BINATIONAL PANEL REVIEW PURSUANT TO THE
NORTH AMERICAN FREE TRADE AGREEMENT
ARTICLE 1904

1. Background

As noted in the previous discussion concerning CEMEX�s sales of Type II and Type V cement, CEMEX produces cement that meets the ASTM physical requirements for Type V cement at only two of its cement plants (Campana and Yaqui), which are located in the Hermosillo region of Mexico. Because Type V cement meets or exceeds the ASTM standards for Type I and Type II cement, CEMEX can and does sell this Type V cement as Type I, Type II, or Type V cement. The Hermosillo plants are the only two CEMEX plants that on a consistent basis produce cement meeting the ASTM standard for Type V cement that is sold as a different ASTM type. All of CEMEX�s remaining facilities produce cement that meet the ASTM physical requirements for Type I cement which these plants in turn sell as Type I cement.

In the seventh administrative review, Commerce determined that, based on the factors discussed below, home market sales of Type V cement produced at the Hermosillo plants and invoiced as Type I cement were outside the ordinary course of trade.

CEMEX challenges Commerce�s determination that CEMEX�s sales of Type V cement to Type I customers were outside the ordinary course of trade on the grounds that it is not supported by substantial evidence and is otherwise not in accordance with law. CEMEX makes the following specific challenges to Commerce�s OCT determination.

As a threshold matter, CEMEX argues that Commerce erred in its OCT analysis when it separated CEMEX�s sales of cement on the basis of how the sales were invoiced rather than on the basis of the physical characteristics of the cement itself. According to CEMEX, Commerce should have made a unitary OCT determination encompassing all of CEMEX�s Type V sales, regardless of how the cement was invoiced. See CEMEX's May 21, 2001 Rule 57(1) Brief, at 44-50.

Next, CEMEX contends that Commerce�s determination that CEMEX�s home market sales of Type V cement produced at the Hermosillo plants and invoiced as Type I cement were outside the ordinary course of trade is not supported by substantial evidence. Specifically, Commerce relied on five factors in reaching its conclusion that sales of Type I cement that is physically Type V cement were outside the ordinary course of trade, none of which, according to CEMEX, is supported by substantial evidence:

(1) Sales Volume - Commerce relied upon the fact that the volume of sales of Type V cement sold to Type I customers was small in comparison to total sales of Type I cement. CEMEX counters that Commerce failed to consider that the volume was significant in absolute terms.

(2) Number and Types of Customers - Commerce cited the fact that the number and type of Type I customers purchasing cement that was physically Type V were substantially different from customers purchasing Type I cement produced at other CEMEX plants. CEMEX responds that Commerce failed to consider the fact that these sales were bona fide sales and that the number and types of customers buying from the Hermosillo plants are consistent with those of other CEMEX plants.

(3) Freight Costs - Commerce considered the fact that freight costs for Hermosillo cement sold as Type I were different from the average freight costs for CEMEX�s sales of cement that was physically Type I cement. CEMEX challenges this finding on the ground that no significant disparity exists between freight charges on sales of Type V cement to Type I customers, on the one hand, and on sales of Type I cement sold to Type I customers, on the other.

(4) Relative Profit Levels - Commerce cited the disparity in profitability between sales of Type I cement that is physically Type I, on the one hand, and sales of Type V cement sold as Type I, on the other. CEMEX takes issue with this conclusion, given that sales of Type I cement were highly profitable, regardless of whether the Type I cement was physically Type I or Type V.

(5) Handling Charges - Commerce relied upon the fact that a differential existed between handling charges for Type V cement sold as Type I compared to Type I cement sales to Type I customers. CEMEX observes that not every difference among products necessarily leads to the conclusion that sales of the subject product are outside the ordinary course of trade.

CEMEX's May 21, 2001, Rule 57(1) Brief, at 44-50.

Commerce and STCC take the position that based on the factors identified by Commerce to exist in this case, coupled with the weight that Commerce assigned to each of these factors, the totality of circumstances supports Commerce�s determination that sales of Type V cement sold as Type I were outside the ordinary course of trade. Commerce's November 16, 2001, Rule 57(2) Brief, at 69-88; STCC's November 16, 2001, Rule 57(2) Brief, at 81-92.

3. Analysis

Because CEMEX�s Hermosillo plants consistently produce cement meeting one ASTM standard that is sold as a different ASTM type, Commerce determined that this factor, along with the five factors discussed below, distinguishes sales of cement that is physically Type V cement but sold as Type I cement from CEMEX�s sales of Type I cement produced as Type I cement and sold from its other plants. CEMEX�s challenge to Commerce�s OCT determination regarding Type V cement sold as Type I is in several respects a reprise of its challenge to Commerce�s OCT determination concerning CEMEX�s sales of Type II and Type V cement produced at CEMEX�s Hermosillo plants, discussed above.

