ATAR S.R.L., Plaintiff-Appellee, v. UNITED STATES, Defendant-Appellant, and American Italian Pasta Company, Dakota Growers Pasta Company, and New World Pasta Company, Defendants.
No. 2013-1001.
United States Court of Appeals, Federal Circuit.
Sept. 11, 2013.
730 F.3d 1320
Jane C. Dempsey, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellant. With her on the brief were Stuart F. Delery, Deputy Principal Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Jr., Assistant Director. Of counsel on the brief was Deborah R. King, Senior Attorney, Office of Chief Counsel for Import Administration, United States Department of Commerce, of Washington, DC.
Before LOURIE, BRYSON, and TARANTO, Circuit Judges.
LOURIE, Circuit Judge.
The United States, as Defendant-Appellant, appeals from the final judgment of the United States Court of International Trade (the “trade court“), which rejected calculations advanced by the Department of Commerce (“Commerce“) regarding, inter alia, the profit cap applicable under
Because we conclude that Commerce‘s original profit cap calculation was reasonable, we reverse.
BACKGROUND
This appeal arrives with a lengthy and complex history. On June 14, 1996, Commerce determined that certain pasta products from Italy were being sold in the United States at less than fair value.1
Some years later, Commerce conducted its ninth administrative review of that antidumping duty order, covering the period of July 1, 2004, through June 30, 2005. In pertinent part, Commerce arrived at an antidumping duty margin of 18.18% for Atar. Certain Pasta from Italy, 72 Fed. Reg. 7,011, 7,012 (Dep‘t of Commerce Feb. 14, 2007) (notice of final results) (“Final Results“). To calculate antidumping margins, Commerce ordinarily compares the export price of the subject merchandise with the “normal value,” i.e., the price of like products sold in the exporter‘s home market or in a representative third country. See
As defined by statute, the constructed value for merchandise under antidumping review ordinarily equals the sum of (1) the cost of materials and fabrication needed to produce the merchandise in the ordinary course of trade; (2) the exporter‘s actual selling, general, and administrative costs incurred and actual profits realized in the production of a foreign like product in the ordinary course of trade; and (3) packing and container costs.
In this case, Commerce determined that it could not proceed under
Commerce disregarded option (i) because Atar did not produce any products other than the subject merchandise. Decision Mem. at 19. Option (ii) also proved unavailable because the ninth administrative review included only one other respondent, and Commerce concluded that relying on that respondent‘s reported profit and SGA cost data would expose confidential business information. Id. at 20.
Thus finding options (i) and (ii) inapposite, Commerce invoked option (iii), which broadly authorizes the agency to derive the necessary profit and SGA values via “any other reasonable method,” subject to the statutory profit cap. In so doing, Commerce sought “a methodology that most closely simulate[d] the preferred method” of
In March 2007, Atar brought suit in the trade court to challenge the Final Results. The trade court upheld Commerce‘s decision to use a constructed value approach but concluded that the agency had not employed a “reasonable method” for calculating the constructed value of Atar‘s products under
Following Atar I, Commerce issued its first remand redetermination on September 3, 2009. Although it “continue[d] to believe that the methodology used in the Final Results constitute[d] a ‘reasonable method,‘” Commerce recalculated Atar‘s constructed value using above- and below-cost sales data obtained from those respondents in the eighth administrative review that had earned a net profit during
On review, the trade court remanded again. Atar S.r.l. v. United States, 703 F.Supp.2d 1359 (Ct.Int‘l Trade 2010) (”Atar II“). The court concluded that Commerce‘s revised method for determining Atar‘s constructed value profit was deficient for failing to separately and independently calculate the statutory profit cap. Id. at 1364-67. Accordingly, the court set aside the first remand redetermination and remanded again for Commerce to reconsider Atar‘s constructed value profit under option (iii). Atar II, 703 F.Supp.2d at 1370.
