Slip Op. 04-145

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS

________________________________________ 

:

ELKEM METALS COMPANY and :

GLOBE METALLURGICAL INC., :

:

Plaintiffs, :

:

v. :

:

UNITED STATES, : Court No. 02-00232

:

Defendant, :

:

and :

:

RIMA INDUSTRIAL S/A, :

:

Defendant-Intervenor. :

________________________________________:

[Commerce’s Remand Redetermination is remanded.]

Piper Rudnick LLP (William D. Kramer and Martin Schaefermeier)

for Elkem Metals Company and Globe Metallurgical, Inc., plaintiffs.

Peter D. Keisler, Assistant Attorney General; David M. Cohen,

Director, and Reginald T. Blades, Jr., Senior Trial Counsel,

Commercial Litigation Branch, Civil Division, United States

Department of Justice; of counsel: Barbara J. Tsai, Office of the

Chief Counsel for Import Administration, United States Department

of Commerce, for the United States, defendant.

Greenberg Traurig, LLP (Philippe M. Bruno and Rosa S. Jeong)

for Rima Industrial S/A, defendant-intervenor.

November 16, 2004

OPINION

I. Standard of Review

The Court will uphold the United States Department of

Commerce’s (“Commerce”) redetermination pursuant to the Court’s
Court No. 02-00232 Page 2

remand unless it is “unsupported by substantial evidence on the

record, or otherwise not in accordance with law.” 19 U.S.C. §

1516a(b)(1)(B)(i) (2000). Substantial evidence is “more than a

mere scintilla. It means such relevant evidence as a reasonable

mind might accept as adequate to support a conclusion.” Universal

Camera Corp. v. NLRB, 340 U.S. 474, 477 (1951) (quoting Consol.

Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)). Substantial

evidence “is something less than the weight of the evidence, and

the possibility of drawing two inconsistent conclusions from the

evidence does not prevent an administrative agency’s finding from

being supported by substantial evidence.” Consolo v. Fed. Mar.

Comm’n, 383 U.S. 607, 620 (1966) (citations omitted).

II. Background

Commerce issued its final results of the antidumping duty

administrative review on silicon metal from Brazil on February 12,

2002. See Final Results of Antidumping Duty Administrative Review

of Silicon Metal From Brazil (“Final Results”), 67 Fed. Reg. 6,488

(Feb. 12, 2002). Elkem Metals Company and Globe Metallurgical Inc.

(collectively, “Plaintiffs”) filed a complaint on April 15, 2002,

challenging Commerce’s Final Results. See Compl. On October 24,

2002, Plaintiffs filed a motion for judgment upon the agency record

and requested that the Court remand the Final Results to Commerce

with instructions to include in its constructed value (“CV”)
Court No. 02-00232 Page 3

1 Two types of VAT are at issue in this proceeding, imposto

sobre a circulacao de mercadorias e servicos and imposto sobre

produtos industrialzados, which are imposed by the Brazilian

government on purchases of certain goods and services. See Def.-

Intervenor Rima Resp. Pls.’ Comments Commerce Final Remand Results

(“Rima’s Resp.”) at 3.

calculation the value added tax (“VAT”), which was paid by Rima

Industrial S/A (“Rima”) upon certain production inputs.1 See Pls.’

Br. Supp. Mot. J. Upon Agency R. at 11. Commerce subsequently made

a motion to dismiss for lack of jurisdiction as moot because

Commerce’s test calculation did not change the final dumping

margin. See Def.’s Reply Pls.’ Opp’n Def.’s Mot. Dismiss Lack

Juris. Moot at 9. On February 14, 2003, Rima moved to strike from

the Court record portions of Plaintiffs’ opposition to Commerce’s

motion to dismiss. See Def.-Intervenor’s Mot. Strike R. Portions

Pls.’ Opp’n Def.’s Mot. Dismiss. The Court denied Rima’s motion

and ordered Rima and Commerce to respond to Plaintiffs’ motion.

See Elkem Metals Co. v. United States, 27 CIT ___, 297 F. Supp. 2d

1347 (2003). 

On January 29, 2004, Commerce filed a motion for voluntary

remand for it to include the VAT Rima incurred upon inputs used for

silicon metal production in its calculation of CV. See Def.’s

Mot. Remand. Rima consented to the remand but noted that the

calculation of CV also requires an accounting of the VAT credits

included in Rima’s costs thereby ensuring that double counting does
Court No. 02-00232 Page 4

not occur. See Def.-Intervenor Rima Resp. Def.’s Mot. Remand at 2-

3. On February 25, 2004, the Court remanded this matter to

Commerce. On June 8, 2004, Commerce submitted its Final Results of

Redetermination Pursuant to Court Remand (“Remand

Redetermination”). On July 22, 2004, Plaintiffs filed comments

with the Court regarding the Remand Redetermination and Commerce

subsequently submitted its response to Plaintiffs’ comments on

September 16, 2004. Rima filed its response to Plaintiffs’

comments on September 17, 2004. An oral argument was held before

this Court on November 12, 2004.

