Allied Tube & Conduit Corp. v. United States

Slip Op. 05-56

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
________________________________________
:
ALLIED TUBE & CONDUIT CORP. :
and WHEATLAND TUBE COMPANY, :
:
Plaintiffs, :
:
v. :
:
UNITED STATES, :
: Court No. 04-00439
Defendant, :
:
and :
:
BORUSAN BIRLESIK BORU :
FABRIKALARI A.S., :
:
Defendant-Intervenor. :
________________________________________:

This action concerns the claims raised by Allied Tube &
Conduit Corp. and Wheatland Tube Company (collectively “Allied
Tube”), who move pursuant to USCIT R. 56.2 for judgment upon the
agency record challenging the Department of Commerce, International
Trade Administration’s (“Commerce”) final determination, entitled
Notice of Final Results of Antidumping Administrative Review for
Certain Welded Carbon Steel Pipe and Tube from Turkey (“Final
Results”), 69 Fed. Reg. 48,843 (Aug. 11, 2004). Allied Tube
complains that Commerce violated the statute, legislative history
and its own policy by failing to require proof of import duties
paid on inputs used in producing the merchandise subject to this
action, which was sold in the home market. Moreover, Allied Tube
claims that the record does not contain substantial evidence to
support Commerce’s conclusion that import duties were paid on
inputs used in production for home market sales.

Commerce maintains that it properly applied its standard two-
prong test for granting a duty drawback adjustment and properly
determined that Borusan Birlesik Boru Fabrikalari A.S. (“Borusan”)
satisfied the requirements of such test. Commerce maintains that
it verified that Borusan paid duties upon inputs used in the
production of merchandise sold domestically. Borusan adds that
there is no additional requirement that a respondent show that it
paid duties on other imported raw materials or that its home market
Court No. 04-00439 Page 2

price was based on a duty-inclusive cost.

Held: Allied Tube’s 56.2 motion is denied. Case dismissed.

Dated: May 12, 2005

Schagrin Associates (Roger B. Schagrin) for Allied Tube &
Conduit Conduit Corp. and Wheatland Tube Company, plaintiffs.

Peter D. Keisler, Assistant Attorney General; David M. Cohen,
Director, and Jeanne E. Davidson, Deputy Director, Commercial
Litigation Branch, Civil Division, United States Department of
Justice (Kelly B. Blank); of counsel: James K. Lockett, Office of
the Chief Counsel for Import Administration, United States
Department of Commerce, for the United States, defendant.

Lafave & Sailer LLP (Arthur J. Lafave III) for Borusan
Birlesik Boru Fabrikalari A.S., defendant-intervenor.

OPINION

TSOUCALAS, Senior Judge: This action concerns the claims

raised by Allied Tube & Conduit Corp. and Wheatland Tube Company

(collectively “Allied Tube”), who move pursuant to USCIT R. 56.2

for judgment upon the agency record challenging the Department of

Commerce, International Trade Administration’s (“Commerce”) final

determination, entitled Notice of Final Results of Antidumping

Administrative Review for Certain Welded Carbon Steel Pipe and Tube

from Turkey (“Final Results”), 69 Fed. Reg. 48,843 (Aug. 11, 2004).

Allied Tube complains that Commerce violated the statute,

legislative history and its own policy by failing to require proof

of import duties paid on inputs used in producing the merchandise
Court No. 04-00439 Page 3

subject to this action, which was sold in the home market.

Moreover, Allied Tube claims that the record does not contain

substantial evidence to support Commerce’s conclusion that import

duties were paid on inputs used in production for home market

sales.

Commerce maintains that it properly applied its standard two-

prong test for granting a duty drawback adjustment and properly

determined that Borusan Birlesik Boru Fabrikalari A.S. (“Borusan”)

satisfied the requirements of such test. Commerce maintains that

it verified that Borusan paid duties upon inputs used in the

production of merchandise sold domestically. Borusan adds that

there is no additional requirement that a respondent show that it

paid duties on other imported raw materials or that its home market

price was based on a duty-inclusive cost.

