Petition for Writ of Certiorari — International Union of Electronic v. United States
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Suprema Court, U.S,
Fit
; _
= A
931328 Fee 1 6 1994
No. 93-
—=GFFICE-GF THE CLERK
In The
Supreme Court of the United States
October Term, 1993
*
INTERNATIONAL UNION OF ELECTRONIC,
ELECTRICAL, TECHNICAL, SALARIED AND
MACHINE WORKERS, AFL-CIO, INTERNATIONAL
BROTHERHOOD OF ELECTRICAL WORKERS, AND
INDUSTRIAL UNION DEPARTMENT, AFL-CIO,
Petitioners,
UNITED STATES OF AMERICA,
Respondent.
¢
Petition For Writ Of Certiorari To The
United States Court Of Appeals
For The Federal Circuit
¢
PETITION FOR WRIT OF CERTIORARI
4
Paut D. CULLEN*
JerFReY S. BECKINGTON
CoLuER, SHANNON, Ritt & Scott
3050 K Street, N.W.
Washington, D.C. 20007
(202) 342-8400
Counsel for Petitioners
*Counsel of Record
COCKLE LAW BRIEF PRINTING CO., (800) 225-6964
QUESTIONS PRESENTED
1. Whether the Federal Circuit erred sn extending
deference to the Commerce Department’s ii:terpretation
of Section 772(u)(1)(C) of the Tariff Act of 1930, as
amended, when the words of the statute make it clear
that Congress intended United States Price to be tax-
inclusive only to the extent Foreign Market Value is
shown by a foreign respondent likewise to be tax-inclu-
sive.
2. Whether an interpretation of Section 772(d)(1)(C)
offered on appeal by the Department of Justice is entitled
to deference by a reviewing court where that interpreta-
tion flatly contradicts interpretations previously
announced by the client agency itself in formal adminis-
trative proceedings and where the interpretation is incon-
sistent with the plain meaning of the words used in the
statute.
3. Whether the Federal Circuit erred in extending
deference to the Commerce Department's interpretation
of Section 737(a) of the Tariff Act of 1930, as amended,
that a cap mav be placed on the financial liability of
foreign responuents for the payment of antidumping
duties secured by bonds on merchandise imported during
the period of the original antidumping investigation,
when the express terms of the statute extend that cap
only to obligations secured by cash deposits.
RULE 29.1 STATEMENT
The International Union of Electronic, Electrical,
Technical, Salaried and Machine Workers, AFL-CIO,
International Brotherhood of Electrical Workers, and the
Industrial Union Department, AFL-CIO, are domestic
labor organizations representing workers who are
engaged in the manufacture in the United States of color
television receivers.* None of the labor organizations is a
publicly owned corporation that issues shares to the pub-
lic.
* Parties to the proceeding whose names do not appear in the
caption of the case are Zenith Electronics Corporation; Sam-
sung Electronics Co., Ltd.; Samsung Electronics America, Inc.;
Daewoo Electronics Co., Ltd.; Daewoo Electronics Corp. of
America, Inc.; Goldstar Co., Ltd; and Goldstar Electronics
International, Inc.
TABLE OF CONTENTS
Page
QUESTIONS PRESENTED .......-----+s+eeereeeee: i
RULE 29.1 STATEMENT .......------+e seer rerrrees ii
TABLE OF AUTHORITIES.........-----eeeeeeeeee: iv
OPINIONS BELOW.........---:se cere teeter tee? 2
JURISDICTION .....-.--- eee ee cece eer ener eceeceee: 2
STATUTES INVOLVED ........--- eee sree creer 3
STATEMENT OF THE CASE.......---+-++eee errr: 4
1. The U.S. Antidumping Law......--.--++++++ 4
2. Proceedings Before The International Trade
Administration. ........--02seeeee cere rer eeee: 6
3. Proceedings Before The U.S. Court Of Interna-
Horal TAGE ...-.csecvccccvcceseveseveess 8
4. The Appeal To The Federal Circuit........... 11
a. The Adjustment to United States Price for
Indirect TaX@S ......-cccccccccervecccscess 11
b. Liability for the Payment of Antidumping
Duties Is Not Capped When Payment Is
Secured by Bonds Rather Than Cash ..... 16
REASONS FOR GRANTING THE WRIT ........--- 19
‘oi. GF) 68 eee 24
iv
TABLE OF AUTHORITIES
Page
FEDERAL CASES
American Dental Ass‘n v. Shalala, 3 F.3d 445 (D.C.
See Qe os vein eevee desea er ee ee 20
Bowen v. Georgetown Univ. Hosp., 488 U.S. 204
CU PUEE 0 4.64 da ish ee0cnnb caeedn eee 23
Chevron, U.S.A., Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837, reh'g denied, 468 U.S.
SAGE COPED f 600.560 bie RSV Ee ee ee passim
Coalition for Clean Air v. Southern Cal. Edison Co.,
971 F.2d 219 (9th Cir. 1992), cert. denied, EPA v.
Coalition for Clean Air, 113 S.Ct. 1361 (1993)....... 20
Daewoo Elecs. Cv. v. International Union of Elec., 6
Fite S50) (Ped, (20 BO ieccnc base passim
Daewoo Elecs. Co. v. United States, 712 F. Supp. 931
ee ee B Pee Te Cry TC ee ote passim
Daewoo Elecs. Co. v. United States, 760 F. Supp. 200
ee. | errr ey ioe perme se 2,40, 11
Daewoo Elecs. Co. v. United States, 794 F. Supp. 389
eg BE, : Rerpeirapere rane 8 hp Neo cee ah ih y oh
Estate of Cowart v. Nicklos Drilling Co., 112 S. Ct.
EOE SAUTE waht steed chee chu atesdskiehateperce: 17
Oberstar v. Fed. Deposit Ins. Corp., 987 F.2d 494 (8th
Le: SPWM chai ciate suas cienivnendeerereeieeeess 20
Public Employees Retirement System of Ohio v. Betts,
Te A Se CRUE nc 5s iE ods dencodsreeiredeerenss 16
United States v. H. Rosenthal Co., 609 F.2d 999
OS eg PEE ORT ETO er eee te err ry errr 22
Zenith Elecs. Corp. v. United States, 633 F. Supp.
Se ee: Pe I: I oe 6 5 is b's eke vee ok oe g
Zenith Radio Corp. v. United States, 437 U.S. 443
ERs erm alee UA eon rales re eA eves a Met 20
Vv
TABLE OF AUTHORITIES - Continued
Page
Supreme Court Rule 29.1 .......- 0. eee eee reer ees e ii
STATUTES AND REGULATIONS
Tariff Act of 1930, as amended (codified in scattered
sections of 19 U.S.C.)
Section 707(a) (19 U.S.C. § 1671f(a))..........---+- 17
Section 731 (19 U.S.C. § 1673) ....... cece reece eee 4
Section 733(d)(a) (19 U.S.C. § 1673b(d)(2)).....----- 6
Section 737(a) (19 U.S.C. § 1673f(a)).........-- passim
Section 751(a) (19 U.S.C. § 1675(a)) ....-----++ee 4,7
Section 772(d)(1)(C) (19 U.S.C. § 1677a(d)(1)(C)). . . passim
6 USC: 6 CIES nics nee 3
0 USE. OO oe ecscorsees oees 19
19 CEE BO a i eee, 18
19 CER 6 M98 GON... bone neers 18
Federal Courts Improvement Act of 1982, Pub. L.
No. 97-164, 96 Stat. 25 (codified in scattered
gacticons GF TE UG). uscncccceectandssenensettass 19
ADMINISTRATIVE DETERMINATIONS
Antidumping Duty Order; Color Television Receivers
from Korea, 49 Fed. Reg. 18,336 (April 30, 1984) ..... 7
Antidumping Duties: Provisional Measures Deposit
Cap, 57 Fed. Reg. 45,769 (Oct. 5, 1992)........-+-: 18
Vi
LABLE OF AUTHORITIES — Continued
Page
Color Television Receivers from Korea; Final Results of
Administrative Review of Antidumping Duty
Order, 49 Fed. Reg. 50,420 (Dec. 28, 1984).......... 7
Final Determination of Sales at Less Than Fair Value;
Color Television Receivers from Korea, 49 Fed. Reg.
Fon {meee by Fee ccone cede eee AS
CONGRESSIONAL REPORTS
H.R. Rep. No. 1, 67th Cong., Ist Sess. (to accom-
DRY Fite, SER) CEMENT 66 6bei purer eer bho twas; 21
S. Rep. No. 1619, 85th Cong., 2d Sess. (to accom-
pasty Ft... GGles LESOGe ores valk chdeas ce tracked i dews 22
MISCELLANEOUS
Dept. of the Treas., U.S. Customs Service, “Annual
Report on the Status of the Antidumping /
Countervailing Duty Program,” Nov. 21, 1993..... 19
In The
Supreme Court of the United States
October Term, 1993
4
No. 93-
= —
INTERNATIONAL UNION OF ELECTRONIC,
ELECTRICAL, TECHNICAL, SALARIED AND
MACHINE WORKERS, AFL-CIO, INTERNATIONAL
BROTHERHOOD OF ELECTRICAL WORKERS, AND
INDUSTRIAL UNION DEPARTMENT, AFL-CIO,
Petitioners,
UNITED STATES OF AMERICA,
Respondent.
—_—_—_—— ¢@ —_____-_—____—_-
Petition For Writ Of Certiorari To The
United States Court Of Appeals
For The Federal Circuit
+
PETITION FOR WRIT OF CERTIORARI
¢
Petitioners, International Union of Electronic, Electri-
cal, Technical, Salaried and Machine Workers, AFL-CIO,
International Brotherhood of Electrical Workers, and
Industrial Union Department, AFL-CIO, respectfully pray
that a writ of certiorari issue to review -he judgment of
the United States Court of Appeals for the Federal
Circuit, entered in the above proceeding on September
30, 1993, rehearing denied, November 18, 1993.
°
OPINIONS BELOW
The opinion of the Court of Appeals for the Federal
Circuit, Daewoo Elecs. Co. v. Int'l Union of Electronic, Elec-
trical, Technical, Salaried and Machine Workers, AFL-CIO
(“Daewoo IV”), is reported at 6 F.3d 1511 (Fed. Cir. 1993)
and is reprinted at pages 3-34 of the appendix to this
petition (“Pet. App.”). On November 18, 1993, the Court
of Appeals for the Federal Circuit denied the Petitioners’
Petition for Rehearing and Suggestion for Rehearing In
Banc. The order is reprinted at pages 1 to 3 of Pet. App.
The Federal Circuit overturned decisions of the United
States Court of International Trade in Daewoo Elecs. Co. v.
United States, 712 F. Supp. 931 (Ct. Int’l Trade 1989)
(“Daewoo I’) and Daewoo Elecs. Co. v. United States, 794 F.
Supp. 389 (Ct. Int’l Trade 1992) (“Daewoo III”). The opin-
ion of the Court of International Trade in Daewoo I is
reprinted at 69-138 of Pet. App.; the opinion of the Court
of International Trade in Daewoo III is reprinted at pages
35-44 of Pet. App. The opinion of the Court of Interna-
tional Trade in Daewoo Elecs. Co. v. United States, 760 F.
Supp. 200 (Ct. Int’l Trade 1991) (“Daewoo II”) is reprinted
at pages 45-68 of Pet. App.
one ¢
JURISDICTION
The judgment of the Court of Appeals for the Federal
Circuit was entered on September 30, 1993. A Petition for
Rehearing and Suggestion for Rehearing In Banc was denied
on November 18, 1993. The jurisdiction of this Court to
review the judgment is invoked under 28 U.S.C. § 1254(1).
+
STATUTES INVOLVED
Section 772(d)(1)(C) of the Tariff Act of 1930, as
amended, 19 U.S.C. § 1677a(d)(1)(C) (1988), provides in
pertinent part as follows:
The purchase price and the exporter’s sales
price shall be adjusted by being .. . increased
by ... the amount of any taxes imposed in the
country of exportation directly upon the
exported merchandise or components thereof,
which have been rebated, or which have not
been collected, by reason of the exportation of
the merchandise to the United States, but only
to the extent that such taxes are added to or
included in the price of such or similar mer-
chandise when sold in the country of exporta-
tion.
Section 737(a) of the Tariff Act of 1930, as amended,
19 U.S.C. § 1673f(a) (1988), provides as follows:
If the amount of a cash deposit collected as
security for an estimated antidumping duty
under section 1673b(d)(2) of this title is different
from the amount of the antidumping duty deter-
mined under an antidumping duty order issued
under section 1673e of this title, then the differ-
ence for entries of merchandise entered, or with-
drawn from warehouse, for consumption before
notice of the affirmative determination of the
Commission under section 1673d(b) of this title
is published shall be -
(1) disregarded, to the extent that the cash
deposit collected is lower than the duty under
the order, or
(2) refunded, to the extent the cash deposit
is higher than the duty under the order.
S
STATEMENT OF THE CASE
1. The U.S. Antidumping Law
Ihe U.S. antidumping law requires the assessment of
antidumping duties if two conditions are met: (1) the
International Trade Administration of the U.S. Depart-
ment of Commerce (hereinafter “the Department” or “the
ITA”) determines that the imported merchandise is being
sold at less than fair value; and (2) the U.S. International
frade Commission (hereinafter “the ITC”) determines
that a U.S. industry is materially injured or threatened
with material injury by reason of imports of that mer-
chandise. 19 U.S.C. § 1673 (1988). If the Department
determines that less than fair value sales exist and the
ITC makes an affirmative injury determination, an anti-
dumping duty order is issued. Imported merchandise
covered by such an order is subject to the imposition of a
special antidumping duty equal to the amount by which
Foreign Market Value exceeds the United States Price for
the merchandise. 19 U.S.C. § 1675(a) (1988). This amount
is referred to as the “dumping margin.”
lhis case involves the methodology specified in the
antidumping law to adjust for indirect taxes which are
imposed on sales in the country of exportation, but which
are rebated, or forgiven, on exports to the United States.
An adjustment in the price comparison is necessary to
ensure that a dumping margin is not created solely
because a tax-inclusive Foreign Market Value is compared
to a tax-exclusive United States Price. In 1921, Congress
incorporated a provision in the antidumping law
designed to adjust for the absence of tax 1. United States
Price by adding to that price an amount equal to the tax
that would have been imposed on the merchandise but
for the fact of exportation.
An upward adjustment to United States Price tends
to lower a potential margin of dumping by narrowing the
difference between the Foreign Market Value and the
relatively lower United States Price. In 1974, Congress
amended the law by placing limitations on the upward
adjustment to United States Price with respect to this tax
adjustment. The law as presently written provides for an
upward adjustment to United States Price by:
[T]he amount of any taxes imposed in the coun-
try of exportation directly upon the exported
merchandise or components thereof, which have
been rebated, or which have not been collected,
by reason of the exportation of the merchandise
to the United States, but only to the extent that
such taxes are added to or included in the price of
such or similar merchandise when sold in the coun-
try of exportation; ....
Section 772(d)(1)(C) of the Tariff Act of 1930, as amended,
19 U.S.C. § 1677a(d)(1)(C) (1988) (emphasis added). By
limiting the upward adjustment to United States Price,
Congress ensured that margins of dumping would not be
reduced in cases where the full amount of the tax was not
included in Foreign Market Value.
This case also involves the question of how much
antidumping duties may be collected for entries of mer-
chandise imported during the original antidumping
investigation before an antidumpiny duty order has been
published. Under Section 733(d)(2) of «he Act, foreign
respondents must secure their obligations to pay anti-
dumping duties during this period either by posting a
bond or by making cash deposits in an amount equal to
the estimated duty. 19 U.S.C. § 1673b(d)(2) (1988). Korean
companies covered their estimated duty obligations for
this period by posting bonds rather than by making cash
deposits. Pet. App. 28. Section 737(a) limits the antidump-
ing liability on such entries and expressly states that the
difference between a cash deposit of estimated antidump-
ing duties and the final antidumping duty determined
shall be “disregarded, to the extent the cash deposit col-
lected is lower than the duty under the order.” 19 U.S.C.
§ 1673ft(a) (1988) (emphasis added). No provision is made
for the limitation of liability when that liability is secured
by bonds.
2. Proceedings Before The International Trade
Administration
Petitioners are labor organizations who represent
workers engaged in the manufacture of color television
receivers (“CTVs”) in the United States. On May 2, 1983,
Petitioners filed a petition seeking relief under the anti-
dumping law from the harmful effects of dumped
imports of CTVs from Korea. During the original anti-
dumping investigation, the Petitioners argued that mea-
surement of home market taxes was required by the
statute to ascertain the extent to which Foreign Market
Value was tax-inclusive before any upward adjustment to
United States Price is made under Section 772(d)(1)(C).
he Department conceded the correctness of this posi-
tion, but nevertheless failed to follow the statute:
[I]t is only reasonable to conclude that the Con-
gress, in its addition to section 772(d)(1)(C) of
the “but only to the extent” language, intended
that we measure absorption and limit the addi-
tion to the tax passed through. However, it is
impossible to do so... . [thus] the Department
has presumed full pass through in this investi-
gation.
Final Determination of Sales at Less Than Fair Value; Color
Television Receivers from Korea, 49 Fed. Reg. 7620, 7624
(Mar. 1, 1984). The Department “presumed full pass
through” in the original investigation and failed to
undertake any measurement of tax included in the price
of the sale in the Korean home market. Nevertheless, the
Department issued an antidumping duty order against
CTVs from Korea. Antidumping Duty Order; Color Televi-
sion Receivers from Korea, 49 Fed. Reg. 18,336 (April 30,
1984).
Thereafter, the Department initiated an administra-
tive review of antidumping duties under Section 751(a) of
the Act, 19 U.S.C. § 1675(a) (1988). During this first
annual review, the Department once again conceded that
the statute required that the amount of the upward
adjustment to United States Price should be limited to the
amount of tax actually included in the price to purchasers
in the home market. Nevertheless, the Department failed
to conduct such a measurement and instead “assumed
full pass-through” of the taxes. Color Television Receivers
from Korea; Final Results of Administrative Review of
Antidumping Duty Order, 49 Fed. Reg. 50,420, 50,421 (Dec.
28, 1984). The Department found that the three Korean
CTV manufacturers under review, Daewoo, Goldstar, and
Samsung, were dumping CTVs in the United States at
margins of 14.88 percent, 7.47 percent, and 12.23 percent,
respectively. The Department's final determination in this
first administrative review is the subject of this litigation.
3. Proceedings Before The U.S. Court Of Interna-
tional Trade
Petitioners filed an appeal with the U.S. Court of
International Trade challenging the determination by the
Department that it was free to assume that 100 percent of
the taxes had been included in the foreign market price.
Petitioners, relying on the plain meaning of the words of
the statute, contended that the Department is obliged to
limit the upward adjustment to United States Price on
account of taxes included in the Foreign Market Value by
measuring “the extent that such taxes are added to or
included in the price of such or similar merchandise
when sold in the country of exportation.” 19 U.S.C.
§ 1677a(d)(1)(C) (1988). The Court of International Trade
found that the Department’s contrary interpretation of
Section 772(d)(1)(C) was “not in accordance with the
law.” Daewoo I, Pet. App. 125.
Application of Section 772(d)(1)(C) necessarily
involves two separate questions. The first concerns
whether this statutory provision requires the ITA to mea-
sure the extent to which Foreign Market Value is tax-
inclusive. If this first question is answered in the affirma-
tive, the second question asks how this measurement is to
be made. In Daewoo I, the Court found that Section
eo
772(d)(1)(C) requires such a measurement. The Court did
not attempt to resolve the second question. Rather, it
remanded the proceeding to the ITA so that it could
determine how that measurement was to be made. Thus,
the opinion in Daewoo I clearly states:
The Court finds that the Zenith case is con-
trolling in its holding and reasoning that Com-
merce’s interpretation of Section 772(d)(1)(C) of
the Act is not in accordance with the law and
that the final results of this administrative
review are not supported by the evidence on the
record with regard to this issue. The Court
remands this issue to the ITA for reconsidera-
tion in accordance with this opinion.
Pet. App. 125. The opinion of Senior Judge Watson in
Zenith Elecs. Corp. v. United States, 633 F. Supp. 1382 (Ct.
Int'l Trade 1986), which served as the bedrock upon
which Daewoo | rests, states as follows:
Although § 1677a(d)(1)(C) requires the ITA
to measure actual! tax absorption, it leaves the
precise method of performing this measurement
to the discretion of the agency.
.. . [t]he agency must find a methodology for
measuring absorption which it considers satis-
factory and must base its measurements upon
substantial evidence.
The court leaves open whether the simple
method of subtracting after-invoice discounts and
rebates from gross invoice prices, suggested by
Zenith and the Unions below, is sufficient, or
whether an econometric approach is required. . . .
633 F. Supp. at 1400.
we
10
On remand following Daewoo I, the ITA elected to
embark upon an econometric analysis of tax incidence in
the Korean color television market. On the basis of its
econometric analysis, the ITA concluded that the full
amount of the taxes imposed on Korean televisions in the
home market was included in the price paid and that no
limitation on the upward adjustment to United States
Price was necessary under Section 772(d)(1)(C). The
results of this first remand were before the Court of
International Trade in Daewoo II. The Court of Interna-
tional Trade evaluated the econometric analysis under-
taken by the ITA and found that it was not supported by
substantial evidence. Pet. App. 57-59. The Court gave
specific instructions to the ITA respecting legal and evi-
dentiary deficiencies in its econometric analysis. Id. It is
important to note, however, that those instructions came
only after the ITA had decided to use an econometric
analysis to measure the extent to which indirect taxes
were included in the home market price. The instructions
of the Court of International Trade in Daewoo II should
not be confused as a directive to the ITA to use an
econometric approach.
During the second remand following Daewoo II, the
ITA continued to follow the econometric approach begun
in the first remand. Korean respondents tried to support
the first remand result with additional evidence and
expert econometric analysis. Eventually, Korean respon-
dents abandoned their analysis and offered a totally dif-
ferent approach, which they believed would still support
a finding that 100 percent of the home market taxes were
included in the foreign market price. Commerce con-
cluded that this second analysis was flawed and decided
1]
to base its tax measurement on an analysis advanced by
an expert witness offered by Zenith Electronics Corp., a
domestic producer of color televisions. Pet. App. 13.
PI
Daewoo III followed the second remand determina-
tion. The Court of International Trade accepted the
results of the second remand, which had found that less
than 100 percent of the taxes imposed in the Korean home
market were included in the foreign market price of the
merchandise. Accordingly, the amount of the upward
adjustment to United States Price required under Section
772(d)(1)(C) became smaller, and the margin of dumping
for the principal Korean color television producers went
up substantially.!
4. The Appeal To The Federal Circuit
a. The Adjustment to United States Price for
Indirect Taxes
The ITA appealed the decisions of the Court of Inter-
national Trade in Daewoo I and Daewoo III. It did not
appeal directly from Daewoo I]. On appeal to the Court of
Appeals for the Federal Circuit, that Court seriously mis-
apprehended the nature of the decision of the lower court
in Daewoo I:
We address the propriety of the following hold-
ings in the Daewoo opinions: that 19 U.S.C.
~
§ 1677a(d)(1)(C) of the antidumping law
| The ad valorem margins of dumping for Daewoo, Goldstar,
and Samsung grew from 14.88, 7.47, and 12.23 percent, respec-
tively, in the Department's original finding to 48.18, 33.95, and
30.36 percent, respectively. Pet. App. 7.
—_
12
requires that ITA make an econometric analysis
of tax incidence in foreign markets (Daewoo
ee
Pet. App. 7-8.
The Federal Circuit overturned the finding of the
Court of International Trade that the plain meaning of
Section 772(d)(1)(C) required the ITA to measure taxes in
the home market. The Federal Circuit’s ruling that the
ITA is not required to measure tax incidence is based
largely on the perceived inadequacies and burdens of the
econometric approach selected by Commerce. Pet. App.
12, 21-22. The Federal Circuit deferred to the Depart-
ment’s interpretation of Section 772(d)(1)(C), noting that
it “has recognized the ITA as the ‘master’ of [the] anti-
dumping law” and that the tenets expressed in Chevron,
U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467
U.S. 837, 843, reh’g denied, 468 U.S. 1227 (1984), “extend to
their limits when the ITA interprets the antidumping
laws.” Pet. App. 16.
The Federal Circuit’s decision to defer to the ITA’s
interpretation under the principles set forth in Chevron
was plainly wrong. The rule in Chevron requires a two-
part analysis:
When a court reviews an agency’s construction
of the statute which it administers, it is con-
fronted with two questions. First, always, is the
question whether Congress has directly spoken to the
precise question at issue. If the intent of Congress is
clear, that is the end of the matter; for the court, as
well as the agency, must give effect to the unam-
biguously expressed intent of Congress. If, how-
ever, the court determines Congress has not
13
directly addressed the precise question at issue,
the court does not simply impose its own con-
struction on the statute, as would be necessary
in the absence of an administrative interpreta-
tion. Rather, if the statute is silent or ambiguous
with respect to the specific issue, the question for the
court is whether the agency’s answer is based on a
permissible construction of the statute. (footnotes
omitted).
467 U.S. at 842-43 (emphasis added).
The Federal Circuit bypassed completely step one of
the Chevron analysis, never addressing the critical ques-
tion of whether the statute is ambiguous or open to more
than one interpretation. Had the Federal Circuit under-
taken step one of the Chevron analysis, it would have seen
that the unambiguous wording of Section 772(d)(1)(C)
requires the Department to limit the upward adjustment
to United States Price by measuring the extent to which
taxes are included in the home market price. At the same
time, the statute leaves open to the Department’s discre-
tion the precise methodology to be used in conducting
that measurement. But ambiguity with respect to how the
tax measurement should be made does not imply ambi-
guity as to whether some measurement should be made.
The Federal Circuit’s opinion points to the perceived
burdens and shortcomings of the econometric approach
taken by the Department on remand following Daewoo I.
The Federal Circuit mistakenly believed that the Court of
International Trade ordered the Department to conduct
an econometric analysis in Daewoo I:
The trial court held that the final clause of sec-
tion 1677a(d)(1)(C), allowing augmentation of
———————
14
USP “only to the extent that such taxes are
added to or included in the price of such or
similar merchandise when sold in the country of
exportation,” compelled the ITA to analyze the
consumer tax incidence of the commodity taxes.
Ihus, instead of employing an accounting
approach that allows USP to be increased by the
full amount of the tax levied and paid on home
market sales, the court reasoned that the ITA must
undertake an econometric study of the Korean mar
ket to determine the tax incidence, or “pass
through,” of the commodity taxes upon con-
sumers. (Emphasis added.)
Pet. App. 10-11. As shown above, however, the opinion in
Daewoo I made it clear that the court ordered only that the
Department conduct a measurement of home market
taxes. It left the precise methodology for conducting that
measurement to the discretion of the Department. Supra
at Y.
[he Federal Circuit also concluded that there is no
evidence that Congress intended to effect the kind of
revolutionary change in the antidumping law that is nec-
essarily implied by an obligation to conduct an economet-
ric analysis of tax incidence. Therefore, the Federal
Circuit asserted that it could not say that the ITA’s inter-
pretation contravenes the statute. Pet. App. 20. The fal-
lacy of this argument lies in the assumption that the court
in Daewoo I read the statute as requiring an econometric
analysis. Neither the Court of International Trade nor the
Petitioners have ever taken the position that the statute
mandates an econometric analysis, although such an
analysis is clearly one option for measuring home market
taxes. Supra at 9. The ITA decided to embark upon an
econometric approach even though Petitioners
JT
were urging other alternatives. Id. The Federal Circuit's
attempt to point to the ITA’s own bungled effort at econo
metrics as proof that no measurement at all is required
must be rejected as a misreading of Daewoo I and an
unacceptable substitute for a step one ¢ hevron analysis
fhe contention that the Department's only practical
alternative on remand following Daewoo I was to conduct
an econometric analysis is simply incorrect fhe Court of
International Trade made reference to Petitioners’ con
cerns over the tax treatment of after-sale discounts and
rebates. Id. A measurement based upon imple allocation
could easily form the basis for a limitation of the tax
adjustment on United States Price. [he Department's
improvident selection of an econometric approach was a
self-inflicted wound which does not relieve it of the
responsibility ty measure home market taxes and to limit
the upward adjustment to United States Price under Se
tion 772(d)(1)(C)
Finally, the Federal Circuit suggests that the ITA has
consistently interpreted Section 772(d)(1)(C) to require it
merely to “examine customary business records of
exporters” to determine whether the tax was included in
the price and was paid to the government Pet. App. 16
if a Korean producer sells a color television for $100 plus
$50 tax (tax-inclusive sales price $150) and then gives his
customer a $15 post-sale discount or rebate, there are any
number of accounting techniques available to determine how
much of that $15 discount might be considered tax not included
in the price and how mux} 01 the net selling price of $135 was
tax
lo
The plain meaning of the statute requires more of the
Department than a simple inquiry into whether a tax has
been paid on the sale in the foreign market. The 1974
amendment that added the language, “but only to the
extent that,” is robbed of all meaning if no quantitative
measurement is required and no limitation on the
upward adjustment to United States Price is imple-
mented. If Congress intended to place no restrictions on
the amount by which the Department may raise United
States Price in the dumping margin calculation, it would
not have used language that denotes both measurement
and limitation. Even if a longstanding administrative
practice existed, this would not permit the Department to
iznore the plain meaning of the law.’
1 sy
b. Liability for the Payment of Antidumping
Duties Is Not Capped When Payment Is
Secured by Bonds Rather Than Cash
The Federal Circuit also addressed the issue of
whether the financial responsibility of Korean respon-
dents for the payment of antidumping duties was capped
by the amount of the bonds that they had posted during
the period of investigation. Section 737(a) of the Tariff Act
* A detailed examination of the record discloses that there
was no longstanding administrative practice by the Depart-
ment. Even .f such a practice existed, however, it would not
justify actions that are in conflict with the clear intent expressed
in Section 772(d)(1)(C). See, e.g., Public Employees Retirement Sys-
tem of Ohio v. Betts, 492 U.S. 158, 171 (1989) (noting that “[e]ven
contemporaneous and longstanding agency interpretations
must fall to the extent they conflict with Statutory language.”).
17
of 1930, as amended, expressly limits respondents’ obli-
gations to the amount of cash deposits made. The terms
of the statute do not extend this cap to liabilities sec ured
by bonds
[he Federal Circuit overruled the Court of Interna-
tional Trade and sided with the Department on this mat-
ter, holding that the Korean companies’ final anti
dumping, liability was limited to the amount of their
estimated antidumping duties secured by bonds. In
reaching this result, the Federal Circuit emphasized the
need for great deference to the Department as the admin-
istering authority and its purportedly longstanding, con
temporaneous interpretation of the statute. The Federal
Circuit additionally stressed that section 737(a) does not
explicitly prohibit the capping of antidumping liability
when bonds have been posted, construing this “silence”
as further support for its conclusion that the Depart
ment’s reading is not unreasonable. Pet. App. 30
[he Department found ambiguity in the statute
where none exists. A step one Chevron analysis would
have disclosed that Congress spoke directly and unequiv-
ocally to the question of when final antidumping liability
can be limited to the estimated antidumping liability.
Section 737(a)’s plain words authorize a cap only when a
cash deposit has been posted. Had Congress so intended,
it would have extended the cap to bonds, as it did in
section 707(a) of the Tariff Act of 1930, as amended, 19
U.S.C. § 1671f(a), with regard to countervailing duties.
Rather than adhere to “the basic and unexceptional
rule that courts must give effect to the clear meaning of
statutes as written,” Estate of Cowart v. Nicklos Drilling Co.,
18
112 S. Ct. 2589, 2594 (1992), the Federal Circuit resorted to
an inappropriate and unreasonable analysis of legislative
and regulatory history. In fact, the Department's contem-
poraneous reading of section 737(a) was faithful to the
statute and capped antidumping liability only to “the
amount of the estimated antidumping duty deposited.”
45 Fed. Reg. 8182, 8204 (Feb. 6, 1980) (codified at 19 C_ER.
§ 353.50 (1980)). The Department changed its position on
the cap issue once in 1989, extending the benefits of the
cap to obligations secured by bonds. It then changed its
position a second time in 1992, limiting the cap to obliga-
tions secured by cash deposits.4 The Federal Circuit
seems to have gotten out of step with the Department's
latest position on this issue, having deferred to the
Department’s 1989 policy after the Department had
reversed that policy in 1992. The Federal Circuit should
have decided this matter, as the Court of International
Trade did,® on the basis of a straight-forward analysis
under step one of Chevron rather than extending unfet-
tered deference to the administrative agency.
—_—_—__—¢
* The Department formally changed its regulations in 1989
to extend the cap to bonds as well as to cash deposits. 54 Fed.
Reg. 12,742, 12,779 (Mar. 28, 1989) (codified at 19 C_ER. § 353.23
(1989)). More recently, the Department reverted to its original
interpretation limiting the cap to imports secured by cash
deposits in keeping with section 737(a). Antidumping Duties:
Provisional Measures Deposit Cap, 57 Fed. Reg. 45,769 (Oct. 5,
1992).
> Pet. App. 43-44 and case cited therein.
19
REASONS FOR GRANTING THE WRIT
1. The U.S. Court of Appeals for the Federal Circuit
is a court of specialized jurisdiction. 28 U.S.C. § 1295
(1988). It provides the only appellate review available for
antidumping and countervailing duty trade cases
brought under Title VII of the Tariff Act of 1930. Deci-
sions of the Federal Circuit in matters involving interna-
tional trade law are, to some extent, shielded from review
by this Court because there can never be a split with
other circuits on substantive issues within the Court's
area of specialized jurisdiction. When the Federal Circuit
errs, however, its error endures, affecting all interested
parties under the international trade laws.®
The decision of the Federal Circuit in this proceeding
demonstrates a fundamental misconception by that Court
regarding its responsibilities for providing meaningful
judicial review of agency action. The Federal Circuit's
failure to apply the Chevron test properly has conse-
quences under the international trade laws that range far
beyond the specific issues raised in this petition.
This Court has not reviewed a case arising under the
international trade laws since before the Federal Circuit
was created by the Federal Courts Improvement Act of
1982. Pub. L. No. 97-164, 96 Stat. 25 (codified in scattered
6 Figures for 1992 place the dollar value of commodities
covered by antidumping or countervailing duty orders at $6.7
billion. Dept. of the Treas., U.S. Customs Service, “Annual
Report on the Status of the Antidumping/Countervailing Duty
Program,” Nov. 21, 1993. The Department of the Treasury, U.S.
Customs Service estimates that imported merchandise covered
by active antidumping and countervailing duty orders valued
in excess of $9 billion was imported in 1993.
sections of 28 U.S.C.). The last international trade case to
be given plenary review by this Court was Zenith Radio
Corp. v. United States, 437 U.S. 443 (1978). The time has
come for this Court to issue a writ of certiorari to review
a decision of the Federal Circuit in a trade case.
2. The Federal Circuit failed to engage in a careful
and probing inquiry into whether Congress has spoken
directly to the issues at hand. This stands in stark con
trast to the approach taken by other circuits having long
standing expertise in matters involving review of federal
agency action.” The Federal Circuit effectively bypassed
step one of the Chevron test by beginning its analysis with
the unqualified statement that “[t]his question is one of
statutory interpretation, which we must resolve with def-
erence to the agency’s interpretation rather than to the
court's.” Pet. App. 14. Rather than conduct a preliminary
analysis of the statute to discern whether the intent of
Congress was made clear in the language chosen, the
Court referred to the ITA as the “master” of the anti-
dumping law, Pet. App. 16, and stated that Chevron’s
' See, e.g., American Dental Ass'n v. Shalala, 3 F.3d 445, 446
(D.C. Cir. 1993) (explaining that under the two-step test of
Chevron the court will “proceed to Chevron’s second step, and
approve any reasonable agency construction of the statute, only
if the statute is silent or ambiguous on the disputed point”)
(emphasis in original); Oberstar v. Fed. Deposit Ins. Corp., 987 F.2d
494, 501 (8th Cir. 1993) (noting that the agency interpretation
“does unacceptable violence to the plain language of the stat-
ute”); Coalition for Clean Air v. Southern Cal. Edison Co., 971 F.2d
219, 228 (9th Cir. 1992), cert. denied, EPA v. Coalition for Clean Air,
113 S.Ct. 1361 (1993) (recognizing a duty under Chevron to
“exhaust the ‘traditional tools of Statutory construction’ to
determine if Congress has spoken to the precise question at
issue”).
2]
“tenets extend to their limits when the ITA interprets
antidumping law.” Id. The Federal Circuit turned a blind
eye toward the threshold question of whether Congress
had spoken with sufficient clarity to determine whether it
intended to limit the upward adjustment to United States
Price when it amended the law in 1974
It is particularly distressing to see a court of spe
cialized jurisdiction which by definition should itself
possess specialized expertise —~ assume such a compliant
position with respect to the agency over which it has been
given exclusive jurisdiction. Moreover, the Federal Cir
cuit’s subservience to decisions of the Department on
pure questions of statutory interpretation was not tem
pered in any way by the fact that the ITA’s interpretation
significantly reduced the margin of dumping, thereby
diminishing the remedial effect that the antidumping law
is intended to afford domestic industries and their
workers. The legislative history of the 1921 Act and the
various amendments to that Act over the years establish
that the antidumping iaw is designed to offset injurious,
unfair pricing by means of antidumping duties. Under-
stated dumping margins and the capping of liability for
the payment of antidumping duties secured by bonds do
not provide the effective deterrent intended by Con-
gress.”
5 The House Report which accompanied the Antidumping
Act 1921 sets forth the purpose of imposing antidumping
duties:
The principle underlying the proposed additional
duty to be added in prevention of dumping
[makes] it unprofitable to dump goods on the
markets of the United States at lower prices. If the
seller of the goods is compelled to add as duty the
Se
}. Even if there were ambiguity in the
statute, the ITA’s interpretation would still not warrant
deference here. The ITA has, on two previous occasions,
publicly declared-an interpretation of the commodity tax
provision in direct contradiction to its current position
Supra at 7. The ITA freely admitted that Section
77 2(a\1)(C) called for measurement of the tax, but
declined to do so, saying that it was impossible to make
such a measurement. Difficulty in administering a statute
is not, however, sufficient reason for an agency to ignore
the express intent of Congress. United States v. H. Rosen
thal Co., 609 F.2d 999, 1002 (CCPA 1979). Moreover, the
proposition that the statute does not call for any measure-
ment of foreign market taxes was offered for the first time
on appeal by attorneys for the Department of Justice. This
is precisely the sort of post-hoc litigation posture to which
difference between the sales price and what he would
receive by selling in the otherwise highest obtainable
market, all reward or inducement to dumping is
removed.
H.R. Rep. No. 1, 67th Cong., Ist Sess. (to accompany H.R. 2435),
at 23 (1921)
The Senate Report accompanying the 1958 amendments to
the 1921 Act also emphasized the regulatory goals of the anti-
dumping law to act as a deterrent to dumped sales:
The antidumping feature of our Tariff Act [H.R. 6006]
is of considerable importance in protecting domestic
industries from inroads of foreign goods sold or
offered for sale at less than fair value. Not only will
the improvements made by this bill assist in speeding
up the operating procedure, they will strengthen the
deterrent effect of the law and in that respect help to
prevent dumping.
S. Rep. No. 1619, 85th Cong., 2d Sess. (to accompany H.R. 6006),
at 2 (1958)
Ff
this Court has refused to grant deference. Bowen v. Geor
getown Univ. Hosp., 488 U.S. 204, 212 (1988). Similarly
with its regulations governing the capping of antidump
ing liability, the Department has shifted its view over
time. Initially in 1980 and since October 1992 the Depart
ment has correctly awarded this limitation only when
estimated antidumping duties have been secured by cash
deposits. The Justice Department's position on appeal is
contrary to the currently stated policy of the Commerce
Department and is entitled to no deference whatsoever
Id
4. The Federal Circuit’s failure to implement the
Chevron doctrine properly has important implications
well beyond its interpretation of Section 772(d)(1)(C) and
Section 737(a). Review of agency action is at the very core
of the Federal Circuit’s appellate jurisdiction in trade
cases. Excessive deference to agency determinations by
the Federal Circuit deprives interested parties of effective
judicial review in an area of jurisprudence of consider-
able importance. Failure to provide a careful and probing
inquiry under step one of the Chevron analysis tilts the
whole process of judicial review decisively in favor of the
government, which needs only to assert a permissible
interpretation in order to prevail under Chevron’s step
two. The role of the judiciary in our system of checks and
balances is to resolve tension between Congress which
writes the laws and the Executive Branch which executes
them. The Chevron doctrine is an important and delicate
instrument in maintaining a proper balance. Certiorari
should be granted to restore that critical balance in the
implementation of our laws regulating international
trade.
24
CONCLUSION
For the foregoing reasons the Writ should issue for
review of the Federal Circuit’s decision extending defer-
ence to the Department's interpretation of Sections
772(d)(1)((C) and 737(a) of the Tariff Act of 1930, as
1
amended.
Respectfully submitted,
Paut D. CULLEN
JEFFREY S. BECKINGTON
COLLIER, SHANNON, Ritt & Scott
3050 K Street, N.W.
Washington, D.C. 20007
(202) 342-8400
Attorneys for Petitioners
Washington, D.C.
February 16, 1994
App. 1
UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT
92-1558,-1559,-1560,-1561,-1562
DAEWOO ELECTRONICS CO., LTD. and
DAEWOO ELECTRONICS CORP. OF AMERICA, INC.
Plaintiffs-Appellants,
and
SAMSUNG ELECTRONICS CO., LTD. and
SAMSUNG ELECTRONICS AMERICA, INC.,
Plaintiffs-Appellants,
and
GOLDSTAR CO., LTD. and
GOLDSTAR ELECTRONICS INTERNATIONAL, INC.,
Plaintiffs-Appellants,
Vv.
INTERNATIONAL UNION OF ELECTRONIC,
ELECTRICAL, TECHNICAL, SALARIED AND
MACHINE WORKERS, AFL-CIO, INTERNATIONAL
BROTHERHOOD OF ELECTRICAL WORKERS OF
AMERICA, INDEPENDENT RADIONIC WORKERS OF
AMERICA and INDUSTRIAL UNION DEPARTMENT,
AFL-CIO,
Plaintiffs-Appellants,
Vv.
ZENITH ELECTRONICS CORP.,
Plaintiff-Appellee,
Vv.
THE UNITED STATES,
Defendant-Appellant.
ORDER
ial
App. 2
UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT
ORDER
A combined petition for rehearing and suggestion for
rehearing in banc having been filed by the APPELLANT,
and the petition for rehearing having been referred to the
panel that heard the appeal, and thereafter the suggestion
for rehearing in banc having been referred to the circuit
judges who are in regular active service,
UPON CONSIDERATION THEREOF, it is
ORDERED that the petition for rehearing be, and the
same hereby is, DENIED, and it is further
ORDERED that the suggestion for rehearing in banc
be, and the same hereby is, DECLINED.
The mandate of the court will issue on November 26,
1993.
FOR THE COURT,
FRANCIS X. GINDHART,
CLERK
Dated: November 18, 1993
By /s/ Diane M. Frye
Diane M. Frye
Chief Deputy Clerk
cc: DAVID A. GANTZ, WARREN E. CONNELLY
FREDERICK L. IKENSON
MICHAEL P. HOUSE, VELTA A. MELNBRENCIS
PAUL D. CULLEN, BRUCE M. MITCHELL
DAEWOO ELECTRONICS CO V US, 92-1558
(CIT — 85-01-00140)
App. 3
DAEWOO ELECTRONICS CO., LTD. and Daewoo Elec-
tronics Corp. of America, Inc., and Samsung Electronics
Co., Ltd. and Samsung Electronics America, Inc., and
Goldstar Co., Ltd. and Goldstar Electronics Interna-
tional, Inc., Plaintiffs-Appellants,
V.
INTERNATIONAL UNION OF ELECTRONIC, ELEC-
TRICAL, TECHNICAL, SALARIED AND MACHINE
WORKERS, AFL-CIO, International Brotherhood of
Electrical Workers of America, Independent Radionic
Workers of America and Industrial Union Department,
AFL-CIO, Plaintiffs-Appellants,
V.
ZENITH ELECTRONICS CORP.,
Plaintiff-Appellee,
V.
The UNITED STATES, Defendant-
Appellant.
Nos. 92-1558 to 92-1562.
United States Court of Appeals,
Federal Circuit.
Sept. 30, 1993.
Rehearing and Suggestion for Rehearing in Banc Denied
Nov. 18, 1993.
Korean television manufacturers appealed antidump-
ing order. The Court of International Trade, 712 F.Supp.
931, remanded for reconsideration. The International
Trade Administration (ITA) of Department of Commerce
determined antidumping margins, and manufacturers
appealed. The Court of International Trade, 760 F.Supp.
App. 4
200, remanded for reconsideration. United States manu-
facturer moved for final judgment on Department's
redetermination of antidumping margins. The Court of
International Trade, Watson, Senior Judge, 794 F.Supp.
389, affirmed as modified. Parties appealed. The Court of
Appeals for the Federal Circuit, Nies, Chief Judge, held
that: (1) ITA reasonably interpreted antidumping statute
In using accounting methodology to add all commodity
taxes assessed on home market sales but forgiven upon
export, and ITA was not required to make econometric
analysis of tax incidence on home market consumers; (2)
ITA’s use of net delivered selling price to first unrelated
customer as imputed commodity tax for calculating
amount of tax adjustment was supported by substantial
evidence; and (3) cap existed for antidumping duties
irrespective of whether bond or cash deposit was posted
as security.
Attirmed in part; reversed in part and remanded.
David A. Gantz, Reid & Priest, Washington, DC,
argued, for plaintiffs-appellants, Daewoo Electronics Co.,
Ltd. and Daewoo Electronics Corp. of America, Inc. With
him on the brief, were Elizabeth H. Lefebvre and Jennifer
Karas.
Warren E. Connelly, Akin, Gump, Hauer & Feld,
L.L.P., Washington, DC, argued for plaintiffs-appellants,
samsung Electronics Co., Ltd. and Samsung Electronics
America, Inc. With him on the brief, was P. Bryan Christy,
IIT.
Michael P. House, Donovan, Leisure, Rogovin &
Schiller, Washington, DC, argued for plaintiffs-appellants,
Goldstar Co., Ltd. and Goldstar Electronics International,
App. 5
Inc. With him on the brief were R. Will Planert and John
K. Brautigam.
Paul D. Cullen, Shannon, Rill & Scott, Washington,
DC, argued, for plaintiffs-appellants, International Union
of Electronic, Elec., Technical, Salaried and Machine
Workers, AFL-CIO, Intern. Brotherhood of Elec. Workers
of America, Independent Radionic Workers of America
and Indus. Union Dept., AFL-CIO With him on the brief,
were Jeffrey S. Beckington, David C. Smith, Jr. and
Stephen A. Jones.
John D. McInerney, Deputy Chief Counsel for Import
Admin., argued, for defendant-appellant, the U.S. With
him on the brief, was Robert E. Nielsen, Sr. Atty., Office
of the Chief Counsel for Import Admin Also on the brief,
were Stuart M. Gerson, Asst. Atty. Gen., David M. ( ohen,
Director and Velta A. Melnbrencis, Asst. Director, Com-
mercial Litigation Branch, Dept. of Justice, Washington,
DC
Frederick L. Ikenson, Frederick L. Ikenson, P.€
Washington, DC, argued, for plaintiff-appellee, Zenith
Electronics Corp. With him on the brief, was J. Erick
Nissley.
Noel Hemmendinger and William J. Clinton, Wilkie
Farr & Gallagher, Washington, DC, were on the brief, for
Amicus Curiae, American Ass’n of Exporters and Impor-
ters.
Bruce Mark Mitchell and David L. Simon, Grunfeld,
Desiderio, Lebowitz & Silverman, Washington, DC, were
on the brief, for amicus curiae, Emerson Radio Corp.
App. 6
Betore NIES, Chief Judge, RICH, Circuit Judge, and
SKELTON, Senior Circuit Judge.
NIES, Che? Pudge
[hese appeals challenge the antidumping duties
Imposed o1 r television receivers from Korea im-
ctober 19, 1983 and April 30, 1984. The
te ‘he Court of International Trade to be
| electronics Co. v. United States, 712
r.Supy t Intl Trade 1989) (“Daewoo I”); Daewoo
ted States, 760 F.Supp. 200 (Ct. Int’
[rade 199] Jaewoo Il”); and Daewoo Electronics Co. v,
United States, 794 F.Supp. 389 (Ct. Int’l Trade 1992)
(“Daewoo III"). We affirm in part, reverse in part, vacate
the judgment and remand for entry of a judgment in
accordance with this decision.
I.
Background
Appellants Daewoo Electronics Co. Ltd., Samsung
Electronics Co., Ltd., and Goldstar Co., Ltd. (collectively
“the Korean companies”), are leading importers of color
television receivers into the United States from Korea.
Petitions by the International Union of Electronic, Electri-
cal, Technical, Salaried, and Machine Workers, AFL-CIO,
the International Brotherhood of Electrical Workers of
America, and the Independent Radionic Workers of
America and Industrial Union Department, AFL-CIO
(collectively “the Unions”) and by Zenith Electronics
Corp., resulted in an antidumping investigation into the
Korean television receivers imported between October 19,
1983 and April 30, 1984. On December 28, 1984, the
App. 7
International Trade Administration of the Department of
Commerce (“ITA”) published the final determinations of
its first administrative review, concluding that dumping
margins of 14.88 percent, 12.23 percent and 7.47 percent
existed on U.S. sales of Daewoo, Samsung, and Goldstar
products respectively.! Color Television Receivers from
Korea; Final Results of Administrative Review of Anti-
dumping Duty Order, 49 Fed.Reg. 50420, 50431 (1984). As
a result of rulings of the Court of International Trade in
the successive appeals and remands, the dumping duties
were revised upward to 48.18 percent, 30.36 percent, and
33.95 percent for Daewoo, Samsung, and Goldstar,
respectively which the trial court approved.
The Korean companies, the Unions, and the United
States have each appealed from the judgment of the
Court of International Trade raising numerous issues. We
address the propriety of the following holdings in the
| Where, as here, goods identical to the imported goods are
sold in the home market of the exporting country, a margin of
dumping is determined by comparing the foreign market value
(“FMV”) to the United States price (“USP”). The absolute dump-
ing margin for a sale is the amount, if any, by which FMV
exceeds USP
Determinations of USP and FMV often entail involved cal-
culations. USP is based upon the import’s “purchase price,” as
defined by 19 U.S.C. § 1677a(b), or if the first sale to an unre-
lated American purchaser occurred in the United States, upon
the “exporter’s sales price,” as provided in 19 U.S.C. § 1677a(c).
FMV is based upon home market sales, third country sales, or
constructed value. 19 U.S.C. § 1677b. Once these base figures are
determined, Commerce further modifies them to account for
shipping costs, differences in commercial quantities sold, or
other factors pursuant to statutory provisions and its own regu-
lations. See, e.g., 19 U.S.C. §§ 1677a(d), 1677b(a)(1)(A).
App. 8
Daewoo opinions: that 19 U.S.C. § 1677a(d)(1)(C) of the
antidumping law requires that ITA make an econometric
analysis of tax incidence in foreign markets (Daewoo 1);
that the ex factory price must be used for tax adjustments
of the U.S. price (Daewoo II); and that under 19 U.S.C.
§ 1673f(a) a bond deposit may not cap the amount of
liability for antidumping duties (Daewoo III). The identi-
cal issue of the multiplier effect of 19 U.S.C.
§ 1677a(d)(1)(C) raised in the Korean companies’ appeal
was rejected in the recently decided appeal. Zenith Ele
tronics Corp. v. United States, 988 F.2d 1573, 1581, (Fed.Cir.
