WHEATLAND TUBE COMPANY a nd ALLIED TUBE &

CONDUIT CORPORATI ON,

Plaintiff s,

v. UNI TED STATE S, Defend ant, and SAHA THAI STEEL

PIPE COMPANY, LTD., Defendant-Inte

rvenor. SLIP OP. 06-8 UNITED STATES COURT OF INTERNATIONAL TRADE BEFORE: GREGO RY W. CARMAN, J UDGE

Court No. 04-00568

[Plaintiffs’ Motion for Judgment on the Agency Record is granted in part and denied in par t. Case remanded to the United States Department of Commerce f or further proceedings consistent with this opinion.] Schagrin Associates ( Roger B . Schag rin ), Washing

ton, D.C., for Plain

tiffs. Peter D. Keisler

, Assistant Attorney Gene ral, David M. Cohen

, Director, Jeanne E. Davidson , Deputy Direc

tor, Civil Division, Commercial Litigation Branch, U.S. Depa rtment of Justice ( David S. Silverbrand ), for De fendant

. O’Melveny &

Myers L LP (Veronique L anthier & Greyson Brya n) , Washington, D.C., for Defendant-Inte

rvenor.04-00568 Page 2

1 Sections 201 and 203 of the Trade Act of 1974, 19 U.S.C. §§ 2251 and 2253 (2000) permit the

Presiden t of the Un

ited State s to impose s afegu ard mea sures in r

eaction to threa ts posed to domestic ind

ustry by i dentifie d imported

items. Dated: January 17, 2006 O PINI ON & O RDER C ARMAN , J UDGE : This case comes before the Court on Plaintiffs’ Motion for Judgment on the Ag ency

Record. Plaintiff

s, Wheatla

nd Tube Co mpany

and Allie d Tube &

Conduit Corporation, contest the treatment accorded ce rtain duty drawba

ck adjustments and § 201 duties 1 by the United States Depa rtment of Commerce (“Defendant” or “ Commerce”) in Certain Welded Carbon Steel Pipes and Tubes from Thailand (“Final Results”), 69 Fed. Reg. 61,649 (De p’t Commerce Oct. 20, 2004) (final results). Based upon the r easons that follow, the Court finds for Plaintiffs in part and Defendant in part and remands this case to Commerc e for recalculation of the antidumping (“AD”) margin f or Defendant-I

ntervenor, Saha Thai Pipe Company , Ltd. (“Saha Thai” or “Respondent”), in a manner consistent with this opinion.

P ROCEDUR AL H IST ORY & F ACTUAL B ACKGROUND On April 21, 2003, Commerce issued a notice of initiation of an AD duty administrative review for circular welded c arbon steel pipes and tubes (“pipe”) from Thailand. Initiation of Antidumping and Countervailing Duty Administrative Reviews (“Notice of Initiation”), 68 F ed. Reg. 19,498 (Dep’t Commerce Apr. 21, 2003) (notice of initiation). Plaintiffs are U.S. producers of pipe and were the petitioners in the administrative review. ( Br. of Pls.’ Wheatland Tube Co. & Allied Tube & Conduit Corp. in Supp. of R. 56.2 Mot. for J. on the Agency R. (“Pls.’ Br.”) at04-00568 Page 3

2 Section 772(a) of the Act defines the “export price” a s the price at which the subject merchandise is first sold (or ag reed to be sold) before the date of importation by the producer or exporter of the subject merchandise outside of the United States to an unaffiliated purchaser in the United States or to an unaffiliated purchaser for exportation to the United States, as adjusted under subsection (c) of this section. 19 U.S.C. § 1677a(a) (2000) (emphasis added). 3.) The period of review (“POR”) wa s March 1, 2002, through February 28, 2003. Notice of Initiation at 19,499. The review involved a single Thai produce r of subject pipe: Saha Thai. Id. On March 5, 2002, the President of the United States imposed § 201 safegua rd duties on imports of certain steel products, including the subject pipe. Proclamation No. 7529 (“Proclamation 7529”), 67 Fed. Reg. 10,553 (Ma r. 7, 2002). When entered for consumption between March 20, 2002, through Marc h 19, 2003, the Proclamation 7529 mandated pay ment of

an additional 15% duty on imported cover ed steel products. Id. at 10,590. On April 8, 2004, Commerce issued the preliminary results of the pipe administrative review. Certain Welded Carbon Steel Pipes and Tubes from Thailand (“Preliminary Results”), 69 Fed. R eg. 18, 539 (Dep ’t Commerc e Apr. 8, 2004) (pr eliminar y r esults). B ecause

Saha Tha

i is not affiliated with its U.S. customers, Commerce calculated the export price (“EP”) of the subject pipe based upon the price from Saha Thai to the first unaff iliated U.S. purchaser in accordance with § 772(a) of the Tariff Act of 1930 2 (the “Act”). Id. at 18,540.04-00568 Page 4

3 Section 772(c)(2)(A) of the Act require s that Commerce decrease EP by the amount of “any a dditional costs, charges, or expenses, and United States import duties, which are incide nt to bringing the subject merchandise fr om the original place of shipment in the exporting country to the place of delivery

in the United States.” 19 U.S.C. § 1677a(c)(2)(A) (2000). As requir ed by § 772(c) (2) of th e Act, 3 Comm erce ded ucted –where appro priat e–fore ign inland fr eight, f oreign brokera ge and handling , foreig

n inland in surance , bill of la ding ch arges , ocean freight to the U.S. port, U.S. brokerag e and handling charge s, and U.S. duty. Id. During the prel iminary

review, Saha Tha

i reques ted that c ertain a

djustments

be made t

o the EP in accordance with § 772(c)(1)( B) of the Act. Section 772(c)(1)(B ) requires that Commerce increase the EP by

“the amount of any

import duties imposed by the country of exportation which have been rebated, or which have not been collected , by reason of the exportation of the subject merchandise to the United States.” 19 U.S.C. § 1677a(c)(1)(B ) (2000) (emphasis added). Saha Tha i claimed that it wa s eligib le for a

n increa se in EP due

to its use of

a Thai cu stoms bonded warehouse, which entitled Saha Thai to an exemption from duties on imports of raw materials used in the manufacture of exported pipe. Prelim. Re sults , 59 Fed. Reg. at 18540. Upon verification, Commerce adjusted Saha Thai’s EP upward to re flect the exempted import duties. Id. During the preliminary

review, Commerce also considered whether it should deduct from EP the § 201 duties Saha Thai paid upon importation of subject merchandise into the United States after March 20, 2002. Id. at 18,541 . Beca use the a gency had neve r befor e addre ssed this issue, Commerce made no adjustment to the EP for § 201 duties for purposes of the Preliminary Results. Id.04-00568 Page 5

After considering a number of other issues, Commerce calculated Saha Thai’s preliminary we ighted-average dumping margin at 2%. Id. at 18,542. The Final Results differed from the Preliminary Results. Final Re sults , 69 Fed. Reg. at 61,649. In the Final Results, Commerce ca lculated Saha Thai’s weighted-ave rage margin to be 0.17%. Id. at 61,650 . Beca use the ma

rgin in t he final results w as de minimis , Saha Tha i’s cash deposit rate for the POR was zero. Id. The var iance be tween the Prelimina

ry and Fina l Results is the effect of Commerce permitting Saha Tha i to add certain billing adjustments for § 201 duties to the EP of the subject pipe and to minor corrections to the margin prog ram. Id.

I SSUES P RESENTED 1. Whether Commerce should exclude from EP § 201 duties paid by Saha Thai on subject g oods impor

ted into the

United Sta

tes.

