Slip Op. 99-47
UNITED STATES COURT OF INTERNATIONAL TRADE
___________________________________
:
E.I. DUPONT DE NEMOURS & COMPANY, :
: Court No. 97-08-01335
Plaintiff, :
:
v. :
:
THE UNITED STATES, :
:
Defendant, :
:
and :
:
ARAMID PRODUCTS V.o.F. and :
AKZO NOBEL ARAMID PRODUCTS INC., :
:
Defendant-Intervenors. :
___________________________________:
[ITA determination remanded upon consent.]
Dated: June 2, 1999
Wilmer, Cutler & Pickering (John D. Greenwald, Ronald I.
Meltzer, and John A. Trenor) for plaintiff.
David W. Ogden, Acting Assistant Attorney General, David M.
Cohen, Director, Velta A. Melnbrencis, Assistant Director,
Commercial Litigation Branch, Civil Division, United States
Department of Justice (Mark L. Josephs), Mildred E. Steward,
Office of the General Counsel, United States Department of
Commerce, of counsel, for defendant.
Adduci, Mastriani & Schaumberg, L.L.P (Barbara A. Murphy,
Tom M. Schaumberg, and Gregory C. Anthes) for defendant-
intervenors.
OPINION
RESTANI, Judge: This matter is before the court on
plaintiff, E.I. DuPont De Nemours & Company's ("DuPont"), motion
Court No. 97-08-01335 Page 2
for judgment on the agency record pursuant to USCIT R. 56.2.
Plaintiff, the domestic party petitioner before the Department of
Commerce, challenges Commerce's antidumping duty determination in
the second administrative review of its order on aramid fiber
from the Netherlands. See Aramid Fiber Formed of Poly Para-
Phenylene Terephthalamide from the Netherlands, 62 Fed. Reg.
38,058 (Dep't Commerce 1997) [hereinafter Final Results].
Background
During the original less-than-fair-value ("LTFV")
investigation, a wholly-owned subsidiary of the Dutch
corporation, Akzo Nobel NV ("Akzo"), increased its equity holding
in Aramid Products V.o.F. ("Aramid")1 from 50 to 95 percent. See
Aramid Fiber Formed of Poly-Phenylene Terephthalamide from the
Netherlands, 59 Fed. Reg. at 23,688. Commerce did not consider
the corporate reorganization for purposes of the LTFV
investigation because the reorganization took place after the
period of investigation ended. Id. Commerce, however, accepted
Aramid's and Akzo's corporate restructuring for purposes of the
1
Aramid is a Dutch producer of PPD-T aramid fiber. Aramid
Fiber Formed of Poly-Phenylene Terephthalamide from the
Netherlands, 59 Fed. Reg. 23,684, 23,687 (Dep't Commerce 1994)
(LTFV final determination). Akzo Nobel Aramid Products Inc. is
Akzo's U.S. selling arm. Commerce's Verification Report (Feb.
21, 1997), at 2, C.R. Doc. 27, Def.'s App., Tab 9, at 2
[hereinafter Verification Report]. The U.S. parent company is
Akzo Nobel, Inc., which is wholly owned by Akzo Nobel NV. Id.
Court No. 97-08-01335 Page 3
first administrative review. See Aramid Fiber Formed of Poly
Para-Phenylene Terephthalamide from the Netherlands, 61 Fed. Reg.
51,406, 51,407 (Dep't Commerce 1996) (final results of
antidumping admin. rev.) [hereinafter First Review]. Commerce
states that it took this approach because the first
administrative review covered the period following consolidation.
Gov't Br. at 3.
During the first administrative review, having recognized
the corporate restructuring, Commerce, for purposes of cost of
production ("COP"), calculated "the respondent's net interest
expense based on the financing expenses incurred on behalf of the
consolidated group of companies to which the respondent belongs."
First Review, 61 Fed. Reg. at 51,407. Commerce utilized this
methodology because of Akzo's controlling interest in Aramid and
the fungible nature of debt and equity. Id. The court upheld
this approach in DuPont's challenge to Commerce's first
administrative review. E.I. DuPont de Nemours & Co. v. United
States, No. 96-11-02509, 1998 WL 42598, *3-5 (Ct. Int'l Trade
Jan. 29, 1998) ("E.I. DuPont I").
Commerce followed the approach taken in the first
administrative review in calculating Aramid's financing expenses
in the second administrative review covering the period June 1,
1995, through May 31, 1996. See Final Results, 62 Fed. Reg. at
Court No. 97-08-01335 Page 4
38,060. During the second review, Commerce requested that Aramid
report its corporate structure and affiliations, Commerce's
Questionnaire (Aug. 20, 1996), at A-3, P.R. Doc. 4, Def.'s App.,
Tab 1, at 4 [hereinafter Commerce's Questionnaire], in order to
confirm that Aramid's corporate structure remained unchanged from
the first administrative review, Gov't Br. at 4. Aramid
responded that this structure had not changed, indicating that
Akzo owned a 95 percent interest in the producing company.