The five factors that Commerce cites in support of its determination that sales of Type V cement sold as Type I cement from the Hermosillo plants were outside the ordinary course of trade are: (1) the disparity in sales volume, (2) the difference in freight costs, (3) a comparison of relative profit levels, (4) differences in the number and type of customers, and (5) handling charges associated with both kinds of sales. This Panel addresses each of these factors in turn.

First, regarding the disparity in sales volume, the record developed during the period of review in this case supports Commerce�s finding that CEMEX�s sales of Type V cement sold as Type I represented a very small percentage of its total home market sales of Type I cement that is physically Type I cement. CEMEX argues that its sales of Type V cement sold as Type I cement are significant in absolute terms because the volume exceeds five percent of its U.S. sales and, therefore, constitutes a viable home market upon which to base normal value. When undertaking an analysis of the viability of the home market in an antidumping duty proceeding, the focus is on a comparison of home market sales to sales of the subject merchandise in the U.S. market. However, even if CEMEX's home market sales of physically Type V cement sold as Type I cement do exceed five percent of U.S. sales, that fact is not responsive to the question whether such sales are in the ordinary course of trade in terms of volume. The OCT analysis focuses instead on the conditions and practices in the home market, not on the volume of home market sales in relation to the volume of export sales to the U.S. market.

Second, regarding the differences in freight costs, Commerce found that freight costs for sales of Type I cement that are physically Type V cement were higher than the freight costs for Type I cement when sold on a CIF basis but less than the freight costs for Type I cement when sold on an FOB basis. Concededly, the differences in freight costs in absolute terms are small and might in fact offset each other if sales under the two different shipping terms were aggregated. However, Commerce determined that such aggregation would preclude an apples-to-apples comparison. Nevertheless, neither in its Ordinary Course of Trade Memorandum dated August 31, 1998 (�OCT Memorandum�), nor in its brief filed with this Panel, does Commerce adequately explain why an apples-to-apples comparison is prevented if FOB and CIF sales are aggregated.

Third, regarding a comparison of relative profit levels, Commerce found during the period of review that the profit levels on sales of Type V cement sold as Type I cement and sales of Type I cement that is physically Type I cement differed. Although in its OCT Memorandum Commerce described these profits as �comparable,� it still listed this factor as part of the totality of circumstances supporting its conclusion that sales of Type V cement sold as Type I cement were outside the ordinary course of trade. In its brief filed in the panel review, Commerce argues this point with a palpable lack of conviction. In its brief Commerce accurately reports the agency�s action, but offers absolutely no explanation as to why the agency acted properly in listing profit disparities as a factor indicating sales outside the ordinary course of trade. See Commerce's November 16, 2001, Rule 57(2) Brief, at 81. In short, Commerce has failed to adequately explain why this factor leads to the conclusion that sales of Type V cement produced at the Hermosillo plants and invoiced as Type I cement were outside the ordinary course of trade.

Fourth, regarding differences in the number and type of customers, Commerce concluded that the number and type of customers who purchase Type V cement that is invoiced as Type I cement is substantially different from the number and type of customers who purchase Type I cement that is physically Type I cement. In addition, average per shipment quantities also differed to customers of Type V cement sold as Type I, on the one hand, and average per shipment quantities to customers of Type I cement that is physically Type I, on the other. We find some merit in CEMEX�s observation that by isolating the sales at any one plant and then comparing those sales to the total sales of all other plants, it will often be the case that sales at the isolated plant are made to fewer customers when compared to total sales at all remaining plants. Are such sales thus outside the ordinary course of trade? Commerce�s response to this question seems to sidestep the issue. Commerce states that OCT determinations are based on the totality of circumstances, �meaning that this factor is not dispositive and by itself does not automatically dictate a finding of sales outside the ordinary course of trade.� Commerce's November 16, 2001, Rule 57(2) Brief, at 83.

But the question is not whether any single factor is dispositive, but rather whether a factor is probative of sales outside the ordinary course of trade and, if so, why. Commerce has not adequately answered this question to the satisfaction of this Panel in the case of the number and type of customers for Type V cement sold as Type I cement.

Fifth, regarding handling charges associated with both kinds of sales, Commerce found a disparity in the handling charges associated with sales of the two different Type I cements. This Panel observes as a threshold matter that the agency did not use the correct unit of currency, referring to handling charges in terms of �pesetas per metric ton� (the peseta is the national currency of Spain, not Mexico). We do not know if the agency meant to use �pesos per metric ton� or �centavos per metric ton� as the relevant unit of currency. If it is �centavos per metric ton�, then the absolute difference in handling charges between Type V cement sold as Type I, on the one hand, and physically Type I cement sold as Type I, on the other, is minuscule. While it is true that Commerce�s regulations direct the agency to evaluate �all of the circumstances particular to the sales in question� to determine whether �such sales or transactions have characteristics that are extraordinary for the market in question,� 19 C.F.R. � 351.102(b) (definition of �Ordinary Course of Trade�), the agency is also obligated to adequately explain its decision.

