Public Document
SANYO ELECTRIC CO., LTD. AND SANYO ELECTRIC INC.
v. THE UNITED STATES
Slip Op. 98-41, No. 87-04-00620 (April 6, 1998)
FINAL RESULTS OF REDETERMINATION
PURSUANT TO COURT REMAND
SUMMARY
On April 6, 1998, the U.S. Court of International Trade (the Court) issued an order remanding to the Department of Commerce (the Department) the final results of the fourth administrative review (covering the period from April 1, 1982 through March 31, 1983) of the antidumping duty order on television receivers, monochrome and color, from Japan. This review covered subject merchandise produced and exported by Sanyo Electric Co., Ltd. and Sanyo Electric Inc. (collectively Sanyo). In its order, the Court instructed that the Department do the following: 1) reconsider its decision to calculate foreign market value (FMV) on the basis of the prices from Sanyo's related home market distributors to unrelated dealers, and to explain further the rationale for this decision; 2) in conjunction with the related party price issue, reconsider its decision to deny Sanyo a level-of-trade (LOT) adjustment; 3) recalculate Sanyo's advertising and sales promotion expense adjustment; and 4) recalculate the adjustment for Sanyo's rebated Japanese commodity taxes. (See Sanyo Electric Co., Ltd. and Sanyo Electric Inc. v. United States, Slip Op. 98-41, No. 87-04-00620 (April 6, 1998) (Sanyo Electric)).
BACKGROUND
On March 20, 1987, the Department published in the Federal Register a notice of final results of antidumping duty administrative review on television receivers, monochrome and color, from Japan. See Television Receivers, Monochrome and Color, from Japan: Final Results of Antidumping Duty Administrative Review, 52 FR 8940 (March 20, 1987) (Final Results). In those final results, Sanyo asserted that the Department erroneously calculated the adjustment for Sanyo's rebated Japanese commodity taxes (see Final Results, Comment No. 25, 52 FR at 8942). Sanyo further argued that in calculating its home market advertising and sales promotion expenses, the Department failed to use the "traditional methodology" (see Final Results, Comment No. 28, 52 FR at 8942-43). Sanyo also claimed that the Department erred in calculating FMV on the basis of the prices from Sanyo's related home market distributors to unrelated dealers, instead of prices from Sanyo to its distributors (see Final Results, Comment No. 31, 52 FR at 8943). Finally, Sanyo asserted that, in conjunction with the Department's FMV calculation methodology, the Department erred in denying Sanyo a LOT adjustment (see Final Results, Comment No. 32, 52 FR at 8943). In the final results, the Department rejected Sanyo's arguments on these issues.
Sanyo challenged the Department's final results of the fourth administrative review on the above four issues in the CIT. On April 6, 1998, the CIT issued an order (Sanyo Electric) remanding these issues to the Department.
In its remand order, the Court instructed the Department to recalculate the adjustment for the rebated Japanese commodity taxes in accordance with 19 U.S.C. section 1677a(d)(1)(C)(1988), (i.e., to increase the United States price by the amount of the rebated or uncollected tax); and to recalculate the amount of home market advertising expenses in accordance with the product-line methodology using the figures originally submitted by Sanyo. The Court also instructed the Department to reconsider its decision to calculate FMV on the basis of the prices from Sanyo's related home market distributors to unrelated dealers, stating that the Department had not adequately explained the reasoning behind its departure from the methodology used in the prior reviews. The Court further instructed that if the Department continued to calculate FMV on this basis, it must explain the rationale underlying its decision. Finally, the Court instructed the Department to reconsider its decision to deny Sanyo a LOT adjustment if the Department continued to calculate FMV on the basis of sales between Sanyo's related distributors and their unrelated dealers, because this adjustment would only be applicable under these circumstances.
On August 17, 1998, we issued draft results for comment; on August 21, 1998, we received comments from Sanyo. We have addressed Sanyo's comments in our discussion of the issues. The Department has prepared these final results of redetermination, discussed below, pursuant to this remand order.
