supported by the

Government as a means to redress a perceived unfairness in

the computation of foreign market value under the statute.

Section 1677a(e)(2) provides for certain adjustments to ex-

porter’s sales price (United States price), which adjustments

increase the dumping margin. The challenged offset allows

adjustments to foreign market value, which offset reduces the

margin. Smith-Corona argues that the offset thus renders

section 1677a(e)(2) void and is, therefore, invalid.

cannot agree. The use of cost criteria to satisfy the quantum of

evidence required to establish entitlement is reasonable. Whatever

the quantum of evidence that would “satisfy” the Secretary, once

that evidence is adduced, the “burden” will be “shifted” in every case.

Smith-Corona’s remedy lies with Congress. Congress can provide

more specific guidelines to govern the exercise of the Secretary’s

discretion; this court cannot.

. The ready availability of cost data that can be employed without

extensive complex econometric analysis supports the reasonableness

of the Secretary's decision to rely on cost. Cost may be the only

practical way to administer the statute.

* 19 C.F.R. § 368. 15le).

18a

The statute provides for the adjustment of United States

price for certain specified “direct costs.”” Section 1677a(e),

however, provides for the adjustment of only exporter’s sales

price for certain “indirect costs”—selling expenses.” Com-

merce perceived that the United States price based on ex-

porter’s sales price was distorted by the adjustment for in-

direct costs and, accordingly, promulgated 19 C.F.R.

§ 353.15(c) to afford a similar adjustment to foreign market

value.” Smith-Corona contends that the offset establishes two

different fair value comparisons as a function of the basis for

the computation of United States price. This allegedly con-

travenes the use of only one fair value by the statute. Arguab-

ly, regardless of the basis of United States price, purchase

price or exporter’s sales price, the same antidumping margin

should result. Smith-Corona also argues that the statute estab-

lishes the fair value comparison on an “f.o.b. foreign port” price

basis, and since the offset perturbs this result, the offset is

invalid.

% 19 U.S.C. § 1677a(d).

* 19 U.S.C. § 1677a(e) provides, in pertinent part:

“(e) Additional adjustments to exporter’s sales price

“For purposes of this section, the exporter’s sales price shall also

be adjusted by being reduced by the amount, if any, of—

* * « * « *

“(2) expenses generally incurred by or for the account of the

exporter in the United States in selling identical or substantial-

ly identical merchandise, * * * [.}” (Emphasis supplied.)

3.19 C.F.R. § 353.15(c) (1980) provides:

“(c) Special rule. Notwithstanding the criteria for adjust-

ments for differences in circumstances of sale set forth in para-

graphs (a) and (b) of this section, * * * [in] making com ns

psa te at pl sales price, reasonable allowance will be made

for all actual selling expenses incurred in the home market up to

the amount of the selling expenses incurred in the United States

market.” (Emphasis supplied. )

19a

The statute does refer repeatedly to foreign market value,

as if there were only one foreign market value under considera-

tion. Yet, the statute does not expressly foreclose the use of

two different United States price-foreign market value com-

parisons. Given the two methods of computation of United

States price, it is apparent that the final United States price

may be affected by the basis for the computation. United

States price computed on the basis of exporter’s sales price

may result in an f.o.b. foreign port price /ess specified selling

expenses. Computed on the basis of purchase price, United

States price will generally be an f.o.b. foreign port price,

including selling expenses. Given the differences in adjust-

ments, it is apparent that the statute does not compel United

States price to be the same irrespective of the method of

computation.

In view of the statutory requirement of a direct relationship

between circumstances of sale and the relevant transaction,

the statutory deduction of selling expense from exporter’s

sales price, section 1677a(e), is somewhat anomalous. The ab-

sence of any such statutory adjustment to foreign market

value, however, is entirely consistent with the statute’s re-

liance on “direct costs.” Thus, the challenged offset is in-

consistent with the general requirement of a direct relation. It

shares that inconsistency, however, with the statutory adjust-

ment that it counteracts.

One of the goals of the statute is to guarantee that the

administering authority makes the fair value comparison on a

fair basis—comparing apples with apples. The offset appears

to generate two fair value comparisons, apples with apples

(purchase price) anc’ oranges with oranges (exporter’s sales

price). The difference between United States price generated

from purchase price and from exporter’s sales price was cre-

ated by the statute. Were it not for the exporter’s sales price

offset, comparisons based on purchase price would be fair, yet

comparisons based on exporter’s sales price would be skewed

in favor of a higher dumping margin. We do not believe that the

statute requires the Secretary to compare both apples and

oranges with only apples. Rather, it expressly requires a fair

20a

comparison. The offset is an attemp* to achieve such a com-

parison.

As was the case with subsection (d), the legislative history

and the legislative purpose are ambiguous on this question.

The offset issue was not addressed substantively in the Trade

Agreements Act of 1979. The legislative history does contain

general statements to the effect that the Secretary should be

both firm and fair. Yet, these generalities are not helpful in

determining the validity of the offset.

The Secretary’s interpretation is entitled to consideration,

but here again, we cannot agree with the CIT that the Secreta-

ry’s interpretation is entitled to heightened deference by vir-

tue of either the long-standing application of that regulation or

legislative acquiescence. The offset was originally published in

1976." It was criticized by congressional committees and in-

ternally in the Commerce Department as being inconsistent

with the statute’s insistence on a direct relationship to the sales

under consideration. Although Congress made no move

against the offset, neither did it endorse it in the Trade Agree-

ments Act of 1979.

The statutory language, therefore, is the only compelling

evidence of record regarding the validity of the offset. Al-

though the statute expressly requires a direct relationship

between the differences in circumstances of sale and adjust-

ments to foreign market value, we cannot conclude that the

administering authority acted either beyond its authority or

unreasonably in promulgating the offset. The offset does per-

mit negation of one specific statutory adjustment to exporter’s

sales price, but does so to achieve a broader statutory purpose

otherwise frustrated because of the alternative statutory

methods of computing United States price.

The main problem with the offset is that it is not based on

directly related costs, nor is it based on differences in the

®. The offset was originally published at 41 Fed. Reg. 26,204 (1976)

and was codified at 19 C.F.R. § 153.10(b) (1976).

2la

circumstances of sale but, rather, on similarities. Yet, these

limitations are tempered by the very structure of the fair value

computation under the statute. If the statute is skewed by the

offset it is because the Secretary, in constructing a fair com-

parison, has erected the offset on a foundation that was already

slightly askew. In view of the discretion accorded the Secreta-

ry under the statute to make adjustments to foreign: market

value, we conclude that the exporter’s sales price offset, 19

C.F.R. § 353.15(c) is a proper and reasonable exercise of the

Secretary's authority to administer the statute fairly. Thus,

insofar as it is challenged here, 19 C.F.R. § 353.15(c) is valid.