Aramid's Questionnaire Section A Response (Sept. 20, 1996), at 6,
P.R. Doc. 10, Def.'s App., Tab 2, at 4 [hereinafter Aramid's
Section A].
As part of its request for information relating to U.S.
sales,2 Commerce requested that Aramid report financing expenses
as part of indirect selling expenses ("ISE"). See Commerce's
Questionnaire, Def.'s App., Tab 1, at 6. In response, Aramid
reported financing expenses and explained that the interest
expenses component of the ISE was based upon information taken
from Akzo's consolidated financial statements. Aramid's
Questionnaire Sections B-D Response (Oct. 25, 1996), at 111-112,
C.R. Doc. 2, Def.'s App., Tab 3, at 3-4 [hereinafter Aramid's
2
To determine the dumping margin, U.S. sales prices are
compared to normal value, which may be based on home market
sales, third country sales, or constructed value ("CV"), which
reflects COP. 19 U.S.C. § 1677b (1994).
Court No. 97-08-01335 Page 5
Sections B-D]. Similarly, Commerce requested that Aramid report
its financial interest expenses related to COP. See Commerce's
Questionnaire, at D-18, Def.'s App., Tab 1, at 7. In response,
Aramid reported the net interest expenses associated with COP.
Aramid's Sections B-D, at D-18, Def.'s App., Tab 3, at 17. As
with the ISE, the interest expense component of COP was based
upon the consolidated financial statements of Akzo. Id.3
Aramid submitted Akzo's consolidated financial statements as
part of its response to the original questionnaire. See
generally Aramid's Section A, P.R. Doc. 10, Def.'s App., Tab 2.
These statements contained the financing costs incurred by Akzo
on behalf of all of its subsidiaries. See id. at A-15 to A-16,
Def.'s App., Tab 2, at 24-67. Commerce subsequently issued a
supplemental questionnaire requesting additional financing
information. See Commerce's Supplemental Questionnaire (Nov. 19,
1996), at 1-8, C.R. Doc. 8, Def.'s App., Tab 4, at 3-10.
Commerce conducted verification of the costs and expenses that
Aramid reported in its original and supplemental questionnaires
in January and February of 1997. See Commerce's Verification
3
For U.S. ISE, Commerce used the consolidated financial
data of Akzo Nobel, Inc., the U.S. parent company. See
Verification Report, at Ex. 24, Def.'s App., Tab 9, at 19-20.
For COP, Commerce used the consolidated financial data of Akzo
Nobel, NV, the Dutch parent company of producer Aramid. Gov't
Br. at 5 n.2, see also Aramid's Section B-D Response, at 161-162,
Def.'s App., Tab 3, at 13-14.
Court No. 97-08-01335 Page 6
Outline (Jan. 13, 1997), at 1, C.R. Doc. 13, Def.'s App., Tab 5,
at 1.
In its first administrative review, Commerce isolated the
various parts of Akzo's amortized goodwill and included within
COP certain depreciation expenses related to devalued assets, but
declined to account for the residual goodwill arising from Akzo's
corporate restructuring. See E.I. DuPont I, 1998 WL 42598, at
*5-6. This approach was upheld by the court. Id. at *8-9.
Commerce followed this approach in its treatment of Akzo's
goodwill in the second review. Final Results, 62 Fed. Reg. at
38,063. In response to Commerce's section D questionnaire,
Aramid indicated that it was reporting COP based upon the actual
costs incurred during the POR. Aramid's Sections B-D, at 128,
139-140, Def.'s App., Tab 3, at 7, 9-10. Aramid also stated in
this response that it was following the depreciation methodology
used by Commerce in the first administrative review as part of
Commerce's breakdown of goodwill. Id. at 128 n.26, Def.'s App.,
Tab 3, at 7 n.26. Accordingly, Aramid's reported cost of
manufacturing ("COM") included the part of depreciation
associated with the revaluation of Aramid's assets that occurred
as part of the corporate restructuring. Id.
Commerce verified Aramid's COP and CV from January 27,
through January 31, 1997. Commerce's COP/CV Verification Report
Court No. 97-08-01335 Page 7
(Feb. 21, 1997), at 1, C.R. Doc. 26, Def.'s App., Tab 8, at 1.
During verification, Commerce confirmed to its satisfaction that
Aramid had made a proper adjustment for depreciation associated
with the revaluation of certain assets. Gov't Br. at 10; see
also Exhibit 27 to Verification Report (Feb. 21, 1997), C.R. Doc.