DISCUSSION - FINAL RESULTS OF REMAND
Japanese commodity tax
In its remand order, the Court instructed the Department to recalculate the rebated Japanese commodity taxes paid by Sanyo pursuant to 19 U.S.C. section 1677a(d)(1)(C)(1988), (see Sanyo Electric, at 20, 21). We have recalculated the tax adjustment in accordance with the Court's instructions, (i.e., we removed the adjustment for taxes rebated on U.S. sales from the calculation of net home market price and have added this amount to the U.S. price). (See Memorandum to the File: Final Remand Analysis from J. Dulberger and R. Trentham,
September 4, 1998 (Memorandum to the File)).
Advertising and Sales Promotion Expenses
In response to the Department's request the Court remanded to the Department to recalculate this adjustment for advertising and sales promotion expenses by allocating these expenses in accordance with the product-line methodology using the figures originally submitted by Sanyo. (See Sanyo Electric, at 11-17). Therefore, for these final remand results, we have used the advertising and sales promotion expense figures originally submitted by Sanyo in its July 8, 1983 questionnaire response and we have deducted these amounts from Sanyo's gross home market prices. (See Memorandum to the File at 2).
Foreign Market Value
The Court remanded the issue of FMV to the Department to reconsider its decision to calculate FMV on the basis of the prices from Sanyo's related home market distributors to unrelated dealers, stating that the Department did not explain the reason for its departure from the FMV calculation methodology employed in the first three administrative reviews of this order (see Sanyo Electric, at 5-10).
Through an analysis of the prior three reviews and related cases, as discussed below, the Department has determined that it would be inappropriate to reverse our determination in the final results of review. The rationale underlying our determination in the fourth review reflects the steady progression of Department practice resulting in a clearly established policy. We have applied this rationale to the facts present in the fourth review, and conclude that reversing our position regarding the FMV calculation for Sanyo would be inappropriate and inconsistent with the Department's established policy.
The Department's regulations require the respondent to demonstrate "to the satisfaction of the Secretary," that prices to related parties are "at prices comparable to those at which such or similar merchandise is sold to persons unrelated to the seller." See 19 CFR section 353.22(b)(1987). It has been clearly established that the burden for showing that sales to related parties were made at comparable, arm's-length prices is on the respondent. (See Certain Small Business Telephone Systems and Subassemblies Thereof From Japan; Final Results of Antidumping Duty Administrative Review, 57 FR 4949, 4950 (February 11, 1992)).
The Department's general policy pursuant to 19 CFR section 353.22(b) is that "in the absence of any indication that the unrelated sales are arranged solely to validate the price to related parties, the ITA is within its authority to use such sales as are commercially significant." (See Zenith Radio Corp. v. United States, 606 F. Supp. 695, 700 (CIT 1985) (Zenith Radio). However, where the quantity of unrelated party sales is too small to be considered commercially significant, these sales cannot be considered to provide a meaningful comparison to related party sales, and therefore fail to provide a sufficient basis for the Department's comparability test, (i.e., of whether the sales to the related parties were made at arm's-length prices). In such cases, we use the related parties sales (downstream sales) to the first unrelated party. See Certain Tapered Journal Roller Bearings and Parts Thereof from Italy; Final Determination of Sales at Less-Than-Fair-Value, 49 FR 2278, 2279 (January 19, 1984) (Roller Bearings LTFV); see also Notice of Final Results of Antidumping Administrative Review, and Determination not to Revoke in Part: Roller Chain, other than Bicycle, from Japan, 55 FR 42602, 42608 (October 22, 1990) (Roller Chain 88-89).
