Slip Op. 04-145
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
________________________________________
:
ELKEM METALS COMPANY and :
GLOBE METALLURGICAL INC., :
:
Plaintiffs, :
:
v. :
:
UNITED STATES, : Court No. 02-00232
:
Defendant, :
:
and :
:
RIMA INDUSTRIAL S/A, :
:
Defendant-Intervenor. :
________________________________________:
[Commerce’s Remand Redetermination is remanded.]
Piper Rudnick LLP (William D. Kramer and Martin Schaefermeier)
for Elkem Metals Company and Globe Metallurgical, Inc., plaintiffs.
Peter D. Keisler, Assistant Attorney General; David M. Cohen,
Director, and Reginald T. Blades, Jr., Senior Trial Counsel,
Commercial Litigation Branch, Civil Division, United States
Department of Justice; of counsel: Barbara J. Tsai, Office of the
Chief Counsel for Import Administration, United States Department
of Commerce, for the United States, defendant.
Greenberg Traurig, LLP (Philippe M. Bruno and Rosa S. Jeong)
for Rima Industrial S/A, defendant-intervenor.
November 16, 2004
OPINION
I. Standard of Review
The Court will uphold the United States Department of
Commerce’s (“Commerce”) redetermination pursuant to the Court’s
Court No. 02-00232 Page 2
remand 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). 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 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).
II. Background
Commerce issued its final results of the antidumping duty
administrative review on silicon metal from Brazil on February 12,
2002. See Final Results of Antidumping Duty Administrative Review
of Silicon Metal From Brazil (“Final Results”), 67 Fed. Reg. 6,488
(Feb. 12, 2002). Elkem Metals Company and Globe Metallurgical Inc.
(collectively, “Plaintiffs”) filed a complaint on April 15, 2002,
challenging Commerce’s Final Results. See Compl. On October 24,
2002, Plaintiffs filed a motion for judgment upon the agency record
and requested that the Court remand the Final Results to Commerce
with instructions to include in its constructed value (“CV”)
Court No. 02-00232 Page 3
calculation the value added tax (“VAT”), which was paid by Rima
Industrial S/A (“Rima”) upon certain production inputs.1 See Pls.’
Br. Supp. Mot. J. Upon Agency R. at 11. Commerce subsequently made
a motion to dismiss for lack of jurisdiction as moot because
Commerce’s test calculation did not change the final dumping
margin. See Def.’s Reply Pls.’ Opp’n Def.’s Mot. Dismiss Lack
Juris. Moot at 9. On February 14, 2003, Rima moved to strike from
the Court record portions of Plaintiffs’ opposition to Commerce’s
motion to dismiss. See Def.-Intervenor’s Mot. Strike R. Portions
Pls.’ Opp’n Def.’s Mot. Dismiss. The Court denied Rima’s motion
and ordered Rima and Commerce to respond to Plaintiffs’ motion.
See Elkem Metals Co. v. United States, 27 CIT ___, 297 F. Supp. 2d
1347 (2003).
On January 29, 2004, Commerce filed a motion for voluntary
remand for it to include the VAT Rima incurred upon inputs used for
silicon metal production in its calculation of CV. See Def.’s
Mot. Remand. Rima consented to the remand but noted that the
calculation of CV also requires an accounting of the VAT credits
included in Rima’s costs thereby ensuring that double counting does
1
Two types of VAT are at issue in this proceeding, imposto
sobre a circulacao de mercadorias e servicos and imposto sobre
produtos industrialzados, which are imposed by the Brazilian
government on purchases of certain goods and services. See Def.-
Intervenor Rima Resp. Pls.’ Comments Commerce Final Remand Results
(“Rima’s Resp.”) at 3.
Court No. 02-00232 Page 4
not occur. See Def.-Intervenor Rima Resp. Def.’s Mot. Remand at 2-
3. On February 25, 2004, the Court remanded this matter to
Commerce. On June 8, 2004, Commerce submitted its Final Results of
Redetermination Pursuant to Court Remand (“Remand
Redetermination”). On July 22, 2004, Plaintiffs filed comments
with the Court regarding the Remand Redetermination and Commerce
subsequently submitted its response to Plaintiffs’ comments on
September 16, 2004. Rima filed its response to Plaintiffs’
comments on September 17, 2004. An oral argument was held before
this Court on November 12, 2004.
