                        Slip Op. 99-42

       UNITED STATES COURT OF INTERNATIONAL TRADE
___________________________________
                                   :
THAI PINEAPPLE CANNING INDUSTRY    :
CORP., LTD., and MITSUBISHI        :
INTERNATIONAL CORP.,               :   Court No. 98-03-00487
                                   :
          Plaintiffs,              :    Public Version
                                   :
               v.                  :
                                   :
UNITED STATES,                     :
                                   :
          Defendant,               :
                                   :
          and                      :
                                   :
MAUI PINEAPPLE CO., LTD., and      :
INTERNATIONAL LONGSHOREMEN’S AND   :
WAREHOUSEMEN’S UNION,              :
                                   :
          Defendant-Intervenors.   :
___________________________________:

[ITA determination remanded.]


                                        Dated:   May 5, 1999


     Dickstein Shapiro Morin & Oshinsky LLP (Arthur J. Lafave,
III, Douglas N. Jacobson, and Patricia M. Steele) for plaintiffs.

     David W. Ogden, Acting Assistant Attorney General, David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Lucius B. Lau), Stacy J.
Ettinger, Office of the Chief Counsel for Import Administration,
United States Department of Commerce, of counsel, for defendant.
COURT NO. 98-03-00487                                         PAGE 2


                               OPINION

     RESTANI, Judge:    This motion is before the court on

Plaintiffs’ Motion for Judgment on the Administrative Record,

pursuant to CIT Rule 56.2.     Plaintiffs seek review of the final

results of the first administrative review of the antidumping

duty order on Canned Pineapple Fruit from Thailand, 63 Fed. Reg.

7,392, 7,392 (Dep’t Commerce 1998) [hereinafter “Final Results”],

covering sales to the United States during the period January 11,

1995, through June 30, 1996.

                Jurisdiction and Standard of Review

     The court has jurisdiction pursuant to 28 U.S.C. § 1581(c)

(1994).   In reviewing final determinations in antidumping duty

investigations, the court will hold unlawful those agency

determinations which are unsupported by substantial evidence on

the record, or otherwise not in accordance with law.    19 U.S.C. §

1516a(b)(1)(B)(i) (1994).

                         Procedural History

     On July 18, 1995, the United States Department of Commerce

(“Department” or “Commerce”) published an antidumping duty order

on canned pineapple fruit (“CPF”) from Thailand.    Canned

Pineapple Fruit from Thailand, 60 Fed. Reg. 36,775, 36,776 (Dep’t

Commerce 1995).   On August 15, 1996, the Department published a
COURT NO. 98-03-00487                                         PAGE 3


notice initiating an administrative review for sales during the

period January 11, 1995, through June 30, 1996.    Initiation of

Antidumping and Countervailing Duty Administrative Reviews and

Requests for Revocation, 61 Fed. Reg. 42,416, 42,417 (Dep’t

Commerce 1996).    Initial questionnaires were issued on September

5, 1996, to Thai Pineapple Canning Industry Corp., Ltd. (“TPC”),

Princes Foods B.V. (“Princes”) and Mitsubishi International Corp.

(“MIC”).    Princes is a TPC affiliate, located in the Netherlands,

that resells canned pineapple fruit into the German market.

Pl.'s Br. at 4.    MIC is an affiliated reseller in the United

States.    Id.   TPC reported third-country sales to Germany in its

sales responses because the home market was not viable.    TPC

Questionnaire Response (Nov. 13, 1996), at 2-3, P.R. Doc. 35,

Pl.'s App., Tab 3, at 2-3.

      The Department initiated a below-cost sales investigation on

January 13, 1997.    Canned Pineapple Fruit from Thailand, 62 Fed.

Reg. 42,487, 42,487 (Dep’t Commerce 1997) (prelim. results and

partial termination of antidumping duty admin. rev.) [hereinafter

“Preliminary Results”].     TPC, Princes, and MIC participated in

verifications conducted in May and June 1997 in Thailand, the

Netherlands, and the United States, respectively.    Pl.’s Br. at

5.   Following verification, the Department issued the Preliminary
COURT NO. 98-03-00487                                          PAGE 4


Results on August 7, 1997.    62 Fed. Reg. at 42,487.   The

Department provided interested parties the opportunity to comment

on its Preliminary Results.     See id.

     After issuance of the Final Results on February 13, 1998,

TPC filed a letter alleging a clerical error.     Letter to Commerce

(Feb. 17, 1998), at 1, C.R. Doc. 95, Pl.'s App., Tab 7, at 1.

TPC noted that, without comment, the Department calculated in the

Final Results a single assessment rate for two separate

importers, Mitsubishi Foods, Inc., (“MFI”) and MIC, even though

it had calculated separate rates for each of these companies in

its Preliminary Results.     Id. at 1-2.   The Department issued a

memorandum concluding that its calculation of a single assessment

rate for these two companies was not a clerical error and was in

accordance with its practice regarding affiliated importers.

Memo from Commerce (March 5, 1998), at 2-3, P.R. Doc. 204, Pl.'s

App., Tab 2, at 2-3.