BACKGROUND

This matter concerns an administrative review of an

antidumping duty order on certain welded carbon steel pipe and tube

from Turkey, covering the period of review May 1, 2002 through

April 30, 2003. See Initiation of Antidumping and Countervailing

Duty Administrative Reviews and Request for Revocation in Part, 68

Fed. Reg 39,055 (July 1, 2003). On April 6, 2004, Commerce

published its preliminary results. See Notice of Preliminary
Court No. 04-00439 Page 4

Results of Antidumping Duty Administrative Review for Certain

Welded Carbon Steel Pipe and Tube From Turkey (“Preliminary

Results”), 69 Fed. Reg 18,049 (Apr. 6, 2004). For the Preliminary

Results, Commerce compared the export price (“EP”) to the normal

value. See id. at 18,050. Commerce calculated EP by using the

packed delivered price to unaffiliated purchasers in the United

States as the starting price. See id. Commerce then made

deductions from the starting price for: foreign inland freight,

foreign brokerage and handling, international freight, marine

insurance, and other related charges. See id. In addition,

Commerce added duty drawback to the starting price. See id. In

its comments to Commerce on the Preliminary Results, Allied Tube

argued that Borusan was not entitled to a duty drawback adjustment.

Borusan failed to provide evidence that it paid duties upon inputs

used to produce the foreign like product sold in the home market.

See Pls.’ App. Tab 8 at 3. On August 11, 2004, Commerce published

its Final Results. See Final Results, 69 Fed. Reg. at 48,843.

Commerce found that Borusan had paid import duties upon inputs used

to produce subject merchandise for sales in Turkey. See Issues &

Decision Mem.1 at 5-6. Allied Tube now challenges Commerce’s

1
The full title of this document is Issues and Decision
Memorandum for the Final Results of Antidumping Duty Administrative
Review for Certain Welded Carbon Steel Pipe and Tube From Turkey,
and was adopted by the Final Results, 69 Fed. Reg. at 48,844
(generally accessible on the internet at http://ia.ita.doc.gov/frn/
summary/turkey/04-18393-1.pdf). The Court will refer to this
Court No. 04-00439 Page 5

decision to grant Borusan a drawback adjustment. Oral arguments

were heard by the Court on April 27, 2005.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 19

U.S.C. § 1516a(a) (2000) and 28 U.S.C. § 1581(c) (2000).

STANDARD OF REVIEW

In reviewing a challenge to Commerce’s final determination in

an antidumping administrative review, the Court will uphold

Commerce’s determination unless it is “unsupported by substantial

evidence on the record, or otherwise not in accordance with law .

. . .” 19 U.S.C. § 1516a(b)(1)(B)(I) (2000).

I. Substantial Evidence Test

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.” Universal Camera Corp. v. NLRB,

340 U.S. 474, 477 (1951) (quoting Consol. Edison Co. v. NLRB, 305

U.S. 197, 229 (1938)). Substantial evidence “is something less

than the weight of the evidence, and the possibility of drawing two

document as Issues & Decision Mem. and match pagination to the
printed documents provided by Allied Tube. See e.g., Pls.’ App. at
Tab 2.
Court No. 04-00439 Page 6

inconsistent conclusions from the evidence does not prevent an

administrative agency’s finding from being supported by substantial

evidence.” Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620 (1966)

(citations omitted). Moreover, “the court may not substitute its

judgment for that of the [agency] when the choice is ‘between two

fairly conflicting views, even though the court would justifiably

have made a different choice had the matter been before it de

novo.’” Am. Spring Wire Corp. v. United States, 8 CIT 20, 22, 590

F. Supp. 1273, 1276 (1984) (quoting Penntech Papers, Inc. v. NLRB,

706 F.2d 18, 22-23 (1st Cir. 1983) (quoting, in turn, Universal

Camera, 340 U.S. at 488)).

II. Chevron Two-Step Analysis

To determine whether Commerce's interpretation and application

of the antidumping statute is “in accordance with law,” the Court

must undertake the two-step analysis prescribed by Chevron U.S.A.

Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837

(1984). Under the first step, the Court reviews Commerce's

construction of a statutory provision to determine whether

“Congress has directly spoken to the precise question at issue.”

Id. at 842. “To ascertain whether Congress had an intention on the

precise question at issue, [the Court] employ[s] the ‘traditional

tools of statutory construction.’” Timex V.I., Inc. v. United

States, 157 F.3d 879, 882 (Fed. Cir. 1998) (citing Chevron, 467
Court No. 04-00439 Page 7

U.S. at 843 n.9). “The first and foremost ‘tool’ to be used is the

statute’s text, giving it its plain meaning. Because a statute’s

text is Congress’ final expression of its intent, if the text

answers the question, that is the end of the matter.” Id.

(citations omitted). Beyond the statute’s text, the tools of

statutory construction “include the statute's structure, canons of

statutory construction, and legislative history.” Id. (citations

omitted); but see Floral Trade Council v. United States, 23 CIT 20,

22 n.6, 41 F. Supp. 2d 319, 323 n.6 (1999) (noting that “not all

rules of statutory construction rise to the level of a canon”)

(citation omitted).

If, after employing the first prong of Chevron, the Court

determines that the statute is silent or ambiguous with respect to

the specific issue, the question for the Court becomes whether

Commerce’s construction of the statute is permissible. See

Chevron, 467 U.S. at 843. Essentially, this is an inquiry into the

reasonableness of Commerce’s interpretation. See Fujitsu Gen. Ltd.

v. United States, 88 F.3d 1034, 1038 (Fed. Cir. 1996). Provided

Commerce has acted rationally, the Court may not substitute its

judgment for the agency’s interpretation. See Koyo Seiko Co. v.

United States, 36 F.3d 1565, 1570 (Fed. Cir. 1994) (holding that “a

court must defer to an agency's reasonable interpretation of a

statute even if the court might have preferred another”); see also
Court No. 04-00439 Page 8

IPSCO, Inc. v. United States, 965 F.2d 1056, 1061 (Fed. Cir. 1992).

The “Court will sustain the determination if it is reasonable and

supported by the record as a whole, including whatever fairly

detracts from the substantiality of the evidence.” Negev

Phosphates, Ltd. v. United States, 12 CIT 1074, 1077, 699 F. Supp.

938, 942 (1988) (citations omitted). In determining whether

Commerce’s interpretation is reasonable, the Court considers the

following non-exclusive list of factors: the express terms of the

provisions at issue, the objectives of those provisions, and the

objectives of the antidumping scheme as a whole. See Mitsubishi

Heavy Indus. v. United States, 22 CIT 541, 545, 15 F. Supp. 2d 807,

813 (1998).

DISCUSSION

I. Borusan Is Not Required to Show Payment of Duties Upon Inputs
Used to Produce Merchandise Sold in the Home Market

Under 19 U.S.C. § 1677a(c)(1)(B) (2000), an importer is

entitled to an upward adjustment to EP for import duties that are

“imposed by the country of exportation which have been rebated, or

which have not been collected, by reason of the exportation of the

subject merchandise to the United States.” Id. A duty drawback

adjustment is meant to prevent dumping margins that arise because

the exporting country rebates import duties and taxes that it had

imposed on raw materials used to produce merchandise that is
Court No. 04-00439 Page 9

subsequently exported. See Hornos Electricos de Venezuela, S.A. v.

United States (“HEVENSA”), 27 CIT ___, ___, 285 F. Supp. 2d 1353,

1358 (2003); see also Far East Mach. Co. v. United States, 12 CIT

428, 430, 688 F. Supp. 610, 611 (1988). To determine if a duty

drawback adjustment is warranted, Commerce has employed a two-prong

test which determines whether: (1) the rebate and import duties are

dependent upon one another, or in the context of an exemption from

import duties, if the exemption is linked to the exportation of the

subject merchandise; and (2) the respondent has demonstrated that

there are sufficient imports of the raw material to account for the

duty drawback on the exports of the subject merchandise. See

HEVENSA, 27 CIT at ___, 285 F. Supp. 2d at 1358. In claiming a

favorable duty drawback adjustment to EP, Borusan bears the burden

of demonstrating that both prongs of Commerce’s test have been

satisfied. See Allied Tube & Conduit Corp. v. United States, 25

CIT 23, 29, 132 F. Supp. 2d 1087, 1093 (2001). The Court finds

that Commerce properly applied its two-prong test in determining

that Borusan sufficiently established that it was entitled to a

favorable duty drawback adjustment.