Lastly, CEMEX contends that home market sales should be based on a comparison of products as produced rather than as invoiced. However, whereas the statute calls for matching based on physical characteristics when comparing U.S. sales with home market sales, see 19 U.S.C. � 1677(16)(A), the correct focus in an OCT determination is to compare the �conditions and practices� of the sales in issue with the usual �conditions and practices� for home market sales generally.

The Final Determination addresses both the Type II and Type V OCT determination and the Type I OCT determination in approximately three and a one-half pages. See Final Determination, 64 Fed. Reg. at 13154-13158. The analysis of Type V cement sold as Type I cement and produced at the Hermosillo plants is limited to one paragraph beginning at page 13157. The sum total of the Type I OCT analysis is as follows:

With respect to cement from the Hermosillo plants meeting Type V specifications but sold in the HM as Type I, as noted in the memorandum referred to above (August 31, 1998 Memorandum from Ronald L. MacDonald to Joseph A. Spetrini with subject: Seventh Antidumping Administrative Review on Gray Portland Cement and Clinker from Mexico-Ordinary Course of Trade), the record evidence indicates that only at the Hermosillo plants did CEMEX produce consistently a cement meeting on e ASTM standard and sell that cement as a different ASTM type. That factor, and others discussed in that memorandum, distinguishes sales of Type I cement produced at Hermosillo from CEMEX�s sales of Type I cement produced as Type I from other production facilities.

Id. at 13157-58.

The analysis of the OCT determination for Type I cement found in the Final Determination is limited to a statement that the record indicates that only Type V cement produced at the Hermosillo plants that is physically Type V cement meets various ASTM standards. The analysis concludes by stating that �[t]hat factor, and others discussed in that memorandum [the OCT Memorandum of August 31, 1998] distinguishes sales of physically Type V cement sold as Type I cement and produced at Hermosillo from CEMEX�s sales of Type I cement produced as Type I from other production facilities."

The OCT Memorandum in turn analyzes the OCT issue in nine and one-half pages. The first three and one-half pages are introductory. Pages 4 through 7 analyze the OCT determination with regard to Type V cement sold as Type II and Type V cement (discussed previously). While this analysis refers to Type I cement sales, it is not clear that the references are to anything other than Type I cement produced outside Hermosillo. The issue of Type V cement produced at Hermosillo but sold as Type I cement is analyzed separately in a section commencing on page 7 of the Memorandum. The heart of that analysis, which appears to be the reasoning adopted by Commerce, commences on page 8 and reads:

The record evidence indicates that only at the Hermosillo plants did CEMEX consistently produce a cement meeting one ASTM standard and sell that cement as a different ASTM cement type.

The Memorandum continues:

These factors distinguish CEMEX�s sales of Type I cement produced at and sold from the Hermosillo facilities (those which meet Type V physical specifications) from CEMEX�s sales of Type I cement (physically Type I cement) produced at (and sold from) other production facilities.

Thus, the sum total of the reasoning that leads to the agency�s OCT determination is the reference to one factor, viz., that only at Hermosillo is a cement produced meeting one ASTM standard, but sold as various types of cements meeting other ASTM standards.

Having concluded that sales of Type V cement sold as Type I cement are not in the ordinary course of trade, the Memorandum goes on to list five other factors. However, given that these factors are mentioned after the OCT conclusion is reached, they appear to be more of an afterthought than as support for the OCT conclusion itself. The sentence that introduces these additional factors reads, �In addition, the record indicates that the following factors exist with regard to sales of Type I cement from the other Hermosillo plants . . . .� While one could assume that these additional factors are placed in the Memorandum as support for the conclusion drawn, this assumption is undercut when one considers the analysis accompanying several of the factors. Regarding the difference in freight costs, for example, there is no analysis of why the freight cost differential is calculated on a CIF or FOB basis. Likewise, profit is listed as a factor, but again there is no analysis of why the numbers cited are relevant. This is particularly troubling when one considers that the profit margins are comparable. With respect to the number and types of customers, the number of customers is discussed, but the types of customers are all but ignored. Perhaps this Panel should assume that the types of customers refer to large industrial contractors versus individual consumers. However, this Panel could only make that assumption if we incorporate by reference the analysis at page 6 of the Memorandum where Commerce discusses Type V cement sold as Type II and Type V cement, but not Type V cement sold as Type I cement. Finally, regarding handling charges, we are not told what the relevance of the numbers are, much less why reference is made to the Spanish peseta rather than the Mexican peso. In short, it appears that while Commerce may have looked at several relevant factors, it has failed to adequately explain their relevance. A remand under these circumstances is entirely warranted. Such a remand is for the purpose of requesting the agency to make its reasoning processes more transparent. Having seen references to relevant factors, this Panel simply cannot take Commerce�s word for it that these factors support its OCT determination. Commerce needs to explicate its analysis so that this Panel can discern the path of its reasoning and either affirm or remand for further consideration.