     At issue in this review are the propriety of the single

weighted-average cost of production for the entire period of

review (“POR”), the selection of date of sale for third-country

sales, the calculation of profit for constructed export price

(“CEP”) purposes, the assessment rate on sales outside the cap

period established by 19 U.S.C.A. § 1673f (West Supp. 1999), and
COURT NO. 98-03-00487                                          PAGE 5


the related issue of the propriety of a single assessment rate

for MIC and its predecessor, MFI.   The final issue of the

assessment rate on entries made after the Final Results is

remanded per agreement of the parties, as neither plaintiffs nor

Commerce had an adequate opportunity to address this issue.

Facts regarding the remaining issues will be set forth in

connection with each issue separately.1

I.   Use of a Single Weighted-Average Cost of Production
     Covering Entire 18-Month Period of Review

     A.   Facts

     As noted, the challenged administrative review results

involved CPF from Thailand which entered the United States during

the period January 11, 1995, through June 30, 1996.    Final

Results, 63 Fed. Reg. at 7,392.   As part of its antidumping

analysis, Commerce conducted a cost of production (“COP”)

investigation of TPC's third-country sales.2   Id.   Because

certain CPF products produced by TPC failed the COP test as

applied by Commerce, Commerce used constructed value ("CV") as



     1
          Defendant-intervenors Maui Pineapple Co., Ltd., elected
not to file a response brief and did not otherwise participate in
the substantive aspects of this case.
     2
          Third country sales are sales of like merchandise in
other than the United States or the exporting country. See 19
U.S.C. § 1677b(a)(1)(B)(ii) (1994).
COURT NO. 98-03-00487                                         PAGE 6


the basis of normal value ("NV")3 where (1) there were no

contemporaneous sales of a comparable product or (2) all

contemporaneous sales of a comparable product failed the COP

test.    Gov't Br. at 14.   For both COP and CV, Commerce determined

the cost of production of CPF using a single, weighted-average

cost for the entire period of review.    Final Results, 63 Fed.

Reg. at 7,399-7,400.

     Given generally rising costs,4 TPC computed a separate cost


     3
          If sufficient quantities of goods are sold in the
country of production above the cost of production, normal value
will be based on home country sales prices. If home country
sales are not usable, Commerce may use third country sales or CV,
which is based on COP, as normal value. See 19 U.S.C.
§ 1677b(a).
     4
          By plaintiff’s calculations, fresh pineapple costs per
carton of CPF, computed using the Department’s net realizable
value (“NRV”) method, rose by [ ]% from 1994 to 1995 and by [ ]%
from 1994 to 1996. See Memo from Commerce (July 31, 1997), at
Sch. 1, C.R. Doc. 86, Pl.'s App., Tab 9, at 2 ([ ] baht per
standard carton in 1995 and [ ] in 1996); TPC Case Brief (Sept.
8, 1997), at Attachment 1, C.R. Doc. 87, Pl.'s App., Tab 10, at 9
([ ] baht per standard carton in 1994).
     Fresh pineapple costs account for about [ ]% of the finished
product cost. Plaintiff arrives at this calculation by dividing
the Total Net Pineapple Cost to CPF of [ ] by total standard
cases, [ ], to yield fruit costs of [ ] baht per carton and
comparing this with total cost of manufacturing ("TOTCOM") for
1995 products ranging from [ ] baht per carton to [ ] baht per
carton. Memo from Commerce, at Sch.s 1 and 5(a), Pl.'s App., Tab
9, at 2-3. In addition, interest expenses (“INTEX”), calculated
according to the methodology used by the Department in its
Preliminary and Final Results, amounted to [ ]% of cost of
manufacturing ("COM") in 1995, but were [ ] in 1994. TPC Case
Brief, at 7, Pl.'s App., Tab 10, at 2.
     Therefore, plaintiffs calculate that finished product costs
COURT NO. 98-03-00487                                         PAGE 7


for each fiscal period covered by its sales responses -- 1994,

1995, and 1996 -- and submitted them in its cost responses with a

request that the Department use the separate fiscal period costs

for its determinations of COP and CV.    TPC Section D

Questionnaire Response (Feb. 18, 1997), at 27, C.R. Doc. 31,

Pl.'s App., Tab 11, at 2.    Notwithstanding TPC’s request, the

Department calculated a single “average” COP and a single

“average” CV based on costs of production computed over the

period January 1, 1995, to June 30, 1996.    Final Results, 63 Fed.

Reg. at 7,399-7,400.    Plaintiffs allege that the calculation of a

single, weighted-average cost over this period, and the use of

that cost for comparison to sales prices early in the period,

resulted in significant distortions in the Department’s price-

cost comparisons, including distortions in its determination of

which sales should be disregarded as below cost and in the

Department’s determination of CV.   Id. at 7,399.   Plaintiffs

allege in particular that distortion occurred because the

Department did not match up 1995 sales with the low 1994 costs




rose by [ ]% from 1994 to 1995 and by [ ]% from 1994 to the first
half of 1996. Pl.'s Br. at 8 (computed by multiplying the
increase in fresh fruit cost by [ ] to derive the increase in COM
and adding [ ]% for increased interest expenses).
COURT NO. 98-03-00487                                           PAGE 8


related thereto.5   Id.

