Florida Citrus Mutual v. United States

United States Court of Appeals for the Federal Circuit
2008-1102

FLORIDA CITRUS MUTUAL,
A. DUDA & SONS (doing business as Citrus Belle), CITRUS WORLD, INC.,
and SOUTHERN GARDENS CITRUS PROCESSING CORPORATION
(doing business as Southern Gardens),

Plaintiffs-Appellants,

v.

UNITED STATES,

Defendant-Appellee,

and

FISCHER S/A AGROINDUSTRIA,

Defendant-Appellee,

and

CITRUS PRODUCTS, INC. and SUCOCITRICO CUTRALE LTDA,

Defendants-Appellees.

Matthew T. McGrath, Barnes, Richardson & Colburn, of Washington, DC, argued
for plaintiffs-appellants. With him on the brief was Stephen W. Brophy.

Michael J. Dierberg, Trial Attorney, Commercial Litigation Branch, Civil Division,
United States Department of Justice, of Washington, DC, argued for defendant-appellee
United States. With him on the brief were Jeffrey S. Bucholtz, Acting Assistant Attorney
General; Jeanne E. Davidson, Director; and Franklin E. White, Jr., Assistant Director.
Of counsel on the brief was Mildred E. Steward, Senior Attorney, Office of Chief
Counsel for Import Administration, United States Department of Commerce, of
Washington, DC. Of counsel was Mykhaylo A. Gryzlov.

Robert G. Kalik, Kalik Lewin, of Bethesda, Maryland, for defendant-appellee
Fischer S/A Agroindustria. With him on the brief was Brenna S. Lenchak.

Christopher Dunn, Heller Ehrman LLP, of Washington, DC, for defendants-
appellees Citrus Products, Inc., and Sucocitrico Cutrale Ltda. With him on the brief was
Valerie S. Ellis.

Appealed from: United States Court of International Trade

Judge Evan J. Wallach
United States Court of Appeals for the Federal Circuit
2008-1102

FLORIDA CITRUS MUTUAL,
A. DUDA & SONS (doing business as Citrus Belle), CITRUS WORLD, INC.,
and SOUTHERN GARDENS CITRUS PROCESSING CORPORATION
(doing business as Southern Gardens),

Plaintiffs-Appellants,

v.

UNITED STATES,

Defendant-Appellee,

and

FISCHER S/A AGROINDUSTRIA,

Defendant-Appellee,

and

CITRUS PRODUCTS, INC. and SUCOCITRICO CUTRALE LTDA,

Defendants-Appellees.

Appeal from the United States Court of International Trade in case no.
06-00114, Judge Evan J. Wallach.

__________________________

DECIDED: December 18, 2008
__________________________

Before MICHEL, Chief Judge, and MOORE, Circuit Judge, O’GRADY, District Judge. *

*
Honorable Liam O’Grady, District Judge, United States District Court for
the Eastern District of Virginia, sitting by designation.
O’GRADY, District Judge.

The question presented in this appeal is whether the Department of Commerce

(“Commerce”) reasonably interpreted ambiguous language in 19 U.S.C.

§ 1677a(c)(2)(A). This language allows a reduction in the U.S. price of imported

merchandise for “United States import duties” before that domestic price is compared

against the foreign price in an antidumping analysis. The court finds Commerce’s

interpretation reasonable because it accords with the statutory language and accurately

reflects the overall duty costs to importers. Accordingly, we affirm the decision of the

Court of International Trade.

I. BACKGROUND

A. Proceedings Before The Department of Commerce.

Appellants are four U.S. orange juice producers, Florida Citrus Mutual, A. Duda &

Sons, Citrus World, Inc., and Southern Gardens Citrus Processing Corp., collectively

referred to as “FCM.” Appellees are Brazilian orange juice producers: Citrosuco

Paulista S.A. d/b/a Fischer S/A-Agroindustria (“Fischer”), and Citrus Products, Inc. and

Sucocitrico Cutrale SA (“Cutrale”).

