Koenig & Bauer-Albert AG v. United States

Slip Op. 99-25

UNITED STATES COURT OF INTERNATIONAL TRADE

KOENIG & BAUER-ALBERT AG, ET AL.,

Plaintiff,

v. BEFORE: Pogue, Judge
UNITED STATES, Consol. Court No. 96-10-
02298
Defendant,
(Germany)
and

GOSS GRAPHICS, INC.

Defendant-Intervenor.

[Final results of Commerce’s redetermination sustained in part and
remanded in part.]

Decided: March 16, 1999

Shearman & Sterling (Thomas B. Wilner, Jeffrey M. Winton, Michael
J. Chapman, and Meredith Kolsky Lewis) for Plaintiffs MAN Roland
Druckmaschinen AG and MAN Roland Inc.; Kirkland & Ellis (Kenneth G.
Weigel, Carol A. Rafferty, Nancy Kao) for Plaintiffs Koenig &
Bauer-Albert AG and KBA-Motter Corp.

David W. Ogden, Acting Assistant Attorney General, David M. Cohen,
Director, Commercial Litigation Branch, Civil Division, United
States Department of Justice; Boguslawa B. Thoemmes, Attorney,
Office of the Chief Counsel for Import Administration, United
States Department of Commerce, Of Counsel, and Randi Rimerman
Serota, Attorney, Department of Justice, Civil Division, Commercial
Litigation Branch, for Defendants.

Wiley, Rein & Fielding (Charles Owen Verrill, Jr., Alan H. Price,
Willis S. Martyn III, and Leslie Johnson Pujo) for Defendant-
Intervenor.
OPINION

POGUE, Judge: On June 23, 1998, this Court remanded certain

aspects of the Department of Commerce’s ("Commerce") determination
 Consol. Court No. 96-10-02298 Page 2

in Large Newspaper Printing Presses and Components Thereof, Whether

Assembled or Unassembled, From Germany, 61 Fed. Reg. 38,166 (Dep’t

Commerce, July 23, 1996)(final determination)("Germany Final").

See Koenig & Bauer-Albert AG v. United States, 22 CIT , 15 F.

Supp.2d 834 (1998).1 Specifically, the Court directed Commerce: 1)

to reconsider the decision not to combine MAN Roland’s large

newspaper printing press ("LNPP") production costs with those

incurred by its subsidiary, MAN Plamag, and 2) to recalculate MAN

Roland’s selling, general, and administrative costs using an

appropriate allocation ratio. See id. at , 15 F. Supp.2d at

858.

Standard of Review

The Court will uphold a Commerce determination in an

antidumping investigation 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)(1994).

I. Combining MAN Roland and MAN Plamag Production Costs

A. Background

Where certain criteria are met, Commerce "collapses" related

1
In that decision, Plaintiffs Koenig & Bauer-Albert AG
("KBA") and MAN Roland Druckmaschinen AG and MAN Roland Inc.
("MAN Roland"), respondents in the underlying investigation, and
Plaintiff Goss Graphic Systems, Inc. ("Goss"), petitioner in the
underlying investigation, filed separate motions challenging
various aspects of Commerce’s determination. The motions were
consolidated.
 Consol. Court No. 96-10-02298 Page 3

companies into one entity, deriving a single, weighted-average

dumping margin for the collapsed entity as a whole. See Asociacion

Colombiana de Exportadores de Flores v. United States, 22 CIT ,

, 6 F. Supp.2d 865, 893 (1998). Here, during the underlying

administrative proceedings, MAN Roland argued that, because MAN

Roland and its wholly owned subsidiary, MAN Plamag, met the

criteria for collapsing, Commerce "should [have] average[d] the

labor and overhead rates of both the MAN Plamag and [MAN Roland]

facilities because LNPPs [were] produced at both locations."

Germany Final at 38,187.
In its final determination, Commerce neither outlined its

collapsing practice nor explained why MAN Roland and MAN Plamag did

not meet the requisite criteria. See id. at 38,188. Instead,

without addressing the fact that both companies produced LNPPs,

Commerce stated that "MAN Plamag is an affiliated party to [MAN

Roland] . . . [that] supplies [MAN Roland] with one of the major

production inputs[.]" Id. Commerce concluded, "[c]ontrary to [MAN
Roland’s] assertion, the Department’s normal practice is not to

automatically collapse affiliated suppliers and the respondent

company." Id. In its brief, the government argued that it did not

average MAN Roland’s and MAN Plamag’s costs because MAN Plamag was

not a producer of identical merchandise. See Koenig & Bauer-

Albert, 22 CIT at , 15 F. Supp.2d at 849, n. 7.

