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BINATIONAL PANEL REVIEW
DECISION OF THE PANEL
Víctor Blanco Fornieles
Jorge Alberto Silva
D. Michael Kaye
For Cinsa, S.A. de C.V. ("Cinsa") and Esmaltaciones de Norte America, S.A. de C.V. ("ENASA"): Manatt, Phelps & Philipps, LLP (Irwin P. Altschuler, David R. Amerine, Thomas P. Ondeck, Ronald M. Wisla)
For the Investigating Authority: U.S. Department of Commerce, Office of the Chief Counsel for Import Administration (Stephen J. Powell, Elizabeth C. Seastrum, Linda S. Chang)
TABLE OF CONTENTS
III. STANDARD OF REVIEW
Final Results, 62 Fed. Reg. at 42505.
CHP argues that the Department erred in determining that Cinsa and ENASA were not reimbursing their affiliated U.S. importer for antidumping duties. CHP Brief, at 18. According to CHP, Commerces determination that the transfer of funds by an affiliated holding company, Grupo Industrial Saltillo, S.A. ("GIS") to Cinsas affiliated importer, Cinsa International Corp. ("CIC"), expressly for the purpose of paying antidumping duties was not reimbursement of antidumping duties within the meaning of 19 C.F.R. § 353.26(a) is unsupported by substantial evidence in the agency record and is otherwise not in accordance with law. Id. at 19. CHP argues further that Commerces determination that the reimbursement regulation does not apply in this review is patently unreasonable and inconsistent with prior practice. Id. at 21. Furthermore, CHP reasons, the Dutch Steel4 determination indicates that Commerce has reconsidered its reimbursement policy and therefore the review should be remanded for a reconsideration of the evidence. Id. at 23.
According to Commerce, the determination that Cinsa and ENASA did not reimburse their affiliated importer CIC for antidumping duties was reasonable, supported by substantial evidence on the record, and otherwise in accordance with law. Commerce Response Brief, at 12. First, the Department explains, a "producer" or "reseller" within the meaning of the reimbursement regulation did not reimburse CIC. Id. at 15-17. Second, it is not Commerces general practice to treat the different members of a corporate family as if each were a single entity. Id. at 19. Third, Commerce claims its determination in the Dutch Steel cases does not support the application of the reimbursement regulation here. Id. Finally, Commerce asserts that CHPs arguments as to the "fungibility of money" and the "holding company rule" are barred in this case because of exhaustion of administrative remedies. Id. at 24.
In its Response Brief, at 9, Cinsa and ENASA argue that Commerce was correct in determining that they did not reimburse the affiliated U.S. importer for antidumping duties. Cinsa claims that Commerces conclusion is based on the facts of this case and is wholly consistent with its past practice. Id. at 13-14. Cinsa and ENASA note that Commerce has never treated affiliated exporters and importers as "one entity" for purposes of analyzing reimbursement and its approach in this case is consistent with that practice. Id.
Finally, CHP asks that the Panel take note of the Departments preliminary determination in the eleventh annual review of POS Cookware from Mexico5 where the Department preliminarily determined that Cinsa and ENASA were reimbursing a U.S. affiliate.
As there is no allegation that Cinsa or ENASA paid antidumping duties directly on behalf of CIC, the question to be answered is whether either company reimbursed CIC for antidumping duties within the meaning of 19 C.F.R. § 353.26(a)(ii).
According to the Department, in order for section 353.26(a)(ii) to be triggered, the producer or reseller itself must make the payment to the importer because:
See Departments Brief at 17 (emphasis added). The Panel cannot say that the Departments interpretation of its regulation is unreasonable. As the Department notes, the plain language of the regulation states that the reimbursement must be made by the "producer or reseller," not by the producers or resellers affiliates. Therefore, given that the evidence on the record shows that GISSA, and not Cinsa or ENASA, made the payment to CIC, and given that there is no evidence on the record showing that Cinsa or ENASA made payments to GIS or GISSA for the purpose of reimbursing CIC, the Panel affirms the Departments determination that GISSAs payment to CIC did not constitute reimbursement within the meaning of 19 C.F.R. § 353.26(a)(ii).