In view of the foregoing, this Panel is unable to endorse the conclusion reached by Commerce that all of the facts the agency has found support its OCT determination with regard to sales of physically Type V cement sold as Type I cement. Specifically, we have reservations about Commerce�s conclusions with respect to (1) differences in freight costs, (2) relative profit levels, (3) number and type of customers, and (4) the disparity in handling charges.

With regard to freight costs, Commerce has not explained why CIF and FOB shipments of Type I cement cannot be aggregated, other than to state in a conclusory fashion that doing so would preclude an �apples-to-apples� comparison. Why does aggregating FOB and CIF shipping costs preclude an apples-to-apples comparison? Commerce should explain why this is the case on remand.

Regarding differences in the number and type of customers, Commerce has not adequately explained why its finding regarding differences in the number of customers supports its OCT determination. As has been pointed out, by isolating the sales of one type of cement sold from any one plant and then comparing those sales to the total sales of that type of cement sold from all other plants, it will often be the case that sales at the isolated plant are made to fewer customers when compared to total sales at all remaining plants. Are such sales thus outside the ordinary course of trade? If so, then Commerce should explain on remand why such sales are outside the ordinary course of trade. Likewise, Commerce has not explained how customers for Type V cement sold as Type I differ in type from customers for its other cement sales. Commerce should do so on remand.

Regarding the disparity in profit levels, Commerce has conceded that profit levels for Type V cement sold as Type I, on the one hand, and for Type I cement that is physically Type I, on the other, are comparable. Yet the agency has not explained why this finding supports the conclusion that sales of physically Type V cement sold as Type I are outside the ordinary course of trade. Moreover, Commerce has offered no explanation as to why disparities in profit levels support an OCT determination, when all sales of Type I cement, whether physically Type V or physically Type I, were in fact profitable. Its analysis is this connection is conclusory. Therefore, Commerce should explain on remand why the difference in profit levels supports its OCT determination.

Finally, regarding the disparity in handling charges, Commerce should explain on remand which unit of currency was used to support its conclusion. If handling charges are in fact denominated in centavos rather than pesos, then Commerce should also explain on remand why this minuscule absolute difference in handling charges supports its OCT determination.

This Panel�s evaluation of Commerce�s OCT determination is not based on any second-guessing of the agency. Rather, our reservations are based on the lack of an adequate explanation of why these various factors support the conclusion that sales of Type V cement sold as Type I cement are outside the ordinary course of trade. This Panel finds Commerce�s current explanation to be both confused and poorly organized. In its OCT Memorandum Commerce appears to have blurred and conflated the analysis of the two OCT issues that are presented in this review, i.e., whether sales of Type V cement sold as Type II and Type V cement were outside the ordinary course of trade with whether Type V cement sold as Type I cement were also outside the ordinary course of trade. As we note below in that part of our opinion addressing the regional duty assessment issue, it is a vital and time-honored principle of U.S. administrative law that an agency's ruling in an adjudicative proceeding be supported by reasoned decision-making, with the various connections among the agency�s fact findings, its reasoning process, and its conclusion being sufficiently clear. As the U.S. Supreme Court observed in SEC v. Chenery Corp,:

If the administrative action is to be tested by the basis upon which it purports to rest, that basis must be set forth with such clarity as to be understandable. It will not do for a court to be compelled to guess at the theory underlying the agency's action; nor can a court be expected to chisel that which must be precise from what the agency has left vague and indecisive. In other words, �We must know what a decision means before the duty becomes ours to say whether it is right or wrong.�

332 U.S. 194, 196-97 (1947) (quoting United States v. Chicago, M., St. P. & P.R. Co., 294 U.S. 499, 511 (1935)). In short, an agency�s reasoning process must be transparent before a reviewing body can be asked to review an agency decision.

It may be that the totality of circumstances as found and weighed by Commerce supports its determination that CEMEX�s home market sales of physically Type V cement sold as Type I cement were outside the ordinary course of trade. However, Commerce�s reasoning process in support of that conclusion lacks transparency and requires further explication.

4. Conclusion

We cannot conclude that Commerce properly determined that CEMEX's home market sales of Type V cement sold as Type I cement were outside the ordinary course of trade. This Panel remands to Commerce and instructs the agency to explain why the findings it made regarding the difference in freight costs, the relative profit levels, the number and type of customers, and the disparity in handling charges support the agency�s determination that sales of physically Type V cement sold as Type I cement were outside the ordinary course of trade.

