Slip Op. 04-46

UNITED STATES COURT OF I NTERNATIONAL

TRADE

________________________________________ : 

### T A 

### C HEN 

### S TAINLESS 

### S TEEL 

### P IPE , 

### L TD ., :

Plaintiff , : v. : 

### U NITED 

### S TATES , :

Defendant , : and : 

### A LLOY 

### P IPING 

### P RODUCTS , 

### I NC ., ET AL ., : Defenda nt-Inter

venors . ________________________________________: Consolidated ________________________________________ Court No. 01-00027 : 

### A LLOY 

### P IPING 

### P RODUCTS , 

### I NC ., 

### F LOWLINE 

### D IVISI ON , 

### M ARKOVITZ : 

### E NTERPRISES , 

### I NC ., 

### G ERLIN , 

### I NC . and 

### T AYLOR 

### F ORGE 

### S TAINLESS , 

### I NC ., :

Plaintiffs , :

v. : 

### U NITED 

### S TATES , :

Defendant

. :

________________________________________ [Final Results of

U.S. Depa

rtment of Commerce ’s adminis trative r eview of antidumpin

g duty order remanded for further action consistent with this opinion.] Decided: May 4, 2004Court No. 01- 00027 Page 2

1 All statu tory cita tionsare t o the 1994 v ersi on of

the U .S. Co de. H owev er, t he pe rtine nt text of the cited provisions remained the same at all times relevant here in. Miller & Chevalier Chartered ( Peter J. Koe nigand Kristen Sm

ith ), for Plaintiff Ta Chen Stainless Steel Pipe, Ltd. Collier Sh ann on S cot t, PLLC ( David A. H artquist and Jeffrey S. Be ck ington ), for Plaintiffs/Defendant-Interve nors Alloy Piping Products, I nc., et al

. Peter D. Kei sler , As sistant Att orney Genera l; David M. Cohen , Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice ( Lucius B. L au ); Berniece A. Browne , Senior Counsel, Office of Chief Counsel for Import Administration, U.S. Department of Commerce, Of Counse l; for De fendant United Sta

tes.

OPINION RIDGWAY, Judge: This consolidated appeal contests the final results of the administrative review of the antidumping duty order c overing certain stainle ss steel butt-weld pipe fittings from Taiwan, conducted

by the U.S. Depar

tment of Commerce for

the period of June 1998 through May 1999. See Final Results of Antidumping Administrative Review: Certain S tainless Steel Butt-Weld Pipe Fittings From Taiwan , 65 Fed. Reg. 81,827 (Dec. 27, 2000) (“ Final Re sults ”), adopting the Issues and Decision Memorandum (Dec. 15, 2000), Pub. Doc. 105 (“ Decision Memo ”). Ju risdiction is predicated on 28 U.S.C. § 1581(c) (1994). 1 The Commerce Department ’ s fin dings, conclusi ons and de terminat ions in the

Final Re sults must be

sustaine d unless th ey ar e “unsupported

by substantial evidence

on the re cord, or

otherwis e not in

accordance with law.” 19 U.S.C. § 1516a(b)(1)(B).Court No. 01- 00027 Page 3

2 All citations to agency

regulat ions a

re to the 2000 version of the Code of Federal Regula tions. However, the pertine nt t ext of the cited provisions remained the same at all times relevant herein. Pending before the Court

are two motions for judgment on the agency record, both of which challenge certain aspec

ts of the Final Results. Ta Chen Stainless Steel Pipe, Ltd. (“Ta Chen”) – a Ta iwanese producer and e xporter o f fitt ings subject to

the antid umping du

ty o rder an

d the admi

n istra tive review here at issue – is the plaintiff in one of

the two cases consolidated into this action. Ta Chen’s Motion for Judgment on the Agency

Record contests the Comme rce Department’s determination that Ta Chen had a greed to reimburse its U.S. importer for antidumping duties – a determination which caused the agenc y to doubleTa Chen’s dumping margin. See Plaintiff’s Memorandum of Law in Support

of Motion for Judgmenton the Agency Record (“Ta Chen Brief”) at 5-22. In addition, Ta Chen dispu tes the Commerce Department’s calculation of profit for the company’s c onstructed export price (“CEP”) sales, as well as the agency ’s decision to deny the company

a CEP offset adjustment. Ta Chen Brief at 22-33, 33-39. Ta Chen concludes that – if the asserted agency errors are corrected – Commerce Department regulations require that the antidumping duty orde r against it be revoked, because the company’s

dumpin g mar gin falls to 0% for the period of review a t issue here, and because the company has no t been found to be dumping in prior years. Ta Chen Brief at 39-40; 19 C.F.R. § 351.222(b) (2000). 2 The other pending motion was filed by four domestic fittings produce rs (the “Domesti c Produce rs” ) who commenced their own action challenging the Final Results, which was consolida te dCourt No. 01- 00027 Page 4

3 The Do me st ic Pr od uc er s – Al lo y Pi ping Pro ducts, I nc.; Flow line Divis ion, Mark

ovitz Enterpr ises, Inc.; Gerlin, I

nc.; and Taylor Forge Stainless, I

nc. – were the four domestic petitioners in the administrative review here at issue. with Ta Chen’s case (in which they appear as Defendant-I

ntervenors). 3 The Dome stic Produce rs’ motion is much more limited, challenging only the Com merce D epartment’s choice of financial statemen ts used to calculate U.S. indirect selling expenses. The Domestic Producers charge that the data used by the age ncy understa te those expenses and, thus, the Final Results understate Ta Chen’s dumping margin. See Domestic Producers’ Memorandum of L aw in Support of Motion for Judgm ent on the Agency

Record (“Dom. Prod. Brief”) at 9-21; De fendant-Interve nors’ Repl y t o Defendant’s Memorandum in Partial Opposition to the Motions for Ju dgment Upon the Agency Record Filed by

Plaintiff and Defendant-I ntervenors (“Dom. Prod. Reply Brief”) at 4-12. Defend ant, the United States (“the Government”), contends that the Final Results should be sustained in all res pects, sa ve one. T hus, the G overnme

nt – joined by the Domes tic Produ cers – u rge that the reimbursement issue be remanded to the Commerce De partment, and

that Ta Chen’s motion be denied in

all other respects. See Defendant’s Memorandum in Partial Opposition to the Motions for Judgment Upon the Agency Record (“Gov’t Brief”) a t 32-34 (urging

remand on

reimbursement issue), 18-32, 34-55; Response of Defendant-I nterveno rs to Ta Chen Stainless Pipe Co., Ltd.’s Motion for Judgm ent on the Agenc y Re cord (“ Dom. Prod. Response Brief”) at 2 n.2 (urging remand

on reimbursement issue), 8-32. And the Government asserts that the Domestic Producers’ motion should be denied in its entirety. Gov’t B rief at 55-61. For the rea sons set f

orth belo w, the Domestic Producers ’ motion is denied. Ta Chen’s motion is gran

ted in par

t, and this

action is r

emanded to the Dep artment o f Comm er ce forCourt No. 01- 00027 Page 5

r econsideration

of its determinations on the alleged reimbursement ag reement and the calculation of constr ucted export price

(“CEP”) profit.

