Borden, Inc. v. United States , 23 Ct. Int'l Trade 372 ( 1999 )

Slip Op. 99-50
UNITED STATES COURT OF INTERNATIONAL TRADE
________________________________________
:
BORDEN, INC., GOOCH FOODS, INC. and :
HERSHEY FOODS CORP., :
:
Plaintiffs, :
:
v. : Consol. Ct.
: No. 96-08-01970
UNITED STATES and :
UNITED STATES DEPARTMENT OF COMMERCE, :
:
Defendants, :
:
and :
:
DELVERDE, SrL and DELVERDE USA, INC., :
:
Defendant-Intervenors. :
:
________________________________________:
[Amended Final determination following remand sustained as to
plaintiffs Borden, Inc., Gooch Foods, Inc., and Hershey Foods
Corp. and defendant-intervenors Delverde, SrL and Delverde USA.]
Dated: June 4, 1999
Collier, Shannon, Rill & Scott, PLLC (Paul C. Rosenthal,
Kathleen W. Cannon, David C. Smith, Jr., and John B. Brew) for
plaintiffs Borden, Inc., Gooch Foods, Inc., and Hershey Foods
Corp.
Neville, Peterson & Williams (Lawrence J. Bogard), Mound,
Cotton & Wollan (Constantino P. Suriano) for defendant-
intervenors Delverde, SrL and Delverde USA.
David W. Ogden, Acting Assistant Attorney General, David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Erin E. Powell), Dean
Pinkert, Attorney Advisor, Office of the Chief Counsel for Import
Administration, United States Department of Commerce, of counsel,
for defendants
CONSOL. CT. NO. 96-08-01970 PAGE 2
OPINION
RESTANI, Judge: This matter is before the court following
remand to the United States Department of Commerce ("Commerce")
of Certain Pasta from Italy, 61 Fed. Reg. 30,326, 38,547-01,
42,231-02 (Dep't Commerce 1996) (final and amended final
determinations of sales at less than fair value). Familiarity
with the court's earlier decision in this case is presumed. See
Borden, Inc. v. United States, 4 F. Supp.2d 1221 (Ct. Int'l Trade
1998) [hereinafter "Borden I"]. Issues relating to respondent
DeCecco were resolved in Borden, Inc. v. United States, No. 98-
167, 1998 WL 895890 (Ct. Int'l Trade Dec. 16, 1998) (remand
determination affirmed as to De Cecco). As to the issues
remaining, following remand, the court sustains Commerce's
Redetermination on Remand [hereinafter "Remand Determination"].
I. Targeted Dumping
Background
Borden asked the court to find that Commerce erred in
failing to calculate dumping margins for Delverde by comparing
weighted-average normal values to transaction-specific export
prices, pursuant to 19 U.S.C. § 1677f-1(d)(1)(B) (1994), the
"targeted dumping" provision of the anti-dumping statute. The
court remanded to Commerce to continue its targeted dumping
CONSOL. CT. NO. 96-08-01970 PAGE 3
inquiry. Borden I, at 1248. On remand, the court required that
Commerce either articulate standards by which it would evaluate a
targeted dumping petition or, if not yet prepared to do so, that
Commerce conduct its own analysis of the data to determine
whether to calculate dumping margins for Delverde using
transaction-specific rather than weighted-average prices. Id. at
1229. The court further instructed that if Commerce chose to
articulate the standards by which a targeting petition would be
evaluated, the agency was also obliged to clarify the allocation
of the analytical burden between petitioners and Commerce. Id.
at 1230.
Commerce chose to articulate the standards by which it would
evaluate a targeted dumping petition, explicitly noting that the
methodology developed for this case might vary in the future.
Remand Determination, at 15. After receiving comments on its
proposed standards, Commerce released its final methodology by
letter on July 22, 1998. Id. at 17.
Commerce defined price difference as a separation in price,
defining price as gross unit prices less adjustments for movement
charges, discounts, rebates, and post-sale price adjustments.