In reaching this conclusion, the Panel rejects CHPs assertion that the Departments position is inconsistent with its prior practice. According to CHP, the Statement of Administrative Action ("SAA")6 to the Uruguay Round Agreements Act ("URAA") states that the Department has "full authority . . . to increase the duty when an exporter . . . reimburses the importer, whether independent or affiliated, for the importers payment of duties." CHP Brief at 22, citing SAA at 886 (emphasis added). Although CHPs citation of the SAA is accurate, it does not mandate a conclusion that the Departments position is unlawful. The Departments determination that section 353.26(a)(ii) is triggered only when the producer or reseller makes the payment to the importer is fully consistent with the language in the SAA.
Furthermore, the Departments decision in Dutch Steel does not compel a different result. See Certain Cold-Rolled Carbon Steel Flat Products From The Netherlands, 63 Fed. Reg. 13204 (Mar. 18, 1998). The portion of the determination that CHP cites in its brief, see CHP Brief at 22-23, states only that a capital infusion can constitute reimbursement of antidumping duties under certain circumstances, not that it always will. Presumably, if it had been Cinsa or ENASA that had made the capital infusion, rather than GISSA, then the Departments statement in Dutch Steel would have compelled a finding of reimbursement. However, the evidence on the record does not compel such a conclusion.
In any event, the petitioners and respondents in Dutch Steel both addressed the Departments decision in the case at bar, with the petitioners arguing that the Departments interpretation of its regulation was incorrect, and the respondents arguing that, given the Departments interpretation, there was no basis for applying the reimbursement regulation in Dutch Steel. See id., 63 Fed. Reg. at 13215. If the Department had intended Dutch Steel to constitute a change in practice, it presumably would have said so. It did not.
In addition, the Panel is not convinced by CHPs citation of Departmental practice with respect to the fungibility of money and the allocation of holding company expenses. See CHP Brief at 24-28. None of the cases which CHP cites relate to these concepts as applied in the context of the reimbursement regulation. While CHP claims that the Departments determination is based on the "false premise" that GISSAs expenses are "neither tied to revenues generated by Cinsa and ENASA nor provide administrative support to Cinsas and 8 ENASAs businesses," see CHP Brief at 27, it fails to recognize that ISLO, not GISSA, is the holding company which supports Cinsa and ENASA. Given this fact, it is not clear to the Panel why GISSAs expenses would be tied to Cinsa or ENASA or provide support to those companies businesses.
Finally, the Panel feels compelled to address the Departments preliminary determination in the 11th administrative review. See Porcelain-on-Steel Cookware from Mexico: Preliminary Results of Antidumping Duty Administrative Review, 64 Fed. Reg. 1592 (January 11, 1999). As CHP notes in its brief to this Panel, "an agencys interpretation of its own regulation that departs from its established administrative practice must be struck down if the agency fails to provide a reasonable explanation for the new interpretation." CHP Brief at 21, citing Atchinson, Topeka & Santa Fe Ry. Co. v. Wichita Bd. of Trade, 412 U.S. 800, 808 (1973). The Department has asserted forcefully both in the ninth administrative review and before this Panel that section 353.26(a)(ii) is triggered only when the payment to the importer is made by the exporter or reseller itself, not when the payment is made by another party acting on behalf of, or for the benefit of, the exporter or reseller. Reviewing the preliminary determination, it does not appear to the Panel that the Department has explained why its interpretation in the ninth review should no longer apply. That, however, is a question that a future Panel may be called upon to address. It is not germane to the current proceeding.
Final Results, 62 Fed. Reg. at 42500.
CHP argues that Commerce erred in classifying Cinsas FOB Laredo sales as export price (EP) sales. CHP Brief, at 28. CHP claims that Commerces determination that Globals and CICs activities with respect to sale of merchandise that did not enter Globals or CICs inventory in the United States were merely clerical in nature and therefore insufficient to classify 10 these sales as CEP sales was not supported by substantial evidence in the administrative record. Id. at 29. Moreover, CHP argues that there is no evidence to support Cinsas claim that sales reported as EP sales were made by Cinsas export department in Mexico and not by CIC in the United States. Id. at 35.
