Opinion ID: 772548
Heading Depth: 2
Heading Rank: 2

Heading: Constructed Export Price Deductions Under 19 U.S.C. 1677a(d)(1)

Text: 41 Before this court, Micron argues that the plain text of 19 U.S.C. 1677a(d)(1), the SAA, the legislative history of the statute, and the statute's purpose require the deduction from the starting price of all selling expenses related to CEP sales. The Language of the Statute 42 Micron urges that the statutory language itself requires the deduction of all selling expenses. As noted above, subsection D provides for the deduction of any selling expenses not deducted under subparagraph (A), (B), or (C). 19 U.S.C. 1677a(d)(1) (emphasis added). Micron and amici point us to cases holding that the term any necessarily means all. See United States v. Rosenwasser, 323 U.S. 360, 362-63 (1945) (The use of the words `each' and `any' to modify `employee' . . . leaves no doubt as to the Congressional intention to include all employees within the scope of the [Fair Labor Standards] Act unless specifically excluded.); Barseback Kraft AB v. United States, 121 F.3d 1475, 1481 (Fed. Cir. 1997) (The word `any' is generally used in the sense of `all' or `every' and its meaning is most comprehensive.). 43 While we agree that the word any necessarily includes all, the real question here is all of what? We conclude that the description of the what in the statute is ambiguous, as the statute does not define the selling expenses within subsection D. We reach this conclusion for several reasons. Application of the interpretive rule of ejusdem generis to 1677a(d)(1) suggests that Congress intended subsection D to encompass the same types of expenses as are included in subsections A, B and C. As this court has previously stated: 44 Under the rule of ejusdem generis, which means of the same kind, where an enumeration of specific things is followed by a general word or phrase, the general word or phrase is held to refer to things of the same kind as those specified. 45 Sports Graphics, Inc. v. United States, 24 F.3d 1390, 1392 (Fed. Cir. 1994) (italics in original); see generally 2A Norman J. Singer, Statutes and Statutory Construction, 47.17, at 273 (6th ed. 2000) (Where general words follow specific words in a statutory enumeration, the general words are construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words.). 46 The plain text of the statute and the accompanying SAA make it clear that the three types of expenses enumerated in 19 U.S.C. 1677a(d)(1)(A)-(C) are limited to expenses incurred specifically with respect to sales to unaffiliated purchasers in the United States: only those commissions for selling the subject merchandise in the United States are deductible under subsection A; see also SAA at 823 (stating that commissions are deductible only to the extent that they are incurred in the United States on sales of the subject merchandise), reprinted in 1994 U.S.C.C.A.N. 4040, 4163. Subsection B sets forth a non-exhaustive list of direct selling expenses, which the SAA defines as expenses which result from and bear a direct relationship to the particular sale in question. SAA at 823, reprinted in 1994 U.S.C.C.A.N. 4040, 4163. The SAA further provides that such expenses may be deducted from the constructed export price only to the extent they are incurred after importation. Id. Finally, the expenses assumed by the seller on behalf of the purchaser may be deducted under subsection C in the same manner as the direct selling expenses, i.e., only if the expenses bear a direct relationship to the sale to the unaffiliated purchaser in the United States. SAA at 824, reprinted in 1994 U.S.C.C.A.N. 4040, 4164. 47 In short, the only expenses deductible under the first three subsections of 19 U.S.C. 1677a(d)(1) are those expenses arising specifically out of the sale of the subject merchandise in the United States to an unaffiliated purchaser, as opposed to those general expenses incurred by the foreign producer or exporter in all sales, without regard to the identity or location of the purchaser. Subsection D, in turn, is a general provision which merely provides for the deduction of any selling expenses not deducted under subparagraph (A), (B), or (C). Under these circumstances, subsection D was at least ambiguous, and it was reasonable for Commerce to interpret subsection D as encompassing the same types of expenses as those enumerated in the previous subsections. 48 The plain text of 19 U.S.C. 1677a(f) also supports Commerce's reading of the statute. Subsection (f), a new provision regarding profit adjustment for CEP sales, effectively provides for the deduction of profit on United States expenses, which are defined to be the total expenses described in subsections (d)(1) and (d)(2) of this section. 