I. Background A. The Lega

l Framework Dumping takes place when goods a re imported

into the U.S. and sold at a price lower than their “normal value” – i.e. , the foreign market value of the g oods. 19 U.S.C. §§ 167 3, 1677(3 4). The difference between

the normal value and the U.S. price is the “dumping marg in.” 19 U.S.C. § 1677(35); See gen erally

Antidumping Manual, Chap. 6 at 1-2 (Dept. of Comm., Jan. 22, 1998) (“AD Manual”). When norma

l value is c ompared

to the U.S. price a

nd dumping

is found, antidumping duties equal to the dumping margin may be imposed. 19 U.S.C. § 1673(2)(B). Normal value is calculated using the exporting market price ( i.e. , the market where the goods

are produced), an

appropriate third country market price, or the cost of production of the g oods. 19 U.S.C. § 1677b. The U.S. price is calculated in one of two way s – export price (“EP”) or constructed export price (“CEP”) – depending on the re lationship between the producer or exporter and the U.S. purchaser. 19 U.S.C. § 1677a. Whe re the U.S. purchaser is unaffiliated with the producer or exporter, the U.S. price is based on the export price (EP) ( i.e. , the transaction pric e). 19 U.S.C. § 1677a(a). Where the

U.S. purc

haser is affilia ted with th e produc er or exporter, the U.S. pric e is based on the first sale from the affiliated purchaser to an unaffili ated pur

chaser in the U.S. This is the basis for constructed export price (CEP). 19 U.S.C. § 1677a(b). Becau se the sale prices used to determine normal value and the U.S. price (either EP or CEP),

occur at diffe rent poin ts in the chain of co mmerce, and unde r differ ent circ umst ances, cert ainCourt No. 01- 00027 Page 6

adjustmen

ts are mad

e to attem pt to make them comparable. For example, packing e xpenses, duties and taxes, and shipping and handling costs may affect normal value and the U.S. price di ff er en tl y, and therefore could preclude the fa ir comparison of prices, distor ting the dumpin

g marg in. Thus, at least in theory, adjustments to account for such costs ens ure “ap ples to ap ples” pr ice comp arisons. Certain other special adjustments are made when the price to be ca lculated is CEP. Among these are adj ustments to

accoun t for sell ing expen ses incur red in the U.S. by the entity affilia ted with the foreign prod

ucer or ex porter, such as c ommissions, guara ntees an d warra nties, an d credit expenses. 19 U.S.C. § 1677a(d)(1).

1. CEP Profit Inadditio n to the ad

justments for selling expenses, the CEP is reduced to account for the portion of profit attributable to those selling expenses. 19 U .S .C . § 1 677 a(d )(3 ). In calcula ting this CEP profit adjustment, the Commerce Department determines the “total actual profit” e arned on

all sales, foreign and dom estic, of the subject goods. 19 U.S.C. § 1677a(f)(2)(D). To that end, the agency calculates the “total expenses,” foreign and domestic, incurred in the pr oduction and sale of the goods. See 19 U.S.C. § 1677a(f)(2)(C). Total pro fit is what remains once expenses are subtracted

from revenue. See Ausimont SPA v. United States , 25 CIT___,___, 2001 WL 1230596 at *20 (2001)

. To calcula

te the por tion of pr ofit attr ibutable to U.S. selling expenses – i.e. , the CEP pro fit

– the total a

ctual pr ofit figure is multiplied by the “applicable pe rcentage.” 19 U.S.C.§ 1677a(f)( 1). This statutorily gover

ned figure is arrived at by dividing the “total U.S. expenses” – the sellingCourt No. 01- 00027 Page 7

4 Insome circumstances, other expenses not rele vant her e may also be included in

“total U. S. expenses.” See 19 U.S.C. § 1677a(f)(2)(B). expenses incurre d in the U. S. 4 – by the “total expenses. ” 19 U.S.C. § 1677a(f)(2). Thus, the amount of total prof it to be de signate d as U.S. profit is based on the ratio of U.S. expens es to total

expenses. This calculation may be

expressed as an equation: Tota l prof it all ocated = T otal A ctua l Prof it x Total U.S. Expenses to U.S. expe

nses Total Expenses

2. Level of Trade

/CEP Offset The Commerce

Departm ent al so must make adjustments to the CEP to account for any differences in the “level of trade” (“LOT”) be tween the exporting market and the U.S. market that affect the compa

rability of prices. 19 U.S.C. § 1677b(7)(A). Difference s in LOT occur where , for example, the sales in the foreign market are made at different marketing stag es from the U .S. marke t, such th at th er e i s a “d if

fe re nc e i n t he ac tu al fu nc ti on s p er fo rm ed by the selle rs” in ea ch marke t. Statement of Administra

tive Acti on for the

Urugua y Ro und Agr eements Act of 19 94, H.R. Doc. No. 103-316 at 829 (1994) (“SAA”), reprinte d in 1994 U.S.C. C.A .N. 4040, 4167; 19 C.F.R. § 351.412(c)(2). A special adjustment called the “CEP of

fset” mus tbe made when the agency determines that the LOT o f the expor

ting mar ket ( i.e. , norm al val ue) is at a mo re adva nced s tage of distribution than the LOT o f the U.S. market ( i.e. , constru cted expor

t price) , and that

– despite the best efforts of the producer or exporter

– the ava ilable da ta do not pr

ovide an a

dequate basis upon which to determine wh ether the difference in the levels of trade a ffects the comparability

of prices. 19 U.S.C. §Court No. 01- 00027 Page 8

5 Stainless steel b utt-w eld pipe fittings are manufactured in a va riety of shape s, including elbows, tees, reducers, stub-ends and caps. They are wide ly

used in piping systems subject to, for example, high pre ssure or extreme temperatures, and in systems where contamination and/or corrosion are concerns. Final Re sults at 81,828.

6 The administrative record in this case consists of two sections, designated “ Public” and “Busine ss Proprietary,”

respectively

. The “Public” section consists of copies of all documents in the record of this action, with all confidential information redacted. The “Business Proprietary ” section consists of complete, unredacted copies of only those documents that include confidential information. 1677b(a)(7)(B); 19 C.F.R. § 351.412. In such cases, the agency reduces normal value by

the amount of i ndire ct selling expenses for the goods at issue in the foreig n market, capped by

the amount of indirect expenses used in determining constructed export price (in the U.S. marke t). Id.

B. The Fac

ts of This Ca se Ta Che n is a Taiwa nese p roduc er and e xpor ter of stain less s teel b utt-w eld pi pe fit tings subj ect to an antidumping duty orde r dating from 1993. 5 See Amended Final De termi nation an d Antidumping Duty Order : Certa in We lded S tainl ess S teel Bu tt-W eld P ipe Fi ttin gs From Taiwan , 58 Fed. Reg. 33,250 (June 16, 1993). Ta Chen sells its fittings to its U.S. subsidiary , Ta Chen International

(“TCI”), locate d in Califor nia. TCI , in turn, s ells the f ittings to unaffili ated U.S. custom ers. Non-Pub. Doc. 1. As the importer of record, TCI is responsible for any

duties on th e fittings. At the request of both Ta Chen and the Domestic Producer s (who wer e petitioners in the procee dings before the agency ), the Commerce Department conducted an administrative review of the antidumping order for the period of June 1, 1998 through May 31, 1999. Pub. Docs. 2, 3. 6 InCourt No. 01- 00027 Page 9

