Opinion ID: 767689
Heading Depth: 2
Heading Rank: 2

Heading: Classification as Export Price Sales

Text: 19 The Court of International Trade held that the PQ Test did not contradict the statute as amended. The court found that the test was simply a means to determine whether the sale at issue for anti-dumping duty purposes is in essence between the exporter/producer and the unaffiliated buyer, in which case the EP rules apply. AK Steel, 34 F. Supp. 2d at 762 (emphasis added). The domestic producers argue that Commerce's PQ Test is in conflict with the unambiguously expressed intent of Congress because the statute and legislative history make clear that a sale by any affiliated seller in the United States to an unrelated U.S. buyer must be classified as CEP. The appellees argue, however, that the statute is ambiguous about how to classify those sales that occur before importation but are made by affiliated entities in the United States. Therefore, according to the appellees, the PQ Test is an appropriate methodology for determining whether EP or CEP classification is best applied to those sales. 20 The language of the statute must be viewed in context. The U.S. Price used in making anti-dumping determinations is meant to be the sales price of an arm's length transaction between the foreign producer and an unaffiliated U.S. purchaser. The U.S. Price is derived from either EP or CEP sales. To isolate an arm's length transaction under the current statute, Commerce looks to the first sale to a purchaser that is not affiliated with the producer or exporter. If the producer or exporter sells directly to the U.S. purchaser, that sale is used because it is considered an arm's length transaction. In that situation the sale is classified as EP. 5 If, however, the first sale to an unaffiliated purchaser occurs in the United States, then that sale must be used to determine the U.S. Price. Such a sale will be classified as a CEP sale and have additional deductions made to account for certain expenses of the seller in the United States. 6 The purpose of these additional deductions in the CEP methodology is to prevent foreign producers from competing unfairly in the United States market by inflating the U.S. Price with amounts spent on marketing and selling their products based on costs that are in excess of what is spent in their home markets. In the administrative review process, the foreign producers submit to Commerce the information about sales to unaffiliated purchasers. Those sales must be classified as either: (1) between an unaffiliated U.S. purchaser and the producer or exporter, and thus EP; or (2) between the unaffiliated U.S. purchaser and another entity in the United States, that must, by definition, be related to the producer, and thus CEP. Sales in the United States between unaffiliated purchasers and unaffiliated sellers are never at issue; such a sale could never be the first sale to an unaffiliated purchaser. 21 The question at the root of this appeal is whether a sale to a U.S. purchaser can be properly classified as a sale by the producer/exporter, and thus an EP sale, if the sales contract is between the U.S. purchaser and a U.S. affiliate of the producer/exporter and is executed in the United States. The appellees argue that it can, if the role of the U.S. affiliate is sufficiently minor that the sale passes the PQ Test. The domestic producers argue that the plain language of the statute prevents such a classification. 22 We note first that Commerce's three-part test and much of the Court of International Trade case law reviewing it were created before the enactment of the URAA in 1994. Prior to the URAA, purchase price (now EP) was described as: 23 the price at which merchandise is purchased, or agreed to be purchased, prior to the date of importation, from a reseller or the manufacturer or producer of the merchandise for exportation to the United States. 24 19 U.S.C. § 1677a(b) (1988). The exporters sales price (now CEP) was defined as: 25 the price at which merchandise is sold or agreed to be sold in the United States, before or after the time of importation, by or for the account of the exporter. 26 19 U.S.C. § 1677a(c) (1988). The amendments to the statute most relevant to this issue are the addition of the phrase outside the United States to the definition of EP, and by a seller affiliated with the producer to the definition of CEP. 27 While the statute has changed, Commerce's test for interpreting it has not; Commerce still relies on the PQ Test. The function of this court is to determine whether the use of the test is appropriate in light of the current statutory language, not whether the test may have been a proper interpretation of the language effective as of the time the test was developed in 1987. 28 In PQ Corporation, the Court of International Trade focused on whether there was a relationship between the foreign producer and the U.S. importer as the primary factor enabling Commerce to differentiate between the two sales classifications in the old statute. In response to an argument by Commerce that there was no statutory requirement that the importer must be an independent party in order to apply [EP], the court held that: 29 [w]hile the statute does not state in so many words that [purchase price] and [exporter's sales price] are to be distinguished by the relationship of the foreign producer to the U.S. importer, the statutory definitions of [purchase price] and [exporters sales price] have been distinguished upon this basis from their inception . . . . The express terms of the statute make it clear that a U.S. importer's relationship to a foreign producer will affect the determination of whether [purchase price] or [exporter's sales price] will apply. 30 PQ Corporation, 652 F. Supp. at 732-33 (emphasis added). The test developed by Commerce after the remand in PQ Corporation does not directly examine the legal relationship between the producer and the importer, but rather looks at the role played by the importer in the transaction. 31