     Commerce contends that costs did not rise in a continuous

manner over that entire POR and that a period-wide weighted-

average was approved in Fujitsu General Ltd. v. United States, 88

F.3d 1034, 1038-39 (Fed. Cir. 1996).

     B.   Discussion

     It is apparent to the court that Commerce has read too much

into Fujitsu, which is readily distinguishable.   First, Fujitsu

approved costs constructed on an annual basis.    Id. at 1039

("decision to sustain Commerce's use of annual weighted-average

COP in calculating FMV . . . correct.") (emphasis added).   This

is basically all plaintiffs seek here.   They want costs for a




     5
          Because there is a 30-40 day transit time from Thailand
to the United States, TPC Case Brief, at 40, Pl.'s App., Tab 10,
at 8) and merchandise is typically held in inventory in the
United States for [ ] months prior to sale to the first
unaffiliated customer, most of the merchandise in CEP comparison
sales made by TPC’s affiliate MFI in the first few months of the
POR appear to have been manufactured in 1994. See id. at 9,
Pl.'s App., Tab 10, at 4; TPC Questionnaire Response (Nov. 12,
1996), at Ex. 56, C.R. Doc. 5, Pl.'s App., Tab 12, at 4 (showing
number of days of approximately [ ] months); TPC Verification Ex.
No. LA-18, at 1, C.R. Doc. LA-18, Pl.'s App., Tab 14, at 1
(showing number of days of approximately [ ] months). TPC
brought this fact to the Department’s attention in its initial
responses, reported the year of manufacture in its response, and
suggested that the Department calculate a separate fiscal period
COP and CV for 1994 production. Final Results, 63 Fed. Reg. at
7,399.
COURT NO. 98-03-00487                                         PAGE 9


fiscal year matched to sales for a fiscal year.6    In Fujitsu,

respondents sought monthly or quarterly averaging.    Id. at 1036.

     Second, almost all of the factors which the appellate court

found were missing in Fujitsu are present here.     Fujitsu involved

multi-input television receivers, id., not a one primary-input

product, such as canned pineapple from raw pineapple.     In such a

case, Commerce must be particularly sensitive to changes in the

price of the raw commodity.     See e.g. Brass Sheet and Strip From

the Netherlands, 53 Fed. Reg. 23,431, 23,432-33 (Dep’t Commerce

1988) (final LTFV determ.) (POR split to account for metal price

rise).7    Next, the Fujitsu court noted no significant cost rise

from the beginning to the end of the POR.     Fujitsu, 88 F.3d at

1039.     Here, a cost rise of almost 50% occurred over eighteen

months, notwithstanding the fact that there was a tremendous cost

rise mid-review which moderated somewhat by June 1996.     See Pl.'s

Br. at Tab C (reflecting monthly fresh pineapple costs from


     6
          Because the POR does not match up with TPC’s fiscal
year, this might necessitate a 6-month averaging period, but this
does not seem greatly burdensome.
     7
          Defendant is incorrect that this was necessitated by
the difference in merchandise provision because similar, not
identical, merchandise was used for comparison. The Brass Sheet
respondents requested a circumstances of sales adjustment to
account for a 70% metals price rise. This was denied, and
separate foreign market values were computed for four-month
periods. Comparison U.S. sales were matched to the periods. See
Brass Sheet 54 Fed. Reg. at 23,432-433.
COURT NO. 98-03-00487                                       PAGE 10


January 1995 to June 1996).

     In the past, the Department has adjusted for changes in

costs over the POR or matched costs to POR sales more

specifically than it did here.   The court notes a few

particularly telling examples.   In Certain Cold-Rolled Carbon

Steel Flat Products from Germany, for example, the Department

relied upon separate fiscal year costs and allocated expense data

for sales observations according to the year in which the sales

took place.   60 Fed. Reg. 65,264, 65,270 (Dep’t Commerce 1995)

(final results of antidumping duty admin. rev.).8

     Commerce admits that there is a basic principle that

Commerce will utilize shorter cost reporting periods if markets

experience significant and consistent price declines.    See, e.g.,

Static Random Access Memory Semiconductors from Taiwan, 63 Fed.

Reg. 8,909, 8,920 (Dep’t Commerce 1998)(final LTFV determ.).

Commerce has not explained why significant price rises are not

worthy of such an adjustment.9


     8
          Defendant is incorrect that this was done only for the
general expenses calculation. It is apparent from the discussion
that separate fiscal year costs and expenses were used for all
elements of constructed value because the respondent reported
them that way. See Certain Cold-Rolled Carbon Steel Flat
Products from Germany, 60 Fed. Reg. at 65,270.
     9
          Moreover, in the preliminary determination in Static
Random Access, the Department stated that it would generally
"compare sales and conduct the sales below cost test using annual
COURT NO. 98-03-00487                                         PAGE 11


      Finally, the Department cannot explain away the following

cases.   In Sweaters Wholly or in Chief Weight of Man-Made Fiber

from Taiwan, the Department did not use annual average unit costs

where there was a significant variation between what was produced

during the POR and what was sold during the POR.   55 Fed. Reg.

34,585, 34,596 (Dep’t Commerce 1990) (final LTFV determ.)

[hereinafter “Sweaters”].   Instead the Department used the costs

of the individual production runs (whether or not falling within

the POR) in which the subject merchandise was actually produced.