In terms of the amounts of the specific adjustments for

differences in circumstances of sales and in the physical charac-

teristics of the merchandise, the question is whether the ad-

justments were made in accordance with the statute and

implementing regulations and whether the adjustments are

supported by substantial evidence.®*

The ITA made adjustments, for after-sale rebates, to the

foreign market value of portable electric typewriters imported

into the United States by both Brother and Silver. Rebates

were given on specific models as well as on total sales. Smith-

Corona challenges only those adjustments for rebates based on

total sales—for which some apportionment computation was

required.

Silver granted volume rebates to Japanese customers for

purchases of targeted quantities of certain Silver typewriters.

Commerce computed the adjustments on the basis of expense

to Silver. Silver granted rebates on sales of portable electric

typewriters and other merchandise, necessitating apportion-

ment of the rebate expense. Commerce initially computed the

3.5 U.S.C. § 706.

22a

ratio of the total sales amount of portable electric typewriters

to the total sales amount of all merchandise subject to the

rebate program. This ratio, multiplied by the total amount of

rebate paid, yields the total amount of rebate paid for portable

electric typewriter sales. Commerce then computed the ratio

of the sales amount of each model of portable electric typewri-

ter to the total sales of all portable electric typewriters and

multiplied this figure by the total amount of rebate paid for

portable electric typewriters to yield the yen amount of rebate

paid for each model of porvable electric typewriter. That fig-

ure, divided by the quantity of each model sold, yields the

rebate amount per unit allowed as an adjustment to foreign

market value.

Two of Brother’s rebate programs are challenged: periodic

and monthly. With respect to a portion of the recipients of the

monthly rebate, the rebate was a fixed amount per unit, deter-

mined on the basis of the total number of all typewriters

purchased. The remaining monthly rebates, based on a percen-

tage of the total volume of portable electric typewriter sales,

were computed by apportioning the expense among the vari-

ous models sold and dividing by the quantity to each model sold

to yield a per unit amount. With respect to periodic rebates,

the total fixed yen amount of the rebate was divided by the

total number of typewriters sold subject to the rebate to yield a

per unit amount. Thus, the rebates were calculated directly

from actual sales figures and from the total amount of rebate

paid.

Smith-Corona challenges these specific rebates as not

directly related to the sales under consideration because they

were based on total sales. Allegedly, the rebates are not identi-

fied with specific sales and are not properly quantifiable and,

therefore, not properly subject to adjustment.

The statute requires that the adjustment be for differences

in circumstances of sales. Brother and Silver both offer the

rebate in Japan and not in America. Thus, the rebates con-

stitute differences that may be adjustable. The rebates based

on total sales were apportioned, as described above, in an

23a

attempt to correlate the rebates with the appropriate sales of

portable electric typewriters within the pool of merchandise

upon which the rebates were based. Relying on F.W. Myers &

Co. v. United States,** Smith-Corona alleges that this

apportionment is not adequate to establish a direct rela-

tionship to the sales under consideration.

In Myers, the Customs Court held that differences in cir-

cumstances of sale must have a reasonably direct relationship

to the sales under consideration,” and that value determina-

tions must be based on proof of actual costs not on estimates,

approximations, or averages.” While Myers is not controlling

here, we note that the adjustments nonetheless satisfy both

criteria.

The rebates were actually paid on the sales under considera-

tion. The effective cost to the manufacturer of the specific

transactions subject to the rebates was increased by the

amount of the rebates. More importantly, the apportionment

of rebate cost was made on the basis of actual cost and sales

figures. Despite the necessity of apportionment calculations to

unravel the rebate transactions, the cost of the rebates can be

directly correlated with specific merchandise using verified

cost and sales information. While it would be simpler to make

adjustments for a more direct rebate scheme, the necessity to

undertake a straightforward mathematical analysis on the

basis of verified, actual cost and sales data does not deprive

these rebates of their direct relationship to the sales under

consideration.

We conclude therefore that, in allowing these adjustments,

the ITA acted within the framework of the statute and regula-

tions and that the adjustments were based on substantial evi-

dence.

4. F W. Myers & Co. v. United States, 376 F.Supp. 860

(Cust.Ct.1974).

%. Td. at 872.

%. Td. at 873.

24a

Commerce also made certain adjustments to foreign market

value, under 19 C.F.R. § 353.15(b), for certain “direct” adver-

tising expenses incurred by Brother in the home market. The

ITA allowed adjustments for 12 advertisements financed by

Brother and aimed at the ultimate consumer. Some of these

ads were for multiple products or involved a commemorative

announcement. Commerce considered the adjustments to be

for direct advertising expenses that were attributable to a

later sale by a purchaser.

Smith-Corona challenges the adjustments for multiple prod-

uct advertising and for institutional advertising as violative of

the specific limitations of 19 C.F.R. § 353.15(b).*” Smith-

Corona argues that the challenged advertisements did not

constitute the assumption by a seller of the purchaser’s costs

and were not attributable to a later sale of the merchandise toa

purchaser. Additionally, it is alleged that the lead time in-

volved in supplying the demand generated by the ads negates

the direct relationship of the advertisements to the relevant

sales.

Commerce allowed only a portion of the expense for the

challenged advertisements based on its apportionment of these

expenses to sales of portable electric typewriters. While the

challenged ads were not exclusively directed to the relevant

merchandise, a portion of each advertising effort was. In a

*. 19 C.F.R. § 353.15(b) (1980) provides, in pertinent part:

“§ 353.15 Differences in circumstances of sale.

* « x ad Soa *

“(b) Examples. Examples of differences in circumstances of sale

for which reasonable allowances generally will be made are those

apie. hy * assumption by a seller of a purchaser's advertis-

ing or other selling costs. * * Allowances generally will not be

made for differences in advertising and other selling costs of a

seller, unless such costs are attributable to a later sale of the

merchandise by a purchaser.” (Emphasis supplied.)

25a

purely metaphysical sense, Smith-Corona is correct in that the

ad expense cannot be directly correlated with specific sales.

Yet, the statute does not deal in imponderables.

That portion of the advertising that featured portable elec-

- tric typewriters was related to the expense of selling that

merchandise. The presence of multiple products or in-

stitutional advertising in the same advertisement does not

deprive the relevant portion of the advertisement of its direct

relationship to the relevant sales.

Commerce accepted the direct relationship of the advertis-

ing expenses to the relevant sales without requiring evidence

of the lead time involved in placing orders to meet the addition-

al demand generated by the advertising. The statute estab-

lishes that the relationship between the difference in circum-

stances of sale and the particular sale be established to the

satisfaction of the Secretary. There is no evidence of record to

refute the Secretary’s assumption. Thus, we cannot say that

the Secretary abused his discretion in this regard. Nor can we

say that the Secretary acted improperly in considering that

quantum of evidence to be adequate. In the absence of evi-

dence to the contrary, the Secretary could reasonably conclude

that the advertising expense was related to sales during the

relevant period. Thus, we must uphold the Secretary.