Citations to documents in the “Public” section of the administrative record are noted as “Pub. Doc. ____.” Citations to

documents in the “Business Proprietary ” section are noted as “Non-Pub. Doc. ____

.” All pag e number s refer to the orig

inal, inte rnal pag ination of the documents. the preliminary re sults of that review, the Commerce Department determined that all of Ta Chen’s U.S. sales sh ould be cl ass ified as constructed export price (“CEP”) sales, because all of the company’s

sales to unaffiliated buyers occurred in the United Sta tes, between Ta Chen’s subsidiary TCI and U.S. customers. See Prelimina ry Results of Antidum

ping Dut y Review and Intent To Not Revoke in Part: Certa in St ainle ss St eel But t-Wel d Pip e Fitt ings From Taiwan , 65 Fed. Reg. 41,629, 41,630-31 (July 6, 2000) (“ Prelimina ry Results ”). Becau se all of Ta

Chen’s sa

les were classifi ed as CEP sa

les, cer tain addi tional ad justments to the sales prices were required, to ac count for the selling expenses and profit incurred by

TCI. See generall y19 U.S.C. § 1677a(d); section I.A, supra . However, because the Commerce D epartment found that “the [leve l of trade ] in the home market [ i.e. , Taiwan] matched the [level of trade] of the CEP transactions [ i.e. the U.S. sales],” the agency did not make a CEP offset adjustment to normal value. Prelimina

ry Results at 41,632; 19 U.S.C. § 1677b(a)(7)(B). After conducting verifications of Ta Chen’s data in Ta iwanand in California, the Commerce Department

issued its verification reports. Non-Pub. Docs. 41, 43. Thereafter, Ta Chen and the Domestic Produce rs filed t heir administrative case br

iefs with the age ncy . The Dome stic Produ cers’

case brief disputed, inter alia , the agency ’s calculation of U.S. indirect selling expenses using TCI ’s October 31, 1998 income statement (rather than the 1999 statement). Se e Non-Pub. Doc. 46 at 6.Court No. 01- 00027 Page 10

Ta Chen’s case brief challenge d the Commerce Department’s CEP profit calculation, but made no mention of the ag ency ’s decis ion to deny Ta Chen a

CEP offset adjustme

nt to norma

l v alue. See Non-Pub. Doc. 45. Several weeks after the parties’ case briefs were filed, the Commerce Department extended the deadline

for comp letion of t

he admini strative

review, to allow it t

o addres s “ a new issue on which interested parties [had] not had the opportunity to comment.” Pub. Doc. 89. The Department

ass erted that its examination of various financial statements submitted by Ta Chen a nd TC I evidenced

an agreement under which “the president of Ta Chen and TCI ha s agre ed to rei

mburse TC I for dumping d

uti es ” imposed on Ta Chen’s fittings, although the age ncy conc eded that “such reimbursement

may not have y

et taken place.” Pub. Doc. 90. See generally Notice of Postponement of Final Results of

Antidumpin

g Duty Administra

tive Revie

w: Certai n Stainles s Steel Bu

tt-Weld Pipe Fittings From Taiwan , 65 Fed. Reg. 67,348 (Nov. 9, 2000). Ta Chen filed comments with the Commerce Dep artment responding to the agency ’s allega tio ns. Pub. Doc. 92. But the company ’s submission was rejected because it also addressed the Department’s decision to deny the company a

CEP offset adjustment – anissue beyond the scope of the agency ’s request for comments. Pub. Doc. 95. I n addition , the ag ency

objecte d to Ta Chen’s inclusion of “untimely new f actual information” relating to the reimbursement issue. Pub. Doc. 96. That informat ion includ

ed docume

ntary evidenc e which, accord

ing to Ta Chen, proves that there

was no agreement to reimburse TCI and that there had been no reimbursement of TCI’s antidumpingCourt No. 01- 00027 Page 11

duties during the pe riod of review. See Non-Pub. Doc. 49. Ta Chen filed a revised submission, deleting all discussion of the CEP offset issue, and omitting t

he docume

nts suppor

ting its a rgumen ts on the issue of reimbursement. Non-Pub. Doc. 51. The Final Results published by the Commer

ce Depa rtment fo und that e vidence pointing to

a reimbu rsement a

greement dating from 1992 to 1994 raised “ a rebuttable presumption that the ag re ement

[was] still in effect during [this period of review].” Decision Memo at 9. The agency therefore concluded th at the dumping margin assigned to Ta Chen should be doubled. Decision Memo at 12. The Final Results also rejected Ta Chen’s request that the Commerce Department make

ce rt ain adjustmen

ts for impu

ted cre dit and inv entory

carry ing cost s in calc

ulating CEP profit. Reviewing Policy

Bulletin 97.1 (which explains the agency ’s methodology f or such calculations), the Commerce Department stated that it does not include imputed int erest in the calculation of CEP profit because it already

accounts for actual interest. D ecis ion Memo at 25-26. Referring to the policy bul let in, the agency

further stated that accepted acc ounting principles only pe rmit the deduction of actual booked expenses – not imputed expenses – in determining profit. Id

. Fi na ll y, in calculating U.S. indirect selling expenses, the Commerce De partment continued to rely on the figures in TCI’s October 31, 1998 income statement, r ather than the October 31, 1999 statement urged by D omestic Pr

oducers

. Decision

Memo at 28. Explaining that it pre fers “to u tilize actual , verified

data for . . . final results,” the Department pointed out that the figures in TCI’s 1998 st at em en t h ad be en ve ri fi ed by t he ag en cy, and that the Domestic Producers’ proposed calculation “incorporate[d] an es tim ate of the antidumping legal fees and Sec tion C expenses reported elsewhereCourt No. 01- 00027 Page 12

for the fiscal yea

r ending October 31, 1999.” Decision Memo at 29 (emphas is added). In addition, the agency

stated that “[b]asing [U.S. indirect selling expenses] on the 1998 fiscal yea r data is . . . consis tent

with the Department’s use of the verified 1998 fiscal y ear data for Ta Chen’s G& A [general and administrative] and interest expenses.” Decision Memo at 29. The Final Results were challenged by Ta Chen, as well as the Domestic Producers, in two separate appeals, which were consolidated into this action.

II. Analysis A. The Determination on Reimbursement Th e Commer ce Department’s regulations contemplate that, in certain cases, antidumping duties may be imposed that exceed the actual dumping margins foun d. Wher e the Commerce Depart ment

finds that an exporter or producer either paid antidumping (or countervailing) dutie s directly on behalf of the importer or reimbursed the importer for such duties, the regulations provide that the amount of the payme nt is to be deducted from the export price or constructed export price. 19 C.F.R. § 351.402(f). This eff ectively increases the dumping margin by lowering the U.S. price ( i.e. , the export price or constructed export price), thus increasing the difference between

the U.S. price and normal value. As discussed i n section I.B above, the Final Results here at issue found that evidence of a reimbursement

agree ment dati n g from 1992 to 1994 raised “a rebuttable pre sumption that the agreement

[was] still in effect during [this period of review].” Decision Memo at 7-8. Relying

on its reimburs ement re gulatio n, the Comme rce De partm ent th erefor

e doubled the dumpin

g marg inCourt No. 01- 00027 Page 13

assigned to Ta Chen. Decisi on Mem o at 9. Ta Chen attacks the agency ’s reimbursement determination

on evidentiary, pr

ocedural, and

legal grounds. See generally Ta Chen Brief at 5-22. First, Ta Chen argues that the ag en cy’ s r ei mb ur se me nt de te rm in at io n i s u ns up po rt ed by any evidence, much less “substantial evidence.” See generally Ta Chen B rief at 5 -12. Ta Ch en arg ues, inter alia , that the mere existence of an agree ment by t he presi dent of Ta

