ABB Inc. v. United States

355 F.Supp.3d 1206

ABB INC., Plaintiff,

v. UNITED STATES, Defendant,andHyundai Heavy Industries Co., Ltd., Hyundai Corporation USA, and Hyosung Corporation, Defendant-Intervenors.

Slip Op. 18-156

Consol. Court No. 16-00054

United States Court of International Trade.

Dated: November 13, 2018

R. Alan Luberda and Melissa M. Brewer, Kelley Drye & Warren LLP, of Washington, DC, argued for Plaintiff. With them on the brief was David C. Smith, Jr.

John J. Todor, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for Defendant. With him on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin E. White, Jr., Assistant Director. Of Counsel on the brief was Christopher Hyner, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, DC.

J. David Park, Arnold & Porter Kaye Scholer LLP, of Washington, DC, argued for Consolidated Plaintiff and Defendant-Intervenor Hyosung Corporation. With him on the brief were Andrew M. Treaster, Henry D. Almond, Daniel R. Wilson, and Sylvia Y. Chen.

David E. Bond, White & Case LLP, of Washington, DC, argued for Defendant-Intervenors Hyundai Heavy Industries, Co., Ltd.¹ and Hyundai Corporation USA. With him on the brief were William J. Moran and Ron Kendler.

OPINION AND ORDER

Barnett, Judge:

This matter comes before the court following the U.S. Department of Commerce's ("Commerce" or the "agency") redetermination upon remand. See Confidential Final Results of Redetermination Pursuant to Court Remand ("Remand Results"), ECF No. 96.² ABB Inc. ("ABB") and Hyosung Corporation ("Hyosung") initiated this action, challenging certain aspects of Commerce's final results in the second administrative review ("AR 2") of the antidumping duty order on large power transformers ("LPT") from the Republic of Korea for the period of review August 1, 2013, through July 31, 2014. See Large Power Transformers from the Republic of Korea , 81 Fed. Reg. 14,087 (Dep't Commerce March 16, 2016) (final results of antidumping duty admin. review; 2013–2014) (" Final Results "), and accompanying Issues and Decision Mem., A–580–867 (Mar. 8, 2016) ("I & D Mem."), ECF No. 27-2; see also Consent Mot. to Consolidate, ECF No. 33; Order (Jun. 14, 2016), ECF No. 36. ABB challenged Commerce's treatment of U.S. commissions of Hyosung, Hyundai Heavy Industries Co., Ltd. ("HHI"), and Hyundai Corporation USA ("Hyundai USA," collectively with HHI, "Hyundai"), arguing that Commerce improperly added commission expenses to normal value when it should have deducted them from the constructed export price, and improperly granted commission offsets to normal value for commissions on U.S. sales incurred in the United States. See Confidential Pl.'s Mem. of Law in Supp. of Mot. for J. on the Agency R. at 13-31, ECF No. 41-2. ABB further argued that Commerce failed to cap Hyundai's service-related revenue included in the gross unit price of the LPTs by the amount of the related expenses. Id. at 31-44. Hyosung challenged Commerce's decision to cap Hyosung's reported inland freight revenue by Hyosung's reported domestic (i.e., within Korea) inland freight expense. See Confidential Mem. in Supp. of Consol. Pl. Hyosung's Rule 56.2 Mot. for J. Upon the Agency R. at 11-22, ECF No. 40-2.

The United States ("Defendant" or the "Government") requested a remand to address the issues that ABB raised; the court granted that request on October 10, 2017. See ABB, Inc. v. United States ("AR 2 Remand Opinion "), 41 CIT ––––, ––––, 273 F.Supp.3d 1200, 1205-06 (2017).³ The court directed Commerce to reconsider its treatment of Hyundai's and Hyosung's U.S. commissions and to "evaluate its revenue capping practice and ensure that its application of this practice is consistent with respect to [Hyundai and Hyosung]." Id. at 1212. With respect to the issues Hyosung raised, the court sustained Commerce's determination to cap Hyosung's reported freight revenue by its reported domestic inland freight expense. Id.

Commerce filed its Remand Results on February 9, 2018. See Remand Results. Therein, Commerce declined to grant home market commission offsets to Hyundai and Hyosung for U.S. commissions incurred in the United States. See id. at 28-31. Commerce re-examined the record with respect to Hyundai's reporting of the gross U.S. prices for the LPTs and determined that Hyundai had failed to report service-related revenues separate from gross unit price. See id. at 17 & n.56 (citing Draft Results of Redetermination Pursuant to Court Remand (Jan. 9, 2018) ("Draft Remand Results"), CJRA Tab 1, CRR 1, PJA Tab 1, PRR 1, ECF No. 113). Commerce used facts available with an adverse inference for certain U.S. sales of Hyundai. Draft Remand Results at 14; Remand Results at 24 (cross-referencing the Draft Remand Results for the agency's methodological use of partial adverse facts available).