The ITA merely attempted to identify and isolate that por-

tion of advertising expense that was properly adjustable.

These direct expenses are differences in the circumstances of

sale and, on the basis of the record before us, the direct rela-

tionship requirement of the statute and of the regulation has

been satisfied.” The ITA apportioned the advertising expense

on the basis of actual, verified cost data. We feel that this was

entirely reasonable. We conclude, therefore, that the ITA

acted within the framework of the statute and regulations and

that the adjustments to foreign market value for Brother’s

%.19 U.S.C. § 1677b(a)(4)(B); 19 C.F.R. § 353. 15(a).

26a

“direct” advertising expense were supported by substantial

evidence.

The ITA also made adjustments to foreign market value for

differences in the physical characteristics of the goods under 19

C.F.R. § 353.16. Certain allowances were based on accessor-

ies and printed materials furnished with the merchandise by

Brother. Portable electric typewriters sold in Japan were

accompanied by spare typewriter ribbons and a pamphlet in-

cluding a text on how to type. The merchandise sold for export

to America consisted of the typewriter, without accessories,

and with a pamphlet that did not include a typing instruction

text.

Smith-Corona argues that the definition of the subject “mer-

chandise” should be limited to portable electric typewriters.

Consequently, differences in accessories or the pamphlet

would not constitute differences in the physical characteristics

of the merchandise.

19 C.F.R. § 353.16 (1980) provides:

“§ 353.16 Differences in physical characteristics.

“In comparing the United States price with the selling price in

the home market, or for exportation to countries other than the

United States in the case of similar merchandise, due allowance

shall be made for oe pn in the physical characteristics of

the merchandise in the markets being compared. In this ‘

the Secretary will be guided primarily by the differences in cost

of production, to the extent that it is established to his satisfac-

tion that the amount of any price differential is 7 or parti

due to such differences, but, when appropriate, the effect of suc

differences upon the market value of the merchandise may also

be considered. In the case of merchandise which does not lend

itself to comparison with other merchandise for the purpose of

this section, any method reasonably calculated to reflect the

impact on cost or valiie of any differences in the merchandise

under consideration may be used. Differences in costs of produc-

ing merchandise with identical physical characteristics as end

products will not be considered appropriate adjustments.” (Em-

phasis supplied.)

27a

The ITA has defined the term differently, however, and our

inquiry is at an end if that interpretation is reasonable. The

statute attaches significance to differences in value. Accessor-

ies included in sales to one market could enhance the value of

the merchandise in that market relative to the value in the

market not provided with those accessories. There is no evi-

dence of record tending to show that value was not enhanced.

It is, therefore, reasonable for the ITA to make adjustments on

the basis of those features as physical characteristics of the

merchandise. We hold that the ITA acted within the frame-

work of the statute and regulations and that the allowances for

differences in the physical characteristics of the merchandise

on the basis of accessories provided with the principal goods

were supported by substantial evidence.

VI.

Our review of the statute reveals tremendous deference to

the expertise of the Secretary of Commerce in administering

the antidumping law. We find no specific limitation in the

statute, nor do we find any evidence of record, that would

compel reversal of the ITA’s determinations in this proceed-

ing. Insofar as they are challenged here, 19 C.F.R.

§§ 353. 15(c) and (d) constitute a proper exercise of the Secreta-

ry’s authority under the antidumping law and are reasonable.

Additionally, in determining the amounts of the three specific

adjustments challenged by Smith-Corona, the ITA acted with-

in the framework of the statute and regulations. The amounts

of these specific adjustments are supported by substantial

evidence. Accordingly, we affirm the judgment of the U.S.

Court of International Trade sustaining the August 13, 1980,

Early Determination of Antidumping Duties.

AFFIRMED.

28a

APPENDIX B

United States Court of International Trade.

April 30, 1982.

Consolidated Court No. 80-9-01436.

BROTHER INDUSTRIES, LTD., and

Brother International Corporation,

Plaintiffs,

UNITED STATES,

Defendant,

Smith-Corona Group, Consumer Products

Division, SCM Corporation,

Party-in-Interest.

SMITH-CoRONA GROUP, CONSUMER

Propucts Division, SCM Corporation, Plaintiff,

Vv.

UNITED StaTEs, Defendant,

Brother Industries, Ltd., and Brother International

Corporation;

Silver Seiko, Ltd., and

Silver Reed America, Inc., Parties-in-Interest.

MEMORANDUM AND ORDER ON CROSS-MOTIONS FOR

SUMMARY JUDGMENT.

NEWMAN, Judge:

We are faced in this consolidated action with a humber of

highly complex issues which are of novel impression, and

undoubtedly are of great significance in the administration of

the nation’s antidumping laws. The above-captioned cases

arose out of the same determination by the Department of

29a

Commerce, thus are largely interrelated and consequently—

for the sake of expedition—were consolidated by this Court for

review.

BACKGROUND

Smith-Corona Group, Consumer Products Division, SCM

Corporation (“SCM”), and the related companies of Brother

Industries, Ltd., of Nagoya, Japan and Brother International

Corporation, of Piscataway, New Jersey (collectively

“Brother”),' challenge the “Early Determination of Antidump-

ing Duties” by the International Trade Administration, United

States Department of Commerce (“Commerce”) in Portable

Electric Typewriters from Japan; Determination of Duty,

published in the Federal Register on August 13, 1980,7 45 FR

53853-56, as clarified and corrected in 46 FR 14006 (1980).

! SCM filed the summons in Court No. 80-9-01343 and Brother filed

the summons in Court No. 80-9-01436. SCM intervened as a party-in-

interest in Brothers’ case Brother and Silver Seiko, Ltd., and Silver-

Reed America, Inc., in turn, intervened in Court No. 80-9-01343.

Subsequently, by an order of this Court entered on December 30,

1980, the two actions were consolidated pursuant to a motion filed by

Brother; and a motion to sever by intervenors Silver Seiko, Ltd., and

Silver Reed America, Inc. was denied. See 1 CIT—, Slip Op. 80-18

(1980).

2 This determination was made pursuant to section 736(c) of the

Tariff Act of 1930, as added by the Trade Agreements Act of 1979, 19

U.S.C. § 1673e(c). See my decision in 1 CIT—. Slip Op. 80-17, 507

F.Supp. 1015 (1980) for the background of the “Early Determination

of Antidumping Duties” by Commerce; and the memorandum and

order granting SCM’s application for injunctive relief, while denying

Brother’s cross-motion to dismiss for lack of subject matter jurisdic-

tion. See also SCM Corporation v. United States (Brother Interna-

tional Corporation, Party-in-Interest), 84 Cust.Ct, 227, C.R.D. 80-

2, 487 F.Supp. 96 (1980) and F.W. Myers & Co., Inc., et al. v. United

States, 72 Cust.Ct. 219, 220-21, C.D. 4544, 376 F.Supp. 860 (1974),

for excellent summaries of the Antidumping Act and its administra-

tion by Chief Judge Re and Judge Maletz respectively.