Id. at 16. Accordingly, if targeting had occurred, the allegedly
targeted purchaser would receive a lower average price than each
CONSOL. CT. NO. 96-08-01970 PAGE 4
allegedly non-targeted purchaser, and that price difference would
not be attributable to non-targeting factors such as product
type, level of trade, time of sale, or terms/conditions of sale.
Id.
Commerce defined two ways it would identify price
differences significant enough to trigger a targeted dumping
investigation. First, to avoid the illogical conclusion that the
majority of purchasers were targeted,1 the price to the allegedly
targeted purchaser must be in the lowest 20 percent of all
average transaction prices. Id. Second, to determine what
magnitude of price differences is significant for the market at
hand, Commerce requires that the price separation between
allegedly targeted and non-targeted customers must be equal to or
greater than the maximum price separation within the non-targeted
group, unless a party shows the exporter's data to be non-
representative of the industry as a whole. Id.
Commerce also defined which significant price differences
would qualify as a pattern. Specifically, the department would
recognize a pattern of significant price differences if i) they
1
By definition, if a petition alleges that the price charged
the majority of purchasers is less than fair value, that petition
effectively does not allege targeting. Likewise, if the majority
of purchasers are sold goods at less than fair value, the risk
that weighted-average price comparisons will mask dumping
evaporates.
CONSOL. CT. NO. 96-08-01970 PAGE 5
existed, on average, over all relevant time periods and for all
products sold by the exporter to the allegedly targeted customer
or customers, and ii) average transaction prices exhibited a
"downward skewness" with respect to allegedly targeted customers.
Id. Commerce noted, in response to comments from the parties,
that the department would relax its standards if a party could
show that the allegedly targeted purchasers comprised a well-
defined group, such as those who buy for a niche market or those
who recently changed suppliers due to price-undercutting. Id. at
16-17.
Following Commerce's detailed instructions for identifying
customers frequently "at the bottom," Letter from Commerce (July
22, 1998), Attachment, at 1, Borden filed a targeted dumping
petition against Delverde on July 27, 1998. Remand
Determination, at 17. On the basis of this application, Commerce
decided to pursue a targeted dumping investigation of Delverde.
Id. In its July 27, 1998 petition, Borden had alleged that all
customers "frequently at the bottom" were being targeted by
Delverde. Draft Remand Determination on Targeted Dumping (Aug.
20, 1998), at 2 [hereinafter "Draft Redetermination"].
Commenting that this might have been the result of a
misunderstanding by Borden, Commerce modified its targeting
CONSOL. CT. NO. 96-08-01970 PAGE 6
inquiry for this single occasion. Id. at 2-3. Commerce
considered that the set of purchasers proposed by Borden might be
over-inclusive and might mask actual targeting. Id. at 3.
Commerce announced that in addition to its targeting analysis of
Borden's data, it therefore also would perform this analysis on a
subset of Borden's purchaser group: those found at the lower end
of that set. Id. at 3.
On the basis of these calculations, Commerce concluded that
the data did not reveal targeted dumping by respondent Delverde.
Remand Determination, at 17. Borden here challenges five aspects
of Commerce's Remand Determination.
Discussion
a. Motion to Amend and Exhaustion of Administrative Remedies
Borden makes three arguments which pertain to the targeted
dumping petition it filed under Commerce's methodology announced
during remand. The court addresses two of these at this point
and the third in a separate section below. First, Borden alleges
that Commerce erred in its targeted dumping analysis when it
deviated from its normal calculation methodology for determining
net prices by including selling expenses incurred by Delverde.
Second, Borden argues that Commerce incorrectly included customer
category as a control factor in its targeted dumping analysis,
CONSOL. CT. NO. 96-08-01970 PAGE 7
despite a prior finding that all sales were made at the same
level of trade. Plaintiffs' Comments on Redetermination on
Remand (Sept. 28, 1998), at 9-10 [hereinafter "Plaintiffs'
Comments"].