2. Whether Commerce should revise EP upward to reflect billing adjustments Saha Thai req uested to accoun t for post- sale invo ices it dis patched to its custo mers.

3. Whether Commerce erred in permitting Saha Thai to claim a dr awback adjustmen

t to EP abse

nt proof t hat Saha T

hai paid i mport dutie s on inputs u sed in the produ ction of s ubject me rchandi se sold in the domestic market.

P ARTIES ’ C ONTENTI ONS I. Plaintiffs’ Contenti ons Plaintiffs raise two primary issues on r eview by this Court: Commerce’s tre atment of 1) § 201 duties applicable to Saha Thai’s imports and 2) drawback adjustments reque sted by Saha Thai.04-00568 Page 6

A. Section 201 Duties Plaintiffs take issue with Commerce’s treatment of the § 201 duties for three re asons. First, Plaintiffs contend that Commerce’s failure to deduct § 201 duties from the EP violates 19 U.S.C. § 1677a(c)(2)(A). (Pls.’ Br. at 16.) Plaintiffs submit that § 201 duties are “import duties” that must be d

educted from EP in c omplianc e with the statute. P laintiff

s reason that if the § 201 duties are not deducted from EP they are transformed “into a credit ag ainst the antidumping margins that would otherwise exist.” ( Id. at 16-17.) Plaintiffs point out that the § 201 duty pay

ment credit may c ompletely eliminate dumping mar gins, as it did in this matter. ( Id. at 17.) Further, Plaintiffs allege that had the § 201 duties r emained in place for three or more years the § 201 duty credit “c ould result in a series of negative or de minimisresults le ading to the fina l revoca tion of the

antidumpin

g duty order a nd the ter mination of

relief f rom unfa ir dumping.” ( Id. ) Second, Pl aintiffs

insist that

it was impr

oper for Commerce

to permit u

pward a djustments to EP due to supplemental invoices Saha Thai issued to its customers for the § 201 duties. Plaintiffs maintain that “[t]he upward adjustment is improper on its face because the transaction price of the sale had alre ady

been est ablished and the po st-sale a

djustment was attrib

utable so lely to the newly applica

ble Section 201 duty.” ( Id. at 18.) Third, Plaintiffs claim that Commerce’s treatment of § 201 duties “countermands the President’s action” in imposing § 201 relief. ( Id. at 19.) According to Plaintiffs, because the Presiden t’s proc lamation i

mplementi

ng § 201 a

cknowle dged th e on-g oing ef fect of AD duties ,04-00568 Page 7

Commerce’s decision to accept § 201 “duty -inclusive prices” was a usurpation of the President’s power and privilege to impose § 201 relief. ( Id. at 18-19.)

B. Drawba

ck Adjustments Plaintiffs state that the rationale for the duty drawback adjustment is “to offset duties that are paid on inputs used in production of merchandise sold in the home market.” ( Id. at 9 (quotation & cita

tion omitte d).) Plai

ntiffs ar gue tha t Commerc e failed

to follow a

“clear ly enunciated” policy

and “established statutory interpretation” that were designed to a chieve the purpose of the drawback adjustment. ( Id. ) In support of its position, Plaintiffs cite an unrelated (to this case) Commerce final determination in Silicomanganese f rom Vene zuela (“Silicomanganese”), 67 Fed. Re g. 15,533 (Dep’t Commerce Apr. 2, 2002) (f inal determination). ( Id. ) Plaintiffs seek to bind Commerce to the position it took in Silicomanganese , which Plaintiff s claim sup

port their position he

re. Plain tiffs ass ert that t

he prese nt case i s similar to Silicomanganese , and therefore, the cases–abse nt justification–must be treated the same. ( Id. at 12.) According to Plaintiffs, in Silicomanganese , Commerc e denied drawba ck adjust ments claimed by He

vensa (the respondent) because He vensa failed to establish that it paid import duties on goods used to produce merchandise for the domestic market. ( Id. at 10.) On review, this court upheld Commerce’s denial of the Hevensa’s cla imed drawback adjustments. Hornos Electricos de Venezuela, S.A. (Hevensa) v. U nited States , 27 CIT __, 285 F. Supp. 2d 1353 (2003). Therefore, Plaintiffs arg ue that payment of duties on imported inputs used in produc tion04-00568 Page 8

of subject goods f

or sale in the domes tic marke

t must be pr

oved bef ore a re spondent may

avail itself of a drawb ack adju stment to EP

. Plaintiffs also argue that drawback adjustments should be trea ted like other circumstances of sales adjustments, “which ‘are made when the se ller incurs certain costs in its home market sales that it does not incur when selling to [the] United States market.’” ( Id. at 15 (citation omitted). ) Beca

use Saha Thai had no duty costs for inputs use d to produc e subjec t goods so ld in the domestic market, Plaintiffs’ position is that no drawback adjustment should be allowed.

II. Defendant’ s Content ions Defendant argues that § 201 duties are “special duties,” which are not considered “ United States import duties” for purposes of the Act and therefore are notdeductible from EP. The gover nment also

contends that bec ause Sah a Thai sa tisfied th e requis ite two-pronge d test, Commerce’s allowance of the drawba ck adjustment was proper.

A. Section 201 Duties Commerce

argue s that it is o wed def erence in its const

ruction o f 19 U.S.C. § 1677a(c)(2)(A), which require s deduction of “United States import duties” from EP. (Def.’s Mem. in Opp ’n to Pls.’ Mot. for J. u pon the Ag ency

R. (“Def .’s Br. ”) at 18. ) In a

rriving at its statutory interpreta

tion of “United States import duties,” Commerce explains that it analyzed the legislative history of

§ 201. Commerce concluded that § 201 duties are not “United States import duties” and should be treated the same as AD and counter vailing (“CV”) duties, which are04-00568 Page 9

not deducted from EP. ( Id. at 17.) Commerce reasons that–like AD and CV duties–§ 201 duties “are imposed following a determination of ‘mate rial injury.’” ( Id. at 17-18.) Because AD and CV duties are “special duties,” Commerce points out that this court has upheld Commerce’s practice of not deducting them from EP. ( Id. at 18.) Commerce claims that “deducting special duties would ‘double-count’ those duties.” ( Id. at 19.) Co mmerce maintains t hat “[t]o av oid such double-counting, it is therefore appropria te not to reduce the United States price in the amount of the section 201 duties.” ( Id. ) With regard to the upward adjustment to EP to reflect Saha Thai’s pric e revisions for § 201 duties, Commerce insists that it “properly adjusted United States pr ice to accurately

reflect the sales price” because “Saha Thai’s sales contracts were ‘duty inclusive.’” ( Id. at 21.) According to Commerce, the duty -inclusive sales price consists of a § 201 duty component that must be added to EP when separately invoiced to Saha Thai’s unrelated United States customers. ( Id. )