30a

SCM is the sole domestic manufacturer of portable electric

typewriters (“PETs”). Brother Industries, Ltd. is a Japanese

manufacturer of PETs and Brother International Corporation

is an importer of such merchandise from Japan. Silver Seiko,

Ltd. and Silver Reed America, Inc. (collectively “Silver”) have

intervened in these proceedings. The former is a Japanese

manufacturer of PETs, and the latter is an importer of such

merchandise from Japan.

At a previous stage of this litigation, SCM made application

under section 516A(c)(2) of the Tariff Act of 1930, as amended

by the Trade Agreements Act of 1979 (19 U.S.C.

§ 1516a(c)(2)), to enjoin the liquidation of the entries that were

the subject of Commerce’s early determination of antidumping

duties pending the final hearing and disposition on the merits

of the action, and additionally, for certain incidental relief.

Brother filed a cross-motion to dismiss for lack of subject

matter jurisdiction, which cross-motion was opposed by SCM

and the Government. Silver does not challenge the Court’s

jurisdiction. In 1 CIT __., Slip Op. 80-17, 507 F.Supp. 1015

(December 30, 1980), this Court entered a memorandum and

order: (1) granting SCM’s motion for injunctive relief (thus,

staying the liquidation of entries of PETs on and after January

4, 1980 to May 7, 1980, covered by the early determination of

antidumping duties); (2) denying SCM’s application for in-

cidental relief; and (3) denying Brother’s cross-motion to dis-

miss for lack of jurisdiction. The prior history of this case is

summarized in my prior decision of December 30, 1980, and in

the interest of brevity that background will be reiterated here-

in only to the extent necessary for discussion of the issues

presently before the Court.’

In its early determination of antidumping duties, Commerce

granted Brother and Silver a wide range of adjustments or

% On October 14, 1980, oral argument was heard on SCM’s re-

quested injunctive and incidental relief, and Brother’s cross-motion

to dismiss. On March 4, 1982, oral argument was heard concerning

the merits in this consolidated case pursuant to SCM’s request.

3la

deductions in determining the foreign market value of their

PETs sold in Japan in the four-month period investigated that

resulted in findings of various weighted average dumping

margins.‘ The gravamen of SCM’s action is that certain of these

adjustments or deductions are contrary to law and unsup-

ported by substantial evidence in the administrative record.

Specifically, the adjustments to foreign market value made

by Commerce which are challenged by SCM are:

(1) Adjustment of the foreign market value of each typewri-

ter model for differences in packing costs and in Japanese

inland freight incurred in sales in the home market and to the

United States.

(2) Adjustment of the foreign market value of each typewri-

ter model by the amount of certain types of rebates in connec-

tion with sales in Japan.

(3) Adjustment of the foreign market value of each typewri-

ter model pursuant to 19 CFR § 353.15(c), for the exporter’s

sales price offset (“ESP offset”), in those instances where

foreign market value was compared with the exporter’s sales

price.

(4) Adjustment of the foreign market value of each Brother

typewriter model for differences in physical characteristics by

an amount that was equal to the difference in the costs of

«The PETs covered by the early determination of antidumping

duties were entered or withdrawn from warehouse for consumption

on or after January 4, 1980 to May 7, 1980. January 4, 1980 was the

date of publication by the Treasury Department of its tentative

determination of sales at less than fair value, and the date on which

liquidation was suspended (44 FR 1220); May 7, 1980 was the date of

publication by the International Trade Commission of its affirmative

final injury determination (45 FR 30188). On January 2, 1980, Treas-

ury’s responsibility for the administration of the antidumping law

was transferred to the Commerce Department by the President’s

Reorganization Plan No. 3 of 1979 (44 FR 69275 and 45 FR 9931).

32a

certain accessories and printed materials provided in connec-

tion with sales in Japan and to the United States.

(5) Adjustment to the foreign market value of each typewri-

ter model by an amount for certain advertising expenses in-

curred in sales in Japan.

As is evident from the above, SCM has mounted a broad and

multifaceted challenge to Commerce’s early determination of

antidumping duties.°

Brother’s action contests the denial by Commerce of an

additional adjustment to foreign market value for the cost of a

promotional campaign conducted in Japan, namely the give-

away of transistor radios in connection with the sale of portabie

typewriters (including PETs). Brother contends that the dis-

allowance was arbitrary and capricious or otherwise not in

‘pecordance with law.” In all other respects, Brother supports

the adjustments made by Commerce and challenged by SCM.

Presently before the Court are SCM’s motion for summary

judgment and cross-motions for summary judgment by the

Government, Brother and Silver. Silver takes no position on

that aspect of Commerce’s determination challenged by

Brother.

5 SCM also challenges an alleged determination by Commerce

granting Silver an adjustment for differences in merchandise for

costs associated with the changeover of production lines. However,

in light of the statements of defendant and of Silver that in fact no

adjustment was granted to Silver for production changeover costs,

SCM “does not at the present time further pursue this issue” (SCM’s

Brief, at 156).

* Brother’s complaint also alleged that Commerce erred by includ-

ing a certain typewriter (Brother Model No. 7800, ball-type typewri-

ter) within the scope of the early determination. However, Brother

has abandoned that claim.

33a

II.

“CAUSAL LINK” ISSUE

We first consider SCM’s argument that Commerce erred as

a matter of law in granting the contested adjustments to for-

eign market value because no “causal link” was established

between the differences in circumstances of sale and the dif-

ferential between United States price and foreign market

value, as required by 19 U.S.C. § 1677b(a)(4). In this connec-

tion, SCM argues that the Court must hold invalid the

administering authority's reglation 19 CFR § 353.15(d) as

being inconsistent with and in violation of the antidumping

law. The “causal link” issue is the centerpiece of SCM’s chal-

lenge to all of the contested adjustments.

SCM complains that Commerce in its early determination of

antidumping duties made no finding of a causal link between

the differences in circumstances of sale and the difference in

the United States price and the foreign market value. Further,

SCM contends that no information concerning a causal link was

submitted by Brother or Silver to Commerce, nor was any such

information requested by the administering authority.

