                                        Slip Op. 09-29

                UNITED STATES COURT OF INTERNATIONAL TRADE

____________________________________
                                     :
ALLOY PIPING PRODUCTS, INC., et al., :
                                     :
            Plaintiffs,              :
                                     :
      v.                             :
                                     :             Before: Judith M. Barzilay, Judge
UNITED STATES,                       :             Consol. Court No. 08-00027
                                     :
            Defendant,               :
                                     :
      and                            :
                                     :
TA CHEN STAINLESS STEEL PIPE         :
CO., LTD.,                           :
                                     :
            Defendant-Intervenor.    :
____________________________________:


                                   OPINION AND ORDER


[Plaintiffs’ Motion for Judgment Upon the Agency Record is denied; Defendant-Intervenor’s
Motion for Judgment Upon the Agency Record is granted and the case is remanded to
Commerce.]


                                                                  Dated: April 14, 2009


Kelley Drye & Warren, LLP (Jeffrey S. Beckington, David A. Hartquist) for Plaintiffs.

Michael F. Hertz, Acting Assistant Attorney General; Jeanne E. Davidson, Director, Reginald T.
Blades, Jr., Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department
of Justice (Stephen C. Tosini); Evangeline D. Keenan, Attorney, Of Counsel, Office of the Chief
Counsel for Import Administration, U.S. Department of Commerce, for Defendant.

Miller & Chevalier Chartered (Peter J. Koenig, David T. Hardin, Jr.) for Defendant-Intervenor.
Court No. 08-00027                                                                         Page 2


       BARZILAY, JUDGE: The issues in this case concern the final results of the thirteenth

administrative review of an antidumping duty order on stainless steel butt-weld pipe fittings from

Taiwan during the period of review June 1, 2005 to May 31, 2006.1 Notice of Final Results and

Final Rescission in Part of Antidumping Duty Administrative Review: Certain Stainless Steel

Butt-Weld Pipe Fittings From Taiwan, 73 Fed. Reg. 1,202 (Dep’t Commerce Jan. 7, 2008)

(“Final Results”); Issues and Decision Memorandum for the Administrative Review of Certain

Stainless Steel Butt-Weld Pipe Fittings from Taiwan; Final Results of Antidumping Duty

Administrative Review (Dep’t Commerce Dec. 27, 2007), Public Record Document (“P.R. Doc.”)

97 (“Issues and Decision Memorandum”).2 The underlying antidumping duty order, in place

since 1993, has been the source of an abundance of litigation before the Court.3 Amended Final

Determination and Antidumping Duty Order: Certain Welded Stainless Steel Butt-Weld Pipe

Fittings From Taiwan, 58 Fed. Reg. 33,250 (Dep’t Commerce June 16, 1993). Here, the four

Plaintiffs, Alloy Piping Products, Inc., Flowline Division of Markovitz Enterprises, Inc., Gerlin


       1
         Once an antidumping order has been issued, it may be reviewed periodically. See 19
U.S.C. § 1675 (2000) (governing the administrative review of determinations). An
“administrative review” occurs when an interested party requests that Commerce review the duty
applied to the subject merchandise over a particular twelve month period. 19 U.S.C.
§ 1675(a)(1)(B) (2000).
       2
           The Issues and Decision Memorandum is also available at
http://ia.ita.doc.gov/frn/summary/taiwan/E7-25644-1.pdf.
       3
         See, e.g., Alloy Piping Prods., Inc. v. United States, Slip Op. 08-30, 2008 WL 743830
(Mar. 13, 2008) (not reported in F. Supp.) (“Alloy Piping II”); Ta Chen Stainless Steel Pipe Co.,
Ltd. v. United States, Slip Op. 07-87, 2007 WL 1573920 (May 30, 2007) (not reported in F.
Supp.); Ta Chen Stainless Steel Pipe, Ltd. v. United States, 30 CIT 376, 427 F. Supp. 2d 1265
(2006) (“Ta Chen II”); Alloy Piping Prods., Inc. v. United States, 28 CIT 1805 (2004) (not
reported in F. Supp.) (“Alloy Piping I”); Ta Chen Stainless Steel Pipe, Ltd. v. United States, 28
CIT 627, 342 F. Supp. 2d 1191 (2004) (“Ta Chen I”).
Court No. 08-00027                                                                          Page 3


Inc., and Taylor Forge Stainless, Inc. (collectively, the “Plaintiffs”) and Defendant-Intervenor Ta

Chen Stainless Steel Pipe Co., Ltd. (“Ta Chen”) challenge the final results of the thirteenth

administrative review pursuant to USCIT R. 56.2.4 The court must now decide whether the

dumping margin calculated by the Department of Commerce (“Commerce”) is supported by

substantial evidence and in accordance with law.5 Specifically, Plaintiffs challenge Commerce’s

(1) grant of a constructed export price (“CEP”) offset adjustment to the Normal Value (“NV”)

and (2) calculation of the profit adjustment to the CEP.6 The court affirms Commerce’s

determination under (1), but finds that the agency did not provide a sufficient explanation that

demonstrates it acted with substantial evidence under (2). Accordingly, the issue of the CEP

profit adjustment is remanded to Commerce for further proceedings.