32 After the 1994 amendments the language of the statute became clear. Any ambiguity that might have necessitated a test to define what type of activity by an affiliated importer might give rise to a sale in the United States was eliminated by the addition of the phrase by a seller affiliated with the producer. 19 U.S.C. § 1677a(b). Like the language in PQ Corporation, the plain meaning of the language enacted by Congress focuses on whether the foreign producer and the U.S. importer are related. The language added by the 1994 amendments makes clear that if a sale or agreement to sell occurred in the United States and was made by a seller affiliated with the producer/exporter, then that sale must be classified as a CEP sale and the CEP deductions applied to the sale price. In contrast, an EP sale may only be made by the producer or exporter, as the EP definition in the statute makes no provision for an EP sale by a U.S. affiliate of the foreign producer. Thus, the additional language highlights the difference between the two definitions: an EP sale can only be made by the producer/exporter while a CEP sale can be made by an affiliate. 33 Here the sales contracts in evidence clearly indicate that the sales to the unaffiliated U.S. purchasers were made by affiliates of the foreign producers that are located in the United States. If the importer and the producer are affiliated, then the first sale to an unaffiliated party is necessarily the sale between the affiliated importer and the unaffiliated purchaser (unless there is another intermediate U.S. affiliate involved). With the addition of the language in the 1994 amendment, the relationship that necessitated use of a sale between U.S. entities (CEP) rather than between a foreign and U.S. entity (EP) to establish the U.S. Price became even clearer: a U.S. seller to the ultimate buyer that is affiliated with the producer requires CEP classification, regardless of the specific activities or role of the U.S. affiliate, or whether the foreign producer was the party that initially negotiated the terms of the sale. Thus, the 1994 amendment rendered the PQ Test inappropriate because any arguable ambiguity was removed from the statute, and the test conflicts with the plain meaning of the statute. 34 Despite the plain meaning of the language of the statute, the government and the Korean manufacturers cite to the Statement of Administrative Action (SAA) that accompanied the URAA as evidence of congressional intent to endorse the PQ Test as a proper interpretation of the new statutory language. The SAA declares that the [n]ew section 772 retains the distinction in existing law between 'purchase price' (now called the 'export price') and 'exporters sales price' (now called the 'constructed export price'). That statement goes on to declare that [n]otwithstanding the change in terminology, no change is intended in the circumstances under which export price . . . versus constructed export price . . . are used. H. Doc. No. 103-316, Vol. 1 at 822 (1994), reprinted in 1994 U.S.C.C.A.N. 3773, 4163. The appellants argue that this indicates congressional approval of the distinctions made by the PQ Test. We disagree. 35 The addition of the word affiliated to the CEP sales definition is consistent with a definition of CEP sales based on whether the foreign exporter/producer and the U.S. importer are related, as the Court of International Trade said in PQ Corporation. There is nothing in the SAA to indicate that Congress was aware of Commerce's PQ Test or intended the use of EP or CEP to be determined based on the activities of the importer rather than the relationship between the importer and the producer/exporter. Defining a sale by a U.S. affiliate as one that requires a CEP classification did not change the circumstances under which CEP and EP had historically been used. The addition of this term merely reinforced the language in the statute prior to the 1994 amendment and the holdings in the case law by emphasizing that the critical question was not the role of the affiliate in the sale but the relationship between the seller and the producer/exporter, i.e., whether the U.S. importer is an affiliate of the foreign producer. 