Chen and T CI to r

eimburse TCI for antid umping du

ties i ncurre d from 1992 through 1994 cannot constitute evidence that reimbursement

occurred during this period of review

. See Ta Chen Brief at 6. Ta Chen points to its certified statement, submitted to the agency , attes ting to th e absence of any reimbursement agreement

covering this period of review. See Ta Chen B rief at 7 ( citing Non-Pub. Doc. 49). Ta Chen emphasizes that the Commerce Department itself determined – in the administrative review following the review at bar – that the reimbursement agreement

on which the agency

here relies “was li mited solely to the 1992-1994 [periods of review ].” Ta Chen Brief at 7 ( quoting Preliminary Res u lts of Ant idum ping Ad mini strat ive Re view: Certa in St ainle ss St eel But t-Wel d Pip e Fitt ings From Taiwan , 66 Fed. Reg. 36,555, 36,559 (July 12, 2001) ). Second, Ta Chen a sserts that – as a matter of procedure – the Commerce Department abused its discretion when i t rejected the documentary evidence proffered by

the company to prove

that there

was no reimbursement agreement and that TCI ’s antidumping duties had not been reimbursed duri n g the relevant period of review. Ta Chen ar gues that the a

gency failed to even ra ise the reimbursement issue until very

late in the pro ceeding , and then unreasonably

denied th e compan

y th e opportu

nity to present evidence on the issue on the ground that the evidence was “untimely .” Ta Chen Brief at 12-13. Ta Chen c oncludes that – although the Commerce Department stated that its determinationCourt No. 01- 00027 Page 14

7 Intheir bri efs file d with the C ourt, the Domes tic Produce rs take no position o n the leg ality of the reimbursement regulation. See Dom. Prod. Response Brief, passim

. was based on a rebuttable presumption that the earlier reimburs ement ag

reemen t continue d in

effect during the period of rev iew – the agency in fact imposed an illegal, irrebuttab le presumption, by denying Ta Chen the opportunity to prese nt contradictory e

vidence. Ta Chen Brief at 14-16. Finall y, Ta Chen challenges – as a matter of law – the validity of the re imbursement regulation

itself. Specifically, Ta Chen contends that, because the regula tion authorizes the imposition of antidumping du ties in excess of the dumping margins actually calculated, the regulation

contravenes the U.S. antidumping statute, as well as the United States’ interna tional obligat ions. According

to the company, under

both domestic and international law, dumping duties may offset only

the amount of any dumping , and no more. Ta Chen Brief at 20-22. The Government mounts a vigorous defense of the leg ality of the Commerce Department’s reimbursement

regulation, arguing – in short – that the regulation is a reasonable interpre tation of the antidumping statute that has been endorsed at least implicitly (if not explicitly) by

Congress. See Gov’t Brief at

19-32. 7 However, even the Government now conc edes that Ta Chen was “denied a meaningful opportuni

ty to rebut [the Commerce Department’s] presumption of reimbursement [as a result of] the agency ’s decision to reject the fac tual infor mation Ta

Chen atte

mpted to su

bmit .

.

. .” Gov’t Brief at 13. The Government – joined by the Domestic Produce rs – therefore urges that the reimbursement issue be remanded to the Comme

rce De partmen t, and tha t “the Cour

t . . . defer ruling upon the question whether Commerce’s finding of reimburse ment is supported

by substantialCourt No. 01- 00027 Page 15

8 The Governm ent arg

ues, in es sence, t

hat the r eimburse ment reg ulation is a

legitima te exercise of the Comm erce D epartme nt’s auth ority

under the

statute to promulg at e implementing regula tions. Bu t the matte

r is not as o

pen-and -shut as th e Gover

nment sug gests. The Government’s argument implicitly assumes that the antidumping statute is, on its face, silent on the imposition of duties that exceed the actual amount of dumping. Howeve r, the sta tute expressly authorizes the Commerce Department to impose antidumping duties “in an amount equal to the amount by which normal value exceeds the export price (or the constructed export price) of the merchandise” ( i.e. , in an amount equal to the dumping margin) – language tha t can ea sily

be read to preclude the imposit

ion of duti es that exceed the dumping margin. 19 U.S.C. § 16 73a(1)(B)

. Moreover, the statutory scheme a ddresses in detail the agency ’s calculation of normal value, export price, and construct ed expo rt price , includin g the ad justments t

o be made

in those c alculati ons. Indeed, the statut

e specif ically enumera tes – in lists that appear

to be exhau stive, ra

ther tha n merely illustrative – those adjustments that the agency is authorized t o make. See 19 U.S.C. §§ 1677a, 1677b. Nowhere

in the stat

ute is there language a

uthorizing an adjustment to normal value, export price, or constructed export price, to account for the reimburse ment of dumpi ng duties to an importer. Recent developments – in Congress, in the courts, and before the World Trade Organizations

– may also bear

on the legality

of the Commerce Department’s reimbursement re gulation (raising issues s uch as whether the imposition or distribution of duties in excess of the actual dumpi n g margin effectively

converts the remedial antidumping reg ime into a punitive scheme). evidence and otherwise in accordance with law pe nding the results of

the remand.” Gov’t Brief at 32-34; Dom. Prod. Response Brief at 2 n.2. Considerations of judicial economy a nd judicial restraint

counsel remand where, as here, that

course may moot a signific ant legal issue – in this case, the legality of the reimbursement

regulation. On remand, the Commer

ce Depa rtment sha

ll recon sider the

bases for its determination concerning the alleged reimbursement agr eement, in light of any

relevant fact

ual e vidence, as well as the agency ’s own findings, conclusions , and determinations in other matters (including its determination

– in the adm

inistrativ e revie

w followin

g the re view at ba

r – that the

reimburs ement ag

reemen t o n which it here r

elies wa s limited so lely

to the 1992-1994 periods of review ) , and the applicable law. 8Court No. 01- 00027 Page 16

9 Imputing credit costs is based on the time va lue of money. Thus, for

example, where goods are warehoused for longer per iods prior to sale, the opportunity cost is highe r than where the seller receives payment soon afte r producti on. Similar

ly, where a

seller extends long er terms of pay ment, greater credit expenses are incurred. These expenses are usually incorporate d into the price of the goods. See , e.g. , Import Administration Policy Bulletin 98.2 (Feb. 23, 1998). B. The Calc

ulation of CEP Profit Indetermining Ta

Chen’s constructed export price (CEP), the Commerce Department wa s required to calculate the percentage of profit attributable to the U.S. selling expenses of Ta Chen’s subsidiar y, T CI. A s discusse d in sectio n I.A above, CE