       4
         Plaintiffs are domestic producers of the subject merchandise, and Ta Chen is a producer
and exporter of the same goods from Taiwan. Ta Chen sells some of the subject merchandise to
its wholly-owned U.S. subsidiary, Ta Chen International (“TCI”), who in turn sells those goods
to unaffiliated U.S. customers. See Issues and Decision Memorandum at 1-2.
       5
        The “dumping margin” refers to the amount by which the NV exceeds the export price
(“EP”) or CEP, expressed in an equation as DM = NV - (EP or CEP). 19 U.S.C. § 1677(35)(A).
       6
          The NV is the market price of the subject merchandise in the home market, an
appropriate third country market price, or the cost of production of the goods subject to
statutorily permitted adjustments. See 19 U.S.C. § 1677b(a)(1)(B)(i)-(ii), (a)(4). The EP is the
price at which the subject merchandise is sold from the producer or exporter to an unaffiliated
purchaser in the U.S. or for exportation to the U.S. See 19 U.S.C. § 1677a(a). However, when
the foreign producer or exporter is affiliated with the importer of the subject merchandise, a CEP
usually is or may be used, which “refers to the price, as adjusted pursuant to section 1677a, at
which the subject merchandise is sold in the [U.S.] to a buyer unaffiliated with the producer or
exporter.” SNR Roulements v. United States, 402 F.3d 1358, 1359 (Fed. Cir. 2005). Here,
Commerce calculated the price of Ta Chen’s sales in the U.S. based on a CEP rather than an EP
because “the sale to the first unaffiliated U.S. customer was made by . . . TCI.” Certain Stainless
Steel Butt-Weld Pipe Fittings From Taiwan: Preliminary Results of Antidumping Duty
Administrative Review and Notice of Intent to Rescind in Part, 72 Fed. Reg. 35,970, 35,972
(Dep’t Commerce Jul. 2, 2007) (“Preliminary Results”).
Court No. 08-00027                                                                             Page 4


                                           I. Background

       On July 27, 2006, after receiving petitions from Plaintiffs and from Ta Chen, Commerce

announced that it would initiate the thirteenth administrative review of the subject merchandise

to update the applicable antidumping duty order. Initiation of Antidumping and Countervailing

Duty Administrative Reviews and Request for Revocation in Part, 70 Fed. Reg. 42,028, 42,028

(Dep’t Commerce July 21, 2005). To ensure that it would accurately determine the NV and CEP

when calculating the dumping margin, Commerce requested that Ta Chen provide information

regarding its channels of distribution, as well as the selling activities it performed and services it

rendered in both its home and U.S. markets.7 See Preliminary Results, 72 Fed. Reg. at 35,973.

Ta Chen responded to these questions from Commerce in its Section A response, and noted that

the “Sections B and C Questionnaire Responses [would] provide the data necessary to calculate




       7
          See Ta Chen Section A Resp. (Sept. 11, 2006), P.R. Doc. 16. Ta Chen reported that the
relevant selling activities in the home market during the period of review include maintaining
inventory in Taiwan to provide just-in-time or immediate shipments to customers; incurring
seller’s risk of non-payment by customers; addressing customer complaints as to quality,
delivery, or specification; handling freight and delivery arrangements; traveling to and
entertaining customers; projecting market needs and conducting new customer research;
providing customers with technical assistance; providing packing services; and providing after-
sale services, including additional or supplemental documents sought by customers. See P.R.
Doc. 16 at 12; Issues and Decision Memorandum at 38. For sales made to its U.S. affiliate, TCI,
Ta Chen reported its selling activities as consisting of “accepting orders, scheduling production,
and making arrangements for inland freight to the port, brokerage, containerization and Taiwan
customs clearance, including payment of harbor tax.” Id. Additionally, Ta Chen noted that TCI
is a “master distributor” that engages in the following selling activities to the first unaffiliated
customers in the United States: “all communications with customers, U.S. customs duties, U.S.
brokerage, U.S. inland freight, U.S. warehousing, inventory maintenance and assumption of risk
of nonpayment.” Id.
Court No. 08-00027                                                                            Page 5


the CEP offset” necessary to reflect different levels of trade (“LOT”).8 P.R. Doc. 16 at 14

(emphasis added). Before Commerce issued the Preliminary Results, Ta Chen twice provided

additional information on selling activities performed in Taiwan and on its claim for a CEP offset

on February 15 and April 6, 2007, respectively. See Ta Chen’s Response to Commerce’s First

Supplemental Questionnaire (Feb. 15, 2007), P.R. Doc. 38; Ta Chen’s Response to Commerce’s

Second Supplemental Questionnaire (Apr. 6, 2007), P.R. Doc. 45.

       In the Preliminary Results, Commerce examined the selling activities that Ta Chen

reported for each channel of distribution and organized the home market reported activities into

the following four categories: (1) sales process and marketing support; (2) freight and delivery;

(3) inventory maintenance and warehousing; and (4) warranty and technical services.

Preliminary Results, 72 Fed. Reg. at 35,973. Using these four defined selling activities as the

framework for its analysis, Commerce found that there were different LOTs in Ta Chen’s home

and U.S. markets, and that sales were made by Ta Chen in Taiwan at a more advanced LOT than

in the U.S. market. Id. Specifically, Commerce noted that in the home market “Ta Chen

provides significant selling [activities] . . . which it does not for the U.S.” Id. Because

Commerce was unable to quantify a LOT adjustment, it adjusted the NV with a CEP offset. Id.

Commerce also made an adjustment to the CEP to account for the profit from selling expenses

incurred in the U.S. by TCI, stating that “in accordance with [§§ 1677a(d)(3) and 1677a(f)], we

deducted [the] CEP profit.” Id. at 35,972. Ultimately, Commerce determined that the weighted-



       8
         The Section B Questionnaire contained information on Ta Chen’s home market sales,
whereas the Section C Questionnaire explained its U.S. sales. See Ta Chen’s Section B and C
Resps. (Sept. 26, 2006), P.R. Doc. 18.
Court No. 08-00027                                                                         Page 6


average dumping margin for the subject merchandise during the period of review was 0.52%. Id.

at 35,973.

