Page 1 of 3 Steel Service Center Institute Comments on ‘Reseller Liquidation’ – Item No. I November 13, 1998 I. The DOC’s Current Practice Is Equitable, Easy to Administer, and Supported by Statutory Authority and Judicial Precedent Comment: We are aware of four (4) potential methods for liquidating a reseller’s entries when an Administrative Review is requested for the actual producer of the subject merchandise (and there was no express request for a reseller review and the producer does not know that certain merchandise ultimately would be exported to the U.S. at time of its sale to the reseller). 1. Liquidate the entries based upon the producer’s results; 2. Liquidate the entries at the cash deposit rate, regardless of the results of the review; 3. Liquidate the entries at the “all others” rate, regardless of the initial cash deposit rate or the results of the review; or 4. Liquidate the entries based on a reseller specific rate, after commencing and conducting a reseller specific review. As discussed in its “Proposed Clarification,” the DOC’s current practice with respect to resellers is to apply the first of these methods; that is, to liquidate the reseller’s entries at the producer’s assessment rate, in those instances in which “there is no company-specific reseller cash deposit rate and the importer identifies the producer.” See, e.g., Message No. 4110112 of April 20, 1994 (“If the unrelated exporter performs no further processing but simply resells the flat-rolled steel product which it purchased from the manufacturer, the deposit required will be equal to that of the manufacturer, or the ‘all others’ rate if the manufacturer has no rate assigned specifically to it.”). The DOC proposes to change this practice in one critical respect. That is, in those cases in which the DOC conducts an administrative review for a designated producer, but does not conduct a company specific review for a designated reseller, and during the course of the review the DOC determines that “the producer did not know that the merchandise it sold to the reseller was destined for the United States,” the DOC proposes to instruct the Customs Service to liquidate the reseller’s shipments at the “all others” rate. In most instances, the DOC’s proposed rate will differ from the assessment rate the Department determines for the producer and from the rate at which the subject merchandise was entered (i.e, the cash deposit rate applicable to entries for which no review is requested). Page 2 of 3 The reasons why the DOC should continue its current practice are readily apparent. First, the DOC’s current practice constitutes a reasonable construction of applicable law, which has served the interests of all concerned parties over time. Thus, whenever either a Petitioner or a Respondent requests an Annual Review of an AD Order, all parties recognize that the DOC’s Final Determination with respect to the named foreign manufacturer will apply to all merchandise produced by that manufacturer, and shipped to the United States, either directly or through a reseller. This certainty as to result is of critical importance to both Respondents and Petitioners alike. All interested parties – Petitioners, Foreign Respondents, resellers and importers – are aware of the rules of the game and the results of the proceeding – results which do not necessarily favor any particular interest. Moreover, current practice allows either a Petitioner or a reseller, who has reason to doubt the potential equity of the normal result (i.e., that the manufacturer’s rate will apply to all shipments, either direct or by resellers, regardless of the manufacturer's knowledge) to request a reseller specific review at the outset of an Annual Review proceeding. Thus, a Petitioner whose business is purportedly being adversely affected by the pricing practices of a particular reseller can expressly request, pursuant to Section 351.213(b)(1) of the DOC Regulations, that the DOC conduct an exporter specific review, while a reseller who believes that it qualifies for its own rate, and who is not satisfied with the manufacturer’s rate, can request its own review pursuant to Section 351.213(b)(2). During the course of these reviews, which are only requested where warranted, the DOC can readily determine, at the outset of the review, if the reseller should be entitled to its own rate. If not, the review can be immediately terminated, thereby saving the scarce resources of all concerned. This exception to the DOC’s general practice constitutes an important safeguard against unfair treatment of individual resellers, where appropriate. The current practice also is easy to administer, as interested petitioners and foreign resellers are aware of the “rules of the game,” and will not request unnecessary and costly annual reviews when they are satisfied with the manufacturers’ rates. Finally, the DOC’s current policy conforms to law, as the DOC has the discretion to assess duty on a reseller’s sales at the rate applicable to a producer whose shipments are examined during an Annual Review. Statutory authority for this result is found in Section 777A(c)(2) of the Tariff Act of 1930, as amended, which authorizes the DOC, in appropriate circumstances, to determine the weighted average margin for noninvestigated exporters based on either a sample of exporters or producers or on the results of “exporters and producers accounting for the largest volume of the subject merchandise from the exporting country that can be reasonably determined.” See, e.g., Koyo Seiko Co., Ltd. v. United States, 768 F. Supp 832, 837 (Ct. Int’l Trade 1991). Page 3 of 3 That the facts and circumstances at issue herein constitute an appropriate forum for the DOC to rely on Section 777A(c)(2) to calculate and assess the reseller’s margins is underscored by the fact that the competing parties to a review – Petitioners and Respondents – will have agreed to this result prior to the commencement of the administrative proceeding, by not affirmatively requesting an exporter specific review. Thus, both Petitioners and Respondents, in effect, will have waived their rights to challenge the DOC’s decision to apply the manufacturer’s margins to the reseller’s sales. In fact, the DOC’s current practice has been implicitly approved by the Court of International Trade in ABC International Traders, Inc. v. United States, 19 CIT 787 (CIT 1995), a decision which the DOC improperly cites as justification for its proposed change in policy. Contrary to the DOC’s suggestion, the ABC International Traders Court did not conclude that the DOC could assess duty on a reseller’s shipments at an “all others” rate as determined in an initial investigation. Rather, after noting that “ordinarily a final determination as to a manufacturer’s dumping margin for particular merchandise applies to anyone who imports such merchandise,” the Court expressly held that the proper rate to be applied to the reseller in question was “the manufacturers rates as determined on review, because no reseller rates exist.” 19 CIT at 790. Accordingly, for all of the reasons discussed above, the DOC should adhere to its current practice.