III. Commerce Improperly Excluded the VAT Rima Paid on Inputs in
its Calculation of CV
A. Contention of the Parties
1. Plaintiffs’ Contentions
Plaintiffs contend that 19 U.S.C. § 1677b(e) (2000) and case
law require Commerce to include the VAT Rima paid on inputs in
calculating CV. See Pls.’ Comments Commerce Final Remand Results
(“Plaintiffs’ Comments”) at 6-9. Plaintiffs argue that Commerce
improperly excluded the VAT Rima paid on inputs. See id.
Commerce’s decision was based on a recent clarification made in the
Final Results of Antidumping Duty Administrative Review of
Silicomanganese From Brazil (“Final Results of Silicomanganese”),
Court No. 02-00232 Page 5
69 Fed. Reg. 13,813 (Mar. 24, 2004).2 See id. at 6. Plaintiffs
contend that Commerce’s rationale for excluding the VAT from Rima’s
CV calculation “is no different than its rationale for excluding
the VAT in its original determination in this case.” Id. at 7-8.
Furthermore, Plaintiffs assert that Commerce “cited no record
evidence to support its finding that Rima fully recovered the VAT
it paid on inputs during the [period of review] and no such
evidence exists.” Id. at 7.
Plaintiffs argue that Commerce’s interpretation is contrary to
the plain language of the statute and to what the Court of Appeal
for the Federal Circuit (“CAFC”) actually decided. See id. at 9.
The plain language of the statute allows for the exclusion of taxes
paid on inputs from CV only when the VAT is remitted or refunded
upon exportation. See id. at 9 (emphasis omitted). Plaintiffs
note that the CAFC held that “unless [VAT] are remitted or refunded
2
Commerce interpreted Aimcor v. United States, 141 F.3d
1098 (Fed. Cir. 1998), and Camargo Correa Metais, S.A. v. United
States, 200 F.3d 771, 774 (Fed. Cir. 1999) as “not dictat[ing] that
VAT must always be included in CV unless the tax is remitted or
refunded upon exportation.” See Plaintiffs’ Comments at 6-9
(quoting Final Results of Silicomanganese, 69 Fed. Reg. at 13,813).
In Final Results of Silicomanganese, 69 Fed. Reg. at 13,813,
Commerce determined that when the VAT paid is recovered by the
producer during the period of review, the VAT is not incurred and
does not constitute a material cost for the purposes of calculating
CV. See Plaintiffs’ Comments at 6. Moreover, Commerce found that
19 U.S.C. § 1677b(e) does not prohibit the exclusion of VAT from CV
if those taxes are recovered after the exportation of the subject
merchandise. See id. at 7 (citing Final Results of
Silicomanganese, 69 Fed. Reg. at 13,813).
Court No. 02-00232 Page 6
‘upon exportation’ they are properly included in the constructed
value of the exported merchandise.” Id. (quoting Camargo, 200 F.3d
at 774. The record indicates that the VAT paid by Rima on inputs
was not remitted or refunded upon exportation. See id.
Accordingly, Plaintiffs argue that based on the plain language of
the statute and the CAFC case law the VAT incurred by Rima on
inputs must be included in CV.
2. Commerce’s Contentions
Commerce responds that the language of 19 U.S.C. § 1677b(e)
requires that “internal taxes remitted or refunded upon exportation
of the associated merchandise are to be disregarded in the
calculation of constructed value.” Def.’s Resp. Pls.’ Comments
Upon Commerce’s Final Remand Determination (“Commerce’s Resp.”) at
4. Commerce asserts that the statute “provides no direction
specifically for the treatment of internal taxes that are not
remitted or refunded upon exportation of the associated
merchandise.” Id. Consequently, Commerce may recognize “that the
Brazilian tax system provides mechanisms for the recovery of taxes
paid, and Commerce may account for that recovery to determine the
correct value of taxes actually incurred for inclusion in
calculating constructed value.” Id. Commerce argues that
including the full amount of VAT Rima paid on inputs purchased
would not accurately represent the cost of those materials if Rima
Court No. 02-00232 Page 7
recovered some or all of the VAT paid. See id. Based on this
determination, Commerce’s calculation of CV excluded the VAT paid
by Rima.
Commerce further asserts that Plaintiffs’ reliance upon the
holdings of the CAFC, in Aimcor, 141 F.3d 1098 and Camargo, 200
F.3d 771, are misplaced. See Commerce’s Resp. at 5. Commerce
notes that the CAFC “found that the Brazilian VAT at issue was not
remitted or refunded upon exportation of the associated merchandise
and, therefore, was not required to be excluded from CV.” Id.