26, Def.'s App., Tab 10. Commerce also verified that Aramid had
included that portion of goodwill appropriately associated with
certain assets used in the cost of production. Gov't Br. at 10
(relying on figures found in Exhibits 36 and 37 to Verification
Report (Feb. 21, 1997), C.R. Doc. 26, Def.'s App., Tab 11.). The
final calculated dumping margin was 26.25 percent for Aramid's
merchandise. Final Results, 62 Fed. Reg. at 38,064.
The issues raised by DuPont are: (1) whether Commerce erred
in using Akzo Nobel, Inc.'s consolidated financial data to
calculate the financial expense component of Aramid's U.S. ISE,
(2) whether Commerce erred in using Akzo Nobel NV's consolidated
interest expenses in calculating Aramid's COP, and (3) whether
Commerce erred in excluding residual goodwill expenses arising
from the earlier corporate restructuring from Aramid's COP.4
4
All parties are agreed that remand is necessary to
correct Commerce's use of constructed value when suitable above-
cost home market sales were available for contemporaneous price
to price comparisons. Accordingly, remand is permitted for this
purpose.
Court No. 97-08-01335 Page 8
Jurisdiction and Standard of Review
The court has jurisdiction pursuant to 28 U.S.C. § 1581(c)
(1994). In reviewing final determinations in antidumping duty
investigations, the court will hold unlawful those agency
determinations which are unsupported by substantial evidence on
the record, or otherwise not in accordance with law. 19 U.S.C. §
1516a(b)(1)(B)(i) (1994).
Discussion
DuPont asserts that remand is necessary as to the first
issue involving the use of financial data from Akzo Nobel, Inc.,
the U.S. parent of Aramid's U.S. selling arm, for Aramid's U.S.
ISE calculation, because Commerce did not address in the Final
Results DuPont's arguments that the subsidiary's data should be
used. Commerce's reasoning with regard to this issue is readily
discernable and it fully disposes of DuPont's arguments. A court
may uphold an agency decision if the agency's path is reasonably
discernable. Ceramica Regiomontana, S.A. v. United States, 810
F.2d 1137, 1139 (Fed. Cir. 1987) (citing cases). Commerce's
reasoning is exactly the same as that supporting its decision to
use consolidated financial information of the foreign parent to
compute COP of the Dutch subsidiary. See Final Results, 62 Fed.
Reg. at 38,060. In sum, Commerce determined that the parent
corporations and not the subsidiaries controlled financial
Court No. 97-08-01335 Page 9
structuring and their data provided the most accurate measures of
financial costs. Remand to obtain further explanation is not
necessary.
The remainder of DuPont's arguments as to the three issues
before the court, and the responses thereto are essentially those
that were presented in E.I. DuPont I. Defendant-intervenor
Aramid argues that the court should not consider these issues
further, should apply collateral estoppel principles to this
case, and should find that DuPont is precluded from raising the
issues addressed in E.I. DuPont I. The Court of Appeals for the
Federal Circuit requires that the following four conditions be
met for issue preclusion to apply:
(1) the issue previously adjudicated is identical
with that now presented;
(2) the issue was "actually litigated" in the
prior case;
(3) the previous determination of that issue was
necessary to the end-decision then made; and
(4) the party precluded was fully represented in
the prior action.
Thomas v. General Servs. Admin., 794 F.2d 661, 664 (Fed. Cir.
1986).
Although the parties and legal issues are the same, and the
issues were necessarily litigated and decided in E.I. DuPont I,
Commerce's decision is based on the facts and arguments presented
Court No. 97-08-01335 Page 10
as to this review period. That is, although the methodologies at
issue, which were found to be permissible under the statute, are
the same, the calculations are different. Also, DuPont
specifically challenged ISE in the second, but not in the first,
review, and Commerce was required to reassess in the second
review the corporate financing structure to determine if it had
been altered from the first period of review. Further, Commerce
reconsidered all of DuPont's arguments and was not prohibited
from taking other reasonable approaches. DuPont was not
precluded from trying to convince Commerce to change its
methodologies. Thus, it appears that DuPont should not be
precluded from, at least, having the court review Commerce's
determination not to change its methodologies in the second
review.5
Moreover, DuPont notes, neither this court, nor the Court of
Appeals for the Federal Circuit, has found issue preclusion
applicable in a trade case. In PPG Indus., Inc. v. United
States, 978 F.2d 1232, 1239 (Fed. Cir. 1992), the court rejected
5
DuPont is incorrect, however, in assuming the court fully
considered the preclusion issue in denying its motion for
extension of time to file appeal of the court's decision as to
the first review. E.I. DuPont De Nemours & Co. v. United States,
15 F. Supp.2d 859 (Ct. Int'l Trade 1998). The parties did not
discuss the issue and the court's decision did not rise or fall
on DuPont's ability or inability to pursue the same issues in the
future.