P profit is determined by multiply ing total actual p rofit by

the ratio of total U .S. expense s to total expenses. Inapplying the

statutory equation in this case, the Commerce Department calc ulated “total actual profit” by to taling th e profit f or all sub ject fitt i ngs sold in the U.S. and in the exporting market, re fl ec ti ng on ly actual, bo oked ex penses – that

is, imputed credit and inventor y c arry ing cost s

were not includ

ed. I mputed cr edit and inven

tory carry ing cost s were excluded as well in calculating the “total expenses” denominator of the statutor y r atio. In contrast, the same imputed cre dit and inventory carry ing costs were included in “total U.S. expenses,” the numerator of the statutory ratio. See Gov’t Brief at 34-35. 9 Ta Chen attack s the Com merce Department’s calculation of the CEP profit adjustment as unsupported

by substantial evidence

and otherwise not in accordance wi th law. Se e generally Ta Chen Brief at 22-33. Ta Chen arg ues that the Department’s CEP profit calculation resulted in an overstatement

of the co mpany ’s profit

deduction, thus significantly incr easing its dumping margin. Ta Chen faults the agency

for, inter alia , failing to include imputed credi t and i nventory ca rryingCourt No. 01- 00027 Page 17

costs in both the “total actual profit” and “total expenses” portions of the CEP profit calculation. Ta Chen asserts that the Commerce Department essentially “ignored[d] enormous . . . inventory carry ing and cre dit costs,”

making U .S. sales a

ppear ov erly

profitable in comparison

to home market sales. Ta Chen Brief at 25. The Governm ent and th e Domesti c Produc ers dispu te Ta Che n’s char ges, and ur ge that the Commerce Department’s CEP profit calculation be sustained. See generally Gov’t Brief at 34-46; Def. Prod. Response Brief at 19-32. The Government dismisses Ta Chen’s claim that the

m ethod ology used to calculate the CEP profit adjustment distorted the CEP profit allocation, a n d maintains that the methodology he re was consistent with established agency practice. Gov’t Brief at 38-40. The Governm ent asse

rts that th e financ ial data u sed to calculate “total actual profit” already include “net inte

rest expe nses” ( i.e. , actual interest expenses) and thus “there is no need to include imputed interest in determining total profit.” Gov’t Brief at 39. The G overnme nt sta tes that imputed expenses a

re exclud ed from the “total e

xpenses” c alculati on si nce, as with “total actual profit,” those expenses are already reflected in the net expenses used in the CEP profit calculation. Gov’t Brief at 40. Thus, according to the Government, excluding imputed expenses from both total actual profit and total expenses avoids double-counting of interest expenses. Id. Seeking to further bolster the agency ’s case on exclusion of imputed expenses from the total actual profit and tot al expenses calcula

tions, the Government asserts that “normal accounting principles only permit the deductionof ac tu al book expenses – not imputed expenses – for purposes of determining profit.” Gov’t Brief at 42.Court No. 01- 00027 Page 18

10 See also , Fag I

talia, S.p.A. v. United States , 24 CIT 1311, 1318, 2000 WL 1728317 at *6 (2000); Fag Kugelfische

r Georg Schafer AG v. U

nited States , 25 CIT ___, ___, 131 F. Supp. 2d 104, 114 (2001 ); NTN Bearing Corp. of Americ a , 25 CIT ___, ___, 155 F. Supp. 2d 715, 743 (2001). The Government states that – although the Commerce Depar tment exclud es imp uted expenses e lsewhere in the CEP pr ofit equa tion – it inc ludes suc

h expenses

in the “to tal U.S.

e xpenses”

numerator because it considers them to be selling expenses within the meaning of th e statute. Gov’t Brief at 38. Alth ough the courts have had several occa sions to address the Commerce Depart m ent’s calcul ation of CE P profit, the precedent is – as the Government so delicately puts it – “mixed.” Gov’t Brief a t 43. The p arties therefore point to different lines of cases in their efforts to support their pos itions. Ta Chen r elies on a line of a uthority in which c ourts hav e found that the pla inlanguage of the CEP statute makes clear that “total U.S. expenses” is a subset of “total expenses.” See , e.g. , SNR Roulement s v. United

States , 24 CIT 1130, 11 38, 118 F. Supp.2d 1333, 1340 (2000). 10 Thus, thos e courts have reasoned, any expenses in the U.S. expenses numerator must logically also be included inthe total expenses denominator. By that logic, that line of

cases ha s consiste

ntly held that, when the Commerce

Department includes imputed expenses in “t otal U.S. e xpenses,” “[imputed e

xpenses] must be included in ‘total expenses’ as well.” SNR Rouleme nts at 1341. Thai Pineapple

to ok a rather different approach vis-à -vis the Commerce Department’s exclusion of imputed

expenses from “total actual profit” and “total expenses.” The court there noted the agenc y’ s obliga tion to pro

perly allocate profit to U .S. sales. Focusin g on the “total ac tual prof it” side of th e e qu at io n, th e c ou rt fo un d “ so me am bi gu it y” in the language of the CEP statute, such thatCourt No. 01- 00027 Page 19

11 Finding that the Co mmerce D epartme nt had not e stablish e d that the imputed expenses were already accounted

for in the “total expenses” denominator, Thai Pineapple I remanded the matter to the agency

for further proceedings. 23 CI T at 296. In Tha i P in eap pl e II , the court sustained the Commerce Department’s CEP profit calculations. 24 CIT 107, 115 (2000). The court ac cepted the agency ’s “t he or y” that

the particular data used to calculate the “total e xpenses” denominator reflec te d the interest expenses captured in the “total U.S. expenses” numerator. Id. The court then considered whether there was any

reason why

that theory would be inapplica ble to the facts of that case. The court concluded that the petitioner had failed to demonstrate that the agency ’s exclusion of imputed expe ns es resulted in a distortion in the CEP profit calculations. The court also noted that the petitioner failed to counter the agency ’s argument that excluding imputed expenses avoided d ouble counting. Id. “it may not be an unre asonable interpretation to conclude that imputed expenses should be excluded inthe actual profit calculation . . . .” Thai Pineapple Canning Indus. Corp. v. United States , 23 CIT 286, 296 (1999) (“ Thai Pineapple I ”), aff’d in pa rt, rev’ d in part , 273 F.3d 1077 (Fed. Cir. 2001). However, Thai Pineappl e I also emphasized that “nothing categ orically pre vents the inclusion of imputed expenses” in the CEP profit calculation. Id. The court explained that the exclusion of imp uted expenses could be proper “ if that construction can be squared with the necessity of a properl y calculated statutory

ratio.” Id. (emphas is a d ded). The court concluded that imputed expenses s hould be excluded “ if they duplicate e

xpenses already a

ccounted for.” Id. (emphas is added). 11 The Government invokes Ausimont SPA v. United States , 25 CIT___, 2001 WL 1230596 (2001), wh ic h s us ta in ed th e C om me rc e D ep ar tm en t’ s C EP pr of it me th od ol og y. See Gov’t Brief at 43-44. Similarly, Timken held the agency ’s exclusion of imputed expenses from the “total expenses”

calcula tion to be “a reasonable interpretation of the sta tute.” See Timken Co. v. United States , 26 CIT ___, ___, 240 F. Supp. 2d 1228, 1246 (2002).Court No. 01- 00027 Page 20

12 Thai Pineapple I , like the SNR Rouleme nts line of cases, also found that the CEP sta

tute defines “total U.S. expenses” as a subset of “total expenses.” Thai Pineapple I at 296.

