19 U.S.C. 1581(c)-JUDICIAL REVIEW OF ANTIDUMPING & COUNTERVAILING DUTY DETERMINATIONS ISSUED BY THE DEPARTMENT OF COMMERCE

Georgetown Journal of International Law, Fall 2007 by Brightbill, Timothy C, Kwon, Jennifer, Fogarty, Matthew W

In Elkem Metals Co. v. United States, the CAFC addressed the issue of whether Commerce is statutorily obligated to include internal taxes in its calculations of constructed value if the tax is not refunded or remitted.39 Upon reviewing the plain language of the governing statutes, and determining that Chevron deference was appropriate in this case, the CAFC held that Commerce, although not prohibited from doing so, is not required to include in its calculations of constructed value of subject merchandise any VATs paid by a producer that are not refunded or remitted.40

The internal taxes at issue in Elkem Metals Co. were two value-added taxes imposed by the Brazilian Government on certain goods and services (collectively, "VAT").41 Under the Brazilian VAT system, Rima Industrial S/A ("Rima"), a foreign producer of silicon metal, incurred VAT on its input purchases but was not required to pay the VAT immediately.42 Instead, Rima was permitted to use the VAT paid by its domestic customers on sales of finished merchandise to offset the VAT it incurred from its input purchases at the end of each month.43 If the VAT paid by Rima's domestic customers exceeded the VAT incurred by Rima, Rima was required to remit any excess VAT payments it received to the Brazilian Government.44 If the VAT incurred by Rima exceeded that paid by its domestic customers, although Rima was still required to pay the difference to the Brazilian Government, Rima would also receive a VAT credit offset for the difference.45 Under Brazilian law, companies may use their VAT credits to purchase goods or materials from other companies.46

In the underlying administrative review of the AD order on silicon metal from Brazil, Commerce excluded the VAT on Rima's inputs from its constructed value calculations, finding that Rima had recovered in full the amount that it had paid on the VAT incurred from input purchases.47 Using this constructed value, Commerce calculated a de minimis dumping margin for Rima.48

On appeal, the U.S. Government moved for a remand so that the constructed value could be recalculated to include the VAT incurred from Rima's input purchases, which the CIT granted.49 On remand, however, Commerce again determined that Rima had fully recovered all of the VAT incurred on input purchases related to U.S. sales, based on the VAT paid by Rima's domestic customers and the VAT credits Rima used to make purchases.50 Accordingly, Commerce's remand results continued to exclude the VAT from its calculations of Rima's constructed value.51

Upon reviewing Commerce's remand results, the CIT held that Commerce is required to include VAT paid for input purchases in its constructed value calculations as a matter of law, as the VAT was neither remitted nor refunded.52 The CIT then remanded the case again, directing Commerce to include the VAT paid by Rima in its calculations of constructed value, and to adjust the dumping margin accordingly.53

As instructed by the CIT, Commerce recalculated the constructed value by including the VAT paid by Rima.54 The CIT sustained Commerce's second decision on remand.55 Elkem, a domestic producer of the subject merchandise, then appealed to the CAFC challenging Commerce's determination that Rima's questionnaire responses provided a proper accounting of the VAT on input purchases.56 Both the Government and Rima cross-appealed, challenging the CIT's holding that Commerce is statutorily required to include VAT in the calculations of Rima's constructed value.57