19 U.S.C. 1677a(f)(2)(B). By describing the expenses to be deducted under 19 U.S.C. 1677a(d)(1) as United States expenses, subsection (f) assumes that the expenses at issue are indeed those expenses arising specifically out of the sale of the subject merchandise in the United States. Even more to the point, the SAA instructs that this profit deduction applies only to profits allocable to selling, distribution and further manufacturing activities in the United States. SAA at 824, reprinted in 1994 U.S.C.C.A.N. 4040, 4164. We agree with Commerce that this subsection thus suggests that the coverage of section 772(d)(1) [19 U.S.C. 1677a(d)(1)] is limited to those expenses incurred in connection with a sale in the United States. Preamble, 62 Fed. Reg. at 27,351. The SAA and the Legislative History 49 Micron next argues that in enacting the URAA, Congress did not intend to alter the provisions governing the deduction of selling expenses in the previous law. Micron asserts that the SAA, which purported to identify all changes in the statutory approach following the enactment of the URAA, SAA at 656-57, reprinted in 1994 U.S.C.C.A.N. 4040, 4040-41, did not mention any change with respect to selling expenses. The SAA, of course, is more than mere legislative history. Congress has instructed that [t]he statement of administrative action approved by the Congress under [19 U.S.C. 3511(a)] shall be regarded as an authoritative expression by the United States concerning the interpretation and application of the Uruguay Round Agreements and this Act in any judicial proceeding in which a question arises concerning such interpretation or application. 19 U.S.C. 3512(d). 50 Micron also relies on House and Senate reports on the URAA for the proposition that the 1994 amendments to the statute did not change the current law with respect to the deduction of indirect selling expenses. The House report, H.R. Rep. No. 103-826, at 79 (1994), reprinted in 1994 U.S.C.C.A.N. 3773, 3851, states that the amended statute retain[s] current U.S. law with respect to the deduction made for direct and indirect expenses. . . The pertinent Senate report states that: 51 [A]mended section 772(d)(1)(D) [19 U.S.C. 1677a(d)(1)(D)] provides, as under current law, for the deduction of indirect selling expenses. The Committee intends that this category will, as under current practice, encompass those expenses that do not result from, or cannot be tied directly to specific sales, but that may reasonably be attributed to such sales. 52 S. Rep. No. 103-412, at 65 (1994). 53 Micron further argues that the provision of the pre-URAA statute corresponding to current subsection D was interpreted by the Department of Commerce to require the deduction of all indirect selling expenses, and that the Court of International Trade reached a similar conclusion in Silver Reed America Inc. v. United States, 683 F. Supp. 1393 (Ct. Int'l Trade 1988). Micron contends that Congress should be assumed to have been aware of Silver Reed and Commerce's interpretation when it enacted the URAA; and that, under such circumstances, we should assume that Silver Reed and Commerce's corresponding interpretation were incorporated into the amended antidumping statute. Thus, Micron contends, Commerce's current interpretation contravenes the amended statute. 54 Micron's argument has considerable force, but we are not convinced. 55 First, we do not read the SAA to state that current law as to the expenses enumerated in 19 U.S.C. 1677a(d) is not being changed. Indeed, the SAA suggests to the contrary. It lists the adjustments enumerated in a different section - 19 U.S.C. 1677a(c) - and states that [t]hese adjustments have not changed from current law. SAA at 823, reprinted in 1994 U.S.C.C.A.N. 4040, 4163. But then in the next paragraph it states: 56 Additionally, under new section 772(d) [19 U.S.C. 1677a(d)], constructed export price will be calculated by reducing the price of the first sale to an unaffiliated customer in the United States by the amount of the following expenses (and profit) associated with economic activities occurring in the United States: . . . The deduction of profit is a new adjustment in U.S. law, consistent with the language of the [Antidumping] Agreement, which reflects that constructed export price is now calculated to be, as closely as possible, a price corresponding to an export price between non-affiliated expporters and importers. 57 Id. The fact that the profit deduction is a new adjustment in U.S. law hardly suggests that the 1677a(d) expense deductions, unlike the 1677a(c) adjustments, have not been changed. 58 Second, even if we assume that Congress did not intend to change the law with respect to the deduction of indirect selling expenses, there is no evidence that Congress understood the law to be anything more than the earlier statutory provisions with respect to selling expenses. The pre-URAA statute, while explicit with respect to the deduction of certain selling expenses, was ambiguous as to what other selling expenses were to be deducted. It merely provided, in pertinent part, for the deduction of expenses generally incurred by or for the account of the exporter in the United States in selling identical or substantially identical merchandise. 19 U.S.C. 1677a(e)(2) (1988). In short, the pre-URAA statute does not define the scope of indirect selling expenses to be deducted. Therefore, Congress at best determined to continue the existing ambiguity. 59 Third, no claim is made that the Silver Reed decision was called to Congress' attention. Micron urges that if Congress re-enacts a statute which has been judicially interpreted, then Congress is presumed to have adopted the interpretation, citing Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. 353, 382 n.66 (1982). However, Micron has not demonstrated that Congress was aware of the decision in Silver Reed when it amended the statute. We are unwilling to apply the presumption relied upon by Micron when there is no evidence that Congress' attention was directed to the decision in Silver Reed when the statute was re-enacted. 