13 The Governm ent points to Ausimont SPA v. United States , 25 CIT___, 2001 WL 1230596 (2001), for the proposition that the reasoning of U.S. Steel undercuts Ta Chen’s claim that the agency ’s CEP profit methodology is contr ary to law. Gov’ t Brief

at 42-43. In Ausimont , the court indeed stated that U.S. Steel “appea rs” to un de rc ut th e r es po nd en t’ s a rg um en ts re ga rd in g s ymm et ry. 25 CIT at ___, 2001 WL 1230596, at *21. Nevertheless, the Ausimont court was careful to note that the record there did not support a finding that the agenc y’s methodology c aused a distortion in the CEP profit calculation. Id. Timken thus broke with the holding i n the SNR Rouleme

nts line of cases that mathematical logic and the plain language of the CEP profit

statute require that “total U.S. expenses” be calculated

as a subset of “total expenses.” 12 But Timken , like Ausimont , found U.S. Steel Group v. United States , 225 F.3d 1284 (Fed. Cir. 2000) (“ U.S. Steel ”), cont rolling . The Cour

t of Appe als there he ld that the “pla in la ngu age and the structure” of the statute do not require symmetry between the definitions of “total U.S. expenses” and “total expenses.” 225 F.3d at 1290. 13 “S ymm et ry” is not truly in question here, howeve r, because the Government maintains that the Commerce Department included the costs at issue in the “total expenses” denominator. Nor is it cl ear t hat U.S. Steel controls. As the Government concedes, U.S. Steel dealt with a different agency methodology that

includes movement expenses in the “total expenses” denominator of the CEP profit ration, but

excludes them from “total U.S. expenses.” See Gov’t Br ief at 43 -44. Thus , when the U.S. Steel court ac cepted t he age ncy methodolo gy

there a t issue, it approved the agency ’s inclusion of

the certain expenses in the “total expenses” denominator. 255 F.3d at 1288. Here , the agency has excluded the expenses at issue from the total expenses denominator – and they are, in any event, different from the expenses at issue in U.S. Steel . Moreover, the Court of Appeals reasonedCourt No. 01- 00027 Page 21

in U.S. Steel that the statute equates “total expenses” with “all expenses,” and thus “does not exclude movement

expenses, but rather suggests their inclusion with the breadth of [the] definition of ‘total expenses.’” Id. at 1290. T hus, to the extent that U.S. Steel is relevant here, its broad reading of “total expenses”

would appear to favor Ta Chen. Inany eve

nt, even if the Commerce Department’s exclusion of imputed expenses from the “total actual p rofit”

and “tota l expenses ” calculations is based on a reasonable interpreta tion of the statute, “it is possi

ble for th e applic ation of that meth odology to be unre asonable

in a give n case when a more accurate methodology is available and has been

used in similar cases.” Thai Pinea pple Canning Ind. Corp. v. United States , 273 F.3d 1077, 1085 (Fed. Cir. 2001) (finding that the agency ’s standard methodolo gy

for matc hing co sts to sale s made dur ing the p erio d of review u nreasonably caused distortions in the calculation of respondent’s dumping margin). Here, as Ta C hen argu ed befo re the a gency, the C ommer ce Depa rtmen t’s m ethod ology finds TCI’s U.S. sale s to be “st agge ringly profitab le – in sha

rp contr ast to rep orts . . . th at U.S. marke t prices for fittings were at

unprofitable levels.” Decision Memo at 17. Ta Chen explains that TCI’s sales of subject f

itti ngs had exceptional ly long ave rage inventory

time, resulting in inventory c arrying costs greatly

exceeding the actual interest costs allocated by the agency . Ta Chen Brief at 25. Further, Ta Chen ma

intains, a nd the Gov ernment

fails to di spute, tha

t the Comme rce Department

has previo usly

included imputed e xpenses in CE P profit c alculati ons of TCI ’s U.S. sales, while a v oiding double counting. Compare Ta Chen Brief at 27-29 ( citing Final Determination of Sales at L

ess Than Fair Va lue: Cert ain Stainle ss Steel B utt-Weld Pipe Fittings From

Taiwan , 58 Fed. Reg. 28,556, 28,558 (May 14, 1993)), with Gov’t Brief at 45. Indeed, it does appea r that theCourt No. 01- 00027 Page 22

agency previous ly a

voided do uble coun ting by calcula ting an o ffset to T CI’s

actual in terest costs to account for the portion reflecting imputed cr edit and inventory ca

rrying costs. Id. at 28. Mor eover, the Comme rce Department here actua lly “ran a te st program which added imputed credit and inven

tory carry ing cost s to the tota

l expenses

used in the

calcula tion of the

to tal prof

it ratio.” Decision

Memo at 29 n.9. Although the agency asserted that the resulting change in the CEP profit ratio was “insignificant,” the very fact of that test program casts doubt on the Government’s claim that accepted

accounting principles prohibit the inclusion of imputed expenses in determining profit (and/or any

claim tha t the ag ency

adhere s relig iously

to those principles in all cases). In a ny event , as Ta Chen ob serves, the age ncy failed to include a ny d ocumenta tion of its t

est prog ram in the administrative record

filed here, effectively

precluding independent analy sis and judicial review. Ta Chen Brief at 32 n.16. The evidence of record sugg ests that the agency ’s CEP profit me thodolog y in this case in fact may have distorted

the allocation of profit to TCI’s U.S. sales, as Ta Chen claims. Thus, the

case must be remanded to afford

the agency

an opportunity to explain why , in this case, actual expenses

are an adeq

uate pro xy fo r imputed e

xpenses, or

– if nece ssary

– to recalc

ulate Ta Chen’ s CEP profi t to properly re flect TCI’s imputed expenses. Further, it is not clear from the record whether , in other cases, t he Commer

ce Depa rtment ha s indeed u sed other methodolo gies for calcu

lating CE P profit that avoid double counting while more accura tely accounting for imputed expenses. On remand, the agency will have an opportunity to ex plain whe th er and, if so, in what circumstances, it includes imputed expenses i

n the tota l expenses

denomin ator of

the statutory CEP profit ratio, and in the calculation of total actual profit.Court No. 01- 00027 Page 23

C. The Calculation of TCI’s I ndirect Selling Expenses Incalculating Ta Chen’s constructed export price, the Commerce Department was required to make deductions to account for indirect selling expenses incu rr ed in the U.S. by Ta Chen’s

su bs id ia ry, TCI. See 19 U.S.C. § 1677a(d)(1)(D). I ndirect selling expenses are expenses – such as salespe rsons’ salarie s –

that are incurred rega

rdless of whether particular saleshave been made, but are reasonably

attributable to such sales. SAA at 824; AD Manual, Chap. 8 at 44. Inthis case, the Commerce Department based its calculation of indirect selling expenses on figures in TCI’s inc om e statement for fiscal y ear 1998. Decision

Memo at 22. The Dome stic Producers contend that the figures in the statemen t f or fiscal ye ar 1999 should have been used inst ead. See generally Dom. Prod. Brief at 9-21; Dom. Prod. Reply Brief at 4-12. The Dome stic Producers assert that the 1998 data are inherently less accurate, given the per iod of review at issue (June 1, 1998 through May 31, 1999), because – while the 1998 data overlap with five months of the period of review – the 1999 data cover the period from November 1, 1998 to October 31, 1999, and thus overlap with seven months of the period of review. Dom. Prod. Brief at 15-16; Dom. Prod. Reply Brief

at 2 n.2. The antidumping statute does not specify how indirect selling expenses are to be calculated. Koenig & Bauer-Albert AG v. United States , 22 CIT 574, 580, 15 F. Supp.2d 834, 843 (1998), rev’d

on other grounds , 259 F.3d 1341 (Fed. Cir. 2001). The Commerce Department’s usual pra

ctice is to use the audited fiscal y ear financial statements that most clos el y corre spond to the period of review. Gov’t