C. Whether This NAFTA Panel Has The Authority To: (A) Review Commerce's Conclusion That The U.S. Statutory Scheme For Assessment Of Antidumping Of Antidumping Duties In Regional Industry Cases Is Consistent With the Obligations of the United States Under The WTO Antidumping Agreement; (B) Review The Questions Raised By CDC Concerning The Interpretation Of The U.S. Constitution As Bearing On The Regional Assessment Issue; and (C) Order Commerce To Revoke The Order Based On An Allegedly Improper Assessment Methodology

1. Background

In the proceeding before Commerce, CEMEX and CDC argued that, in imposing antidumping duties on all imports of the subject merchandise, including those consigned for consumption outside the Southern Tier region, the United States was failing to honor its obligations under Article 4.2 of the WTO Antidumping Agreement and its predecessor, Article 4.2 of the 1979 Tokyo Round Antidumping Code. Article 4.2 of the WTO Antidumping Agreement provides:

When the domestic industry has been interpreted as referring to the producers in a certain area, i.e., a market as defined in paragraph 1 (ii), anti-dumping duties shall be levied only on the products in question consigned for final consumption to that area. When the constitutional law of the importing Member does not permit the levying of anti-dumping duties on such a basis, the importing Member may levy the anti-dumping duties without limitation only if (a) the exporters shall have been given an opportunity to cease exporting at dumped prices to the area concerned or otherwise give assurances pursuant to Article 8 and adequate assurances in this regard have not been promptly given, and (b) such duties cannot be levied only on products of specific producers which supply the area in question.

CEMEX and CDC argued that Article 4.2 compels Commerce to refrain from assessing duties on subject merchandise destined for consumption outside the Southern Tier. They further argued that there is no U.S. constitutional prohibition against levying antidumping duties on a regional basis. CDC also argued that, in adopting Section 218 of the Uruguay Round Agreements Act ("URAA"), the United States implemented Article 4.2 inadequately, in particular by failing to address the situation of producers/exporters who, like CDC, export merchandise into the U.S. both inside and outside of the pertinent U.S. region. CDC asked that Commerce terminate this review and revoke the antidumping order or, alternatively, assess antidumping duties only on CDC�s entries of merchandise consumed within the Southern Tier region.

In the proceeding before Commerce, STCC argued that Commerce had properly assessed antidumping duties on all nationwide entries of the subject merchandise. STCC asserted that the Congress intended U.S. law to prevail in the event of a conflict between U.S. law and the international trade agreements and that, because Commerce�s actions were consistent with U.S. law, Commerce did not need to consider the respondents� other arguments. STCC also contended that the provisions of 19 U.S. C. � 1673e(d)(1)-(2) [Section 736 (d)(l)-(2) of the Tariff Act of 1930 ("Act")] and 19 U.S.C. � 1673c(m)(1)-(2) [Section 734 (m) (l)-(2) of the Act], which were added to the Act by Section 218 of the URAA to conform to the regional industry provisions of the WTO Antidumping Agreement, are inapplicable to these respondents and thus confer no authority upon Commerce to refrain from assessing antidumping duties outside the Southern Tier.³

In its Final Determination, Commerce disagreed with the contention of CEMEX and CDC that it should exempt entries of subject merchandise exported into regions other than the Southern Tier from antidumping duties and cash deposits. See Final Determination, 64 Fed. Reg. at 13163-66. It stated that, pursuant to both judicial precedents and Section 102 of the URAA, �even if respondents were correct in asserting that the [U.S.] statutory provisions relating to regional assessment of duties conflicted with the obligations contained in Article 4.2 of the Antidumping Agreement, Commerce must act in conformity with the antidumping statute.� Id. at 13165. In this connection, Commerce reasoned, first, that Section 1673e(d)(l) of the Act applies only to investigations initiated on the basis of petitions filed after January 1, 1995, which would not cover CEMEX�s and CDC�s exports since the original Mexican cement antidumping investigation took place in 1989-90. Id. Second, Commerce determined that, even if the provisions of 19 U.S.C. �1673e(d)(l) and (2) were to be applied to the present review, they would not support the respondents� position about regional assessment. Since CEMEX and CDC did export subject merchandise into the region during the period of investigation, the language of subsection (d)(l) would not exclude any of respondents� merchandise from assessment. Id.⁴  Moreover, subsection (d)(2) would also be inapplicable to the respondents because neither was a new exporter or producer as described in the provision. Id. Further, 19 U.S.C. �1673c(m), providing exporters the opportunity to enter into suspension agreements, was not applicable because Commerce �cannot enter into a suspension agreement once the 60-day post-order period has passed (and, indeed, seven administrative reviews have passed).� Id. Commerce stated further that, since its actions conformed to the statutory provisions, it did not need to consider further respondents� arguments concerning the United States� implementation of its obligations under the Antidumping Agreement. Nonetheless, invoking the rule of statutory interpretation that, absent express Congressional language to the contrary, a U.S. statute should be interpreted consistently with the international obligations of the U.S., Commerce observed that, �[b]ecause qualifying exporters are given an opportunity for exemption from the assessment of antidumping duties, the statutory scheme described above is consistent with Article 4.2 of the Antidumping Agreement.� Id. at 13166. Finally, Commerce stated that it had no authority to terminate the review and revoke the order at this stage. Id.