This Court found Commerce’s response in its final

determination to be insufficient. See id. at 849. Moreover,

because Commerce’s "identical merchandise" argument was a post hoc
 Consol. Court No. 96-10-02298 Page 4

rationalization, the Court did not address it on the merits. See

id. at 849, n.7. Therefore, the Court remanded the issue for

Commerce to reconsider. See id. at 850. The Court also instructed

Commerce that, if it chose to rely on the "identical merchandise"

argument, it would have to reconcile its determination with Certain

Fresh Cut Flowers From Colombia, 55 Fed. Reg. 20,491, 20,497 (Dep’t

Commerce, May 17, 1990)(final determination)("Fresh Flowers") and

Silicon Metal From Brazil, 59 Fed. Reg. 42,806, 42,808 (Dep’t
Commerce, Aug. 19, 1994)(final determination)("Silicon Metal").2

See id. at 849, n.7.

In its redetermination, Commerce reconsidered the issue, but

again decided not to combine the costs of MAN Roland and MAN Plamag

for purposes of calculating the cost of production. See Final

Results of Redetermination Pursuant to Remand (Dep’t Commerce,

Sept. 17, 1998)("Redetermination") at 3. Commerce maintained that,

pursuant to its "established practice," it only averages a

company’s production costs from multiple facilities where the
facilities actually produce identical merchandise. Id. (citing

Open-End Spun Rayon Shingles Yarn From Austria, 62 Fed. Reg.

43,701, 43,703 (Dep’t Commerce, Aug. 15, 1997)(final

determination); Canned Pineapple Fruit From Thailand, 62 Fed. Reg.

2
In Certain Fresh Cut Flowers From Colombia, Commerce
averaged the costs of two related companies it collapsed even
though it found that the flowers produced by the two farms were
"somewhat different[.]" Fresh Flowers at 20,497. In Silicon
Metal From Brazil, Commerce averaged a company’s costs incurred
at different furnaces in part because "other furnaces used to
produce non-subject merchandise [could] be used to produce
silicon metal." Silicon Metal at 42,808.
 Consol. Court No. 96-10-02298 Page 5

42,487, 42,491 (Dep’t Commerce, Aug. 7, 1997)(preliminary results

of admin. review); Antifriction Bearings (Other Than Tapered Roller

Bearings) and Parts Thereof From France, 61 Fed. Reg. 66,472,

66,477 (Dep’t Commerce, Dec. 17, 1996)(final results of admin.

review)). In addition, Commerce argued that its decision in

Germany Final was consistent with Fresh Flowers and Silicon Metal.

See id. at 5,6.

Finally, Commerce addressed the policy argument advanced by

MAN Roland as support for MAN Roland’s position. In its comments

to Commerce’s redetermination, MAN Roland argued that Commerce’s

practice of averaging a respondent’s production costs incurred at

multiple facilities was designed "to avoid an opportunity for a

respondent to escape dumping liability . . . simply because of the

choice of the facility in which the merchandise was produced."

Cmts. of MAN Roland on Redeterm. Pursuant to Remand ("MAN Roland

Cmts.") at 7. In other words, according to MAN Roland, Commerce’s

practice is to average a respondent’s production costs incurred at

multiple facilities where the various facilities have the

capability to produce the subject merchandise.

Countering MAN Roland’s assertion, Commerce stated,

We disagree with [MAN Roland’s] argument that, where a
respondent has the ability to produce the subject
merchandise at more than one facility, the reported costs
should reflect the weighted-average cost of manufacturing
at all facilities. Contrary to [MAN Roland’s] assertion,
the Department does not weight-average the production
costs incurred for non-identical merchandise simply
because the respondent could have produced identical
merchandise at one of its facilities.

Redetermination at 8.
 Consol. Court No. 96-10-02298 Page 6

B. Discussion

In its redetermination, Commerce maintained that it properly

did not average MAN Roland’s and MAN Plamag’s production costs

because, under its "established practice," Commerce only averages

a company’s production costs from multiple facilities where the

facilities produce identical merchandise. See Redetermination at

3. The Court here reviews whether in fact Commerce’s identical

merchandise requirement constitutes its established practice in the

context of affiliated parties.

The Court first concludes that Commerce has failed to explain

how its identical merchandise practice is consistent with its

decisions in Fresh Flowers and Silicon Metal.
In Fresh Flowers, Commerce weight-averaged the production

costs of two related companies, Floramerica and Cultivos de Caribe,

that were collapsed for purposes of calculating constructed value.

See Fresh Flowers at 20,497. The Floramerica farm produced

standard chrysanthemums, while the Cultivos de Caribe farm produced
spider chrysanthemums. See id. In its redetermination, Commerce

contended that it averaged the two farms’ production costs because

Commerce regarded the two chrysanthemum varieties "as part of the

identical product category, chrysanthemums[.]" Redetermination at

5.

Commerce’s position here is not consistent with the reasoning

articulated in Fresh Flowers. There, Commerce explained,

"[a]lthough the flowers are somewhat different, we consider spider

chrysanthemums and standard chrysanthemums to be the same type and
 Consol. Court No. 96-10-02298 Page 7

therefore calculated one [constructed value] for both." Fresh

Flowers at 20,497. The Court fails to see how the phrases

"somewhat different" and "the same type" can be reconciled with

"identical." Moreover, if, quoting Commerce, it is sufficient for

the purpose of cost averaging that the products produced at each

facility be "part of the identical product category," Commerce has

not explained how different models of LNPPs are not members of an

identical product category, LNPPs.

Similarly, Commerce failed to explain how its decision in

Germany Final is consistent with Silicon Metal. In that

determination, Commerce averaged a silicon metal producer’s costs

incurred by different furnaces. See Silicon Metal at 42,808. In

its redetermination, Commerce asserted that Silicon Metal did not

"support . . . [MAN Roland’s] contention that the Department

normally computes a weighted-average cost for merchandise that is

non-identical . . . [because there the respondent] produced the

identical merchandise in multiple furnaces during the period of
review." Redetermination at 9.

While Commerce is correct that all the furnaces in question in

Silicon Metal produced the subject merchandise during the period of

review, see Silicon Metal at 42,808, Commerce’s characterization of

that determination ignores its stated rationale. In Silicon Metal,

Commerce indicated that it averaged production costs incurred at

multiple facilities to prevent the respondent from being able to

avoid dumping liability through the manipulation of production:

The Department believes that it is inappropriate to
 Consol. Court No. 96-10-02298 Page 8

specifically identify inputs obtained at a lower cost to
a particular product or production run. The furnaces
used to produce silicon metal can produce other products
that are not subject to review. Likewise, other furnaces
used to produce non-subject merchandise can be used to
produce silicon metal. Accordingly, any benefits derived
from the use of a particular furnace relate to all
products produced during the period of review.

Id. (emphasis added). Therefore, contrary to Commerce’s assertion,

the decision in Silicon Metal did not require that the multiple

facilities actually produce identical merchandise; rather, the

decision was based on the ability to produce the subject

merchandise at more than one facility.

Moreover, Commerce has failed to demonstrate that its

identical merchandise requirement is its established practice in

the context of affiliated parties. First, the determinations

Commerce cited as support for its assertion were all made after its

decision in Germany Final. See Redetermination at 3 (citing Open-

End Spun Rayon Singles Yarn From Austria, 62 Fed. Reg. 43,701,

43,703 (Dep’t Commerce, Aug. 15, 1997)(final determination); Canned

Pineapple Fruit From Thailand, 62 Fed. Reg. 42,487, 42,491 (Dep’t
Commerce, Aug. 7, 1997)(preliminary results of admin. review);

Antifriction Bearings (Other Than Tapered Roller Bearings) and

Parts Thereof From France, 61 Fed. Reg. 66,472, 66,497 (Dep’t

Commerce, Dec. 17, 1996)(final results of admin. review)).

Therefore, Commerce cannot rely on these decisions as support for

its assertion that its identical merchandise requirement was its

established practice prior to its determination in Germany Final.

Moreover, none of Commerce’s cites specifically addresses the
 Consol. Court No. 96-10-02298 Page 9

question at issue here: whether Commerce only averages the

production costs incurred by affiliated parties at multiple

facilities where the facilities produce identical merchandise

during the period of review.3

Upon review of Commerce determinations, it is apparent that

Commerce does have a multiple facility cost averaging practice

3
The issue in the Austrian Yarn case was whether, for
purposes of the difference in U.S. and home market merchandise
adjustment under 19 U.S.C. § 1677b(a)(6)(C)(ii), the respondent
should report "a different cost of manufacturing for identical
yarns due to the fact that different machines produce the yarn."
Open-End Spun Rayon Singles Yarn From Austria, 62 Fed. Reg.
43,701, 43,703 (Dep’t Commerce, Aug. 15, 1997)(final
determination). Commerce decided to calculate a single weighted-
average cost of manufacturing for the identical yarns because
"the difference in merchandise adjustment is intended to account
for physical differences in similar merchandise being compared
and not differences in the production process[.]" Id. (emphasis
added). The difference in merchandise adjustment is not relevant
to the issue before the Court.
The Thai Pineapple decision Commerce cited was a preliminary
determination that simply stated that Commerce "calculated a
single weighted-average cost for products with identical physical
characteristics[,]" without any indication of the context or the
issue. Canned Pineapple Fruit From Thailand, 62 Fed. Reg.
42,487, 42,491 (Dep’t Commerce, Aug. 7, 1997)(preliminary results
of admin. review). Upon review of the matter’s final
determination, however, it is apparent that the issue addressed
was not whether the costs at separate facilities should be
averaged, but whether Commerce should calculate one average cost
for the entire review period or separate costs for each fiscal
year. See Canned Pineapple Fruit From Thailand, 63 Fed. Reg.
7,392, 7,399 (Dep’t Commerce, Feb. 13, 1998)(final results of
admin. review).
Finally, in Antifriction Bearings, Commerce decided that the
respondent appropriately reported the production costs of a
related party. See Antifriction Bearings (Other Than Tapered
Roller Bearings) and Parts Thereof From France, 61 Fed. Reg.
66,472, 66,497 (Dep’t Commerce, Dec. 17, 1996)(final results of
admin. review). There was, however, no discussion of the degree
of the parties’ affiliation and no indication that the parties’
merchandise needed to be identical. See id. Therefore, the
determination does not help resolve the issue before this Court.
Consol. Court No. 96-10-02298 Page 10

where the respondent is a single entity. See, e.g., Steel Wire Rod

From Venezuela, 63 Fed. Reg. 8,948, 8,952 (Dep’t Commerce, Feb. 23,

1998)(suspension of investigation)("Weighted-average costs are used

for a product that is produced at more than one facility . . .

based on the cost at each facility."); Certain Cut-to-Length Carbon

Plate From South Africa, 62 Fed. Reg. 61,751, 61,754 (Dep’t

Commerce, Nov. 19, 1997)(suspension of investigation); Antifriction
Bearings (Other Than Tapered Roller Bearings) and Parts Thereof

From Italy, 60 Fed. Reg. 10,959, 10,962 (Dep’t Commerce, Feb. 28,

1995)(final results of admin. review). None of these

determinations indicates, however, that the products manufactured

at multiple facilities must be identical as a prerequisite to the

weight-averaging of production costs.

Moreover, no authority discusses whether or not to average the

production costs incurred by affiliated producers at multiple

facilities. The only context in which such discussion does occur

is in the context of collapsing. See, e.g., Fresh Flowers at
20,497.

As noted in this Court’s original decision, Commerce was not

completely responsive to MAN Roland’s underlying argument at the

administrative level. See Koenig & Bauer-Albert, 22 CIT at , 15

F. Supp.2d at 849. There, MAN Roland argued that MAN Roland’s and

MAN Plamag’s production costs should have been averaged because the

two affiliated companies met Commerce’s criteria for collapsing.

See Germany Final at 38,187. Where Commerce collapses two

affiliated companies, it calculates a single weighted-average
Consol. Court No. 96-10-02298 Page 11

dumping margin for the companies as a whole. See Asociacion, 22

CIT at , 6 F. Supp.2d at 893. In Germany Final, Commerce

described MAN Roland and MAN Plamag as affiliated parties, yet did

not address whether the two companies should have been collapsed.

See Germany Final at 38,188. Instead, Commerce merely stated that

"the Department’s normal practice is not to automatically collapse

affiliated suppliers and the respondent company." Id.
This Court has previously held that Commerce has the authority

to collapse multiple parties and treat them as a single entity.

See Queen’s Flowers de Colombia v. United States, 21 CIT , ,

981 F. Supp. 617, 622 (1997).4 Just prior to the issuance of

Germany Final, Commerce outlined its criteria for collapsing as

follows:

In determining whether to collapse related or affiliated
companies, the Department must decide whether the
affiliated companies are sufficiently intertwined as to
permit the possibility of price manipulation. In making
this decision, the Department considers factors such as:
(1) The level of common ownership; (2) interlocking
boards of directors; (3) the existence of production
facilities for similar or identical products that would
not require retooling either plant’s facilities to
implement a decision to restructure either company’s
manufacturing priorities; and (4) whether the operations
of the companies are intertwined as evidenced by
coordination in pricing decisions, shared employees or
transactions between the companies.

4
The Court’s decision in Queen’s Flowers addressed
Commerce’s practice under the antidumping law as it existed prior
to the implementation of the Uruguay Round Agreements Act
("URAA"), which became effective on January 1, 1995. Commerce
decided Germany Final under the current law as amended by the
URAA. See Germany Final at 38,166. This court has recently
upheld Commerce’s collapsing practice as consistent with the
URAA. See AK Steel Corp. v. United States, 22 CIT , , slip
op. 98-159 at 22-23 (Dec. 22, 1998).
Consol. Court No. 96-10-02298 Page 12

Certain Pasta From Italy, 61 Fed. Reg. 30,326, 30,351 (Dep’t

Commerce, June 14, 1996)(final determination)(emphasis added). See

also, Certain Hot-Rolled Carbon Steel Flat Products From Canada, 58

Fed. Reg. 37,099, 37,107 (Dep’t Commerce, July 9, 1993)(final

determination); Certain Granite Products From Spain, 53 Fed. Reg.

24,335, 24,337 (Dep’t Commerce, June 28, 1988)(final

determination).

In particular, the Court notes the third criterion, which

indicates that, in determining whether to collapse, Commerce

considers the existence of production facilities for similar or
identical products that afford the company the ability to

manipulate its manufacturing priorities. Indeed, in the context of

collapsing, this criterion contradicts Commerce’s assertion that it

will only average a respondent’s production costs incurred at

multiple facilities where the facilities produce identical

products. See Redetermination at 3. Moreover, it undermines

Commerce’s assertion that "the Department does not weight-average
the production costs incurred for non-identical merchandise simply

because the respondent could have produced identical merchandise at

one of its facilities." Redetermination at 8. To the contrary,

whether a collapsed entity has the ability to evade the antidumping

law through the manipulation of production is central to the

question of whether to collapse the related entities in the first

place. See Queen’s Flowers, 21 CIT at , 981 F. Supp. at 622

(holding that Commerce has statutory authority "to treat a related

exporter and importer as a single entity in order to prevent price
Consol. Court No. 96-10-02298 Page 13

or production manipulation.").

In establishing regulations to conform with the URAA, Commerce

codified its collapsing practice. See Antidumping Duties;

Countervailing Duties, 61 Fed. Reg. 7,308, 7,330 (Dep’t Commerce,

Feb. 27, 1996)(proposed rules). The new regulation states,

(f) Treatment of affiliated producers in antidumping
proceedings--(1) In general. In an antidumping
proceeding under this part, the Secretary will treat two
or more affiliated producers as a single entity where
those producers have production facilities for similar or
identical products that would not require substantial
retooling of either facility in order to restructure
manufacturing priorities and the Secretary concludes that
there is a significant potential for the manipulation of
price or production.

(2) Significant potential for manipulation. In
identifying a significant potential for the manipulation
of price or production, the factors the Secretary may
consider include:

(i) The level of common ownership;
(ii) The extent to which managerial employees or board
members of one firm sit on the board of directors of an
affiliated firm; and
(iii) Whether operations are intertwined, such as through
the sharing of sales information, involvement in
production and pricing decisions, the sharing of
facilities or employees, or significant transactions
between the affiliated producers.