In their response to Borden's comments on the Remand
Determination, defendants noted that Borden's argument regarding
the inclusion of selling expenses was not raised before the
agency. Defendants' Response (Oct. 2, 1998), at 1. Defendants
now seek leave to amend their response to raise the same concern
with respect to Borden's customer category claim, proposing to
argue that Borden failed to exhaust its administrative remedies
in failing to raise this question during the administrative
stages of the remand.2 Defendants' Amended Response (Oct. 9,
1998), at 1.
Borden responds with an equitable argument that Commerce
should not be permitted to amend its response. Plaintiffs'
Opposition to Defendants' Amended Response (Oct. 26, 1998), at 2-
3. Borden complains that after the agency had received an
2
In its response to Borden's and defendants' comments after
the Remand Determination, Delverde raised the issue of Borden's
failure to exhaust its administrative remedies as to both the
selling expense and customer category issues. Thus, the court
would be required to address the exhaustion issue, whether
Commerce raised it or not. One might argue, however, that
Commerce has a more direct interest in the procedural issue.
CONSOL. CT. NO. 96-08-01970 PAGE 8
extension of time amounting to three additional months to submit
its remand analysis to the Court, the agency permitted Borden
only a few days to respond to each of three statistically-complex
stages during the remand. In particular, the agency required
Borden to comment upon its draft redetermination dated Thursday,
August 20, 1998, by close of business Monday, August 24, 1998.
Id. at 2. Given this tight schedule, Borden finds unfair
Commerce's attempt here to preclude arguments Borden failed to
raise in that short period. Accordingly, Borden specifically
requests that the court deny Commerce leave to amend its response
to Plaintiffs' Comments to make this preclusion argument in light
of the relatively long time Commerce had (11 days) to respond in
the first place.
Borden's response to Commerce's motion compounds the
exhaustion issue. Borden did not make a due process objection
or any other kind - to Commerce's response schedule in either
its response to Commerce's Draft Redetermination or in
Plaintiffs' Comments. Nor, strictly speaking, does Borden make
such an argument here, relying only on its persuasive value in
CONSOL. CT. NO. 96-08-01970 PAGE 9
equity.3 The court notes that Commerce has not promulgated
regulations specifying certain procedures or timing on remand.
The court is satisfied from the record that as a factual
matter, Borden failed to raise either the selling expense or the
customer category issue during the administrative phase of the
remand. To the extent they are divisible, the court addresses
the motion to amend and the exhaustion issue in turn.
The court considers Commerce's October 9, 1998 motion to
amend its response to Plaintiffs' Comments analogous to a motion
to amend a pleading. A party may amend its pleading by leave of
court. USCIT Rule 15(a). The court has the discretion to grant
or deny a motion to amend. See Saarstahl AG v. United States,
949 F. Supp. 863, 866 (Ct. Int'l Trade 1996), aff'd in part,
rev'd in part, 1999 WL 203323 (Fed. Cir. Apr. 12, 1999). The
3
Even if the court should consider that Borden unwittingly
has raised a due process issue at this belated stage, and even if
the court deemed such a due process claim to be viable in an
antidumping context, the claim likely would be unavailing to
Borden. The court applies a rule of reason in evaluating
administrative due process claims. See United States v. Islip,
18 F. Supp.2d 1047, 1064-66 (Ct. Int'l Trade 1998) (Customs fraud
defendant given seven rather than the required 30 days to respond
was not deprived of due process such as would preclude
jurisdiction on review because "[d]efendant was ultimately given
sufficient opportunity to be heard at the administrative level.")
Borden's thoughtful responses to Commerce's proposed methodology
and draft redetermination, and Commerce's responses to those
detailed remarks in the Remand Determination clearly show that,
as a practical matter, Borden was not substantially deprived of
an opportunity to be heard before the agency.
CONSOL. CT. NO. 96-08-01970 PAGE 10
Rule provides, in relevant part, that "a party may amend the
party's pleading . . . by leave of court," and that "leave shall
be freely given when justice so requires." USCIT Rule 15(a).
The Supreme Court has described the parameters of this
discretion.4 Foman v. Davis, 371 U.S. 178, 182 (1962). In
Saarstahl, 949 F. Supp. at 866, this court denied a motion to
amend the complaint because of undue delay and unfair prejudice
to the other parties. By contrast, defendants' motion to amend
here cannot be said to be unduly delayed, as it followed almost
directly the procedural event (the filing of defendants' response
to Borden) it seeks to revise. None of the other factors listed
in Foman suggest that the court must deny defendants' motion.
4
In Foman, the Supreme Court discussed Fed. R. Civ. Proc.
15(a), which contains the same language and is parallel to USCIT
Rule 15(a). See also Earth Island Institute v. Christopher, No.
95-169, 1995 WL 604708, at *1 (Ct. Int'l Trade Oct. 12, 1995).
The Court in Foman stated,
If the underlying facts or circumstances relied upon by
a plaintiff may be a proper subject of relief, he ought
to be afforded an opportunity to test his claim on the
merits. In the absence of any apparent or declared
reason - such as undue delay, bad faith or dilatory
motive on the part of the movant, repeated failure to
cure deficiencies by amendments previously allowed,
undue prejudice to the opposing party by virtue of
allowance of the amendment, futility of amendment, etc.
- the leave sought should, as the rules require, be
'freely given.'
Foman, 371 U.S. at 182.
CONSOL. CT. NO. 96-08-01970 PAGE 11
That the argument therein may be damaging to Borden does not
render the amendment unduly prejudicial. The court therefore
grants defendants' motion and allows the proposed amendment.
The court now turns to the question of exhaustion of
administrative remedies as to both the selling expense and the
customer category issues. In the Court of International Trade,
the doctrine of the exhaustion of administrative remedies is
statutorily based. 28 U.S.C. § 2637 (1994). With certain
enumerated exceptions, the court is instructed that it "shall,
where appropriate, require the exhaustion of administrative
remedies." 28 U.S.C. § 2637(d).
The exhaustion requirement of § 2637(d) is discretionary
rather than strictly jurisdictional. United States v. Priority
Products, Inc., 793 F.2d 296, 300 (Fed. Cir. 1986). The court
may decide to waive the requirement and reach an issue not raised
before the agency. Id. (emphasizing the discretionary language
in 28 U.S.C. § 2637(d)).
When the court bases its review of an administrative
decision on grounds not before the agency, it "deprives the
[agency] of an opportunity to consider the matter, make its
ruling, and state the reasons for its action." Budd Co., Wheel &
Brake Div. v. United States, 15 CIT 446, 452, 773 F. Supp. 1549,
CONSOL. CT. NO. 96-08-01970 PAGE 12
1554 (1991) (citing Unemployment Compensation Comm'n of Alaska v.
Aragon, 329 U.S. 143, 155 (1946)). Accordingly, the court will
not hear an issue a party failed to raise during the
administrative process where that issue does not fall within one
of the recognized exceptions to the exhaustion doctrine. See
Federal-Mogul Corp. v. United States, 18 CIT 785, 803-04, 862 F.
Supp. 384, 402 (1994) (issue excluded for failure to exhaust
where no exception to exhaustion requirement permits the court to
entertain the argument).
One aim of the exhaustion doctrine is to give the agency a
chance to address the issue before the court considers it.5
McKart v. United States, 395 U.S. 185, 194 (1969); see also
Mitsubishi Heavy Indus., Ltd. v. United States, 15 F. Supp.2d
807, 821 n.6 (Ct. Int'l Trade 1998) (permitting party to raise
issue despite failure to exhaust where agency had "ample
opportunity to respond to th[e] question at the administrative
level").
The majority of the cases collected in Budd, 15 CIT at 452
n.2, illustrating exceptions to the exhaustion doctrine,
5
Other purposes include giving effect to the agency's
governing statute, permitting the agency to make a record,
respect for agency expertise and discretion, administrative
efficiency in discouraging parties from seeking interlocutory
review, and respect for administrative autonomy. McKart, 395
U.S. at 193-95.
CONSOL. CT. NO. 96-08-01970 PAGE 13
represent instances where this purpose would not be effected by
strict application of the doctrine. See, e.g., Rhone Poulenc,
S.A. v. United States, 7 CIT 133, 136, 583 F. Supp. 607, 611
(1984) (recognizing that plaintiff raised new, purely legal
argument requiring no further agency involvement); Timkin Co. v.
United States, 10 CIT 86, 92-93, 630 F. Supp. 1327, 1334 (1986)
(reasoning that an intervening judicial interpretation following
remand changed the result); Rhone Poulenc, 7 CIT at 135, 583 F.
Supp. at 610-11 (considering that an administrative challenge
asking the agency not to apply its regulation would have been
futile); Philipp Bros., Inc. v. United States, 10 CIT 76, 80, 630
F. Supp. 1317, 1321 (1986) (finding plaintiff lacked timely
access to administrative record).
Though the court has recognized exceptions to the doctrine,
there are established limits, especially as to the issue now
before the court. In Bethlehem Steel Corp. v. United States,
1988 WL 731602, *5 (Ct. Int'l Trade Oct. 14, 1998), where
Commerce was required by statute, under 19 U.S.C. § 1677m(g), to
permit the parties a "reasonable time" to respond to a
submission, and the agency allowed a party only two days to
respond, the court concluded that, "[b]y failing to protest at
the time of its response, [the party] failed to exhaust its
CONSOL. CT. NO. 96-08-01970 PAGE 14
administrative remedies within the meaning of 28 U.S.C. § 2637(d)
(1994). Thus it cannot now claim that it had an inadequate
opportunity to comment on the supplemental information."
Bethlehem Steel, 1988 WL 731602, *5. Where a party did express
difficulty with the time permitted by the agency for response,
the court has been more flexible in allowing non-exhausted
claims. See Al Tech Specialty Steel Corp. v. United States, 11
CIT 372, 378, 661 F. Supp. 1206, 1211 (1987) (allowing claims
where request to agency for additional time went unanswered).
Thus, it can be seen that failure to protest time limits before
the agency is crucial to the survival of related claims.
As noted, Borden did not request additional time from the
agency or raise a protest about the time Commerce allowed for
comments from the parties either to the agency itself or in its
initial response to the Remand Determination submitted to the
court. The court concludes that Borden has foregone its
opportunity to protest the time allowed it. To the extent Borden
makes it, the court disallows that claim for failure to have
exhausted administrative remedies.
Likewise, the court rejects Borden's defense, by way of
reference to the short time period, of its failure to have
exhausted its administrative remedies as to its selling expense
CONSOL. CT. NO. 96-08-01970 PAGE 15
and customer category claims. Borden does not, and on this
record could not, argue that the selling expense or customer
category issue was considered by the agency. The court therefore
declines to hear those claims and proceeds to consider Borden's
remaining arguments.
b. Price Mean Comparisons
In its effort to establish whether the data showed a pattern
of significant price differences, Commerce conducted a "skewness
test," stating that "average transaction prices must exhibit a
downward skewness with respect to allegedly targeted customers."
Remand Determination, at 16. Where the difference between the
highest price among non-targeted customers and the median price
for all customers exceeded the difference between the highest
price among the set of customers defined as "frequently at the
bottom" and the median price, Commerce concluded that no
targeting had occurred. Plaintiffs' Comments, at 7-8.
Borden objects that this methodology is "inappropriate"
because it
relies heavily on the differences in distances between
the comparison points (highest price to non-targeted
and targeted customers) to the median, and therefore
distorts the Department's analysis of Delverde's
pricing practice for purposes of [the] skewness test.
The results of such a "skewness test" will, in turn,
CONSOL. CT. NO. 96-08-01970 PAGE 16
defeat any attempt to prove the existence of targeted
dumping.