III. Commerce Improperly Excluded the VAT Rima Paid on Inputs in

its Calculation of CV

A. Contention of the Parties

1. Plaintiffs’ Contentions

Plaintiffs contend that 19 U.S.C. § 1677b(e) (2000) and case

law require Commerce to include the VAT Rima paid on inputs in

calculating CV. See Pls.’ Comments Commerce Final Remand Results

(“Plaintiffs’ Comments”) at 6-9. Plaintiffs argue that Commerce

improperly excluded the VAT Rima paid on inputs. See id.

Commerce’s decision was based on a recent clarification made in the

Final Results of Antidumping Duty Administrative Review of

Silicomanganese From Brazil (“Final Results of Silicomanganese”),
Court No. 02-00232 Page 5

2 Commerce interpreted Aimcor v. United States, 141 F.3d

1098 (Fed. Cir. 1998), and Camargo Correa Metais, S.A. v. United

States, 200 F.3d 771, 774 (Fed. Cir. 1999) as “not dictat[ing] that

VAT must always be included in CV unless the tax is remitted or

refunded upon exportation.” See Plaintiffs’ Comments at 6-9

(quoting Final Results of Silicomanganese, 69 Fed. Reg. at 13,813).

In Final Results of Silicomanganese, 69 Fed. Reg. at 13,813,

Commerce determined that when the VAT paid is recovered by the

producer during the period of review, the VAT is not incurred and

does not constitute a material cost for the purposes of calculating

CV. See Plaintiffs’ Comments at 6. Moreover, Commerce found that

19 U.S.C. § 1677b(e) does not prohibit the exclusion of VAT from CV

if those taxes are recovered after the exportation of the subject

merchandise. See id. at 7 (citing Final Results of

Silicomanganese, 69 Fed. Reg. at 13,813). 

69 Fed. Reg. 13,813 (Mar. 24, 2004).2 See id. at 6. Plaintiffs

contend that Commerce’s rationale for excluding the VAT from Rima’s

CV calculation “is no different than its rationale for excluding

the VAT in its original determination in this case.” Id. at 7-8.

Furthermore, Plaintiffs assert that Commerce “cited no record

evidence to support its finding that Rima fully recovered the VAT

it paid on inputs during the [period of review] and no such

evidence exists.” Id. at 7. 

Plaintiffs argue that Commerce’s interpretation is contrary to

the plain language of the statute and to what the Court of Appeal

for the Federal Circuit (“CAFC”) actually decided. See id. at 9.

The plain language of the statute allows for the exclusion of taxes

paid on inputs from CV only when the VAT is remitted or refunded

upon exportation. See id. at 9 (emphasis omitted). Plaintiffs

note that the CAFC held that “unless [VAT] are remitted or refunded
Court No. 02-00232 Page 6

‘upon exportation’ they are properly included in the constructed

value of the exported merchandise.” Id. (quoting Camargo, 200 F.3d

at 774. The record indicates that the VAT paid by Rima on inputs

was not remitted or refunded upon exportation. See id.

Accordingly, Plaintiffs argue that based on the plain language of

the statute and the CAFC case law the VAT incurred by Rima on

inputs must be included in CV.

2. Commerce’s Contentions

Commerce responds that the language of 19 U.S.C. § 1677b(e)

requires that “internal taxes remitted or refunded upon exportation

of the associated merchandise are to be disregarded in the

calculation of constructed value.” Def.’s Resp. Pls.’ Comments

Upon Commerce’s Final Remand Determination (“Commerce’s Resp.”) at

4. Commerce asserts that the statute “provides no direction

specifically for the treatment of internal taxes that are not

remitted or refunded upon exportation of the associated

merchandise.” Id. Consequently, Commerce may recognize “that the

Brazilian tax system provides mechanisms for the recovery of taxes

paid, and Commerce may account for that recovery to determine the

correct value of taxes actually incurred for inclusion in

calculating constructed value.” Id. Commerce argues that

including the full amount of VAT Rima paid on inputs purchased

would not accurately represent the cost of those materials if Rima
Court No. 02-00232 Page 7

recovered some or all of the VAT paid. See id. Based on this

determination, Commerce’s calculation of CV excluded the VAT paid

by Rima.