The Department's requirement that the quantity of unrelated party sales be commercially significant so as to provide a meaningful basis for comparison to related party sales is intended to prevent the manipulation of sales transactions to the respondent's advantage and to prevent the fabrication of sales. (See Zenith Radio at 700). Over time, it has been the Department's experience that to use a very small number of unrelated party sales in the arm's-length test would not produce reliable results. In particular, the instance of a very small number of unrelated party sales poses problems of accuracy in representing the underlying price situation. As we stated in the Final Results of the second review of this proceeding, "[t]he proper way to validate related party prices is to compare those prices to the prices of commercially significant sales to unrelated parties." See Television Receiving Sets, Monochrome and Color, From Japan; Final Results of Administrative Review of Antidumping Finding, 56 FR 24278 (June 10, 1985). Based on this, the Department has developed the practice of rejecting unrelated/unaffiliated sales if they are not commercially significant and therefore are insufficient to provide a meaningful comparison to related/affiliated party sales. See Final Results of Antidumping Administrative Review, and Determination not to Revoke in Part: Roller Chain, other than Bicycle, from Japan, 62 FR 60472 (November 10, 1997) (Roller Chain 95-96) (Department found unaffiliated sales insufficient); Notice of Final Results of Antidumping Administrative Review, and Determination not to Revoke in Part: Roller Chain, other than Bicycle, from Japan, 61 FR 64328, 64329 (December 4, 1996) (Roller Chain 92-94) (the Department found insufficient unrelated party sales such that comparison to related party sales could not be made); Notice of Final Results of Antidumping Administrative Review, and Determination not to Revoke in Part: Roller Chain, other than Bicycle, from Japan, 62 FR 64322, 64326-27 (December 4, 1996) (Roller Chain 94-95) (the Department found unaffiliated sales insufficient); Certain Stainless Steel Cooking Ware From the Republic of Korea: Preliminary Results of Antidumping Duty Administrative Review, 61 FR 8253 (March 4, 1996) (Stainless Steel Cooking Ware).
The issue of whether unrelated party sales are sufficient to provide a meaningful basis for an arm's-length comparison is especially crucial where the entire universe for comparison is a single sale of one unit to an unrelated party. In this situation, the potential for manipulation by a respondent is particularly significant.
In the first, second, and third reviews, the volume of subject merchandise sold to unrelated parties were [ * * * * ], [ * * * * ], and [ * * * * ] units, respectively. However, in those reviews, nothing on the record indicated that the sales in question did not provide a meaningful comparison to related party sales. Therefore, we simply compared the prices and where the sales to related parties were priced lower than sales to unrelated parties, we used the unrelated party sales in determining FMV.
In the fourth review in this proceeding, we examined our policy with regard to the sufficiency threshold and determined that Sanyo's single unrelated party sale of one unit which represented less than 1 percent of home market sales was not commercially significant and therefore was too small to provide a meaningful comparison to related party sales. Consequently, we did not use Sanyo's single unrelated sale in the fourth review. This change in our practice with regard to the threshold for sufficiency of unrelated party sales has been expressed in subsequent cases. See Roller Chain 95-96; Roller Chain 92-94; Roller Chain 94-95; and Stainless Steel Cooking Ware. In those cases, we applied the Department's practice of requiring the respondent to demonstrate that the volume sold to unrelated parties provides a meaningful basis for comparison.
After carefully revisiting the relevant facts of the first through fourth reviews, and having demonstrated above the rationale for our original determination in the fourth review, we have determined that it would be inappropriate to reverse that determination because it is based on the Department's changed practice developed (but not articulated clearly) between the second and fourth reviews. Consequently, consistent with the above-established practice, we will continue to calculate FMV using home market sales made by Sanyo's related distributors to unrelated dealers.
Level of Trade Adjustment
The Court remanded the issue of a LOT adjustment for reconsideration if we continued to use the sales from Sanyo's related distributors to unrelated dealers for FMV, because this adjustment would only be applicable under these circumstances. (See Sanyo Electric, at 10, 11). Because we have determined to continue to calculate FMV on the basis of the prices from Sanyo's related home market distributors to unrelated dealers, (see Foreign Market Value, above), we must revisit the issue of a LOT adjustment.