60 For example, in Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 431 (1955), the Supreme Court held that money received by a taxpayer as exemplary damages for fraud or as punitive damages in a treble-damage antitrust action was reportable gross income, under section 22(a) of the Internal Revenue Code. The taxpayers pointed to a decision of the Board of Tax Appeals which held punitive damages to be nontaxable, and argued that because Congress had re-enacted section 22(a) without change following the Board's decision, such re-enactment indicates congressional satisfaction with that holding. The Supreme Court disagreed, stating that [r]e-enactment -- particularly without the slightest affirmative indication that Congress ever had the [Board of Tax Appeals] decision before it -- is an unreliable indicium at best. Id. Subsequent decisions of the Supreme Court have reaffirmed this prerequisite for the application of the presumption. 9 In short, at least without evidence of Congress' awareness of the decision in Silver Reed, we will not presume that Congress adopted the Court of International Trade's reasoning in that decision when it amended the antidumping statute. 61 Fourth, no claim is made that the Silver Reed decision was a settled judicial interpretation of the statute. The decision of the Court of International Trade on this issue was hardly the last word regarding the interpretation of the pre-URAA antidumping statute. Under these circumstances we would not assume that Congress intended to adopt sub silentio the single decision of a trial court, even if it had been aware of the decision. In United States v. Powell, 379 U.S. 48, 55 n.13 (1964), for example, the Supreme Court declined to presume that Congress had adopted the reasoning of four judicial decisions when it twice re-enacted a provision of the Internal Revenue Code. The Court stated that [t]hese cases represent neither a settled judicial construction . . . nor one which we should be justified in presuming Congress, by its silence, impliedly approved. See also Bragdon v. Abbott, 524 U.S. 624, 646 (1998) (stating that the presumption applies [w]hen administrative and judicial interpretations have settled the meaning of an existing statutory provision . . .); Pierce v. Underwood, 487 U.S. 552, 567 (1988) (noting that Congressional reenactment of statute that had in fact been given a consistent judicial interpretation . . . generally includes the settled judicial interpretation). 62 Finally, while Commerce had interpreted the pre-URAA statute to provide for the deduction of indirect selling expenses related to sales in the United States, we do not assume that Congress silently intended to adopt such an interpretation by the agency. Again, this presumption of implicit Congressional approval of an administrative interpretation requires that Congress be aware of the existence of the agency's interpretation. 10 Micron has presented no evidence that Congress, when it amended the antidumping statute, was aware of Commerce's interpretation of the pertinent provisions of the pre-URAA statute. 63 Micron argues that the specific language of the Senate and House Committee reports refers to current practice and states that section 1677a(d)(1)(D) will encompass those expenses that do not result from, or cannot be tied directly to specific sales, but that may reasonably be attributed to such sales. S. Rep. No. 103-412, at 65 (1994). This, says Micron, makes clear that Congress was not limiting the deductible expenses to those solely related to U.S. sales. 64 Unfortunately for Micron, the reports are ambiguous. The reference to current practice standing alone is unclear, and the Senate report, for example, can be read as intended to ensure that it is not necessary to tie expenses to individual U.S. sales or not necessary to tie expenses to U.S. sales at all. Those reports fall far short of demonstrating that Congress was aware of Commerce's interpretation, or that it endorsed it. 65 Any assumption that Congress intended to freeze an administrative interpretation of a statute, which was unknown to Congress, would be entirely contrary to the concept of Chevron - which assumes and approves the ability of administrative agencies to change their interpretation. As the Supreme Court noted, [t]he power of an administrative agency to administer a congressionally created . . . program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress. Chevron, 467 U.S. at 843 (quoting Morton v. Ruiz, 415 U.S. 199, 231 (1974)). Congress cannot, and need not, draft a statute which anticipates and provides for all possible circumstances in which a general policy must be applied to a specific set of facts. It properly leaves this task to the authorized agency. Commerce's ability to alter its interpretation of the antidumping statute is particularly important because Commerce is the acknowledged master of the antidumping laws, and its interpretations of the pertinent statutes are worthy of considerable deference. Zenith Elecs. Corp. v. United States, 77 F.3d 426, 430 (Fed. Cir. 1996); see also Micron Tech., Inc. v. United States, 117 F.3d 1386, 1394 (Fed. Cir. 1997) (In antidumping cases, we acknowledge Commerce's special expertise and accord substantial deference to its construction of pertinent statutes.). Congressional Purpose 66 Micron next argues that the effect of Commerce's interpretation is to exclude from the scope of 19 U.S.C. 1677a(d)(1)(D) those expenses incurred outside of the United States, a result Micron asserts is contrary to the intent of Congress. 67 Micron also argues that deducting all selling expenses serves the purposes of Congress by preventing the false characterization of expenses by the overseas producer or exporter. Micron urges that unless all indirect selling expenses are deducted, foreign competitors will deliberately shift certain expenses out of the United States to mask the extent of the dumping, thereby defeating the Congressional purpose. 68 In fact, Commerce has not imposed any geographic limitation on those expenses deductible under subsection D. For example, Commerce's regulation provides, in pertinent part, that Commerce will make adjustments for expenses associated with commercial activities in the United States that relate to the sale to an unaffiliated purchaser, no matter where or when paid. 19 C.F.R. 351.402(b) (emphasis added). As Commerce explained in the Preamble accompanying that regulation: 69 [T]he phrase no matter where or when paid is intended to indicate that if commercial activities occur in the United States and relate to the sale to an unaffiliated purchaser, expenses associated with those activities will be deducted from CEP even if, for example, the foreign parent of the affiliated U.S. importer pays those expenses. 70 Preamble, 62 Fed. Reg. at 27,351. 71 In several instances since the passage of the URAA, Commerce has deducted indirect selling expenses physically incurred overseas because they were associated with economic activities occurring in the United States. SAA at 823, reprinted in 1994 U.S.C.C.A.N. 4040, 4163. See, e.g., Certain Stainless Steel Wire Rods from France, 61 Fed. Reg. 47,874, 47,881-82 (Sept. 11, 1996) (final admin. review); Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, From Germany, 61 Fed. Reg. 38,166, 38,173-74 (July 23, 1996) (final determination). 72 Indeed, it is Micron's interpretation that makes no sense in terms of the statutory purpose. As discussed above, the overarching purpose of the antidumping statute is to permit a fair, `apples-to-apples' comparison between foreign market value and United States price. . . . Torrington Co., 68 F.3d at 1347; see also 19 U.S.C. 1677b(a) (providing that a fair comparison shall be made between the export price or constructed export price and normal value). Commerce makes this fair comparison by adjusting CEP so that is at the same level of trade as EP and then making a comparison to normal value. The SAA provides, in pertinent part, that: 73 The deduction of profit is a new adjustment in U.S. law, consistent with the language of the [Antidumping] Agreement, which reflects that constructed export price is now calculated to be, as closely as possible, a price corresponding to an export price between non-affiliated exporters and importers. 74 SAA at 823, reprinted in 1994 U.S.C.C.A.N. 4040, 4163 (emphasis and brackets added); see also Preamble, 62 Fed. Reg. at 27,371 (CEP is not a price exclusive of all selling expenses, because it contains the same type of selling expenses as a directly observed export price.). 75 To calculate CEP at a price corresponding to EP, Commerce logically must deduct only those expenses incurred solely in CEP transactions, i.e., only those expenses associated with the sale of subject merchandise to an unaffiliated purchaser in the United States by a party affiliated with the foreign producer or exporter. As discussed above, the expenses at issue here are incurred by LG Semicon regardless of whether it uses an affiliated distributor in the United States to market its products, or sells directly to unaffiliated purchasers in the United States. It is undisputed that these expenses are not deducted when calculating EP. The deduction of these expenses from CEP, without corresponding deductions from EP, would cause adjusted CEP not to correspond to EP, a result contrary to the language of the SAA. 76 In other words, the expenses to be deducted from the CEP starting price to make it comparable to EP are those expenses associated with the more advanced level of trade represented by the CEP starting price, i.e., the expenses associated with the sale to the first non-affiliated purchaser in the United States. The expenses that Micron seeks to deduct are not such expenses. Rather, these expenses - sales office rents in Korea, salesmen's salaries in Korea, and certain inventory carrying costs - are incurred by LG Semicon regardless of whether it uses an affiliated distributor in the United States to market its products. In short, these indirect selling expenses are no more of an expense related to the use of affiliated United States entities than the raw material costs incurred during the production of the merchandise. 77 In sum, we find, contrary to Micron's suggestion, that 19 U.S.C. 1677a(d)(1)(D) is ambiguous as to the scope of the indirect selling expenses to be deducted under the CEP methodology. We further find that the Department of Commerce's interpretation of that provision in the administrative decision under review is reasonable, and therefore entitled to deference under Chevron. Accordingly, we affirm the Court of International Trade as to Issue 1.