36 In addition, the Korean producers argue that because the terms seller and sold are undefined in the statute, they are therefore ambiguous. Thus, they argue, Commerce developed the PQ Test to determine, based on the affiliate's activities, if it is indeed a seller. When a word is undefined in a statute the agency and the reviewing court should give the undefined term its ordinary meaning. See Perrin v. United States, 444 U.S. 37, 42 (1979) (A fundamental canon of statutory construction is that, unless otherwise defined, words will be interpreted as taking their ordinary, contemporary, common meaning.). Black's Law Dictionary (6th ed. 1990) defines seller as one who has contracted to sell property . . . the party who transfers property in the contract of sale. As to sold, this court previously addressed the meaning of that term in the definition of the Exporter's Sales Price (now CEP). See NSK Ltd. v. United States, 115 F.3d 965, 973 (Fed. Cir. 1997). In that case we defined sold to require both a transfer of ownership to an unrelated party and consideration. Id. at 975 (emphasis added). We see no reason to question these definitions, and therefore hold that the seller referred to in the CEP definition is simply one who contracts to sell and sold refers to the transfer of ownership or title. Since there can be no real ambiguity about these terms, contrary to the assertions of the appellees, we are not required to do any analysis under the second part of the Chevron test. 37 The record in this appeal is not disputed; it was the U.S. affiliates of the Korean producers that contracted for sale with the unaffiliated U.S. purchasers. The title or ownership passed from the U.S. affiliate to the unaffiliated U.S. purchaser. There were no contracts between the Korean producers and the unaffiliated U.S. purchasers. Thus, U.S. affiliates were the sellers, as indicated by the plain language of the statute. Commerce does not require a cumbersome test, examining the activities of the affiliate, to determine whether or not the affiliate is a seller, when the answer to that question is plain from the face of the contracts governing the sales in question. If Congress had intended the EP versus CEP distinction to be made based on which party negotiated the terms of the deal or on the relative importance of each party's role, it would not have written the statute to distinguish between the two categories based on where the sale was made and which party made the sale.
38 The addition of the words outside the United States to the EP definition in the 1994 amendments similarly clarified what could be an EP sale. An earlier decision of the Court of International Trade held these words to be ambiguous, finding that it was unclear whether they described the location of the sale or the location of the producer/exporter. See Mitsubishi Heavy Indus., Ltd. v. United States, 15 F. Supp. 2d 807, 812 (Ct. Int'l Trade 1998). The language of the CEP definition leaves no doubt that modifier in the United States relates to first sold. We hold that the term outside the United States, read in the context of both the CEP and the EP definitions, as it must be, applies to the entire transaction at issue. Therefore, the 1994 amendment makes clearer that the critical difference between EP and CEP sales is whether the sale or transaction takes place inside or outside the United States. 39 A sales contract executed in the United States between two entities domiciled in the United States cannot generate a sale outside the United States. Thus, if outside the United States refers to the sale, as the government argues in this appeal, one of the parties to the sale or the execution of the contract must also be outside the United States for an EP classification to be proper. 7 Accordingly, contrary to the holding of the Mitsubishi court, the phrase does not ambiguously refer to either the sale or the producer/exporter; those two things are not separable in this context. The addition of the phrase outside the United States merely clarified what was already evident from the statutory definition prior to the amendments: a transaction in which both parties are located in the United States and the contract is executed in the United States cannot be an EP transaction. 40 In the Final Results, Commerce attempted to circumvent this geographic restriction on the use of EP sales by stating that when the PQ Test was satisfied it consider[ed] the exporter's selling functions to have been relocated geographically from the country of exportation to the United States, where the [U.S. affiliate] performs them. The trial judge's holding that the PQ Test does not contradict the statute because it is a means of defining whether a sale is in essence between a producer/exporter and the unaffiliated buyer appears to make the same point. This relocation concept is contrary to the plain language of the statute. 41 The statute distinguishes CEP and EP sales based on whether the transaction occurs inside or outside the United States. In addition, PQ Corporation precludes relocation of selling activity by holding that the statute provides no mechanism for imputing actual sales by an importer to that importer's related 'foreign manufacturer or producer of the merchandise' so that [purchase price (now EP)] will apply. PQ Corp., 652 F. Supp. at 733. Thus, Commerce's decision to redefine the activities occurring inside the United States as occurring outside the United States makes an impermissible end-run around both the plain meaning of the statutory language and the mandate of the Court of International Trade. Whether this redefinition does or does not perfectly comport with Congress's intent to isolate an arm's length transaction is not for this court to decide. Where Congress has made a clear distinction between the two categories based on the geographic location of the transaction, the agency may not circumvent this geographic distinction by relocating the activities of the U.S. affiliate. 