In accordance with the Department's regulations, any party that claims an adjustment to FMV must establish the basis for that claim (see 19 CFR 353.19 (1987)). The Department has applied this regulation by requiring that the respondent request that the adjustment be made, indicate the adjustment amount, and provide documented support for the amount of the adjustment sought. With respect to LOT, our practice has been to require a respondent to (1) request a LOT adjustment, (2) demonstrate that distinct, discernable levels of trade exist by describing the functions performed at each LOT, and (3) quantify the claimed adjustment, normally by demonstrating that it incurred differing selling expenses on sales to different levels of trade. See 19 CFR 353.19; Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From the Federal Republic of Germany: Final Results of Antidumping Duty Administrative Review, 56 FR at 31692, 31710, July 11, 1991 ("The Department's practice has established that it is the respondents' burden to request such a {LOT} adjustment, to demonstrate that such an adjustment is justified, and to appropriately quantify the adjustment"); Television Receivers, Monochrome and Color, from Japan: Final Results of Antidumping Duty Administrative Review, 54 FR 35517 (August 28, 1989) (Television Receivers 1989), (Comment 21); and Color Television Receivers from Korea; Notice of Final Results of Antidumping Administrative Review, 51 FR 41365 (November 14, 1986) (CTVs 84-85), (Comment 102).
Sanyo first requested a LOT adjustment in its comments to the Final Results, (see Final Results at 8943; Sanyo Brief at 19), where it argued that if the Department based FMV on the prices from the related distributors to unrelated dealers, (i.e., the first unrelated customer), then the Department must adjust the prices to the dealers by allowing a LOT adjustment. Sanyo based its claim for a LOT adjustment on its assertion that its sales to United States distributors were made at one LOT while the home market sales to which those sales were matched, sales from Sanyo's related distributors to unrelated dealers, were made at a different LOT. (See Sanyo Brief at 19, 20; see also Sanyo Document Appendix at 62). However, Sanyo did not describe the functions performed by the distributors at each LOT nor did it provide any explanation regarding different functions that might be performed at each LOT in its response to the Department's original questionnaire. Consequently, we find that Sanyo did not demonstrate that distinct, discernable levels of trade exist between the sales in the United States and the home market sales from Sanyo's related distributors to unrelated dealers.
The Department's established practice is that in order to quantify a LOT adjustment, a respondent normally must demonstrate that it incurred different indirect selling expenses for sales at one LOT in the comparison market than it incurred on sales at a different LOT in the U.S. market, and that these differences in indirect selling expenses are attributable to the differences in LOT. (See Sugiyama Chain Co., Ltd. v. United States, Slip Op. 95-32 (March 3, 1995) (Sugiyama Chain); Phosphoric Acid from Israel: Final Results of Antidumping Administrative Review, 56 FR 33248, 33249 (July 19, 1991); and Notice of Final Results of Antidumping Administrative Review: Mirrors in Stock Sheet from the United Kingdom, 51 FR 43411, 43413-14 (December 2, 1986).
Even if we were to accept Sanyo's argument that a LOT adjustment is warranted, Sanyo has not provided us with the expense data necessary to make the LOT adjustment to sales made by the distributors. In particular, we determined in the Final Results that Sanyo had not demonstrated what portion of the distributors' selling expenses were solely related to their sales of comparison models. (See Final Results, 52 FR at 8943). We accordingly disallowed these expenses as differences in LOT. Although in its brief before the CIT, Sanyo argued that it had submitted the required data (see Sanyo Brief at 20), the document referred to in that brief does not demonstrate what portion of the distributors' selling expenses were solely related to their sales of comparison models (see Sanyo Document Appendix at 31, footnote 8, referring to Exhibit 8 (Confidential)), and therefore does not contain the data required. Therefore, we lack the required expense data with which to make a LOT adjustment to sales made by Sanyo's distributors.