Id.   In Fresh and Chilled Atlantic Salmon from Norway, the

Department found that a single average cost of cultivation (COC)

should not be calculated for the POR, stating:

      [B]ecause no 1990-generation salmon were harvested
      until 1991, averaging the COC for 1990-generation
      salmon with the 1989-generation salmon could lead to
      distortions in determining whether 1990-third country
      sales were made at prices below cost. Moreover, given
      the fluctuations of farmers' costs during the POR, the
      ease with which different generations' COC can be
      segregated, and the fact that we have calculated
      separate 1990 and 1991 processing costs for respondent
      Skaarfish, we believe it is reasonable to use separate


averages. However, where prices have moved significantly over
the course of the POI, it has been the Department's practice to
use shorter time periods." Static Random Access Memory
Semiconductors from Taiwan, 62 Fed. Reg. 51,442, 51,444 (Dep't
Commere 1997) (prelim. determination of sales at LTFV) (emphasis
added). This statement further shows there is no reason to limit
the use of shorter cost reporting periods to instances when the
market experiences price declines and not when it experiences
price increases.
COURT NO. 98-03-00487                                       PAGE 12


     1990 and 1991 COCs.

58 Fed. Reg. 37,912, 37,913 (Dep’t Commerce 1993) (final results

of antidumping duty admin. review) (emphasis added).

     It is insufficient to cast away previous decisions on the

basis that the extent of the distortion was not noted.   This

cannot be a way to insulate inconsistent decisions from review.

While it is certainly true that the need to use monthly averages

generally may be restricted to cases of hyper inflation, see

Asociacion Colombiana de Exportadores de Flores v. United States,

6 F. Supp.2d 865, 873-74 n.7 (Ct. Int'l Trade 1998), even

Commerce recognizes that there is a middle range choice of six

months to one year averaging.   There is also the possibility of

matching costs more closely with sales, as various administrative

determinations indicate.

     Given the distortions in calculating COP and CV caused by

inattention to the price rise for a single primary input product,

and the lag between goods produced (in a one-day canning process)

but not sold until months later, Commerce must revisit this

issue.

     Commerce must reanalyze the data to determine whether TPC

has provided sufficient data to match costs to appropriate fiscal

year sales.   If it has, in the absence of any proper antidumping
COURT NO. 98-03-00487                                        PAGE 13


policy reason10 for not doing this seemingly minimally burdensome

and substantially less distortive comparison, Commerce must

proceed as it has in the past and match fiscal year costs with

sales.

II.   Use of Date of Contract for Date of Third Country Sale

      A.    Facts

      In its antidumping analysis, Commerce identifies a "date of

sale" for merchandise sold to the United States, the exporting

country, and third countries.    In the Final Results, Commerce

recognized the existence of two dates associated with TPC's

export price ("EP") and third-country sales:    the earlier date of

contract and the later date of invoice.    See 63 Fed. Reg. at

7,394.     Commerce examined these dates and found that all but five

of the third country sales11 had identical terms in both the

contracts and the invoices.    Id.   Thus, Commerce determined that

the date of contract was the proper date of sale because the

contract, not the invoice, established the material terms of

      10
          Commerce's answer that respondents would only provide
pre-POR cost data when it suited them does not appear to be a
sufficient reason. Commerce can ask for relevant cost data if
costs are either declining or rising significantly and it has not
been stopped by such a concern in the past. See, e.g., Sweaters,
55 Fed. Reg. at 34,596.
      11
          Five of [ ] third country sales had contract changes.
Gov't's Br. at 27. One of several hundred EP sales had changes.
Final Results, 63 Fed. Reg. at 7,394.
COURT NO. 98-03-00487                                                PAGE 14


sale.    Id.

        B.     Discussion

        The first question to ask is what principle should guide

Commerce in choosing the date of sale.          It appears undisputed

that in the past, in general, Commerce has looked to the date by

which the essential terms of sale are fixed in order to determine

date of sale.      See Al Tech Specialty Steel Corp. v. United

States, No. 97-08-01328, 1998 WL 661461, at *2 (Ct. Int'l Trade

1998) (citing cases).        This seems reasonable if one is trying to

compare sales in two markets or costs and sales.

        There is no new statutory guidance on this point except for

the general statement that NV shall be the price "at a time

reasonably corresponding to the time of the sale used to

determine the export price or constructed export price."          19

U.S.C. § 1677b(a)(1)(A).          There was no regulation on point

applicable to the investigation at issue.

        On March 29, 1996, Commerce stated in an internal memorandum

that it had published proposed regulations which provide that the

agency would normally establish the date of invoice as the date

of sale.       Pl.'s Br. at Tab D.     Commerce further stated that it

was implementing this change immediately in all reviews initiated

after April 1, 1996.        Id.    The administrative review at issue
COURT NO. 98-03-00487                                         PAGE 15


here was initiated on August 15, 1996.   Initiation of Antidumping

Duty and Countervailing Duty Admin. Reviews, 61 Fed. Reg. at

42,417.   The proposed regulations referenced by Commerce in its

March 29, 1996, memorandum were ultimately issued as final

regulations on May 19, 1997.   See Antidumping Duties;

Countervailing Duties, 62 Fed. Reg. 27,296, 27,296 (Dep't Comm.