The “causal link” issue presented by SCM arises from 19

U.S.C. § 1677b(a)(4), which so far as pertinent, reads:

(4) Other adjustments.—In determining foreign market

value, if it is established to the satisfaction of the administer-

ing authority that the amount of any difference between the

United States price and the foreign market value (or that the

fact that the United States price is the same as the foreign

market value) is wholly or partly due to—

(A) the fact that the wholesale quantities, in which such

or similar merchandise is sold or, in the absence of sales,

offered for sale, for exportation to, or in the principal

markets of, the United States, as appropriate, in the

ordinary course of trade, are less or are ter than the

wholesale quantities in which such or si me

is sold or, in the absence of sales, offered for sale, in the

principal markets of the country of exportation in the

34a

ordinary course of trade for home consumption (or, if not

so sold for home consumption, then for exportation to

countries other than the United States);

(B) other differences in circumstances of sales; or

(B) or (C) of section 1677(16) of this title is used in

_ determining foreign market value.

then due allowance shall be made therefor. [Emphasis

added.

From a reading of the statute, it is clear that the party claiming

entitlement to an adjustment of foreign market value must

prove: (1) the existence of “other differences in circumstances

of sales” within the meaning of the statute; (2) that the differ-

ence in United States price and foreign market value is wholly

or partly due to other differences in circumstances of sale; and

(3) the monetary value of the differences for which adjust-

ments are claimed.

Focusing on the second requirement above, and particularly

the language “due to” (denominated by SCM as the “causal

link” requirement), it must be stressed that the statute re-

quires only that a causal link be established to the satisfaction

of the administering authority. But the statute provides no

standards or guidelines as to how the administering authority

is to determine whether the price differential is wholly or

partly “due to” other circumstances of sale. 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. In granting adjustments to the foreign market value of

the Brother and Silver typewriters, the administering author-

ity was presumptively satisfied from the evidence submitted

that the requisite causal link between the differentials in price

and the differences in circumstances of sale existed in this case.

While 19 U.S.C. § 1677b(a)(4) does not define “other differ-

ences in circumstances of sales” or prescribe the method for

35a

determining allowances, 19 CFR § 353.15 has been prom-

ulgated for that purpose. That regulation reads:

§ 353.15 Differences in circumstances of sale.

(a) In general. In comparing the United States price

with the sales, or other criteria applicable, on which a

determination of foreign market value is to be based,

reasonable allowances will be made for bona fide differ-

ences in the circumstances of the sales compared to the

extent that it is established to the satisfaction of the Secre-

tary that the amount of any price differential is wholly or

partly due to such differences. Differences in circum-

stances of sale for which such allowances will be made are

limited, in general, to those circumstances which bear a

direct relationship to the sales which are under considera-

tion.

(b) Examples. Examples of differences in circum-

stances of sale for which reasonable allowances generally

will be made are those involving differences in credit

terms, guarantees, warranties, technical assistance,

servicing, and assumption by a seller of a purchaser's

advertising or other selling costs. Reasonable allowances

also generally will be made for differences in commissions.

Allowances generally will not be made for differences in

advertising and other selling costs of a seller, unless such

costs are attributable to a later sale of the merchandise by

a purchaser.

justments for differences in circumstances of sale set forth

in paragraphs (a) and (b) of this section, reasonable allo-

wances for other selling expenses generally will be made

in cases where a reasonable allowance is made for commis-

36a

(d) Determination of allowances. In determining the

amount of the reasonable allowances for any differences in «

circumstances of sale, the Secretary will be guided

primarily by the cost of such differences to the seller, but,

where appronriate, he may also consider the effect of such

differences upon the market value of the merchandise.

It is evident that section 353.15(d) assumes a causal link

exists between differences in circumstances of sale and price

differentials primarily where there are cost differences to the

seller or, where appropriate, the differences in circumstances

of sale have an effect upon the market value of the merchan-

dise. In quantifying the reasonable allowances for any differ-

ences in circumstances of sale, the regulation specifies an ad-

ministrative preference for considering the cost of such differ-

ences to the seller, “but where appropriate [the administrating

authority] may al consider the effect of such differences upon

the market value ot the merchandise.” Stated differently, sec-

tion 353. 15(d) provides, in effect, that if there are differences in

circumstances of sale, and if there is also a price differential,

then the administering authority will be satisfied that there isa

causal connection between those events upon a showing either

that the costs to the seller are different, or under appropriate

circumstances, that the differences in circumstances of sale

have an effect upon the market value of the merchandise.

SCM insists that 19 CFR § 353. 15(d) is inconsistent with and

in violation of 19 U.S.C. § 1677b(a)(4) because it permits the

administering authority, when determining the amount of the

reasonable allowance for differences in circumstances of sale,

to “be guided primarily by the cost of such differences to the

seller.” Continuing, SCM maintains that the regulation’s cost

criterion is invalid, and that the only correct standard under

the statute is the effect, if any, of differences in circumstances

of sale upon the market value of the merchandise. Consequent-

ly, according to SCM, the regulation unlawfully eliminates the

statutory requirement that a “causal link” be established be-

tween the selling price differential and the claimed differences

in circumstances of sale. SCM also argues that the regulation is

invalid because the statute is concerned with factors affecting

selling prices, not witii the differences in cost to the producer.

37a

I must disagree with SCM’s contention that regulation 19

CFR § 353.15(d) is violative of the statute:

First, regulation 19 CFR § 353.15(a) requires that it be

established to the satisfaction of the Secretary that the amount

of any price differential is wholly or partly due to bona fide

differences in the circumstances of the sales compared. Hence,

while 353. 15(a) sets forth the statutorily mandated causal link,

it leaves open the circumstances in which the Secretary will be

satisfied as to the existence of the causal link. Indeed, regula-

tion 353. 15(d) indicates that the Secretary will be satisfied that

the price differential is wholly or partly due to differences in

circumstances of sale upon a showing that there is a cost

difference to the seller for the different circumstances of sale,

with the amount of the allowance to be based upon the cost of

such differences. It is stressed, however, that the regulation

expressly permits the administering authority to also con-

sider, when appropriate, the effect that differences in circum-

stances of sale may have upon market value of the merchan-

dise.

But in determining the validity of regulation 353.15(d), it

must be emphasized that under the statute whether a price

differential is due to differences in circumstances of sale need

only be established to satisfaction of the administering author-

ity. Manifestly, the statutory language, “to the satisfaction of

the administering authority” confers upon Commerce wide

discretion in determining the existence of a “causal link”. And

plainly, the statute does not limit the administering authority

to determining the effect of differences in circumstances of sale

on market values, as urged by SCM. If the administering

authority is satisfied that adjustments should be made to the

foreign market values predicated upon differences in relative

costs, as provided in the regulation, then that approach is well

within the discretion granted by the statute, unless there is no

rational connection between costs and prices.

