Atar, S.R.L. v. United States

Slip Op. 09-53

UNITED STATES COURT OF INTERNATIONAL TRADE

ATAR, S.r.l.,

Plaintiff,

v.

UNITED STATES,

Defendant, Before: Timothy C. Stanceu, Judge

and Court No. 07-00086

AMERICAN ITALIAN PASTA CO., PUBLIC*
DAKOTA GROWERS PASTA CO.,
AND NEW WORLD PASTA CO.,

Defendant-Intervenors.

OPINION AND ORDER

[Affirming in part, and remanding in part, the final results issued by the United States
Department of Commerce in an administrative review of an antidumping duty order on certain
pasta from Italy]

Dated: June 5, 2009

Riggle & Craven (David J. Craven) for plaintiff.

Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, Reginald T.
Blades, Jr., Assistant Director, Commercial Litigation Branch, Civil Division, United States
Department of Justice (Jane C. Dempsey); Deborah King, Office of the Chief Counsel for Import
Administration, United States Department of Commerce, of counsel, for defendant.

Kelley Drye & Warren, LLP (David C. Smith, Jr. and Paul C. Rosenthal) for defendant-
intervenors.

*
With the consent of the parties, this public version is being issued without the redaction
of any information contained in the confidential version of this Opinion and Order.
Court No. 07-00086 Page 2

Stanceu, Judge: Plaintiff Atar S.r.L. (“Atar”), an Italian producer and exporter of pasta

products, contests the final results issued by the International Trade Administration, United

States Department of Commerce (“Commerce” or the “Department”), in the ninth administrative

review of an antidumping duty order on certain pasta from Italy. Atar challenges the

Department’s finding of a “particular market situation” and its resulting decision to use the

“constructed value” provisions of the antidumping statute, rather than the “third country sales”

provisions, as the basis for determining the normal value of Atar’s merchandise that was subject

to the antidumping duty order and the review. In the alternative, Atar challenges certain

decisions Commerce made in the constructed value calculation. Defendant and defendant-

intervenors argue that these challenges lack merit and that the court should uphold the final

results in their entirety. For the reasons discussed in this Opinion and Order, the court concludes

that Commerce’s decision to proceed under the constructed value provisions of the statute was

lawful. However, the court also concludes that the Department’s constructed value

determinations are, in some respects, not in accordance with law. On remand, the court orders

Commerce to reconsider, and redetermine as necessary, the constructed value of Atar’s

merchandise.

I. BACKGROUND

Commerce published the final results of the ninth administrative review (“Final Results”)

in February 2007. Notice of Final Results of the Ninth Admin. Review of the Antidumping Duty

Order on Certain Pasta from Italy, 72 Fed. Reg. 7011 (Feb. 14, 2007) (“Final Results”).

Plaintiff brought this action contesting the Final Results on March 7, 2007. Before the court is

plaintiff’s motion under USCIT Rule 56.2 for judgment upon the agency record.
Court No. 07-00086 Page 3

Commerce initiated the ninth administrative review on August 29, 2005 and published

preliminary results of the review (“Preliminary Results”) on August 8, 2006. See Notice of

Prelim. Results and Partial Rescission of Antidumping Duty Admin. Review: Ninth Admin.

Review of the Antidumping Duty Order on Certain Pasta from Italy, 71 Fed. Reg. 45,017, 45,018

(Aug. 8, 2006) (“Prelim. Results”). The review covered two manufacturer/exporters, one of

which was Atar, and pertained to entries of certain non-egg dry pasta1 (the “subject

merchandise”) made during the period July 1, 2004 through June 30, 2005 (“period of review” or

“POR”). Id.

Because Atar’s sales of the foreign like product in its home market were less than five

percent of the aggregate of the sales of Atar’s subject merchandise to the United States during the

period of review, Commerce found in the Preliminary Results that Atar did not have a viable

home market for purposes of determining the normal value of Atar’s subject merchandise that

was sold in the United States during that period. Id. at 45,019; see 19 U.S.C. § 1677b(a)(1)(C)

(2000). In response to this finding, Atar submitted information on its third-country selling

activity in Angola, arguing that the Department should calculate normal value based on that

activity. See Issues and Decisions for the Final Results of the Ninth Admin. Review of the

Antidumping Duty Order on Certain Pasta from Italy and Determination to Revoke in Part 2, 4

(Admin. R. Doc. No. 150) (“Decision Mem.”).

1
Imports covered by the order were shipments of certain non-egg dry pasta in packages of
five pounds four ounces or less, whether or not enriched or fortified or containing milk or other
optional ingredients. See Notice of Final Results of the Ninth Admin. Review of the Antidumping
Duty Order on Certain Pasta from Italy, 72 Fed. Reg. 7011, 7012 (Feb. 14, 2007).
Court No. 07-00086 Page 4

Commerce determined in the review that a “particular market situation,” within the

meaning of that term as used in 19 U.S.C. § 1677b(a)(1)(B)(ii)(III) and (a)(1)(C)(iii), prevented a

proper comparison between Atar’s selling activity in Angola and export price. Commerce

explained its conclusion in an internal Issues and Decisions Memorandum (“Decision

Memorandum”) that it incorporated by reference in the Final Results. See Final Results, 72 Fed.

Reg. at 7012. In the Decision Memorandum, Commerce stated a finding that Atar’s selling

activity in Angola during the period of review consisted of a single sale. Decision Mem. 7.

Commerce further found that Atar did not have an established market in Angola for sales of the

foreign like product during the period of review. Id. at 7-8. Additionally, Commerce found that

significant differences existed between the terms and conditions of the sale in Angola and the

sales made in the U.S. market that “would prevent a proper comparison even if an established

market existed.” Id.

The Final Results, published on February 14, 2007, assigned Atar a weighted-average

antidumping duty margin of 18.18%. Final Results, 72 Fed. Reg. at 7012. The Final Results

reflected Commerce’s conclusion that Atar’s sales in Angola could not properly serve as the

basis for determining normal value because of the particular market situation that Commerce

found to exist with respect to Atar’s selling activity in the Angolan market. See 19 U.S.C.

§ 1677b(a)(1)(B)(ii)(III) and (a)(1)(C)(iii). Having rejected Atar’s proposal that Angola serve as

a third country comparison market, Commerce resorted to constructed value. Decision Mem. 19;

see Def.’s Mem. in Opp’n to Pl.’s Rule 56.2 Mot. for J. Upon the Agency R. 16 (“Def.’s Br.”).

In so doing, when calculating Atar’s constructed value indirect selling expense (“ISE”) and

constructed value profit rate, Commerce used the weighted average indirect selling expenses and
Court No. 07-00086 Page 5

profit rate of the six respondents (not including Atar) from the previous (eighth) period of review

for sales occurring in the ordinary course of trade. Decision Mem. 15, 20. Also, the Department

increased Atar’s selling, general and administrative expenses to account for services provided to

Atar by a shareholder who elected to forego compensation for those services. Id. at 24-26.

II. DISCUSSION

The court must uphold the Final Results unless they are unsupported by substantial

evidence on the record or are otherwise not in accordance with law. 19 U.S.C.

§ 1516a(b)(1)(B)(i) (2006). “Substantial evidence is more than a mere scintilla. It means such

relevant evidence as a reasonable mind might accept as adequate to support a conclusion.”

Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938).

Atar argues, first, that Commerce erred in refusing to determine normal value according

to Atar’s third country selling activity in Angola. Mot. for J. on the Agency R. Submitted

Pursuant to Rule 56.2 of the Rules of the U.S. Court of Int’l Trade 18-34 (“Pl.’s Br.”).

Contending that Commerce incorrectly found that a “particular market situation” prevented a

proper price comparison of Atar’s U.S. sales to its selling activity in Angola, Atar argues that a

particular market situation analysis “can only be used in very limited circumstances where it is

impossible to properly compare a respondent’s U.S. sales with its sales in the comparison

market.” Id. at 2. According to Atar, “no legal basis for a finding of [a particular market

situation] was established on the facts of record.” Id.

Atar’s second, and alternative, challenge to the Final Results is to Commerce’s

calculation of ISE and profit for use in the constructed value determination. Id. at 39-65. Atar

claims that Commerce erred when, in performing the constructed value determination for Atar, it
Court No. 07-00086 Page 6

used the indirect selling expenses incurred, and the profits realized, on sales made in the ordinary

course of trade by six respondent companies (other than Atar) in the previous (eighth)

administrative review. Atar argues that in so doing, Commerce did not comply with the statutory

requirement in 19 U.S.C. § 1677b(e)(2)(B)(iii) to calculate ISE and profit according to a

“reasonable method.” Id. at 39-65; 19 U.S.C. § 1677b(e)(2)(B)(iii).