19 C.F.R. § 351.401(f)(1998)(emphasis added).

Although the collapsing regulation was not promulgated until

May 19, 1997, it had already been proposed on February 27, 1996,

and had been relied upon by Commerce as instructive and consistent

with Commerce’s practice and policy before its effective date.

See, e.g., Gray Portland Cement and Clinker From Mexico, 62 Fed.

Reg. 47,626 (Dep’t Commerce, Sept. 10, 1997)(preliminary results of

admin. review)(stating that, although the proceeding was not
Consol. Court No. 96-10-02298 Page 14

governed by the new regulations, 19 C.F.R. § 351.401(f) was

instructive because it described Commerce’s current practice and

policy); Certain Pasta From Italy, 61 Fed. Reg. 30,326, 30,352

(Dep’t Commerce, June 14, 1996)(final determination)("While

consistent with our practice on this issue, section 351.401(f) of

the Department’s proposed regulations give a new articulation to

the collapsing test."). Therefore, Commerce was aware of the

proposed regulation when it addressed MAN Roland’s request to

collapse on July 23, 1996.

In this context, the language of 19 C.F.R. § 351.401(f)

contradicts the practice Commerce here asserts. Commerce claims

that it will only average a respondent’s production costs incurred

at multiple facilities where the facilities produce identical
products. See Redetermination at 8. The regulation, however,

expressly states that Commerce will collapse (i.e., calculate a

single weighted-average dumping margin for) two affiliated

producers where "those producers have production facilities for
similar or identical products[.]" 19 C.F.R. § 351.401(f)(emphasis

added); see also Antidumping Duties; Countervailing Duties, 61 Fed.

Reg. 7,308, 7,330 (Dep’t Commerce, Feb. 27, 1996)(proposed

rules)("[I]n rare situations the Department may conclude that a

product that is not subject merchandise or a foreign like product

is sufficiently similar to subject merchandise that the producers

of those products may be candidates for collapsing.").

The regulation also undermines Commerce’s assertion that "the

Department does not weight-average the production costs incurred
Consol. Court No. 96-10-02298 Page 15

for non-identical merchandise simply because the respondent could

have produced identical merchandise" at more than one facility.

Redetermination at 8. Under the regulation, the presence of a

"significant potential for the manipulation of price or production"

is central to the decision of whether to collapse in the first

place. 19 C.F.R. § 351.401(f)(emphasis added).5

The Court recognizes that "substantial deference [is] accorded

to Commerce when interpreting and applying its own regulations[.]"

Torrington Co. v. United States, 156 F.3d 1361, 1363 (Fed. Cir.
1998). Here, however, Commerce’s application of the identical

merchandise requirement is inconsistent with 19 C.F.R. § 351.401

and contrary to Commerce’s collapsing practice.6

5
Commerce cited 19 C.F.R. § 351.401(f) in its
redetermination, arguing that even where Commerce collapses two
affiliated companies, it may properly decide not to weight-
average the companies’ production costs where the products
manufactured by each are not identical. See Redetermination at
4-5. While it is certainly within Commerce’s authority to make
fact specific determinations, Commerce cannot do so in a way that
is inconsistent with the regulation.
6
Commerce argues that, even if the identical merchandise
requirement is not its established practice, the Court should
sustain it because the practice is reasonable, and Commerce gave
the affected parties an opportunity to comment. See Def.’s
Response to MAN Roland’s Cmts. at 11 (citing Usinor Sacilor v.
United States, 19 CIT 711, 742, 893 F. Supp. 1112, 1139 (1995),
appeal docketed, No. 98-1269 (Fed. Cir. Feb. 13, 1998)).
"Commerce has the flexibility to change its position providing
that it explains the basis for its change and providing that the
explanation is in accordance with law and supported by
substantial evidence." Cultivos Miramonte S.A. v. United States,
21 CIT , , 980 F. Supp. 1268, 1274 (1997). Here, however,
it is inconsistent for Commerce to argue that the identical
merchandise requirement is both an established practice and a new
practice. Moreover, the identical merchandise requirement is not
consistent with Commerce’s collapsing practice as it existed
after, as well as before, the determination in Germany Final.
Consol. Court No. 96-10-02298 Page 16

C. Conclusion

Commerce has not demonstrated that the identical merchandise

requirement is its established practice in the context of

affiliated parties. Moreover, the only context in which the

discussion of whether to average the production costs of affiliated

parties does occur is in the context of collapsing. Here, Commerce

never addressed the threshold question of whether MAN Roland and

MAN Plamag should be collapsed. Therefore, to properly determine

whether MAN Roland’s and MAN Plamag’s production costs should be

averaged, Commerce should apply its collapsing practice as it then

existed and was later codified at 19 C.F.R. § 351.401(f). Commerce

has not made the required finding. Therefore, the Court remands

the matter for a determination consistent with this Court’s

opinion.

