PAPIERFABRIK AUGUST KOEHLER AG, Plaintiff, v. UNITED STATES, Defendant, and Appleton Papers Inc., Defendant-Intervenor.
Court No. 11-00147
United States Court of International Trade
March 25, 2014
Slip Op. 14-31
STANCEU, Judge
Joshua E. Kurland, Trial Attorney, Commercial Litigation Branch, U.S. Department of Justice, of Washington, DC, argued for defendant United States. With him on the brief were Stuart F. Delery, Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Assistant Director. Of counsel on the brief was Jessica M. Forton, Attorney, Office of the Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce, of Washington, DC.
Gilbert B. Kaplan, King & Spalding LLP, of Washington, DC, argued for defendant-intervenor. With him on the brief was Daniel L. Schneiderman and Joseph W. Dorn.
STANCEU, Judge:
Plaintiff Papierfabrik August Koehler SE contests the final determination (“Final Results“) issued by the International Trade Administration, U.S. Department of Commerce (“Commerce” or the “Department“) to conclude the first administrative review of an antidumping duty order on certain lightweight thermal paper (the “subject merchandise“) from the Federal Republic of Germany (“Germany“). See Lightweight Thermal Paper From Germany: Notice of Final Results of the First Antidumping Duty Admin. Review, 76 Fed. Reg. 22,078, 22,079 (Apr. 20, 2011) (“Final Results“). The first administrative review period covers entries of subject merchandise made from November 20, 2008 through October 31, 2009 (“period of review” or “POR“). Id.
Before the court is plaintiff‘s USCIT Rule 56.2 motion for judgment on the agency record, Pls.’ Rule 56.2 Mot. for J. on the Agency R. (Nov. 15, 2011), ECF No. 26 (“Pls.’ 56.2 Mot.“), which both defendant United States and defendant-intervenor Appvion, Inc. (“Appvion“)1 oppose, Def.‘s Mem. in Opp‘n to Pls.’ Rule 56.2 Mot. for J. upon the Agency R. (Mar. 6, 2012), ECF No. 39 (“Def.‘s Opp‘n“); Resp. in Opp‘n to Pls.’ Rule 56.2 Mot. for J. on the Agency R. (Mar. 7, 2012), ECF No. 42 (“Def.-intervenor‘s Opp‘n“).
Plaintiff brings two claims. First, plaintiff claims that the Department‘s decision in the Final Results not to make downward adjustments in Koehler‘s home market sales prices to account for certain rebates made on a monthly basis is not supported by substantial evidence and is otherwise not in accordance with law. First Am. Compl. ¶¶ 24-25 (May 20, 2013), ECF No. 83 (“Am. Compl.“). Second, plaintiff claims that Commerce unlawfully denied Koehler an opportunity to respond to certain correspondence between U.S. Senators and Representatives and the Secretary of Commerce that was placed on the record on the last day of the agency proceeding giving rise to this action. Id. ¶¶ 22-23.
Concluding that the contested determination was contrary to law, the court remands the Final Results for further proceedings.
I. BACKGROUND
Plaintiff Papierfabrik August Koehler SE (“Koehler“) is a German producer and exporter of lightweight thermal paper.2 Compl. 1 (May 13, 2011), ECF No. 6. Koehler and its U.S. affiliate, Koehler America, Inc., participated as respondents in the first administrative review.3
In the antidumping investigation, Commerce determined a 6.5% antidumping duty margin for Koehler, the only producer/exporter investigated. Lightweight Thermal Paper from Germany: Notice of Final Determination of Sales at Less Than Fair Value, 73 Fed. Reg. 57,326, 57,328 (Oct. 2, 2008). Commerce issued an antidumping duty order on certain lightweight thermal paper from Germany (the “Order“) on November 24, 2008.4 Antidumping Duty Orders: Lightweight Thermal Paper from Germany & the People‘s Republic of China, 73 Fed. Reg. 70,959, 70,959-60 (Nov. 24, 2008). In response to requests by Koehler and Appvion, the petitioner in the antidumping investigation, Commerce initiated the first administrative review of the Order on December 23, 2009. Prelim. Results, 75 Fed. Reg. at 77,831.