       In the Final Results and the accompanying Issues and Decision Memorandum, Commerce

reaffirmed its earlier findings on the adjustments to the NV and CEP. Final Results, 73 Fed.

Reg. at 1,202; Issues and Decision Memorandum at 35-41. Specifically, with thorough

explanation and detailed justification, Commerce found that “the LOT is more advanced in the

home market than in the United States” and that it would apply a CEP offset to the NV because it

was unable to quantify a LOT adjustment. Issues and Decision Memorandum at 38-39. On the

issue of the profit adjustment to the CEP, Commerce affirmed the calculation in the Preliminary

Results (which excluded Ta Chen’s inventory carrying and credit costs from the “total expenses”

and “total actual profit” components of the CEP profit calculation) and relied on the Court’s

decisions in cases that concerned the sixth and seventh administrative reviews of the underlying

antidumping duty order. Issues and Decision Memorandum at 41 (citing Ta Chen II, 30 CIT at

389-90, 427 F. Supp. 2d at 1277; Alloy Piping I, 28 CIT at 1811). Accordingly, Commerce

instructed U.S. Customs and Border Protection (“Customs”) to assess antidumping duties on the

subject merchandise that entered the U.S. during the period of review at a rate of 0.52%. Final

Results, 73 Fed. Reg. at 1,203-04.
Court No. 08-00027                                                                            Page 7


                    II. Subject Matter Jurisdiction & Standard of Review

       In an action properly before the Court under 28 U.S.C. § 1581(c),9 as is the case here, we

must “hold unlawful any determination, finding, or conclusion found . . . to be unsupported by

substantial evidence on the record, or otherwise not in accordance with law . . . .”10

§ 1516a(b)(1)(B)(i). When reviewing an agency determination, the Court must therefore

determine whether “the administrative record contain[s] substantial evidence to support it and

[whether it is] a rational decision.” Matsushita Elec. Indus. Co., Ltd. v. United States, 750 F.2d

927, 933 (Fed. Cir. 1984) (“Matsushita”). Accordingly, for an administrative agency to support

its factual findings with substantial evidence, a determination must necessarily include an

explanation of the standards applied and the analysis leading to its conclusion, thereby

demonstrating a rational connection between the facts on the record and the conclusions drawn.

See id. Finally, an agency’s action is in accordance with law when that decision is

“constitutional, and not contrary to statute, regulation, precedent, or procedures.” Huvis Corp. v.

United States, 31 CIT ___, 525 F. Supp. 2d 1370, 1374 (2007).




       9
         Pursuant to § 1581(c), this Court has exclusive jurisdiction over any civil action
commenced under section 516A of the Tariff Act of 1930, codified as amended at 19 U.S.C.
§ 1516a, which provides for judicial review of a final determination in an administrative review
of an antidumping order. See § 1516a(a)(2)(B)(iii).
       10
          Substantial evidence is “such relevant evidence as a reasonable mind might accept as
adequate to support the conclusion,” and that there may be two inconsistent conclusions drawn
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, 619-20 (1966) (quotations
& citations omitted).
Court No. 08-00027                                                                          Page 8


                                         III. Discussion

       “Dumping” is an unfair trade practice whereby goods are sold or will likely be sold at less

than fair value. § 1677(34). Commerce, the administrative agency responsible for addressing the

issue of dumping, must calculate the dumping margin to assess whether the subject merchandise

was, or is likely to be, dumped in the U.S. § 1675(a). The first step for Commerce is to ascertain

the value of two elements in the dumping margin equation: (1) the NV and (2) the EP or CEP.

§ 1675(a)(2)(A). Commerce compares the two values and, if the NV exceeds the EP or CEP, it

then instructs Customs to levy antidumping duties on the subject merchandise in the amount of

the difference between the two elements.11 §§ 1675(a)(1), 1677(35)(A)-(B).

       When Commerce calculates the dumping margin, certain adjustments may be made to the

NV or CEP to ensure an “apples-to-apples” price comparison since the prices used to determine

those values occur at different points in the stream of commerce and under different

circumstances. See Ta Chen II, 30 CIT at 379, 427 F. Supp. 2d at 1268. At issue before the

court is the calculation of, and adjustments to, the prices that comprise the NV and CEP in this,

the thirteenth administrative review of the antidumping order on the subject merchandise.

A. Constructed Export Price Offset

       1. Legal Framework

       The NV refers to the price of the subject merchandise in the home market, an appropriate

third country market price, or the cost of production of the subject goods. § 1677b(a)(1)(B)(i)-


       11
          A finding by the International Trade Commission (“ITC”) that the subject merchandise
materially injured or threatens material injury to the domestic industry is a condition precedent to
Commerce instructing Customs to apply antidumping duties on the subject merchandise.
§ 1673d(b)(1).
Court No. 08-00027                                                                         Page 9


(ii), (a)(4). Commerce may make certain adjustments to the NV to ensure that the NV is

established, “to the extent practicable, at the same [LOT] as the [EP] or [CEP] . . . .”

§ 1677b(a)(1)(B)(i); see 1677b(a)(6)-(8). A CEP offset, which is a downward adjustment to the

NV, is one of the permitted adjustments that may be made to the NV. § 1677b(a)(7)(B). Three

conditions must be satisfied before Commerce may apply a CEP offset to the NV: (1) there must

be a difference between the LOT of the home and U.S. markets – i.e., between the NV and the

CEP; (2) the NV must be at a more advanced LOT than the CEP; and (3) a LOT adjustment to

the NV is not appropriate since the available data does not permit a determination on whether the

difference between the home and U.S. markets affects price comparability. See 19 C.F.R.

§ 351.412(f).

        LOTs are defined as marketing stages (or their equivalent). See Alloy Piping II, 2008

WL 743830, at *8 (citing 19 C.F.R. § 351.412(c)(2)). “Where Commerce calculates [the] NV at

a different LOT from the LOT of [the] EP or the CEP (whichever applies), it may adjust [the]

NV to compensate for the difference.” Id. (citing § 351.412(b); see Mittal Steel USA, Inc. v.

United States, Slip Op. 07-117, 2007 WL 2701369, at *7 n.12 (Aug. 1, 2007) (not reported in F.

Supp.). Specifically, “Commerce may make a LOT adjustment if it determines that sales in the

two markets were not made at the same LOT, and that the difference has an effect on the

comparability of prices.” Alloy Piping II, 2008 WL 743830, at *8 (citing § 351.412(a);

§ 1677b(a)(7)(A)) (quotations & brackets omitted). The focal point of Commerce’s LOT

adjustment analysis is on the selling activities performed in each market. § 1677b(a)(7)(A)(i)-

(ii); § 351.412(c)(2). In other words, a LOT adjustment to the NV is proper only where (1) there
Court No. 08-00027                                                                            Page 10


exists a difference between the LOT in the home and U.S. markets as a result of different selling

activities being performed in each market, and (2) such difference “affect[s] price comparability,

based on a pattern of consistent price differences between sales at different [LOTs] in the country

in which [the NV] is determined.” § 1677b(a)(7)(A); see Uruguay Round Agreements Act,

Statement of Administrative Action, H.R. Rep. No. 103-316, at 829 (1994), reprinted in 1994

U.S.C.C.A.N. 4040, 4167-68 (“SAA”); Mittal Steel USA, Inc., 2007 WL 2701369, at *8.

       However, in cases where a LOT adjustment is unavailable, a CEP offset to the NV may

be proper. In particular, when (1) “the NV is at a more advanced LOT than the CEP, and [(2)]

the available data do[es] not permit a determination on whether the difference affects price

comparability,” Commerce may make a CEP offset to the NV in the amount of the indirect

selling expenses incurred by the foreign producer or exporter in the home market. Alloy Piping

II, 2008 WL 743830, at *8 (citing § 351.412(f)). In those situations,

       normal value shall be reduced by the amount of indirect selling expenses incurred in
       the country in which normal value is determined on sales of the foreign like product
       but not more than the amount of such expenses for which a deduction is made under
       section 1677a(d)(1)(D) of this title.

§ 1677b(a)(7)(B). When a foreign producer or exporter seeks a downward adjustment to the NV

in the form of a CEP offset, it “must demonstrate the appropriateness of such adjustment.”12

SAA, H.R. Rep. No. 103-316, at 829, 1994 U.S.C.C.A.N. at 4168.




       12
          “Commerce will require evidence from the foreign producers that the functions
performed by the sellers at the same [LOT] in the U.S. and foreign markets are similar, and that
different selling activities are actually performed at the allegedly different levels of trade.” SAA,
H.R. Rep. No. 103-316, at 829, 1994 U.S.C.C.A.N. at 4168 (emphasis added).
Court No. 08-00027                                                                          Page 11


       2. Ta Chen’s Selling Activities

       The core of Plaintiffs’ first challenge argues that Ta Chen’s Sections A, B and C

Responses to Commerce’s questionnaires – and specifically its description of its selling activities

in the home and U.S. markets – are so “variously and internally inconsistent” that Ta Chen did

not clearly demonstrate it was entitled to a CEP offset adjustment to the NV. Plaintiffs’ Brief in

Support of its Rule 56.2 Mot. (“Pl. Br.”) 11-15. In home market sales, Plaintiffs claim that

Commerce incorrectly found that inland freight services are one of Ta Chen’s selling activities in

the home market, even though customers pick up orders from Ta Chen’s facility in Taiwan and

no expenses were incurred. Pl. Br. 11-12. Another alleged error cited by Plaintiffs is

Commerce’s determination that packing expenses and just-in-time inventory expenses are selling

activities in the home market, even though there was little evidence to support such a finding. Pl.

Br. 12. Plaintiffs also argue that Commerce incorrectly considered credit risk and technical

services to be selling activities since no interest revenue or travel expenses were incurred during

the period of review. Pl. Br. 12-13. In its U.S. sales to TCI, Plaintiffs allege that Ta Chen

grossly understated its U.S. selling expenses, and excluded other costs incurred for the subject

merchandise to enter the U.S. Pl. Br. 15.

       Further, according to Plaintiffs, a quantitative analysis of Ta Chen’s selling expenses

shows that Ta Chen’s home market selling functions were less than those provided in sales to

TCI in the U.S. market. Pl. Br. 8. Plaintiffs also claim that Commerce’s grant of a CEP offset to
Court No. 08-00027                                                                              Page 12


the NV is not supported by substantial evidence because the U.S. LOT is more advanced than the

home market LOT since a greater number of expense fields and amounts correspond to the CEP

sales. Pl. Br. 11, 15-31.