Brief at 57 ( citing Final Results of Anti dump ing Dut y Admini strat ive Re view: Large Newspaper

Printing Presses and Components Thereof, Whether Assembled or Unassembled, FromCourt No. 01- 00027 Page 24

14 See , e.g. , Final Results of Antidumping Duty Administrative Review s: Certain Corrosion Resistant Carbon Steel Flat Products and Certain Cut -to -Length Carbon Stee l Plate from Canada , 62 Fed. Reg. 18,448, 18,456 (Feb. 11, 1998) (indire ct selling expenses calculated based on monthly financial statements from

the period of review); see gene rally Notice of Final Determination of Sales at Less Than Fa ir Value : Hot-Rolle d Flat-Ro lled Carb on-Qual ity S teel Pro ducts From Japan , 64 Fed. Reg. 24,329, 24 ,354 (May 6, 1999) ( explaining

that the Co mmerce D epartme nt alters its metho dolo gy

for allocating certain indirect expenses whe re “case specific facts . . . clearly suppor t a departure from [the agency ’s] normal practice . . . ”).

15 As further

justification for its reliance on TCI’s 1998 income statement (rathe r than that for 1999), the Commerce Depa rt ment explains that the 1998 data were subjected to verification. Decision Memo at 29. As the Domesti c Produc ers obse r ve, howe ver, the verific ation pro cess is essentia lly a “spot-check,” so that not all data t hat was e ventuall y used was actually

reviewed during verification. Dom. Prod. Brief at 16-17. Moreover, the 1999 data w ere w ithin the scope of the agency ’s verification outline here. Dom. Prod. Brief at 17-18. The Domestic Producers therefore contend that the fact that the 1998 data were verifie d should not elevate them above the 1999 data. Dom. Prod. Brief

at 16. It does appear tha

t the Commerce Department may somewhat

overstate the significance of the verification. But that does not change the result here . The agency ’s decision to use the 1998 data rather t ha n the 1999 data would be reasonable, even if those da ta had not been verified. Japan , 66 Fed. Reg. 11,555 (Feb. 26, 2001) ( Issues and Decision Memorandum at comment 3, 2001 WL 193868)). However, that practice is not

carved in stone, and the agenc y deviates fr

om it, where appropriate. 14 Inthis instance, as discussed in section I.B above, the Commerce Department just ified its reliance on TCI’s 1998 income statement (rathe r than the data for fiscal y

ear 1999) by

explaining

its preference

for the use of

“ actual , verified data for . . . final results.” Decision Memo at 29 (emphas is added). 15 See generally Gov’t Brief at 55-61. As the Department pointed out, the 1999 data include estimates for certain legal fee s and other expenses. Decision Memo at 29. And, as the agen cy further observed, the use of 1998 data to calculate U.S. indirect selling expenses had the added virtue of being consiste

nt with the

agenc y’ s use of 19 98 data in

calcula ting indi rect expe nses in Ta Chen’sCourt No. 01- 00027 Page 25

16 Ta Chen’s brief in s upport of i ts Motion for Judgment on the Agency Record did not anticipa te the Domestic Producers’ challenge to the c alculation of TCI’s selling expenses. And Ta Chen electe d not to file

a reply brief in t his action. However, the company a ddressed the issue at the administrative level, defending the Commerce Department’s use of data f rom the inc ome state

ments for fiscal yea r 1998, and

expressin g conc ern that

the 1999 d

ata ref lect ce rtain extraordinary expenses incurred after the period of revie w. See Pub. Doc. 88 at 4. home market. Decision

Memo at 29. Finally, as the agency noted, Ta Chen expressed concern that the 1999 data reflect certain extraordinary expenses incurred

in the five months after the period of review, which could have distorted the Commerce Department’s calculations. Decision Memo at 29. 16 The Domestic Produc ers advan ce no reason, bey ond the two-month difference in overlap, for favoring the 1999 income statement over the earlier statement on which the agency

relied. And that di ff er en ce in ov er la p i s e ss en ti al ly de minimi s – that is, two twelfth s, or one sixth, to be precise. Moreover, the uncon troverted statements of Ta Chen concerning extraordinary expenses incur red in1999, but out side the period of review, further support the conc lusion that the 1998 data more accurately

reflect the indirect expenses that TCI actually incurr

ed during the period of review. Under the circ umsta

nces, the Commerce

Departm ent’s re liance o n the 1998 income statement based entirely

on actual data, rather than the 1999 st

atement i ncorpor ating e stimates, was reasonable; and the agency ’s articulated rationale for deviating f rom its typical practice passes muster. Accordingly , the Commerce Department’s calculation of TCI’s indirect se lling expenses must be sustained, and the Domestic Producers’ objections must be rejected.Court No. 01- 00027 Page 26

D. The Denial of a CEP Offset Adjustment Ta Chen ’s final attack on the Commerce Department’s dete rmination targets the agen cy’ s decisionto deny the compa ny a “CEP offset”

adjustment to “normal value” to reflect asserted “level of trade” differences betwe en the home (Taiwan) market and the market in the U.S. See gen erally Ta Chen Brief at 4, 33-39. As explained in section I .A above, a CEP offset adjustment is appropriate

w here “norma l value is established at a level of trade which constitutes a more a dvanced stage of distribution than the level of trade of the constructed export price” (thus justifying

a “level of trade” adjustment), but where the data ava ilable ar e not suff icient to d etermine a level o f trade

adjustmen

t. 19 U.S.C. § 1677b(a)(7)(B); 19 C.F.R. § 351.412(f). Ta Chen asserts that a CEP offset adjustment was warranted in this case because , inter alia , “[the Commerce

Departm ent] itself verifie d two selli

ng acti vities/fu nctions – inventory and selling effort – as (a) only

occurring for [Ta Chen’s] home market fitting sales a nd notits U.S. CEP sales to i ts a ffiliate TCI and (b) involving c osts of about 5% of price on home market sales.” Ta Chen Brief at 37. Whatever may have be en the me

rit s of Ta Chen’s claim to a CEP offset adjustment, that claim was doome d by

the compa

ny’ s failure

to raise the issue before the Commerce Department in

a timely fashion. In sh ort, it is u

ndisput ed that th e Commerc e Depar tment’s Pr

eliminar y Re sults included a specific finding that Ta Chen was not entitled to such an offset. See Prelimina ry Results, 65 F ed. Reg . at 41,632 (Commerce Department findings that Ta Chen not entitled to CEP offset because “any diff

erences in selling activities [between the Taiwan a nd U.S. markets] are not signific ant” and “the LOT [level of trade] in the home market matched the L OT of the CEPCourt No. 01- 00027 Page 27