Plaintiffs' Comments, at 8-9.
The court finds no actual argument within this conclusory
statement. Borden provides no basis upon which the court could
evaluate its claim. Borden simply argues that the test is
"inappropriate" because it does what it purports to do, because
it makes comparisons it purports to make. Borden has not argued
that the skewness test, as developed and implemented by Commerce,
would not in fact measure downward skewness. Nor has Borden
argued that a test for downward skewness would or could not
establish the "pattern" required by the statute. Most
significantly, Borden has made no attempt to show how Commerce's
methodology would preclude a finding of targeted dumping
altogether.
c. Other Methodological Arguments
Borden's also makes two arguments based on hypotheticals in
response to Commerce's Remand Determination. Borden argues that
Commerce's methodology i) would preclude a targeted dumping
allegation against a single large customer and ii) would fail to
account for customers who purchase only in certain months within
the period of inquiry. Although Borden refers to its data set in
making these arguments, Borden itself casts these arguments as
CONSOL. CT. NO. 96-08-01970 PAGE 17
hypothetical.6 Plaintiffs' Comments, at 3-7. Borden has alleged
neither that Delverde has targeted a single large customer nor
that targeting has been overlooked in the group of allegedly
targeted customers due to high sales concentration within a few
months. Moreover, Borden concedes that petitioners might have
alleged targeting against a single customer, Plaintiffs'
Comments, at 5, which the court reads as a concession that it has
not done so.
Because the court may not engage in abstract review, it
requires an actual case or controversy to hear any issue, U.S.
Const. art. III, § 2. Here, the court would likely require an
allegation of targeting against a single, large customer or
against customers who purchase only in certain months in order to
determine whether the methodology is legal in such situations.
Even if no constitutional standing problem exists, the court
declines to reject a methodology based solely on hypothetical
applications beyond the administrative record. Commerce might
welcome Borden's arguments as suggestions for improvement or
refinement of its targeted dumping methodology as applied in
6
The abstract nature of these arguments is highlighted by
Borden's use of conditionals and the subjunctive. See
Plaintiffs' Comments, at 5-6.
CONSOL. CT. NO. 96-08-01970 PAGE 18
future cases,7 but these do not provide a basis upon which the
court could order a remand or any other relief on this record.
II. Level of Trade
Before remand, Delverde argued that Commerce, during
Delverde's level of trade inquiry, unlawfully denied its request
for a constructed export price ("CEP") offset, an adjustment to
normal value which Delverde claimed would have led to a de
minimis dumping margin. The court remanded to Commerce to revise
its level of trade analysis without recalculating constructed
export price. Borden I, at 1242.
No party contends that Commerce did not comply with the
court's directions with regard to the level of trade adjustments.
Commerce does complain that it could not recalculate CEP under
the court's direction. That is true. The court found that it
was improper to order a remand on that aspect of the original
determination which was not challenged by the parties, where
remand was opposed by both the domestic and foreign interests and
Commerce asked for a remand at the last minute and did not
explain its "error." Id.
7
Commerce has not only "reserved the discretion to alter
[its] methodology in future cases," Remand Determination, at 15,
but, in response to comments by the parties at earlier stages of
this inquiry, has also expressed a good faith willingness to do
so as appropriate in future cases, see id. at 17-20.
CONSOL. CT. NO. 96-08-01970 PAGE 19
The CEP calculation itself was final, and the court did not
permit its reworking. It is not appropriate for Commerce to seek
reconsideration by means of new arguments in a remand
determination; respondent must live with the results of its
choices as well. There are rules which govern both the issuance
of final determinations and the litigation of cases, and the
court and parties must abide by them. Finality is an important
aspect of the unfair trade laws. It is served by both exhaustion
rules and limitations on remand.
Accordingly, the court affirms all aspects of the Remand
Determination addressed herein.
____________________________
Jane A. Restani
Judge
Dated: New York, New York
This 4th day of June, 1999.