On December 27, 2004, FCM filed an antidumping petition with the Department

of Commerce and the U.S. International Trade Commission (“ITC”), alleging that sales

of two types of frozen orange juice from Brazil were materially injuring the domestic

industry. On February 11, 2005, Commerce launched an investigation. It selected

Fischer, Cutrale, and Montecitrus Industria e Comercio Limitada (“Montecitrus”)—the

2008-1102 2
three largest Brazilian orange juice importers—as mandatory respondents in the

investigation. On March 7, 2005, Commerce distributed the standard antidumping duty

questionnaire to the Brazilian companies. Section C of the questionnaire asked the

respondents to report the “unit amount of any customs duty paid on the subject

merchandise.” Fischer and Cutrale reported figures for “import duties” that included

refunds the companies had received as part of U.S. “drawback” programs. These

drawback programs allow foreign companies to receive refunds of duties paid on

merchandise that is exported, or destroyed, within three years of entry into the United

States. Over FCM’s objection, Commerce calculated the “constructed export price”

using net import duties, which were the duties paid to Customs minus the drawback

refunds as reported by Fischer and Cutrale. Fischer and Cutrale argued that the

drawback refunds should be used to offset U.S. duties paid as that amount more

accurately reflected the actual duties paid by the companies on the imported orange

juice.

Whether Fischer and Cutrale were entitled to the proposed offset for drawback

refunds was an issue of first impression for Commerce. Commerce performed an

antidumping analysis—comparing export price or constructed export price in the United

States to the normal value in the foreign market. 1 In its Final Determination, Commerce

1
Under the statute the terms “export price” and “constructed export price”
are defined as follows:

(a) Export price. The term “export price” means the price at which the subject
merchandise is first sold (or agreed to be sold) before the date of importation by
the producer or exporter of the subject merchandise outside of the United States
to an unaffiliated purchaser in the United States or to an unaffiliated purchaser
for exportation to the United States, as adjusted under subsection (c) of this
section.

2008-1102 3
concluded that the applicable statute, 19 U.S.C. § 1677a(c)(2)(A), allowed the offset for

drawback refunds. It therefore calculated a constructed export price for Fischer and

Cutrale by reducing the U.S. price of the orange juice by the net duties paid. In its

Issues and Decision Memorandum, Commerce explained that calculating net import

duties would “encompass the net duty experience of the respondents.” Commerce

further reasoned that the calculation of net import duties was consistent with the

statutory mandate to reduce U.S. price by all movement expenses incident to importing

the goods into the United States. It concluded that allowing the offset for drawback

refunds provided a fair comparison to normal value of the orange juice in the Brazilian

market.

On February 2, 2006, FCM filed a ministerial error allegation, which asserted that

Commerce had erred in calculating dumping margins for Cutrale and Fischer in its Final

Determination. On February 21, 2006, Commerce published an Amended Final

Determination, in which it corrected various ministerial errors and made minor

adjustments to its original calculations, but rejected FCM’s challenge to its price

calculation methodology. On March 9, 2006, Commerce published its antidumping

order as Antidumping Duty Order: Certain Orange Juice from Brazil, 71 Fed. Reg.

12,183 (Dep’t of Commerce Mar. 9, 2006).

(b) Constructed export price. The term “constructed export price” means the
price at which the subject merchandise is first sold (or agreed to be sold) in the
United States before or after the date of importation by or for the account of the
producer or exporter of such merchandise or by a seller affiliated with the
producer or exporter, to a purchaser not affiliated with the producer or exporter,
as adjusted under subsections (c) and (d) of this section.

19 U.S.C. § 1677a(a)-(b).

2008-1102 4
B. Proceedings Before the Court of International Trade.

On April 6, 2006, FCM timely filed a civil action in the U.S. Court of International

Trade. On May 23, 2006 and June 6, 2006, respectively, the court granted Fischer and

Cutrale’s motions to intervene as interested parties. The court held oral argument on

July 25, 2007, wherein FCM asserted that Commerce’s determination to adjust the U.S.

price by the net import duties (allowing the drawback refund offset) was improper. FCM

also argued that Commerce employed improper methodology for calculating the net

import duties.

The court rejected FCM’s arguments in their entirety. In Florida Citrus Mutual v.

United States, 515 F. Supp. 2d 1324 (Ct. Int’l Trade 2007), the court found that

Commerce had reasonably interpreted “United States import duties” to mean net import

duties, and thus sustained Commerce’s determination. It reasoned that Commerce’s

construction of the statute reflected “a policy decision which was made within the

statutory scheme and is well within the bounds of the agency’s discretion in accordance

with Chevron.” Id. at 1332. The court rejected FCM’s argument that because the

drawback refunds came later in time they could not be “incident to bringing the subject

merchandise” into the United States, reasoning that the refunds should be considered

part of the movement expenses enumerated by the statute. Id. at 1334. The court

concluded that Commerce’s methodology produced an accurate U.S. price in accord

with the statute.