During the first administrative review, Koehler, the sole respondent in that review,5 reported having made rebates to customers in Germany, its home market, on monthly, quarterly, and annual bases. Koehler‘s Supplemental Sections A-C Questionnaire Resp. 15 (Apr. 15, 2010) (Admin. R. Doc. No. 44). In the preliminary results of the review (“Preliminary Results“), Commerce, in determining the normal value of Koehler‘s subject merchandise according to Koehler‘s sales of the foreign like product in Germany, made adjustments to the home market sales prices for all of the reported rebates and preliminarily assigned Koehler a de minimis antidumping duty margin. Prelim. Results, 75 Fed. Reg. at 77,835-37.
In response to the Preliminary Results, Appvion submitted a case brief that, inter alia, raised various challenges to the Department‘s preliminary decision to adjust normal value according to the reported monthly rebates. Pet‘rs’ Case Br. 2-36 (Jan. 27, 2011) (Admin.R.Doc. No. 91). Koehler submitted a rebuttal brief responding to Koehler‘s comments. Koehler‘s Rebuttal Br. 4-37 (Feb. 4, 2011) (Admin.R.Doc. No. 96). In the Final Results, issued on April 20, 2011, Commerce continued to adjust normal value for Koehler‘s reported quarterly and annual rebates but excluded the reported monthly rebates from the normal value calculation and assigned Koehler a 3.77% weighted average antidumping duty margin.6 Final Results,
Plaintiff filed a summons on May 13, 2011 and a complaint on June 3, 2011. Summons 1, ECF No. 1; Compl. 1. With leave of the court, Order (May 20, 2013), ECF No. 82, plaintiff filed an amended complaint on May 20, 2013,7 Am. Compl. 1. Plaintiff moved for judgment on the agency record on November 15, 2011, and defendant and defendant-intervenor each filed a brief in opposition on March 6, 2012 and March 7, 2012, respectively. Pls.’ 56.2 Mot. 1; Br. in Supp. of Pls.’ Mot. for J. on the Agency R. Under Rule 56.2 at 1 (Nov. 16, 2011), ECF No. 27 (“Pls.’ 56.2 Mem.“); Def.‘s Opp‘n 1; Def.-intervenor‘s Opp‘n 1. Plaintiff filed its reply to defendant and defendant-intervenor, Pls.’ Reply Br., ECF No. 51 (Apr. 23, 2012) (“Pls.’ Reply Br.“), and requested oral argument, Pls.’ Unopposed Mot. for Oral Arg. & Req. for a Closed Hearing, (Apr. 27, 2012), ECF No. 55, which the court held on October 18, 2012, ECF No. 63.8
At the oral argument, plaintiff requested leave to file additional briefing related to Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 132 S. Ct. 2156, 183 L. Ed. 2d 153 (2012), a decision the U.S. Supreme Court issued after the parties filed all briefs in this action. Oral Tr. 143-47. Plaintiff argued that the decision could have a bearing on the outcome of this action if the court determines that the Department‘s regulations at issue in this matter are ambiguous. Oral Tr. 144-45. The court, upon the agreement of all parties, permitted supplemental briefing on this limited issue. Order, (Sept. 10, 2013), ECF No. 87. See also Def.-Intervenor‘s Supplemental Br. (Oct. 11, 2013), ECF No. 92 (“Def.-intervenor‘s Supplemental Br.“); Def.‘s Supplemental Br. Regarding Deference Accorded to Commerce‘s Interpretation of its Own Regulations (Nov. 18, 2013), ECF No. 100 (“Def.‘s Supplemental Br.“); Pl.‘s Response to Supplemental Brs. (Dec. 9, 2013), ECF No. 101 (“Pl.‘s Supplemental Br.“).
The court exercises jurisdiction under
Commerce determines an antidumping duty margin by comparing the normal value of the subject merchandise to the export price (or constructed export price) at which the subject merchandise is sold in the United States.
Use of price net of price adjustments. In calculating export price, constructed export price, and normal value (where normal value is based on price), the Secretary will use a price that is net of any price adjustment, as defined in
§ 351.102(b) , that is reasonably attributable to the subject merchandise or the foreign like product (whichever is applicable).