B. Drawba

ck Adjustments Commerce

explains tha

t it has a long-sta

nding pr actice of evalu ating c laims for

a duty drawba ck adj ustm ent pu rsuan t to § 772(c )(1)(B) of the Act, 1 9 U.S .C. § 1677a (c)(1) (B), us ing a two-pronged test. ( Id. at 9.) Ac cording to Commerc e, the te st is based upon the c

riteria set forth in the Act and requires the respondent to establish that (1) the import duties and rebates are directly linked to and are dependent upon one another, and (2) there are suff icient imports of raw materials to account for the duty drawba ck rece ived on expo

rts of the manufactured pr

oduct.04-00568 Page 10

( Id. at 10 (quotation & citation omitted).) Commerce restates that “the statute re quires that Commerce grant a duty

drawback adjustment if (1) ‘import duties [are] imposed’ and (2) not collected ‘by

reason of the exportation of the merchandise to the United States.’” ( Id. at 11 (quoting 19 U.S.C. § 1677a(c)(1)(B)) ( brackets in original).) Commerce notes that Plaintiffs do “not dispute that Saha Thai established that import duties are imposed upon the imported inputs it utilized to produce the Thai pipes exported to the United States, and that those duties were not collected because Saha Thai exported the Thai pipes to the United States.” ( Id. at 11-12. ) Furthe r, Commer

ce is sati sfied tha

t “the Tha

i import dut

y regime satisfied prong one of Commerc e’s duty draw back test.” ( Id. at 12.) During it s verification, Commerce also confirmed that “Saha Tha i had imported a sufficient quantity of raw materials to account for the [drawback duty ] exemption.” ( Id. ) Thus, Commerce concluded that Saha Tha i met the se cond pro ng of Com merce’ s test. Commerce

next asser

ts that “no thing in t

he legi slative hi story

sugge sts respo ndents mus t provide proof of import duties actually paid upon imported inputs used in the home market.” ( Id. ) Furthe

r, Commer

ce conte nds that th e legis lative history does not ma

ndate tha t respond ents consume d

uty -paid, imp orted inp

uts on subje ct good s sold in the domestic market to

be elig ible to receive a duty

drawback adjustment. ( Id. at 13.) Commerce advises this Court that the court recently rejected Plaintiffs’ argument that respondents must prove pay ment of import duties to be eligible for a drawback a djustment. ( Id. ( citing Allied Tube & Conduit Corp. v. United States , 29 CIT ___, 374 F. Supp. 2d 1257, 1261 (2005).) Commerce points out that the Allied Tube court held that the “clear langua ge of 1904-00568 Page 11

4 In large part, Saha Thai’s arguments mirror Commerce ’s. Only where they differ

or provide further explanation does the Court note Saha Thai’s arg uments either here or in the Discussion section of this opinion. U.S.C. § 167 7a(C)(1 )(B) [sic ] does not r equire a ny i nquiry into whether the pr

ice of pr oducts sold in the home market includes duties paid for imported inputs.” (Def.’s Br. a t 14 (quotation & citation omitted).) Commerce argues that the court’s ruling in Hevensa

is inapposite. Commerce explains that in Hevensa

an absen ce of ev idence necessita

ted Commer

ce’s re quest for

further proof to substantiate the claim for a duty drawback adjustment. Commerce submits that “in Hevensa , the respondent failed to provide adequate documentation to validate its claims that duties wer e payable a bsent exportation.” ( Id. ) Commerc e did not e ncounter such an a bsence o f eviden

ce in this matter and urges this Court to find the same. Lastly , Commerce notes that Plaintiffs do not challenge Commerce’s finding that Saha Thai satisfied the two-pronged test. ( Id. at 15.) Therefore, Commerce conc ludes that Saha Thai properl y r eceive d a duty

drawba ck adjust ment to EP.

III. Defendant-Interve nor’s Cont entions 4 Saha Thai claims that Commerce would improperly double-count the § 201 duties were the agency

to require their deduction from EP. Saha Thai also maintains that there is no require ment that i

mport dutie s be paid on inputs use d in the pr oduction o f subjec t mercha ndise sold in the domestic market to qualify for a drawback adjustment to EP. Lastly , Saha Thai suggests that Plaintiffs’ misinterpreted the outcomes in Silicomanganese and Hevensa

.04-00568 Page 12

5 Saha Tha

i’s refe rence t o “absor ption” ap parentl y r efers to Commerce ’s reg

ulation tha

t it wi ll “d ed uc t t he am ou nt of an y antidumping duty or countervailingduty which the importer or producer: (A) Paid dire ctly on behalf of the importer; or (B) Reimbursed to the importer.” 19 (continued...) A. Section 201 Duties Accord ing to Saha Thai, “ deductin g Section 201 dutie s from re spondent’ s export pr ice in an antidu mping dut

y r eview wo uld resul t in the impo sition of do

uble rem edies, a

scenar io that is inappropriate and not [in] accordance with U.S. law or our WTO obligations.” (Me m. in Opp’n to Pls.’ Mot. for J. upon t he Age ncy R. (“Resp ’t Br.” ) at 14.)Further , Saha Tha i argue s that § 201 duties should be considered similar to AD and CV duties for purposes of the deduction from EP for import duties. ( Id. ) Saha Thai reasons that § 201 duties and AD duties are ana logous because both “are remedial in purpose a nd effect.” ( Id. at 15.) A s Saha Tha i’s logic goes, because Commerce does not deduct AD duties from EP, it should also not deduct § 201 duties from EP. ( Id. at 16-17.) Saha Thai explains that § 201 safeguard duties are “de signed to remedy the actual or potential injury to the domestic industry posed by the imports in question.” ( Id. at 18.) Saha Thai argues that deducting Section 201 duties from U.S. price cannot then be viewe d as legitima tely fulfilling the statut ory goals of Section 20 1, as those

objectiv es would have been already

met by the application of Sec tion 201 itself, a result not properly a

ccomplished through the circular and duplicative a ntidumping margins that would

be produ ced by deductin g Section 201 dutie s. ( Id. ) Saha Tha

i notes tha

t had Comme

rce not a llowed the

upward a djustment t

o EP for its § 201 reimbursements Plaintiffs likely would “have complained of absorption 5 of the Section 20104-00568 Page 13

5 (...continued) C.F.R. § 35 1.402(f)

(2002) ( emphasis

added). Howeve

r, the re gulation appea

rs only to apply to CV and ADduties an

d not to § 201 duties. duties by Saha Thai.” ( Id. at 19.) Therefore, Saha Thai arg ues that Commerce’s treatment of the § 201 billing adjustments was proper.

B. Drawba

ck Adjustments Saha Tha i points out t

hat Commer

ce has c onsistentl

y a pplied the same two-

part test in determining whether a respondent is elig ible for a drawback adjustment. ( Id. at 5.) Saha Thai reminds the Court that Plaintiffs concede that it met Commerce’s two-pronged te st. In addition, Saha Tha i notes tha

t Commerc e’s test d

oes not re quire tha

t the resp ondent “u se importe d inputs to produce domestic merchandise and demonstrate that it has paid import duties on such inputs.” ( Id. at 5-6.) Further, Saha Thai presses that Commerce has specifically

rejected adding “a third prong r equiring that a re spondent d

emonstra te that it p aid import

duties on r

aw mater ials used in the production of merchandise sold in the home market.” ( Id. at 6.) Moreover, Saha Thai submits that there is no judicial precedent for requiring that “a respondent must use imported inputs to pr

oduce do mestic me

rchandi se and de

monstrate that it has

paid impor

t duties on

those imported inputs in order to receive a duty drawback adjustment.” ( Id. at 8.) Saha Thai places no weight on either Silicomanganese or Hevensa

and posits that Plaintiffs misunderstand the holding in the matters. According to Saha Thai, the f acts of Silicomanganese

differ from those before the Court. I n Silicomanganese , Saha Thai explains that Hevensa used both i

mported a

nd domesti c inputs to

produce subject me

rchandi se for bo th04-00568 Page 14

domestic and export markets. Although Hevensa’s participation in Vene zuela’s duty drawba ck regime was not in dispute, Hevensa failed to prove that it was required to pay duty on the imported inputs used to produce subject goods for the domestic market. ( Id. ) Saha Thai states that “[g]iven that HEVENSA could not establish that the duty e xemption was granted only f or inputs used to produce export merchandise, [Commerce] could only c onclude that the statutory requirement that the duty exemption be ‘by reason of the exportation of the subject merchandise’ was not met.” ( Id. at 9.) I n other w ords, Sah a insists th at Silicomanganese and the court’s holding in Hevensa

relate to a failure of proof that “the import duty and rebate are directly

linked and dependent on one another.” ( Id. at 5.) Saha Thai maintains that the Hevensa court upheld Commerce’s imposition of a requirement that Hevensa prove pa yment of import duties on imported inputs used to produce domestic subject merchandise to establish “that the exemption granted under the

circumst ances of this case was in fact due to the exportation of the merchandise and not as part of a ge neral scheme to exempt all inputs from duties.” ( Id. at. 9 (emphasis in original).) Because there has been no sugge stion that Saha Thai would not have been re quired to

pay duty on importe d inputs for use to pr oduce su bject g oods for t

he domest

ic market a nd beca use Commer

ce and th is court h ave adh ered to Commerce’ s two-pronged te st in matters arising subsequent to Silicomanganese , Saha Tha i urges this Court to

uphold Commerce’s treatment of its drawback adjustments. ( Id. at 10-12.)