II. DISCUSSION

A. Jurisdiction.

2008-1102 5
 FCM appeals from the decision of the U.S. Court of International Trade entered

on September 13, 2007. The Court of International Trade exercised subject matter

jurisdiction under 28 U.S.C. § 1581(c). Appellants filed a timely notice of appeal on

November 9, 2007. This court has jurisdiction over the appeal under 28 U.S.C. §

1295(a)(5).

B. Standard of Review.

“We review de novo whether Commerce’s interpretation of a governing statutory

provision is in accordance with law, but we do so within the framework established by

Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).”

Agro Dutch Indus. Ltd. v. United States, 508 F.3d 1024, 1029-30 (Fed. Cir. 2007).

“Under Chevron, a reviewing court must first ask ‘whether Congress has directly spoken

to the precise question at issue.’” FDA v. Brown & Williamson Tobacco Corp., 529 U.S.

120, 132 (2000) (quoting Chevron, 467 U.S. at 842). “If Congress has done so, the

inquiry is at an end; the court ‘must give effect to the unambiguously expressed intent of

Congress.’” Id. at 132 (quoting Chevron, 467 U.S. at 843). “In the absence of clear

direction from the statute,” we must proceed to “ask whether there is ambiguous

statutory language that might authorize the agency to fill a statutory gap,” and “whether

Commerce’s interpretation of ambiguous statutory language is based on a permissible

interpretation of the statute.” Agro Dutch Indus., 508 F.3d at 1030 (internal quotation

marks omitted); see also Chevron, 467 U.S. at 843 (“[I]f the statute is silent or

ambiguous with respect to the specific issue, the question for the court is whether the

agency’s answer is based on a permissible construction of the statute.”). Ultimately,

“this court will uphold Commerce’s determinations, findings, and conclusions unless

2008-1102 6
they are ‘unsupported by substantial evidence on the record, or otherwise not in

accordance with the law.’” Wheatland Tube Co. v. United States, 495 F.3d 1355, 1359

(Fed. Cir. 2007) (quoting 19 U.S.C. § 1516a(b)(1)(B)(i)).

C. Analysis.

1. Commerce’s Decision To Account For Drawback Refunds Was Reasonable.

The drawback program permits importers to claim reimbursement of 99 percent

of U.S. duties paid on imports when “commercially interchangeable” merchandise is

either (1) exported from the United States, or (2) destroyed within three years of the

date of importation. 19 C.F.R. § 191.32(a) (2008); see generally 19 U.S.C. § 1313. The

Code of Federal Regulations defines “drawback” as “the refund or remission, in whole

or in part, of a customs duty, fee or internal revenue tax which was imposed on

imported merchandise under Federal law because of its importation.” 19 C.F.R.

§ 191.2(i). Thus, drawbacks allow import duties, which are levied on goods imported

into the United States for sale, to be refunded when substituted goods are exported,

destroyed, or used in manufacturing instead of being sold in the United States. As a

practical matter, U.S. Customs and Border Protection receives a deposit of the duties

due from the importer, which is later adjusted if the importer exercises its drawback

rights in a timely fashion.

Fischer and Cutrale claimed and received drawback refunds under two statutory

provisions: 19 U.S.C. §§ 1313(b) and 1313(j)(2). Cutrale claimed refunds under Section

1313(j)(2), which allows a “substitution drawback.” Under this provision, an importer

may receive duty refunds if it then exports from the United States “commercially

interchangeable” merchandise within three years. 19 U.S.C. § 1313(j)(2). Fischer

2008-1102 7
claimed refunds under Section 1313(b), which allows a “manufacturing substitution

drawback.” Id. § 1313(b). Under this provision, if the importer uses the substituted

merchandise in further manufacturing or production in the United States, the importer

becomes eligible for “an amount of drawback equal to that which would have been

allowable had the merchandise used therein been imported.” Id. The importer may

claim the refund after the “exportation or destruction” of the substituted merchandise.

19 C.F.R. § 191.22(a). Before Commerce, Fischer asserted that adding oils and

essences to its orange juice constituted a further manufacturing process in the United

States, which qualified it for “manufacturing substitution drawback” refunds under

Section 1313(b).