In the review proceeding before this Panel, CDC urges that Commerce�s decision fails to implement the assessment rules applicable to regional industry cases and that this justifies termination of the seventh review and revocation of the underlying antidumping order. It states that, during the seventh review period, CDC sold gray Portland cement both inside and outside the Southern Tier region. Commerce calculated antidumping duty margins on both types of sales. CDC maintains that Commerce�s determination regarding sales outside the region is not in accordance with law, and that this Panel should remand the matter to Commerce. CDC argues further that the U.S. Government�s failure to implement its assessment obligations in regional industry cases provides additional justification for termination of this review and revocation of the antidumping duty order. CDC's May 21, 2001, Rule 57(1) Brief, at 20-49.

CDC�s contention that applicable law required the United States to limit its assessment of antidumping duties to the Southern Tier region, the U.S. region in which the International Trade Commission found material injury to the domestic industry by reason of sales of imported Mexican cement, is premised on the international trade agreements to which the United States is a party. Article 4.2 of the 1979 Tokyo Round Antidumping Code, CDC observes, established the general rule (with an exception) that, in regional antidumping cases, the antidumping duties shall be levied only on merchandise destined for consumption inside the relevant region. This general rule (with an exception), states CDC, was carried over to Article 4.2 of the URAA. Id. at 22-25. However, according to CDC, the rule appearing in Article 4.2 of the Tokyo Round Antidumping Code was not implemented by the United States and it was not until the adoption of Section 218 of the URAA in 1995 that this rule regarding assessment in regional industry cases was implemented in any form by the U.S. Id. at 26.

CDC urges that the United States� implementation of Article 4.2, through the statutory amendments and Commerce�s regulations, is �inadequate.� Id. at 30. "Most fundamentally [CDC maintains] the U.S. Government has not explained its theory that implementing the general assessment rule would violate the U.S. Constitution . . .." Id. at 31. In CDC's view, the U.S. Constitution does not prohibit the levying of antidumping duties on a regional basis. Therefore, the exception set out in Article 4.2 -- applicable when implementation of the general rule is unconstitutional in the Member country -- does not apply, and the U.S. must comply with the Article 4.2's general rule of regional assessment. Id. at 32-33. CDC argues that the �Port Preference Clause� (Article 1, Section 9, Clause 6) and the �Uniformity Clause� (Article 1, Section 8, Clause 1) of the Constitution should not be construed as precluding the assessment of duties consistently with the general rule of Article 4.2 of the WTO Antidumping Code. Id. at 33-41.

CDC argues that, in enacting Section 218 of the URAA, Congress has demonstrated that the U.S. is not one of the WTO Members which has a constitutional prohibition against implementation of the Article 4.2 general assessment rule. Yet Section 218 implements that rule only partially by omitting provision for exporters who export the merchandise for sale both in and out of the region. Id. at 46. CDC also contends that Section 218 is inadequate in that its application is limited to exports for sale in the region during the period of investigation, while the U.S. has enacted no transition rule to comply with Article 4.2 in the assessment stage. Id. at 44-45.

CDC further argues that, even if the Constitution prohibits U.S. implementation of the general assessment rule of Article 4.2, the United States has failed to implement the exception provisions adequately in that the Mexican cement producers have not been offered a �meaningful opportunity to sign the type of suspension agreement required by Article 4.2 of the WTO Antidumping Agreement.� Id. at 42. CDC asks this Panel to remand to Commerce with instructions to (a) terminate the seventh review and to revoke the order; or to (b)not assess duties on sales outside the region; or to (c) further consider and explain whether implementing the regional assessment rule of the WTO Antidumping Agreement is inconsistent with U.S. law. CDC's December 14, 2001, Rule 57(3) Brief, at 9-13.

STCC urges that Commerce properly determined, pursuant to the U.S. antidumping statute, that antidumping duties should be assessed on nationwide imports of gray portland cement and clinker from Mexico. STCC's November 19, 2001, Rule 57(2) and 56(1) Brief, at 205-35. STCC maintains that the international agreement provisions pressed by CDC have no direct force or effect in United States law and hence do not govern Commerce�s determinations. Moreover, states STCC, the collection of antidumping duties on a region-specific basis is unconstitutional, and CDC is not able to invoke the statutory provisions which the Congress has crafted that �provide for the assessment of antidumping duties in regional industry cases in a manner that is in accord with both the constitutional constraints and U.S. international obligations." Id. at 207.

STCC asserts that the Tokyo Round and Uruguay Round trade agreements upon which CDC relies are not self-executing and that, therefore, their legal effect in the United States is wholly dependent upon the implementing legislation enacted by the Congress. STCC points out that both the Trade Agreements Act of 1979 and the URAA specifically provide that any provision of the trade agreement that is in conflict with a U.S. statute shall not be given effect under U.S. law. 19 U.S.C.� 2504 (3) (a); 19 U.S.C.� 3512 (a) (1). Id. at 211-12. STCC cites Suramerica de Aleaciones Laminadas, C.A. v. United States, 966 F.2d 660 (Fed. Cir. 1992) as controlling case law in this regard. Moreover, the Tokyo Round Antidumping Code is said to have no effect because it has been superseded by the WTO Antidumping Agreement. Id. at 213-14.