In its Reply Brief, at 11-12, CHP argues that Commerce failed to apply properly the test to classify Cinsas U.S. sales as EP sales, and as a result its determination to classify certain sales to CIC as EP sales is not supported by substantial evidence on the record. CHP replies that it would be inappropriate for the Panel to address the "customary sales channel" factor because Commerce failed to address this factor in its final results. Id. at 12. Additionally, CHP argues that Commerces determination that CIC was merely a sales facilitator with respect to sales classified as export price sales is not supported by substantial evidence on the record. Id. at 13. CHP argues that Commerces final results erroneously permitted Cinsa to allocate expenses in a manner consistent with CEP sales, yet obtain the benefits of EP sales classification, a determination which is not supported by substantial evidence and should be remanded to Commerce with instructions to classify Cinsas reported EP sales as CEP sales and recalculate the margin. Id. at 19.
Commerce asserts that its classification of Cinsas FOB Laredo sales as EP sales was reasonable, supported by substantial evidence on the record and otherwise in accordance with law. Commerce Response Brief, at 29. The FOB Laredo sales were shipped directly to the unaffiliated U.S. customer and the indirect PP/EP sales were part of Cinsas customary commercial channel. Id. at 32-33. Additionally, for the FOB Laredo sales, the U.S. affiliate merely processed sales documentation and linked communications with the exporter. Id. at 35. Cinsa performed selling functions in Mexico on these sales and Cinsa set the price for the FOB Laredo sales therefore making them EP transactions, despite the presence of shrink-wrapping by CIC. Id. at 38-42.
Cinsa argues that Commerce properly classified its FOB Laredo sales in the United States as export price transactions. Cinsa Response Brief, at 15. Cinsa reasons that the evidence on the record and Commerces past practice indicate that Cinsa has met Commerces three-prong test for classifying U.S. sales made before the date of importation as EP sales. Id. at 16-17. Cinsa argues that CHP may not ask the Panel to substitute its own judgment for that of Commerce in remanding the determination. Id. at 17. Commerces determination that some sales were properly classified as EP transaction is supported by substantial evidence. Id. at 21.
In the administrative review, the Department concluded that Cinsas FOB Laredo sales met all of the relevant criteria for classification as IEP sales. Although CHP objects to the Departments conclusion, it does not dispute that the sales meet the first prong of the three part test. See CHP Brief at 30. According to CHP, however, the sales did not satisfy the second or third prongs. Id. Thus, the Panel must determine whether the Departments conclusion that the second and third prongs were met is supported by substantial evidence and otherwise in accordance with law.
As noted above, the second criterion under the Departments IEP test is that the sales channel must be customary between the involved parties. According to CHP, the Final Results failed even to consider whether Cinsas FOB Laredo sales met this test. In CHPs view, the fact that a certain percentage of Cinsas sales during the period of review were classified as CEP sales should prevent the Department from concluding that EP is the "customary" channel of trade for Cinsa. CHP Brief at 30-31.
In response, the Department argues that it has been well established over the life of the antidumping order on POS cookware from Mexico that Cinsa has a history of making EP sales through Laredo. See Department Brief at 33. In some review periods, Cinsa has made only EP (or "purchase price") sales, and in others, it has made both EP and CEP sales. See, e.g., Porcelain on Steel Cooking Ware From Mexico, 51 Fed. Reg. 18470, 18471 (May 20, 1986) (demonstrating that Cinsa made only purchase price sales in the original investigation); Porcelain-on-Steel Cookware From Mexico, 61 Fed. Reg. 54616, 54617 (Oct. 21, 1996). Therefore, the Department argues, it is evident from the history of the antidumping order that EP sales are a customary channel of trade for Cinsa.
Furthermore, the Department argues that the CIT has recognized that if a majority of a companys sales are not warehoused by its U.S. affiliate, this indicates that direct shipments are a customary channel of trade. Defendants Brief at 33, citing E.I. DuPont de Nemours & Co., Inc. v. United States, 841 F. Supp. 1237, 1250 (CIT 1993).
Having reviewed the arguments of the parties, as well as the evidence on the record and the history of this proceeding, the Panel concludes that the Department has adequately demonstrated that Cinsas FOB Laredo sales met the second prong of the IEP test. CHPs argument that the existence of CEP sales should prevent the Department from finding that Cinsas FOB Laredo sales meet the second prong of the test appears to be premised on the idea that there can be only one customary channel of trade, either EP or CEP. CHP has failed, however, to cite any authority for this argument, and the Panel is aware of none. Accordingly, the Panel does not view the fact that Cinsa had CEP sales as fatal to its IEP claim.