1997) ("Final Regulations").   The Final Regulations, however,

only apply to reviews requested on or after July 1, 1997.     See 19

C.F.R. § 351.701 (1998).   With regard to reviews conducted

pursuant to the Uruguay Round Agreements Act (“URAA”), Pub. L.

No. 103-465, 108 Stat. 4809 (1994), but not formally subject to

the Final Regulations, Commerce stated, "[P]art 351 will serve as

a restatement of the Department's interpretation of the

requirements of the Act as amended by the URAA."     Id.   In this

case, Commerce did not refer to the regulations as controlling,

but, rather, discussed the regulations as reflecting Commerce's

current practice with respect to date of sale.   Final Results, 63

Fed. Reg. at 7,394 n.2.

     Notwithstanding its new policy preference to utilize the

date of invoice as the default date of sale, Commerce determined

that the date of contract for TPC's EP and third-country sales

should determine the date of sale.   Id. at 7,394.    In the Final
COURT NO. 98-03-00487                                        PAGE 16


Results, Commerce stated that its new preference for the date of

invoice would apply "’absent satisfactory evidence that the terms

of sale were finally established on a different date.’"    Id.

(quoting the Final Regulations, 62 Fed. Reg. at 27,349).     With

regard to TPC, Commerce stated that it found sufficient evidence

that the terms of sale were established on a different date.      As

noted by Commerce, "[t]he evidence on the record indicates that

there were changes to the contracted terms of TPC's POR sales for

only one out of several hundred EP sales, and five out of several

hundred third country sales."   Id.   For this reason, Commerce

determined that the date of contract should act as the date of

sale because all material terms of sale were established at the

time of contracting.    Id.

     Accepting this as a statement of policy that applied to this

proceeding, it appears that the number of changes noted may not

be particularly probative of whether or not this is an industry

in which renegotiation is common, or whether the terms of the

sales were firmly set on the contract date.   Thus, why this was

accepted as evidence warranting departure from the general

invoice date policy is not clear.

     How the new policy is being applied remains something of a

mystery.   Plaintiffs offer three examples of administrative
COURT NO. 98-03-00487                                        PAGE 17


decisions that at least cause some concern that Commerce acted

inconsistently in this case.   See Small Diameter Circular

Seamless Carbon and Alloy Steel Standard, Line and Pressure Pipe

From Germany, 63 Fed. Reg. 13,217, 13,226 (Dep’t Commerce 1998)

(final results of antidumping admin. review) (use of shipment

date for date of sale when invoice date after shipment; sales

terms not fixed until date of shipment; decision references post-

contract changes, but the amount is not specified); Open-End Spun

Rayon Singles Yarn from Austria, 62 Fed. Reg. 14,399, 14,399-400

(Dep’t Commerce 1997) (prelim. LTFV determ.) (invoice date used

for short term contracts where little lag time between the date

of shipment and date of invoice; no discussion of use of sales

contract date); Certain Stainless Steel Wire Rod from India, 62

Fed. Reg. 38,976, 38,979 (Dep't Commerce 1997) (final results of

antidumping admin. review) (invoice date used because no long

term contracts and short period between purchase orders and

invoice); see also Koenig & Bauer-Albert AG v. United States, 15

F. Supp.2d 834, 843 n.3 (Ct. Int'l Trade 1998) (date of sale

established upon invoice and shipment to allocate indirect

selling expenses to POR U.S. sales; substantial gap between sale

and shipment).

     Neither in the Final Results, nor in its arguments to the
COURT NO. 98-03-00487                                       PAGE 18


court, has Commerce offered evidence that long term contracts or

long lag time between contract and shipment or invoice was a

concern in this case.   If there is another reason for rejecting

invoice date which Commerce did not have reason to state in the

cases cited, it should state that reason.   Commerce must

reconsider this issue and square its reasoning with its other

contemporaneous determinations.

III. Calculation of CEP Profit

     A.    Facts

     Under 19 U.S.C. § 1677a(c) and (d) (1994), CEP is adjusted

for various items which are expected to be found in the sales

price.12   One of the reductions to price for purposes of arriving

at CEP is profit.   19 U.S.C. § 1677a(d)(3).

     Profit is calculated according to 19 U.S.C. § 1677a(f)

(1994), which reads:




     12
        CEP is a constructed United States price which is
compared to NV to determine if the merchandise at issue is being
sold at less than fair value in the United States. CEP is
intended to be an approximation of ex factory price, and it is
used in place of export price when affiliated U.S. sellers,
rather than the exporters, make the U.S. sales. See 19 U.S.C.
§ 1677a(b) (1994).
COURT NO. 98-03-00487                                        PAGE 19


     (f) Special rule for determining profit

          (1) In general

               For purposes of subsection (d)(3) of
          this section, profit shall be an amount
          determined by multiplying the total actual
          profit by the applicable percentage.

          (2) Definitions

          For purposes of this subsection:

               (A) Applicable percentage

                    The term “applicable
               percentage” means the percentage
               determined by dividing the total
               United States expenses by the total
               expenses.

               (B) Total United States expenses

                    The term “total United States
               expenses” means the total expenses
               described in subsection (d)(1) and
               (2) of this section.