Commerce maintains that it may acknowledge that VAT paid on inputs
may be recovered prior to exportation. See id. Commerce notes
that the CAFC stated that “allowing a respondent to demonstrate
that taxes paid upon inputs had been recovered ‘does not foreclose
a future interpretation of the statute that requires taxes to be
remitted or refunded upon exportation to be excluded from the cost
of materials.’” Id. at 6 (quoting Aimcor, 141 F.3d at 1109, n.19).
Commerce argues that Camargo, 200 F.3d at 771, “stands for only the
proposition that because the Brazilian VAT system does not remit or
refund taxes upon exportation of the associated merchandise, the
VAT paid cannot automatically, as a matter of law, be excluded from
CV.” Commerce’s Resp. at 8.
Commerce maintains that it reviewed and analyzed comments
received upon publication of its draft remand results. See id. at
Court No. 02-00232 Page 8
12. For the Final Results, Commerce found that the amount of VAT
Rima paid upon inputs exceeded the amount of VAT it collected from
domestic customers. See id. Commerce found that “Rima had
maintained a net VAT credit balance.” Id. Thus, Commerce treated
Rima’s application of VAT credits towards input purchases as a
recovery of VAT taxes paid. See id. at 13. Rima did not incur any
net VAT costs because the VAT Rima paid exceeded the amount of VAT
Rima collected, resulting in a VAT credit balance. See id. at 12-
13. Under the Brazilian law in effect during the period of review,
VAT credit balances could be used to purchase additional inputs.
See id. at 14-15. Commerce found that “while Rima initially paid
VAT amounts upon inputs, it fully recovered these amounts prior to
exportation through the use of VAT credit as cash such that Rima
did not actually incur any VAT during the [period of review].” Id.
at 13. Accordingly, Commerce excluded VAT in determining the cost
of materials component of CV.
3. Rima’s Contentions
Rima generally agrees with Commerce that the Court should
sustain the Remand Redetermination. See Rima’s Resp. at 1-8.
Taxes are remitted to the Brazilian government only when the amount
of taxes collected by Rima from domestic customers is greater than
the amount of taxes paid by Rima on inputs. See id. at 3-4. On
the other hand, if the amount of VAT paid on inputs is greater than
Court No. 02-00232 Page 9
the amount collected from domestic customs, the balance is retained
by Rima as a credit which may be used as cash to purchase inputs.
See id. at 4. Rima asserts that the amount of VAT it paid on
inputs exceeded the amount collected from domestic customers and,
therefore, Rima accumulated VAT credits. See id. Rima used the
VAT credits to pay its suppliers for certain inputs used to produce
silicon metal. See id. Rima notes that it recovered all VAT paid
for inputs prior to exportation. See id. at 7. Because Rima had
recovered all of the VAT paid by the time of exportation, Rima
asserts that “there were no taxes to be ‘remitted or refunded.’”
Id. Rima asserts that “[r]ather than holding on to its VAT credits
to be offset against future liabilities arising out of domestic
market sales, Rima used VAT credits in lieu of cash to purchase
inputs which were consumed in the production of the subject
merchandise.” Id. Accordingly, Rima contends that VAT was not a
cost of materials at the time of exportation and that Commerce
properly excluded VAT from CV. See id.
B. Analysis
In determining normal value (“NV”), Commerce may disregard
sales made at less than the cost of production. See 19 U.S.C. §
1677b(b)(1). If such sales are disregarded, the statute directs
Commerce to base NV on the remaining sales of the foreign like
product in the ordinary course of trade. See id. If, however,
there are no sales made in the ordinary course of trade, Commerce
Court No. 02-00232 Page 10
is to base NV on the CV of the merchandise.3 See id. In
calculating CV, the statute states that “the cost of materials
shall be determined without regard to any internal tax in the
exporting country imposed on such materials or their disposition
which are remitted or refunded upon exportation of the subject
merchandise produced from such materials.” See 19 U.S.C. §1677b(e)
(emphasis added). Plaintiffs argue that the plain language of the
statute requires Commerce’s calculation of CV to include the
Brazilian VAT paid on inputs by Rima. See Plaintiffs’ Comments at
9. In opposition, Commerce argues that the statute is ambiguous
with respect to the treatment of internal taxes which are not
remitted or refunded upon exportation of the subject merchandise.