II. Recalculating MAN Roland’s SG&A Expenses

In the underlying decision, this Court remanded the matter to

Commerce to recalculate MAN Roland’s selling, general, and

administrative ("SG&A") costs using an appropriate allocation

ratio. See Koenig & Bauer-Albert, 22 CIT at , 15 F. Supp.2d at

855.

See, e.g., Stainless Steel Wire Rod From Sweden, 63 Fed. Reg.
40,449, 40,453 (Dep’t Commerce, July 29, 1998)(final
determination); Gray Portland Cement and Clinker From Mexico, 62
Fed. Reg. 47,626, 47,626-627 (Dep’t Commerce, Sept. 10,
1997)(preliminary results of admin. review). Thus, it is not
apparent that Commerce changed its practice at the time of its
determination in Germany Final.
Consol. Court No. 96-10-02298 Page 17

In calculating constructed value for MAN Roland’s home market

sales, Commerce rejected MAN Roland’s submitted cost figures and

relied instead on cost estimates prepared by MAN Roland prior to

the initiation of the instant investigation. See id. at , 15 F.

Supp.2d at 854. To isolate the SG&A costs attributable to each

LNPP project, Commerce multiplied the total cost of production for

each product by an SG&A ratio, which was equal to the total SG&A

costs for all projects divided by the total cost of production for

all projects. See id.
Inadvertently, however, Commerce used a somewhat inaccurate

allocation ratio. See id. The denominator of the SG&A ratio did

not include the cost of purchased parts worth more than DM 500

while the cost of production to which the ratio was applied

included the cost of purchased parts worth more than DM 500. See

id. Therefore, the resulting SG&A amounts were inflated. See id.

On remand, Commerce corrected the error by multiplying MAN

Roland’s SG&A ratio by the total estimated cost of manufacturing,
exclusive of the value of purchased parts costing more than DM 500.

See Redetermination at 10. Thus, the allocation ratio used on

remand is reasonable because the SG&A ratio was determined on the

same basis as the figures to which it was applied.

Commerce followed this Court’s instructions in recalculating

MAN Roland’s SG&A expenses, and its methodology was reasonable.

Moreover, MAN Roland concedes that the recalculation of SG&A was
Consol. Court No. 96-10-02298 Page 18

"reasonable[.]" MAN Roland Cmts. at 9.7 Therefore, the Court

sustains Commerce’s recalculation of MAN Roland’s SG&A expenses.

Conclusion

For the reasons set out above, Commerce’s redetermination in

Large Newspaper Printing Presses from Germany is remanded for

reconsideration and explanation consistent with this Court’s

opinion. Commerce shall complete its remand determination by

Monday, May 17, 1999; any comments or responses are due by

Wednesday, June 16, 1999; and any rebuttal comments are due by

Thursday, July 1, 1999.

So Ordered.

Donald C. Pogue
Judge

Dated: March 16, 1999
New York, New York

7
MAN Roland argues, however, that, even though Commerce’s
SG&A calculation method on remand may be reasonable, "it
certainly is not the only reasonable method, and it may not be
the most accurate." MAN Roland Cmts. at 9. "’As long as the
agency’s methodology and procedures are reasonable means of
effectuating the statutory purpose, [however,] and there is
substantial evidence in the record supporting the agency’s
conclusions, the court will not . . . question the agency’s
methodology.’" Budd Co., Wheel & Brake Div. v. United States, 15
CIT 446, 450, 773 F. Supp. 1549, 1553 (1991)(quoting Ceramica
Regiomontana, S.A. v. United States, 10 CIT 399, 404-405, 636 F.
Supp. 961, 966 (1986), aff'd, 5 Fed. Cir. (T) 77, 810 F.2d 1137
(1987)).