Fundamentally, the regulation in question can be set aside

by the Court only if the agency exceeded its statutory author-

ity or the regulation is unreasonable. United States v. Gruen

38a

Watch Co., 21 C.C.P.A. 225, T.D. 46761 (1933); Alberta Gas

Chemicals, Inc. v. United States, 1 CIT 312, 515 F.Supp. 780

(1981). When the regulation is related to the purposes of the

enabling legislation—as the case here—its validity should be

sustained. Cf. Kyle v. I.C.C., 609 F.2d 540, 542-43

(D.C. Cir. 1980).

Aside from suggesting the possibility that factors other than

a difference in costs for sales in the home market versus sales

for export to the United States may account for a difference in

selling prices, SCM cites no authority for its contention that

the costs bear no rational relationship to the selling prices of

merchandise. Silver, on the other hand, aptly points out that

“(t]he relationship of cost to the determination of fair market

value is an integral part of the statutory scheme of the anti-

dumping law”. Thus, where a foreign market value cannot be

determined on the basis of prices of such or similar merchan-

dise sold in the principal markets of the foreign country, the

administering authority can determine such value under

§ 773(a)(2) of the Act (19 U.S.C. § 1677b(a)(2)) by use of “con-

§ 1677b(e)), constructed value is a cost-oriented method of

valuation. Congressional recognition of the relationship be-

tween fair value and cost is also underscored by § 773(b) (19

U.S.C. § 1677b(2)), which requires the administering author-

ity to disregard prices as the basis of foreign market value

where those prices do not “permit the recovery of all costs

within a reasonable period of time.” The inclusion of these

provisions in the law is undoubtedly recognition by Congress

that there exists a direct relationship between cost and foreign

market value as defined by the statute.

In the final analysis, one need not be an economist to recog-

nize that under normal market conditions prices directly re-

flect costs.

Further, bearing upon the issue concerning the validity of 19

CFR § 353.15(d) is the fact that the regulation was prom-

ulgated in 1976 following what the Treasury Department re-

39a

garded as its long-standing practice in the administration of

the law. See paragraph 3, preamble to T.D. 76-176 (1976), 41

FR 26203 (1976). As stated in the notice:

3. Para. (d) of § 153.10 has been changed to provide that in

determining allowances for differences in circumstances

of sale, the tary will be lag primarily by the cost

of such differences to the seller but, where anpropriate,

may also consider the effect of such differences upon the

market value of the merchandise. * * * These changes are

intended to reflect long existing Treasury practice. [Em-

phasis added. |

The administrative practice of permitting allowances for

differences in circumstances of sale based upon the cost of such

differences to the seller is a long-standing practice dating back

to the 1960 Treasury Department antidumping regulations.

When in 1958, Congress amended § 202 of the Antidumping

Act of 1921 to include provisions for adjustments for “other

differences in circumstances of sale”, the Treasury Depart-

ment promulgated its first regulations to administer the differ-

ences in circumstances of sale adjustment permitted by stat-

ute. Section 14.7(b)(2)(iii) of those regulations provided in

pertinent part:

(iii) In determining the amount of the reasonable allo-

wances for any differences in circumstances of sale,

the Secretary will be guided primarily by the effect

of such differences upon the market value of the

merchandise but, where appropriate, may also con-

sider the cost of such differences to the seller, as

contributing to an estimate of market value. (Em-

phasis added.)

Hence, contemporaneously with the enactment of the

amendment to § 202 of the Antidumping Act of 1921 permitting

adjustments for “other differences in circumstances of sales,”

the Treasury, while guided “primarily” by a market value

approach, was authorized to, and in fact adopted, the practice

of “also” considering the cost of the differences to the seller.

The importance of such a contemporaneous interpretation of

the statute is pointed up in Zenith Radio Corp. v. United

40a

States, 437 U.S. 443, 450, 98 S.Ct. 2441, 2445, 57 L.Ed.2d 337

(1977), where the Supreme Court said:

Moreover, an administrative “practice has peculiar

weight when it involves a contemporaneous construction

of a statute by the [persons] charged with the responsibil-

ity of setting its machinery in motion, of making the parts

work efficiently and smoothly while they are yet untried

and new.” Norwegian Nitrogen Products Co. v. United

States, 288 U.S. 294, 315 (53 S.Ct. 350, 358, 77 L.Ed. 796]

(1933); see, e.g., Power Reactor Co. v. Electricians, 367

U.S. 396, 408 {81 S.Ct, 1529, 1535, 6 L. Ed.2d 924] (1961).

Moreover, as a familiar matter of well-established principles

of administrative law, a long-standing construction of a statute

by an agency charged with its administration is afforded great

weight by a reviewing court. See, e.g., Zenith Radio Corpora-

tion v. United States, supra; Saxbe, Attorney General, etal. v.

Bustos, et al., 419 U.S. 65, 74, 95 S.Ct. 272, 279, 42 L.Ed.2d

231 (1974); and National Labor Relations Board v. Bell Aeros-

pace Company, Division of Textron, Inc., 416 U.S. 267, 275,

94 S.Ct. 1757, 1762, 40 L.Ed.2d 134 (1974). This is especially

true where, as here, Congress has re-enacted the statute with-

out change, in the face of the long-standing practice. Jd. Signif-

icantly, Congress enacted antidumping legislation in both 1975

and 1980, and on neither occasion did Congress in any way

express disapproval of the practice in question, or on the latter

occasion, the 1976 regulation itself.* When Congress thorough-

ly reviewed the United States antidumping legislation prior to

enacting the Trade Agreements Act of 1979, it expressed

specifically how it was departing from the substance of the

prior law, as it related to the understanding of “foreign market

value.” Accordingly, from the legislative history, it is obvious

that the only changes Congress intended in connection with the

understanding of “foreign market value” were ones which

7 Congress enacted antidumping provisions in the Trade Act of

1974, Pub. L. 93-618, and the Trade Agreements Act of 1979, Pub.L.

96-39.

‘

4la

would put “third country price” and “constructed value” on an

equal footing in terms of priority; would permit the use of

averaging and sampling techniques in price calculations; and

would give Commerce authority to disregard insignificant ad-

justments. In all other respects, Congress expressly intended

to “retain existing law” concerning the term “foreign market

value”.* See S. Rep. No.96-249, 96th Cong., Ist Sess. 95 (1979),

U.S.Code Cong. & Admin. News 1979, p. 381.

Indeed, as if to reinforce its manifest intent, the Senate

Report, supra, states:

Reasons for the provision.—Subtitle B of title VII of

the Tariff Act, as added by section 101 of the bill, contains

2 comprehensive antidumping law. Many of the substan-

tive rules of the Antidumping Act are reenacted in subtitle

B. The Committee does not intend to change the substan-

tive rules except as specifically noted in this report.

Changes in organization and terminology have been made

solely to modernize and clarify the terms of those rules.