STCC urges that Section 218 of the URAA amended the Tariff Act of 1930 specifically to conform to the regional industry provisions of the WTO Antidumping Agreement. These statutory provisions do not apply in CDC�s case for a number of reasons, STCC states. First, by reason of Section 291 of the URAA, the new provisions apply only to investigations initiated on the basis of petitions filed after January 1, 1995. Id. at 215. Second, because CDC exported gray Portland cement to the Southern Tier region during the relevant period, it is subject to antidumping duties on all of its exports to the United States under 19 U.S.C. � 1673e (d) (l). Id. at 216. Third, CDC cannot invoke 19 U.S.C. � 1673c(m), under which Commerce must offer certain exporters the opportunity to enter into a suspension agreement, because Commerce lacks the authority to offer suspension agreements at this stage of the proceedings. Id. STCC asserts that Commerce�s failure to offer CDC an opportunity for a suspension agreement is barred at this time. STCC also argues that the consistent interpretation of the U.S. Government and the legislative history of the URAA expressly recognize that the U.S. Constitution, by reason of the Port Preference Clause and the Uniformity Clause, does not allow differential duty treatment based on ports. Id. at 222.

Commerce�s brief in this Panel review proceeding declares as follows, with respect to the regional assessment issue:

[T]his Panel does not have the authority to l) review the consistency of U.S. antidumping duty assessment provisions with the United States� obligations under the WTO antidumping duty agreement; 2) review the Department�s interpretation of the U.S. Constitution regarding the application of the U.S. antidumping duty assessment provision; or 3) revoke the order based on an allegedly improper assessment methodology.

Commerce's November 16, 2001, Rule 56 (2) Brief, at 89.

Accordingly, Commerce urges that NAFTA Dispute Settlement Panels such as this one do not have the authority to rule on the consistency of U.S. law with the WTO agreements because: (1) Article 1904 (2) of the NAFTA authorizes panels only to �rule on the consistency of Commerce�s determination with U.S. law which CDC has not challenged,� and (2) 19 U.S.C.� 3512(c)(1)(B) provides that only the United States may challenge the action or inaction of a U.S. government agency as inconsistent with the WTO Antidumping Agreement. The remedy, if Mexico believes that it has a grievance on this issue, is review by a WTO dispute resolution panel, states Commerce. Id. at 90.

Commerce also maintains that this Panel does not have the authority to consider the questions concerning the interpretation of the U.S. Constitution which CDC has raised. In this connection, Commerce relies upon the provision in 19 U.S.C.� 1516a(g)(4) headed �Exception to exclusive binational panel review for constitutional issues.� Commerce asserts that CDC�s remedy in this regard is to take its challenge on the interpretation of these constitutional provisions to the CIT after the completion of the panel review process.⁵ Id. at 91-92.

Finally, Commerce maintains that this Panel lacks the authority to order Commerce to revoke the order based on incorrect assessment methodology because the Panel�s authority is limited to, at most, remanding the issue to Commerce with directions to apply an assessment methodology that is supported by substantial evidence and is otherwise in accordance with law. Id. at 92-93.

In the oral hearing before this Panel, counsel for Commerce reiterated the latter�s position that the Panel lacks authority to rule on the issues raised under the U.S. Constitution, and that CDC can present these issues to a three judge panel of the CIT. Transcript of Oral Hearing of February 27, 2002 at 95-99. During the colloquy with the Panel members, counsel for Commerce also stated that Commerce�s position that it lacks authority to impose antidumping duties on a regional basis is, in fact, not simply a statutory matter, but is fundamentally predicated upon two provisions of the U.S. Constitution. Id. at 95-96, 98. In its rebuttal presentation during the hearing, counsel for CDC commented upon this statement by Commerce as follows:

Mr. Richardson stated today, unequivocally, that the Department does consider itself to be prohibited from assessing duties on a regional basis, and he identified the U.S. Constitution as the source of that prohibition. Now, this is the first time -- the first time -- that we have heard the Department explain its position with respect to regional assessment. The final determination in this review, which is the decision being reviewed by this panel, never states this position.

Id. at 148-49.

CDC urges this Panel to find that Commerce�s decision to assess duties on a nationwide basis in this regional industry case is not in accordance with law. CDC�s position is premised on the terms of the WTO Antidumping Agreement to which the United States is a party. Commerce has not presented its arguments on the merits of this issue to us because it maintains that this NAFTA Panel does not have the authority to consider the issue.

We fully accept two propositions pressed on us by Commerce: (1) by virtue of Section 102 of the URAA, in the event of a conflict between a provision of the WTO Antidumping Agreement and any U.S. statute, the former cannot be given effect; and (2) a NAFTA Panel is not empowered to decide whether the United States is in default in the nation�s obligations under any of the WTO Agreements.