1993), which is controlling here. In addition, our disposi-
tion of the tax incidence issue moots two other
issues: first, the Korean Companies’ appeal from the
holding of Daewoo II, 760 F.Supp. at 204-07, rejecting the
ITA’s finding of full tax pass-through in the Korean
receiver market; and second, the Unions’ challenge of the
ITA’s use of best information available pursuant to 19
U.S.C § 1677e(c) to adjust the USP. Daewoo III, 794 F.Supp.
at 391-92.
IT.
Adjustment for Taxes Levied on
Home Country Sales Only
The antidumping statute, 19 U.S.C. § 1677a(d)(1)(C)
(1988), recognizes that many countries assess excise or
commodity taxes upon goods sold for domestic consump-
tion, but forgive such taxes on export sales. To prevent
the creation of dumping margins merely because the
country of exportation taxes home market sales but not
App. 9
exports,? the antidumping law provides an offsetting
adjustment to the sales price of the goods in the United
States (the “U.S. price” or “USP”). Section § 1677a(d)
(1)(C) mandates that:
The purchase price and the exporter’s sales
price shall be adjusted by being . . . increased
by ... the amount of the taxes imposed in the
country of exportation directly upon the
exported merchandise or components thereof,
which have been rebated, or which have not
been collected, by reason of the exportation of
the merchandise to the United States, but only
to the extent that such taxes are added to or
included in the price of such or similar mer-
chandise when sold in the country of exporta-
tion.
In its original determination, the ITA interpreted sec-
tion 1677a(d)(1)(C) as allowing the addition to the U.S.
price of the full amount of the Korean taxes on television
sets forgiven upon export. In this case the Korean taxing
authority imposed a special excise tax, a defense tax and
a value added tax that resulted in an aggregate commod-
ity tax of 50.04 percent of the price of the television
receivers. None of these taxes were assessed against the
receivers exported to the United States. It is undisputed
that the taxes had been added to Korean home market
prices and had actually been paid by the Korean com-
panies. The ITA concluded that these facts met the
2 As an example, assume that goods are sold for $100 in
both the home market and the United States. While a tax of $50
is imposed in the home market, none is levied in the United
States. If tax is not accounted for, a comparison of USP and FMV
produces a dumping margin of $50.
App. 10
requirements of section 1677a(d)(1)(C) for adding the full
amount of the forgiven commodity taxes to the USP. In
ITA’s view, the statute permits what it terms an “account-
ing” method of determining that taxes were added to or
included in the price of merchandise sold in the home
country.
In the first appeal of this determination, Daewoo I, 712
F.Supp. at 931, the trial court rejected the ITA’s allowance
of the full amount of these Korean taxes.3 The trial court
held that the final clause of section 1677a(d)(1)(C), allow-
ing augmentation of USP “only to the extent that such
taxes are added to or included in the price of such or
similar merchandise when sold in the country of exporta-
tion,” compelled the ITA to analyze the consumer tax
incidence of the commodity taxes. Thus, instead of
employing an accounting approach that allows USP to be
increased by the full amount of a tax levied and paid on
home market sales, the court reasoned that the ITA must
undertake an econometric study of the Korean market to
determine the tax incidence, or “pass through,” of the
* The standard of review is set forth in 19 ,9.€.
§ 1516a(b)(1)(B), which provides:
The court shall hold unlawful any determination,
finding, or conclusion found -
(B) in an action brought under paragraph (2) of
subsection (a) of this section, to be unsupported by
substantial evidence on the record, or otherwise not
in accordance with law.
28 U.S.C. § 2640(b) requires the Court of International Trade to
apply this “substantial evidence” standard. See Matsushita Elec.
Indus. Co. v. United States, 750 F.2d 927, 932 n. 10 (Fed.Cir. 1984).
App. 11
commodity taxes upon consumers.* According to the
court, only that amount of the commodity tax that con-
sumers actually bore in an economic sense should be
added to USP. In so doing, the court relied on its earlier
decision in Zenith Electronics Corp. v. United States, 633
F.Supp. 1382 (Ct. Int’l Trade 1986), appeal dismissed as
4 A leading introductory economics textbook describes a
tax incidence analysis as asking the question:
Who ultimately pays a particular tax? Does the bur-
den stay on the person on whom it is first levied? One
cannot assume that the people [a government] says a
tax is levied on will end up paying that tax. They may
be able to shift the tax: shift it “forward” on their
customers by raising their price as much as the tax; or
shift it “backward” on their suppliers (wage earners,
rent and interest receivers) who end up being able to
charge them less than they would have done had
there been no tax.
Economists therefore say: We must study the
final incidence of the tax — the way its burden ulti-
mately is borne, the totality of its effects on commod-
ity prices, factor-prices, resource allocation, efforts,
and composition of production and consumption. Tax
incidence is no easy problem and requires all the
advanced tools of economics to help toward its solu-
tion.
Paul A. Samuelson, Economics 164-65 (11th ed. 1980).
A simple example may illuminate this argument. Suppose a
government imposes a sales tax of $50 upon previously untaxed
merchandise sold for $100. Assuming away all other market
intricacies, if the ultimate cost to the consumers becomes $150
following the tax, the tax incidence is 100%. The seller has
passed through the entire amount of the tax to the purchaser.
If, however, the price of the merchandise rises to only $125
after the tax is imposed, the tax incidence is 50%. Here, the seller
has passed through half the tax to the consumer, either absorb-
ing or shifting backward the remaining $25.
App. 12
moot, 875 F.2d 291 (Fed.Cir.1989). Unimpressed by the
ITA’s reasoning that its accounting methodology was a
long-standing agency practice, that an econometric anal-
ysis would place an impractical and extremely onerous
burden on the agency and importers in almost every
investigation, and that such an approach is imprecise and
would artificially inflate dumping margins,> the court
remanded to the ITA holding that its methodology was
not in accordance with the law.
On remand, the ITA commissioned Dr. Paul Wachtel,
an economist affiliated with New York University, to
undertake the mandated tax incidence analysis. Wachtel
developed a complex oligopolistic® model of the Korean
receiver market based upon the behavior of a single,
representative firm. Although this approach did not dis-
tinguish individual firm traits, Wachtel determined that
such a model would not suffer losses in accuracy due to
> To the extent tax incidence is less than 100%, an economic
or econometric analysis leads to a smaller upwards adjustment
of USP than the accounting approach and therefore to greater
dumping margins. To continue the previous example, support
USP is $75. Further assume that a home market tax of $50,
imposed on merchandise previously costing $100, resulted in a
FMV of $125. If tax incidence is assumed to be 100%, USP is
adjusted from $75 to $125, and no dumping margin exists. If tax
incidence is instead considered to be 50%, then USP is adjusted
upwards by only half the amount of the tax, from $75 to $100.
Comparing a USP of $100 to a FMV of $125 results in a dumping
margin of $25.
® An oligopoly is a “market condition in which sellers are
so few that the actions of any one of them will materially affect
price and hence have a measurable impact upon competitors.”
American Heritage Dictionary 866 (2d college ed. 1991). Here,
the Korean receiver market was determined to be an oligopoly.
App. 13
certain characteristics of the Korean receiver market.
Based upon his analysis, Wachtel concluded that tax inci-
dence in the Korean receiver market was 100 percent; i.e.,
that the consumer bore the entire amount of the Korean
excise, defense and value-added taxes.
In a second appeal, Daewoo II, 760 F.Supp. at 200, the
trial court rejected Dr. Wachtel’s analysis, finding that the
study did not adequately analyze Korean market data
and that the aggregate approach did not reflect the reality
of the marketplace. The court again remanded the case to
the ITA. In this second remand, the ITA considered com-
pany-specific tax incidence measurements completed by
Dr. Robert E. Litan of the Brookings Institute for the
Korean companies and Dr. Michael D. Bradley of the
George Washington University for Zenith. After rejecting
the Litan study, the ITA adjusted USP based upon the
Bradley study, which it characterized as the “best infor-
mation available” pursuant to 19 U.S.C. § 1677e(c)
(1988).” The agency ultimately found tax incidence vary-
ing from 33-63 percent, leading to dumping margins of
30.36 percent for Samsung, 33.95 percent for Goldstar,
7 Section 1677e(c) provides:
Determinations to be made on best information avail-
able. In making their determinations under this title,
the administering authority and the Commission
shall, whenever a party or any other person refuses or
is unable to produce information requested in a
timely manner and in the form required, or otherwise
significantly impedes an investigation, use the best
information otherwise available.
See generally Atlantic Sugar, Ltd. v. United States, 744 F.2d 1556,
1559-62 (Fed.Cir. 1984).
App. 14
and 48.18 percent for Daewoo. The trial court approved
the ITA’s analysis in Daewoo III, 794 F.Supp. at 389.
In this appeal, the United States and the Korean
companies ask us to reverse the holding in Daewoo I and,
in effect, the prior decision of the Court of International
Trade in Zenith Electronics. They contend that the trial
court erred in interpreting the statute to require the ITA
to undertake an econometric measurement of tax inci-
dence on home market consumers when adjusting USP to
offset the forgiveness of consumption taxes upon
exported merchandise.® In Zenith Electronics, 633 F.Supp.
at 1398, the Court of International Trade had reached the
“inescapable conclusion . . . that Congress intended the
administering agency to perform tax absorption measure-
ments for application in individual cases.” While the ITA
ultimately appealed the ruling, this court dismissed the
appeal in Zenith because of the absence of a case or
controversy. 875 F.2d at 293. The instant case now
requires resolution of the issue of whether section
1677a(d)(1)(C) compels the ITA to undertake a tax inci-
dence analysis.
This question is one of statutory interpretation,
which we must resolve with deference to the agency’s
interpretation rather than to the court’s. Suramerica de
Aleaciones Laminadas, C.A. v. United States, 966 F.2d 660,
663 (Fed.Cir.1992). When considering the agency’s con-
struction of 19 U.S.C. § 1677a(d)(1)(C), we decide only
whether “[the ITA’s] interpretation of its statutory power
* Amicus Curiae, American Association of Exporters and
Importers, also submitted briefing on this issue, urging reversal
of the Court of International Trade.
App. 15
falls within the range of permissible construction.” Id. at
667. The Supreme Court has instructed that
a court may not substitute its own construction
of a statutory provision for a reasonable inter-
pretation made by the administrator of an
agency.
We have long recognized that considerable
weight should be accorded to an executive
department’s construction of a statutory scheme
it is entrusted to administer, and the principle of
deference to administrative interpretations has
been consistently followed by this Court when-
ever decision as to the meaning or reach of a
statute has involved reconciling conflicting poli-
cies, and a full understanding of the force of the
statutory policy in the given situation has
depended upon more than ordinary knowledge
respecting the matters subjected to agency regu-
lation.
Chevron U.S.A., Inc. v. Natural Resources Defense Council,
Inc., 467 U.S. 837, 844, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694
(1984). The Court has further indicated that
[w]hen faced with a problem of statutory con-
struction, this Court shows great deference to
the interpretation given the statute by the offi-
cers or agency charged with its administration.
To sustain [an agency’s] application of [a] statu-
tory term, we need not find that its construction
is the only reasonable one, or even that it is the
result we would have reached had the question
arisen in the first instance in judicial proceed-
ings.
Zenith Radio Corp. v. United States, 437 U.S. 443, 450, 98
S.Ct. 2441, 2445, 57 L.Ed.2d 337 (1978) (citations omitted).
App. 16
These tenets extend to their limits when the ITA
interprets the antidumping laws. As noted in Smith-
Corona Group, Consumer Products Div., SCM Corp. v. United
States, 713 F.2d 1568, 1571 (Fed.Cir.1983), cert. denied, 465
U.S. 1022, 104 S.Ct. 1274, 79 L.Ed.2d 679 (1984) (citations
omitted):
The Tariff Act of 1930, as amended by the Trade
Agreements Act of 1979, establishes an intricate
framework, for the imposition of antidumping
duties in appropriate circumstances. The
number of factors involved, complicated by the
difficulty in quantification of those factors and
the foreign policy repercussions of a dumping
determination, makes the enforcement of the
antidumping law a difficult and extremely deli-
cate endeavor. [The ITA] has been entrusted
with responsibility for implementing the anti-
dumping law. [The ITA] has broad discretion in
executing the law.
This court has recognized the ITA as the “master” of
antidumping law, Consumer Prods. Div., SCM Corp. v. Sil-
ver Reed Am., Inc., 753 F.2d 1033, 1039 (Fed.Cir.1985),
worthy of considerable deference. See also Suramerica, 966
F.2d at 667.
The statutory language of 19 U.S.C. § 1677a(d)(1)(C)
allows tax adjustment of USP “only to the extent that
such taxes are added to or included in the price of such or
similar merchandise when sold in the country of exporta-
tion.” The ITA and its predecessor have consistently
interpreted this language since its enactment in 1974 as a
requirement to examine customary business records of
exporters. If an exporter’s records show that a tax was
either a separate “add on” to the domestic price or,
App. 17
although not separately stated, was, in fact, included in
the price and that the taxes were paid to the government,
that satisfies the tax inquiry required by the statute for an
adjustment of the USP. We conclude that this interpreta-
tion of the statute is reasonable. The statute does not
speak to tax incidence, shifting burdens, or pass-through,
nor does it contain any hint that an econometric analysis
must be performed. The statutory language does not
mandate that ITA look at the effect of the tax on con-
sumers rather than on the Korean company. The reality is
that, as an unavoidable incident of any sale by the com-
pany, these taxes can only be recouped in their entirety
from purchasers.
Both Zenith and the Unions argue that such a reading
of 19 U.S.C. § 1677a(d)(1)(C) renders its final phrase
superfluous, but we disagree. As indicated, the language
specifies adjustment whether or not the tax is separately
stated in the home market price. Further, taxes of the type
forgiven upon export may not actually be charged upon
all home market sales. Exemption may be allowed under
various taxation regimes. For example, the statutes
describing the Korean defense tax, special excise tax, and
value-added tax each include exemption provisions for
certain transactions, such as international navigation ser-
vices or sales to the military. Defense Tax Act, No. 2768,
art. 3 (1975); Special Excise Tax Act, No. 2935, art. 2
(1976); Value-Added Tax Act, No. 2934, art. 11 (1976). See
also, e.g., Final Results of Antidumping Duty Administrative
Review, Oil Country Tubular Goods from Canada, 56 Fed.
Reg. 38408, 38414 (1991) (noting that only certain home
market sales incur “provincial tax”). The phrase is not
rendered superfluous by ITA’s interpretation.
SS ee
App. 18
In Zenith Electronics, the Court of International Trade
found support for econometric studies in the history of
the Trade Act of 1974, Pub.L. No. 93-618, 88 Stat.1978,
2045, the legislation that added the disputed language of
section 1677a(d)(1)(C) to the statute.? The court quoted
the following passage from H.R.Rep. No. 571, 93d Cong.,
Ist Sess. 69 (1973) (emphasis added):
With the amendment, no adjustment to the
advantage of the foreign exporter would be per-
mitted for indirect tax rebates unless the direct
relationship of the tax to the product being exported,
or components thereof, could be demonstrated.
Further, an adjustment for such tax rebates
would be permitted only to the extent that such
taxes are added to or included in the price of
such or similar merchandise when sold in the
country of exportation. This is to insure that the
rebate of such taxes confers no special benefit
upon the exporter of the merchandise that he
does not enjoy in sales in his home market. To
the extent that the exporter absorbs indirect taxes in
his home market sales, no adjustments to purchase
\ price will be made and the likelihood or size of
dumping margins will be increased.
633 F.Supp. at 1396. The court also set forth a portion of
Ambassador William D. Eberle’s statement to the Senate
Finance Committee, Hearings Before the Senate Committee
on Finance on H.R. 10710, 93d Cong., 2d Sess. 310 (1974):
The definition of both “purchase price” and
“exporter’s purchase price” are amended to har-
monize the treatment of foreign tax rebates
” No party argues that a mandate for tax incidence analyses
comes from any other source.
App. 19
under the Antidumping Act with the standard
of their treatment under the countervailing duty
law. No adjustment for tax rebates to the advan-
tage of the foreign exporter will be permitted
unless the direct relationship between the tax and
the exported product or its components can be
demonstrated. For example, if the exported
product benefited from a tax rebate on the mort-
gage on the plant that produced it, the rebate
could not be used in the computations to reduce
the dumping margin. Moreover, an adjustment
for a tax rebate will be permitted only to the
extent such taxes are added to or included in the
price of the merchandise when sold in the home
market. To the extent the exporter absorbs indirect
taxes in sales in the home market, no adjustment will
be made to purchase price. The effect will be to
increase the size of dumping margins under
such circumstances.
633 F.Supp. at 1396-97. In the view of the trial court, these
“és
references constituted a “straight-forward explanation of
the operation and purpose of the [disputed] clause” by
Congress.'° Id. at 1395.
We initially note that the thrust of these remarks
expresses concern over identification of a particular tax
with the specific product. Congress wished to limit any
tax rebate to taxes with a direct relationship to the
exported product. It is not at all clear what is meant by
the later reference to “absorbs indirect taxes.” But even if
both of the quoted passages were intended to refer to tax
incidence of directly related taxes, we cannot accept that
10 The court also cited other references that merely recited
the words of the statute. See 633 F.Supp. at 1395-97.
App. 20
these two passing references alone are sufficient to effect
a revolutionary alteration of the ITA’s and its prede-
cessors’ consistent use of an accounting approach. As the
Supreme Court noted in Allen v. State Bd. of Elections, 393
U.S. 544, 568-69, 89 S.Ct. 817, 833, 22 L.Ed.2d 1 (1969), “in
any case where the legislative hearings and debate are so
voluminous, no single statement or excerpt of testimony
can be conclusive.” On this meager legislative history and
with no real debate on what would have been a dramatic
change in law, we cannot say that the ITA’s interpretation
of the statute contravenes the statute.