Given that Sanyo did not demonstrate 1) that distinct, discernable levels of trade exist, and 2) what portion of the reported selling expenses were solely related to the distributors' sales, we have not made a LOT adjustment for Sanyo in these final remand results.(1)
ANALYSIS OF COMMENTS RECEIVED
Home Market Advertising
Comment 1: Sanyo states that the Department's amended calculations actually reflect the CIT's instructions with respect to the calculation of the commodity tax adjustment and the home market advertising and sales promotion expense adjustments. Sanyo notes, however, that the Department failed to include the recalculation of advertising in its discussion of changes made in the Memorandum to the File regarding "Corrections Made for Advertising and Sales Promotion Expenses."
Department Position: We agree and have included the recalculation of advertising in the Memorandum to the File.
Foreign Market Value and Arm's Length Test
Comment 2: Sanyo states that the Department erred in refusing to calculate FMV on the basis of Sanyo's sales prices to its distributors. According to Sanyo, the Department should reconsider and reverse its position. Sanyo claims that the Department's Draft Redetermination is internally inconsistent because the Department cannot reasonably conclude that Sanyo's unrelated party sales did not provide "a meaningful comparison to related party sales" for the fourth review, after concluding that the comparison was meaningful for review periods one through three. Specifically, the number of units sold during the fourth administrative review and the first and second administrative reviews are identical or nearly so.
In addition, Sanyo argues that the third and fourth administrative review were conducted simultaneously and that the administrative records for these reviews comprise one administrative record. Consequently, Sanyo argues, these periods must be considered as one administrative review, and the [ * * * * ] units of unrelated party sales made during the 18 months dating from the middle (October 1, 1981 - March 31, 1982) of the third POR (April 1, 1981 - March 31, 1982) until the end of the fourth period of review (April 1, 1982 - March 31, 1983) comprise "meaningful" comparators for the related party sales during the same period.
Department Position: For the fourth administrative review, we changed our practice with respect to the methodology for testing the arm's-length nature of related party sales. This change amended the test for related party sales to no longer permit the use of a single sale to an unrelated party to demonstrate the arm's-length nature of sales to related entities where that single sale represented such an insignificant portion of home market sales as not to be meaningful. While the Department permitted such single sale tests in the prior administrative reviews of this order, the final results for the fourth administrative review signaled a change in this practice.
Sanyo's assertion that the circumstances of the first and second administrative reviews, with [ * * * * ] units and [ * * * * ] unit respectively, are nearly identical with those of the fourth administrative review and, thus, requires the same result, misses the point. The Department changed its practice for the fourth administrative review and has explained the reasons for that change in these final results of redetermination. See Foreign Market Value Section above. This change resulted in the Department determining whether the number of units or unrelated party sales during a period are sufficient for comparison to sales to related parties on a case-by-case basis when applying the arm's-length test. Consequently, any comparison between and among the number of units sold or the number of sales made in prior reviews is irrelevant to the Final Results for the fourth review given the Department's change in practice.
Sanyo's argument that the Department analyzed the third and fourth administrative reviews simultaneously based on facts contained in one combined administrative record, and, therefore, the Department must consider the sales made during the 18-month period mischaracterizes the final results made for these periods and the administrative record covering the relevant periods. Although the Department maintained one administrative record for both the third and fourth administrative reviews, there is no evidence in the Federal Register notices announcing the preliminary and final results for each of these periods or in the administrative record itself which indicates that the Department considered information submitted in the third administrative review in making its determinations for the fourth administrative review or vice versa. Indeed, the Department issued separate determinations for the third and fourth administrative reviews with each notice indicating the bases for the Secretary's decisions for the relevant period reviewed. See, 52 FR at 8947; Television Receivers, Monochrome and Color, From Japan: Preliminary Results of Antidumping Duty Administrative Review, 51 FR 40474, 40475 (November 7, 1986).