The Court agrees with Commerce’s assertion that “this Court

has rejected explicitly plaintiffs’ contention that, as a

prerequisite to receiving duty drawback, a company must demonstrate

the payment of duties upon raw materials used to produce
Court No. 04-00439 Page 10

merchandise sold in the home market.” Def.’s Mem. Opp’n Pls.’ R.

56.2 Mot. J. Upon Agency R. (“Commerce’s Mem.”) at 12 (citing

Avesta Sheffied, Inc. v. United States, 17 CIT 1212, 1215, 838 F.

Supp. 608, 611 (1993); Chang Tieh Indus. Co., Ltd. v. United

States, 17 CIT 1314, 1320, 840 F. Supp. 141, 147 (1993). Similar

to Allied Tube’s argument in the case at bar, the plaintiff in

Avesta Sheffield, 17 CIT at 1215, 838 F. Supp. at 611, argued that

Commerce improperly allowed a duty drawback adjustment without

first determining whether the foreign market value was duty

inclusive. See id. The Court, however, held that the “statute

provides for the duty drawback adjustment without reference to any

finding that the home market price is reflective of duties.” Id.

The Court addressed the very same argument, in Chang Tieh, 17 CIT

at 1320, 840 F. Supp. at 147, and added that requiring Commerce to

determine whether the cost of merchandise in the home market

includes duties paid “would add a new hurdle to the drawback test

that is not required by the statute.” Id. The clear language of

19 U.S.C. § 1677a(c)(1)(B) does not require an inquiry into whether

the price for products sold in the home market includes duties paid

for imported inputs. See Timex, 157 F.3d at 882 (“Because a

statute’s text is Congress’ final expression of its intent, if the

text answers the question, that is the end of the matter.”)

(citations omitted).
Court No. 04-00439 Page 11

Allied Tube contends that Commerce failed to follow its past

practice. See Br. Pls. Supp. R. 56.2 Mot. J. Agency R. (“Allied

Tube’s Br.”) at 8-14. Allied Tube notes that, in Notice of Final

Determination of Sales at Less Than Fair Value for Silicomanganese

from Venezuela, 67 Fed. Reg 15,533 (Apr. 2, 2002), Commerce

considered and denied a claimed drawback adjustment based on facts

similar to those in the present action. See Allied Tube’s Br. at

9 (citing HEVENSA, 27 CIT at___, 285 F. Supp. 2d at 1360). The

respondent, Hevensa, took part in a program under which it was

exempt from paying import duties on certain imports used to produce

subject merchandise that was subsequently exported. See id.

Commerce found that Hevensa had not sufficiently established that

it paid import duties on inputs used to produce subject merchandise

sold in the home market. See id. Allied Tube asserts that, in

HEVENSA, this Court upheld Commerce’s determination as being

consistent with past practice. See id. The Court noted that

Hevensa’s inability to show that duties were paid on the

importation of inputs used for domestic sales but not for export

sales defeated its duty drawback claim. See Allied Tube’s Br. at

9 (citing HEVENSA, 27 CIT at ___, 285 F. Supp. 2d at 1360).

Allied Tube further argues that the facts of Hevensa are

similar to those involved in the case at bar. See id. In both

cases, the respondents participated in a government exemption
Court No. 04-00439 Page 12

program. See id. Allied Tube asserts that Borusan, like Hevensa,

failed to demonstrate and quantify the amount of import duties paid

on inputs used to produce merchandise sold in the home market. See

id. at 10. Therefore, Allied Tube contends that Commerce’s grant

of a duty drawback adjustment to Borusan is improper because

Commerce did not provide sufficient reasons for treating similar

situations differently. See id. Commerce must explain why it

chose to change its methodology and demonstrate that such change is

in accordance with law and supported by substantial evidence. See

id. The Court, however, finds that, contrary to Allied Tube’s

argument, HEVENSA, 27 CIT at ___, 285 F. Supp. 2d at 1358-60, does

not impose a requirement that Borusan prove that it paid port

duties upon inputs used in the home market.