A consideration of subsequent legislative activity
confirms this analysis. In Chaparral Steel Co. v. United
States, 901 F.2d 1097, 1106 (Fed.Cir.1990), we stated that
“additional deference may be given to an agency inter-
pretation when a statutory provision remains unchanged
after Congress has considered an amendment, Partic-
ularly one that plainly would have reversed established
agency practice on this issue.” Although Congress both
knew of the ITA’s interpretation of the statute! and
revisited the antidumping statute both in 1984 and 1988, !2
it took no action to modify the practice of the ITA.
'! See Options to Improve the Trade Remedy Laws: Hearings
Before the House Subcommittee on Trade, Committee on Ways and
Means, 98th Cong., Ist Sess. 619, 624 (1983) (statement of Ter-
rence P. Stewart informing Congress that Commerce does not
require proof of tax “pass through” when adjusting USP for
domestic taxes).
'2 Omnibus Trade and Competitiveness Act, Pub.L. No.
100-418, 102 Stat. 1107 (1988); Trade and Tariff Act of 1984,
Pub.L. No. 98-573, 98 Stat. 2948.
App. 21
In reaching this result, we are also cognizant of the
onerous burden entailed by the Court of International
Trade’s mandate. In contrast to the commercial facts
available in sales receipts, tax returns and other account-
ing records, an econometric analysis of tax pass-through
requires numerous subsidiary market inquiries, entails a
high degree of speculation based on one economic theory
rather than another, and produces results of dubious
soundness. As the Supreme Court noted in Zenith Radio,
437 U.S..at 458-59, 98 S.Ct. at 2449 (citation omitted), a
countervailing duty case:
Even “modern” economists do not agree on the
ultimate economic effect of remitting indirect
taxes, and — given the present state of economic
knowledge — it may be difficult, if not impossi-
ble, to measure the precise effect in any particu-
lar case. .. . In this situation, it is not the task of
the judiciary to substitute its views as to fairness
and economic effect for those of [the ITA].
Similarly, when this court considered the ITA regula-
tions that modified foreign market value based upon cost
differences in circumstances of sales, rather than on
“value”, we recognized that “[t]he ready availability of
cost data that can be employed without extensive com-
plex econometric analysis supports the reasonableness of
[the ITA’s] decision to rely on cost. Cost may be the only
practical way to administer the statute.” Smith-Coroma,
713 F.2d at 1577 n. 27. An economic analysis of tax inci-
dence may reasonably be rejected for the same reason.
The delay and expense in making such an analysis in
virtually every investigation would restrict the number of
investigations which could be handled and interfere with
App. 22
ITA’s statutorily mandated duty to “complete the [anti-
dumping] determination within rigid time limits.” Id. at
1577. Nor would this approach enable exporters to the
United States to operate within the confines of the anti-
dumping laws; antidumping duty assessments could
issue based upon econometric measurements the exporter
could not possibly predict. Further, we cannot conclude
that the burden is worth undertaking because of more
soundly based results. The results of econometric analysis
of tax pass-through in this case resulted in three widely
disparate opinions.
We thus cannot agree with the trial court that the
ITA’s interpretation of section 1677a(d)(1)(C) was con-
trary to the statute. We reverse this holding of Daewoo I,
712 F.Supp. at 954-56.
IT].
Tax Basis
[he Korean companies additionally allege error by
the Court of International Trade in reversing the ITA’s use
of the net delivered selling price to the first unrelated
customer as the imputed commodity tax base under 19
U.S.C. § 1677a(d)(1)(C) for calculating the amount of tax
adjustment. That provision mandates a calculation of
imputed tax amounts to be added to the USP, but does
not specify to which USP the Korean taxes are to be
applied as the product moves to the consumer. This
determination is important because the Korean taxes are
not a specific amount, but instead ad valorem in nature;
and it is difficult because the question is a hypothetical.
The Korean taxes must be applied to sales of goods at
App. 23
some discrete moment in the stream of commerce with or
in the United States, a different market from that in
which the taxes should be levied, but are not, because of
exportation.!*
By analyzing Korean tax law and practice, the ITA
sought to make an informed judgment on how the Korean
authorities would theoretically tax the exported televi-
sion receivers so as to select the most comparable price in
the U.S. market. Upon the first remand, the ITA deter-
mined that in Korea, the taxes were assessed against the
net price of the delivered television receivers to unrelated
dealers. The Korean price paid by the dealer included
post-factory costs, such as delivery and warehousing and
the tax was assessed on the price including these post-
factory costs. The ITA reasoned that the Korean dealers
had the distinguishing trait of being the first parties in
the Korean stream of commerce unrelated to the manufac-
turer. Accordingly, in selecting the U.S. prices, the ITA
‘5 An example may demonstrate the significance of this
determination. Assume that certain guods sell for $200 in both
the United States and in the seller’s home market, and that the
foreign market tax rate is 50%. In the United States, the goods
are sold from the factory to a related distributor for $100. The
distributor then sells the goods to consumers for $200. In the
foreign market, the goods are sold directly to consumers for
$200, plus a tax of $100, for a total of $300.
If the tax base is considered to be the sales price to the first
unrelated customer, then FMV, including taxes, equals $300.
Commerce would also modify the base USP of $200 upwards by
50%, to equal $300. No dumping margin exists.
If, however, the tax base is considered to be the factory sales
price, Commerce would only modify a base USP of $100 to $150.
As the FMV remains $300, a dumping margin of $150 results.
App. 24
passed over the intracompany transfer price to affiliates
of the Korean manufacturer which brought the receivers
to the U.S., i.e., an ex factory price. Instead the ITA
selected as most comparable the sales price to customers
who were the first unrelated purchasers in the chain. The
USP from the importer to U.S. dealers thus also included
transportation, storage and selling expenses
On appeal, Daewoo II, 760 F.Supp. at 202-04, the Court
of International Trade rejected the ITA’s selected tax base.
According to the court, the “plain mandate of Korean
law” indicated “that the tax base in the home market is
the price at which the goods are carried out of the place
of manufacture.” Id. at 203. The court considered the
statutory language to compel use of an ex factory price,
which does not include any post-factory expenses, as the
tax base. In the view of the trial court, the ITA acted
without the support of substantial evidence in the record
that the sales price to the first unrelated purchaser in the
United States would likely be the tax base chosen by
Korean authorities. The court did note, however, that “in
the Korean market the taxable events were sales to unre-
lated dealers, but that just happened to be the type of
price at which the ex factory transaction occurred.” Id. at
204.
On review of this issue, like the trial court, we look to
see whether substantial evidence supports the decision of
the ITA on this issue. Substantial evidence consists of
“such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.” Matsushita,
750 F.2d at 932 (quoting Consolidated Edison Co. v. NLRB,
305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126 (1938)).
App. 25
The specific determination we make is “whether the evi-
dence and reasonable inferences from the record support
the [ITA] finding.” Matsushita, 750 F.2d at 933. The ques-
tion is whether the record adequately supports the dec-
sion of the ITA, not whether some other inference could
reasonably have been drawn. As frequently stated, “the
possibility of drawing two inconsistent conclusions from
the evidence does not prevent an administrative agency's
finding from being supported by substantial evidence.”
Id. (quoting Consolo v. Federal Maritime Comm’n, 383 U.S.
607, 619-20, 86 S.Ct. 1018, 1026, 16 L.Ed.2d 131 (1966)).
It cannot be determined from review of the three
Korean tax statutes alone what would be the tax base in
Korea. The legislation is broadly worded and does not
specify whether, for instance, delivery and insurance
costs are included. The Value-Added Tax Act, No. 2934,
art. 6 (1976) provides only that a taxable transaction
consists of “the delivery and/or transfer of goods.” The
“taxable basis” consists of monetary payments for those
goods; although such items as damaged goods are
excluded from the basis, the statute does not address
delivery costs. Id. at art. 13.
The Special Excise Tax Act, the statute apparently
relied upon by the Court of International Trade, see
Daewoo II, 760 F.Supp. at 203, is at first blush more help-
ful.!4 It provides that the appropriate tax base for manu-
facturers consists of “the price at which the goods are
carried out from the factory.” Special Excise Tax Act, No.
14 As the defense tax is a surtax on the special excise tax, it
presents no relevant basis provisions and is unhelpful. See
Defense Tax Act, No. 2768, art. 4, item 5 (1975).
App. 26
2935, art. 8 (1976). Although the translated statutory lan-
guage suggests that we would call an ex factory price,
i.e., without delivery and other post-factory charges, it
could also be that the price contemplated by the statute
includes an add-on for the “carrying out from the fac-
tory.”
In reaching its conclusion of the USP, the ITA relied
on actual Korean tax practice, not merely on the statutes.
As part of the ITA investigation, the Korean companies
submitted numerous accounting records providing infor-
mation on receiver sales and taxation. These records
spanned tens of thousands of sales over the period under
review. It is uncontested that these records demonstrate
that in each case, the tax base employed by the Korean
authorities consisted of the full delivered sales price to
dealers. The tax base actually employed by the Korean
authorities therefore included delivery, warehousing and
other post-factory costs. In addition, the Korean com-
panies point to evidence demonstrating that, when the
manufacturer sold receivers to its affiliate rather than
directly to an unrelated dealer, Korean tax officials used
the dealer price as the tax base and ignored the intra-
company transfer price.
Given this evidence, we cannot agree with the trial
court that the ITA erred in selecting the analogous point
for the tax base in the United States. Substantial evidence
supports the ITA’s choice, and that is all the statute
requires. The Court of International Trade’s rejection of
the USP selected by the ITA for lack of substantial evi-
dence is reversed.
App. 27
IV.
Cap on Duties
The Korean companies also appeal the Court of Inter-
national Trade’s holding in Daewoo III, 794 F.Supp. at 393,
that no cap on assessment rates exists if estimated duties
are deposited in the form of a bond.!5 This ruling con-
cerns an ITA regulation, 19 C.F.R. § 353.50, which speci-
fically treated cash deposits and bond deposits the same
for capping purposes.!6
Under the antidumping laws, estimated duties may
be assessed and must be paid or guaranteed before the
amount is finally resolved. If a preliminary determination
'° Amici curiae Emerson Radio Corporation and the Ameri-
can Association of Exporters and Importers filed briefs on this
issue.
16 45 Fed. Reg. 8182, 8204 (1980) (codified at 19 C.ER.
§ 353.50) provided that:
If the amount of the estimated antidumping duty
deposited pursuant to the Preliminary Affirmative
Determination is different from the .. . Antidumping
Duty Order, the difference . . . shall be:
(a) Disregarded, to the extent that the estimated
duty is less than the duty determined to be assessable
under the Order, or
(b) Refunded, to the extent that estimated
duties collected were more than the duty determined
to be assessable under the Order.
Commerce later clarified the provisional rate cap regulation:
If the cash deposit or bond . . . is different from the
dumping margin . . . , the Secretary will instruct the
Customs Service to disregard the difference to the
extent that the cash deposit or bond is less than the
dumping margin... .
54 Fed. Reg. 12742, 12779 (1989) (codified at 19 C.F.R. § 353.23).
App. 28
indicates that dumping has occurred, 19 U.S.C. § 1673b(d)
requires the ITA to “order the posting of a cash deposit,
bond, or other security, as it deems appropriate, for each
entry of the merchandise concerned equal to the esti-
mated average amount by which the [FMV] exceeds the
[USP].”
If a preliminary determination matures into a final
affirmative determination of dumping and issuance of a
dumping order which exceeds the cash or bond deposit,
the ITA by regulation limited an importer’s antidumping
duty liability to the amount of the previously deposited,
estimated duties whether the ‘deposit was in the form of
cash or bond. In issuing this regulation, the ITA relied on
the statute respecting the cap although the statute does
not specifically deal with capping by a bond deposit. The
pertinent statute, 19 U.S.C. § 1673f(a) (1988), provides:
If the amount of a cash deposit collected as security for
an estimated antidumping duty .. . is different... from
the antidumping order, . . . then the difference shall be -
(1) disregarded, to the extent the cash deposit col-
lected is lower than the duty under the order, or
(2) refunded, to the extent the cash deposit is higher
than the duty under the order.
The Korean companies here covered their estimated duty
obligations with bonds in accordance with the statute and
regulations.
In determining that bond deposits did not suffice to
cap antidumping duty liability, the Daewoo III court relied
upon a ruling in Zenith Electronics v. United States, 770
F.Supp. 648 (Ct. Int’l Trade 1991) (“Zenith II”). There, the
iii cea na emraneay
App. 29
court rejected the ITA’s interpretation that a bond deposit
had the same effect as a cash deposit. The ITA had argued
that section 1673f(a), in referring only to cash deposits,
contrasted with other related sections which refer also to
bonds and other forms of security, see 19 U.S.C.
§§ 1673b(d)(2), 1673d(c)(2)(B), 1673e(c)(1), and believed
that the difference was an inadvertence which would
have awkward results. However, the court disagreed,
noting that section 1673f(a) appeared to single out cash
deposits, and that a cap on assessment rates for deposits
in the form of bonds or other security was contrary to the
Statute. Zenith Il, 770 F.Supp. at 651-54. Applying this
rule, the Daewoo III court, held that the Korean companies
were liable for the amount of the dumping margin deter-
mined in the final antidumping order - an amount signif-
icantly greater than the estimated duties for which they
posted a bond. 794 F.Supp. at 393.17
In considering the issue, we continue to rely upon the
case law previously cited in Part II of this opinion
respecting deference to the ITA’s interpretation. We have
additionally examined the authority of Melamine Chemi-
cals, Inc. v. United States, 732 F.2d 24 (Fed.Cir.1984), where
this court also considered an antidumping regulation pro-
mulgated by the ITA. We there observed:
When the issue is the validity of a regulation
issued under a statute that an agency is charged
'7 After the Court of International Trade issued its opinion
in Zenith Il, Commerce indicated that it would follow that hold-
ing, but prospectively only. 57 Fed. Reg. 45769 (1992). The court
here rejected that limitation. In view of our resolution of this
issue, the changed regulation may have prospective application
only.
App. 30
with administering, it is well established that
the agency’s construction is entitled to great
weight. Similarly, agency regulations are to be
sustained unless unreasonable and plainly
inconsistent with the statute, and are to be held
valid unless weighty reasons require otherwise.
Id. at 928 (citations omitted). We are also mindful of the
ITA’s past practice in this area. The Trade Agreements Act
of 1979, Pub.L. No. 96-39, § 107, 93 Stat. 144, 193, pro-
vided that its provisions, including 19 U.S.C. § 1673f(a),
would take effect on January 1, 1980. The ITA issued 19
C.F.R. § 353.50 the next month, on February 6, 1980,
interpreting the statute to allow the cap for bond and
cash deposits. 45 Fed. Reg. 8182, 8204. In this regard, the
Supreme Court has instructed that “an administrative
practice has particular weight when it involves a contem-
poraneous construction of a statute by the [persons]
charged with the responsibility of setting its machinery in
motion, of making the parts work efficiently and
smoothly while they are yet untried and new.” Zenith
Radio Corp. v. United States, 437 U.S. 443, 450, 98 S.Ct.
2441, 2445, 57 L.Ed.2d 337 (1978) (citations omitted). We
further note that the ITA has consistently placed a ceiling
upon antidumping duties irrespective of whether a bond
or cash deposit is posted as security.
With these standards guiding us, we again must hold
that the Court of International Trade erred by substitut-
ing its interpretation for that of the ITA. Section 1673f(a)
does not prohibit the application of the cap to bonds. This
provision simply does not speak to whether estimated
duty bonds cap antidumping duties. Given this silence, as
well as the statute’s authorization to file bonds to cover
App. 31
estimated duties, we cannot say that the ITA’s allowance
of a duty ceiling for bonds is contrary to the statute. We
also are unpersuaded of any other “weighty reasons” to
hold that the ITA’s longstanding practice rests on an
unreasonable interpretation of the statute.'*
An examination of the antidumping statute’s legisla-
tive history buttresses our conclusion. The House Com-
mittee Report to the 1979 Trade Agreements Act includes
the following passage:
[T]he Committee understands that it is the
intent of the Authority to require cash deposits
only in those cases where it believes that bonds
or other forms of security will not adequately
protect the revenue. Because injurious dumping
has not been finally determined at this point in
the investigation and a requirement of a cash
deposit, if unnecessary, might represent a bur-
den to the importer, the Committee has agreed
with this practice.
H.R.Rep. No. 31, 96th Cong., Ist Sess. 62 (1979). Further,
this court has recognized that “failure to revise or repeal
the agency's interpretation is persuasive evidence that
the interpretation is the one intended by Congress.” Chap-
arral Steel, 901 F.2d at 1106 (quoting NLRB v. Bell Aerospace
Co., 416 U.S. 267, 94 S.Ct. 1757, 40 L.Ed.2d 134 (1974)).
16 Considered alone, the failure to specify bonds in
§ 1673f(a) might indicate a deliberate decision by Congress
against a cap based on a bond or security. Cf. Nissan Motor Corp.
v. United States, 884 F.2d 1375, 1377 (Fed.Cir.1989) (reciting the
familiar maxim that expressio unius est exclusio alterius, the
expression of one thing is the exclusion of the alternative).
However, such a conclusion is not the only possible inference
here in view of the other factors discussed above.