At issue in this case are rebates made to Koehler‘s home market customers according to a “monatsbonus” i.e., monthly rebate, program. Plaintiff claims that Commerce violated
In the Preliminary Results, Commerce stated that “Koehler reports customer-specific rebates which may apply to all products or be product-specific” and reached a finding that “Koehler paid rebates on a periodic basis (either monthly, quarterly, or annually).” Prelim. Results, 75 Fed. Reg. at 77,835. Addressing an allegation by the petitioner (Appvion) that “Koehler
In the Final Results, Commerce reversed its position with respect to the monthly (but not the quarterly or annual) rebates Koehler reported, concluding that “the record does not demonstrate that the monatsbonus is a legitimate rebate that should be treated as a price adjustment for this review.” Decision Mem. 15. Commerce based this conclusion on findings that it summarized by stating that certain “2002/03 written rebate documentation” on the record “does not specifically apply to the monatsbonus,” that “the monatsbonus is unique because it differs significantly from Koehler‘s other rebates,” and that “Koehler failed to demonstrate that its customer was aware of the terms and conditions of the monatsbonus prior to the sales.” Id.
At no point during the administrative review did Commerce find that the monthly rebates reported by Koehler were not actually paid to the home market customers. The Issues and Decision Memorandum (“Decision Memorandum“) incorporated into the Final Results raises no question as to whether the monthly rebates were “reflected in the purchaser‘s net outlay,”
In the situation presented by this case, Commerce lacked the discretion not to recognize a reduction in the purchaser‘s net outlay for the foreign like product that satisfied the definition of a “price adjustment” in
Among the Department‘s irrelevant findings is that “Koehler has not provided sufficient evidence on the record of its monthly rebate program.” Decision Mem. 19. Similarly, Commerce found that “Koehler has not provided documentation specifically describing the monatsbonus and the terms and conditions of the monatsbonus (as opposed to longer-term rebates), as reported in this review.” Id. Both of these findings are directed to the wrong question. Under the regulations, the question is not whether the rebates were made according to a “program” that satisfied the various prerequisites Commerce identified in the Decision Memorandum but whether the monthly rebates actually were made, i.e., whether there were downward adjustments in the prices charged for the foreign like product that were reflected in purchasers’ net outlays.
Commerce also found that “Koehler has not demonstrated that its customers had prior knowledge of the rebate program.” Id. Commerce further found that “Koehler has not provided sufficient evidence on the record to demonstrate that the monthly rebate program was in existence before the sales were made” and “has acknowledged that its customer(s) may not be aware of the precise amount of the rebate prior to a particular sale.” Id. at 20. Here also, these findings are directed to matters other than whether there was “any change in the price charged for . . . the foreign like product” that was “reflected in the purchaser‘s net outlay.”
In reaching conclusions from its findings, the Department‘s reasoning is erroneous in several respects. Beginning with the premise that the “standard for determining the legitimacy of a price adjustment is codified in the regulations, outlined in the Department‘s antidumping duty questionnaire, and reflected in the Department‘s prior practice,” Decision Mem. 15, the Decision Memorandum misinterprets the applicable regulations and misconstrues the discussion of these regulations in the preamble that accompanied promulgation (“Preamble“). See Antidumping Duties; Countervailing Duties, 62 Fed. Reg. 27,296, 27,344 (May 19, 1997) (“Final Rule“). But neither the regulations nor the Preamble supports a regulatory interpretation under which Commerce was free to disregard the rebates at issue in this case. The Decision Memorandum then grounds the Department‘s decision in a passage from the questionnaire and a practice of the Department regarding rebates, both of which are inconsistent with the regulations.
The Decision Memorandum misapplies the regulations in declining to adjust the home market prices for the monthly rebates. As discussed above, Commerce did not conclude from its various findings that the monthly rebates were not “reflected in the purchaser‘s net outlay” within the
The Decision Memorandum also mistakenly relies on the Preamble to support the Department‘s decision. When read in context, the pertinent discussion in the Preamble reveals that the Department‘s intent in promulgating the final rule was that reductions in the price of the foreign like product, such as those at issue in this case, must be reflected in the starting price used to determine normal value.
The Preamble explained that the new
The Preamble further explained that Commerce took “several steps aimed at alleviating” confusion concerning the proposed
The Preamble elaborated that “we have made a clarification in [§ 401(c)] itself,” adding that the paragraph “now provides that in calculating export price, constructed export price, or a price-based normal value, the Secretary will use a price that is net of any price adjustment that is reasonably attributable to the subject merchandise or the foreign like product.” Id. at 27,344. The Preamble went on to state that “[t]his use of a net price is consistent with the view that discounts, rebates and similar price adjustments are not expenses, but instead are items taken into account to derive the price paid by the purchaser.” Id. This Preamble discussion, like the regulation itself, makes clear that Commerce intended to apply a uniform definition of “price adjustment” when determining a starting price, regardless of whether it is the starting price for determining normal value or for determining export price or constructed export price. Id.