17 Ta Chen’s br

ief in sup port of its

Motion for

Judgment on the Agen cy Recor d did not anticipa te the exhaustion arguments advanced by the Governm ent and by

the Domes tic Produc ers. Moreover, as indica

ted in note

16 above, Ta Chen elected not to file a reply brief. Accordingly , the Courthas not had the benefit of Ta Chen’s views on the doctrine of exhaustion and its application here. transactions”). See also Gov’t Brief at 48; Ta Chen Brief a t 36; Dom. Prod. Response Brief at 9, 11. It is also undisputed thatTa Chen f ailed to c halleng e that fin

ding in th e case brief tha

t it filed w

ith the Commerce Department following the issuance of the Preliminary Results, and that the company raised the issue for the first time only in its November 20, 2000 response to the agency ’s request for comments

on the reimbursement issue. Gov’t Brief at 48; Ta Che n Brief at 39 n.23; Dom. Prod. Response Brief a t 9, 11. Ta

Chen thus f

ailed to p roperly

exhaust its a

dministra tive reme dies. 17 As a general matter, the doctrine of exhaustion holds that “no one is entitledto judicial relief for a supposed or threatened injury until the prescribed

administrative remedy ha s been exhausted.” Sandvik Steel Co. v. United States , 164 F.3d 596, 599 (Fed. Cir. 1998) ( quoting McKart v. United States , 395 U.S. 185, 1 93 (1969)) (internal quotations omitted). The prescribed reme dy for challenging

Preliminary Results issued by the Commerce Department is to file a case brief with the agency setting forth obj ections. By

regula tion, the D epartme

nt affor ds inte reste d parties the opportuni ty to submit such bri efs within 30 days afte r Preliminary Results are published. The regulations specific ally

require that such briefs “ present all

argume nts . . . relevant to the Secretary ’s

. . . final r

esu lt s, including any a

rguments presented before the da te of publication of the . . . preliminary re sults.” 19 C.F.R. § 351.309(c)(1)-(2) (emphasis added). This Court has “generally take[n] a strict view of the need [for parties] to exhaust [their] remedies by

raising all arg uments” in

a timely fashion so that they may

be appropriately

addressedCourt No. 01- 00027 Page 28

by the agency

. Pohang Iron and Stee l Co. v. United States , 23 CIT 778, 792 (1999). The underlying principle is that “courts should not topple over administrative d ecisio ns unless the administrative body not only has er

red but has er

red ag ainst obje ction mad e at the ti me appro priate u nder its practice.” United

States v. L.A. Tucker

Truck Lines, I

nc. , 344 U.S. 33, 37 (1952). The doctrine of exhaustion thus works to serve two basic purposes: It a llows the administrative agency to perform the functions withi n its area o f specia l compete nce (to d evelop th e factu

al reco rd and to a

pply its expertise), and – at th e same tim e – it promote s judicial

efficie ncy and cons erves ju

dicial re sources , by afford ing the a gency the oppor

tunity to rectif y its own mista

kes (and thus to moot c ontroversy and obvia te the need for judicial intervention). See Parisi v. Davidson , 405 U.S. 34, 37 (1972); Richey v. United States , 322 F.3d 1317, 1326 (Fed. Cir. 2003) (exhaustion serves “the twin purposes

. . . of prote cting a

dministra tive ag ency

authority and promo ting judi cial eff iciency ”) (cita tio n omitted). In this case, the policy

considerations underlying the doctrine of exhaustion cut against Ta Chen. Because Ta Chen fa iled to raise the CEP offset issue in its Case Brief filed following the issuance of the Pre liminary Results, the petitioners did not address the issue in their re buttal brief and the Commerce Department was not put on timely notice of the company’ s objection. See NonPub. Doc. 47. And, w

hile it mig

ht have be en at lea st theore tically possible f

or the De partmen t t o consider the issue later ( e.g. , when it addressed the reimbursement issue), the agency was under no obligation

to do s o. Permi tting ev en one pa rty to “flout[ ] . . . adminis trative processe s could weaken the effectiveness of a n agency by encouraging [others] to ignore its proce dures.” McKart

v. United States , 395 U.S. at 195. In this context, the con sequenc es of flouting agency processesCourt No. 01- 00027 Page 29

18 None of the

esta blish ed exc eptio ns to the doctrine of exhaustion is relevant here. See generall y Luoy ang Bearing

Factory v. United States , 26 CIT ___, ___ n.26, 240 F. Supp. 2d 1268, 1297 n.26 (2002). For example, Ta Chen had timely access to the confidential administrative record. Compare Philipp Bros., Inc. v. United States , 10 CIT 76, 80, 630 F. Supp. 1317, 1321 (1986). And Ta Chen does

not char ge that the age ncy failed to adhere to some cle arly

applica ble prec edent. Compare 10 CIT at 79-80, 630 F. Supp. at 1320-21. There is no indication that it would have been futile for the company to have timely raised its CEP offset arg ument before the agency

. Compare PPG Indus., Inc . v. United States , 14 CIT 522, 542-43, 746 F. Supp. 119, 137 (1990). No judicial interpretation

has intervened. Compare Timken Co. v. United States , 10 CIT 86, 93, 630 F. Supp. 1327, 1334 (1986). And the CEP offset issue is not a pure question of law. Compare Hercules, Inc. v. United States , 11 CIT 710, 735, 673 F. Supp. 454, 476 (1987). See generally Budd Co., Wheel & Brake Div. v. United States , 15 CIT 446, 452 n.2 , 773 F. Supp. 1549, 1555 n.2 (1991) (surveying cases where e

xhaustio n has not been required); L ayton & F ine, The Draft and Exhaustion of Administrative Remedies , 56 Geo. L.J. 315, 322-31(1967) (discussing exceptions to require ment of exhaustion) ( cited in McKart v. United States , 395 U.S. at 193 n.9). could be potentially devastating , given the extraordinarily tight time constraints prescribed by Congress in the statutes governing interna tional trade. Congre ss has expressly manda ted that this Court “shall, where appropriate, require the exhaustion of administrative remedies.” 28 U.S.C. § 2637(d). I n an antidumping case such as this, where “Congress has prescribed a c lear, step-by -step process for a claimant to follow, . . . the failure to do so prec lu des [th e claimant] from obtaining review of that issue in the Court of I nternational Trade.” JCM, Ltd. v. United States , 210 F.3d 1357, 1359 (Fed. Cir. 2000) ( citing Sandvik Steel Co. , 164 F.3d at 599-600). 18 In su m, becau se Ta Che

n failed to timely raise before the Commerce Department its claim that it was entitled to a CEP offset adjustment, it cannot now be he ard to cr itic ize the agency

for denying it that off

set. By its silenc e, Ta Che

n waived its right to raise t

he iss ue on appeal. See AIMCOR v. United States , 141 F.3d 1098, 1111-12 (Fed. Cir. 1998).Court No. 01- 00027 Page 30

III. Conclusion For the reasons set forth above, the Domestic Produc er s’ Motion for Judgment on the Agency Record is denied in its entirety, and Ta Chen’ s motion is granted in part. T his action is remanded to the Department of C ommerce to permit i t to reco nsider th e factu al and le gal bas es for its determinati on concer

ning the allege d reimbur sement a greem ent; to all ow it to re consider its calculation

of CEP prof

it; and to accord

it the opportunity to fully

articulate the reasoning underly ing its finding s, conclu sions and d etermina tions on tho se issues

. A s ep ar at e o rd er wi ll en te r a cc or di ng ly.

/s / D el is sa A. Ri dg wa y Judge Decided: May

4, 2004 New York, New York