App. 32
Although Congress has twice significantly amended the
Act, it did not alter section 1673f(a) on either occasion.!%
Both of these actions evidence that the policy of the ITA
comports with congressional intent.
In reaching its conclusion, the Court of International
lrade relied principally on a “clear distinction [between
treatment of cash and bonds] in the underlying interna-
tional agreements” that the U.S. international trade laws
were designed to implement. Zenith Electronics, 770
F.Supp. at 653. The court concluded that while the GATT
Subsidies Code provided for a cap whether the security
took the form of cash or bond, the GATT Antidumping
Code distinguished a security from cash and only a cash
deposit capped the duties. We do not find such differ-
ences between the GATT Antidumping and Subsidies
Codes. The court quoted from a House of Representatives
reprint of the GATT Antidumping Code?° which stated
that provisional measures “may take the form of a provi-
sional duty or, preferably, a security — by deposit or bond -
equal to the amount of the anti-dumping duty provi-
sionally estimated.” Id. (emphasis added). From this lan-
guage, the court then reasoned, “jt]his establishes a
distinction in the Antidumping Code between ‘provisio-
nal duty,” which would be the equivalent of cash deposits
under the law, and the posting of securities.” Id.
19 See supra note 12.
20 Agreements Reached in the Tokyo Round of Multilateral Trade
Negotiations, H.R.Doc. No. 153, 96th Cong., Ist Sess., pt. 1, at
312, 323 (1979).
App. 33
Our examination of the GATT Antidumping Code
reveals that the distinction drawn by the Court of Inter-
national Trade was based on an incorrect print.?! The
correct version of the GATT Antidumping Code reads:
“[p]rovisional measures may take the form of a provisio-
nal duty, or, preferably, a security — by cash deposit or
bond — equal to the amount of the antidumping duty
provisionally estimated.”?2 The addition of the word
“cash” negates the court’s interpretation that a security
could not be a cash deposit.
We conclude that the Court of International Trade
erred in invalidating the ITA’s regulation on the ground
of conflict with section 1673f(a). The holding of Daewoo
III, 794 F.Supp. at 393, that bond deposits do not cap
antidumping duties is reversed.
V
Conclusion
For the foregoing reasons, we affirm the decision of
the Court of International Trade on the issue of multiplier
effect of 19 U.S.C. § 1677a(d)(1)(C), and reverse its rulings
on the other issues addressed herein. The case is
remanded for proceedings consistent with this opinion.
21 The House Report cited by the court includes this lan-
guage in its “Corrigendum” section, which instructs the reader
to “[i]nsert ‘cash’ between ‘by’ and ‘deposit’ in the second line”
of paragraph 2 of Article 10. H.R.Doc. No. 153, supra, at 333,335.
22 Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade, supra, Part I, art. 10, para. 2, 31
U.S.T. at 4933 (emphasis added).
App. 34
VI
Costs
Each party shall bear its own costs
AFFIRMED-IN-PART, REVERSED-IN-PART, AND
REMANDED
App. 35
DAEWOO ELECTRONICS CO.,
LTD. et al., Plaintiffs,
V.
The UNITED STATES, Defendant.
Court No. 85-01-00140.
United States Court of International
Trade.
July 14, 1992.
Korean television manufacturers appealed antidump-
ing order. The Court of International Trade, 712 F.Supp.
931, remanded for reconsideration. The Department of
Commerce determined antidumping margins, and manu-
facturers appealed. The Court of International Trade, 760
F.Supp. 200, remanded for reconsideration. United States
manufacturer moved for final judgment on Department's
redetermination of antidumping margins. The Court of
International Trade, Watson, Senior Judge, held that: (1)
Department properly ordered Korean manufacturers to
use econometric methods; (2) Department properly relied
on report of United States manufacturer’s expert as best
information available; (3) Department used correct tax
basis for exported television receivers; and (4) earlier
decision with respect to assessment rate cap had to be
modified to conform with subsequent decision in another
case.
Affirmed as modified.
Reid & Priest, Washington, D.C. (David A. Gantz,
Andrea E. Migdal, Kevin Lara, of counsel) for plaintiffs
Daewoo Electronics, Co., Ltd., Daewoo Electronics Corp.
of America Inc. and the Daewoo Corp.
App. 36
Aiken [sic], Gump, Hauer & Feld, Washington, D.C.
(Warren E. Connelly and Edith E. Scott of counsel) for
plaintiff-intervenors Samsung Electronics Co., Ltd. and
Samsung Electronics America, Inc.
Donovan Leisure, Rogovin, Huge & Schiller, Wash-
ington, D.C. (Michael P. House & R. Will Planert, of
counsel) for plaintiff-intervenors Goldstar Co., Ltd. and
Goldstar Electronics Intern., Inc.
Collier, Shannon, Rill & Scott, Washington, D.C. (Paul
D. Cullen and Jeffrey S. Beckington of counsel) for defen-
dant-intervenors the International Union of Electronic,
Elec., Technical, Salaried and Machine Workers, AFL-CIO;
Internl. Broth. of Elec. Workers; Independent Radionic
Workers of America, and Indus. Union Dept., AFL-CIO.
Frederick L. Ikenson, P.C., Washington, D.C. (Fred-
erick L. Ikenson, J. Eric Nissley and Larry Hampel of
counsel) for plaintiff Zenith Electronics Corp.
Stuart M. Gerson, Asst. Atty. Gen., David M. Cohen,
Director, Commercial Litigation Branch, U.S. Dept. of Jus-
tice, Washington, D.C. (Velta A. Melnbrencis, Attorney)
and Robert E. Nielsen, Attorney-advisor, Office of Chief
Counsel for Import Admin., U.S. Dept. of Commerce, for
defendant U.S.
OPINION AND ORDER
WATSON, Senior Judge:
Following a second remand to the Department of
Commerce and its redetermination, this action is now
before the court on a motion by Zenith Electronics Corpo-
ration for final judgment. The motion is supported by the
App. 37
government and opposed by three groups of Korean liti-
gants, Daewoo, Samsung, and Goldstar. The previous
opinions in this case were Daewoo Electronics Co., Ltd. v.
United States, 13 C.1.T. 253, 712 F.Supp. 931 (1989) and
Daewoo Electronics Co., Ltd. v. United States, C..1.T. __,
760 F.Supp. 200 (1991).
The central issue in this motion for final judgment
concerns the tax pass-through measurement for which the
court set out guidelines in its second remand.
The tax pass-through measurement which remains at
issue here is done for the purpose of determining to what
extent the foreign market price is higher than the price in
the United States due to the fact that it includes a tax
imposed when the merchandise is sold in the country of
exportation, but not imposed when it is exported. In
order to eliminate the unfairness which would result
from comparing a price which includes the tax to one
which does not, and thus finding a dumping margin
where one does not exist, the law requires an adjustment
for taxes. Obviously, the greater the percentage of the
commodity tax which is passed on to the consumer and
which shows up in the price, the larger is the effect
resulting from its removal from the equation comparing
the price in the home market of the foreign producer and
the price in the United States market.
In the remand opinion, the court disapproved the
method by which Commerce found that the entire com-
modity tax was passed through to consumers. In brief,
Commerce made certain assumptions about the nature of
the demand curve for the products in the Korean market
which were not tested against actual data. Commerce also
App. 38
aggregated the data of all Korean respondents for differ-
ent types of television receivers, creating a database
which did not accurately reflect the evidence in the
record. Accordingly, the court remanded the action to
Commerce “to perform the analysis on a disaggregated
basis, to consider alternative forms for demand curves,
and explain the evidence from the data which justifies it
[sic] choice of one form over others.” At the conclusion of
its opinion, the court ordered “that with respect to the
measurement of tax pass-through, Commerce shall per-
form the measurements on a disaggregated basis for each
respondent and for the different types of television
receivers; and that Commerce shall consider alternative
forms of demand curves and specify the evidence in the
record which makes it [sic] chosen curve a superior repre-
sentation of the facts with respect to demand in the home
market.”
The Korean litigants argue that the results of this
latest remand proceeding are defective because Com-
merce did not comply with the full terms of the court’s
order. They further argue that Commerce did not specify
the methodology which was to be used in measuring the
pass-through when it placed a burden on the Korean
litigants to use generally accepted econometric methods
to calculate the pass-through. The Korean interests also
claim that Commerce ultimately erred in using Professor
Bradley’s measure of pass-through (which had earlier
been submitted by Zenith), as the best information avail-
able.
As to the first argument, the court is satisfied that
Commerce complied with its obligations under the
App. 39
remand order by requiring the respondents to use gener-
ally accepted econometric methods. The failure of respon-
dents to supply the information on which a more precise
analysis could have been made, cannot be held against
Commerce.
The court views econometrics as one of a number of
alternative methodologies. Although it would obviously
be easier for the respondents if Commerce specified the
particular econometric technique which should be used,
that is not a requirement of the court, nor would it be
reasonable in the formative stages of administrative expe-
rience in this area.
The claim that Commerce improperly relied on the
best information available and unlawfully rejected the
information supplied by the Korean respondents requires
some background discussion. Commerce began its recon-
sideration on remand by requiring the respondents to
provide pass-through measurements, utilizing any meth-
odology which they wished to employ, and opened up
the record for the receipt of new information. Zenith
objected to the opening of the record. Thereafter, the
government moved the court for an extension of time
within which to complete the remand, asking for nine
months if the record was to be reopened or four months if
it was to remain closed. The court approved the second
alternative. In the meantime, Commerce had corrected its
first remand instructions by informing the respondents
that in order to perform the tax pass-through measure-
ment, they had to use generally accepted econometric
methods and were not free to use any methodology at all.
The three Korean respondents submitted individual pass-
through analyses, all of which relied exclusively upon a
App. 40
report which had been prepared for them by their jointly
retained consultant, Dr. Litan. With respect to the basic
question of what demand curve functional form would
best fit the underlying data in this case (linear, log-linear,
or quadratic), the Litan report gave overwhelming sup-
port for the log-linear specification. That conclusion was
based on the fact that Dr. Litan calculated certain statis-
tics for several types of regressions run against each of
the three functional forms in issue. According to Dr.
Litan, the log-linear form, which is the one which con-
clusively dictates full pass-through in this case, produced
the best results for 11 of the 12 models/producer combi-
nations. Based on that conclusion, it was unnecessary for
Dr. Litan to perform actual pass-through measurements
and none were made.
Following the submission of the Litan Report, Zenith
submitted comments by Professor Bradley which con-
clusively showed that Dr. Litan had erred in applying the
formula for developing the statistics for the log-linear
equation. A correct computation of those statistics actu-
ally provided corroboration that tax pass-through was
less than 100%.
Thereafter, the Korean respondents submitted a cor-
rected report from Dr. Litan. That correction was fol-
lowed by another response from Professor Bradley.
Commerce ultimately rejected the corrected Litan report
on the ground that his chosen method wzs not adequately
implemented. More specifically, Commerce noted that the
Litan report should have employed a maximum likeli-
hood test, a test that it considered necessary to implement
the procedure finally being used by Dr. Litan to distin-
guish between functional forms.
App. 41
The rejection of the Litan report, after a relatively
generous allowance of an opportunity for its correction,
left the record bare of any pass-through measurements
other than those of Professor Bradley. At that point Com-
merce chose to invoke its authority to use the best infor-
mation available to designate Professor Bradley’s
measurement as such information without relying
directly upon Professor Bradley’s underlying analysis as
the one preferred by Commerce.
The Korean litigants argue that having rejected Dr.
Litan’s work, Commerce should have reiied on the work
of its own economists rather than moving to the measure-
ments of Professor Bradley.
The court is of the opinion that the work done by
Commerce’s own economists does not amount to a mea-
surement of pass-through, does not cure the defects
found in the Litan report on which it is based, and would
be insufficient to support a choice between linear and
log-linear demand equations. The only conceivable sup-
port for using the work of Commerce’s own economists is
[able One of Technical Appendix Two to the second
remand results. This shows only the outcome of a single
manipulation of Dr. Litan’s result and does not represent
the outcome of a new set of estimations. The economists
themselves indicate that their table does not provide any
statistical tests which would allow one to choose between
linear and log-linear demand equations. Second R.R. Pub-
lic Doc. No. 71, Technical Appendix Two at 14.
What remains is the question of the legality of Com-
merce’s use of Professor Bradley’s results as the best
information available. The court does not find this to be
App. 42
an improper use of the authority to rely on best informa-
tion available. There can certainly come a point in an
administrative proceeding when providing further
opportunities for respondents to supply information has
to be balanced with the need to reach a final result. The
court does not find it necessary to discuss the flaws
which Commerce itself professes to find in the Bradley
measurement result. Even if the Bradley measurement
results are flawed, this would not detract from their use
as best information available.
The court notes that the use of best information avail-
able by the Commerce Department in its final results in
this second remand led to a conclusion that from thirty-
three percent to sixty-two percent of the Korean commod-
ity taxes were passed-through by the Korean respondents
and could therefore enter into the calculation of the
dumping margin. It should be pointed out that this was
not the harshest result which the agency could have
reached. It would have been entirely within the power of
the Commerce Department, in the absence of satisfactory
information concerning the claimed commodity tax
adjustment, to deny that claim in its entirety. In point of
fact, the Unions argue that in the absence of a proper
showing of entitlement by the Korean respondents to the
claimed adjustment, no adjustment whatsoever should
have been made. The unions argue that Commerce vio-
lated a fundamental tenet of administrative law by
departing from the standard practice of requiring a dem-
onstration of entitlement before granting an adjustment.
The court does not find that such a rigorous standard
applies in this area of the law. The Commerce Depart-
ment has the authority to make adjustments to the extent
ee
App. 43
warranted by the evidence in the record and they need
not be made on an all or nothing basis.
Aside from the argument about the pass-through
measurements, the Korean litigants argued that Com-
merce erred by not including U.S. resale profit in the tax
basis of exported receivers. Goldstar also argues that
Commerce erred by removing international movement
costs from the tax basis of exported receivers.
The court finds that Commerce's use of the price for
exportation as the tax basis for all exported receivers was
correct. This conforms to the court’s previously expressed
opinion in this case that there is no evidence in the record
to contradict the conclusion based on Korean law that the
price for exportation at which the merchandise left the
place of manufacture would have been the tax base if a
tax was to be imposed on exportations. The price for
exportation clearly does not include U.S. resale profit nor
does it include the cost of international movement and
U.S. importation, which are incurred after exportation.
For this reason, the court approves the tax basis used for
exported receivers in the second remand.
In its motion for final judgment, Zenith also asks this
court to reverse its earlier decision in this case, which
goes back three years, that a cap existed on the duty
assessment rate which ultimately would be applied to
“dumped” entries if estimated antidumping duties were
deposited in the form of a bond. Zenith is correct in
pointing out that a conflict exists between that opinion
and the court’s more recent decision in July of 1991 on
that same issue. The later decision fully and clearly sets
out the court’s current opinion that there is no cap on
App. 44
assessment rates if estimated duties are deposited in the
form of a bond. In the interest of justice and in the
interest of having this opinion accurately reflect the state
of the law as it presently exists, the earlier decision in this
case must be modified to conform to the decision in Slip
Op Y] fala)
For the reasons given above, it is hereby ORDERED,
\DILDGED and DECREED that the second determina-
tion of the Department of Commerce on remand in this
action, which is dated September 24, 1991, is upheld, and
it is further
ORDERED, ADJUDGED and DECREED that no
assessment rate cap may be applied in liquidating the
subject entries unless the importer paid a cash deposit for
an estimated antidumping duty. This is in accordance
with the court’s decision and holding on July 29, 1991
(Slip Op. 91-66) in Zenith Electronic Corporation v. United
States, Et. Al, Court No. 87-01-00039, 770 F.Supp. 648, and
it is further
ORDERED, ADJUDGED and DECREED that to the
extent that the court’s earlier decision herein on April
1989 (Slip Op. 89-42), 712 F.Supp. 931, on the subject of
the assessment rate cap is inconsistent with the court's
more recent decision on July 29, 1991 (Slip Op. 91-66) the
decision in Slip Op. 89-42 is modified to conform to the
decision in Slip Op. 91-66.
App 45
DAEWOO ELECTRONICS COMPANY,
LTD., et al., Plaintiffs,
v.
The UNITED STATES, Defendant.
Court No. 85-01-00140.
United States Court of
International Trade
March 25, 1991
Korean television manufacturers appealed from
Department of Commerce’s antidumping order. The
Court of International Trade, 712 F Supp. 931, remanded
tor reconsideration. On remand, the Department of Com-
merce again determined dumping margins, and appeal
was taken. The Court of International Trade, Watson.
senior Judge, held that: (1) in determining foreign taxes
forgiven for purposes of calculating dumping margins
substantial evidence did not support Commerce Depart-
ment’s determination that taxes forgiven on exportation
of merchandise would have been taxes based on first sale
to unrelated purchaser in the United States market; (2) in
Department’s econometric model used to determine
whether Korean commodity tax was passed through to
onsumers in Korea was not supported by substantial
evidence; and (3) Department’s errors in calculations in
determining dumping margins were required to be cor-
rected on remand
Remanded
Oppenheimer Wolff & Donnelly (David A. Gantz and
limothy A. Harr, of counsel), Washington, D.C., for
App. 46
plaintiffs Daewoo Electronics Co., Ltd., Daewoo Elec
tronics Corp. of America, Inc. and Daewoo Corp.