Commerce further asserts that Plaintiffs’ reliance upon the

holdings of the CAFC, in Aimcor, 141 F.3d 1098 and Camargo, 200

F.3d 771, are misplaced. See Commerce’s Resp. at 5. Commerce

notes that the CAFC “found that the Brazilian VAT at issue was not

remitted or refunded upon exportation of the associated merchandise

and, therefore, was not required to be excluded from CV.” Id.

Commerce maintains that it may acknowledge that VAT paid on inputs

may be recovered prior to exportation. See id. Commerce notes

that the CAFC stated that “allowing a respondent to demonstrate

that taxes paid upon inputs had been recovered ‘does not foreclose

a future interpretation of the statute that requires taxes to be

remitted or refunded upon exportation to be excluded from the cost

of materials.’” Id. at 6 (quoting Aimcor, 141 F.3d at 1109, n.19).

Commerce argues that Camargo, 200 F.3d at 771, “stands for only the

proposition that because the Brazilian VAT system does not remit or

refund taxes upon exportation of the associated merchandise, the

VAT paid cannot automatically, as a matter of law, be excluded from

CV.” Commerce’s Resp. at 8.

Commerce maintains that it reviewed and analyzed comments

received upon publication of its draft remand results. See id. at
Court No. 02-00232 Page 8

12. For the Final Results, Commerce found that the amount of VAT

Rima paid upon inputs exceeded the amount of VAT it collected from

domestic customers. See id. Commerce found that “Rima had

maintained a net VAT credit balance.” Id. Thus, Commerce treated

Rima’s application of VAT credits towards input purchases as a

recovery of VAT taxes paid. See id. at 13. Rima did not incur any

net VAT costs because the VAT Rima paid exceeded the amount of VAT

Rima collected, resulting in a VAT credit balance. See id. at 12-

13. Under the Brazilian law in effect during the period of review,

VAT credit balances could be used to purchase additional inputs.

See id. at 14-15. Commerce found that “while Rima initially paid

VAT amounts upon inputs, it fully recovered these amounts prior to

exportation through the use of VAT credit as cash such that Rima

did not actually incur any VAT during the [period of review].” Id.

at 13. Accordingly, Commerce excluded VAT in determining the cost

of materials component of CV. 

3. Rima’s Contentions

Rima generally agrees with Commerce that the Court should

sustain the Remand Redetermination. See Rima’s Resp. at 1-8.

Taxes are remitted to the Brazilian government only when the amount

of taxes collected by Rima from domestic customers is greater than

the amount of taxes paid by Rima on inputs. See id. at 3-4. On

the other hand, if the amount of VAT paid on inputs is greater than
Court No. 02-00232 Page 9

the amount collected from domestic customs, the balance is retained

by Rima as a credit which may be used as cash to purchase inputs.

See id. at 4. Rima asserts that the amount of VAT it paid on

inputs exceeded the amount collected from domestic customers and,

therefore, Rima accumulated VAT credits. See id. Rima used the

VAT credits to pay its suppliers for certain inputs used to produce

silicon metal. See id. Rima notes that it recovered all VAT paid

for inputs prior to exportation. See id. at 7. Because Rima had

recovered all of the VAT paid by the time of exportation, Rima

asserts that “there were no taxes to be ‘remitted or refunded.’”

Id. Rima asserts that “[r]ather than holding on to its VAT credits

to be offset against future liabilities arising out of domestic

market sales, Rima used VAT credits in lieu of cash to purchase

inputs which were consumed in the production of the subject

merchandise.” Id. Accordingly, Rima contends that VAT was not a

cost of materials at the time of exportation and that Commerce

properly excluded VAT from CV. See id. 

B. Analysis

In determining normal value (“NV”), Commerce may disregard

sales made at less than the cost of production. See 19 U.S.C. §

1677b(b)(1). If such sales are disregarded, the statute directs

Commerce to base NV on the remaining sales of the foreign like

product in the ordinary course of trade. See id. If, however,

there are no sales made in the ordinary course of trade, Commerce
Court No. 02-00232 Page 10

3 The statute states that the CV is the amount equal to the

sum of:

(1) the cost of materials and fabrication or other

processing of any kind employed in producing the

merchandise, during a period which would ordinarily

permit the production of the merchandise in the ordinary

course of business.