               (C) Total expenses

                    The term “total expenses”
               means all expenses in the first of
               the following categories which
               applies and which are incurred by
               or on behalf of the foreign
               producer and foreign exporter of
               the subject merchandise and by or
               on behalf of the United States
               seller affiliated with the producer
               or exporter with respect to the
               production and sale of such
               merchandise:

                            (i) The expenses incurred with
COURT NO. 98-03-00487                                         PAGE 20


                        respect to the subject merchandise
                        sold in the United States and the
                        foreign like product sold in the
                        exporting country if such expenses
                        were requested by the administering
                        authority for the purpose of
                        establishing normal value and
                        constructed export price.

                             (ii) The expenses incurred
                        with respect to the narrowest
                        category of merchandise sold in the
                        United States and the exporting
                        country which includes the subject
                        merchandise.

                             (iii) The expenses incurred
                        with respect to the narrowest
                        category of merchandise sold in all
                        countries which includes the
                        subject merchandise.

                (D) Total actual profit

                     The term “total actual profit”
                means the total profit earned by
                the foreign producer, exporter, and
                affiliated parties described in
                subparagraph (C) with respect to
                the sale of the same merchandise
                for which total expenses are
                determined under such subparagraph.

Id.

      For its Final Results, the Department calculated CEP profit

by computing the ratio of total profit to total expenses and

multiplying that ratio, on a transaction-by-transaction basis, by

reported U.S. selling expenses.     Final Results, 63 Fed. Reg. at

7,395.   The statute dictates a different approach.    The statute
COURT NO. 98-03-00487                                        PAGE 21


calls for multiplication of total profit by the ratio of total

United States expenses to total expenses.   See 19 U.S.C.

§§ 1677a(f)(1)-(2)(A).   Theoretically, the two computations

should yield the same result:   A * B/C = A/C * B.   The Department

apparently adopted its method because total profit is generally

not computed on a per-unit basis, but is calculated in gross.

Therefore, the Department divides the total profit in gross by

the total expenses in gross and multiplies by unit U.S. selling

expense for an individual sale to obtain a unit profit.

     The statute’s drafters intended that profit would be

allocated to U.S. sales in the same ratio as United States

selling expenses are to total expenses (i.e., that the portion of

total profit on a sale attributable to activities conducted in

the United States is equal to the ratio of the cost of those

activities to the cost of all activities generating the sales

revenue).   As explained in the Statement of Administrative Action

(“SAA”),13 the profit to be deducted from the CEP is the profit

“allocable to the selling, distribution, and further


     13
          The Statement of Administrative Action represents "an
authoritative expression by the Administration concerning its
views regarding the interpretation and application of the Uruguay
Round Agreements . . . The Administration understands that it is
the expectation of the Congress that future Administrations will
observe and apply the interpretations and commitments set out in
this statement." SAA, at 1.
COURT NO. 98-03-00487                                        PAGE 22


manufacturing expenses in the United States.”   SAA accompanying

the URAA, H.R. 103-5110, H.R. Doc. No. 316, Vol. 1, 103d Cong. 2d

Sess. (1994), at 823, reprinted in 1994 U.S.C.C.A.N. 3773, 4163.

“The profit to be deducted from the starting price in the U.S.

market is that proportion of total profit equal to the proportion

which U.S. manufacturing and selling expenses constitute of total

manufacturing and selling expense.”    SAA, at 824.

     The Department does include U.S. imputed expenses in the

numerator of the applicable percentage or ratio but not in the

denominator.   See Final Results, 63 Fed. Reg. at 7,394.    The

Department also excludes imputed expenses from the total actual

profit figure required by 19 U.S.C. § 1677a(f)(2)(D), which

perforce represents total expenses deducted from total revenue.

It then uses the total expense figure for purposes of the

statutory ratio.    Commerce is not following the statutory formula

precisely.   It is focusing on creating symmetry in the ratio it

constructs, i.e., total profit to total expenses, as opposed to

the ratio established by the statute, total U.S. expenses to

total expenses.    The question before the court, therefore, is

whether this is permissible.

     Both parties’ briefs failed to cite the court’s decision

which is most on point, U.S. Steel Group v. United States, 15 F.
COURT NO. 98-03-00487                                            PAGE 23


Supp.2d 892, 896-98 (Ct. Int'l Trade 1998).14

     B.   Discussion

     In U.S. Steel, the court ruled that, under 19 U.S.C.

§ 1677a(f), the statutory ratio applied to “actual profit” for

purposes of calculating CEP profit must be calculated on a

proportional basis.     15 F. Supp.2d at 896-98.   The court left

undecided whether the “actual” profit calculation under 19 U.S.C.

§ 1677a(f)(2)(D) must include categories of expenses present in

the ratio.   See id. at 898 n.6.    The court indicated that

defendant had presented no argument that this was so.      Id.