Dow, Lohnes & Albertson (William Silverman,
Michael P. House and R. Will Planert, of counsel), Wash-
ington, D.C., for plaintiffs Goldstar Co., Ltd. and Gold-
star Electronics Intern., Inc
Arnold & Porter (Sukhan Kim, Lawrence A. Schnei-
der and Susan G. Lee, of counsel), Washington, D.C., for
plaintiffs Samsung Electronics Co., Ltd. and Samsung
Electronics America, Inc.
Frederick L. Ikenson, P.C. (Frederick L. Ikenson, J].
Eric Nissley and Larry Hampel, of counsel), Washington,
D.C., for plaintiff Zenith Electronics Corp.
Collier, Shannon & Scott (Paul D. Cullen and Jeffrey
S. Beckington, of counsel), Washington, D.C., for plain-
titts Intern. Union of Electronic, Elec., Technical, Salaried
and Mach. Workers, AFL-CIO, Intern. Broth. of Elec
Workers, Independent Radionic Workers of America and
Industrial Union Dept., AFL-CIO.
Stuart M. Gerson, Asst. Atty. Gen., David M. Cohen,
Director, Commercial Litigation Branch, Civil Div., U.S.
Dept. of Justice, Velta A. Melnbrencis, atty., New York
City, Robert E. Nielsen, atty., Office of the Chief Counsel
tor Import Admin., U.S. Dept. of Commerce, Washington,
D.C., tor defendant.
WATSON, Senior Judge
[his consolidated action is before the court for
review of the results of a redetermination made by the
Department of Commerce (“Commerce”) pursuant to this
court’s remand in Daewoo Electronics Co., Ltd. v. United
a
App. 47
eetieeiee et
States, 13 CIT , 712 F.Supp. 931 (CIT 1989). It relates to
the question of dumping margins which were determined
for color television receivers from Korea.
rhe court turns first to the question of whether or not
Commerce complied with the adjustment for taxes
required by § 772(d)(1)(C) of the Tariff Act of 1930, as
amended (19 U.S.C. § 1677a(d)(1)(C)). That provision is
among those designed to insure that before a comparison
is made between the price in the home market of the
foreign producer and the price for the U.S. market, the
“United States price”, (further categorized as “purchase
price” or “exporter’s sales price”) does not come out
lower than the home market price of the foreign producer
simply because it does not include certain unavoidable
amounts which are included in the price of the merchan-
dise when it is sold in the foreign country. In particular,
the provision involved here is concerned with the «xtent
to which the foreign market price may be higher due to
the fact that it includes a tax imposed when the merchan-
dise is sold in the country of exportation but not imposed
when it is exported. To eliminate that possible imbalance
or unfairness in the comparison the law provides that the
U.S. price should be increased by -
the amount of any taxes imposed in the country
of exportation directly upon the exported mer-
chandise or components thereof, which have
been rebated, or which have not been collected,
by reason of the exportation of the merchandise
to the United States, but only to the extent that
such taxes are added to or included in the price
of such or similar merchandise when sold in the
country of ex portation.
App. 48
The Korean taxing authority imposes three taxes on
such merchandise when it is not exported. They are, a
special excise tax of 28%, a defense tax of 30% of the
special excise tax amount, and a value added tax of 10%
levied on the sum of the tax base, the special excise tax
amount and the defense tax amount.
Commerce ultimately determined that the actual
Korean tax base was the net dealer delivered price, that is
to say, the price to the first unrelated home and market
buyer. It therefore concluded that the analogous hypo-
thetical tax base in the export market (for the United
States) i.e., the amount which would have been taxed but
for the exportation and to which the hypothetical tax had
to be added in order to make a fair comparison between
prices, was the sale to the first unrelated U.S. buyer.
Zenith Electronics Corporation (“Zenith”) argues that
Commerce erred in determining that the taxes forgiven
on exportation of this merchandise would have been
taxes based on the first sale to an unrelated purchaser in
the U.S. market.
Zenith first argues that the Korean tax laws make the
tax base the equivalent of the ex-factory price. It points
out that for home market sales purposes under the
Korean Special Excise Tax Act, television receivers are
taxed on “the price at which the goods are carried out
from the factory.” [Goldstar January 5, 1990 questionnaire
response, Appendix 1-2 at p. VI-288; remand Rec.P-Doc.
37, RK. 1, Fr. 428.] It further asserts that the Defense Tax,
insofar as it is a percentage of the Special Excise Tax, is
also derived from the price at which the television
receivers are carried out of the place of manufacture.
App. 49
Finally, Zenith asserts that the value added tax has
the same focus as the Special Excise Tax because inter
alia, the place of the transaction is “where the moving of
the goods starts.” [Id. at page VI-268 (Art. 10, para. 1,
item 1); Fr. 445.] Zenith also stresses that in response to
Commerce's tax questionnaire in this remand, the Korean
respondents all described the Korean home market taxes
as percentages either directly or indirectly related to “the
ex-factory price.”
Zenith characterizes Commerce’s action as the trans-
formation of taxes forgiven upon exportation in the for-
eign country into taxes forgiven upon resale in another
country, taxes which would hypothetically be levied on
the amount of import duty paid to the United States
government, and taxes which would not be calculated
until months after the taxable event of exportation.
Zenith characterizes this as an absurd result without
foundation in the evidentiary record. Zenith also points
out that Commerce’s determination with respect to the
tax base was a reversal of its position in its proposed
remand results and was reached in response to comments
by Daewoo and Goldstar on those results without giving
Zenith an opportunity to address those comments. Zenith
also notes the absence of a bar in the Korean tax law to
the use of prices to related parties as the basis for tax
assessments, arguing that even though the sales which it
believes form the proper tax base may have been sales to
related parties, there is nothing in the record to show that
they would not be used as the tax base by the Korean
authorities.
In response to Zenith’s arguments, Commerce con-
tends that it would have been arbitrary and capricious for
App. 50
it to select a point in the continuum between manufactur-
ing and marketing which differed from the point in Korea
at which the taxes were actually imposed. It points out
that initially it concluded that the Korean taxing author-
ity would have imposed taxes on the exported merchan-
dise on the basis of the f.o.b. Korean port price. However,
when Daewoo pointed out that the taxes in question are
imposed in the Korean home market on the net price to
the dealer, Commerce assertedly realized that the f.o.b.
Korean port price did not properly correspond to the
actual Korean tax base, which, in practice, was the net
dealer delivered price, i.e., the price to the first unrelated
home market buyer. The defendant argues that there is
nothing in the law which precludes a conclusion that the
Korean taxing authorities would impose a tax on
exported colored television receivers at the same point in
the export market as they do in their own home market.
Zenith contends that the mere fact that, in this case, the
net unrelated dealer delivered price happened to be the
first price at which the goods left the factory, does not
mean that in those situations in which the goods left the
factory at a price to a related party that selfsame price
would not be the proper tax base.
In the opinion of the Court, the Commerce Depart-
ment acted without the support of substantial evidence in
the record when it sought te find an analogous point for
fixing the tax base in the United States and when it
concluded that, if the Korean taxing authority were to
impose taxes on exports to the United States, which taxes
were to be rebated, the amount of those taxes would be
determined by multiplying the tax rate by the amount of
the first sale to an unrelated party in the United States.
App. 51
This is obviously a response to a hypothetical situation
which is unavoidably raised by § 772(d)(1)(C) of the Act
but that does not justify departing from the evidence of
record without the support of other substantial evidence.
The record supports the view that the tax base in the
home market is the price at which the goods are carried
out of the place of manufacture. This basic fact would
indicate that, in the absence of any other evidence in the
record that the exportations involved here would be
treated differently, the ex-factory price is the only prop-
erly supported point for determining the tax base. In this
context the plain mandate of the Korean tax law is a
matter of fact. The attempt to hypothesize about how the
Korean government would depart from that point is not a
matter of fact, but a matter of unsupported speculation.
It does appear that in the Korean market the taxable
events were sales to unrelated dealers, but that just hap-
pened to be the type of price at which the ex-factory
transaction occurred. There has been no showing that the
price at which the goods left the factory would have been
ignored if it had not been a price to unrelated dealers.
There has been no showing, and there can be no pre-
sumption, that a price to related parties would be rejected
if it happened to be the price at which the goods left the
factory. In short, there is no evidence in the record to
contradict the plain conclusion based on Korean law, that
the price for exportation at which the merchandise left
the place of manufacture would have been the tax base, if
indeed a tax was to be imposed on exportations. There is
no evidence that the Korean tax authorities would reject
the price for exportation, or would prefer a U.S. resale
price, either in its entirety or somehow modified to
App. 52
remove from it various elements which would bring it
closer to an ex-factory price for exportation between
unrelated parties. This indicates that the only conclusion
supported by evidence in the record is that the tax
amount forgiven on exportation is an amount which
would have been assessed on the ex-factory price for
exportation. Commerce will be required to change its
calculation of forgiven taxes accordingly.
The Commerce Department also failed to cap the
adjustment at the amount of tax in Korea. The Commerce
Department now agrees with Zenith that it inadvertently
tailed to follow the standards set out in Zenith Electronics
Corp. v. United States, 10 CIT 268, 633 F.Supp. 1382 (1986),
appeal dismissed, 875 F.2d 291 (Fed.Cir. 1989) [“Zenith 1”].
In that opinion the Court held that, after determining the
amount of taxes applicable to the home market and the
U.S. market, the Cgmmerce Department should compare
the two and in each instance increase U.S. price by the
lesser of those two amounts. Accordingly, the case will be
remanded to Commerce to make this particular correction
as well.
In its first decision in this case, the Court forbade
Commerce to assume that home market taxes passed
through fully to consumers in Korea. The Court required
Commerce to measure the amount of pass-through. On
remand, Commerce performed an econometric measure-
ment of pass-through and determined that all of the
commodity tax was passed through to consumers. That
econometric measurement is now under attack by Zenith
and by the International Union of Electronic, Electrical,
Technical, Salaried and Machine Workers, AFL-CIO;
IN,
App. 53
International Brotherhood of Electrical Workers; Indepen-
dent Radionic Workers of America; and Industrial Union
Department, AFL-CIO; [the Unions].
What Commerce did was to set up a model of the
economic factors involved in the Korean home market
The intention was to see whether the commodity tax
would be fully included in the price as a result of factors
controlling the production side of the market, and then
see whether the demand side of the market would allow
the full commodity tax to be included in the price. The
econometric method makes quantitative estimates of the
various economic factors which affect supply and
demand and indicates to what extent those two elements
of the market will permit a tax to be included in the price
Ihe technique by which these analyses are made is a
mathematical one using mathematical and statistical
methods to analyze data regarding costs, prices, sales
volume and similar factors to arrive at the most likely
description of the behavior of those involved in the mar-
ket.
The form taken by the mathematical and statistical
analyses is that of graphs with one line or curve repre-
senting the supply and the other line or curve represent-
ing the demand. The relationship between these lines can
be used to reveal the effect which an increase in price has
on consumption. The price indicated by the intersection
of these lines is the “equilibrium price,” the price that
consumers are willing to pay and manufacturers are will-
ing to accept. Depending on the position and shape ot the
lines, the equilibrium price can change. Depending on the
shape of the graphic lines such graphs can indicate
whether an increase in price will be fully accepted by
App. 54
consumers, or will be met with a response which causes a
lower quantity of the merchandise to be sold.
The responsiveness of these lines to the economic
factors which affect them is termed their “elasticity.” For
example, the demand curves for such things as are con-
sidered the necessities of life tend to have relatively
inelastic demand curves, that is to say, the demand will
not fall off significantly in response to price increases or
rise much in response to price decreases. On the other
hand, the demand curves for so-called luxury items tend
to have relatively elastic curves which means that
demand is very responsive to changes in the price of
these commodities.
On the supply side, the elasticity of the supply curve
relates to the economic factors which arise in producing
the commodity in various quantities at various scales of
production. When a supply curve is inelastic that indi-
cates that increased costs of making and selling the com-
modity do not affect the producer’s willingness to supply
the commodity at a higher price. On the other hand, an
elastic supply curve is one which shows that the
increased costs of producing or selling the commodity
reduces the amount the producers are willing to supply.
As applied in this case, the supply curve discussed in
general terms above, was replaced by cost curves for the
producers. These cost curves were found to be such that
increases in production would not increase the cost of
producing the additional television products. This can be
stated as a finding that in the Korean color television
market the cost elasticity is one, or, that the production of
the product shows constant returns to scale. The fact that
App. 55
additional production does not raise unit costs leaves a
manufacturer free to increase its production in accor-
dance with its motivation of maximizing its profits. The
production side of the Korean television market was
found to exhibit imperfect competition of an oligopolistic
type which means that only a few suppliers exist, with
each one having a meaningful brand identity, consumer
loyalty and some power to set its own prices. It is clear
from the record that on the production side of a market
such as this, when an excise tax is imposed on the pro-
ducers, they will have the will and the capacity to raise
their prices by the amount of the tax, if we consider only
the factors operating on their side of the market equation.
There has been no significant dispute with this aspect
of the determination by Commerce on remand. It can
therefore be concluded that it would be the tendency of
the Korean firms to raise their prices in the full amount of
the excise tax unless such price increases would be influ-
enced by factors coming into play from the demand side
of the market. This zives central importance to the con-
clusions reached by Commerce with respect to the
demand curve.
The demand curve will indicate to what extent higher
prices might mean lost sales and might require the firm to
balance the increased price per unit with the decreased
quantity of units sold.
Zenith argues that when it came to the formulation of
the demand curve, Commerce did not proceed in accor-
dance with the law. Zenith claims that Commerce’s choice
of a demand curve for color television receivers in Korea
;
4
|
:
:
App. 56
is an assumption which is not based on substantial evi-
dence, which cannot be reconciled with known charac-
teristics of that market, and which was not adequately
tested against the data base relevant to choosing a
demand curve.
The demand curve in issue has a form which indi-
cates that demand elasticity in the Korean market is con-
stant. This means that when the factors on the supply
side, namely, the cost elasticity of one, show that the tax
will be fully included in price by the producers, demand
for the television receivers will not significantly decrease
when the prices rise. This would indicate that all of the
tax imposed on the producers can and will be passed
through to the consumers.
The government defends its determination of the
nature of the demand curve as preferable over other
forms on theoretical grounds and as supported by the
economic literature. The government also asserts that its
demand curve, termed as “iso-elastic demand function”
was to be preferred because the alternatives were not
supported by the data contained in the study of the
Korean market. However, the alternatives do not appear
to have been tested against the actual data.
This brings us to another issue connected to the
dispute over the measurement of pass-through. The data
base to which Commerce applied its measurement of the
market characteristics was one which was aggregated.
This means that Commerce combined the data for all of
the Korean respondents and for the different types of
television receivers. Commerce also transformed the
quarterly data of two respondents into semi-annual data
ee ee ee
App. 57
in order to accommodate the fact that the third respon-
dent had only supplied semi-annual data. Zenith argues
that this aggregation of the data base precluded a deter-
mination of whether the amount of pass-through differed
between the various respondents and between various
types of television receivers. Commerce argues that such
an approach was preferable to excluding the respondent
which supplied semi-annual data from the data base and
relying on the best information available to make a calcu-
lation for that respondent. Commerce also argues that it
is not uncommon for empirical research on economic
phenomena to accomplish a sound result based on lim-
ited data.
After close study of this aspect of the dispute, and
even after allowing for the fact that econometric tech-
niques cannot be expected to have perfectly accurate
methodology, the Court finds unacceptable defects on the
demand side of the Commerce determination. Although
Commerce makes theoretical objections to the various
alternative shapes of demand curves proposed by Zenith,
it does not appear to have actually made a full fledged
attempt to apply those curves to the data base and to
determine whether they might not conform to the data
and explain its behavior better than the iso-elastic form
used to reach the determination challenged here. What
this amounts to, in the opinion of the Court, is a lack of
adequate connection between a crucial determination and
the evidence in the administrative record. This ts simply
another way of saying that the demand function and the
results which arise from its use are not supported by
substantial evidence on the record. [It may have a theo-
retical basis and it may have support in the literature but
App. 58
it has not been shown to be sufficiently supported by
facts in the record. In the absence of reliance on evidence
derived from the data, which justifies the choice of one
demand curve over another, the Court cannot affirm the
results of this remand. Unless that is done, the results
have the appearance in the end of being ordained by
selection of the demand curve rather than arising from,
and being based on, the data in the record. In other
words, if one demand curve is to be selected as the one
which most accurately reflects the realities of the market,
Commerce is obliged to explain what data in the record
qualifies that curve for a preferred role, and disqualifies
the other possible demand curves. It is not enough to
simply disqualify alternatives on theoretical or academic
grounds.
The Court is also of the opinion that the aggregation
of the data for purposes of measuring the pass-through
cannot be reconciled with the obligation to base such
findings on substantial evidence. It appears to the Court
that the amalgamation of all the data from different
respondents and different products into one composite is
equivalent to the creation of a non-existent single firm,
producing an undifferentiated product, and therefore
does not have sufficient connection to the reality of the
market place. Conceivably, such an aggregation might be
justifiable if there was no other way to treat the data.
However, in the past, Commerce has successfully disag-
gregated such data and analyzed it by producer and by
product category. In fact, this was done in an antidump-
ing case involving Japanese television receivers in which
less data was available than in this case. There is a
contradiction between the way Commerce used two
App. 59
levels of disaggregated measurement in a remand deter-
mination involving Japanese television receivers, in
which even less data was available, and the way it treated
data in this remand involving Korean television receivers.