J URIS DICTI ON This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(c) (2000).04-00568 Page 15

S TAND ARD O F R EVIEW I. Substantial Evidence In reviewing

a challenge to Commerce’s final dete rmination in an AD administrative review, the Court will uphold Commerce’s decision unless it is “unsupported by substantial evidence on the record, or otherwise not in ac cordance with law.” Tariff Ac t of 1930, § 516A(b)(1)(B) (codified as a mended at 19 U.S.C. § 1516a(b)(1)(B)(i) (2000) ). “Substantial evidence is more than a mere scintilla. I t means such relevant evidence as a re asonable mind might accept as adequate to support a conc lusion.” Consol. Edi son Co. v. N LRB , 305 U.S. 197, 229 (1938 ) (citat

ions omitte d); see also Micron Tech., Inc. v. U nited States , 117 F.3d 1386, 1393 (Fed. Cir. 1997) (“‘Substantial evidence’ has be en defined as ‘more than a mere sc intilla,’ as ‘such re levant e

vidence as a rea sonable m

ind might accept as adequ ate to sup port a conclusion.’”). “As long as the ag ency’s me thodology and pr

ocedures are reasonable me ans of effectuating the statutory

purpose, and there is substantial evidence in the recor d supporting the agency ’s conclusions, the court will not impose its own views as to the sufficiency of the agency ’s investigation or question the agency ’s methodology.” Ceramica Regiomontana, S.A. v. United States , 10 CIT 399, 404-05, 636 F. Supp. 961 (1986) (citations omitted), aff’d , 810 F.2d 1137 (Fed. Cir. 1987).

II. Agency Deference In determining whe

ther Commerce’s interpretation and application of the antidumping statute is “in accordance with law,” the Court must undertake a two-step analysis. F irst, the04-00568 Page 16

Court must consider “whether Congress has directly spoken to the precise question at issue.” Chevron U.S.A., Inc. v. Natura l Res. Def. Council, Inc. , 467 U.S. 837, 842 (1984). If so, the matter is at an end. Id. If th e statute

is silent or

ambiguo us conce rning th e issue be fore it, t he Court mu st assess whether the agency ’s interpretation of the statute is reasonable. See, e .g. NSK Ltd. v. United States , 26 CIT 650, 654, 217 F. Supp. 2d 1291 (2002) (“[T]his is an inquiry into the reasonableness of Commerce’s interpreta tion.”). To evaluate whether Commerce’s statutory interpretation is reasonable, the Court will consider several fa ctors, including, but not limited to, the following: “the express terms of the provisions at issue, the objectives of those provisions and the objectives of the antidumping scheme as a whole .” Id. “[A] court must defer to an agency ’s reasonable interpretation of a statute eve n if the court might have preferred a nother.” Koyo Seiko Co., L td. v. United States , 36 F.3d 1565, 1570 (Fed. Ci r. 1994) ( citation omitted). T he Court o wes Comme

rce def erence in these c ases bec ause it has special expertise in administering AD law. Ta Chen Stainless Steel Pipe, Inc. v. United States , 298 F.3d

1330, 1335 (Fed. Ci

r. 2002); see also Koyo Seiko , 36 F .3d a t 1570 (“[A ]n agency ’s statutory interpre tation is at its peak in the case of a court’s review of Commerc e’s interpretation of the antidumping laws.”).

D ISCU SSI ON For the r easons that follow , the Cour t finds tha t Commerc e’s allowance of the § 201 d

uty billing a djustments

and impor

t duty drawba ck adjust ments wer

e proper and in ac cordanc e with04-00568 Page 17

law. However, the Court finds that Commerce’s failure to deduc t § 201 duties from EP was unreasonable and not in accordance with law. Therefore, this case is affirmed in pa rt and remanded to Commerce for recalc ulation of Saha Thai’s AD margin after de duction of § 201 duties fr om EP.

I. Section 201 Adjustments In the ir motion f

or judgment on the

agenc y r ecord, P laintiff

s argue that Saha Thai shou

ld not be allowed to increase the EP of the subject pipe by the amount of the § 201 billing adjustments. Plaintiffs also argue that Saha Thai should be required to deduc t the amount § 201 duties from the EP because they are “import duties” within the meaning of the statute. The Court disagrees with Plaintiffs on the first point and agree s with Plaintiffs on the second.

A. Billing

Adjustmen

ts The President’s imposition of § 201 duties occurred after Saha Thai ente red into sales contracts that resulted in imports of subject pipe. Upon importation, Saha Thai paid the § 201 duties and later issued invoices to its customers for the § 201 duties. Saha Thai issued the invoices, which are presently at issue, to account for the increase in the price of the subject pipe due to the imposition of the § 201 duties after Saha Thai’s sales contracts were negotiated. Issues & Dec ision Mem. for the Antidumping Duty Admin. Review of Certain Welded Carbon Steel Pipes & Tubes from Thailand (“Dec ision Memor

andum”) , A-549- 502, POR 02- 03, at 4 (Oct. 5, 2004), available at http://www.ia.ita.doc.gov/frn/summary /thailand/E4-2727-1.pdf.04-00568 Page 18

6 In its reply

brief, Plaintiffs concede this point. (Reply Br. of Pls. to Mem. of Def., the United States, & Def. Inte rvenor, Saha Thai, in Opp’n to Mot. for J. on the Agency R. (“Pls.’ Reply”) at 14-15 ( “To be clear, Wheatland is not objecting to Commerce’s a ddition of Saha Thai’s section 201 billing adjustments to Saha Thai’s originally -contracted prices, because the addition of the billing adjustments to the negotiated prices establishes the actua l prices paid by the unaffiliated purchasers in the United States for sales involving billing adjustments.”).)