       The court finds that the record is neither ambiguous nor unclear, and that Plaintiffs’ LOT

adjustment analysis is legally inaccurate. To be sure, the court commends Plaintiffs’ diligent

quantitative analysis and recognizes that Commerce should address this kind of detailed

information, in the first instance, when determining whether an adjustment to the NV is proper.13

However, the focus of the LOT adjustment analysis, which may ultimately lead to a CEP offset,

is on selling activities and not on expenses as the Plaintiffs suggest.14 § 1677b(a)(7)(A)(i)

(stating that a difference in LOTs is based on the “performance of different selling activities”

(emphasis added)); § 351.412(c)(2) (noting that “[s]ubstantial differences in selling activities are

a necessary, but not sufficient, condition for determining that there is a difference in the stage of

marketing.” (emphasis added)); SAA, H.R. Rep. No. 103-316, at 829, 1994 U.S.C.C.A.N. at 4168

(emphasizing that a difference in the LOT means that there “is a difference between the actual



       13
          Defendant avers that because they did not first present this kind of quantitative analysis
to Commerce, Plaintiffs have not exhausted their administrative remedies. Def. Br. 11. Because
the court addresses and decides in favor of the Defendant considering and rejecting the substance
of Plaintiffs’ argument, it need not address the exhaustion issue here. However, the parties
should know that these sorts of factually intensive, record-based arguments are best decided, and
indeed are normally required to be first presented, in the administrative arena.
       14
          The term “activities” is the plural form of the word “activity,” which refers to “a
specified pursuit or action.” AMERICAN HERITAGE COLLEGE DICTIONARY 14 (4th ed. 2007).
Similarly, a “function” is “the action for which a . . . thing is particularly fitted or employed.” Id.
at 561. In contrast, an “expense” is “[s]omething spent to attain a goal or accomplish a purpose.”
Id. at 491 (emphasis added). Accordingly, an expense is something incurred in, and is not itself,
an activity or function. See id. at 14, 491.
Court No. 08-00027                                                                            Page 13


functions performed by the sellers at the different [LOTs] in the two markets” (emphasis added));

Antidumping Duties; Countervailing Duties, 62 Fed. Reg. 27,296, 27,371 (Dep’t Commerce May

19, 1997) (explaining that § 1677b(a)(7)(A)(i) provides for LOT adjustments where there is a

difference in the LOTs and “the difference involves the performance of different selling

activities. . . . The [SAA] reinforces this point by explaining that [Commerce] must analyze the

functions performed by the sellers . . . .” (emphasis added) (quotations omitted)).

       If Commerce, or this Court, in reviewing an administrative determination, were to narrow

the focus of its LOT analysis to selling expenses, it could act contrary to law and cause

misleading results. Expenses do not necessarily translate directly into activities, nor do they

capture the intensity of the activities. Moreover, expenses related to several selling activities

may fall under a single expense field. Though expenses alone may not accurately represent the

number of selling activities associated with each LOT, Commerce may certainly analyze

expenses to measure the frequency of various selling activities, and consider this frequency with

other information in assigning the level of intensity to the activity. See, e.g., Slater Steels Corp.

v. United States, 27 CIT 1775, 1780-81, 297 F. Supp. 2d 1351, 1357-58 (2003). In other words,

the weighing of both the narrative descriptions of the foreign producer or exporter’s sales

processes with certain quantifiable information on the reported selling activities in each market is

precisely the kind of thorough and diligent analysis that would benefit Commerce, the interested

parties and, if need be, this Court.

       The record here supports Commerce’s determination that a CEP offset to the NV is

proper. In the Issues and Decision Memorandum, after it established the selling activities in each
Court No. 08-00027                                                                             Page 14


market,15 Commerce determined that there is a difference in the LOT between home market and

U.S. sales, and that “Ta Chen’s home market sales are made at a more advanced LOT than its

[CEP] sales to TCI . . . .” Issues and Decision Memorandum at 37-39. Commerce specifically

noted that while Ta Chen’s activities related to freight and delivery arrangements are somewhat

greater for sales to TCI than in its home market, “the record shows that Ta Chen engages in a

higher level of sales effort for home market sales than for U.S. sales.” Id. at 38 (emphasis

added). Commerce stated that Ta Chen likely exerted more of an intense effort in home market

sales because it “has more home market customers who purchase in smaller volumes than TCI

and require more individual contact.” Id. That Ta Chen assumed credit risk and provided

technical services, in addition to offering just-in-time delivery only in the home market, also

convinced Commerce that the selling activities were different and at a more advanced level in the

home market than in the United States. See id. at 38-39. Because Commerce was also unable to

quantify the effect of the difference in LOT on prices, it ultimately decided to continue to grant

Ta Chen a CEP offset to the NV. Id. Thus, Commerce’s analysis includes an explanation of the

standards it applied, and the analysis that led to its conclusion, demonstrating a rational

connection between the facts on the record and the conclusions drawn.

       Finally, Plaintiffs argue that the facts in this administrative review are nearly identical to

those in the seventh administrative review of the subject merchandise, such that Commerce

incorrectly granted Ta Chen the CEP offset to the NV. Pl. Br. 34-37 (discussing generally

Certain Stainless Steel Butt-Weld Pipe Fittings From Taiwan: Final Results of Antidumping



       15
            See supra note 7.
Court No. 08-00027                                                                           Page 15


Duty Administrative Review, 66 Fed. Reg. 65,899 (Dep’t Commerce Dec. 21, 2001)) (“Seventh

Administrative Review”). Plaintiffs’ reliance on the Seventh Administrative Review, however, is

misplaced. Even assuming Commerce’s determinations at issue are factually identical, as a

matter of law a prior administrative determination is not legally binding on other reviews before

this court. See, e.g., Timken U.S. Corp. v. United States, 434 F.3d 1345, 1352 (Fed. Cir. 2006).

Thus, the court is not persuaded by Plaintiffs’ suggestion to follow the analysis in the Seventh

Administrative Review given that Commerce has demonstrated with substantial evidence, and in

accordance with law, that a CEP offset is proper under the facts of the present case.

B. Constructed Export Price Profit

       1. Legal Framework

       The other component of the dumping margin calculation, the CEP, is the price at which

the subject merchandise is first sold in the U.S. to a purchaser independent from the foreign

producer or exporter. § 1677a(b). To ensure an “apples-to-apples” comparison between home

market and U.S. sales, section 1677a authorizes Commerce to make adjustments to the price used

to establish the CEP, one of which reduces that value to account for the portion of profit

attributable to certain U.S. selling activities. § 1677a(d)(3). The deduction of the profit amount,

called the CEP profit, is intended to bring the CEP “as closely as possible [to] a price

corresponding to an export price between non-affiliated exporters and importers.” See SAA, H.R.

Rep. No. 103-316, at 823, 1994 U.S.C.C.A.N. at 4163.

       The CEP profit is derived by multiplying the total actual profit for all production and

selling activities of the subject merchandise by the applicable percentage, with the applicable
Court No. 08-00027                                                                            Page 16


percentage determined by dividing the total U.S. expenses by the total expenses, i.e., CEP profit

= Total Actual Profit x (Total U.S. Expenses / Total Expenses). §§ 1677a(d)(3), (f). The “total

actual profit” multiplier is calculated by “(1) adding the revenue attributable to sales of subject

(or like) merchandise in both the U.S. and the home market; (2) deducting from that sum the cost

of the merchandise for both markets; and (3) deducting the selling, packing, and distribution

expenses for both markets.” Ta Chen II, 30 CIT at 380, 427 F. Supp. 2d at 1269 (citing

§ 1677a(f)(2)(D)). The “total expenses” denominator is the sum of “(1) the cost of merchandise

for both markets and (2) the selling, packing, and distribution expenses for both markets.” Id.

(citing § 1677a(f)(2)(C)). In both of these components, “recognized financial expenses are

included in the cost of both the U.S. and the home market merchandise.” Id. (citing U.S.

Department of Commerce Policy Bulletin 97/1, Calculation of Profit for Constructed Export

Price Transactions (Sept. 4, 1997); SAA, H.R. Rep. No. 103-316, at 825, 1994 U.S.C.C.A.N. at

4164).16 Historically, Commerce has read “the statute to require that those two numbers be

actual (i.e., recognized) amounts,” and that they do “not include imputed financial expenses

. . . ,” which are themselves an estimate of actual expenses. Ta Chen II, 30 CIT at 381, 427 F.

Supp. 2d at 1269. Therefore, to avoid double-counting, Commerce has reasoned that it is proper

to exclude imputed costs from the “total actual profit” multiplier and “total expenses”




       16
          “[W]hen calculating both the Total Actual Profit multiplier and the Total Expenses
denominator, net financial expenses are calculated from the foreign producer [or] exporter’s
constructed value (‘CV’) database in determining the cost of U.S. merchandise, and from the
foreign producer [or] exporter’s cost of production (‘COP’) database in determining the cost of
home market merchandise.” Ta Chen II, 30 CIT at 380-81, 427 F. Supp. 2d at 1269 (citing
§§ 1677b(e), 1677b(b)(3)) (quotations & brackets omitted).
Court No. 08-00027                                                                          Page 17


denominator since total actual financial expenses reflect the costs of carrying merchandise in

inventory and extending credit. See Ta Chen II, 30 CIT at 381, 427 F. Supp. 2d at 1270.

       However, in contrast to the two above, the calculation of the last component of the CEP

profit equation – “total U.S. expenses” – includes imputed credit and inventory carrying costs.

Commerce has explained that “the imputed financial expenses related to selling activities[,] i.e.,

imputed credit and inventory carrying costs[,] simply represent the opportunity cost of having . . .

merchandise sit in inventory prior to sale, and of extending credit after the sale.” Ta Chen II, 30

CIT at 381, 427 F. Supp. 2d at 1269-70 (quotations & brackets omitted). Moreover, Commerce

has noted that its practice is to use imputed expenses in the “total U.S. expenses” numerator

because, “as a practical matter, appropriate [actual] figures do not exist.” Id., 30 CIT at 381, 427

F. Supp. 2d at 1270.

       This Court and the Federal Circuit have repeatedly upheld this kind of method for

calculating CEP profit in the absence of certain conditions. See Ta Chen II, 30 CIT at 383, 427

F. Supp. 2d at 1271 (citing SNR Roulements, 402 F.3d at 1361; SNR Rouelements v. United

States, 28 CIT 1284, 1287-88, 341 F. Supp. 2d 1334, 1340 (2004); Thai Pineapple Canning

Indus. Corp., Ltd. v. United States, 24 CIT 107, 114-15 (2000) (not reported in F. Supp.) (“Thai

Pineapple”)). For instance, in Thai Pineapple, the court examined Commerce’s remand

determination and sustained the CEP profit calculation, as it found that plaintiffs could not point

to any great distortion or discrepancy in the methodology used. 24 CIT at 115.
Court No. 08-00027                                                                           Page 18


       2. Commerce’s CEP Profit Calculation

       Here, Ta Chen lodges a complaint against Commerce that is eerily familiar to one that it

alleged in at least two prior proceedings before the Court – namely, that the agency erred when it

excluded imputed inventory carrying and credit costs from the “total actual profit” multiplier and

“total expenses” denominator.17 Issues and Decision Memorandum at 40-41. Commerce refused

to do so, however, on the basis that (1) Ta Chen’s argument had been rejected before and (2) this

Court has allegedly found that “imputed expenses [do not] represent some real, previously

unaccounted for, expense[].” Id. at 41 (quotations & citations omitted). Ta Chen argues that this

reasoning is insufficient to uphold Commerce’s determination since “Commerce failed to explain

why the use of only purported actual costs was sufficient based on the record evidence of this

particular case . . . .” Defendant-Intervenor’s Brief in Support of its Rule 56.2 Mot. (“Def.-

Intervenor Br.”) 8. Expanding on its contention at the administrative stage, Ta Chen argues that

controlling law unequivocally requires that the actual costs used in the “total actual profit”

multiplier and “total expenses” denominator must adequately reflect imputed costs.18 Def.-

Intervenor Br. 9-14.