See Commerce’s Resp. at 4. The Court finds that the plain language
of the statute requires the inclusion of the VAT Rima paid upon
inputs in the calculation of CV.
The CAFC has noted that “the Brazilian system of keeping a
running total of taxes paid and collected and the ‘settling up’
3
The statute states that the CV is the amount equal to the
sum of:
(1) the cost of materials and fabrication or other
processing of any kind employed in producing the
merchandise, during a period which would ordinarily
permit the production of the merchandise in the ordinary
course of business.
19 U.S.C. § 1677b(e).
Court No. 02-00232 Page 11
monthly with the Brazilian government does not seems [sic] to meet
the literal requirements of the statute in terms of refund and
remittance.” Aimcor, 141 F.3d at 1109 n.19. Commerce contends
that it “is not required to ignore that the Brazilian tax system
provides mechanisms for the recovery of taxes paid, and Commerce
may account for that recovery to determine the correct value of
taxes actually incurred for inclusion in calculating constructed
value.” Commerce’s Resp. at 4. The statute directs Commerce to
determine the cost of materials “without regard to any internal tax
in the exporting country imposed on such materials . . . .” 19
U.S.C. § 1677b(e). The statute, however, directs Commerce to
exclude internal taxes from the calculation of CV only when such
taxes “are remitted or refunded upon exportation of the subject
merchandise produced from such materials.” Id.
Contrary to Commerce’s contention, the plain language of the
statute is unambiguous. The language of the statute precludes
Commerce from including an internal tax in its calculation of CV
when such a tax is remitted or refunded upon exportation. See id.
When internal taxes are not refunded or remitted upon exportation
of the subject merchandise, Commerce must include such internal
taxes paid on inputs in its calculation of CV. See Camargo, 200
F.3d at 774. Here, the VAT Rima paid was not remitted or refunded
upon exportation of the subject merchandise. RIMA’s use of VAT
Court No. 02-00232 Page 12
credits to purchase inputs during the period of review does not
constitute a remittance or refund upon exportation. See Aimcor,
141 F. 3d at 1109 n.19. Commerce does not have the statutory
authority to account for VAT which is remitted or refunded prior to
or after exportation of the subject merchandise. The statute
directs Commerce to account for the recovery of VAT which is
remitted or refunded upon exportation.4 See 19 U.S.C. § 1677b(e).
The plain language of the statute is clear on its face and requires
Commerce to include the VAT Rima paid on inputs in CV. The Court
finds Commerce’s exclusion of the VAT Rima paid on inputs in the
calculation of CV is not in accordance with law.
Conclusion
The Court finds that Commerce failed to follow this Court’s
remand instruction to include the VAT paid by Rima in the
calculation of CV. Commerce has not provided a reasonable
explanation for excluding the VAT Rima paid from the CV
4
Under Commerce’s interpretation of the statute, Commerce
would recognize and account for VAT recovered prior to exportation
and not just VAT remitted or refunded upon exportation. Commerce
asserts that Rima recovered VAT paid prior to exportation through
VAT credits which were used to purchase inputs during the period of
review. See Remand Redetermination at 6. The statute, however,
does not provide Commerce with the discretion to exclude from its
CV calculation VAT refunded or remitted prior to or after
exportation. If Commerce determines that it is necessary to
account for VAT remitted or refunded prior to or even after
exportation of the subject merchandise, then Commerce should seek
redress through the legislative process.
Court No. 00-07-00373 Page 13
calculation. Commerce’s contention that the language of 19 U.S.C.
§ 1677b(e) is ambiguous is unpersuasive. The plain language of the
statute directs Commerce to include in the calculation of CV any
internal taxes paid that are not remitted or refunded upon
exportation. Here, the VAT paid by Rima on inputs was not remitted
or refunded upon exportation of the subject merchandise. Rather,
Rima recovered the VAT paid prior to exportation. Accordingly,
Commerce improperly calculated CV by excluding the VAT paid by Rima
on inputs from CV. This matter is again remanded to Commerce with
instructions to include the VAT paid by Rima in its recalculation
of CV and make all necessary adjustments to the dumping margin.
/s/ Nicholas Tsoucalas
NICHOLAS TSOUCALAS
SENIOR JUDGE
DATED: November 16, 2004
New York, New York