7 See supra

note 4. Commerce permitted the billing adjustments because Saha Thai executed the duty -inclusive sales contracts for whi ch the bil ling adj ustments w ere cla imed bef ore the § 201 duties

became effective on March 20, 2002. Id. at 5. ( See also Def.’s Br. at 21.) Commerce verified Saha Thai’s payment of

§ 201 duties and re-invoicing of its U.S. customers and found no discrepancies. Dec. Me

m. at 5. Conse quently, Commerc e added the billing

adjustmen

ts to Respondent’s EP. Id. The § 201 billing adjustments represent part of the actual pric es paid for subject pipe by Saha Thai’s unaffiliated customers in the United States. As such, the billing adjustments form part of the EP. Therefore, the billing adjustments for § 201 duties that Commerce permitted were based upon substantial evidence and otherwise in accor dance with law. 6

B. Deduction from EP Whether § 201 duties must be deducted from EP in accordance with section 772 of the Act, 19 U.S.C. § 1677a(c)(2)(A), 7 as “Unite d States imp ort duties ” is a que stion of fi rst impression. Plaintif

fs arg ue that § 2 01 duties a

re “Unit ed States import duti es” that

Commerce

is require d to deduct from EP. T he Court a

grees .04-00568 Page 19

Because Congress did not define “ United States import duties,” the Court must determine whether it is reasonable for Commerce to interpre t the statute to exclude § 201 duties. See NSK , 26 CIT at 654. While Commerce’s determination need not be the only possible outcome, Ko yo Seiko , 36 F.3d at 1570, the interpretation genera lly must meet the objectives of the statute, NSK , 26 CIT at 654. The Court finds that Commerce’s fa ilure to deduct § 201 duties from EP does not satisfy the objectives of the statute or trade remedy legisla tion–in g eneral

–and is, th erefor

e, not in accordance with law. In interpreting the phr

ase “United States import duties,” this Court looks first to the statute itself. Chevron , 467 U.S. at 842-43. The Trade Act does not define “United States import duties.” However, the Trade Act of 1974, which g ives rise to the dispute over the deductib ility

of § 201 du

ties, doe s provide

guidance on the

meaning of the phr

ase and C ongre ss’ intention. Section 201 of the Trade Act of 1974 permits the President to impose safeg uard measures in reaction to threats posed to domestic industry by identified imported g oods. Section 202(d)( 1)(A) of

the Trad e Act of 1 974 direc

ts the I nternat ional Tra de Commissio

n (“I TC”) to “recom mend the a

ction tha t would ad

dress the serious in

jury , or thre at there of.” 19 U .S.C. § 2252(e)(1) (2000). One such action that the I TC may recommend is “ an increase in, or the im po si ti on of

, a ny duty on the imported ar

ticle.” 1 9 U.S.C. § 22 52(e)( 2)(A) ( 2000) (e mphasis added). By

way of Proc lamation 7529, the President imposed “an increase in duties on i mports ” of the subject merchandise. 67 Fed. Reg . at 10,555 (emphasis added). Section 601(1) of the Tr ad e A ct of

19 74 de fi ne s “ du ty” as in cl ud in g “ th e r at e a nd fo rm of an y import duty

, including04-00568 Page 20

8 Plaintiffs assert that the Supreme Court has defined import duties as “charg es which are collected on, or in connection with, the importation of goods.” (Pls.’ Reply at 5 ( quoting Itel Containers Int’l Corp. v. Huddleston , 507 U.S. 6 0, 65 (199 3).) While this defin

ition is hel

pful to Plaintiffs’ case, the Supreme Court was merely quoting the definition of “import duties and tax es” asc rib ed b y the Cu st om s C onv ent io n on Co nt ain ers (“C onv ent io n”) , De c. 2 , 19 72, Art . I, 988 U.N.T .S. 43. The

question o f definin

g an “im port duty ” was not before the Supre

me Court, and the Supreme Court did not adopt, as Plaintiffs suggest, the Convention’s definition of “import du

ties” for all purpo ses.

9 Because Commerce had not previously considered the deductibility of § 201 duties, the agency requested public comments. Antidumping Proceedings: Treatment of Section 201 Duties and Countervailing Duties , 68 Fed. Reg. 53,104 (Dep’t Commerce Sept. 9, 2003) ( request for public comment). In SSWR , Commerce discussed the various comments submitted from the public and from the petitioners and the respondents in SSWR and provided a detailed analysis of its position on the matter. Because Commerce relied on SSWR in its Decision Memorandum for

(continued...) but not limite d to tarif

f-rate quotas.” 19 U.S.C. § 2 481(1) ( emphasis added). Clearly

, Congre ss envisioned that the duties imposed under § 201 would be considered “import duties” for purposes of the legislation. 8 Commerce undertook a different analy sis in interpreting the phrase “United States import duties” and concluded that the legislative history of the provision distinguishes between “special duties” and “normal duties.” (Def.’s Br. a t 17.) According to Commerce, “special duties” need not be deducted from EP pursuant to 19 U.S.C. § 1677a(c)(1)(B) , while “normal duties” must be deducted. In support of its position, Commerce cites the Senate repor t that accompanied the Antidumpin

g Act of 1921, whic

h refer red to AD duties as “specia l dumping

duties” a nd to “normal customs duties” as “United States import duties.” Stainless Steel Wire Rod from the Republic of Korea

(“SSWR”), 69 Fed. Reg. 19,153, 19,159 (Dep’t Commerce Apr. 12, 2004) (final results). 9 From this refer ence, Co mmerce d

educed that04-00568 Page 21

9 (...continued) this case, the Court can infer that Commerce’s justification for its treatment of § 201 duties derives not only from Commerc e’s brief and Decision Memorandum, but also from Commerce’ s position as set forth in SSWR

. Congre ss has long

recog nized that a

t least some duties implementing trade remedies–including at least antidumping duties–are spe cial duties that should be distingu ished fr om ordina

ry customs du

ties. Acc ordingl

y, C ommerce

consiste ntly has treated AD duties as special duties not subject to the requirement to deduc t “United S tates import duties” (normal c

ustoms dutie s) from U .S. price s [EP] in calcula ting dump ing mar

gins. Id. (emphasis added). Even Commerce leaves open the possibility that “some” “special duties” may also be “normal customs duties” that must be deducted from EP as “United States import duties.” The Court finds that § 201 duties are such duties, though the Court is reluctant to ratify the terminology of

“special duties” and “normal customs duties” adopted by Commerce. Commerce

likens § 20 1 duties to

AD duties

because “sectio n 201 dutie s are impo sed only following a determination of injury .” (Def.’s Br. at 20.) See also SSWR , 69 Fed. Reg. at 19,159-6 0 (“201 d

uties are imposed on

ly f ollowing a finding of serio us injury to the indu stry

in question”). This is simply a misstatement of the law. The Pre sident may impose § 201 duties after an ITC finding

that “an article is being imported into the United States in such increase d quantities as to be a substantial cause of serious injury , or the threat thereof , to the domestic industry .” 19 U.S. C. § 2251(a ) (2000)(emphas is added) . Beca use no actual injur

y to domestic industry is neces sary

prior to the imposition of § 201 d uties, Comm erce is

incorre ct to sug gest that § 201 duties are the product of a review “a kin to antidumping duties.” (Def.’s Br. at 21.)04-00568 Page 22

AD duties are intended to offset price discrimination from overse as competitive industries. The AD duty ra te generally

is established for an individual manufacturer based upon a complic ated ana

lys is of economic, ma

nufactu ring, c ost, pric e, and other data . Commerc e must then revise EP based upon an array of statutorily-dictated a

djustments before it can compare EP to normal value. Once Commerce completes these complex calculations, the a gency can determine the dump ing mar gin and appropr iate AD d umping de

posit rate or final c ash depo sit rate. In contrast, § 201 duties are se t forth by Presidential fiat to counter a surge in imports. Unlike AD duties, § 201 duties are not “intended to offset the effe ct of discriminatory pric ing between . . . two markets.” AK Steel Corp. v. United States , 21 CIT 1265, 1280, 988 F. Supp. 594 (1997), aff’d , 215 F.3d 1342 (Fed. Cir. 1999) (quotation & citation omitted). Rather, § 201 duties are remedial duties designed to provide “ temporary

relief for an industry

suffering from serious injury, or the threat thereof, so that the industry w ill have sufficient time to adjust to the freer interna tional co mpetition. ” S. Rep. N o. 93-129 8, at 119 ( 1974) (e mphasis a dded). B ecause they specific ally address two distinct ty pes of harms, AD and § 201 duties may be “complementary ,” but they are not “interchangeable,” as Commerc e suggests. SSWR , 69 Fed. Reg. at 19,161. Simply beca use § 201 and AD duties are each reme dial in nature does not–as Saha Thai urges–create a