Finally, Atar contends that Commerce acted unlawfully when, in determining constructed

value, it included in the calculation of Atar’s selling, general and administrative expenses an

amount for the value of certain services rendered to Atar by its principal, a shareholder in the

company who made a decision to forego salary. Pl.’s Br. 66-67. Atar argues that Commerce

acted contrary to law in valuing those services based on the total amount of dividends paid by

Atar to the principal. Id.

A. Commerce Acted Lawfully in Declining to Determine Normal Value Based on Atar’s Third
Country Selling Activity

Atar challenges Commerce’s findings that Atar’s selling activity in Angola constituted a

single sale and that, for purposes of 19 U.S.C. § 1677b(a)(1)(B)(ii)(III) and (a)(1)(C)(iii), a

particular market situation existed with respect to that sale that prevented a proper comparison

with export price. See Final Results, 72 Fed. Reg. at 7012. Atar argues that it actually made

multiple sales in Angola, rather than one sale as the Department found. Pl.’s Br. 19-24. Atar

argues, further, that the Department improperly concluded that a particular market situation

existed and that what the Department considered to be significant differences between Atar’s

U.S. sales and Angolan sales were actually minor and insignificant. Id. at 2, 19-34. Next, Atar

contends that Commerce lacked the legal authority to conduct a “particular market situation”
Court No. 07-00086 Page 7

analysis in the absence of a specific allegation by a party that a particular market situation

existed. Id. at 34-37. Finally, Atar claims that even if the regulations permitted a particular

market situation analysis in the absence of an allegation, Commerce’s stated intention in the

Preliminary Results to use such an analysis was not timely and did not allow Atar an adequate

opportunity to register its opposition. Id. at 37-39. The court does not find merit in these

arguments.

1. Commerce’s Determination that a Single Sale Occurred Between Atar and Its Angolan
Customer Is Supported by Substantial Record Evidence

In finding that Atar made only a single sale in the Angolan market during the period of

review, Commerce relied on record evidence including an agreement (“Sale Agreement”) setting

forth certain terms for the sale of pasta by Atar to a single customer in Angola, dates of invoices,

Atar’s rebuttal comments submitted during the review, and a statement from an Atar employee.

See Decision Mem. 8; see also Resp. of Atar S.r.l. to Fourth Supplemental Antidumping Duty

Questionnaire Ninth Admin. Review, Ex. S-10 (“Sale Agreement”)2 (June 30, 2006) (Confidential

Admin. R. Doc. No. 30; Admin. R. Doc. No. 93) (“Atar’s Fourth Supplemental Questionnaire

Resp.”); Admin. Review of the Antidumping Duty Order on Certain Dry, Non-Egg Pasta from

Italy: 07/01/04-06/30/05; Determination of Particular Market Situation; Resp. to Dep’t of

Commerce letter dated August 1, 2006 12-16 (Aug. 25, 2006) (Confidential Admin. R. Doc.

No. 44) (“Atar’s Confidential Resp.”). From this record evidence, Commerce concluded that the

2
Although Atar claimed proprietary treatment for the existence of the agreement during
the administrative proceeding, the company publicly discussed the agreement in its Rule 56.2
brief. See Mot. for J. on the Agency R. Submitted Pursuant to Rule 56.2 of the Rules of the U.S.
Court of Int’l Trade 21-22.
Court No. 07-00086 Page 8

material terms of sale were established by the Sale Agreement and that Atar’s selling activity in

Angola constituted a single sale with multiple shipments. See Decision Mem. 11.

Atar contends that the record demonstrates that Atar made multiple, distinct sales in

Angola during the period of review rather than the one sale the Department found. Pl.’s Br. 19.

Atar points to the invoice dates of its shipments, arguing that the Department, pursuant to

19 C.F.R. § 351.401(i) (2006), routinely uses the invoice date as the date of sale unless a

different date better demonstrates the date on which the material terms of sale were established.

Pl.’s Br. 19-20. According to Atar, each of the separate invoices, per 19 C.F.R. § 351.401(i), is

record evidence of a separate sale because the invoices established material terms of sales. Id.

at 20-22; see 19 C.F.R. § 351.401(i). Atar argues that the Sale Agreement was an informal

preliminary agreement, not a binding sales contract. Pl.’s Br. 19-24. Atar submits that essential

terms, such as port of destination, quantities, and production and shipment dates, were subject to

change after the Sale Agreement was signed. Id. at 21-22. Atar argues that without a port of

destination, the destination of the goods (“a key material term . . . not defined in the agreement”)

and the cost of shipping are not agreed upon. Reply to Resps. of Def. and Def.-Intervenor to Pl.’s

Mot. for J. on the Agency R. Submitted Pursuant to Rule 56.2 of the Rules of the U.S. Court of

Int’l Trade 16 (“Pl.’s Reply”). Atar also argues that the Sale Agreement provides no penalty for

non-delivery of product or other contractual violations and that the price paid in the actual

currency of the transaction (U.S. dollars, rather than Euros) was not established until the invoice

date. Id. at 17. Further, Atar argues that “[e]ach shipment [into Angola] required a separate

import license tailored specifically to the prices and quantities reflected in the pro-forma invoice

and not to the preliminary prices and quantities reflected in the memo of understanding,” a fact
Court No. 07-00086 Page 9

that, along with the requirement for each shipment to have a separate pro-forma invoice,

“supports the conclusion that the invoice date, rather than the date of the memorandum of

understanding, is the date of sale.” Pl.’s Br. 23.

The court is not convinced by plaintiff’s argument that Commerce, on the record facts,

was required by its regulation, 19 C.F.R. § 351.401(i), to regard each invoice as constituting a

separate sale. The cited regulation provides that the Secretary of Commerce “normally” will use

the date of invoice as the date of sale, but the regulation also qualifies the normal practice, stating

that “the Secretary may use a date other than the date of invoice if the Secretary is satisfied that a

different date better reflects the date on which the exporter or producer establishes the material

terms of sale.” 19 C.F.R. § 351.401(i); see also Antidumping Duties; Countervailing Duties,

62 Fed. Reg. 27,296, 27,349 (May 19, 1997) (the “Preamble”) (“If the Department is presented

with satisfactory evidence that the material terms of sale are finally established on a date other

than the date of invoice, the Department will use that alternative date as the date of sale.”

(emphasis added)); see also Agreement on Implementation of Article VI of the General

Agreement on Tariffs and Trade 1994, Marrakesh Agreement Establishing the World Trade

Organization, Annex 1A, Art. 2.4.1, n.8 (1994) (stating that “[n]ormally, the date of sale would

be the date of contract, purchase order, order confirmation, or invoice, whichever establishes the

material terms of sale”). The pertinent question, therefore, is whether substantial evidence of

record supports Commerce’s finding that the Sale Agreement established the material terms of

Atar’s entire selling activity in Angola during the period of review. The court concludes that it

does.
Court No. 07-00086 Page 10

During the review, Commerce instructed that Atar report as its “date of sale” the date on

which the material terms of sale were established. In its initial questionnaire responses, Atar did

not disclose the existence of a sales agreement pertaining to its selling activity in Angola. See

Atar’s Section A Questionnaire Resp. 11 (Oct. 31, 2005) (Admin. R. Doc. No. 26) (“[A]ll sales in

both markets were initiated by the customer’s purchase order . . . . Atar then communicates the

order to its unaffiliated tolling processors and . . . issues a commercial invoice to the customer.”).

Atar claimed during the review that the invoice date was the proper date of sale. See Letter

Regarding § 751 Admin. Review of the Antidumping Duty Order on Certain Dry, Non-Egg Pasta

from Italy: 07/01/04-06/30/05 at 10 (Dec. 2, 2005) (Admin. R. Doc. No. 41) (“Invoice date has

been used as the date of sale by Atar in each review as it represents the date that all material

terms are fixed . . . .”). Atar disclosed the existence of the Sale Agreement only in response to

questioning from the Department, which observed that the invoice date for Atar’s first sale in

Angola preceded the date on which Atar instructed its toll processor to produce pasta. Atar

acknowledged that its submitted description of its sales practices in Angola “was not properly

qualified” and explained that “Atar invoiced . . . pursuant to the prices agreed upon with the third

party trading company in the price agreement, at the quantities ordered by phone . . . .” Atar’s

Fourth Supplemental Questionnaire Resp. 11. Atar went on to explain that “[p]rices and all

relevant sales terms are contained in the agreement, attached as Exhibit S-10.” Id. at 12.

Commerce found that the Sale Agreement established the material terms of a sale and that the

material terms so established did not change. Decision Mem. 12 (stating that there was “no

documentary evidence that the terms [of the Sale Agreement] were subject to change, nor did the

essential terms change in any way from those specified”).
Court No. 07-00086 Page 11

Commerce acts reasonably, and within its authority, in considering a sale or an agreement

to sell to exist as of the time when the material terms of sale, i.e., price and quantity, have been

established between the foreign producer/exporter and the customer. See Corus Staal BV v.