     In this action, defendant has attempted an explanation of

why actual profit should not contain “imputed expenses” based on

the use of the word “actual” in 19 U.S.C. § 1677a(f)(2)(D), but

not elsewhere in the provision.     This is facially a plausible

reason for the omission.     Commerce’s argument misses the mark,

however, where it indicates that the statute and the SAA require

that total expenses in the statutory ratio applied to actual

profit must be exclusive of imputed expenses just because some

form of total expenses is also used in the actual profit


     14
        This is a particularly egregious error on the part of
the Government, as the case is adverse to its position. Upon
discovering the case during preparations for oral argument,
counsel should have advised opposing counsel and the court.
Failure to do so impeded oral argument.
COURT NO. 98-03-00487                                           PAGE 24


calculation.

     First, in the total actual profit provision, 19 U.S.C.

§ 1677a(f)(2)(D), the term “total expenses” is used simply to

indicate the pool of sales from which to calculate actual profit.

Second, the SAA makes clear that the pool of sales involved is

the same for both total expenses in the ratio and total actual

expenses in the total actual profit calculation.    SAA, at 824-25.

Third, the three alternatives for selection of a sales pool for

calculation of expenses found at 19 U.S.C. § 1677a(f)(2)(C) do

not relate directly to the selection of the categories of

expenses to be used in the ratio.    As with subsection

1677a(f)(2)(D), it is the choice of the sales pool which is

specified, not categories of expenses.

     Commerce has some flexibility in determining total U.S.

expenses under 19 U.S.C. §§ 1677a(d)(1)-(2), the figure which is

used in the ratio calculation, pursuant to 19 U.S.C.

§ 1677a(f)(2)(B).   But if Commerce decides to include a category

of expenses in calculating total U.S. expenses in the numerator,

it must also include such expenses in the denominator of the

ratio, unless they are already represented in total expenses in

some other fashion.     See U.S. Steel, 15 F. Supp.2d at 898.    The

statutorily defined denominator represents a figure containing
COURT NO. 98-03-00487                                         PAGE 25


both total U.S. expenses and the expenses attributable to the

foreign like product sold in the home market.    See 19 U.S.C.

§ 1677a(f)(2)(C)(i).    Commerce cannot arbitrarily remove part of

the total U.S. expenses from the statutory ratio.

     The court concludes that there is some ambiguity in the use

of the word “actual” in § 1677a(f)(2)(D).    It may not be an

unreasonable interpretation to conclude that imputed expenses

should be excluded in the actual profit calculation, if that

construction can be squared with the necessity of a properly

calculated statutory ratio.   It is a proper ratio that ensures

proper allocation of profit to U.S. sales.    If the profit

allocable to CEP is somewhat lower because U.S. expenses are made

higher by the addition of imputed expenses, this would not seem

to be antithetical to the statute.   There is also nothing that

categorically prevents the inclusion of imputed expenses.

Rather, imputed expenses should be omitted from actual profit if

they duplicate expenses already accounted for.    Their inclusion

is not per se incompatible with the use of the word “actual.”

The question is whether the imputed expenses represent some real,

previously unaccounted for, expense.

     Commerce may not ignore the statutory language just because,

for administrative reasons, it has chosen a different starting
COURT NO. 98-03-00487                                         PAGE 26


point for its profit calculation.   Of course, it may continue to

use a different form of calculation if the result comports with

the statute.   What Commerce must do in this case is to start with

the statutory scheme.   If its method of calculating U.S. expenses

is not compatible with the new CEP statute, it must amend that

approach.   It cannot ignore that “total expenses” in the

denominator includes both U.S. expenses and expenses allocable to

the foreign sold product.   See 19 U.S.C. § 1677a(f)(2)(C).     Of

course, if the imputed expenses are simply a part of an expense

which was allocated to U.S. sales, and that portion is fully

retained as to the foreign sales as a part of “total expenses,”

it is perforce included in the denominator of the ratio.    If this

is so, Commerce needs to support this with citations to the

record.15   Commerce has not established that the expenses at

issue are already in the denominator and thus, has not

distinguished U.S. Steel.   This issue is remanded for calculation

in accordance with this opinion.




     15
        Commerce provides no record appendix with its brief, nor
did it cite to portions of the appendix provided by plaintiff.
COURT NO. 98-03-00487                                        PAGE 27


IV.   Use of a Single Assessment Rate

      A.   Facts

      If Commerce makes a final affirmative dumping determination

and the International Trade Commission ("ITC") makes a final

affirmative injury determination, the statute requires that

Commerce publish an antidumping order which directs Customs to

"assess an antidumping duty equal to the amount by which the

normal value of the merchandise exceeds the export price (or the

constructed export price) of the merchandise" and to collect cash

deposits for estimated antidumping duties pending liquidation of

entries.   See 19 U.S.C. § 1673e(a)(1),(3) (1994).   If an

administrative review is subsequently requested, the statute

provides that Commerce will "review, and determine (in accordance

with paragraph (2)), the amount of any antidumping duty."     19

U.S.C. § 1675(a)(1)(B) (1994).   "[P]aragraph (2)" provides that

Commerce shall determine "the normal value and export price (or

constructed export price) of each entry of the subject

merchandise" and "the dumping margin for each such entry."     19

U.S.C. § 1675(a)(2)(A) (emphasis added).