See Determination on Remand (dated April 14, 1987) filed
in consolidated C.I.T. No. 85-06-00788, Perloff Report
(dated April 8, 1987) at 6.
It is the opinion of the Court that in order to test the
extent of pass-through of taxes to consumers, at a mini-
mum, the relevant data must be utilized, as it has in the
past, in a way which recognizes the separate identity of
different producers and the existence of major commer-
cial distinctions or types of products within the market
for television receivers. For the reasons given above,
Commerce’s measurement of pass-through cannot be
affirmed. This aspect of the case must be remanded to
Commerce to perform the analysis on a disaggregated
basis, to consider alternative forms for demand curves
and explain the evidence from the data which justifies its
choice of one form over others.
In short, it is the opinion of the Court that the evi-
dence of record with respect to actual transactions in the
market must be given a significant role in the choice of
the form to be applied in the course of econometric
measurement. The form cannot be allowed to become a
Procrustean bed into which the evidence is fitted. With-
out a strong demonstration of linkage between the data
and the chosen form, the threat exists that the administra-
tive process can become a matter of choice between theo-
retical techniques which are equally defensible in the
abstract, but which do not have a proper grounding in
substantial evidence.
App. 60
The Unions have made an additional argument
against the correctness of the Commerce Department's
procedure in reaching a determination regarding the
extent to which the commodity tax was passed through to
the consumer. The Unions argue that Commerce should
only have adopted a methodology to measure pass-
through, and should have left it as the burden of the
respondents to prove what the pass-through was in their
transactions.
The government responds that its procedure was
mandated by the terms of the Court’s remand and fur-
thermore, is the most efficient way to accomplish the
process. With respect to this disagreement, the Court
notes only that its instructions to Commerce to find a
methodology for measuring pass-through should be
understood as obligating the agency only to establish the
methodology. From that point it is free to proceed as it
did here or to impose an appropriate burden of proof on
the respondents. In this case, the establishment of the
methodology was required but the procedure by which it
was to be applied to the facts was left to the authority of
Commerce.
The Unions correctly point out the importance of the
adjustment for tax pass-through in the administration of
the antidumping law and its great potential for affecting
dumping margins, but those factors indicate only the
essentiality of adherence to legal standards and do not
dictate that the burden of proof for such adjustment must
be wholly placed on the respondents.
Both Zenith and the Unions have requested the Court
to certify its ruling for immediate appeal so that the
App. 61
recurring question of pass-through measurement may be
decided with finality. However, the Court does not find
that the issue satisfies the requirements for certification.
The Korean interests continue to argue for a circum-
stances of sale adjustment to account for differences in
the amount of commodity tax included in foreign market
value and in United States price. This recurring argument
is based on the fact that dumping margins, to a certain
extent, become increased by a so-called “multiplier
effect” when the adjustment for foreign commodity taxes
required by 19 U.S.C. § 1677a(d)(1)(C) (1988) is accom-
plished by adding to U.S. price the amount of home
market taxes that would have been imposed on the sale
had it been made in the home market. Commerce per-
forms this adjustment by multiplying the U.S. sale price
by the home market tax rate and adding the resulting
amount to U.S. price.
Repeating the example given in Footnote 9 of Zenith
Elec. Corp. v. United States, 10 CIT 268, 273, 633 F.Supp.
1382, 1386 (1986), if the home market price, excluding the
tax, is $100, and the U.S. price is $90, the dumping margin
would be $10. If a 50% foreign commodity tax was to be
added to both the home market and the US. price, the
foreign price would become $150, the U.S. price would
become $135, and the margin would now become $15, $5
more than the theoretical neutral dumping margin. With
respect to this occurrence, the Court adheres to its view
that a circumstance of sale adjustment, to fully offset the
absolute difference in tax amounts arising from a pre-
existing dumping price, is not in accordance with the law
However, the Court has noted that it is possible for the
multiplier effect to result from differences in the home
App. 62
market and U.S. tax bases which are not related to pre-
existing dumping margins. (10 CIT at 281 n. 22, 633
F.Supp. at 1393 n. 22.) The Court now clarifies its views
on how the previously expressed opinion with respect to
the use of circumstances of sale adjustments should be
applied in this case.
It is the opinion of the Court that the consequences of
pre-existing dumping margins are not appropriate for
correction as circumstances of sale. This would go
beyond the intention of the statute and would represent
an unreasonable interpretation of its terms. However, by
the same token, when the “multiplier effect” can be
attributed in whole or in part to bona fide differences in
the circumstances of sale, then those differences should
be accounted for and the multiplier effect should be
mitigated to the extent that it is generated by those fac-
tors. Commerce can do this by multiplying the net adjust-
ment to home market and U.S. price for differences in
such things as moving expenses, selling expenses, duty
draw-back, and physical characteristics of the merchan-
dise, by the tax rate, and then deducting that additional
amount from home market price in arriving at foreign
market value. So long as this can be done without elim-
inating the consequences arising from pre-existing dump-
ing margins, it would be the proper application of the law
and of its intent that adjustments be made for those
factors which arise from genuine differences in the cir-
cumstances of sale of the sales being compared. The
Court views Commerce’s expressed reluctance to make
such secondary-level adjustments as tantamount to a
decision not to do so and therefore considers it appropri-
ate to issue directions on this point. Accordingly, on this
App. 63
remand, Commerce will be required to make circum-
stances of sales adjustments consistent with the afore-
mentioned distinctions.
Several of the parties have brought to the attention of
the court a number of errors in calculations about the
existence of which there appears to be no serious dispute.
What resistance there has been to the corrections of those
errors appears to arise from procedural objections. Com-
merce has taken the position that it was barred from
addressing errors not pointed out in the Court’s remand
decision by this Court’s ruling in Zenith Electronics Corp.
v. United States, 699 F.Supp. 296 (C.1.T. 1988), aff'd, 884
F.2d 556 (Fed.Cir.1989) that Commerce was prohibited
from making changes in the final result without the
express authorization of the Court. Although that holding
should not have prevented any application to the Court
for the purpose of correcting errors, the focus of the
Court at this time is to determine whether the errors
should be corrected now. The important thing is to cor-
rect the errors and not to be impeded by any obstacles
other than those required by law. See Serampore Industries
PVT, Ltd. v. U.S. Dept. of Commerce, 696 F.Supp. 665 (CIT
1988).
The Court’s review of the record and consideration of
the arguments of the parties lead to the following conclu-
sions:
Zenith demonstrated that the foreign market values
for Goldstar fell short of the amount equivalent to the
50.04% of average home market prices net of tax. Gold-
star has revealed that this substantial understatement
arose, from a ministerial error by Commerce, namely, its
App. 64
failure to define fields in its data base that were suffi-
ciently large to accommodate the tax value reported by
Goldstar. This amounts to a clerical error and should be
corrected on remand. The government argues that the
need for this correction was not raised previously. What
is important, however, as Goldstar itself notes, is that the
erroneous home market tax values did not play a role in
Commerce's calculations prior to the issuance of the draft
remand results. Furthermore, it was only the final admin-
istrative remand results that brought the use of erroneous
home market tax amounts under scrutiny by counsel
Even if the Court was to set stricter standards for raising
such issues, it would be reasonable to consider this as the
first appropriate time for raising that error.
Goldstar has suggested alternative means by which
that error may be corrected, but because those means
involve converting Goldstar’s submitted raw data file
into an SAS data set, a technique which has been prone to
problems, the Court adopts Zenith’s suggestion that the
most reliable means of correction would be for Commerce
to calculate the tax amounts in a consistent manner for
both markets. Therefore, on this remand, Commerce is
instructed to calculate Goldstar’s home market tax
amounts by multiplying the tax bases (net home market
prices) by 50.04%. The Court notes that this error was
clearly inadvertent in nature and does not indicate in any
way that Goldstar under-reported home market taxes.
Goldstar points out that it was adversely affected by
Commerce’s failure to eliminate the deductions from
Goldstar’s exporters sale price [“ESP”] of an amount
representing accounts receivable from the parent com-
pany. In addition, the dumping margin calculation was
App. 65
affected by a clerical error regarding a reduction of duty
drawback by a wastage factor, which error was first
brought to Commerce’s attention during the remand pro-
ceeding. On this remand, Commerce will be required to
correct both of those errors.
With respect to Goldstar, Zenith points out that Com-
merce failed to analyze one Goldstar purchase price
transaction, but nevertheless included full U.S. price for
that transaction in the denominator used to ascertain
Goldstar’s weighted-average margin. Although Goldstar
and Commerce correctly point out that the Court did not
specifically address this error in its first remand decision,
it is unquestionably an error. Its triviality is not apparent
and it should be corrected on this second remand.
Zenith has also pointed out errors in the calculation
of average values used to generate foreign market values
for Daewoo. This arose from the use of numerous home
market “sales” between related Daewoo parties, which
Daewoo acknowledges were only paper transactions and
not the sort of sales which should be included in these
calculations. It is unquestionable that consideration of
these paper transactions skewed the average home mar-
ket prices derived by Commerce and resulted in an
understatement of foreign market values for Daewoo. In
the Court’s opinion, this error is of a clerica! or minis-
terial type and the Court approves the method suggested
by Zenith for correcting it. The proper way to correct this
error is for Commerce to correct the home market data
based used to calculate average fair market values for
Daewoo by excluding consideration of the related party
paper transactions altogether, and Commerce is directed
App. 66
to do this by means of the program instructions sug-
gested by Zenith in its initial brief.
Zenith has also pointed out another error in Com-
merce’s analysis of Daewoo’s ESP transactions which
apparently arose from the incorrect designation of a cer-
tain home market model as the comparison model for
model TCK405P. The Court agrees with Zenith that the
appropriate solution is to designate home market model
TCK406PW as the comparison for sales of export model
TCK405P and Commerce will be required to correct the
error in this manner on remand.
Zenith has also raised an objection to Commerce’s
treatment of certain expenses incurred by Goldstar in
replacing its own brand name plate with private brand
name plates on certain shipments of television receivers.
In the remand of this case, Commerce had been directed
to address the adjustment to Goldstar’s U.S. price for the
cost of replacing the brand name plates. (712 F.Supp. at
958.) On remand, Commerce treated that expense as an
indirect selling expense and deducted the cost of the
replacement name plates in recalculating U.S. price for
ESP sales. In addition, Commerce allocated the expense
by apportioning it over all ESP sales, not simply over
those television sets on which the name plates were
changed. As to the second step, Commerce now agrees
that it was an error to allocate the expense of changing
the name plates over all television sets and it will be
required to make an appropriate allocation over the tele-
vision sets affected by the name plate change on this
remand.
App. 67
The characterization and treatment of these name-
plate costs, prior to allocations, still remains in dis «ute.
Zenith argues that such an expense must be accounted for
as a deduction from ESP of post-importation U.S. value-
added, under 19 U.S.C. § 1677a(e)(3), which provides for
adjustment for “any increased value, including additional
material and labor, resulting from a process of manufac-
ture or assembly” performed on imported merchandise in
the United States. The government argues that the
replacement of nameplates is not the type of activity
contemplated by § 1677a(e)(3) and suggests that it is not a
sufficiently substantive part of the manufacture or assem-
bly of the television set. The Court is of the opinion that
the work of replacing nameplates falls literally within the
meaning of the statutory terms and that it would not be
in accordance with the statute to develop additional stan-
dards for the substantiality of manufacturing or assem-
bling work. The affixing of labels is part of the process of
assembly at the very least and its relative importance in
that process should not be the determinant of how it is to
be accounted for. It was unlawful to treat such expenses
as indirect selling expenses and subject to offset by indi-
rect home market selling expenses. It was also error to
consider such costs in the calculation of the ESP offset
cap. Commerce will vu required to correct its error by
attributing such costs directly to the sales of private
labeled sets as further processing costs provided for in 19
U.S.C. § 1677a(e)(3).
For the reasons given above, it is hereby ORDERED,
ADJUDGED AND DECREED that the case is remanded to
Commerce for the correction of errors found in its first
App. 68
redetermination on remand in accordance with this opin-
ion; that it shall use ex-factory prices to determine the
taxes forgiven by reason of exportation of Korean televi-
sion receivers and shall cap the upward adjustment of
U.S. taxes for such forgiven taxes passed through to home
market purchasers of comparison merchandise; that with
respect to the measurement of tax pass-through, Com-
merce shall perform the measurements on a disaggre-
gated basis for each respondent and for the different
types of television receivers; and that Commerce shall
consider alternative forms of demand curves and specify
the evidence in the record which makes its chosen curve a
superior representation of the facts with respect to
demand in the home market.
It is further ORDERED that Commerce shall include
in its tax determination a circumstance-of-sale adjustment
for those differences arising from bona fide circumstances
of sale and not from pre-existing dumping margins; and
it is further ORDERED that Commerce shall correct the
understatement of foreign market values for Goldstar,
shall adjust the U.© prices for Goldstar’s replacement of
nameplates, correct its failure to anal: .e one Goldstar
purchase price transaction, shall exciude the paper trans-
actions in the calculation of Daewoo’s average values,
and designate the proper model for comparison with
export model TCK405P.
It is further ORDERED that Commerce shall issue a
redetermination on remand, consistent with this opinion,
within 60 days and transmit said redetermination to the
Clerk of this Court. In all other respects, the motions
pending before the Court are denied.
App. 69
DAEWOO ELECTRONICS COMPANY,
LTD., et. al., Plaintiffs,
v.
The UNITED STATES, Lefendant.
Court No. 85-01-00140.
United States Court of
International Trade.
April 3, 1989.
Foreign manufacturers exporters of color television
receivers from Korea challenged determinations of Inter-
national Trade Administration of Department of Com-
merce in final results of first administrative review
regarding importations of CTRs from Korea that resulted
from anti-dumping order. The Court of International
[rade, Watson, J., held that: (1) circumstance-of-sale
adjustment should be made to foreign market value for
differences in bad debt expenses between United States
and home markets similarly to adjustment made for war-
ranty expenses; (2) whether management, marketing, and
advertising expenses of foreign manufacturer exporter
incurred postacquisition of produce: were start-up costs
excludable in determining sales at ‘ess than cost of pro-
duction that would be excluded in determining foreign
market value should have been considered; (3) selling
expenses not incurred within territory of United States
that related to export sales in United States were deduct-
ible from exporter’s sales price in determining antidump-
ing duties; and (4) Tariff Act section did not limit actual
assessment of antidumpting duty to preliminary rates of
estimated duty, but rather, if merchandise were entered
App. 70
prior to final determination, rates established in prelimi-
nary determination would serve as assessment cap, while
if merchandise were entered after preliminary rate were
raised as result of final determination, that higher rate
would serve as limit of actually assessed duties for
entries which were made prior to final injury determina-
tion.
Atfirmed in part; remanded for reconsideration in
part.
See also, C.LT., 655 F.Supp. 508.
Oppenheimer Wolff & Donnelly, David A. Gantz,
limothy A. Harr, and Jong-Dae Lee, Washington, D.C.,
tor plaintifts Daewoo Electronics Co., Ltd. and Daewoo
Electronics Corp. of America, Inc.
Arnold & Porter, Thomas B. Eilner, Sukhan Kim, M.
Howard Morse and Jeffrey M. Winton, Washington, D.C.,
tor plaintiffs Samsung Electronics, Co., Ltd. and Samsung
Electronics America, Inc.
Dow, Lohnes and Albertson, William Silverman, Mic-
hael P. House, Ryan Trainer, and Douglas J. Heffner,
Washington, D.C., for plaintiffs Gold Star Co., Ltd. and
Gold Star Electronics Intern., Inc.
Frederick L. Ikenson, P.C., Frederick L. Ikenson and J.
Eric Nissley, Washington, D.C., for plaintiff Zenith Elec-
tronics Corp.
Collier, Shannon, Rill & Scott, Patrick B. Fazzone and
Paul D. Cullen, Washington, D.C., for plaintiffs Indepen-
dent Radionic Workers of America, et al.
App. 71
John R. Bolton, Asst. Atty. Gen., David M. Cohen,
Director, Commercial Litigation Branch, Jeanne E. David-
son, Civ. Div., U.S. Dept. of Justice (Robert E. Nielson, of
counsel), U.S. Dept. of Commerce, Washington, D.C., for
defendant.
MEMORANDUM OPINION
AND ORDER
WATSON, Judge:
Plaintiffs in this consolidated action challenge the
determinations of the International Trade Administration
of the U.S. Department of Commerce (ITA or Commerce)
in the final results of the first administrative review with
regard to importations of color television receivers
(CTRs) from Korea, which were published on December
28, 1984 (49 Fed. Reg. 50420).
The importations of CTRs from Korea are subject to
administrative review under Section 75l(a) of the Tariff
Act of 1930, as amended, (the Act) 19 U.S.C. § 1675(a) as a
result of the antidumping order of March 1, 1984 (49 Fed.
Reg. 7620).
Plaintiffs Daewoo Electronics Co., Ltd. and Daewoo
Electronic Corporation of America, Inc. (collectively
“Daewoo”), Gold Star Co., Ltd. and Gold Star Electronics
International, Inc. (collectively, “Gold Star”), Samsung
Electronics Co., Ltd. and Samsung Electronics America,
Inc. (collectively “Samsung”) are foreign manufacturers
and exporters of CTRs from Korea, and respondents in
App. 72
the administrative proceedings subject to this judicial
review. !
Zenith Electronics Corporation (“Zenith”) and the
Independent Radionic Workers of America, the Interna-
tional Union of Electronic, Electrical, Technical, Salaried
and Machine Workers, AFL-CIO-CLC, the International
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