United States, 502 F.3d 1370, 1376 (Fed. Cir. 2007) (“Neither a sale nor an agreement to sell

occurs until there is mutual assent to the material terms (price and quantity).”). In this review,

Commerce determined that the Sale Agreement, which was signed by Atar and dated by its

Angolan customer, established price and quantity and thereby established the material terms of a

sale by Atar to that customer. Decision Mem. 12. With regard to quantity, Commerce found that

“[t]he quantity specified in the sales agreement is identical to the quantity invoiced and

delivered.” Id. The Department concluded that the price was established in the Sale Agreement

because “[t]he record shows that the euro price established in the [Sale Agreement] is the

controlling price. . . . This euro price does not change [al]though foreign currency exchange

rates may fluctuate from day to day.” Id. at 13. Commerce noted that “Atar itself on several

occasions referred to the terms of sale, as established in the agreement, as fixed.” Id. (quoting

the Atar submission stating that “[p]rices and all relevant sales terms are contained in the

agreement, attached as Exhibit S-10 and are not typically reiterated by the parties”).

On this record, the court is unable to agree with plaintiff that Commerce, having found

that the Sale Agreement established the price and quantity terms of a sale, erred in concluding

that other matters did not constitute essential terms. By Atar’s own admission, “[p]rices and all

relevant sales terms are contained in the agreement.” Atar’s Fourth Supplemental Questionnaire

Resp. at 12. Atar argues that Commerce failed to consider a statement of an Atar official,

submitted by Atar, attesting to a personal belief that the Sales Agreement “did not constitute a
Court No. 07-00086 Page 12

binding agreement to sell a fixed quantity of pasta at a fixed price.” Pl.’s Br. 23-24. In

considering the record evidence as a whole, Commerce was not required to accord controlling

weight to this self-serving statement, which appears to offer a legal conclusion on whether the

Sale Agreement is enforceable rather than inform Commerce of facts probative on the issue of

whether the Sale Agreement established the material terms of sale. The court is also

unconvinced by Atar’s argument that the requirement for each shipment to be accompanied by a

separate import license in Angola that is tied to a separate pro forma invoice supports the

conclusion that the invoice date, rather than the date of the Sale Agreement, is the date of sale.

See id. at 23. The pertinent determination is the date upon which the material terms of a sale of

merchandise were settled between the parties. The existence of an import licensing requirement

in Angola that applies to each separate shipment and invoice does not refute the substantial

record evidence that the Sale Agreement settled these terms.

In summary, the court concludes, based on its examination of the record evidence,

including the Sale Agreement and Atar’s own admission in communications with the Department

during the review, that substantial evidence supports Commerce’s findings that the material

terms of sale were established by the Sale Agreement and that Atar’s selling activity in Angola

during the review consisted of a single sale.

2. Commerce’s Determination that Atar’s Angolan Selling Activity Should Not Be Compared to
Atar’s U.S. Sales Due to a Particular Market Situation Is Supported
by Substantial Record Evidence

The court next considers Atar’s claim that the record does not support Commerce’s

determination that a “particular market situation” existed under which Commerce could not make

a proper comparison between Atar’s selling activity in Angola and Atar’s U.S. sales. The term
Court No. 07-00086 Page 13

“particular market situation” is not defined by the statute, Commerce’s regulations, or the

Statement of Administrative Action (“SAA”) accompanying the Uruguay Round Agreements

Act. See 19 U.S.C. § 1677b(a)(1)(B)(ii)(III) and (a)(1)(C)(iii); 19 C.F.R. § 351.404(c)(2)(i)

(2006); Uruguay Round Agreements Act Statement of Administrative Action (“SAA”), H.R.

Doc. No. 103-316, at 656 (1994), reprinted in 1994 U.S.C.C.A.N. 4040. Under the language in

the statute, Commerce has considerable discretion in determining whether a particular market

situation in a third country prevents a proper comparison with export price or constructed export

price. Nevertheless, the court must consider whether such a determination is supported by

substantial record evidence and is otherwise in accordance with law. In so doing, it must

consider whether the determination is based on “[a] rational connection between the facts found

and the choice made.” Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962).

Commerce based its determination on several findings. The Department found that the

sale Atar made during the POR in Angola constituted a low percentage of the aggregate volume

of Atar’s U.S. sales for the POR. See Ninth Admin. Review of Pasta from Italy - Determination

of Particular Market Situation 2 (Aug. 1, 2006) (Confidential Admin. R. Doc. No. 40; Admin. R.

Doc. No. 106) (“Particular Market Situation Mem.”). Finding according to record evidence that

Atar did not make any sales of the foreign like product in Angola prior to the period of review,

the agency found that Atar did not have an established market in Angola during the period of

review, during which only the single sale occurred. Id. (concluding, in the absence of other sales

of pasta, that “there is no reason to believe that a single sale of pasta would be indicative of an

established market”); see Decision Mem. 10. In concluding that Atar lacked an established

market in Angola during the period of review, the Department also considered evidence
Court No. 07-00086 Page 14

consisting of four invoices that Atar placed on the record pertaining to selling activity in Angola

after the POR. Decision Mem. 11. Commerce concluded that these invoices, although speaking

to the development of a market over time, were not evidence of an established market prior to the

sales represented by the four invoices. Commerce reasoned as follows:

[W]e note that Atar has placed four invoices on the record of this review as
evidence of subsequent sales. Atar did not provide the Department with any sales
agreement relating to any of these four subsequent shipments. Consequently, the
Department cannot determine whether these four invoices constitute one or more
sales, as evidence on the record of this review indicates that multiple invoices may
be generated for a single sale. Because the record evidence regarding these
subsequent transactions is scant and inconclusive, the Department does not find
that the record evidence with respect to subsequent sales provides sufficient
support for a finding that during the POR Atar had an established market in
Angola for the foreign like product.

Decision Mem. 11. The Department found, further, that the particular structure of Atar’s sale in

Angola prevented a proper comparison with Atar’s sales in the United States in that Atar’s sales

of pasta in Angola, unlike the company’s U.S. sales, were made through a “triangular” selling

arrangement; i.e., a Lebanese company ordered pasta from Atar on behalf on the Angolan

customer. Particular Market Situation Mem. 3; see also Def.’s Br. 5 (citing Letter Regarding

§ 751 Admin. Review of the Antidumping Duty Order on Certain Dry, Non-Egg Pasta from Italy:

07/01/04-06/30/05 at 8-9 (Dec. 1, 2005) (“Atar’s Dec. 1, 2005 Rebuttal Comments”)

(Confidential Admin. R. Doc. No. 5)). Atar issued invoices to, and received payment from, the

Lebanese company but shipped its pasta to the Angolan customer. See Particular Market

Situation Mem. 3; see also Def.’s Br. 5 (citing Atar’s Dec. 1, 2005 Rebuttal Comments 8-9).

Atar argues, unpersuasively, that the appropriate test for whether an established market

exists is whether a market was established for the foreign like product, not whether a market was
Court No. 07-00086 Page 15

established for a foreign like product sold by Atar. Pl.’s Br. 24-25. Because the relevant issue

was whether Atar’s presence in the Angolan market was appropriate to serve as a comparison

market for Atar’s U.S. sales, it was reasonable for Commerce to consider Atar’s own market

experience in Angola. Commerce logically considered the evidence Atar submitted to be, on the

whole, insufficiently probative on the question of whether a market existed for Atar’s products in

Angola. Decision Mem. 9-10 (noting that Atar’s evidence consisted of “invoices of pasta and

other products which Atar did not produce” and that “pet food and corn meal are not within the

definition of foreign like product in this case”). Commerce also found, based on the record

evidence, that “the vast majority of invoices” submitted by Atar consisted of sales to markets in

Africa other than Angola, including Togo, Congo, Kenya, and Somalia. Id. at 9.

In its brief to the court, Atar argues that the differences between the U.S. markets and the

Angolan markets were either formalistic or of a type that Commerce could address adequately by

calculating artificial additional costs for ordinary operations. Pl.’s Br. 30-33. The court rejects

this argument because substantial record evidence supports Commerce’s finding that Atar’s sales

to the United States and Atar’s sale to Angola differed in material respects. See Decision

Mem. 11. Those differences included direct versus indirect sales; differences in product mix;

differences in the timing and sequencing of sale, order, production, invoicing, and shipment; and

significant differences in the average payment date. Id.

The Department took the position that it could adjust for “common differences in terms

of sales where such differences are quantifiable.” Id. It stated, however, that “we have no

accurate means through which to measure the effect on price of other, much more unusual

differences, e.g., the significant difference in the timing and manner in which order, production,
Court No. 07-00086 Page 16

invoicing, shipment and payment occur.” Id. The Department viewed the triangular sale

arrangement affecting Atar’s sale to Angola as distinguishable from the arrangement of Atar’s

sales in the United States; based on Atar’s verification statements, Commerce found that title and

ownership of pasta were transferred to the trading company at the time of invoicing, making it

unclear whether Atar ever held title to the finished pasta it allegedly sold. Id. As Commerce

pointed out, Atar itself acknowledged at various points in the process that its sale to Angola was

unique and admitted that the manner in which it sold to Angola “is in strict contrast to the U.S.

market for which no special import licenses are required, no pro-forma invoices are necessary.”

Id. at 12 (quoting Atar in submissions in which the company commented that “[t]he Angolan

sales and invoicing process is significantly different” and referred to “unique requirements for

selling product to Angola,” the “unique nature of the Angolan market,” and the “unique nature of

the triangular sales arrangement.” (emphasis in Decision Mem.)). Based on the record evidence

and the analysis set forth in the Decision Memorandum, the court concludes that Commerce

reasonably determined that it could not make a proper comparison between these different types

of sales, even through the use of adjustments.

Citing Chemetals, Inc. v. United States, 25 CIT 232, 138 F. Supp. 2d 1338 (2001), Atar

claims that Commerce should have concluded that Atar’s selling activity in Angola did not

present a particular market situation. Pl.’s Br. 27-28. Atar points to language in the opinion in

that case stating that “even a single entry of subject merchandise is sufficient where such an entry

is indicative of the respondent’s regular pricing practices.” Id. 27 (quoting Chemetals, 25 CIT

at 242, 138 F. Supp. 2d at 1350). The language from Chemetals relied on by Atar is not on point.

The opinion in Chemetals expressly uses the reference to a possible single sale to illustrate the
Court No. 07-00086 Page 17

principle that “the statute sets no minimum quantity of U.S. sales that may be used in making the

direct comparison to home market sales.” Chemetals, 25 CIT at 242, 138 F. Supp. 2d at 1350

(emphasis added).

In summary, the court concludes that Commerce’s decision not to use Atar’s third country

selling activity in Angola for purposes of determining normal value, based on a finding of a

particular market situation affecting that selling activity, is supported by substantial record

evidence and is also supported by a rational explanation for the choice Commerce made.

3. Commerce Did Not Err in Proceeding with a “Particular Market Situation”
Analysis Without an Allegation

Commerce considered, and decided, whether Atar’s proposed third-country comparison

market was affected by a particular market situation without first having received from a party to

the review an allegation that a particular market situation existed. Atar objects to Commerce’s

proceeding with its analysis in the absence of such an allegation. Pl.’s Reply 10. Atar directs the

court’s attention to certain language in the preamble accompanying the promulgation of the

Department’s regulations (the “Preamble”), which states, “[t]here are a variety of analyses called

for . . . that the Department typically does not engage in unless it receives a timely and

adequately substantiated allegation from a party.” Pl.’s Br. 34-35 (quoting Preamble, 62 Fed.

Reg. at 27,357) (emphasis in Pl.’s Br.). Atar argues further that, if Commerce proceeds without

an allegation, it “must provide a substitute for the allegation,” and the substitute “must fall within

the time lines contemplated by the statute and regulation.” Pl.’s Reply 10-11. Atar claims, in

addition, that by proceeding as it did, Commerce left Atar no effective way to address the issues

involving the comparison market that Atar proposed. Id. at 10.
Court No. 07-00086 Page 18

The general shortcoming in plaintiff’s argument is that neither the statute nor the

regulations prohibit Commerce from determining, even absent an allegation, that a third-country

market is affected by a particular market situation. Moreover, the Preamble language, in stating

that Commerce “typically” proceeds only upon a timely allegation, does not state or imply that

Commerce intended to confine its own discretion such that it could not act sua sponte. See

Preamble, 62 Fed. Reg. at 27,357. Nor do the statute or regulations require Commerce to

provide a “substitute” for such an allegation. Atar’s argument that, absent an allegation, it has no

effective opportunity to respond hinges on certain provisions in Commerce’s regulations, namely

19 C.F.R. §§ 351.404 and 351.301(d)(1) (2006). See Pl.’s Br. 34-39. Under these provisions,

allegations regarding market viability generally, and specific allegations regarding the existence

of a particular market situation in the exporting country or a third country, must be made

according to specified time limits. See 19 C.F.R. § 351.404(d) (requiring that allegations

involving a particular market situation be made in accordance with § 351.301(d)(1)); 19 C.F.R.

§ 351.301(d)(1) (requiring that the allegation be made within forty days of the transmission of the

initial questionnaire unless the Secretary alters this time limit). Atar argues that allegations

regarding a particular market situation “must” be submitted within forty days of the transmission

of the initial questionnaire, as required by 19 C.F.R. § 351.301(d)(1), and that “[t]his regulation

is as binding on Commerce as it is to parties to the proceeding.” Pl.’s Reply 12. This argument

ignores the purpose of 19 C.F.R. § 351.301, which is to govern time limits for submission of

factual information from interested parties; the section does not address the question of a time

limit when the particular market situation analysis originates with Commerce. See 19 C.F.R.

§ 351.301(a) (“The Department obtains most of its factual information in antidumping and
Court No. 07-00086 Page 19

countervailing duty proceedings from submissions made by interested parties during the course

of the proceeding. This section sets forth the time limits for submitting such factual

information . . . .”).

The record does not support Atar’s contention that it was denied an effective opportunity

during the review to address the question of whether its proposed comparison market in Angola

was affected by a particular market situation. Commerce announced its finding of a particular

market situation in the Preliminary Results. See Prelim. Results, 71 Fed. Reg. at 45,020. Atar

argues that its opportunity to submit arguments on the preliminary determination was

“meaningless” because Commerce did not make its final particular market situation

determination until it issued the Final Results, thereby “effectively depriv[ing Atar] of the

opportunity to comment on the actual logic of Commerce in making the [particular market

situation] determination.” Pl.’s Reply 11 (footnote omitted). Atar itself acknowledges, however,

that a primary item of information that triggered Commerce’s particular market situation

analysis–the Sale Agreement–was not filed until late in the proceedings. See id. at 13, n.5. Also,

neither the statute nor the Department’s regulations require Commerce to provide a party the

opportunity to comment on a particular market situation analysis prior to issuing the Preliminary

Results. See Preamble, 62 Fed. Reg. at 27,357 (“[T]he Department’s [antidumping]

methodology contains presumptions that certain provisions of section [1677b] do not apply

unless adequately alleged by a party or unless the Department uncovers relevant information on

its own.”); see also 19 U.S.C. § 1677m(g) (2000) (entitling a respondent to comment on all

information in the record prior to the Final Results). Atar in fact submitted comments and

information in response to the particular market situation finding by Commerce and submitted
Court No. 07-00086 Page 20

additional comments in its case brief to the agency. See Atar’s Confidential Resp. 1; Case Br. of

Atar Srl Ninth Admin. Review 4-46 (Dec. 28, 2006) (“Atar’s Admin. Case Br.”) (Confidential

Admin. R. Doc. No. 56). For these reasons, the court does not find merit in Atar’s arguments

concerning the lack of an allegation, the lack of a “substitute” for an allegation, and the alleged

lack of an opportunity to comment on the analysis by which the Department concluded that a

particular market situation affected Atar’s proposed comparison market.

B. The Court Remands the Final Results for Reconsideration of the Department’s
Determinations of Constructed Value ISE and Profit

The court is remanding the Final Results to the Department for reconsideration, and

redetermination as necessary, of its determinations of Atar’s constructed value ISE and profit,

which are not supported by adequate reasoning. Although concluding that certain of the

decisions Commerce made in making these determinations were in accordance with law, the

court concludes that these determinations, considered as a whole, do not meet the statutory

requirement expressed in 19 U.S.C. § 1677b(e)(2)(B)(iii) that constructed value ISE and profit be

determined according to a “reasonable method.”

The constructed value of the merchandise of a respondent producer or exporter usually is

calculated as the sum of (1) the cost of materials and processing used in producing the

merchandise, during a period which would ordinarily permit the production of the merchandise

in the ordinary course of business; (2) the actual selling, general, and administrative expenses

incurred by the producer or exporter, and actual profits realized by the producer or exporter, in

connection with the production and sale of a foreign like product, in the ordinary course of trade,

for consumption in the foreign country; and (3) the costs of all containers and coverings and all
Court No. 07-00086 Page 21

other expenses incidental to placing the subject merchandise in condition packed ready for

shipment to the United States. 19 U.S.C. § 1677b(e)(1), (e)(2)(A), (e)(3). The Department

calculated a constructed value for Atar’s ISE and profit ratios by using the weighted-average

indirect selling expenses and a weighted-average profit rate derived from the home market data

of six respondent companies in the previous (eighth) administrative review (“Final Results 8th

Review”).3 See Decision Mem. 20-23 (citing Notice of Final Results of the Eighth Admin.

Review of the Antidumping Duty Order on Certain Pasta From Italy and Determination to

Revoke in Part, 70 Fed. Reg. 71,464 (Nov. 29, 2005)). Commerce confined its calculations to

data pertaining to sales of those six respondents that were in the ordinary course of trade.

In calculating a constructed value for Atar’s subject merchandise, the Department

determined that it could not proceed under 19 U.S.C. § 1677b(e)(2)(A) because Atar lacked a

viable comparison market. Id. at 19. Commerce explained that because it had rejected the use of

Atar’s selling activity in Angola as a comparison market, it could not rely on the actual ISE

incurred, and profit realized, in the single sale in Angola when determining Atar’s constructed

value ISE and profit. Id. Accordingly, Commerce considered each of the three alternatives in

§ 1677b(e)(2)(B)(i)-(iii).

Commerce determined that it could not proceed under alternatives (i) and (ii), and

calculated constructed value profit and ISE for Atar under alternative (iii), of § 1677b(e)(2)(B).

3
The six respondent companies are Barilla G.e.R. Fratelli, S.p.A. (formerly Barilla
Alimentare, S.p.A.), (2) Corticella/Combattenti, (3) Industrie Alimentare Colavita, S.p.A., (4)
Pastificio F.lli Pagani S.p.A., (5) Pastificio Antonio Pallante S.r.L. and its affiliate Vitelli Foods
LLC, and (6) Pastificio Riscossa F.lli Mastromauro, S.r.L. Issues and Decisions for the Final
Results of the Ninth Admin. Review of the Antidumping Duty Order on Certain Pasta from Italy
and Determination to Revoke in Part 15, n.5 (Admin. R. Doc. No. 150).
Court No. 07-00086 Page 22

Commerce disregarded alternative (i) because Atar did not produce any products other than the

subject merchandise. Id. at 20. Alternative (ii), Commerce concluded, was unavailable because

the use of data of the only other respondent in the review, Corticella, would “reveal the business-

proprietary nature of that information,” Corticella having failed to provide publicly ranged sales

and cost data. Id. at 19-20. Accordingly, the agency proceeded under alternative (iii), which

permits the Department to use “any other reasonable method,” subject to the “profit cap”

limitation on the determination of constructed value profit. 19 U.S.C. § 1677b(e)(2)(B)(iii).

Commerce reasoned that, in accordance with the strong preference in § 1677b(e)(2)(B)(i)-(iii) for

the calculation of constructed value profit using data on sales in the home country market,

Commerce would use the profit and ISE data from six Italian producers’ home market sales from

the Final Results 8th Review. Decision Mem. 20. Commerce described its methodology as

similar to that set forth in alternative (ii), “the only difference being that the methodology used is

based on respondents of the preceding review rather than respondents of the current review.” Id.

1. Commerce Acted Lawfully in Deciding Not to Use Atar’s Profit and ISE Data from
Selling Activity in Angola in Determining Constructed Value

Atar argues that, even if the court upholds Commerce’s finding of a particular market

situation, the court should conclude that Commerce erred in not using data on Atar’s own profit

and ISE for its sales activity in Angola when calculating the constructed value of Atar’s

merchandise. Pl.’s Br. 42-47 (citing 19 U.S.C. § 1677b(a)(4) and 19 U.S.C.

§ 1677b(a)(1)(B)(ii)). According to Atar, Commerce could have used the method of 19 U.S.C.

§ 1677b(e)(2)(A) because that provision directs Commerce to determine constructed value ISE

and profit based on the exporter’s sales of the foreign like product, in the foreign country, that are
Court No. 07-00086 Page 23

made in the ordinary course of trade. Id. at 44 (“Section [1677b(e)(2)(A)] does not prevent

Commerce from using a producer/exporter’s actual experience merely because the market may

not be ‘viable.’”). Atar argues that a finding of a particular market situation does not mean that

the sales are not made in the ordinary course of trade for purposes of 19 U.S.C. § 1677b(e)(2)(A).

Although Atar does not so state, the court understands Atar’s argument to rely on

19 C.F.R. § 351.405 (2006). In this regulation, which construes 19 U.S.C. § 1677b(e)(2)(A)

and (e)(2)(B), Commerce addresses the constructed value calculation and “clarifies” the meaning

of certain terms relating to constructed value. See 19 C.F.R. § 351.405. Commerce’s regulation

defines the same statutory term, “foreign country,” to include a third country for purposes of

19 U.S.C. § 1677b(e)(2)(A) but not for purposes of 19 U.S.C. § 1677b(e)(2)(B). See id.

§ 351.405(b) (referencing 19 C.F.R. § 351.404(e), which addresses criteria for the selection of a

third country for purposes of calculating normal value). In Thai I-Mei Frozen Foods Co., Ltd. v.

United States, 32 CIT ___, ___, 572 F. Supp. 2d 1353, 1370-71 n.4 (2008) (“Thai I-Mei II”), the

validity of 19 C.F.R. § 351.405 was questioned. The opinion noted that Commerce, when

promulgating this regulation, rejected the position of commenting parties that Commerce,

impermissibly and contrary to established principles of statutory construction, was attempting to

adopt inconsistent definitions of the same statutory term as that term appeared in the two

subparagraphs of 19 U.S.C. § 1677b(e)(2). Thai I-Mei II, 32 CIT at ___, 572 F. Supp. 2d

at 1370-71 n.4 (citing Preamble, 62 Fed. Reg. at 27,358). However, even if the court were to

assume, for purposes of this case, that the regulation is valid and would have enabled Commerce

to apply § 1677b(e)(2)(A) on this record, the court still could not conclude that Commerce acted

unlawfully in declining to proceed in the way plaintiff advocates. Commerce found that the
Court No. 07-00086 Page 24

particular market situation that existed with respect to Atar’s sale in Angola prevented a proper

comparison between Atar’s selling activity in Angola and its selling activity in the United States.

Commerce decided against relying on Atar’s ISE and profit for Angola because doing so would

result in constructing an Angolan price, which the agency concluded would not provide a proper

basis for comparison. Decision Mem. 19 (“Since price is equal to cost plus profit, to base

[constructed value] profit on the sale to Angola in effect would result in us [sic] constructing the

Angolan sale price. As a result, we cannot determine [constructed value] ISE and profit under

section [1677b(e)(2)(A)] (the preferred method), which requires comparison market sales by the

respondent to be used as the basis for ISE and profit.”). The Department’s decision not to use

Atar’s selling activity in Angola as the source of data for determining constructed value ISE and

profit rested on the several findings regarding Atar’s sale to Angola that supported Commerce’s

ultimate finding of a particular market situation. As discussed previously, the administrative

record contains substantial evidence supporting those findings. Regardless of whether

Commerce validly could have used the ISE and profit data from the sale in Angola in its

constructed value determination, the court is unable to conclude that Commerce was required to

do so.

2. Commerce Acted Lawfully in Deciding Not to Use the Corticella Data

Having concluded that determining constructed value ISE and profit for Atar according to

19 U.S.C. § 1677b(e)(2)(A) was inappropriate for this review, Commerce determined these

elements of constructed value according to § 1677b(e)(2)(B). Commerce was correct in its

conclusion, not challenged by Atar in this litigation, that alternative (i) of § 1677b(e)(2)(B) was

unavailable because Atar did not produce any merchandise other than the subject merchandise.
Court No. 07-00086 Page 25

19 U.S.C. § 1677b(e)(2)(B)(i). Atar challenges Commerce’s decision not to resort to

alternative (ii) and specifically takes issue with Commerce’s reasoning that reliance on the

submitted information of Corticella, the only other respondent in the current review, “would

reveal the business-proprietary nature of that information.” Decision Mem. 20. According to

Atar, Corticella’s data were the “perfect surrogate,” and the problem Commerce identified–that

use of the data would reveal Corticella’s confidential information in the absence of a publicly

ranged version–should not have prevented Commerce from using those data. Pl.’s Br. 64-65.

Atar argues that it was unfairly punished for Corticella’s failure to produce its publicly ranged

data pursuant 19 C.F.R. § 351.304(c) (2006). Id. at 49.

This Court, in analogous circumstances involving data of a single respondent, previously

has affirmed Commerce’s refusal to rely on business proprietary selling expense data and profit

under alternative (ii) where use of such data would reveal that business proprietary information.

Geum Poong Corp. v. United States, 25 CIT 1089, 1092, 163 F. Supp. 2d 669, 674 (2001)

(“Geum Poong I”) (“Because calculating [constructed value] profit under Alternative Two . . .

would result in a [constructed value] profit ratio that impermissibly revealed Samyang’s

proprietary profit ratio, Commerce properly determined that Alternative Two was unavailable.”).

In this case, Commerce acted reasonably and in accordance with law in declining to proceed

under 19 U.S.C. § 1677b(e)(2)(B)(ii) because of its concern over the business-proprietary nature

of Corticella’s information. As Commerce pointed out, statutory and regulatory restrictions

apply to the dissemination of a respondent’s business proprietary information. See 19 U.S.C.

§ 1677f(b)-(c) (2006); 19 C.F.R. § 351.306(a) (2006); see Def.’s Br. 37 (“Congress strictly limits

Commerce’s release of a respondent’s business proprietary information to individuals subject to
Court No. 07-00086 Page 26

an administrative protective order, employees of Commerce connected with a given review, and

employees of Customs and Border Protection in connection with a Customs fraud

investigation.”). In the absence from the record of a nonproprietary version of the Corticella

data, Commerce had a valid reason for rejecting alternative (ii) as a basis for determining

constructed value ISE and profit.

Atar’s argument that it was unfairly punished by Corticella’s failure to place on the record

a nonproprietary version of its data relies on Commerce’s regulation, 19 C.F.R. § 351.304(c),

which addresses the filing of a public version of a business proprietary submission. This

regulation requires that public versions of documents containing nonproprietary summaries of

proprietary information, or an explanation of why proprietary information cannot be summarized,

be filed one business day after the due date of the business proprietary version of the document.

19 C.F.R. § 351.304(c). Although Corticella did not submit a nonproprietary version, Commerce

apparently did not reject that company’s data. The reason why a nonproprietary version of

Corticella’s data was absent from the record is irrelevant to the narrow issue presented by

Commerce’s choice to decline to proceed under alternative (ii). The relevant finding by

Commerce is that a nonproprietary version of Corticella’s data was not on the record. Atar’s

argument that it was unfairly punished by Corticella’s failure to submit a nonproprietary version

of the data is, therefore, unavailing.

3. The Court Cannot Sustain the Department’s Decision to Exclude Sales Outside the Ordinary
Course from the Constructed Value ISE and Profit Calculations Under Alternative (iii)

Atar argues that Commerce, when calculating constructed value ISE and constructed

value profit under alternative (iii), erred in using a method that excluded the home market sales
Court No. 07-00086 Page 27

of the Final Results 8th Review respondents that were outside the ordinary course of trade.4

Pl.’s Br. 63-64. Stating that alternative (iii) “does not provide for an exclusion of sales outside of

the ordinary course of trade,” Atar argues that this exclusion was not reasonable. Id. at 64.

Defendant argues that Commerce properly excluded the sales that were outside the ordinary

course of trade out of a desire to model its methodology upon alternative (ii) and that doing so

was within its discretion, under alternative (iii), to use “any other reasonable method.” See

Def.’s Br. 32. Defendant-intervenors argue that Commerce properly excluded such sales out of a

desire to simulate the “preferred method” of 19 U.S.C. § 1677b(e)(2)(A). See Resp. Br. of Def.-

Intervenors Am. Italian Pasta Co., New World Pasta Co., and Dakota Growers Pasta Co. 29, 32

(“Def.-Intervenors’ Br.”).

An agency generally is required to base a determination on “[a] rational connection

between the facts found and the choice made.” Burlington Truck Lines, 371 U.S. at 168. In

addition, the SAA indicates that Commerce, when choosing a method under alternative (iii),

must “‘provide to interested parties a description of the method chosen and an explanation of

4
The term “ordinary course of trade” is defined in the Tariff Act as:

the conditions and practices which, for a reasonable time prior to the exportation
of the subject merchandise, have been normal in the trade under consideration
with respect to merchandise of the same class or kind. The administering
authority shall consider the following sales and transactions, among others, to be
outside the ordinary course of trade:

(A) Sales disregarded under section 1677b(b)(1) of this title [which
section refers to below-cost sales].

(B) Transactions disregarded under section 1677b(f)(2) of this title
[which section refers to certain transactions between affiliated parties].

19 U.S.C. § 1677(15) (2000).
Court No. 07-00086 Page 28

why it was selected.’” Geum Poong Corp. v. United States, 26 CIT 322, 323 n.2,

193 F. Supp. 2d 1363, 1365 n.2 (2002) (quoting SAA at 840, as reprinted in 1994 U.S.C.C.A.N.

at 4176). Accordingly, the court considers the reasoning Commerce put forth in support of its

decision to exclude non-ordinary-course sales from the calculation of Atar’s constructed value

ISE and profit.

The Decision Memorandum explains that “we note that the Department’s preference

under alternative (B)(iii) is to closely simulate the preferred method[,] which requires that the

sales of the foreign like product be in the ordinary course of trade. Therefore, in accordance with

the preferred method, we have only included the respondents’ above-cost sales in the Final

Results 8th Review.” Decision Mem. 22. In using the term “preferred method,” the Decision

Memorandum refers to the method of § 1677b(e)(2)(A). Id. at 19. That method requires

Commerce to use in the constructed value calculation the actual selling expenses incurred (such

as ISE), and the actual profit realized, on sales of the foreign like product in the foreign market

that are made in the ordinary course of trade by the exporter or producer being examined in the

review. The Decision Memorandum discloses that Commerce, relying on the “ordinary course”

language in 19 U.S.C. § 1677b(e)(2)(A), determined Atar’s constructed value ISE and profit by

using only those data from the previous (eighth) administrative review that pertained to sales in

Italy of foreign like product that were made above cost by the six other respondents in that

review. Id. at 22. From the Decision Memorandum, the court concludes that the Department’s

principal rationale for excluding below-cost sales was that it is the Department’s general

preference to do so.
Court No. 07-00086 Page 29

As applied to constructed value profit, the reasoning Commerce adopted to support its

exclusion of below-cost sales in this review has been rejected by the Court of International Trade

in Thai I-Mei Frozen Foods Co., Ltd. v. United States, 31 CIT ___, ___, 477 F. Supp. 2d 1332,

1357 (2007) (finding inadequate Commerce’s explanation that “including only the sales made in

the ordinary course of trade is consistent with the Department’s preferred methodology of

calculating profit” (internal quotation marks and citation omitted)) and Thai I-Mei II, 32 CIT

at ___, 572 F. Supp. 2d at 1368 (rejecting the Department’s conclusion “that it was reasonable

for Commerce, when choosing a method under alterative (iii)” for calculating constructed value

profit, “to ‘mimic’ the general preference Commerce found in construing 19 U.S.C.

§ 1677b(e)(2)(A)”). Under § 1677b(e)(2)(A), Commerce, in determining constructed value, uses

the actual selling expenses incurred, and profit realized, on ordinary-course sales of the

respondent being reviewed. 19 U.S.C. § 1677b(e)(2)(A). In this case, Atar’s own data were not

used because Atar lacked a viable home country market for the foreign like product.

Consequently, the method Commerce applied under alternative (iii) resulted in Atar’s being

assigned a margin that was affected by the exclusion of below-cost sales that were made not by

Atar but by others. Commerce erred in considering the specific requirements of

§ 1677b(e)(2)(A), which do not extend to a determination made under § 1677b(e)(2)(B) and to

alternative (iii) thereunder, to be relevant to the issue of whether or not below cost sales should

be excluded from the calculation of Atar’s constructed value ISE and profit under

§ 1677b(e)(2)(B)(iii). See Thai I-Mei II, 32 CIT at , 572 F. Supp. 2d at 1364. The court,

therefore, rejects defendant-intervenors’ argument that Commerce properly excluded the non-

ordinary-course sales out of a desire to simulate the “preferred method” of 19 U.S.C.
Court No. 07-00086 Page 30

§ 1677b(e)(2)(A), which argument relies on Commerce’s flawed analysis. See Def.-Intervenors’

Br. 29, 32.

The Decision Memorandum uses language in the Preamble informing the public that

“depending on the circumstances and the availability of data, there may be instances in which the

Department would consider it necessary to exclude certain home market sales that are outside the

ordinary course of trade in order to compute a reasonable measure of profit for [constructed

value] under the third alternative method.” Decision Mem. 22-23; see also Preamble, 62 Fed.

Reg. at 27,359. Thus, the Preamble informs the public that Commerce does not consider it

appropriate to exclude non-ordinary-course sales from all constructed value profit calculations

under alternative (iii) but will approach the question on a case-by-case basis. The reference in

the Decision Memorandum to the Preamble language is puzzling because in this particular

review, Commerce excluded the below-cost sales of other respondents without relating that

exclusion to any particular circumstance of Atar’s. Commerce apparently considered the

situations of the respondents in the eighth review to be sufficiently similar to that of Atar in the

ninth review merely because the other respondents were also Italian companies that produced or

exported the foreign like product. See id. at 22-23. However, the Decision Memorandum states

no finding, and no record evidence, from which the court could conclude that the partial sales

experience of the six respondents in the preceding review (i.e., the sales experience of those

respondents as limited to above-cost sales) was a reasonable approximation of what Atar’s home

market sales experience would have been had Atar had a viable home market for the foreign like

product during the ninth review. In this respect, the exclusion of below-cost sales of the other

respondents, as Commerce applied that exclusion to Atar’s situation based on the Department’s
Court No. 07-00086 Page 31

general “preference” to do so, was arbitrary. A default policy or preference under which

Commerce inflexibly excludes below-cost sales in all situations such as the one presented here

cannot serve as a substitute for determining a “reasonable method” for purposes of

alternative (iii). Such a policy or preference is contrary to the Department’s own commitment, as

stated in the Preamble, to a case-by-case determination and does not further the principle that

Commerce is to calculate an antidumping margin as accurately as possible based on the particular

record before it. See Lasko Metal Prods., Inc. v. United States, 43 F.3d 1442, 1443 (Fed.

Cir. 1994); Geum Poong I, 25 CIT at 1098, 163 F. Supp. 2d at 679 (quoting NTN Bearing Corp.

v. United States, 74 F.3d 1204, 1208 (Fed. Cir. 1995)).

The Decision Memorandum also explains that Commerce excluded the below-cost sales

out of a desire to simulate the “preferred method” as that method is reflected in alternative (ii):

The Department’s methodology used in the Preliminary Results 9th Review
closely simulates alternative (B)(ii) in that it relies on data of sales of the foreign
like product in the foreign country in the normal course of trade, the only
difference being that the methodology used is based on respondents of the
preceding review rather than respondents of the current review. The
Department finds that this methodology, a version of alternative (B)(ii), most
closely simulates the preferred method in that it focuses on sales of the foreign
like product in the foreign country in the ordinary course of trade. For purposes
of these final results, we have continued to use the weighted-average ISE and
profit derived from the respondents in the immediately preceding administrative
review, Final Results 8th Review. The Department has determined that this
methodology most closely simulates the requirements of alternative (B)(ii) and
consequently, the preferred method, in that the weighted-average ISE and profit
amounts from the Final Results 8th Review represent actual amounts incurred
and realized in connection with the production and sale of the foreign like
product, in the ordinary course of trade, for consumption in the foreign country.

Decision Mem. 20. For two reasons, the court concludes that this rationale is misguided. First,

as the Decision Memorandum acknowledges, alternative (ii) was inapplicable because the sales
Court No. 07-00086 Page 32

data of the only other respondent in the review, Corticella, was not suitable for use in the ninth

review for the reasons previously discussed. Because alternative (ii) had no applicability in the

circumstance of the review, there was no apparent, logical basis for Commerce to draw from the

language of alternative (ii) a statutory or departmental preference for the exclusion of below-cost

sales that applies whenever Commerce is proceeding under alternative (iii) on facts analogous to

those presented here. See Thai I-Mei II, 32 CIT at ___, 572 F. Supp. 2d at 1367. Second, the

purpose of the exclusion of sales outside the ordinary course under alternative (ii) is to effectuate

the general principle that a respondent should not benefit from its own unfair sales in its home

market, a consideration not applicable in this case. See SAA at 840, reprinted in 1994

U.S.C.C.A.N. at 4176. The SAA explains that where Commerce cannot calculate profit for a

particular foreign producer under the general rule [i.e., 19 U.S.C. § 1677b(e)(2)(A)] because all

of that producer’s sales were at below-cost prices, that producer, absent the exclusion of below-

cost sales in alternative (ii), would benefit from its own unfair pricing because its profit figure

would be based on an average of other producers’ profitable and unprofitable sales. Id.; see Thai

I-Mei II, 32 CIT at ___, 572 F. Supp. 2d at 1366. The court, therefore, rejects defendant’s

argument that Commerce properly excluded the sales that were outside the ordinary course of

trade out of a desire to model its methodology upon alternative (ii). See Def.’s Br. 32.

Commerce’s error in excluding non-ordinary-course sales affected both the constructed

value ISE and the constructed value profit for Atar. In both respects, there is a failure to ground

the decision to exclude those sales in findings of fact, supported by substantial record evidence,

that are pertinent to Atar’s specific situation. With respect to constructed value profit in

particular, the failure to provide adequate reasoning for the method chosen under alternative (iii)
Court No. 07-00086 Page 33

also had implications for the profit cap provision within alternative (iii).5 In the Preliminary

Results, Commerce stated that “the weighted-average profit rate of the respondents in the Pasta

Eighth Review Final Results establishes a profit cap. Thus, the reasonable method used by the

Department to calculate profit does not exceed the profit cap.” See Prelim. Results, 71 Fed. Reg.

at 45,022. In the Final Results, Commerce calculated ISE and profit in the same manner as in the

Preliminary Results. Decision Mem. 19. From the record, it appears that Commerce used the

same data set, and the same methodology, to calculate the profit cap that it used to calculate

Atar’s constructed value profit. The court can only surmise that under the profit cap

methodology the Department applied in the review, no constructed value profit calculation could

ever exceed the profit cap because the two calculations would be the same. If this surmising is

correct, a question arises as to whether such a methodology results in a meaningless profit cap

that fails to serve the purposes Congress intended when it included the profit cap limitation

within the language of alternative (iii). For these various reasons, the court is not persuaded by

defendant’s argument that the court must uphold Commerce’s method of determining

constructed value ISE and profit according to Commerce’s broad discretion in selecting “any

other reasonable method” pursuant to alternative (iii). See Def.’s Br. at 32, 35; 19 U.S.C.

§ 1677b(e)(2)(B)(iii).

5
In alternative (iii), the statute imposes a general and a specific requirement. The general
requirement is that any method that Commerce chooses to use thereunder to determine selling,
general, and administrative expenses, and to determine profit, must be a “reasonable method.”
19 U.S.C. § 1677b(e)(2)(B)(iii) (2000). The specific requirement is the “profit cap” limitation on
Commerce’s determination of constructed value profit, which in pertinent part reads, “except that
the amount allowed for profit may not exceed the amount normally realized by exporters or
producers . . . in connection with the sale, for consumption in the foreign country, of merchandise
that is in the same general category of products as the subject merchandise.” Id.
Court No. 07-00086 Page 34

Atar makes several other arguments in challenging the reasonableness of the

Department’s calculation of its constructed value ISE and profit. Atar argues that Commerce’s

use of the weighted-average data from the Final Results 8th Review was unreasonable in general

because these data “bore no reasonable relationship to Atar’s Corporate make-up, selling

practices, market presence, or business experience” during the ninth period of review. Pl.’s

Br. 47. Atar argues that its business operations are dramatically different from those of the six

companies on which Commerce relied. Id. at 54. According to Atar, the number of customers

and invoices, the weight of product per invoice, and the number and weight of observations, are

indicators of whether business operations of different companies are similar. Id. Atar contends

that, because the other companies are not tollers, have different sales quantities of pasta, and

require utilization of ISE/profit data from a different period of review, these companies are not

sufficiently similar to Atar and therefore do not provide a proper comparison for purposes of

determining constructed value. Id. Atar also makes the specific argument that Commerce should

have relied on the weighted averages of only those respondents from the Final Results 8th

Review whose sales practices “more closely resemble the manner in which Atar conducts

business.” Id. 55. According to Atar, only certain of the respondents in the Final Results 8th

Review had a similar sales practice as Atar, i.e., a large quantity of sales to a limited customer

base. Id. Atar argues, additionally, that Commerce should exclude the data pertaining to

respondent Barilla G.e.R. Fratelli, S.p.A. (formerly Barilla Alimentare, S.p.A.) (“Barilla”) from

any analysis. Id. at 60. Atar maintains that the home market pasta sales of Barilla differ from

Atar’s sales to Angola with regard to size, marketing efforts and overall business operations. Id.
Court No. 07-00086 Page 35

at 63. Atar further contends that Barilla cannot be a reasonable surrogate for Atar because

Barilla’s home market sales were at a more advanced level of trade than Atar’s sales. Id.

Because the court concludes that the methods Commerce used in calculating Atar’s

constructed value ISE and profit have not been shown to be reasonable on the administrative

record, the court need not, and does not, consider these additional objections that Atar raises to

Commerce’s methods. On remand, Commerce, if it so chooses, may reconsider its previous

rejection of these additional objections by Atar. In developing a remand redetermination,

Commerce need not include in its analysis the data of all six respondents in the previous review

but may select those data that it believes are appropriate to a reasonable method. On remand,

however, Commerce must reconsider its calculations of constructed value ISE and profit and,

specifically, must reconsider its prior decision to exclude the data on below-cost sales.

Commerce must submit a remand redetermination in which it demonstrates that the methods it

uses to calculate constructed value ISE and profit comply with the reasonableness requirement

embodied in 19 U.S.C. § 1677b(e)(2)(B)(iii).

C. Commerce Properly Included Dividends Paid by Atar to Its Shareholder in the Selling,
General, and Administrative Expense Calculations

The Department increased Atar’s selling, general, and administrative expenses to account

for the value of certain services that Atar was provided by its principal, an employee and

shareholder in the company who elected to forego compensation for those services. Decision

Mem. 24-26. The services at issue included pursuing customers and arranging sales transactions.

Id. at 25. Commerce valued those services, as provided during the 2004 fiscal year, at the

amount of dividends that Atar paid to the shareholder during that fiscal year. Id. at 26. Atar
Court No. 07-00086 Page 36

claims that Commerce’s addition of the surrogate amount was contrary to law. Pl.’s Br. 66-67.

Atar argues that the distributions it paid to the shareholder are corporate dividends, not salary,

and that in treating the dividends as salary, the Department departed from its long-standing

practice without a factual or legal basis. Id.; see also Decision Mem. 24 (explaining that Atar

argued during the review that, because Atar’s normal books and records are in accordance with

Italian generally accepted accounting principles (GAAP) and reasonably reflect the costs

associated with the production of the merchandise, the Department has no authority to determine

an alternative salary amount).

In determining a surrogate value for the services in question, Commerce relied on

19 U.S.C. § 1677b(f)(2), which provides that Commerce may disregard a transaction between

“affiliated persons,” (which term is defined in 19 U.S.C. § 1677(33) (2000)), “if in the case of

any element of value required to be considered, the amount representing that element does not

fairly reflect the amount usually reflected in sales of merchandise under consideration in the

market under consideration.” 19 U.S.C. § 1677b(f)(2); see Decision Mem. 25. If such “a

transaction is disregarded . . . and no other transactions are available for consideration,”

Commerce shall value the cost of an affiliated-party input “based on the information available as

to what the amount would have been if the transaction had occurred between persons who are not

affiliated.” 19 U.S.C. § 1677b(f)(2). Under the Department’s analysis, the amount of the

salary–zero–does not fairly reflect the value of the services the principal provided to the

company.
Court No. 07-00086 Page 37

Atar does not contest the Department’s conclusion that the employee was an “affiliated

person” for purposes of 19 U.S.C. § 1677(33)(E) because the employee owned more than five

percent of the equity in Atar. See 19 U.S.C. § 1677(33)(E); Decision Mem. 25. In addition, the

record facts are that the employee provided to Atar the services in question and did not receive a

salary. The court concludes that Commerce, on the record before it, acted within its authority in

including in its calculations a value for those services the principal provided to Atar. Atar’s

argument that the addition was improper because it constituted corporate dividends is

unconvincing. The dividends were not added to the calculation as dividends; instead the total

amount of the dividends in the 2004 fiscal year was used to determine the value of the relevant

services that the shareholder performed during that fiscal year, as if the shareholder had been

paid a salary for the services. The only remaining issue, therefore, is whether the amount of the

dividends served as a reasonable surrogate for that hypothetical salary.

After Commerce raised the issue of valuation of the compensation in a cost verification

report, neither Atar nor the petitioners commented on a proper method of valuation. Decision

Mem. 25 (citing Verification of the Cost Resp. of Atar S.r.l. in the Antidumping Duty Admin.

Review of Certain Pasta from Italy 4 (Nov. 30, 2006) (Confidential Admin. R. Doc. No. 54)

(“Cost Verification Report”)). Atar acknowledges that it was aware of the issue of the value of

compensation prior to the issuance of the Final Results but argues that it was unable to comment

effectively on Commerce’s reasoning because “there was no data of record which could have

provided the value” and “[a]s the factual record was closed, Atar could not have provided the

new factual information” to enable Commerce to calculate a value. Pl.’s Reply 41. The court

disagrees. The agency provided the parties the opportunity to address the issue of how it should
Court No. 07-00086 Page 38

value the services, but Atar, rather than providing information on this issue, took the position that

the Department, as a matter of law, could not analyze the compensation paid to the employee,

citing the principle that corporate dividends should be excluded from the calculation. See Atar’s

Admin. Case Br. 64; see also Def.’s Br. 42 (stating that Atar was on notice of the valuation issues

by October 16-20, 2006, the dates when Atar’s verification occurred). Atar did not take

advantage of its opportunity to propose a method by which Commerce should value

compensation for the services. See Atar’s Admin. Case Br. 63-71.

In determining the value of the transaction as if it had occurred between unaffiliated

persons, Commerce looked for data on hourly wage rates in Italy but could not locate such rates

on the International Labor Organization’s website or via the World Wide web. Decision

Mem. 25. The Department also concluded that Corticella’s data would not suffice because it was

not specific to the annual wages paid per person. Id. Commerce concluded that the only

information available on the record that could reflect the fair market value of the employee’s

services was the total of the dividend distributions that the employee received from Atar during

the 2004 fiscal year. Id.

Upon examination of the Decision Memorandum, the court concludes that Commerce has

not provided an adequate rationale for its determination that the value of the dividends

reasonably represented the value of the relevant services that Atar was provided by its principal.

The Department’s rationale is essentially that it tried, but failed, to find any data better than the

dividends with which to value the services, and that Atar could have, but did not, place any

relevant information on the record. This rationale does not suffice because the payments

involved unquestionably were dividends, which by definition are amounts determined according
Court No. 07-00086 Page 39

to equity ownership, not services rendered to the company. Because the record fact is that the

amount Commerce used to value the services was the amount of the dividends, and because there

was no inherent relationship between the value of the dividends and the value of the services,

Commerce’s rationale does not suffice. That rationale is not grounded in findings of fact,

supported by substantial record evidence, that could support the Department’s conclusion that its

estimate of the value of the services was reasonable.

Nevertheless, the court concludes, after conducting its own examination of the record,

that substantial evidence is available on that record to demonstrate the reasonableness of the

amount Commerce used to value the services in question. In the Cost of Production and

Constructed Value Calculation Adjustments for the Final Results, Commerce concluded that a

salary that Atar paid to a certain minority shareholder, who was not a corporate officer, reflected

an arm’s length transaction between affiliated parties. See Cost of Production and Constructed

Value Calculation Adjustments for the Final Results - Atar S.r.l. (“Atar”) 2-3 (Feb. 5, 2007)

(Confidential Admin. R. Doc. No. 58). This report also reveals that the surrogate salary

Commerce determined for Atar’s principal was not substantially greater than the salary that the

company paid to this other shareholder. Id. The record contains other information concerning

the nature of the positions in the company that were held by these two shareholders and the

relative levels of those positions within the organization. Id.; see also Cost Verification

Report 4. From all of this record evidence, the court readily can conclude that the Department’s

estimate of a hypothetical salary for the majority shareholder was set at a reasonable amount.
Court No. 07-00086 Page 40

III. CONCLUSION

Commerce lawfully determined that a particular market situation existed with respect to

Atar’s selling activity in Angola and, therefore, was justified in resorting to constructed value to

determine the normal value of Atar’s subject merchandise. Substantial record evidence

supported Commerce’s findings that Atar made a single sale in Angola during the period of

review and that the terms and conditions of that sale differed significantly from those of Atar’s

sales to the United States. Additionally, substantial evidence exists on the record to demonstrate

the reasonableness of the amount Commerce used to value certain services that Atar was

provided by its principal.

Commerce’s decision in the Final Results to calculate Atar’s constructed value ISE and

profit based on only those sales of respondents in the eighth administrative review that occurred

in the ordinary course of trade was not supported by reasoning that allows the court to conclude

that Atar’s constructed value ISE and profit were determined according to a “reasonable method”

as required by 19 U.S.C. § 1677b(e)(2)(B)(iii). The court, therefore, is directing Commerce to

reconsider, and redetermine as necessary, these aspects of the Final Results and to submit a

remand redetermination conforming with this Opinion and Order.

ORDER

For the reasons stated in this Opinion and Order, plaintiff’s motion for judgment upon the

agency record is granted in part and denied in part, and it is hereby

ORDERED that the determination set forth and published as the Notice of Final Results
of the Ninth Administrative Review of the Antidumping Duty Order on Certain Pasta from Italy,
72 Fed. Reg. 7011 (Feb. 14, 2007), is hereby remanded to the United States Department of
Commerce (“Commerce”) for further proceedings consistent with the requirements of this
Opinion and Order; it is further
Court No. 07-00086 Page 41

ORDERED that Commerce shall reconsider, and redetermine as necessary, its
calculations for Atar of a constructed value indirect selling expense and a constructed value
profit and in so doing must reconsider its decision to exclude from those calculations the data
derived from home market sales of the respondents in the eighth administrative review that
occurred outside the ordinary course of trade; it is further

ORDERED that the findings made in the redetermination that Commerce issues upon
remand shall be supported by substantial evidence on the record; it is further

ORDERED that the redetermination that Commerce issues upon remand shall include an
explanation of the reasoning for the choices Commerce makes with respect to constructed value
indirect selling expense and constructed value profit; it is further

ORDERED that Commerce shall explain why its remand redetermination satisfies the
“reasonable method” requirement of 19 U.S.C. § 1677b(e)(2)(B)(iii); and it is further

ORDERED that Commerce shall have ninety (90) days from the date of this Opinion and
Order to complete and file its remand determination; plaintiff shall have thirty (30) days from the
filing of the Remand Redetermination to file comments; and defendant and defendant-
intervenors shall have twenty (20) days after plaintiff’s comments are filed to file any reply.

/s/ Timothy C. Stanceu
Timothy C. Stanceu
Judge
Dated: June 5, 2009
New York, New York