Comment 3: Sanyo maintains that the Department's decision is flawed because the Department's Draft Redetermination ignores the fact that the third and fourth reviews were examined simultaneously resulting in a single administrative record for the period 8/1/81-7/31/83. Sanyo states that, during this period, its sales prices to related and unrelated distributors were identical and [ * * * * ] units were sold to unrelated companies. According to Sanyo, this is a total which the Department has agreed is sufficient for a meaningful comparison. Thus, Sanyo concludes that the Department is required to consider all of the evidence in the administrative record, including evidence from prior reviews which are intertwined with the relevant period, and cites Floral Trade Council v. United States, 709 F.Supp. 229 (CIT 1989) as support for this proposition.
Department Position: As discussed in our response to Comment 1, Sanyo's understanding of the administrative record and the factual bases for the Secretary's decisions is incorrect. The Department's final results for the fourth administrative review must be supported by substantial evidence in the record, and the administrative record is to be comprised of "all information presented to or obtained by the Secretary in the course of the proceeding." 19 CFR 353.25(a) (1987). This information is that supplied by the parties for the Secretary's consideration in making determinations for the relevant period under review. Section 353.53a of the Department's regulations in describing the "period under review" states: "an administrative review ... normally will cover, as appropriate, entries, exports, or sales of merchandise during the 12 months immediately preceding the most recent anniversary month," or a one year period beginning with the anniversary month. 19 CFR 353a(b) (1987). There is no evidence in the administrative record indicating that the Department treated the sales associated with the third and fourth administrative review periods as other than sales within their respective periods of review. Both the Federal Register notices for the preliminary and final results clearly demonstrate that separate margins were calculated for Sanyo's sales in each of the two relevant "periods under review." Consequently, Sanyo's margins for the third and fourth administrative reviews respectively must be based on the information submitted by Sanyo for that relevant period under review notwithstanding the single administrative record.
Sanyo's citation to Floral Trade Council for its proposition that the Department must consider the "entire" administrative record in making determinations for the fourth administrative review is unavailing. In Floral Trade Council, the CIT held that:
[T]he record is not limited to documents "relied on or used" by the agency. [citation omitted.] That is, the agency cannot ignore relevant information which is before it, and the reviewing court must be in a position to determine if it had done so. That is not to say that all documents found at the agency are before it for purposes of the determination to be reviewed, but rather, that those documents at the agency which become sufficiently intertwined with the relevant inquiry are part of the record, no matter how or when they arrived at the agency.
709 F.Supp. at 229 (emphasis added). Sanyo asserts that the record information submitted for the third administrative review became so "intertwined" with that of the fourth, that all information on the record had to be considered for the final results of the fourth administrative review. Sanyo is wrong.
First, the "relevant inquiry" here is the treatment of related party sales in the fourth administrative review. The related party sales submitted for the third administrative review were addressed in the analysis for that review. Similarly, sales from the fourth administrative review were addressed in the analysis for the fourth administrative review's results, both preliminary and final. There was no "intertwining" of the sales information for determinations made for each relevant review period and separate margins were calculated for each period based on the sales from that period. In addition, a respondent may not rely on data submitted in prior reviews to support a claimed adjustment in a current review. Certain Welded Carbon Steel Pipe and Tube Products from Turkey, 55 FR 42230 (October 18, 1990) (Comment 1). Thus, Sanyo's reliance on sales data submitted for the third administrative review is not relevant to any demonstration of the arm's-length nature of sales in the fourth administrative review,
Second, Sanyo fails to address the essential factual finding of the CIT's holding in Floral Trade Counsel. The CIT found that "the agency expressly incorporated [the] information into the proceeding at issue" and that, as a consequence of this incorporation, "the decision at issue [could not] be reviewed properly" without the contested information. 709 F.Supp. at 230. The Department made no express statements, either in the administrative record or in the final results, indicating that it had used information, submitted for consideration in the third administrative review, in the analysis of Sanyo's related party sales in the fourth administrative review. Absent such a statement, there is no requirement, pursuant to Floral Trade Council, that the Department must consider Sanyo's unrelated sales from the third administrative review in its analysis for the fourth administrative review.