Dumping is the sale of foreign goods in the United States at less than fair value.

See 19 U.S.C. § 1677(34). To determine whether dumping occurred, Commerce

compares the “export price” or “constructed export price” with the normal price of the

goods in the foreign market. Generally under U.S. antidumping laws, constructed

export price is the price at which the goods under investigation are sold, or agreed to be

sold, for exportation to the United States to the first unaffiliated purchaser in the United

States. See 19 U.S.C. § 1677a(b). Commerce adjusts this price in accordance with

statutory factors to achieve “a fair ‘apples-to-apples’ comparison” between U.S. price

and foreign market value “at a similar point in the chain of commerce.” Torrington Co. v.

United States, 68 F.3d 1347, 1352 (Fed. Cir. 1995). If the adjusted price of the goods is

less than the normal value of the goods in the foreign market, and there is a finding of

material injury, Commerce will issue an affirmative finding of dumping. Agro Dutch

Indus., 508 F.3d at 1028 (citing 19 U.S.C. §§ 1673-1673(d)). Commerce will issue an

2008-1102 8
antidumping order that imposes additional dumping duties equal to “the amount by

which the normal value exceeds the export price or constructed export price of the

subject merchandise.” 19 U.S.C. § 1677(35)(A).

Section 1677a(c)(2)(A) requires that U.S. price shall be reduced by:

the amount, if any, included in such price, attributable to any additional costs,
charges, or expenses, and United States import duties, which are incident to
bringing the subject merchandise from the original place of shipment in the
exporting country to the place of delivery in the United States.

To achieve this “apples-to-apples” comparison the agency should adjust the U.S.

price by subtracting the “United States import duties” paid. Fischer and Cutrale

argued—and Commerce agreed—that “United States import duties” should be

calculated by including an offset for the drawback refunds each company claimed.

Because this offset lowered the amount of import duties paid, and that amount was

subtracted from the price, the offset raised the constructed export price. A higher price

makes it less likely that Commerce will make a finding of dumping because dumping is

present only where the adjusted price is less than the normal value of the goods in the

foreign market. See Agro Dutch Indus., 508 F.3d at 1028.

The statute neither defines “import duties” nor specifies whether “import duties”

should include the net import duties (taking into account drawback refunds) or gross

duties. The statute therefore is ambiguous, and Commerce was entitled to supply its

own reasonable interpretation. See Agro Dutch Indus., 508 F.3d at 1030; see also

Wheatland Tube, 495 F.3d at 1359-60 (holding that the term “United States import

duties” in Section 1677a(c)(2)(A) is ambiguous). We now must ask “whether

Commerce’s interpretation of ambiguous statutory language is based on a permissible

2008-1102 9
interpretation of the statute.” FAG Italia S.p.A. v. United States, 291 F.3d 806, 815

(Fed. Cir. 2002).

We find Commerce’s interpretation reasonable because it accords with the

statutory language and accurately reflects the overall duty costs to importers. The

statute requires that the price be reduced by the “amount attributable to any . . . United

States import duties, which are incident to bringing the subject merchandise . . . to the

place of delivery in the United States.” 19 U.S.C. § 1677a(c)(2)(A). First, rather than

“United States import duties,” which could mean either gross or net import duties,

Congress could have used the terms “gross import duties,” or perhaps “duties assessed

at the time the subject merchandise is imported.” Either of those phrases would have

foreclosed the interpretation that Commerce adopted here. But Congress did not,

instead opting for the unqualified phrase “import duties.” Second, drawback refunds are

“attributable to” import duties because “attributable to” describes a loose associative

relationship. See The American Heritage Dictionary of the English Language 85 (1976)

(defining “attribute” as “to regard or assign as belonging to or resulting from someone or

something; ascribe”). Because drawback refunds cannot be obtained without the

foreign company first importing merchandise and being assessed import duties on that

merchandise, the duties are part and parcel of the import duty regime. Furthermore,

Congress’ use of the inclusive term “any” in front of “import duties” indicates that the

adjustment should account for the entire universe of import duties. Finally, drawback

refunds also are “incident to bringing the subject merchandise . . . into the United

States.” “Incident to” commonly means “contingent upon or related to something else.”