The Decision Memorandum misconstrues the language and the intent of the Preamble in concluding that “[w]hile the Department‘s regulations allow for post-sale price adjustments that are reasonably attributable to the subject merchandise, the Preamble to the regulations indicates that exporters or producers should not be allowed ‘to eliminate dumping margins by providing price adjustments “after the fact.“‘” Decision Mem. 15 (emphasis added) (citing Final Rule, 62 Fed. Reg. at 27,344). The passage in the Preamble from which the Decision Memorandum drew this conclusion reads as follows:
One commenter suggested that, at least for purposes of normal value, the regulations should clarify that the only rebates Commerce will consider are ones that were contemplated at the time of sale. This commenter argued that foreign producers should not be allowed to eliminate dumping margins by providing “rebates” only after the existence of margins becomes apparent.
The Department has not adopted this suggestion at this time. We do not disagree with the proposition that exporters or producers will not be allowed to eliminate dumping margins by providing price adjustments “after the fact.” However, as discussed above, the Department‘s treatment of price adjustments in general has been the subject of considerable confusion. In resolving this confusion, we intend to proceed cautiously and incrementally. The regulatory revisions contained in these final rules constitute a first step at clarifying our treatment of price adjustments. We will consider adding other regulatory refinements at a later date.
Final Rule, 62 Fed. Reg. at 27,344. Commerce has not amended the text of
Regarding the questionnaire, the Decision Memorandum mentions that “[a]s stated in the Department‘s initial questionnaire issued to Koehler, ‘{w}hen the seller establishes the terms and conditions under which the rebate will be granted at or before the time of sale, the Department reduces the gross selling price by the amount of the rebate. (Section 351.102(b) of the regulations).‘” Decision Mem. 15-16 (footnote omitted). The provision the questionnaire cited,
As to “prior practice,” the Decision Memorandum states that “the Department‘s practice has been to disallow rebates where the respondent cannot demonstrate that the customer was aware of the terms and conditions of the rebate at or before the time of sale.” Decision Mem. 20 (footnote omitted). The Decision Memorandum explains that respondents are required “to prove that the buyer was aware of the conditions to be fulfilled and the approximate amount of the rebates at the time of the sale” in order “to protect against manipulation of the dumping margins. . . .” Id. at 18 (citing Certain Corrosion-Resistant Carbon Steel Flat Products & Certain Cut-to-Length Steel Plate from Canada, 61 Fed. Reg. 13,815, 13,823 (Mar. 28, 1996)). Applying its described practice, the Decision Memorandum places on Koehler the burden of showing entitlement to a price adjustment “by demonstrating that (1) its customers were aware of the terms and conditions of the monatsbonus at the time of sale, and (2) the monatsbonus was established in the ordinary course of business solely for ‘legitimate commercial purposes.‘” Id. at 20. The practice variously described in the Decision Memorandum imposes requirements unsustainable under the governing regulations,
Before the court, defendant and defendant-intervenor make a number of arguments in support of the Department‘s exclusion of the monthly rebates, most of which parallel the erroneous reasoning of the Decision Memorandum. While acknowledging that Commerce rejected a request that the regulations allow only rebates contemplated at the time of sale, defendant argues that “Commerce‘s practice was, and still is, to require that a company‘s customers had knowledge of the terms and conditions of a claimed rebate at or before the time of sale.” Def.‘s Opp‘n 16. Defendant submits that this practice “long pre-exists the regulation,” Oral. Tr. 34, and that the continuation of this practice before and after Commerce promulgated this regulation “indicates that when Commerce was promulgating this regulation] it understood the reg[ulation] to incorporate its practice.” Oral Tr. 53. According to defendant, Commerce “essentially promulgated this regulation in order to restate the Department‘s practice” and to maintain the status quo. Oral. Tr. 34. Defendant‘s conception of the history of the regulatory provisions in question is
In an attempt to bolster its argument, defendant cites two decisions of this Court, Nachi-Fujikoshi Corp. v. United States, 19 CIT 914, 890 F.Supp. 1106 (1995) and Koenig & Bauer-Albert AG v. United States, 22 CIT 574, 15 F.Supp.2d 834 (1998), aff‘d in part, vacated on other grounds, 259 F.3d 1341 (Fed.Cir.2001). Def.‘s Opp‘n 11-12. Both of these cases arose from administrative determinations made prior to the June 18, 1997 effective date of the final rule that instituted