In HEVENSA, the respondent claimed that duties were payable

absent exportation and Commerce requested additional information to

determine whether Hevensa had satisfied the first prong of the duty

drawback test. See id. Commerce denied the claimed duty drawback

adjustment because Hevensa had failed to demonstrate whether it

paid duties upon importation of raw materials or whether duties

were paid if it failed to export a specified quantity of finished

merchandise.2 See id. In the case at bar, Boursan reported to

2
HEVENSA involved a request by Commerce for additional
information to support Hevensa’s assertion that import duties were
payable absent exportation. See HEVENSA, 27 CIT at ___, 285 F.
Court No. 04-00439 Page 13

Commerce that it would have to pay import duties on certain raw

materials used to produce the subject merchandise if it failed to

export such merchandise to the United States. See Section B, C &

D Response of the Borusan Group in the 2002-2003 Antidumping

Administrative Review Involving Certain Welded Carbon Steel

Standard Pipe from Turkey, Pls.’s App. at Tab 6 at 29-30.

Unlike the respondent in HEVENSA, Borusan provided Commerce

with information and an explanation of the exporting country’s duty

drawback exemption program in effect during the relevant period of

review. See id. Consequently, Commerce did not request additional

information to determine whether Borusan paid duties upon

importation of raw materials or paid duties if it failed to export

subject merchandise to the United States. Accordingly, contrary to

Allied Tube’s assertion, the Court in HEVENSA did not create a

separate, third prong to the duty drawback test. Rather, the Court

affirmed the first prong of Commerce’s test whereby a party seeking

Supp. 2d at 1359-60. Commerce rejected Hevensa’s claimed duty
drawback adjustment for two reasons: “First, Commerce explained
that although [Hevensa] ‘described the duty drawback program in
which it participated as an “exemption program,” the regulations it
provided in its original questionnaire response described a “refund
program.”’ Second, Commerce charged that [Hevensa] ‘failed to
provide certain documentation requested by [Commerce]’” HEVENSA, 27
CIT at __, 285 F. Supp. 2d at 1359 (internal citations omitted).
Accordingly, Commerce determined that Hevensa had not satisfied the
first prong of its test because it was unclear whether the rebate
and import duties were dependent upon one another or,
alternatively, if Hevensa’s claimed exemption from duties was
linked to the exportation of the subject merchandise. See id.
Court No. 04-00439 Page 14

a duty drawback adjustment must demonstrate that either rebate and

import duties are dependent on one another, or that exemption from

import duties is linked to exportation of the subject merchandise.

II. Commerce Properly Granted Borusan a Duty Drawback Adjustment

Allied Tube also contends that prices in the home market and

the United States were reported on an equal basis prior to the

granting of a duty drawback adjustment. See Allied Tube’s Br. at

13. Allied Tube argues that Borusan did not pay any import duties

on raw materials used to produce subject merchandise for the home

market and, therefore, “there is nothing for the [duty drawback]

exemption or rebate to offset.” Id. Accordingly, the duty

drawback adjustment Commerce granted to Borusan violated the

statute and Congressional intent because such adjustment did not

offset import duties included in home market sales. See id. at 14.

Allied Tube maintains that none of the exhibits produced by Borusan

at verification support a finding that it paid customs duties on

imported inputs. See id. While Borusan provided Commerce a

payment ledger, the payment reflected therein represented a small

fraction of the 22.5 percent duty for hot-rolled steel which

Borusan would have been required to pay. See id. at 15. In its

questionnaire response, Borusan submitted that duties on inputs

used to produce the subject merchandise were exempted because the

raw materials were to be used to produce merchandise for export to
Court No. 04-00439 Page 15

the United States. See id. at n.4. Allied Tube argues that record

evidence suggests that the charge Borusan paid was not an import

duty. See id. at 16. Allied Tube asserts that the record lacks

substantial evidence to support the size of the granted adjustment

even if the payment by Borusan is deemed to be for import duties.

See id.

Commerce and Borusan assert that it fulfilled the requirements

of the two-prong duty drawback test. See Commerce’s Mem. at 15-19;

Br. Def.-Intervenor Borusan Opp’n Pls.’ R. 56.2 Mot. J. Agency R.

(“Borusan’s Br.”) at 24-28. Commerce maintains that Borusan

demonstrated that the “relevant import duties and rebates were

directly linked and dependent upon one another . . . .” Id. at 15.

Furthermore, Commerce tied the payment of such duties to Borusan’s

general ledger account for customs duties paid. See id. at 16.

Borusan indicated in its questionnaire responses that it would have

been required to pay import duties on the imported inputs if it had

not exported the completed product to the United States. See id.

Commerce notes that Allied Tube “acknowledges that the customs form

contains a duty amount linking the commercial invoice and a duty

for coil of 22.5 percent.” Id. at 18. Commerce argues that it

exercised its discretion and verified payments of duties for inputs

used for domestic production by comparing domestic sales to

Borusan’s domestic duty payment ledgers. See id. at 17. Commerce
Court No. 04-00439 Page 16

also asserts that it weighed the record evidence and found that the

Turkish drawback system was reliable. See id. at 19. Borsuan adds

that it provided evidence that it did pay “duties on imported raw

materials when it imported more raw material than it was permitted

to import duty free under its duty drawback license.” Borusan’s

Br. at 13. Borusan asserts that Commerce verified this information

and found that Borusan paid import duties on imported inputs in

certain instances. See id.

The Court finds that Commerce’s determination to grant Borusan

a duty drawback adjustment is supported by substantial record

evidence and in accordance with law. Commerce verified Borusan’s

claim for a duty drawback adjustment and “tied commercial invoices

to customs declaration forms. [Commerce] tied the amount of duties

owed as shown on the customs declaration form to Borusan’s general

ledger account for customs duty paid.” Verification of Sales and

Cost Data Submitted by the Borusan Group, Pls.’ App. at Tab 7 at

12. At verification, Borusan provided a payment ledger which

Commerce found indicated that Borusan paid customs duties and other

taxes and charges. Based upon record evidence, Commerce found that

Borusan paid import duties of 22.5 percent for certain raw material

used in domestic production of the subject merchandise. See id.

Consequently, Commerce reasonably determined that the Turkish duty

drawback system was reliable and that the relevant import duties
Court No. 04-00439 Page 17

and rebates were directly linked and dependent upon one another,

thereby satisfying the first prong of the duty drawback test. See

Issues & Decision Mem. at 5; see also Consolo, 383 U.S. at 620

(stating that “the possibility of drawing two inconsistent

conclusions from the evidence does not prevent an administrative

agency’s finding from being supported by substantial evidence”).

Commerce’s determination that Borusan demonstrated that there were

sufficient imports of the raw material to account for the duty

drawback on the exports of the manufactured product was also

reasonable. Accordingly, the Court finds that Commerce properly

determined that Borusan was entitled to a favorable duty drawback

adjustment to its EP.

CONCLUSION

The Court finds that the statute is clear on its face and

Commerce is not required to find that the costs of the subject

merchandise sold in the home market includes import duties.

Moreover, the Court finds that Commerce’s determination that

Borusan satisfied both prongs of its standard two-prong test for

duty drawback adjustments was supported by substantial evidence and

in accordance with law. Therefore, Allied Tube’s USCIT R. 56.2

motion is denied and Commerce’s determination to grant Borusan a
Court No. 04-00439 Page 18

duty drawback adjustment to its EP is affirmed. Judgment will be

entered accordingly.

/s/ Nicholas Tsoucalas
NICHOLAS TSOUCALAS
SENIOR JUDGE

Dated: May 12, 2005
New York, New York