Comment 4: Sanyo contends that the Department may not retroactively reverse its policy. Further, although Sanyo notes that the Department did discuss the issue in subsequent reviews, it submits that the Department cannot reasonably claim that a position first articulated in 1996-97 should be applied retroactively to a determination issued a decade earlier. Moreover, Sanyo claims that a review of two of the administrative determinations, Certain Tapered Roller Bearings and Parts Thereof from Italy, 49 FR 2278 (January 19, 1984) ( TRBs) and Roller Chain 88-89, cited by the Department, do not support the Department's stated position.
Department Position: As stated earlier in the FMV section, the Department changed its practice with respect to criteria for acceptance of related party prices. The Department's determination not to use Sanyo's related party sales was remanded by the CIT for further explanation. Slip Op. 98-41 at 9-10. The Department has explained its change of practice within the context of the remand redetermination for the fourth administrative review and, consequently, that redetermination is not a retroactive application of a later developed practice. Rather, the remand redetermination merely explains the Department's determination not to use Sanyo's related party sales in the fourth administrative review.
The TRBs determination was not cited for the proposition that it contained a factual scenario identical to the instant proceeding as suggested by Sanyo. Rather TRBs was cited to indicate that the Department recognized a concern as early as 1984, about using sales to related parties as the basis for FMV where a party could not demonstrate, to the Department's satisfaction, that these sales were at arm's-length prices. The TRBs final results illustrates the Department's cautiousness concerning methods used to determine that related party sales were at arm's-length prices. In TRBs, the Department rejected several alternative proposals by a respondent to demonstrate that the related party sales were at arm's-length prices because it determined that neither of the alternatives provided "meaningful" measures for determining the arm's-length nature of the transactions. 49 FR at 2279. While this administrative review does not indicate how few unrelated party sales are necessary for the arm's-length test, it was cited as an indicator that the Department was cautious about the potential dangers in using related party sales even where possible alternatives to the Department's standard test were suggested.
The Roller Chain 88-89 determination also was not cited for the proposition that it contained a factual scenario identical to the instant proceeding as suggested by Sanyo. Rather Roller Chain was cited to indicate that the Department recognized a danger in using a significant number of the home market sales made to related parties as the basis for FMV. The Roller Chain final results makes clear that when a party cannot demonstrate that its related party transactions were at arm's-length and a substantial percentage of home market sales were made to a related party, the Department must rely on the sales to the first unrelated purchasers in calculating FMV. 55 FR at 42608. While the case does not indicate how few unrelated party sales are necessary for the arm's-length test, it was a reasonably contemporaneous (to the instant proceeding) indicator of the Department's concern about the arm's-length test and use of related party sales as an ongoing issue.
Comment 5: Sanyo asserts that the Department should reconsider its position because the Draft Redetermination ignores judicial precedent previously cited by Sanyo and ignores both the CIT precedents in Cinsa, S.A. v. United States. See 966 F.Supp 1230 (April 4, 1997) and 976 F.Supp. 1034 (September 16 1997) (collectively, CINSA). Sanyo contends that, in these decisions, the CIT held that once a respondent supplied the same information as had been accepted by the Department in three previous administrative reviews concerning the arm's-length nature of related party transfer prices, the burden then shifted to the Department to establish that the transfer prices were not at arm's-length. According to Sanyo, it has provided the Department with the identical proof as to the bona fides of its related party prices in the fourth administrative review as it had provided in prior reviews. It argues that the absence of evidence contradicting the evidence submitted by Sanyo, the Department cannot reject Sanyo's prices at this time.
Department Position: As explained in the Draft Redetermination, the Department had changed its practice regarding related party pricing by examining what volume is commercially significant and had determined that Sanyo's single unrelated party sale of one unit was not commercially significant and therefore was too small to provide a meaningful comparison to related party sales. Unlike the CINSA cases, the Department was not shifting the burden of proof on an issue, rather for the first time, the Department was focusing on a different aspect of the issue, i.e., the threshold of sufficiency of volume of sales Therefore, the holdings of the CINSA cases are not precisely on point. In CINSA, the issue was one of burden of proof where a respondent provided the same type of information as had been provided in earlier periods, but was rejected in the administrative review which gave rise to the CINSA cases. There was no change in the Department's practice at issue in CINSA.