19 U.S.C. § 1677b(e).

is to base NV on the CV of the merchandise.3 See id. In

calculating CV, the statute states that “the cost of materials

shall be determined without regard to any internal tax in the

exporting country imposed on such materials or their disposition

which are remitted or refunded upon exportation of the subject

merchandise produced from such materials.” See 19 U.S.C. §1677b(e)

(emphasis added). Plaintiffs argue that the plain language of the

statute requires Commerce’s calculation of CV to include the

Brazilian VAT paid on inputs by Rima. See Plaintiffs’ Comments at

9. In opposition, Commerce argues that the statute is ambiguous

with respect to the treatment of internal taxes which are not

remitted or refunded upon exportation of the subject merchandise.

See Commerce’s Resp. at 4. The Court finds that the plain language

of the statute requires the inclusion of the VAT Rima paid upon

inputs in the calculation of CV. 

The CAFC has noted that “the Brazilian system of keeping a

running total of taxes paid and collected and the ‘settling up’
Court No. 02-00232 Page 11

monthly with the Brazilian government does not seems [sic] to meet

the literal requirements of the statute in terms of refund and

remittance.” Aimcor, 141 F.3d at 1109 n.19. Commerce contends

that it “is not required to ignore that the Brazilian tax system

provides mechanisms for the recovery of taxes paid, and Commerce

may account for that recovery to determine the correct value of

taxes actually incurred for inclusion in calculating constructed

value.” Commerce’s Resp. at 4. The statute directs Commerce to

determine the cost of materials “without regard to any internal tax

in the exporting country imposed on such materials . . . .” 19

U.S.C. § 1677b(e). The statute, however, directs Commerce to

exclude internal taxes from the calculation of CV only when such

taxes “are remitted or refunded upon exportation of the subject

merchandise produced from such materials.” Id.

Contrary to Commerce’s contention, the plain language of the

statute is unambiguous. The language of the statute precludes

Commerce from including an internal tax in its calculation of CV

when such a tax is remitted or refunded upon exportation. See id.

When internal taxes are not refunded or remitted upon exportation

of the subject merchandise, Commerce must include such internal

taxes paid on inputs in its calculation of CV. See Camargo, 200

F.3d at 774. Here, the VAT Rima paid was not remitted or refunded

upon exportation of the subject merchandise. RIMA’s use of VAT
Court No. 02-00232 Page 12

4 Under Commerce’s interpretation of the statute, Commerce

would recognize and account for VAT recovered prior to exportation

and not just VAT remitted or refunded upon exportation. Commerce

asserts that Rima recovered VAT paid prior to exportation through

VAT credits which were used to purchase inputs during the period of

review. See Remand Redetermination at 6. The statute, however,

does not provide Commerce with the discretion to exclude from its

CV calculation VAT refunded or remitted prior to or after

exportation. If Commerce determines that it is necessary to

account for VAT remitted or refunded prior to or even after

exportation of the subject merchandise, then Commerce should seek

redress through the legislative process.

credits to purchase inputs during the period of review does not

constitute a remittance or refund upon exportation. See Aimcor,

141 F. 3d at 1109 n.19. Commerce does not have the statutory

authority to account for VAT which is remitted or refunded prior to

or after exportation of the subject merchandise. The statute

directs Commerce to account for the recovery of VAT which is

remitted or refunded upon exportation.4 See 19 U.S.C. § 1677b(e).

The plain language of the statute is clear on its face and requires

Commerce to include the VAT Rima paid on inputs in CV. The Court

finds Commerce’s exclusion of the VAT Rima paid on inputs in the

calculation of CV is not in accordance with law.

Conclusion

The Court finds that Commerce failed to follow this Court’s

remand instruction to include the VAT paid by Rima in the

calculation of CV. Commerce has not provided a reasonable

explanation for excluding the VAT Rima paid from the CV
Court No. 00-07-00373 Page 13

calculation. Commerce’s contention that the language of 19 U.S.C.

§ 1677b(e) is ambiguous is unpersuasive. The plain language of the

statute directs Commerce to include in the calculation of CV any

internal taxes paid that are not remitted or refunded upon

exportation. Here, the VAT paid by Rima on inputs was not remitted

or refunded upon exportation of the subject merchandise. Rather,

Rima recovered the VAT paid prior to exportation. Accordingly,

Commerce improperly calculated CV by excluding the VAT paid by Rima

on inputs from CV. This matter is again remanded to Commerce with

instructions to include the VAT paid by Rima in its recalculation

of CV and make all necessary adjustments to the dumping margin.

 /s/ Nicholas Tsoucalas 

NICHOLAS TSOUCALAS

 SENIOR JUDGE

DATED: November 16, 2004

New York, New York