“single trade practice.” ( Resp’t Br. at 17.) Section 201 duties are “not intended to protect industries which fail to help themselves become more competitive through reasona ble research and investment efforts, steps to improve productivity and other mea sures that competitive industries must continually undertake .” S. Rep.04-00568 Page 23

No. 93-12 98, at 122 . Moreove r, it is cle ar from t

he legi slative hi story

of § 201 tha

t Congre ss did not intend

for § 201 d

uties to re place–or be “int

erchan geable ” with–AD

duties. The [I nternat ional Tra de] Commission would be require d, whene

ver in the course of its investigation it has reason to believe that the increased imports are attributable in part to circumstances which come within the purview of the Antidumping Act, the countervailing duty statute (section 303 of the Tariff Act of 1930), the unfair import practices statute (section 337 of the Tar iff Act of 1930), or other remedial provisions of law, to notify promptly the appr opriate agenc y so that such action ma

y be taken as is otherwise authorized

by such provisions of law. Action under one of those provisions when appropriate is to be pref erred over action under this chapter. This provision is designed to assure that the United Sta

tes will not ne edlessly

invoke the

escape -clause

(article XIX of

the GATT) [§ 201] and will not become involved in granting compensatory concessions or inviting retaliation in situations where the appropriate remedy may be action under one or more U.S. laws ag ainst unfair competition for which no compensation or retaliation is in order. Id. at 122-23 (emphasis added). The legislative history enunciates that Congress expects that Commerce

will addr ess antid umping us ing the a

ppropria te trade remedy laws and that § 201 i s notan appro

priate r emedy for antid umping. I

n fact, Co ngress recog nizes that t

o attempt t

o remedy a ntidumping by way

of § 201 would be in violation of the United States’ obligations under the Genera l Agre ement on T ariffs a

nd Trade (GATT) . It do es notfollow fr om this legisla tive histor

y th at “to the

extent that

201 duties

may lower the dumping margin, this is a legitimate remedy

for dumping.” (Dec. Mem. at 3 ( quoting SSWR , 69 Fed. Reg. at 19,160).) Further, “[i]n determining whether to provide relief [pursuant to § 201] and, if so, in what amount, the President will continue the practice of taking into acc ount relief provided under other provisions of law, such as the antidumping and countervailing duty laws.” Urug

uay Round Agreements Act, Statement of Administrative Action, H.R. Doc. No. 103-316, Vol. 1, at 964 (1994) (“SAA”). Thus, the Court may presume that when setting the level of § 201 duties the04-00568 Page 24

10 Had Saha Thai not issued the billing adjustments, Commerce would presume that § 201 duties we re inclu ded in Sah a Thai’s

sales pr ice. (Pls .’ Reply

at 11 n.10 , 13-14); see also SSWR , 69 Fed. R eg. at 1 ,159 n.18. Thus, the risk of creating

a dumping

margin where none prev

iously existed would depend wholly on the respondent’ s allocation and absorption of its selling expenses. See Def.’s B r. at 19; SSWR , 69 Fed. Reg. at 19,160. The method by which exporters and producers allocate and absorb expenses is alwa ys a considera

tion in the administration of AD laws. Commerce should treat § 201 duties no differently than any other de ductible movement charg e (i.e., foreig

n inland f reight , foreig

n broker age a nd handlin

g, fore ign inla

nd insura nce, bill of lading charg es, ocea

n freig ht to the U. S. port, U. S. broker ing and handling charg es, and U .S. duty ) to Saha T

hai . President took into consideration the existing AD orders on the affected produc ts. Given that AD duties and § 201 duties are designed to remedy distinct harms, the Court may also presume tha t the Presi dent woul d not expect that Comme rce wou ld revise AD duties

downwar d in response to the President’s action. Commerce seems to agree and r easons that “any

adjustment for the potential overlap between 201 and AD remedies is to be made by the President in setting the level of the 201 duties.” SSWR , 69 Fed. Reg. at 19,160 (e

mphasis a dded). F urther, Commerce

claims tha

t “it is not Commer

ce’s pla ce to upse t that bala nce by subtrac ting the

201 duties

from U.S. prices [EP] in calculating dumping margins.” Id. However, by its failure to deduct § 201 duties, Commerce has eff ected th e very

result tha t it intende d to avoid. By failing to deduct § 201 dutie s from EP, Commerce improperly

negates the § 201 duty

imposed by the President, artificia lly decrea ses Responde nt’s AD ma

rgin, a nd upsets t

he balan ce betw een § 201 and AD du ties. This result is aptly demonstrated by

the elimination of Saha Thai’s dumping margin from the pre liminary results to the final determination. 1004-00568 Page 25

11 “Circular logic” refers to the double-counting that would occur if AD duties were deducted from the EP used to calculate the very dumping margin that is then used to determine the AD dumping duty de

posit rate. (Def.’s Br. at 19.) This Court does not take issue with Commerce’s long-standing position not to deduct AD duties from EP in calculating the dumping margin. This cour t, see id. at n.23, and Congress, see id. at n.25, h ave sanc

tioned this

practic e for g ood reas on: deducting AD d uties from EP would result in double-counting AD duties. See, e .g. , Hoogovens Staal BV v. United States , 22 CIT 139, 146, 4 F. Supp. 2d 1213 (1998) (“deducting antidumping duties as costs or import duties from U.S. price wo

uld, in ef fect, do uble-co unt the ma

rgin”) ; AK Steel , 21 CIT at 1280 (“making an additional deduction from [United States price] for the same antidumping duties that correc t this price discrimination would result in double-counting” (quotation & citation omitted)). Plaintiffs explain that “Commerce has traditionally not deducte d AD duties from the EP or [constructed export price] because the AD duty is the result

of the AD margin calculation, and not a component of it. Thus, deducting AD duties in determining the EP or [constructed e xport price] double-counts the AD duty , once as a component of the calculation of the duty , and a second time as the AD duty itself.” (Pls.’ Reply at 7 (empha sis added).) Because § 201 duties are not determined based upon a margin calculation, no such double-counting occurs with § 201 duties. I n fact, Commerce a

cknowle dges tha

t no “circular logic” aff

ects the consideration of whether to deduct § 201 dutie s, as it doe s with AD du ties. 11 SSWR , 69 Fed. Reg. at 19,159. Double- counting

is not the o nly

justifica tion for not deduct

ing AD d uties from EP. This court ha s previou sly

found tha

t AD dutie s are not

deductib le from EP pursuan t to 19 U.S.C. § 1677a(c)(2)(A) because deposits of estimated dumping duties may not a ccurately reflect the04-00568 Page 26

final deposit rate calculated by Commerce. Federal-Mogul Corp. v. United States , 17 CIT 88, 108, 813 F. Supp. 856 (1993). The court held that Commerce should “deduct estimated import duties from [United States price] only to the extent that the actual duties to be collecte d can be determined at the time [Commerce] is calculating the current dumping ma rgins.” Id. The court found that Commerce correctly deducted “only

deposits of the actual normal import duties owed which [could] be accurately determined .” Id. (emphasis added). Commerce concedes that § 201 duties are import duties, albeit a “spe cial type.” SSWR , 69 Fed. Reg. at 19,160. Federal-Mogul supports the finding that import duties must be deducted from EP if they “c an be determined at the time [Commerce] is calculating the curre nt dumping margins.” 17 CIT at 108. Unlike AD duties, § 201 duties are fixed and ce rtain at the time of importation. Proclamation 7529, 67 Fed. Reg. at 10,557, 10,590. Therefore, Commerce and Saha Thai cannot argue that § 201 duties deposited at importation do not acc urately re flect the final duty to be assessed. Thus, Commerce must deduct from EP the § 201 duties, which are accurate, fixed, and determinable, when Commerce calculates the current dumping marg in. See Federal-Mogul , 17 CI T at 108. Commerce d id not act in accor dance w ith law wh en it fail ed to make such a deduction. In fu rther c onsideri

ng the a pplication of sect

ion 772(c )(2)(A

) of the A ct, 19 U.S. C. § 1677a(c)(2)(A), to AD duties, this court noted that If Co mmerce were to de duct existin g antidu mping dut

ies as a ma

tter of c ourse in its administrative review, it would reduce the U.S. price [EP]–and increase the margin –artific ially . As discu ssed ear lier, an antidumpin

g orde r is desig ned to raise the price of dumped g oods to a f

air leve l in the import marke t. It i s not a normal import duty or extra “cost” or “expense” to the importer– it is an element of a fair and reasonable price