       In contrast, Plaintiffs aver that Ta Chen did not exhaust its administrative remedies on the

issue of CEP profit and, therefore, the court may not hear this claim. Plaintiffs’ Resp. to Def.-



       17
            Ta Chen II, 30 CIT at 382, 427 F. Supp. 2d at 1270; Alloy Piping I, 28 CIT at 1808-12.
       18
          Relatedly, as a result of the alleged controlling law, Ta Chen further claims that
(1) Commerce’s failure to include imputed costs in this administrative review is unsupported by
substantial evidence and contrary to law, (2) Commerce’s failure to include imputed costs yields
a distorted result, and (3) Commerce’s CEP profit calculation is unreasonable since a more
accurate methodology exists. Def.-Intervenor Br. 9, 14-27.
Court No. 08-00027                                                                             Page 19


Intervenor’s 56.2 Mot. (“Pl. Resp. Br.”) 1-7. Both Defendant and Plaintiffs contend that,

irrespective of whether Ta Chen exhausted its administrative remedies, Commerce’s CEP profit

determination is supported by substantial evidence and in accordance with law since the CEP

profit methodology employed by Commerce has repeatedly been approved by the Federal Circuit.

Pl. Resp. Br. 7-14; Def. Br. 16-25.

       Generally, no party is entitled to judicial relief for an alleged injury “until the prescribed

administrative remedy has been exhausted.” Agro Dutch Indus., Ltd. v. United States, 30 CIT

320, 330 (2006) (not reported in F. Supp.) (quoting McKart v. United States, 395 U.S. 185, 193

(1969)). “The exhaustion doctrine requires a party to present its claims to the relevant

administrative agency for the agency’s consideration before raising these claims to the Court.”

Luoyang Bearing Corp. v. United States, 28 CIT 733, 760, 347 F. Supp. 2d 1326, 1351 (2004)

(citing Unemployment Comp. Comm’n of Alaska v. Aragon, 329 U.S. 143, 155 (1946) (“A

reviewing court usurps the agency’s function when it sets aside the administrative determination

upon a ground not theretofore presented and deprives the [agency] of an opportunity to consider

the matter, make its ruling, and state the reasons for its action.”)) (“Luoyang”).19 “While a


       19
          The court in Louyang went on to note that there is “no absolute requirement of
exhaustion in the Court of International Trade in non-classification cases,” and that Congress
vested the Court with the discretion to determine the circumstances under which it shall require
the exhaustion of administrative remedies. Luoyang, 28 CIT at 760 n.11, 347 F. Supp. 2d at
1352 n.11 (citation omitted). The Court has recognized exceptions to the exhaustion doctrine in
instances where: “(1) requiring it would be futile; (2) a subsequent court decision has interpreted
existing law after the administrative determination at issue was published, and the new decision
might have materially affected the agency’s actions; (3) the question is one of law and does not
require further factual development and, therefore, the court does not invade the province of the
agency by considering the question; and (4) plaintiffs had no reason to suspect that the agency
would refuse to adhere to clearly applicable precedent.” Luoyang, 28 CIT at 760-61 n.11, 347 F.
Supp. 2d at 1352 n.11 (citations omitted).
Court No. 08-00027                                                                             Page 20


plaintiff cannot circumvent the requirements of the doctrine of exhaustion by merely mentioning

a broad issue without raising a particular argument, [a] plaintiff’s brief statement of the argument

is sufficient if [(1)] it alerts the agency to the argument with reasonable clarity and [(2)] avails

the agency with an opportunity to address it.” Id., 28 CIT at 761, 347 F. Supp. 2d at 1352

(citations omitted).

       Here, Ta Chen challenged the issue of the CEP profit in the underlying administrative

review with sufficient specificity so as to provide Commerce with an opportunity to address the

claim. In its original brief challenging Commerce’s CEP profit methodology, Ta Chen argued:

       Ta Chen’s U.S. subsidiary [TCI] incurs enormous inventory carry[ing] and credit
       costs (from delay in customer payment) as to its U.S. sales     . . . . [Commerce]
       should adjust its calculation of Ta Chen’s CEP Profit to include such costs. Doing
       so accurately reflects Ta Chen’s true profit and costs.

Pl. Resp. Br. App. 1 at 2. That Ta Chen (1) cited specifically to its inventory carrying and credit

costs and (2) asked Commerce to account for those costs shows that it alerted Commerce of its

argument with reasonable clarity. Moreover, Commerce acknowledged the issue, first by

summarizing Ta Chen’s argument (and Plaintiffs’ contentions) and subsequently rejecting it in

the Final Results and accompanying memorandum. Issues and Decision Memorandum at 40-41.

While Defendant’s avoidance of this issue in its brief is telling, it is not dispositive. Def. Br. 16-

25. Therefore, the court finds that Ta Chen properly exhausted its administrative remedies and

may raise this issue.