In the instant proceeding, it is immaterial whether Sanyo provided the same information in the fourth administrative review as it had in the prior reviews because the Department was now examining an additional criteria with regard to testing the arm's-length nature of related party sales. Given that the criteria for the Department's arm's-length test had changed, the type of data that Sanyo had provided in earlier periods was insufficient pursuant to the new practice to provide "meaningful" comparisons for the arm's-length test. Thus, the holdings in the CINSA cases are not applicable here.
Level of Trade Adjustment
Comment 6: Sanyo contends that the Department erred in refusing to grant a LOT adjustment because, contrary to the Department's contention, it has provided the Department with the information necessary to establish this adjustment. According to Sanyo, actual costs of specific selling expenses need not be submitted to quantify the adjustment, since as discussed by the Federal Circuit in NEC Home Electronics Corp., v United States, the Department is required to "estimate" the LOT adjustment "in order to obtain an 'apples to apples' comparison of sales in the home market with those in the United States." Further, Sanyo claims that it has provided all information requested by the Department during its analysis of LOT, which is adequate to calculate the LOT adjustment.
Department Position: Sanyo's entire claim to a LOT adjustment in this proceeding consists of its assertion that it has "provided the DOC with the information necessary to establish the adjustment." Sanyo comments at 8. "[I]t is not the responsibility of the Department to determine and quantify an adjustment where the respondent has not even attempted to prove an adjustment is warranted." Final Determination of Sales at Less Than Fair Value: Antifriction Bearings (Other Than Tapered Roller Bearings) from the Federal Republic of Germany, 54 FR 18992, 19086 (May 3, 1989) (Appendix -1, Comment 14).
For these remand results, the Department carefully outlined its two part test for granting a LOT adjustment. See Level of Trade Adjustment Section above. Under this test, as an initial matter, a party must establish that different levels of trade exist. Sanyo has made no presentation, cited no record evidence, and made no arguments in its comments concerning its entitlement to a LOT adjustment because different levels of trade exist.
In addition, the second part of the Department's test to determine if a LOT adjustment is warranted requires that the requestor quantify the differences between the levels of trade. Other than its assertions that it had provided the Department with the data necessary to make a LOT adjustment, Sanyo has not pointed to such information in the record in response to the Draft Redetermination. It is the respondent's burden to demonstrate its entitlement to any claimed adjustment. See e.g., Television Receivers, Monochrome and Color, From Japan, 54 FR 35517, 35522-23 (August 28, 1989) (Comment 21). Sanyo has neither demonstrated that such information exists through citations to the administrative record nor has it suggested a calculation methodology using the alleged data.
Finally, Sanyo's citation to NEC Home Electronics as support for its claim that it is entitled to a level of trade adjustment is misplaced because, in that case, the respondent provided the Department with record evidence and offered methodologies for quantifying the differences in levels of trade. 54 F.3d at 745. For these remand results, Sanyo has not offered citations to record evidence that suggested a methodology for computing a level of trade adjustment.
Consequently, we have not made a level of trade adjustment for these final results.
FINAL RESULTS OF REMAND
As a result of our analysis, we have determined that the weighted-average margin for the period April 1, 1982 through March 31, 1983, (the fourth review) is as follows:
Margin
Company (Percent)
Sanyo Electric Co., Ltd. 1.10
This redetermination is in accordance with the order of the Court in Sanyo Electric. If these results are affirmed by this Court, we will publish a Federal Register notice giving effect to this determination.
___________________________
(Date)
1. In the Final Results, we allowed Sanyo an exporter's sales price (ESP) offset adjustment, capped by the sum of a portion of the distributors' selling expenses plus Sanyo's comparable indirect expenses, under 19 CFR 353.56(b)(2). (See Final Results at 8943).