.04-00568 Page 27

12 Plaintiff s note tha t Smith-Corona suggests that the “common” point for comparison may be “f.o.b. foreign port.” (Pls.’ Reply at 14 ( quoting Smith-Corona , 713 F.2d at 1572). ) Beca

use defining the common point for comparison is not relevant to the outcome of this case , the Court defers to Commerc e’s conc lusion tha t the common point is the “factory at which t

he merchandise was produced.” AD Manual at 13. Hoogovens Staal , 22 CIT at 146 (emphasis added). As the Hoogovens Staal court indicated, AD duties–and by extension CV duties, see AK Steel , 21 CIT at 1280–are notdeductible from EP because they

are part of the “fair and re asonable price” of the imported subject goods, a s opposed to deductible costs, expenses, or United States import duties. Hoogovens Staal , 22 CIT at 146. The same cannot be said for § 201 duties because § 201 duties a re not intended to redress price discrimination. In addition, Commerce’s failure to de duct § 201 duties “violates the fundamental principle of antidumping law.” (Pls.’ Br. at 17 n.8.) This principle r equires that Commerce adjust EP to permit comparison of EP and normal value at a “‘common’ point in the chain of commerce.” Smith-Corona Group v. United States , 713 F.2d 1568, 1572 (1983). Commerce defines the “common” point for purposes of the comparison of EP to normal value as ex-factory

. Dep’t Commerce, Import Administration, Antidumping Manual (“AD Manual”), at 13 (1998). 12 The Trade Act requires Commerce to de duct from EP “additional costs, charges, or expenses, and United States import duties, which are incident to bringing the subject merchandise from the original place of shipment in the exporting country to the place of delivery in the United States.” 19 U.S.C. § 1677a(c)(2)(A). Bec ause § 201 duties are incurred after the point of shipment and are not–like AD duties–part of the “fair and re asonable price” of the subject merchandise, Hoogovens Staal , 22 CIT at 146, § 201 duties fall within the ambit of04-00568 Page 28

“United States import duties.” Commerce acknowledges a s much. SSWR , 69 Fed. Reg. at 19,160 (“While 201 duties are a special ty pe of import duty, they

are nevertheless a species of import duty, and are thus cove red, if at all, by the

phrase ‘United States import duties.’”) Further, in its questionnaire response, Saha Thai itself describe d the § 201 duties it paid as “additio nal expens es incur red for shipping mercha ndise to th e United S tates.” (App. of Docs. in Supp. of Def.’s Mem. in Opp’n to Mot. for J. upon the Agency R., Tab 1 (Antidumping Questionnaire Resp.) at 2.) Thus, Commerce must treat § 201 duties as deductible movement charges in accordanc e with 19 U.S.C. § 1677a(c)(2)(A). It is clear from legislation and the legislative history tha t Congress intended § 201 duties to be cons idered “ import duti es.” Fu rther, b ecause

AD and § 2 01 duties a

re inten ded to re dress dissimilar trade distortions and are calculated in methods unique to each, it is not reasonable for Commerce to treat the two ty pes of duties similarly for purpose s of section 772(c)(2)(A) of the Tariff Act of 1930, 19 U.S.C. § 1677a(c)(2)(A) . Commerce’s failure to deduct § 201 duties from EP vitiates § 201 duties, arbitrarily reduc es Saha Thai’s dumping margin, and obstructs the purpose of both § 201 and AD trade remedies. Moreove r, Commerce can accurately determine the amount of § 201 duties at the time the AD margin is calculated. Ther efore, Commerce’s failure to deduct § 201 duties from EP was not in accordance with law. Accordingly , this Court remand s thi s matt er to C ommer ce to re calcul ate Sa ha Thai ’s dum ping m argin af ter ded uctin g § 201 duties from EP in accordance with 19 U.S.C. § 1677a(c)(2)(A ).04-00568 Page 29

II. Duty Dra

wback Adjust ment Section 77 2(c)(1 )(B) of

the Tari ff Act, 1 9 U.S.C. § 16 77a(c) (1)(B) , requir es Commer

ce to increase EP for eligible duty drawback received in the responde nt’s home market. This practice is commonly known as a “duty drawback” adjustment. The duty drawback adjustment is limited to “the amount of any import duties imposed by the country of e

xportation which have been rebated, or which have not been collected , by reason of the exportation of the subject mercha ndise to th e United S tates.” 19 U.S.C. § 1 677a(c) (1)(B) (emphas is added) . The duty drawback adjustment is intended to prevent dumping margins from being created or aff ected by the rebate or exemption of import duties on inputs used in the production of exported merchandise. See Hevensa , 285 F. Su pp. 2d at 1 358; Allied Tube , 374 F. Supp. 2d at 1261. In other word s, a duty

drawba ck adjust ment take s into acc ount any differe nce in the prices for home market or normal value and e xport sales accounted for by the fact that such import duties have been paid on inputs used to produce the mercha ndise sold

in the home

market, but have n

ot been pa

id on inputs

used to make the mercha ndise expor

ted to the United Sta

tes. Hevensa , 285 F. Supp. 2d at 1358. To deter mine whet

her a re spondent i s eligib le for a duty drawba ck adjust ment, Commerce

develope d a two-pronge d test. (D ef.’s B r. at 9.)The test r equires the resp ondent to establish that (1) t he re bate and i mport dutie s are

depe nden t upon one a nothe r, or in the cont ext of an exemption from import duties, if the exemption is linked to the exportation of the subject merchandise; and (2) the responde nt has demonstrated that there are sufficient imports of the raw material to account for the duty drawback on the exports of the subject merchandise.04-00568 Page 30