Our acknowledging these propositions does not, however, mean that we accept that the WTO Antidumping Agreement is irrelevant to our assigned task and that we must shield our eyes from any argument in this review proceeding that refers to the United States� international commitments. As Commerce itself recognized in its Final Determination, the terms of the United States� international obligations may be pertinent to the construction of a U.S. statute because �an act of Congress ought never to be construed to violate the law of nations, if any other possible construction remains...� 64 Fed. Reg. at 13165-66 (quoting Murray v. Schooner Charming Betsy, 6 U.S. (2 Cranch.) 64, 118, 2 L. Ed. 208 (1804); citing Restatement (Third) of the Foreign Relations Law of the United States �114 (1987)). �[W]hen an act of Congress and an international agreement...relate to the same subject, the courts, regulatory agencies, and the Executive Branch will endeavor to construe them so as to give effect to both.� Id. at � 115, Comment a; Footwear Distributors and Retailers v. United States, 852 F. Supp. 1078 (Ct. Int'l Trade 1994). Absent express Congressional language to the contrary, the statutes of the U.S. should not be interpreted to conflict with the international trade agreements into which the nation has entered. Federal Mogul Corp. v. United States, 63 F.3d 1572, 1581 (Fed. Cir. 1995); Fundicao Tupy S. A. v. United States, 652 F. Supp. 1538, 1543 (Ct. Int'l Trade 1987). In sum, in performing our function of reviewing whether Commerce has acted in accordance with law under the statutes which it administers, we are bound to look at those international agreements which, like the WTO Antidumping Agreement, may shed light on the Congressional intent.

We now turn to Commerce's determination on the regional assessment argument made by CDC. Although Commerce's determination rejects CDC's argument on statutory grounds, stating that it does not need to reach CDC's contention based on Article 4.2 of the WTO Antidumping Agreement, the determination does go on to find the statutory scheme to be consistent with Article 4.2. 64 Fed. Reg. at 13165-66.

Article 4.2 provides alternative requirements with respect to the regional assessment of duties, depending on whether or not the constitutional law of the importing country permits the levying of antidumping duties on a regional basis. Where there is no such constitutional bar, the general rule of Article 4.2 applies, requiring that the duties be limited to subject products consigned for final consumption in the specified regional area. On the other hand, where there is such a constitutional prohibition, more detailed rules are prescribed by Article 4.2. The proper application of Article 4.2 in the case of the United States, therefore, requires a threshold determination of whether the U.S. Constitution bars the imposition of antidumping duties on a regional basis. Indeed, the respondents and STCC made opposing arguments to Commerce on the constitutional issue, id. at 13164, but Commerce made no findings on the matter. It apparently was not until the oral hearing before this Panel that Commerce gave its opinion that there is a constitutional bar to regional assessment of antidumping duties---and even then Commerce declared its position on this point only in the barest terms.

It is a vital and time-honored principle of U.S. administrative law that an agency's ruling in an adjudicative proceeding must be supported by reasoned decision-making, with the connection between the reasoning process undertaken and the conclusion reached thereby made sufficiently clear. Securities & Exchange Commission v. Chenery Corp., 332 U.S. 194, 196 (1947) (�If the administrative action is to be tested by the basis upon which it purports to rest, that basis must be set forth with such clarity as to be understandable...�); Burlington Truck Lines v. United States, 371 U.S. 156, 168-69 (1962) (�The courts may not accept appellate counsel�s post hoc rationalizations for agency action; Chenery requires that an agency�s discretionary order be upheld, if at all, on the same basis articulated in the order by the agency itself...�) Accord Elec. Consumers Res. Council v. F.E.R.C., 747 F. 2d 1511, 1513 (D.C. Cir 1984); SKF USA Inc. v. United States, 254 F. 3d 1022, 1028 (Fed. Cir. 2001); Rhodia Inc. v. United States, 185 F. Supp. 2d 1343 (Ct. Int'l Trade 2001); A. Hirsh, Inc. v. United States, 729 F. Supp. 1360, 1362 (Ct. Int'l Trade 1990).

An agency�s failure to meet this standard of reasoned decision-making deprives the parties of their opportunity for a fair and transparent proceeding and makes impossible the task of the reviewing authority. In this case, since Commerce's decision on the regional assessment issue was apparently based, in whole or in part, on its views concerning the dictates of the U.S. Constitution in the matter, those views should have been expressed at the time of the agency decision-making. Without the benefit of Commerce's adequately spelled out views on the constitutional issue, respondents cannot have their "day in court", regardless of whether review of the agency�s decision on the matter can be performed by this Panel (a question on which we express no opinion at this time) or, instead, is potentially under the jurisdiction of a three judge panel of the CIT as Commerce urges. The Panel finds that Commerce�s failure to state its position on the constitutional issues in the course of its decision-making was contrary to law.

The regional antidumping duty assessment issue is remanded for Commerce to more adequately explicate the basis of its decision, with particular reference to the requirements of the U.S. Constitution. In light of this remand, we find it unnecessary to reach at this time the questions of whether this Panel is authorized to review matters of constitutional interpretation and whether the Panel is empowered to order Commerce to revoke the antidumping duty order based on an allegedly improper assessment methodology.

Notes: