Mittal Steel Point Lisas Ltd. v. United States

Slip Op. 07-60

UNITED STATES COURT OF INTERNATIONAL TRADE

MITTAL STEEL POINT LISAS LTD.,

Plaintiff,
BEFORE: Pogue, Judge
v.
Court No. 05-00681
UNITED STATES Public Version

Defendant,

GERDAU AMERISTEEL CORP. AND
KEYSTONE CONSOLIDATED INDUSTRIES,
INC.

Defendant-
Intervenors.

[Commerce’s determination affirmed-in-part and remanded-in-part
and Plaintiff’s Motion for Judgment on the Agency Record denied]

Decided: April 24, 2007

Steptoe & Johnson LLP (Eric C. Emerson, Evangeline D. Keenan,
Michael A. Pass) for Plaintiffs.

Peter D. Keisler, Assistant Attorney General; Jeanne E. Davidson,
Director, Patricia M. McCarthy, Assistant Director, Commercial
Litigation Branch, Civil Division, U.S. Department of Justice
(Michael D. Panzera, Trial Attorney) for Defendant.

Kelley Drye Collier Shannon (Paul C. Rosenthal, Mary T. Staley)
for Defendant-Intervenors.

OPINION

Pogue, Judge: In this action, Plaintiff Mittal Steel Point

Lisas Ltd. (“Mittal” or “Plaintiff”) seeks review of the final

results of the second administrative review of the antidumping duty

order on Carbon and Certain Alloy Steel Wire Rod from Trinidad &
Ct. No. 05-681 Page 2

Tobago and the antidumping duty rate thereby imposed by the

Department of Commerce (“Commerce”). Specifically, Plaintiff

challenges (1) Commerce’s decision to treat certain wire rod as

non-prime merchandise, thereby excluding the foreign sales thereof

from its calculation of fair or normal value (“NV”) in Mittal’s

home market, and (2) Commerce’s calculation of Mittal’s constructed

export price (CEP) for Mittal’s U.S. sales, particularly the

deduction of credit expenses for the time period between shipment

from the port in Trinidad & Tobago and the date payment was

received.

Pending before the court is Plaintiff’s USCIT R. 56.2 motion

for judgment on the agency record. For the reasons stated herein,

Commerce’s determination regarding prime versus non-prime

merchandise is affirmed, Commerce’s Consent Motion for Partial

Voluntary Remand is granted so that Commerce may make further

findings regarding Mittal’s CEP consistent with this opinion, and

Plaintiff’s Motion for Judgment on the Agency Record is denied.

Background

Mittal manufactures steel wire rod in Trinidad & Tobago, and

sells such steel wire rod in its home market. Together with its

North American affiliate and importer, Mittal Steel North America

(“MSNA”),1 Mittal also sells steel wire rod for export to the

1
Mittal was formerly known as Caribbean Ispat Ltd.; MSNA was
formerly known as Ispat North America Inc.
Ct. No. 05-681 Page 3

United States.

Following an investigation of Mittal’s sales, Commerce

published an antidumping duty order on steel wire rod from Trinidad

& Tobago in 2002. See Carbon and Certain Alloy Steel Wire Rod from

Brazil, Indonesia, Mexico, Moldova, Trinidad & Tobago, and Ukraine,

67 Fed. Reg. 65,945 (Dep’t Commerce Oct. 29, 2002)(notice of

antidumping duty orders).2

In due course, on November 16, 2005, Commerce published the

final results of Mittal’s second administrative review,3 which

Mittal challenges in this case, see Carbon and Certain Alloy Steel

2
To calculate dumping margins, Commerce “compares the ‘U.S.
Price’ to the ‘normal value’ of the subject merchandise and
imposes anti-dumping duties if, and to the extent, the former is
lower than the latter.” AK Steel Corp. v. United States, 226
F.3d 1361, 1364 (Fed. Cir. 2000).
3
“[T]he United States uses a ‘retrospective’ assessment
system under which final liability for antidumping and
countervailing duties is determined after merchandise is
imported.” 19 C.F.R. § 351.212(a)(2005); see also Hebei New
Donghua Amino Acid Co. v. United States, 29 CIT __, __, 374 F.
Supp. 2d 1333, 1339 (2005). When the investigation is complete,
Commerce issues a final determination and, where appropriate, an
antidumping duty order. See Decca Hospitality Furnishings, LLC v.
United States, 30 CIT __, __, 427 F. Supp. 2d 1249, 1251 (2006);
see also Am. Signature, Inc. v. United States, 31 CIT __, Slip.
Op. 07-20 at 2-3 (Feb. 14, 2007).
Generally, the actual liability faced by the importers is
established through the process of an “administrative review”.
See 19 C.F.R. § 351.213(a)(2005)(“Although duty liability may be
determined in the context of other types of reviews, the most
frequently used procedure for determining final duty liability is
administrative review procedure under section 751(a)(1) of the
Act.”); see also Mukand Int’l, Ltd. v. United States, Appeal No.
06-1259 at 2-3 (Fed. Cir. Feb. 6, 2007); see also Am. Signature,
Inc., 31 CIT __, Slip. Op. 07-20 at 3-6.
Ct. No. 05-681 Page 4

Wire Rod from Trinidad & Tobago, 70 Fed. Red. 69,512 (Dep’t

Commerce Nov. 16, 2005)(notice of final results of antidumping duty

administrative review)(“Final Results”). These final results adopt

and incorporate Commerce’s Issues and Decision Memorandum.

Memorandum to Joseph A. Spetrini from Stephen J. Claeys, Issues and

Decisions for the Final Results of the Second Administrative Review

of the Antidumping Duty Order on Carbon and Certain Alloy Steel

Wire Rod from Trinidad and Tobago, (Dep’t Commerce Nov. 16, 2005),

P . R . D o c . 6 2 , a v a i l a b l e a t

h t t p : / / i a . i t a.doc.gov/frn/summary/trinidad/E5-6331-1.pd f

(“Decisions Mem.”).4

1. Production of prime wire rod

In its products’ price lists for customers in both Trinidad &

Tobago and the United States, Mittal designates certain steel wire

rod as “prime.” At the same time, Mittal also sells another steel

wire rod product exclusively in Trinidad & Tobago that it

designates in its price lists as “composite wire.” See, e.g.,

Letter from Eric C. Emerson to the Hon. Carlos Gutierrez

Administrative Review of Antidumping Duty Order on Carbon and

Certain Alloy Steel Wire Rod from Trinidad & Tobago: Caribbean

Ispat Limited Response to Section A, B, C, and D Questionnaires

4
The explanation of Commerce’s analysis of Mittal’s steel
wire rod sales can be found in the Issues and Decision
memorandum.
Ct. No. 05-681 Page 5

(Jan. 31, 2005), P.R. Doc. 16, C.R. Doc. 5 at 270, 283, Attachs.

A.13, A.14 (“Questionnaire Response”).

Commerce classifies Mittal’s composite wire as non-prime

merchandise, a decision Mittal challenges in this action. At the

same time, the description of the production process for composite

wire is not contested here. That process, however, and its

differences from the production process for “prime”5 wire rod, and

the resultant price difference between the two types of

merchandise, are relevant to a review of Commerce’s decision to

treat composite wire as non-prime merchandise. In sum, the

production process for composite wire produces a physical, though

not chemical, difference in the resultant wire rod, and the

physical difference provides a basis for the difference in price

between prime wire rod and composite wire rod.6

5
Though the court uses the term “prime” in referring to wire
rod, it does not presuppose Commerce’s decision to treat that
merchandise as “prime merchandise” to be correct. The
nomenclature is meant to distinguish “prime” wire rod from
“composite” wire rod, regardless of the category of merchandise
into which it should fall.
6
[

(continued...)
Ct. No. 05-681 Page 6

In its investigation of Mittal’s sales, Commerce determined

that composite wire was not prime merchandise, and therefore

Commerce excluded sales of composite wire in calculating the normal

value of subject merchandise in the home country. In so doing,

Commerce relied on Mittal’s price list, which distinguished between

“Prime Wire Rods and Rebars” and “Composite (Wire Rods).” See

Decisions Mem. at 9 (Cmt. 4) (“we did not use the wire rod which

was not identified as prime on [Mittal’s] price list for matching

purposes”); see also Questionnaire Response P.R. Doc. 16, C.R. Doc.

5 at 270, 283, attachs. A.13, A.14.

2. Calculation of Constructed Export Price

During the administrative review at issue here, Mittal

reported its sales of wire rod to unaffiliated U.S. customers

through MSNA. Both Commerce and Mittal considered these sales to

qualify as constructed export price (“CEP”) sales under section

772(b) of the Act.7 See See Decisions Mem. Mittal made these

6
(...continued)

]
7
When an arm’s-length transaction takes place between a
foreign producer and an independent importer, U.S. price is
calculated using the statutory Export Price (EP) provision; CEP
(continued...)
Ct. No. 05-681 Page 7

CEP sales to U.S. customers and shipped the merchandise to MSNA,

which unloaded it and arranged for its delivery to the U.S.

customers. Id. at 23-24, 245, attach. A.8. During the

investigation, Mittal reported its expenses associated with making

these sales, as well as those expenses associated with making sales

in Trinidad & Tobago, for the purposes of adjusting CEP and NV.

See Id. at 785-86, attach. B.14.8 Specifically, in response to

questionnaires, Mittal reported foreign inventory carrying costs,

U.S. inventory carrying costs, and imputed credit expenses as

information which provided a basis for price adjustments. Id.; see

also Br. Supp. Pl.’s Mot. J. Agency. R. at 15 (“Pl.’s Br.”).

In reporting its imputed credit expenses for sales in the

U.S., Mittal calculated the credit expense for a period commencing

on the date Mittal invoiced the goods to the U.S. customer and

ending on the date Mittal received payment. Pl.’s Br. 15.

Commerce recalculated Mittal’s reported direct credit expenses and

7
(...continued)
is used when the foreign producer and the importer are
affiliated. See, e.g., Smith-Corona Group v. United States, 713
F.2d 1568, 1572 (Fed. Cir. 1983)(“Where the importer is an
unrelated, independent party, purchase price is used . . . .
Where the importer is related, an arm's length transaction does
not occur until the goods are resold to a retailer or to the
public.”); see also PQ Corp. v. United States, 11 CIT 53, 58-59,
652 F. Supp. 724,730 (1987). Exceptions to this rule are
detailed in AK Steel Corp., 226 F.3d at 1365.
8
The statute provides for certain adjustments to CEP and NV
so that an “apples-to-apples” comparison can be made. See infra
p. 14.
Ct. No. 05-681 Page 8

inventory carrying costs, considering the reported expenses to be

inaccurate. Decisions Mem. at 4 (Cmt. 2). Commerce determined that

Mittal’s goods had not been warehoused in a bonded warehouse in the

United States, and thus set to zero the U.S. inventory carrying

costs reported by Mittal, reasoning that in the absence of

warehousing in the United States, MSNA did not incur such inventory

carrying costs. Commerce also recalculated credit expenses to

begin accruing on the date of shipment from the foreign port. In so

doing, Commerce stated that “[c]redit expense is the interest

expense incurred . . . between date of shipment of merchandise to

a customer and date of receipt of payment from the customer.” Id.

Jurisdiction and Standard of Review

This action is brought under 19 U.S.C. § 1516a.9 Section

1677(9) grants Plaintiff standing to bring the action as an

interested party that participated in the administrative

proceedings below. 19 U.S.C. § 1677(9). The court has

jurisdiction over the action pursuant to 28 U.S.C. § 1581(b).

The court’s review is to determine whether Commerce’s

determinations, findings, or conclusions are supported by

substantial evidence on the record, and otherwise in accordance

with law. 19 U.S.C. § 1516a(b)(1)(B)(i).

Analysis

9
All references to the United States Code are to the 2000
edition.
Ct. No. 05-681 Page 9

1. Treatment of composite wire rod as non-prime merchandise

To identify the appropriate foreign like product for the

purpose of determining NV of the subject merchandise, the Statute

dictates that Commerce may first use data about “[t]he subject

merchandise and other merchandise which is identical in physical

characteristics with, and was produced in the same country by the

same person as, that merchandise.” 19 U.S.C. § 1677(16)(A)(emphasis

added).10 Where non-prime merchandise is sold in the United States,

Commerce matches it to non-prime merchandise sold abroad. Corus

Staal BV v. United States Dep’t of Commerce, 27 CIT 388, 405, 259

F. Supp. 2d 1253, 1268 (2003); see also Certain Corrosion-Resistant

Carbon Steel Flat Products from the Republic of Korea, 71 Fed. Reg.

7,513 (Dep’t Commerce Feb. 13, 2006)(notice of final results of the

eleventh administrative review), Mem. to David M. Spooner,

Assistant Secretary, Import Administration from Stephen J. Claeys,

Re: Certain Corrosion-Resistant Carbon Steel Flat Products from the

Republic of Korea (Issues and Decisions for the Final Results of

the 11th Admin. Review) at 23 (Cmt. 13), available at

http://ia.ita.doc.gov/frn/summary/korea-south/E6-1984-1.pdf

(excluding home market sales of non-prime merchandise from

10
This section also permits the use of other categories of
data for this determination. Because the parties do not contest
that data in this first category of “identical” merchandise are
available, the court does not discuss the remainder of the
provision.
Ct. No. 05-681 Page 10

calculations where there were no sales of non-prime merchandise in

the United States).

In this case, Commerce has interpreted the ambiguous term

“identical” in making its determination. Specifically, Commerce

has determined that rod labeled “composite wire rod” is not

identical to “prime wire rod.” The Court of Appeals for the Federal

Circuit has held that in section 1677(16)(A), Congress meant for

“identical” to mean “closely alike or equivalent, rather than

‘being the same’ or ‘exactly equal and alike.’” Pesquera Mares

Australes Ltda. v. United States, 266 F.3d 1372, 1383 (Fed. Cir.

2001). The Federal Circuit found the term “identical” ambiguous,

and, reviewing Commerce’s interpretation, found it to be a

reasonable interpretation, where “Commerce [] concluded that

merchandise should be considered to be identical despite the

existence of minor differences in physical characteristics, if

those minor differences are not commercially significant.” Id. at

1384; see also Chevron U.S.A. Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 837, 845 (1984)(agency’s interpretation of

an ambiguous term in statute reviewed for reasonableness). Thus,

slight physical differences need not preclude merchandise from

being considered prime merchandise. In Pesquera Mares, however,

the differences “were not commercially significant.” Pesquera

Mares, 266 F.3d at 1384.

Faced with this legal landscape, Mittal argues that Commerce’s
Ct. No. 05-681 Page 11

treatment of composite wire rod as non-prime is inconsistent with

prior agency practice. Pl.’s Br. 10. Mittal points to a previous

Commerce determination treating as prime merchandise rolls of film

that had a minor, physical difference from other “prime”

merchandise. Certain Polyethylene Terephthalate Film, Sheet and

Strip from India, 70 Fed. Reg. 8072 (Dep’t Commerce Feb. 17, 2005)

(final results of antidumping duty administrative review)(“PET

Film”). In PET Film, Commerce stated that the “sole reason for

considering shorter rolls of PET film to be non-prime merchandise

is that these rolls cannot be used by customers in normal

production runs; hence, buyers consider shorter rolls of PET film

to be less valuable than full rolls of PET film.” PET Film, Mem. to

Joseph A. Spetrini, Acting Assistant Secretary, Import

Administration from Barbara E. Tillman Re: Certain Polyethylene

Terephthalate Film, Sheet and Strip from India (Issues and Decision

Memorandum for the 2001-2003 Administrative Review), at 21-22 (Cmt.

5) available at http://ia.ita.doc.gov/frn/summary/india/E5-658-

1.pdf. Yet, Commerce treated the shorter rolls as prime

merchandise. Id. Thus, Mittal argues, where there is only one,

minor physical difference11 between prime wire rod and composite

wire rod, composite wire rod should be considered prime

11
[

]
Ct. No. 05-681 Page 12

merchandise.

Mittal fails to take into account the next sentence in

Commerce’s PET Film decision, i.e., Commerce found “no evidence on

the record . . . that Jindal America consistently sold shorter

rolls of PET film at prices lower than that charged for full rolls

of identical PET film . . . .” Id. (emphasis added). In other

words, in PET Film, the physical difference was slight enough that

the merchandise could be considered identical because that

difference did not result in a price difference. Presumably, such

a price difference would distort the comparison of NV and CEP. See,

e.g., Certain Polyethylene Terephthalate Film, Sheet and Strip from

India, 71 Fed. Reg. 47,485 (Dep’t Commerce Aug. 17, 2006)(final

results of antidumping duty administrative review), Mem. to David

M. Spooner, Assistant Secretary, Import Administration from Stephen

J. Claeys Re: Certain Polyethylene Terephthalate Film, Sheet and

Strip from India (Issues & Decision Mem. for the Final Results of

the Administrative Review of the Antidumping Duty Order) at 5 (Cmt.

4) available at http://ia.ita.doc.gov/frn/summary/india/E6-13592-

1.pdf (“[g]iven the difference in the physical characteristics

between prime and non-prime merchandise . . . and the potential

distortion resulting from comparing sales of prime merchandise in

the U.S. market to sales of non-prime merchandise sold in India, we

continue to find that it was appropriate for [Commerce] to

distinguish between [] sales of prime and non-prime merchandise.”).
Ct. No. 05-681 Page 13

A distinction based on both the degree of physical difference and

price difference follows the logic set forth in Pesquera Mares as

well, that “identical” need not mean “exactly equal and alike” in

cases where the differences are not commercially significant.

Pesquera Mares, 266 F.3d at 1384; see also Stainless Steel Wire Rod

from Korea 63 Fed. Reg. 40,404, 40,414 (Gen’l Cmt. 7)(Dep’t

Commerce July 29, 1998)(notice of final determination of sales at

less than fair value)(finding that both “prime 1" and “prime 2"

products should be considered as prime because “[Commerce] found no

physical differences between the two prime products that would lead

[it] to believe that prime 1 and prime 2 products are not

comparable in price or cost.”)

Here, there is evidence on the record that the physical

difference between prime and composite wire was commercially

significant. Namely, as Mittal reports, there was a price

difference between prime wire rod and composite wire rod. Pl.’s

Br. 8-9. This price difference, according to Mittal, was due to

composite rod having a physical difference from prime wire rod,

which is “the only physical distinction between composite rod and

other prime rod”. Id. at 9.

This evidence, which is attested to by Mittal, is adequate to

support the conclusion that composite wire rod is not “identical”

to prime wire rod, and should therefore not be considered prime

merchandise. Nor has Commerce applied the term inconsistently,
Ct. No. 05-681 Page 14

because, in PET Film, the slight physical difference was not

commercially significant. The court therefore affirms Commerce’s

decision to treat composite wire rod as non-prime merchandise.

2. Calculation of Inventory Carrying Costs and Credit
Expenses

In cases where goods are sold in the U.S. through an

affiliated company, the “U.S. Price” is constructed using the first

sale to an unaffiliated entity. See U.S. Steel Group v. United

States, 22 CIT 670, 15 F. Supp. 2d 892 (1998)(analyzing situations

in which U.S. affiliate has sufficient involvement in a sale that

use of CEP, rather than EP, is appropriate), rev’d and remanded on

other grounds in U.S. Steel Group v. United States, 225 F.3d 1284

(Fed. Cir. 2000). Adjustments are made to NV and EP or CEP so that

an “apples-to-apples” comparison can be made, at a “specific,

‘common’ point in the chain of commerce, so that value can be

fairly compared on an equivalent basis." Micron Technology, Inc.

v. United States, 243 F.3d 1301, 1303, 1313 (Fed. Cir.

2001)(citing Koyo Seiko Co. v. United States, 36 F.3d 1565, 1568

(Fed. Cir. 1994)).12 However, “[i]f the sale is classified as a CEP

sale, additional deductions are taken from the sales price to

arrive at the U.S. Price.” AK Steel Corp., 226 F.3d at 1364. This

is because affiliated companies could manipulate their books to

12
Adjustments to NV are detailed in 19 U.S.C. § 1677b(a)(6);
adjustments to EP and CEP are detailed in 19 U.S.C. § 1677a(c).
Ct. No. 05-681 Page 15

escape a determination of dumping:

[t]he risk is that an artificially low price
may be charged to the affiliated distributor
in the home market and an artificially high
price charged to the affiliated distributor in
the United States market. The consequence in
each case is that a lower countervailing duty
(or no duty at all) would be payable.

Micron Technology, 243 F.3d at 1303.

The additional deductions from CEP are set out in 19 U.S.C.

§ 1677a(d), and include costs of sale, such as “expenses that

result from, and bear a direct relationship to, the sale, such as

credit expenses, guarantees and warranties.” 19 U.S.C.

§ 1677a(d)(1)(B).13 The purpose of these additional adjustments to

13
The full text of the provision is:
Additional adjustments to constructed export price
For purposes of this section, the price used to
establish constructed export price shall also be
reduced by--
(1) the amount of any of the following expenses
generally incurred by or for the account of the
producer or exporter, or the affiliated seller in the
United States, in selling the subject merchandise (or
subject merchandise to which value has been added)--
(A) commissions for selling the subject merchandise in
the United States;
(B) expenses that result from, and bear a direct
relationship to, the sale, such as credit expenses,
guarantees and warranties;
(C) any selling expenses that the seller pays on behalf
of the purchaser; and
(D) any selling expenses not deducted under
subparagraph (A), (B), or(C);
(2) the cost of any further manufacture or assembly
(including additional material and labor), except in
circumstances described in subsection (e) of this
section; and
(continued...)
Ct. No. 05-681 Page 16

the CEP is “to prevent foreign producers from competing unfairly in

the United States market by inflating the U.S. price with amounts

spent by the U.S. affiliate on marketing and selling the products

in the United States.” AK Steel Corp., 226 F.3d at 1367.

The deductions at issue in this case include both inventory

carrying costs, which represent the cost of keeping a product in

inventory until it is sold, and credit expenses, which represent

the opportunity cost of money owed to the producer between the date

of sale and the date payment is received.

The date that merchandise is considered to be shipped to the

customer is significant in determining how long the carrying costs

were borne by the seller, while the date of sale is significant in

determining the starting point of the period for which credit

expenses are calculated. As discussed further, below, the date the

merchandise is shipped to the customer is sometimes taken as the

date of sale. A later date of sale results in smaller deductions

from the CEP for credit expenses, although it can increase the

period during which carrying costs are incurred.

Whether goods are shipped to the unaffiliated customers

directly from the foreign port or whether they are warehoused in

the United States is important to the determination of when credit

13
(...continued)
(3) the profit allocated to the expenses described in
paragraphs (1) and (2).
19 U.S.C. § 1677a(d). (emphasis added).
Ct. No. 05-681 Page 17

expenses begin accruing, and whether there are U.S. carrying costs.

If goods are warehoused in the U.S., the date of sale will not

occur until after the merchandise is in the United States, Brake

Drums and Brake Rotors from the People’s Republic of China, 61 Fed.

Reg. 53,190, 53,195 (Dep’t Commerce Oct. 10, 1996)(notice of

preliminary determinations of sales at less than fair value and

postponement of final determinations), and thus the clock for

credit expenses won’t start running until then.

A. Credit Expenses

As noted above, credit expenses are the costs associated with

money being owed to the seller after it has sold its merchandise to

the customer but has not been paid. Determining the date of sale

of the merchandise is therefore critical to calculating this cost.

In its regulations, Commerce states that:

[i]n identifying the date of sale. . . the Secretary
normally will use the date of invoice . . . . However,
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)(2005). The use of a uniform date of sale

(namely, the date of invoice) is to achieve both efficiency and

predictability. Preamble to the Dept.’s Final Regs. at 19 C.F.R.

parts 351, 353 and 355, 62 Fed. Reg. 27,296, 27,348 (Dep’t Commerce

May 19, 1997)(final rule)(“Preamble”). Also in this Preamble to

Commerce’s regulations, in rejecting suggestions that it use the
Ct. No. 05-681 Page 18

date of shipment rather than the date of invoice as the date of

sale, Commerce gave the following reasons:

First, date of shipment is not among the possible dates
of sale specified in note 8 of the AD Agreement. Second,
based on the Department's experience, date of shipment
rarely represents the date on which the material terms of
sale are established. Third, unlike invoices, which can
usually be tied to a company's books and records, firms
rarely use shipment documents as the basis for
preparation of financial reports. Thus, reliance on date
of shipment would make verification more difficult.

Id. at 27,349. Commerce thereby states that the date of shipment

should not normally be used as the date of sale, and that the date

of sale determination depends on the date when material terms of

sale are established. Nevertheless, it is Commerce’s practice to

use the date of shipment as the date of sale when the date of

invoice is after the date of shipment. See, e.g., Certain Hot-

Rolled Flat-Rolled Carbon-Quality Steel Products from Brazil, 64

Fed. Reg. 38,756, 38,768 (Dep’t Commerce July 19, 1999)(notice of

final determination of sales at less than fair value)(“The

Department does not consider dates subsequent to the date of

shipment from the factory as appropriate for date of

sale.”)(emphasis in original)(“Steel Products from Brazil”); see

also Stainless Steel Bar from Japan 65 Fed. Reg. 13,717 (Dep’t

Commerce Mar. 14, 2000)(final results of antidumping administrative

review), Mem. to Robert S. LaRussa, Assistant Secretary, Import

Administration from Richard W. Moreland Re: Issues and Decisions

Mem. For the Administrative Review of Stainless Steel Bar from
Ct. No. 05-681 Page 19

J a p a n ( C m t . 1 ) a v a i l a b l e a t

http://ia.ita.doc.gov/frn/summary/japan/00-6264-1.txt (“In keeping

with the Department’s practice, the date of sale cannot occur after

the date of shipment”). In Steel Products from Brazil, Commerce

explained that “[t]he Department considers the date of sale to be

the date on which all substantive terms of sale are agreed upon by

the parties.” Steel Products from Brazil, 64 Fed. Reg. at 38,768.

The reason for Commerce’s practice regarding the use of date of

shipment is that when a party ships its product to a customer, it

is reasonable to assume that the material terms of the sale have

been established. Id. Thus, Commerce has adopted a practice of

calculating the date of sale to be the date of invoice, unless the

date of shipment is earlier. This is in contradiction to

Commerce’s statement in the preamble that “date of shipment rarely

represents the date on which the material terms of sale are

established.” Preamble, 62 Fed. Reg. at 27,349. Nonetheless, using

the date of shipment when that date is before the invoice date is

a practice the Department has adhered to in other investigations,

and which has been implicitly approved by the courts. See AIMCOR v.

United States., 141 F.3d 1098, 1104-05 (Fed. Cir. 1998)(citing

AIMCOR v. United States, 19 CIT 966, 972 (1995) (“Commerce's

established practice is to calculate credit expenses from the date

of shipment to the date payment is received from the customer.”)).

Commerce’s reasoning therefore seems to be that shipment to the
Ct. No. 05-681 Page 20

customer does not occur before the material terms of sale have been

determined, so that when invoicing is subsequent to shipment, the

date of shipment is generally an appropriate date of sale, although

depending on the facts of specific review, Commerce may find

another date more appropriate.

It is also the case that in instances where a U.S. affiliate

warehouses merchandise in the United States and sells from

inventory, Commerce only starts the credit expense ‘clock’ running

from the date merchandise is shipped from the U.S. warehouse.

Stainless Steel Butt-Weld Pipe Fittings from Taiwan, 63 Fed. Reg.

67,855, 67,856 (Dep’t Commerce Dec. 9, 1998)(final results of

antidumping duty administrative review). In such cases, the sale

does not occur before merchandise enters the country. Here, on the

other hand, Commerce has determined that this is not an instance

where merchandise was shipped into the United States before sales

were made, and then stored at a warehouse here until they were

sold. Rather, it is more like Brake Drums and Brake Rotors from

the People’s Republic of China and Stainless Steel Sheet and Strip

in Coils from Germany, 64 Fed. Reg. 30,710, 30,733 (Cmt. 12)(Dep’t

Commerce June 8, 1999)(final determination of sales at less than

fair value)(finding that because no warehouses were maintained in

the United States and goods were directly shipped to unaffiliated

customers, credit expenses, rather than inventory carrying costs

for time on the water, were appropriate measure of sales costs
Ct. No. 05-681 Page 21

during overseas transit).

Here, as in those cases, Commerce chose to use the date of

shipment for the date on which credit expenses would begin to run.

But for other calculations in this review, Mittal points out, and

Commerce agrees, “Commerce used the invoice date as the date of

sale for all of [Mittal’s] constructed export price [] sales, even

though [Mittal’s] merchandise was shipped from Trinidad before

[Mittal] issued its invoice.” Pl.’s Resp. Ct.’s Feb. 14 Letter 1-2;

see D.’s Resp. Ct.’s Letter Feb. 14 & Consent Mot. Partial

Voluntary Remand 2 (“D.’s Resp. Ct.’s Letter”). For those other

calculations, the government explains that it used the invoice date

for date of sale because “the terms of sale . . . often changed

from the order date to the invoice date.” D.’s Resp. Ct.’s Letter

at 2 (quoting Mem. From Magd Zalok to Gary Taverman, CEP

Verification of the Sales Resp. In the Antidumping Investigation of

Carbon and certain Alloy Steel Wire Rod from Trinidad & Tobago

(June 12, 2000)).14 Commerce chose to use the later date of invoice

because it found that in this case, the material terms of sale were

not set before the invoice date, despite the fact that goods were

14
This is contrary to the government’s earlier arguments
regarding credit expenses in its response brief to Plaintiff’s
motion for judgment on the agency record. There, the government
at least implied that the date of sale should be considered to be
the date merchandise is shipped to the customer, stating that as
of the date of shipment of merchandise, all material terms of a
contract are set, and thus the sale has occurred. Def.’s Resp.
Pl.’s Mot. J. Agency R. 30-36.
Ct. No. 05-681 Page 22

shipped and en route to customers before invoices were issued. The

finding as to date of sale was not challenged by Mittal, nor does

the court find it unreasonable. However, it seems inconsistent for

Commerce to then calculate credit expenses beginning on the date of

shipment.

Recognizing this, Commerce moves for a voluntary remand, with

Mittal’s consent. D.’s Resp. Ct.’s Letter. In its motion, the

government recognizes that “Mittal may not have begun to extend

credit at the date of shipment (given its selling practice of

invoicing its unaffiliated customers after shipping the merchandise

from the foreign port, but not maintaining inventory in the United

States).” Id. at 3. In response to Commerce’s request, the court

grants Commerce’s motion for remand. On remand, Commerce may

determine the date on which credit expenses should begin to run,

keeping in mind its previous determination in this review that the

material terms of sale are not set until Mittal issues an invoice.

B. Carrying Costs

Where the export price is constructed, as here, there are both

indirect costs of sale (costs associated with a sale between the

two affiliated entities) and direct costs (those costs associated

with a sale to an unaffiliated customer). Commerce “ordinarily

do[es] not deduct [from CEP] indirect expenses incurred in selling

to the affiliated U.S. importer.” Stainless Steel Butt-Weld Pipe

Fittings From Taiwan, 63 Fed. Reg. at 67,856 (Cmt. 2); see also
Ct. No. 05-681 Page 23

Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,

From Japan and Tapered Roller Bearings, Four Inches or Less in

Outside Diameter, and Components Thereof, From Japan, 62 Fed. Reg.

11,825, 11,834 (Dep’t Commerce March 13, 1997)(final results of

antidumping duty administrative reviews and termination in part);

see also Gray Portland Cement and Clinker From Mexico, 62 Fed. Reg.

17,148, 17,168 (Dep’t Commerce, April 9, 1997)(final results of

antidumping duty administrative review). Thus, when the affiliated

U.S. company receives merchandise shipped from abroad and

warehouses it in the United States prior to selling it, the

inventory carrying costs for the time in transit from the foreign

country to the United States is considered to be an indirect cost,

and is not deducted from CEP. Stainless Steel Butt-Weld Pipe

Fittings From Taiwan, 63 Fed. Reg. at 67,856 (Cmt. 2). Commerce

defines inventory carrying costs as “interest expenses incurred

. . . between the time the merchandise leaves the production line

at the factory to the time the goods are shipped to the first

unaffiliated customer.” Decisions Mem. at 4 (Cmt. 2).

Here, Mittal reported that merchandise was shipped from

Trinidad & Tobago, and upon arrival in the United States, MSNA

unloaded the merchandise and arranged for its delivery to

unaffiliated customers. Questionnaire Response, P.R. Doc. 16, C.R.

Doc. 5 at 24-28. Nonetheless, MSNA reported inventory carrying

costs in the United States. See Letter to the Honorable Carlos M.
Ct. No. 05-681 Page 24

Gutierrez, Secretary of Commerce from Eric Emerson Re: Carbon and

Alloy Steel Wire Rod from Trinidad & Tobago: Submission of Case

Brief, P.R. Doc. 53, C.R. Doc. 23, 9-10. As noted above, Commerce

disagreed and did not permit a reduction of CEP for inventory

carrying costs in the United States. Commerce reasoned that once

the sale has occurred and the goods are shipped to an unaffiliated

customer, credit expenses are the appropriate variable for costs

related to sale. This is logical because the merchandise is no

longer in inventory. Therefore, Commerce’s decision to assess

inventory carrying costs only until the goods were shipped from

Trinidad & Tobago appears reasonable. Commerce’s decision,

however, may be affected by its determination of appropriate credit

expenses, given its treatment of invoice date as date of sale in

this review. On remand, therefore, Commerce may reassess its

decision regarding inventory carrying costs in light of its

reconsideration of credit expenses.
Ct. No. 05-681 Page 25

Conclusion

For the foregoing reasons, the court affirms in part and

remands in part Commerce’s determinations, and denies Plaintiff’s

Motion for Judgment on the Agency Record.

Remand results are due by June 25, 2007. Comments are due by

July 16, 2007. Reply comments are due by July 26, 2007. SO

ORDERED.

/s/ Donald C. Pogue
Donald C. Pogue, Judge

Dated: April 24, 2007
New York, New York