A closer issue, however, is the Departments failure to clearly address the customary channel of trade issue in its discussion in the Federal Register. As CHP notes, it is not permissible for an agency to rely on post hoc rationalizations of agency counsel in support of its determinations. See CHP Reply Brief at 12-13. Moreover, the Panel is not convinced by the Departments argument that it is "clear" from the fact that it summarized petitioners arguments and classified the sales as IEP sales that it adequately addressed the second prong of the IEP test. See Department Brief at 34. In particular, the Panel is not convinced by the Departments citation of the decision in Ceramica Regiomontana, S.A. v. United States, 810 F.2d 1137, 1139 (Fed. Cir. 1987). See Department Brief at 34. In the Panels view, the Department attempts far too often to rely on Ceramica as a way of avoiding the consequences of inadequate explanations.
Nevertheless, as noted above, the Panel concludes that the Department has adequately demonstrated that Cinsas FOB Laredo sales met the second prong of the IEP test. In the Panels opinion, given the history of this proceeding, there would be little point in ordering a pro forma remand which would only acknowledge what is already abundantly clear from past proceedings: Cinsa has a well established history of making purchase price (now EP) sales to its United States customers, and it is reasonable to conclude that those sales constitute a customary channel of trade.
Finally, we turn to the third prong of the IEP test: whether the affiliated importer acted only as a processor of documents and as a communications link with the exporter. According to CHP, there is no evidence on the record that Cinsa performed selling functions in Mexico with respect to the Laredo sales. See CHP Brief at 33. CHP then posits that if Cinsa performed no selling functions, then Globals and CICs role in the sales process must have been more than ancillary or incidental. Id. In CHPs view, the magnitude of the selling expenses reported by CIC and allocated to EP demonstrates that its role in the sales process was not incidental. CHP also claims that it was CIC and Global, not Cinsa, that sets the selling price for U.S. sales. Finally, CHP argues that CIC shrink wrapped products for certain EP customers, and that this activity should disqualify Cinsas IEP claim.
After reviewing the evidence on the record, the Panel concludes that the Departments determination that the FOB Laredo sales met the third prong of the IEP test is supported by substantial evidence on the record. First, none of the arguments forwarded by the parties lead the Panel to question the Departments finding that CICs and Globals activities relevant to the Laredo sales were merely ancillary. The evidence on the record indicates that the activities performed by CIC and Global "relate[d] primarily to sales processing: issuing payment invoices, 15 accepting payment and forwarding it to Mexico, posting antidumping duty deposits, and clearing products through Customs for sales to unrelated customers in the United States." 62 Fed. Reg. at 42500. While CHP speculates that CICs and Globals activities "must have been" more than incidental or ancillary, it provides no evidence to support its assertion. The Panel agrees with the Department, for example, that shrink wrapping is nothing more than an ancillary activity7.
Second, the Panel disagrees with CHPs argument that Cinsa performed no selling activities on the Laredo sales. Contrary to CHPs assertions, Cinsa stated on the record that it did perform selling activities on the Laredo sales. See Department Brief at 38-39, citing Cinsa supplemental response. Moreover, Cinsa reported indirect selling expenses incurred in Mexico on its EP sales, and nothing on the record leads the Panel to believe that Cinsas statement was untrue. The Panel agrees with the Department that CHP has taken out of context the excerpt from Cinsas and ENASAs case brief which it cites as evidence that Cinsa did not incur such expenses. The Panel also agrees with the Department that, based on the record evidence, it was Cinsa, and not CIC, which set the prices for the Laredo sales. See 62 Fed. Reg. at 42500. As discussed above in relation to the second prong of the IEP test, it has been well established over the history of the POS Cookware antidumping order that Cinsa makes EP sales to its U.S. customers.
In sum, the Departments conclusion that Cinsas FOB Laredo sales met the test for classification as IEP sales is supported by substantial evidence and is otherwise in accordance with law. For this reason, the Panel affirms the Departments determination.