Defendant-intervenor argues that according to the definition in
Finally, defendant and defendant-intervenor make various arguments under which they advocate that the court, under Supreme Court precedent, including Auer v. Robbins, 519 U.S. 452, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997), must give deference to the Department‘s construction of the applicable regulations and therefore must affirm the decision not to recognize the price adjustments at issue in this litigation. Def.‘s Suppl. Br. 5-6; Def.-Intervenor‘s Suppl. Br. 3-4. Defendant argues that the regulations do not define the term “rebate” and that Commerce therefore is entitled to fill this gap. Def.‘s Suppl. Br. 5-6. Defendant-intervenor characterizes the applicable regulations as ambiguous. Def.-
In summary, the court must remand the Final Results because they misapply the Department‘s regulations codified as
The Joint Congressional Letter referred to the Department‘s preliminary determination to “reduce the dumping margin to zero” and requested “a better understanding of the Department‘s rationale for this determination.” Congressional Correspondence Memo 2. The letter elaborated that “[g]iven the importance of the Department‘s final determination to jobs in the U.S. paper industry, we would specifically appreciate additional information from you regarding how after-the-fact rebates in the German home market are being factored into your analysis and the basis for including home market rebates issued retroactively in your calculations, including any similar precedents.” Id. The letter also noted that Appvion had made major investment upgrades during 2008 and that the company‘s Ohio plant had created new jobs. Id.
Commerce first notified the parties to the review of the congressional correspondence on April 13, 2010, the date on which the review was completed and the Decision Memorandum was signed and dated. Pls.’ 56.2 Mem. 5; Congressional Correspondence Memo 1. Plaintiff asks that the court “remand with instructions to reopen the record and provide Koehler an opportunity to comment on the March 30, 2011 letter.” Pls.’ 56.2 Mem. 34. Plaintiff argues that the shift from a de minimis margin in the Preliminary Results to a positive anti-
In pertinent part,
Information that is submitted on a timely basis to the administering authority or the Commission during the course of a proceeding under this subtitle shall be subject to comment by other parties to the proceeding within such reasonable time as the administering authority or the Commission shall provide. The administering authority and the Commission, before making a final determination under
section 1671d ,1673d ,1675 , or1675b of this title shall cease collecting information and shall provide the parties with a final opportunity to comment on the information obtained by the administering authority or the Commission (as the case may be) upon which the parties have not previously had an opportunity to comment.
The court need not decide whether the Joint Congressional Letter constituted “information” requiring an opportunity for comment within the meaning of
III. CONCLUSION AND ORDER
The court concludes that the Department‘s decision not to make downward price adjustments corresponding to the rebates that Papierfabrik August Koehler AG (“Koehler“) paid on a monthly basis to customers that purchased the foreign like product in Germany was contrary to law because it did not comply with applicable regulations. Therefore, upon consideration of all papers and proceedings in this case, and upon due deliberation, it is hereby
ORDERED that the final determination of the International Trade Administration, U.S. Department of Commerce (“Commerce” or the “Department“) in Lightweight Thermal Paper From Germany: Notice of Final Results of the First Antidumping Duty Admin. Review, 76 Fed. Reg. 22,078 (Apr. 20, 2011) be, and hereby is, set aside as unlawful and remanded for reconsideration and redetermination in accordance with this Opinion and Order; it is further
ORDERED that Commerce shall file, within ninety (90) days of the date of this Opinion and Order, a new determination upon remand (“remand redetermination“) that conforms to this Opinion and Order and redetermines Koehler‘s margin as necessary; it is further
ORDERED that plaintiff and defendant-intervenor each may file comments on the remand redetermination within thirty (30) days from the date on which the remand redetermination is filed; and it is further
ORDERED that defendant may file a response to the aforementioned comments within fifteen (15) days from the date on which the last comment is filed.
Timothy C. Stanceu
Judge