Opinion ID: 208510
Heading Depth: 2
Heading Rank: 1

Heading: Commerce's Methodology Was Permissible Under the Statute

Text: We agree with the government that Commerce's decision to construct a market price was in accordance with the governing statutes. We have found permissible Commerce's interpretation of the major input rule, which uses as the value the highest of the three measures, viz. transfer price, cost of production, and market price. See NTN Bearing Corp. of Am. v. United States, 368 F.3d 1369, 1374-76 (Fed.Cir.2004). Huvis argues that the constructed market price always consists of adding an amount to the cost of production, meaning the constructed market price will always be higher than the cost of production, and cost of production is therefore effectively ignored. That system, according to Huvis, violates 19 U.S.C. § 1677m(e) by ignoring available information that Huvis provided and was necessary to Commerce's determination. However, Commerce's decision to construct a market price did not ignore the cost of production data. In fact, cost of production was taken into account twice in Commerce's application of the major input rule. First, Commerce used the cost of production to construct the market price. Second, Commerce included the cost of production in the comparison of the three measures to calculate a value. Further, we agree with the government that the constructed market price will not always be higher than the cost of production, so even the comparison of the three measures does not ignore cost of production. If, for example, Huvis were to take a loss on a certain product, the profit rate would be negative, and the resulting market price would be lower than the cost of production; therefore, the value determined by applying the major input rule would be the cost of production. Thus, Commerce's methodology did not violate 19 U.S.C. § 1677m(e). Huvis also asserts that Commerce's methodology for constructing a market price was adverse to Huvis and demonstrably inaccurate, in violation of 19 U.S.C. § 1677e(b) and (c). The parties agree that Huvis did not fail to cooperate in the investigation, so Commerce was not entitled to use adverse inferences against Huvis under § 1677e(b). Even when Commerce uses adverse inferences, it must use a reasonably accurate estimate of the respondent's actual rate when using facts available. F.lli De Cecco Di Filippo Fara S. Martino S.p.A. v. United States, 216 F.3d 1027, 1032 (Fed.Cir.2000). We disagree with Huvis's argument that the constructed market price is demonstrably inaccurate or constitutes an adverse inference against Huvis. As evidence, Huvis points to the relative market prices of qualified-grade and middle-grade terephthalic acids. Qualified-grade has more impurities, making it presumably of lower quality, than middle-grade acid. However, the constructed market price of qualified-grade acid is higher than the verified market price of middle-grade acid. Thus, Huvis argues that Commerce's method of constructing market prices is clearly inaccurate. We disagree. As the government points out and the Court of International Trade found, the higher level of impurities in qualified-grade acid does not necessarily mean that it should have a lower market price. See Huvis II, 2008 WL 2977890, at -4, , 2008 Ct. Intl. Trade Lexis 82, at -9 n. 2, -12. Other factors affect market price. Indeed, the month-by-month transfer prices reveal that Huvis paid more for qualified-grade acid than it did for middle-grade acid in certain months, even though the average transfer price of qualified-grade acid was lower. Further, Commerce reasonably chose to construct the market price by adding the cost of production to the profit margin, since there is no suggestion here that product sales were unprofitable or that the profit margins were unusually low. [2] At oral argument, Huvis pointed out that the profit margin that Commerce used was the average profit margin for all of Samnam's products, rather than a more precise profit margin for the particular input, e.g., qualified-grade terephthalic acid. Oral Arg. 11:17-11:44, May 4, 2009, available at http: oralarguments.cafc.uscourts.gov/mp3/XXXX-XXXX.mp3. However, Huvis never argued, and presented no evidence, that the overall average profit margin did not accurately reflect the profit margin for the particular input. Huvis instead argued that the profit margin used, it's undisputed, was the profit margin for the supplier company as a whole. That may or may not be accurate in terms of reflecting correctly the profit on this particular input. Id. (emphasis added). Thus, rather than prove the inaccuracy of the profit margin directly, Huvis argued that it had proven the inaccuracy of the profit margin as reflected in the relative market prices of qualified-grade and middle-grade terephthalic acids. Id. at 9:20-9:39 (The basis for our position that it was unreasonable to use it for this input is the verified information that the particular input here, this QTA, qualified terephthalic acid, is the least valuable, ... the lowest quality of the three different terephthalic acids.). As we demonstrated above, the mere fact that the relative market prices of qualified-grade and middle-grade terephthalic acids were different than might have been expected, based on their average transfer prices, does not prove that Commerce's construction of market prices was either inaccurate or adverse to Huvis. We therefore agree with the government that Commerce's constructed market price is not demonstrably inaccurate and does not constitute an adverse inference against Huvis.