Court No. 97-08-01335 Page 11
the application of issue preclusion, observing that the factual
record was different, including the fact that the time period in
review was different. Even if this case is distinguishable from
PPG, it is still far from clear that issue preclusion should be
applied to trade cases.6 A better approach might be to apply the
type of stare decisis principles applied by the court in customs
classification cases.
Res judicata principles (including issue preclusion)7 do not
apply in customs classification cases, unless the entries at
issue are identical. United States v. Stone & Downer Co., 274
U.S. 225, 235-37 (1927); United States v. Boone, 38 C.C.P.A. 89,
94, 188 F.2d 808, 810 (1951) ("doctrine [of res judicata] does
6
As stated by this court in PPG Indus., Inc. v. United
States, 13 CIT 297, 302, 712 F. Supp. 195, 199 (1989),
The burden on the party seeking issue preclusion is and
should be exacting. This is especially so in trade cases,
since Congress has made specific provision for periodic
administrative reviews in countervailing duty and dumping
cases . . . Since the agencies involved perform the function
of expert finders of fact concerning different programs,
different time frames, economic statistics and other factors
in countervailing duty and dumping investigations as well as
similar functions during periodic reviews, principles of
issue preclusion should be carefully applied. To hold
otherwise would have a chilling effect upon the
administrative processes envisioned by the Congress.
7
In Young Eng'rs, Inc. v. United States, 2 Fed. Cir. (T)
9, 19, 721 F.2d 1305, 1314 (1983), the Court of Appeals adopted
the view of res judicata as stated in the Restatement (Second) of
Judgments (1984), that the term is a broad one, which includes
the concepts of merger, bar, and issue preclusion.
Court No. 97-08-01335 Page 12
not apply in cases involving classifications of imported
merchandise."). Certain principles of stare decisis, however, do
apply. United States v. Mercantil Distribuidora, S.A., 45
C.C.P.A. 20, 23-24 (1957). Prior decisions with regard to
classification of the same merchandise, unless clearly erroneous,
govern as to other entries of the same goods. Id. ("public
policy of putting an end to litigation and of not reopening
questions which have been decided is a sound one, subject only to
the qualification that clear error should not be perpetuated.").
The doctrine does not apply if new evidence as to proper
classification is presented. Heraeus-Amersil, Inc. v. United
States, 13 CIT 764, 766 (1989) (citing Schott Optical Glass Inc.
v. United States, 3 Fed. Cir. (T) 35, 36, 750 F.2d 62, 64
(1984)).
This was the approach advocated by the court on issues of
statutory interpretation in trade cases in American Lamb Co. v.
United States, 9 CIT 260, 262, 611 F. Supp. 979, 981 ("stare
decisis counsels the court to follow the prior decisions."),
rev'd on other grounds, 4 Fed. Cir. (T) 47, 785 F.2d 994 (1986).
This makes sense even for methodological issues. While
technically the factual basis may be different because different
entries during different time periods are involved, if the
Court No. 97-08-01335 Page 13
determinative facts and legal arguments do not vary, judicial
economy is served by application of stare decisis principles.
In any case, because the precedential value of prior
judicial determinations of this court is not clear in trade
cases, even where the parties are the same and the operative
facts do not differ in any significant way, it is at least in the
interest of judicial economy under current issue preclusion
precedent for the court to consider these issues fully once
more.8
The court has reviewed the legal arguments presented by the
parties and the relevant facts of this review. They do not
differ in any significant way from those of E.I. DuPont I, as the
parties seem to acknowledge. Having fully considered the issues
once again, the court arrives at the same conclusions.
Accordingly, the court adopts the reasoning of E.I. DuPont I for
purposes of this opinion and incorporates it by reference herein.
Thus, the court sustains Commerce's determination, except that
remand upon consent is ordered to consider suitable home market
sales for contemporaneous price comparison purposes.
8
Even if stare decisis principles applied, under customs
practice with respect to a decision of the same level, that is,
another CIT decision, the court would review the matter for clear
error. See Mercantil, 45 C.C.P.A. at 23-4.
Court No. 97-08-01335 Page 14
Commerce shall issue amended results within 45 days. Any
objections to the new price comparisons shall be filed within 11
days thereof. Responses are due within 7 days thereof. If no
objections are timely filed, defendant shall present a final
proposed judgment to the court on the 15th day following its
amended results.
_____________________
Jane A. Restani
JUDGE
Dated: New York, New York
This 2d day of June, 1999.