      The statute also contains a provision entitled "Deposit of

estimated antidumping duty under section 1673b(d)(1)(B) of this

title," which provides as follows:
COURT NO. 98-03-00487                                        PAGE 28


          If the amount of a cash deposit, or the amount of
     any bond or other security, required as security for an
     estimated antidumping duty under section 1673b(d)(1)(B)
     of this title is different from the amount of the
     antidumping duty determined under an antidumping duty
     order published under section 1673e of this title, then
     the difference for entries of merchandise entered, or
     withdrawn from warehouse, for consumption before notice
     of the affirmative determination of the Commission
     [ITC] under section 1673d(b) of this title is published
     shall be —

               (1) disregarded, to the extent that the
          cash deposit, bond, or other security is
          lower than the duty under the order, or

               (2) refunded or released, to the extent that
          the cash deposit, bond, or other security is
          higher than the duty under the order.

19 U.S.C.A. § 1673f(a) (West Supp. 1999) (emphasis added).

     Plaintiff argues that the statutes, read together, require

Commerce to compute two assessment rates, one for the “cap

period” (the period from Commerce's preliminary determination

through the publication of the ITC's affirmative final

determination) and one for the period after publication of the

ITC’s affirmative injury determination.

     B.   Discussion

     The court simply does not agree with plaintiffs’ argument.

19 U.S.C.A. § 1673f(a) is a limitation on collection.    It does

not depend on the basic direction for deriving margins set forth

in 19 U.S.C. § 1675(a)(2)(A).
COURT NO. 98-03-00487                                          PAGE 29


     In this case, plaintiff is disturbed because high margins

relating to sales of merchandise entered during the cap period

are part of the final average margin.   It categorizes this as

importing cap period duties to post-cap entries.     Putting aside

the usual problem, which may or may not exist in this case, of

matching sales and entries, Congress did not provide that dumping

margins during the cap period in excess of the anticipated amount

of dumping (i.e., amounts in excess of the preliminary finding of

dumping) should be disregarded in their entirety.    Rather,

Congress provided that Commerce should disregard amounts in

excess of the preliminary finding of dumping "for entries of

merchandise" made during the cap period.   See 19 U.S.C.A. §

1673f(a).   Congress has also provided that the agency shall

determine the dumping margin for "each such entry" during the

period of review.   19 U.S.C. § 1675(a)(2)(A)(ii).    The Final

Results have complied with both of these provisions by

determining dumping margins for each entry during the period of

review but capping the assessed duties during the cap period at

the amount of estimated antidumping duties.

     Previously, this Court has held that Commerce's decision to

determine the dumping margin by use of all sales during the

period (even sales which occur during the cap period) "will not
COURT NO. 98-03-00487                                        PAGE 30


necessarily result in the violation of the statutory duty cap

applicable to entries made between the preliminary less than fair

value determination and the publication of the ITC's injury

determination."   Ad Hoc Comm. of S. California Producers Of Gray

Portland Cement v. United States, 19 C.I.T. 1398, 1407-08, 914 F.

Supp. 535, 545 (1995).    In Ad Hoc, the plaintiff argued that the

agency's decision to utilize all sales during the review period

to determine the dumping margin violated 19 U.S.C. § 1673f(a).

Id. at 1405, 914 F. Supp. at 543.    The Court, however, saw no

violation because the agency indicated "that it will instruct

Customs to liquidate the relevant entries at a rate no higher

than the cap, in accordance with 19 U.S.C. § 1673f(a) (1988)."16

Id. at 1408, 914 F. Supp. at 545.

     Commerce explained in the Final Results that the adoption of

separate assessment rates "would raise concerns about possible

manipulation of data to avoid AD duties and unrestrained dumping

of certain merchandise subject to an order."     Final Results, 63

Fed. Reg. at 7,394.     Furthermore, the cash deposits on entries

during the cap and post-cap periods are simply estimates of


     16
          The only change made to 19 U.S.C. § 1673f(a), by
amendment in 1996, was the replacement of the words "cash
deposit" for "cash deposit, bond, or other security." Compare 19
U.S.C. § 1673f(a) (1988) with 19 U.S.C.A. § 1673f(a) (West Supp.
1999).
COURT NO. 98-03-00487                                         PAGE 31


dumping liability.      The actual assessment of antidumping duties

is calculated in an administrative review under 19 U.S.C. §

1675(a) after Commerce reviews actual sales data for the period

in question.   Under 19 U.S.C. § 1675(a), there is no prohibition

against reviewing actual sales data on entries made during the

cap period.

     As held in Ad Hoc, 19 CIT at 1408, 914 F. Supp. at 545,

Commerce’s determination to use one assessment rate and to

instruct Customs to cap the assessment comports with the statute.

Because the court finds no effort to segregate cap and post-cap

entries is necessary, the issue of whether MFI and MIC, basically

the pre- and post-cap period affiliates, should receive separate

assessment rates is mooted.

                               Conclusion

     This matter is remanded for Commerce to reconsider the

following issues: 1) the assessment rate for entries made after

the Final Results, 2) the matching of costs to sales on a fiscal

year basis, 3) the date of sale, and 4) the CEP profit
COURT NO. 98-03-00487                                        PAGE 32


calculation.   Remand results are due within 60 days.    Objections

thereto are due 20 days thereafter and responses 11 days

thereafter.



                               _______________________
                                    Jane A. Restani
                                        JUDGE



Dated:   New York, New York

         This 5th day of May, 1999.