Allied Tube , 374 F. Su

pp. 2d at 1 261. The f

irst prong establishes a link b etween an import d

uty imposed and a rebate or exemption from such duty

. Avesta Sheffield, Inc. v. U nited States , 17 CIT 12 12, 1215, 8 38 F. Supp . 608 (199 3). I n addition , the firs t prong e nables Co mmerce t

o verify that the home count

ry allows re bates or exemptions only

for those imported i

nputs used

to produce exported merchandise. “The second pr ong of the test focuses more specifica lly on the respondents’[sic] conduct and requires the foreign produc er to demonstrate that it has imported a sufficient amount of raw materials to account for the dr awback received upon export of the finished product.” Id. at 1216 (citation omitted). This court has consistently uphe ld Commerce’s two-pronged test to assess duty drawback eligibility . (Def.’s Br. at 10.) See also Avesta Sheffie ld , 17 CIT at 1215. Both Commerce (Def.’s Br. at 11- 12) and Saha Thai (Resp’t Br. at 3) asser t that Saha Thai satisfied Commerce’s two-pronged duty drawback eligibility

test. Further, both Commerce (Def.’s Br. at 11-12) and Saha Tha i (Resp’t Br. at 6) claim that Plaintiffs concede that Saha Thai met Commerce’s two-pronged test. The Court defe rs to Commerce on whether Saha Thai satisfie d the two-

pronge d test and

agree s that Plain

tiffs con cede thi s point. The issue before this Court is not whether Saha Thai satisfied the two-prong ed test or even whe ther the two-pron ged tes t is valid. R

ather, t he issue b efore t

his Court is

whether –in addition to

comply ing with t he two-pronge d duty

drawba ck elig ibility

test–Saha

Thai must establish that it pai d duty

on importe d inputs use d in the pr oduction o f subjec t mercha ndise sold in the domestic market. (Pls.’ Br. at 2.) This Court finds that there is no requirement in the statute or in Commerc e’s rea sonable i nterpre tation the reof tha t Saha Tha

i prove th at it paid d

uty04-00568 Page 31

on importe d inputs use d in the pr oduction o f subjec t mercha ndise sold

in the dome stic mark

et to qualify for a dut y dr awback adjustmen

t. Plaintiffs rely on Silicomanganese and this court’s subsequent opinion in Hevensa in support of

their pos ition. As Co mmerce a nd Saha Thai point ou

t, Plaintif fs’ reli ance is misplaced. The court’s holding in Hevensa is limited to the facts before that court, which are distingu ishable f rom the fa

cts before this Cou

rt. Like this matter, Hevensa involved the application of a duty dr awback exemption program. Hevensa , 285 F. Supp. 2d at 1359. Venezuela, Hevensa’s home country , operated a duty exe mpti on regi me whe reby Heven sa was “exem pt fro m paying, r ather t han rec eivin g a rebate on, import duties on certain inputs used to produce silicomangane se for export.” Id. In verifying whether Hevensa was eligible f or a duty dra

wback adjustment to EP, “Commerce examined whether import duties were not collected ( i.e. , exempted ) on impor

ted inputs because those inputs were used to produce silicomanganese tha t was exported.” Id. The petitioners asserted that “Hevensa did not pay duties on imported materials used in the production of si li com ang ane se s ol d du rin g th e PO I in either the home or export ma

rkets .” Issues & Dec ision Mem. for the Final Determination of the Antidumping I nvestigation of Silicomanganese from Venezue la , A-307-820, POI 00-01, at cmt.6 (Apr . 2, 2002), available at http://www .ia.ita. doc.go v/frn/sum mary /venezue la/02-79 53-1.txt. The silicoma ngane se petitione rs noted t hat Heve nsa’s total consumption of certain inputs was nearly identical to the amount of those same inputs on which Hevensa claimed duty exemption. Id. Thus, the petitioners contended that “Hevensa did not pay import duties on those inputs, regardless of04-00568 Page 32

whether they were us ed to prod

uce silic omanga

nese sold in the home

market o r export ma

rkets during the POI.” Id. The petit ioners in sisted tha

t Hevens a must pro vide Comme rce with evidenc e that it pa

id duties o n a perc entage

of raw ma

terials e qual to the

percen tage of home market sales to total silicomanganese sales. Id. Commerce agreed with the petitioners that Hevensa was not eligible for a duty drawback adjustment. Id. Both Commerce (Def.’s Br. at 14) and Saha Thai (Resp’t Br. at 9) submit that Silicomanganese

and Hevensa

involve a failure of proof. According to Commerce and Saha Thai, Hevensa failed to satisfy the first prong of the duty drawback eligibility

test. As Commerce stated, Hevensa “failed to provide adequa te documentation to validate its claims that duties were payable a bsent exportation.” (Def.’s Br. at 14.) This court rec ently considere d very similar arguments in Allied Tube , 374 F. Supp. 2d. at 1259. In Allied Tube , the cour

t reject ed the pla intiffs’ assertion that to qu alify for a dut y drawba ck adjust ment the r

esponde nt was re quired to

prove tha t it paid imp ort duties

on inputs used in the production of subject merchandise sold in the domestic market. Id. at 1 261 . In reaching its decision, the court analy zed Hevensa

and held that Hevensa did not create a separate, third prong to the duty drawbac

k test. Rather, the Court [s ic] affir

med the f irst prong of Commer

ce’s te st where

by a party seeking a duty

drawback adjustment must demonstrate that either rebate a nd import duties are dependent on one another, or that exemption from import duties is linked to exportation of the subject merchandise. Allied Tube , 374 F. Supp. 2d at 1263. The Court also considered whether it was releva nt that the responde nt “did not

pay any import duti es on raw

materia ls used to produce s

ubject me rchandi se for the home market.” Id. The cour t conclud ed that Com

merce’ s decisio n to gra

nt the duty04-00568 Page 33

13 The cour

t noted tha

t the resp ondent pr

ovided Com

merce w ith evide nce that it paid duties on s ome import

ed inputs u sed for production of subje ct merchandise so ld in the do mestic market, but the court did not rely upon this evidence in reaching its conclusion. drawback adjustment was reasonable bec ause Commerce found that the drawback re gime was reliable and that t he respondent sat

isfied bo th prong s of the du ty d rawbac k eligib ility

test. 13 This Court finds no reason to deviate from the court’s well-reasone d decision in Allied Tube. “The cle ar lang

uage o f 19 U.S.C. § 1677a( c)(1)( B) does not requi re an inq uiry into whether the price for products sold in the home market include s duties paid for imported inputs.” Id. at 1262. The Trade Act “allows a full upward a djustment,” Avesta , 17 CIT at 1216, to EP for the duties “which have not been collected,” 19 U.S.C. § 1677a(c )(1)(B). Further, this Court explicitly rejects Plaintiffs’ “contention that, as a pr erequisite to receiving [a] duty drawback [adjustmen

t], a compa

ny m ust demons trate the

pay ment of du

ties upon r

aw mater ials used to produce merchandise sold in the home market.” Allied Tube , 374 F. Supp. 2d at 1261. Insofar as Plaintiffs do not challeng e Commerce’s finding that Saha Thai satisfied the two-pron ged dut y dr awback eligibil ity t

est, this Co

urt finds C ommerce ’s allowa nce of th e duty drawback adjustment reasonable and in ac cordance with law.04-00568 Page 34

C ONCLUSI ON For the r easons st ated her ein, the Co

urt finds t hat Commer

ce’s al lowance

of § 201 du

ty billing adjustments and import duty drawba ck adjustments were reasonable and in acc ordance with law. However, the Court finds that Commerce’s failure to deduc t § 201 duties from Responde nt’s EP wa s not rea sonable a nd not in ac cordanc e with law . There fore, th is case is affirmed in part and remanded to Commerce f or recalculation of Saha Thai’s AD marg in after deduction of § 201 duties from EP. Commerce’s remand results must be filed with the United States Court of International Trade on or before March 1, 2006.

/s/ Gregory

W. Carman Gregory W. Carman

Dated: January 17, 2006. New York, New YorkERRATUM

Wheatland Tube Co. v. United States , Court No. 04-00568, Slip Op. 06-8, dated January 17, 2006: Page 21, the last sentence on the pag e is revised to read While AD du

ties may be impose d after

a finding that a dom estic U.S. industry “is threatened with material injury ,” Tariff Act of 1930 § 733(a), 19 U.S.C. § 1673b(a) (2000) (emphasis added), Commerce is incor rect to suggest that § 201 duties are the product of a review “a kin to antidumping duties,” (Def.’s Br. at 21). January 19, 2006