Hyundai now challenges Commerce's Remand Results on both issues. See Confidential Def.-Ints.' Comments in Opp'n to the Final Results of Redetermination Pursuant to Court Remand ("Hyundai's Cmts."), ECF No. 106. Hyosung challenges Commerce's Remand Results with respect to the commission offsets. See Hyosung's Comments on Remand Results ("Hyosung's Cmts."), ECF No. 104. ABB and the Government urge the court to sustain the Remand Results in their entirety. See generally Confidential Pl.'s Comments in Supp. of Remand ("ABB's Cmts."), ECF No. 108; Def.'s Resp. to Def.-Ints' Comments on the Dep't of Commerce's Final Results of Redetermination ("Gov.'s Cmts."), ECF No. 110. For the reasons discussed below, the court sustains the Remand Results with respect to Commerce's treatment of respondents' U.S. commissions and remands this matter to the agency with respect to the service-related revenue issue.

JURISDICTION AND STANDARD OF REVIEW

The court has jurisdiction pursuant to § 516A(a)(2)(B)(iii) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(iii) (2012),⁴ and 28 U.S.C. § 1581(c). The court will uphold an agency determination that is supported by substantial evidence and otherwise in accordance with law. 19 U.S.C. § 1516a(b)(1)(B)(i). "The results of a redetermination pursuant to court remand are also reviewed for compliance with the court's remand order." SolarWorld Ams., Inc. v. United States , 41 CIT ––––, ––––, 273 F.Supp.3d 1314, 1317 (2017) (internal citation omitted).

DISCUSSION

I. U.S. Commission Offsets

a. Commerce's Determination in the Remand Results

In the Remand Results, Commerce explained that its practice is "to distinguish two types of commissions paid on U.S. sales: (i) commissions incurred inside the United States for which Commerce deducts the commission expenses and the related profit from the price used to establish [constructed export price (or "CEP")⁵ ], and (ii) commissions incurred outside the United States, for which [Commerce] adds such commission expenses to normal value^{[6 ]} and offsets differences in home market commission expenses and such U.S. commission expenses incurred outside the United States, if any." Remand Results at 9-10; see also id. at 28. When a commission expense is incurred in the United States, Commerce, pursuant to 19 U.S.C. § 1677a(d)(1) and (3), makes an adjustment to the price used to establish CEP and for profit allocated to that commission expense. See id. at 8-9. In such circumstances, Commerce treats the commission expense as a CEP expense and "deducts the expense[ ] and allocated profit from the price used to establish CEP without providing a home market commission offset because such commissions are only associated with economic activities in the United States." Id. at 11. When a commission expense is incurred outside the United States (on a sale to the United States), Commerce may make an upward or downward adjustment to "normal value based on the circumstance of sale provision in 19 U.S.C. § 1677b(a)(6)(C)(iii) and 19 C.F.R. § 351.410(e)."⁷ Id. at 28-29. Commerce does not treat commissions outside the United States as CEP selling expenses. Id. at 29; see also id. at 10. Instead, the agency "first adds U.S. commissions incurred outside the United States to the normal value of the respective home market sales and then grants home market commission offsets, if applicable, to the normal value of such home market sales." Id. at 10, 29.

Commerce determined that its approach is consistent with the intent of 19 U.S.C. §§ 1677a(d) and 1677b(a)(6)(C)(iii), 19 C.F.R. § 351.402(b),⁸ and the Uruguay Round Agreements Act, Statement of Administrative Action ("SAA"), H.R. Doc. No. 103–316, vol.1 (1994), reprinted in 1994 U.S.C.C.A.N. 4040.⁹ Id. Commerce also noted that its practice is consistent with that articulated in the remand redetermination in the first administrative review of the antidumping duty order on LPT's from Korea, which the court sustained in ABB, Inc. v. United States ("AR 1 Opinion "), 41 CIT ––––, 273 F.Supp.3d 1186 (2017), appeal filed , No. 18-1300 (Fed. Cir. Dec. 14, 2017). See id. at 8 & n.27.

Both Hyundai and Hyosung challenge Commerce's determination as contrary to law. Hyundai's Cmts. at 15; Hyosung's Cmts. at 1. Hyosung contends that "nothing in the statute, regulations, legislative history, or other policy materials" supports a geographic distinction between commissions incurred in the United States versus those incurred in the home market on U.S. sales. Hyosung's Cmts. at 2. According to Hyosung, commissions incurred in the United States qualify for a commission offset pursuant to 19 C.F.R. § 351.410(e), which expressly allows for a commission offset when commissions are incurred in one market and not the other, without a geographical distinction as to where the commission expenses must be incurred. Id. at 2-3.¹⁰ Hyundai argues that Commerce unreasonably treats similar situations differently when it "den[ies] a commission offset in one...