Therefore, although the Antidumping Act, 1921, is re-

placed by subtitle B, the committee intends the adminis-

trative and judicial precedents relating to the terms under

the Antidumping Act to continue to apply under the new

law. [Emphasis added. }

In connection with the above, it is significant that Congress

was well aware of the 1976 regulation explicitly authorizing

quantification of adjustments for differences in circumstances

of sale on the basis of the cost to the seller when it enacted the

Trade Agreements Act. In early 1979, the United States

General Accounting Office (“G.A.O.”) extensively studied the

antidumping legislation and reported its findings to the Con-

gress. See U.S. General Accounting Office, U.S. Administra-

tion Of The Antidumping Act Of 1921; Report To The Congress

§ Thus, the Senate Committee on Finance stated:

The bill—Section 773 of the Tariff Act of 1930, as added by

section 101 of the bill [i.e., the provision defining “foreign mar-

ket value”), would retain existing law with several modifica-

tions. (Emphasis added. }

42a

By The Comptroller General Of The United States, ID-79-15

(March 15, 1979). With specific reference to the practice now

challenged by SCM, the G.A.O. reported and explained (id., at

27):

Adjustments for circumstances of sale are quantified on

the basis of the cost to the seller. Although Customs

regulations provide that, where appropriate, the effect of

these differences on the market value of the merchandise

will be considered, officials explained that this is rarely

practical because ail merchandise is uniformly affected by

circumstances of sale and it normally is not possible to

isolate the effects on market value oi each of these items.’

It clearly appears, then, that Congress knowingly declined

to overturn the existing regulations or otherwise disapprove

the practice in question when it extensively reviewed the

antidumping laws."’ Nevertheless, SCM strenuously argues

against the foregoing conclusion by pointing to the following

* In fact, Congress was made aware of this practice before it

enacted the original provision for circumstances-of-sale adjustments

in the 1958 amendment to the Antidumping Act, 1921, in Pub.L.

85-630, 72 Stat. 583. In testimony quoted by SCM at 71 of its memor-

andum, Assistant Secretary of the Treasury David W. Kendall ex-

plained to Congress how circumstances-of-sale adjustments were

made under the then-existing antidumping regulations, and gave an

example of an adjustment for a certain service guarantee provided by

the manufacturer for bicycles sold for home consumption, but not for

bicycles exported to the United States. The adjustment was com-

puted exclusively on the basis of the cost to the manufacturer. See

Hearings on H.R. 6006, 6007, and 5120 Before the House Comm. on

Ways and Means, 85th Cong., Ist Sess. 39 (1957).

SCM’s quotation from a “Treasury Department Memorandum

Relating to the Antidumping Act, 1921”, at 38 (August 161) for the

rationale of using “price” as a measure of value, rather than seller's

costs, is taken out of context. The excerpt quoted specifically relates

to the allowance of quantity discounts, not to other differences in

circumstances of sale or differences in physical charactenstics. The

terms “price” and “market value” are not necessarily synonymous.

Moreover, the fact that using prices in determining adjustments for

43a

language in S.Rep.No.96-249, supra, at 96, U.S.Code Code &

Admin. News 1979, p. 482:

This report is not intended as a general expression of

approval or disapproval of current a or adminis-

trative practice. This should be emphasized with bay se

to regulations regarding the current law on dumping from

non-market economies countries. The reenactment of cur-

rent statutory provisions on this subject is not an ex-

pression of Congressional approval or ves ot of the

regulations | pee ae by the Secretary of the Treasury

on August 9, 1978 (43 FR 35262).

Several points are relevant in connection with the foregoing

statement. First, the Senate Finance Committee did not disap-

prove the current regulations and administrative practice, but

in effect preserved the status quo, a status quo that other

passages of the same Senate Report indicate that Congress

was intent upon preserving, with “several modifications”.

Treating similar language in legislative history relating to the

Trade Act of 1974, the Court of Customs and Patent Appeals

reasoned in United States v. Zenith Radio Corporation, 64

C.C.P.A. 130, 145, C.A.D. 1195, 562 F.2d 1209 (1977), affd,

Zenith Radio Corporation v. United States, 437 U.S. 443, 98

S.Ct. 2441, 57 L.Ed.2d 337 (1978):

The effect of the Committees’ mutually contradictory

approve-disapprove statements is necessarily to leave un-

touched the status quo with respect to the administrative

practice on tee na duties. Finding no guidance in

what the committees said, we look to what the Congress

did. [Footnote omitted.)

And as noted by the Supreme Court in Zenith Radio Corp.,

“whether or not Congress can be said to have ‘acquiesced’ in

differences in wholesale quantities may be convenient does not sup-

port SCM’s argument that it is more efficient to quantify differences

in circumstances of sale on the basis of market value than on the basis

of cost.

44a

the administrative practice, it certainly has not acted to change

z.”

Second, a careful reading of the passage in question seems to

indicate that the chief concern of Congress was regulations

relating to non-market economies. The regulations specifically

referred to in the passage, i.e., those promulgated on August

9, 1978, dealt with non-market economies. See 43 FR 35262

(1978).

Another important consideration bearing upon the validity

of 19 CFR § 353.15(d) is whether the regulation is reasonably

related to the purpose of the circumstances of sale

adjustment." That purpose was enunciated in the legislative

history of the 1958 amendment to the Antidumping Act, 1921

(predecessor to the current antidumping provisions), wherein

the circumstances of sale provision was initially made a part of

the scheme of the antidumping legislation, i.e., Pub.L. 85-630.

There, H.Rep.No.1261, 85th Cong., 1st Sess. 7 (1957) stated:

Differences due to “other circumstances of sale”.

Under the bill as reported, provision is made (sec.

202(b)(2) and (c)(2)) for consideration of “other differences

in circumstances of sale” in addition to quantity differen-

tials. This is designed to facilitate efficient and fair com-

rison between foreign market value and price to the

nited States market. [Emphasis added. ]

It is self-evident that without adjustments for differences in

circumstances of sale, price comparisons would be essentially

distorted and the objective of fairness would be defeated. And

it is evident to this Court that the cost approach used to

quantify adjustments for differences in circumstances of sale

authorized by 19 CFR § 353.15(d) is consistent with the pur-

pose of the circumstances of sale adjustment, as enunciated in

the House Report, supra. Indeed, for all practical purposes,

the cost approach in most instances is the only efficient means

". Cf. Mourning v. Family Publications Service, Inc., 411 U.S.

356, 369, 93 S.Ct. 1652, 1660, 36 L.Ed.2d 318 (1973).

45a

of administering the circumstances of sale adjustment, con-

sidering that foreign market value and United States price

must under the antidumping law be determined within very

strict limits of time, viz., 90 days in the instant proceeding. See

19 U.S.C. § 16738e(c)(1).

In direct contrast to the primary cost approach provided in

19 CFR § 353. 15(d), the alternative market value methodology

prescribed by the regulation is much more difficult, and in

many instances impossible, to administer fairly and efficiently.