Id. at 664. Drawback refunds are contingent upon and related to importing merchandise

2008-1102 10
because they cannot be claimed without first importing merchandise and paying the

duties to Customs. In sum, the statute is broad enough to allow the offset and

Commerce’s interpretation was reasonable.

Moreover, as noted above, the purpose of adjusting U.S. price by movement

costs is to enable a fair “apples-to-apples” comparison between foreign and domestic

price. This goal is furthered by inclusion of all import expenses—including the offset for

refunds—because the resulting amount accurately represents the importer’s overall

duty liability. Appellants insist that drawback refunds cannot be considered because

such refunds are not assessed on goods at the time of importation. But the statute

does not contain any such requirement. Indeed, appellants’ interpretation would not

reflect the total amount of duties the importer actually pays on the imported goods

because the “import duties” amount would not include duties that were later refunded.

In accord with its statutory mandate to calculate the most accurate U.S. price for

comparison with foreign value, Commerce reasonably discounted import duties for

which the companies ultimately were reimbursed. This decision was consistent with the

statutory scheme and well within Commerce’s authority under Chevron.

2. Commerce’s Method Of Calculating Net Duties Was Reasonable.

Appellants also contend that Commerce’s methodology in calculating net duties

was flawed for two reasons: (1) there is no proof that the net duties or refunds were

“passed through,” i.e., reflected in the price paid by U.S. purchasers; and (2) Commerce

counted duty refunds received by Cutrale during the period of investigation on orange

juice that entered the U.S. before the period of investigation. Under the law of this

court, “Commerce is the ‘master of antidumping law,’ and reviewing courts must accord

2008-1102 11
deference to the agency in its selection and development of proper methodologies.”

Thai Pineapple Pub. Co. v. United States, 187 F.3d 1362, 1365 (Fed. Cir. 1999)

(citations omitted). Thus, Commerce’s methodologies for calculating dumping margin

are “presumptively correct.” Id.

Section 1677a(c)(2)(A) requires that an adjustment to price be based upon

import duties that are “included in such price.” Appellants argue that this language

requires foreign producers to adduce evidence demonstrating that the drawback

refunds actually affected the price paid by U.S. purchasers. Commerce reasonably

concluded that such proof is not required. In Daewoo Electronics Co. v. International

Union, we interpreted similar language in Section 1677a(d)(1)(C), which allowed a price

adjustment “only to the extent that such taxes are added to or included in the price of

. . . merchandise.” 6 F.3d 1511, 1514 (Fed. Cir. 1993). We held that where Commerce

adjusts domestic prices for excise taxes not charged on exports, it need not inquire as

to whether those taxes are “passed through” to the customer. “The statutory language

does not mandate that [the International Trade Administration] look at the effect of the

tax on consumers rather than on the [foreign] company.” Id. at 1517. Likewise here,

Commerce need not analyze whether taxes are “passed through” to U.S. customers.

As appellants admit, the statute contains no provision mandating such an inquiry. 2

Appellants’ second challenge is that Commerce erroneously counted drawback

refunds that Cutrale received for merchandise imported prior to the period of

2
As noted by the Court of International Trade, when defining the term “price
adjustment” in its regulations, Commerce commented that “price adjustments include
such things as discounts and rebates that do not constitute part of the net price actually
paid by a customer.” Florida Citrus, 515 F. Supp. 2d at 1333 (citing Antidumping
Duties: Countervailing Duties, 62 Fed. Reg. 27,296, 27,344 (May 19, 1997)).

2008-1102 12
investigation. The statute requires adjustments for “costs, charges, expenses and

United States import duties,” but, as explained above, it does not restrict these

adjustments only to expenses incurred at the time of importation. Under Sections

1313(b) and 1313(j)(2) importers have up to three years to claim drawback refunds,

even though the import duties are paid to Customs at the time of importation. Because

of this three-year lag, it is inherent that some of the claimed refunds will pertain to

merchandise actually imported prior to the period of investigation. 3 In light of the

discretion vested in Commerce to interpret the antidumping statute, it was reasonable to

allow an offset for drawback refunds claimed for merchandise imported prior to the

period of investigation.

III. CONCLUSION

For the foregoing reasons, we affirm the decision of the Court of International

Trade. Each party shall bear its own costs.

AFFIRMED.

3
This could result in a partial wash, as foreign companies presumably will
import merchandise during the period of investigation for which they might claim refunds
after the period ends—too late to receive any adjustment in price.

2008-1102 13