Commerce issued its second remand redetermination on July 19, 2010. Commerce elected to continue using data from the two profitable respondents in the prior administrative review, including their above- and below-cost sales to calculate Atar‘s constructed value profit. In addition, Commerce expressly used those same data to establish a profit cap, contending that “the weighted-average profit rate of the two [profitable] respondents ... after including sales made both within and outside the ordinary course of trade, establishe[d] a reasonable profit cap.” Because its constructed value profit figure—based on the same data—did not exceed (and indeed matched) the resulting profit cap, Commerce concluded that its preexisting margin of 14.45% complied with statutory requirements.
Once again, the trade court remanded. Atar S.r.l. v. United States, 791 F.Supp.2d 1368 (Ct.Int‘l Trade 2011) (”Atar III“). The court held that the second remand redetermination had yielded an unlawful profit cap because Commerce had misinterpreted the statute and misapplied the available facts. Commerce had determined that the statute required the profit cap to be a positive amount, which in the agency‘s view supported its reliance on data only from profitable respondents in the prior review. The court, however, rejected Commerce‘s statutory interpretation as unreasonable, holding that the statute called for a flexible, case-by-case profit cap determination that did not require Commerce to exclude representative data from unprofitable producers. Id. at 1376. In addition, the court concluded that Commerce‘s limited focus on the two profitable respondents “ignored home-market sales data [by the unprofitable producers] that were material and probative of the general conditions in the home market of Italy affecting the profitability of domestic pasta producers operating there.” Id. at 1377. The court reasoned that basing the calculation on only two producers had heavily skewed Commerce‘s weighted-average profit cap figure toward a single large, profitable exporter and therefore did not reflect the actual conditions affecting the “amount normally realized” by Atar and others operating in the Italian home market. Id. at 1377-78. The court therefore remanded again for Commerce to recalculate Atar‘s constructed value profit using a lawfully determined profit cap. Id. at 1380-81.
Commerce then issued its third remand redetermination on December 6, 2011, once again revising its constructed value profit and profit cap calculations. To begin, Commerce returned to its original method from the Final Results for deriving Atar‘s constructed value profit based on the above-cost sales of all six respondents in the prior administrative review, citing our intervening decision in Thai I-Mei Frozen Foods Co. v. United States, 616 F.3d 1300 (Fed.Cir.2010). Under protest, Commerce also adopted a lower profit
The trade court affirmed Commerce‘s third remand redetermination. Atar IV, 853 F.Supp.2d 1344. In Atar IV, the court held that Commerce had used a reasonable method for determining the profit cap—the amount of profits “normally realized” by exporters or producers in Atar‘s home market. The court explained that “[t]he inclusion of all sales, both above-cost and below-cost, in the profit cap calculation produced a result that more accurately reflected the profit conditions in the home market as a whole than would one confined to sales made in the ordinary course of trade.” Id. at 1349. The court disposed of Atar‘s complaints that Commerce should have used a simple average, rather than a weighted average, of data from the six respondents in the prior review, stating that “Commerce must be allowed a degree of discretion as to its methodological choices in determining a profit cap.” Id. at 1350. As a result, the final 11.76% antidumping duty margin from the third remand redetermination was sustained, and the trade court entered final judgment accordingly.
The government timely appealed. We have jurisdiction pursuant to
DISCUSSION
We review the trade court‘s decision in this case de novo, “apply[ing] anew the same standard used by the court, and [we] will uphold Commerce‘s determination unless it is unsupported by substantial evidence on the record, or otherwise not in accordance with law.” Mittal Steel Point Lisas Ltd. v. United States, 548 F.3d 1375, 1380 (Fed.Cir.2008). Substantial evidence is “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Consol. Edison Co. v. N.L.R.B., 305 U.S. 197, 229 (1938). We must defer to Commerce‘s reasonable construction of its governing statute where Congress “leaves a gap in the construction of the statute that the administrative agency is explicitly authorized to fill, or implicitly delegates legislative authority, as evidenced by ‘the agency‘s generally conferred authority and other statutory circumstances.‘” Cathedral Candle Co. v. U.S. Int‘l Trade Comm‘n, 400 F.3d 1352, 1361 (Fed.Cir.2005) (quoting United States v. Mead Corp., 533 U.S. 218, 229 (2001)). To review the reasonableness of agency action, “[c]ourts look for a reasoned analysis or explanation for an agency‘s decision as a way to determine whether a particular decision is arbitrary, capricious, or an abuse of discretion.” Wheatland Tube Co. v. United States, 161 F.3d 1365, 1369 (Fed.Cir.1998).
On appeal, the government contends that Commerce reasonably excluded below-cost sales from its profit cap calculations in the Final Results. Specifically, the government argues that Commerce followed its normal approach to constructed value profit determinations by excluding below-cost sales from its profit cap calculation. Commerce determined normal value for respondents in the eighth administrative review by excluding their below-cost sales pursuant to
The government also argues that Commerce‘s profit cap calculations were consistent with a broad “statutory preference” for deriving constructed value profits from sales of a foreign like product made in the ordinary course of trade, as set forth in
Finally, the government asserts that the trade court afforded Commerce insufficient deference in interpreting and applying
Atar offers no substantive response. As appellee, Atar did not file substantive briefing or participate in oral argument; instead, Atar submitted papers stating that it “has ceased commercial operations and does not possess the resources” for meaningful participation. Appellee‘s Br. 2. Atar nonetheless urges affirmance of the trade court‘s “well reasoned and considered decision.” Id.
The only question presented in this appeal is whether the trade court erred in rejecting Commerce‘s exclusion of below-cost sales from its profit cap calculations relating to Atar‘s subject merchandise. The governing statute allows Commerce to calculate the amount allocated to profit in a constructed value determination based on any reasonable method,
except that the amount allowed for profit may not exceed the amount normally realized by exporters or producers (other than the [specific exporter or producer being examined]) in connection with the sale, for consumption in the foreign country, of merchandise that is in the same general category of products as the subject merchandise.
As described, subsections (i) to (iii) of
In contrast, the catch-all third option permits Commerce to calculate construct-
In this case, Commerce had no choice but to proceed under option (iii). Atar had no comparison sales suitable for use under option (i), and Commerce rejected option (ii) because the ninth administrative review included only one other respondent, and using that respondent‘s data alone would have revealed business-proprietary information. Atar I, 637 F.Supp.2d at 1082. If the ninth administrative review had included sufficient data from one or more additional respondents, however, under option (ii) Commerce would have been required to exclude data from those respondents’ below-cost sales in calculating Atar‘s constructed value profit. See
While such data were not available here, Commerce did have access to analogous data from the six respondents in the previ-
ous administrative review. Using those surrogate data, Commerce used methods that otherwise mirrored option (ii) to calculate Atar‘s constructed value profit as the weighted average of the actual profits realized from above-cost sales of a foreign like product by the respondents in the eighth review. Decision Mem. 19. The resulting profit figure undeniably would have qualified as a permissible measure of constructed value profit if it had been derived pursuant to option (ii) during the eighth administrative review, and the record contains no indication that the relevant market underwent any substantial intervening change that would meaningfully distinguish the period of the eighth review (July 1, 2003 to June 30, 2004) from the timeframe now at issue (July 1, 2004 to June 30, 2005). Once Commerce decided to mirror option (ii) by using data from other respondents, the exclusion of below-cost sales made sense. As the Statement of Administrative Action (“SAA“) that accompanied the Uruguay Round Agreements Act3 explains with regard to option (ii), the consideration of below-cost sales of a foreign producer‘s competitors could allow that producer to “benefit perversely from its own unfair pricing.” SAA, H.R.Rep. No. 103-316, at 840 (1994), reprinted in 1994 U.S.C.C.A.N. 3,773, 4,176. That is, a foreign producer might have undercut the market, thereby forcing its competitors to make unprofitable sales. Because the approach Commerce selected under option (iii) raised those same concerns, it decided, consistent with the SAA‘s guidance, to avoid the risk of lowering Atar‘s profit cap based on any such unprofitable sales. We therefore cannot conclude that Commerce acted unreasonably in deciding that the same weighted-aver-
We recognize that the enumerated reference products differ between option (ii) and the profit cap provision of option (iii). Specifically, option (ii) contemplates profit data from other respondents’ sales of a “foreign like product,” while the profit cap provision references normal returns from sales of “merchandise that is in the same general category” as the subject products. Compare
Furthermore, the “same general category” language of option (iii) does not prohibit Commerce from excluding below-cost sales when calculating a profit cap. The trade court concluded that “Congress did not intend for Commerce to exclude data on below-cost sales from its calculation when determining a profit cap.” Atar II, 703 F.Supp.2d at 1365. In so doing, the court recited the following language from the SAA: “[T]he Administration does not intend that Commerce would engage in an
analysis of whether sales in the same general category are above-cost or otherwise in the ordinary course of trade.” Id. (quoting SAA at 841).
Despite this statement of intention, however, the SAA does not prohibit Commerce from excluding below-cost sales when deriving a profit cap. Read in context, the cited language instead addresses the ordinarily limited availability of data concerning third-party sales of merchandise that does not qualify as a foreign like product in the review but does fall within the same general category of merchandise. The associated full paragraph from the SAA reads as follows:
The administration does not intend Commerce to require companies to submit all data necessary to apply each alternative. For example, Commerce will not require a company which has provided profit information on its own sales of the particular foreign like product also to submit profit information on its sales of the same general category of products solely to enable Commerce to use the latter information to calculate profit for a different company. Likewise, the Administration does not intend that Commerce would engage in an analysis of whether sales in the same general category are above-cost or otherwise in the ordinary course of trade.
SAA at 841.
The SAA thus recognizes that Commerce faces practical limitations on its
Finally, the trade court‘s decision was in large part founded on its perception that “below-cost sales were a significant feature of the home-market conditions affecting the marketing of pasta in Italy” during the relevant periods of review, such that Commerce‘s attempts to minimize or exclude below-cost sales distorted its calculation of the “amount normally realized” from sales in that market. Atar III, 791 F.Supp.2d at 1380; see also Atar I, 637 F.Supp.2d at 1088 (faulting the Final Results for “a failure to ground the decision to exclude those [below-cost] sales in findings of fact ... that are pertinent to Atar‘s specific situation“). Nevertheless, we have long recognized that antidumping determinations “involve complex economic and accounting decisions of a technical nature, for which agencies possess far greater expertise than courts.” Fujitsu Gen. Ltd. v. United States, 88 F.3d 1034, 1039 (Fed.Cir.1996). Moreover, the statutory language at issue here is ambiguous. Accordingly, Commerce is entitled to substantial deference in its choice of accounting methodology, and, as a reviewing court, we may not substitute one reasonable approach for another according to our own preferences. In addition, we note that Commerce has not advocated a rigid requirement that below-cost sales data must be excluded from all profit cap determinations. See Oral Arg. at 14:37, available at http://www.cafc.uscourts.gov/oral-argument-recordings/2013-1001/all (“Commerce ... must consider each situation on a case-by-case basis, so, in this case, Commerce did not automatically exclude below-cost sales.“). That approach is consistent with the SAA‘s directive that Commerce should “determine on a case-by-case basis the profits ‘normally realized’ by other companies on merchandise of the same general category.” SAA at 841.
CONCLUSION
In view of the foregoing, we conclude that Commerce acted reasonably in excluding below-cost sales data from the prior administrative review when calculating the constructed value profit cap applicable to Atar‘s subject merchandise under
REVERSED AND REMANDED