To require “ommerce to analyze the effects on market value of

every dif}. .ce in circumstances@Psale would be to require a

highly comypiex quantification process involving a multitude of

economic factors, including a cost analysis, and to do so within

strict time limits. I have no doubt that if the market value

approach were the sole (or even the primary) method utilized

for quantifying adjustments for differences in circumstances of

sale, as a practical matter the resulting adjustments in many

instances would be purely speculative or sheer guess work.

The present regulation, in any case, does contemplate the

possibility of situations where a specific difference in circum-

stances of sale may bear no perceived market value (or a

market value more or less than cost) in either the United States

market or in the home market, since the regulation expressly

provides that “where appropriate [the administering author-

ity] may also consider the effect of such differences upon the

market value of the merchandise”. Consequently, the regula-

tion, while it gives primary emphasis to cost differentials, does

not preclude a market value analysis in appropriate instances.

In support of its argument that the current regulation does

not in fact represent a long-continued administrative practice,

SCM attributes much significance to the fact that in 1960 the

antidumping regulation (19 CFR § 14.7(b)(2) (1960)) concern-

ing adjustments for differences in circumstances of sale pur-

suant to § 202 of the Antidumping Act of 1921 providec that

“the Secretary will be guided primarily by the effect of such

differences upon the market value of the merchandise * * *”.

46a

Predicated upon this predecessor regulation, SCM chal-

lenges the statement of the Treasury published in T.D. 76-176

(1976), supra, that the 1976 regulation reflected long-standing

practice on the part of that agency. Several observations are

pertinent in this connection.

First, although regulation 14. 7(b\(2)iii) provided that the

primary approach would be grounded on market value, the

1960 regulation by its terms expressly permitted consideration

of the costs to the seller “where appropriate.”

Second, since the 1976 statement by Treasury was an official

published statement as to that agency’s prior practice, it must

be presumed that Treasury found it consistently “appropriate”

to make adjustments by reference to costs. However, SCM has

failed to show an administrative practice in conflict with the

Treasury statement.

Finally, although the primary approach prescribed under

regulation 14.7(b)(2)(iii) was market value, there is no doubt

that Treasury’s experience over a period of many years with

the circumstances of sale adjustment indicated the necessity

for primarily utilizing a cost rather than market value ap-

proach. But the cost approach prescribed in 19 CFR

§ 353.15(d) was not a revolutionary or abrupt change in metho-

dology, as implied by SCM, inasmuch as under the prior

regulation the seller’s costs could be, and in fact were, con-

sidered.

In sum, the adjustments made by Commerce in the present

case under 19 CFR § 353.15(d) were made pursuant to a valid

regulation.

Since there is no merit in SCM’s contention that Commerce

could look only to the effect on market value in making adjust-

ments for differences in circumstances of sale, its contention

that the various adjustments in question are not supported by

substantial evidence must also fail. Such contention was predi-

cated upon the fact the record did not reflect that Commerce

had requested, or that Brother and Silver had supplied, in-

formation demonstrating the effect of the claimed adjustments

47a

on market values. Nonetheless, the record shows that Brother

and Silver submitted voluminous documentation in support of

their asserted adjustments to foreign market value on the

basis of costs. Since Commerce, pursuant to its own regula-

tion, properly looked to sellers’ costs, it certainly had sufficient

reason to be satisfied that the differences in circumstances of

sale for which allowances or adjustments were in fact made,

accounted in whole or in part, for the amount of the difference

between the United States price and the foreign market value.

Hence, the adjustments are supported by substantial evidence

in the record. °

III.

ESP OFFSET

In determining foreign market value, Commerce allowed

certain adjustments to the home market selling prices of the

Brother and Silver typewriters as “other differences in circum-

stances of sale” in accordance with its “Special Rule” set forth

in 19 CFR § 353.15(c), which provides for the so-called ex-

porter’s sales price offset (“ESP offset”)."* See 45 FR 538565.

Section 353.15(c) provides:

justments for differences in circumstances of sale set forth

in paragraphs (a) and (b) of this section, reasonable allo-

wances for other selling expenses generally will be made

in cases where a reasonable allowance is made for commis-

sions in one of the markets under consideration and no

commission is paid in the other market under considera-

tion, the amount of such allowance being limited to the

actual other selling expenses incurred in the one market,

or the total amount of the commission allowed in such

other market, whichever is less. /n making comparisons

wn 4 exporter’s sales price, reasonable al nce will be

for all actual selling expenses incurred in the home

2 The largest adjustment for the Silver typewriters and one of the

largest adjustments for many of the Brother typewriters is the ESP

offset.

48a

market up to the amount of the selling expenses incurred

in the United States wena [Emphasis added. }

Following the authority of the last sentence of paragraph (c)

(the so-called “exporter’s sales price offset” or “ESP offset”)

Commerce adjusted the foreign market value of Silver’s PETs

for various advertising expenses incurred in Japan up to the

amount of the selling expenses incurred in the United States,

and of Brother’s PETs for certain home market selling ex-

penses (payroll and payroll-related expenses, depreciation,

other operating expenses, indirect advertising and promotion-

al premiums). The ESP offset adjustments were made on the

basis of evidence of the various costs involved.

SCM urges that the special rule is contrary to law because:

(1) the adjustments are not directly related to the sales under

consideration, which is allegedly required by legislative histo-

ry as well as by judicial construction in F.W. Myers & Co., Inc.

v. United States, 72 Cust.Ct. 219, 376 F.Supp. 860 (1974); (2)

the adjustments are unilateral in nature (viz., the adjustments

are not made by comparing similar expenses incurred by the

foreign producer on its export sales in violation of the statutory

language in Section 773(a)(4)(B), which permits adjustment for

“differences in circumstances of sales”); and (3) the adjustment

is not available equally in “purchase price” and “exporter’s

salés price” transactions. Additionally, SCM contends that the

determination is not supported by substantial evidence be-

cause the record is devoid of any information which would

demonstrate that the claimed differences in circumstances of

sale are directly related to the sales under consideration or that

the claimed differences account in whole or in part for the

pricing differentials.

I find that SCM’s contentions have no merit because the

special rule is in conformity with the entire statutory scheme,

constitutes a valid exercise of the statutory discretion granted

in Section 773(a)(4), is neither precluded by legislative history

nor by F.W. Myers, and represents a long existing administra-

tive practice.

= —

49a

Under the antidumping statute, duties are imposed in an

amount equal to the amount by which the foreign market value

exceeds the United States price for the merchandise, which

latter term means “purchase price” or the “exporter’s sales

price” of the merchandise, whichever is appropriate. Sections

731 and 772(a) of the Tariff Act of 1930, as amended, 19 U.S.C.

1673 and 1677a(a). “Exporter’s sales price,” in turn, is defined

in the first part of section 772(c) of the Act,

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