       Ta Chen, however, misreads what it alleges to be the controlling law on the calculation of

the CEP profit. Specifically, Ta Chen mistakes SNR Roulements to stand for the proposition that

the actual costs used in the “total actual profit” and “total expense” components of the CEP profit
Court No. 08-00027                                                                         Page 21


equation must adequately reflect imputed costs. Def-Intervenor Br. 9-14. That case stands for no

such rule; rather, the Federal Circuit merely stated that Commerce must afford interested parties

“an opportunity to make a showing that their dumping margins were wrongly determined

because Commerce’s use of actual expenses did not account for U.S. credit and inventory

carrying costs in the calculation of total expenses.” SNR Roulements, 402 F.3d at 1363

(emphasis added). That is, “Commerce may account for credit and inventory carrying costs using

imputed expenses in one instance and using actual expenses in the other provided that Commerce

affords a respondent who so desires the opportunity to make a showing that the amount of

imputed expenses is not accurately reflected or embedded in its actual expenses.” Id. at 1361.

The Federal Circuit further noted that Commerce did not give the petitioner any opportunity to

argue that actual costs did not adequately reflect imputed costs. Id. at 1363. Because Ta Chen

was afforded such an opportunity in the thirteenth administrative review, the court finds SNR

Roulements inapplicable.

       If Commerce supports its determination with substantial evidence and it acts in

accordance with law, the Court will uphold the agency’s finding. See § 1516a(b)(1)(B)(i). Here,

however, there is insubstantial evidence to support Commerce’s determination that “an

adjustment to the [CEP profit] calculation is unwarranted.” Issues and Decision Memorandum at

41. To justify the Final Results, Commerce cites to two instances where the Court has upheld

Commerce’s CEP profit methodology in prior administrative reviews of the antidumping order

on the subject merchandise. Id. (citing Ta Chen II, 30 CIT 376, 427 F. Supp. 2d 1265; Alloy

Piping I, 28 CIT 1805). Commerce’s justification misses the point. The legal validity of this
Court No. 08-00027                                                                             Page 22


kind of CEP profit methodology employed by the agency here is not at issue; rather, Commerce

fails to directly address Ta Chen’s claim that, in the thirteenth administrative review, the

exclusion of imputed costs in the CEP profit calculation renders Ta Chen’s actual costs

inaccurate.20 The cited cases do not stand for the proposition that Commerce’s CEP profit

methodology is unquestionably in accordance with law, but rather state that in the particular

administrative reviews at issue – the sixth and seventh administrative reviews – Commerce

provided substantial evidence to support its finding that actual costs adequately reflect imputed

costs. See Ta Chen II, 30 CIT 376, 382-83, 427 F. Supp. 2d at 1270-71; Alloy Piping I, 28 CIT at

1811-12. That is, those cases concern different data compiled in different periods of review that

have no legal effect on the administrative review here. Simply because the Court has rejected

identical claims by Ta Chen in other administrative reviews that involve different sets of data

does not suggest that Commerce need not address with rigor the particular claim at issue in the

thirteenth administrative review.

       The critical distinction between the record here and those of the two cases cited above is

that Commerce explained why actual costs adequately reflect imputed costs. See, e.g., Ta Chen

II, 30 CIT at 382-83, 427 F. Supp. 2d at 1270-71 (noting that the administrative determination

“explain[s] how the imputed financial expenses included in the ‘Total U.S. Expenses’ numerator

are a reasonable surrogate for the relevant recognized financial expenses included in both the


       20
          Commerce also suggests that the Court found imputed costs, as a general rule, to be
irrelevant in the CEP profit calculation since they do not “represent some real, previously
unaccounted for, expense[] . . . .” Issues and Decision Memorandum at 41 (citing Alloy Piping I,
28 CIT at 1811-12) (quotations omitted). Commerce misreads the cited passage, which only
found that Commerce adequately accounted for imputed costs in actual costs in the seventh
administrative review. Alloy Piping I, 28 CIT at 1811.
Court No. 08-00027                                                                             Page 23


‘Total Expenses’ denominator and the ‘Total Actual Profit’ multiplier.”). In not one of those

cases does Commerce, as here, adopt a conclusory statement to justify its finding. Such a

statement, without additional justification, hardly includes an explanation of the standards

applied and of the analysis that led to Commerce’s conclusion, nor does it demonstrate a rational

connection between the facts on the record and the conclusions drawn. See Matsushita, 750 F.2d

at 933.

                                          IV. Conclusion

          For the foregoing reasons, the court holds that Commerce acted with substantial evidence

and in accordance with law on the issue of the CEP offset to the NV. The court finds that

Commerce failed to provide substantial evidence for its findings regarding the CEP profit.

Accordingly, it is hereby

          ORDERED that Plaintiffs’ Motion for Judgment Upon the Agency Record is DENIED,

that Defendant-Intervenor’s Motion for Judgment Upon the Agency Record is GRANTED and

that the case is REMANDED to Commerce for further proceedings not inconsistent with this

opinion. Specifically, it is

          ORDERED that Commerce must provide a more rigorous analysis in its examination of

whether imputed costs are adequately reflected in the total actual costs used in the “total actual

profit” and “total expenses” components of the CEP profit methodology; it is further

          ORDERED that Commerce’s determination on the issue of the CEP offset is

SUSTAINED; and it is further
Court No. 08-00027                                                                         Page 24


         ORDERED that Commerce shall have until June 16, 2009, to file its remand results with

the Court. Plaintiffs and Defendant-Intervenor shall file their responses with the Court no later

than July 17, 2009.



Dated:      April 14, 2009                                           /s/ Judith M. Barzilay
         New York, New York                                         Judith M. Barzilay, Judge