42 Thus, the 1994 amendments made even clearer that an EP sale (or agreement for sale) must occur outside the United States. When, as here, there are contracts showing that the sales at issue took place in the United States between two entities with United States addresses, it is contrary to the plain meaning of the statute for Commerce to continue to use the PQ Test to define the sale as occurring outside of the United States. 43 A sale can be defined as either an EP or a CEP sale; a sale can not be in both categories, nor is there a middle ground. Congress only provided for two categories and those two categories are mutually exclusive. Thus, when the EP and CEP definitions are read together, it is clear that Congress distinguished the categories in terms of the relationship of the parties and the location of the sales. In distinguishing the two, Congress opted for what can be seen as a structural approach to defining EP and CEP sales, not the function-driven approach of the PQ Test. The words chosen by Congress are clear and unambiguous words such as affiliated, sold, and in or outside the United States. 44 Congress's intent to fully define EP and CEP without any delegation to Commerce is further evident when the sections are viewed in the context of the rest of the anti-dumping statute. It is common in the anti-dumping statute for Congress to leave decisions about how to make dumping calculations to Commerce's discretion because of its expertise. (See, for example the discretionary use of the so-called fair-value provision discussed infra.) Accordingly, if Congress had intended for Commerce to use its discretion to determine whether the use of CEP or EP was appropriate, it would have explicitly left that task to the agency as it did with other calculations in the statute. 45 When Congress makes such a clear statement as to how categories are to be defined, neither the agency nor the courts are permitted to substitute their own definition for that of Congress, regardless of how close the substitute definition comes to achieving the same result as the statutory definition. 8 The job of revising statutes is for Congress, not the agency or the courts. 46 Finally, the appellees argue that the PQ Test has been upheld repeatedly by the Court of International Trade. We are not swayed by that argument. First, this court is, of course, not bound by those decisions. Second, the Federal Circuit itself has never addressed the question of whether the PQ Test is consistent with the statute. Third, we are not persuaded that the decisions in those cases have any bearing on the question before this court. Cases decided based on the prior statute, such as Outokumpu Copper Rolled Products v. United States, 829 F. Supp. 1371, 1378 (Ct. Int'l Trade 1993), E.I. DuPont de Nemours v. United States, 841 F. Supp. 1237, 1249 (Ct. Int'l Trade 1993), and Independent Radionic Workers of America, 19 CIT 375 (1995), cannot enlighten our analysis of the new statutory language. In Mitsubishi Heavy Indus., 15 F. Supp. 2d at 813-14, a post-amendment decision, the court affirmed a Commerce decision to classify sales as CEP sales after applying the PQ Test. Thus, while Mitsubishi did uphold the test, it did not uphold its use in a way that was contrary to the statutory language. If there was ever any doubt about how to define EP and CEP sales, Congress's amendments to the statutory language make clear that it is the identities of the parties to the actual sale or agreement to sell, and the geographic location of those parties, that determine whether EP or CEP should be used to calculate the U.S. Price. It is no longer necessary or permissible for Commerce to use the PQ Test to determine if the sales activity has been relocated or if the sale was in essence between the producer and the unaffiliated purchaser because the U.S. affiliate acted only as a communications link between them. In light of the amended language Commerce must now base its decision on the identity and geographic location of the parties to a sales contract. If the contract for sale was between a U.S. affiliate of a foreign producer and an unaffiliated U.S. purchaser, then the sale must be classified as a CEP sale. Stated in terms of the EP definition: if the sales contract is between two entities in the United States, and executed in the United States,it cannot be said to have been outside the United States; therefore the sale cannot be an EP sale. Similarly, a sale made by an affiliate or another party other than the producer or exporter cannot be an EP sale. Thus, we reverse the decision of the Court of International Trade and remand to that court for remand to the Department of Commerce for a redetermination of anti-dumping duties that is consistent with this holding. 47