HQ 230112 - Continued Dumping and Subsidy Offset Act of 2000; 19 U.S.C. §1675c(b)(4); qualifying expenditures; honey - United States International Trade Commision Rulings

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HQ 230112

December 16, 2003

LIQ-4-01;LIQ-11 RR:CR:DR
230112 LLB

Category: LIQUIDATION

Collier Shannon Scott, PLLC
Attn: Michael J. Coursey, Esq.
Washington Harbour, Suite 400
3050 K Street, NW
Washington, DC 20007

RE: Continued Dumping and Subsidy Offset Act of 2000; 19 U.S.C. §1675c(b)(4); qualifying expenditures; honey

Dear Mr. Coursey:

This is in response to your September 8, 2003, letter written on behalf of your clients the American Honey Producers Association and the Sioux Honey Association. In your letter you request a ruling regarding the scope of qualifying expenditures under the Continued Dumping and Subsidy Offset Act of 2000 (CDSOA), relating to the production and packing of foreign and domestic honey. Our decision follows.

Facts

The subject of this ruling are distributions made under the CDSOA from antidumping and countervailing duties collected pursuant to two antidumping and one countervailing duty orders for honey sold at less than fair market value.

Notice of Antidumping Duty Order; Honey from Argentina, 66 Fed. Reg. 63,672 (Dec. 10, 2001); Notice of Countervailing Duty Order: Honey From Argentina, 66 Fed. Reg. 63,673 (Dec. 10, 2001; Notice of Amended Final Determination of Sales at Less Than Fair Value and Antidumping Duty Order: Honey from the Peoples Republic of China, 66 Fed. Reg. 63, 670 (Dec. 10, 2001). Contrary to the petitioners’ argument that honey packers are not domestic producers, the International Trade Commission (ITC), during its injury investigation, found the domestic honey industry to be composed of not only beekeepers, which maintain colonies of bees and gather honey produced by the bees, and beekeeper-packers, which engage in both beekeeping activities as well as the processing, These processes included blending, creaming, and flavoring the honey. See Honey from Argentina and China, Investigation Nos. 701-TA-402 & 731-TA-892 & 893(Final), USITC Pub. at 7, I-8 to I-9 (Nov. 2001). packing, and marketing of honey, but also of independent packers, which are not engaged in beekeeping operations, but rather purchase raw honey from domestic and foreign producers and process, package and market that honey. See Honey from Argentina and China, Investigation Nos. 701-TA-402 and 731-TA-892 and 893(Final), USITC Pub. at 6-7, I-7 to I-9, and III-1 to III-2 (Nov. 2001).

The requestors of this ruling, the American Honey Producers Association and the Sioux Honey Association, are beekeepers and beekeeper-packers, respectively and were also petitioners in the antidumping and countervailing proceedings. They stipulate that there are two companies on the Fiscal Year 2003 list of eligible claimants under the CDSOA 68 Fed. Reg. 41,597 (July 14, 2003). that engage in the processing and packing of honey, e.g. independent packers, and that these companies process and pack honey purchased from both foreign or domestic producers. You request that this office issue a ruling holding that the independent packers may not include as qualifying expenditures in their CDSOA claims, funds they have expended in the acquisition of domestic or foreign honey which is subject to further processing, packing or repacking. Further, you request a ruling holding that independent packers’ claims for distribution may only include in their qualifying expenditures, expenses incurred in processing and packing domestic honey.

Issues

1. Whether domestic honey packers may claim, as a qualifying expenditure under 19 C.F.R. § 159.61(c), money they have expended acquiring honey, which the packers subsequently subject to further processing or repacking

2. If so, whether the domestic honey packer’s claim for qualifying expenditures may be limited to the processing and packing of domestic honey

Law and Analysis

Issue 1

Pursuant to 19 U.S.C. § 1675c(a), “[d]uties assessed pursuant to a countervailing duty order; an antidumping duty order; or a finding under the Antidumping Act of 1921 shall be distributed on an annual basis under this section to the affected domestic producers for qualifying expenditures. . .” Under 19 U.S.C. § 1675c(b)(4), the term “qualifying expenditure” means:
an expenditure incurred after the issuance of the antidumping duty finding or order or countervailing duty order in any of the following categories:

(A) Manufacturing facilities.
(B) Equipment.
(C) Research and Development.
(D) Personnel training.
(E) Acquisition of Technology.
(F) Health care benefits to employees paid for by the employer. (G) Pension benefits to employees paid for by the employer (H) Environmental equipment, training, or technology (I) Acquisition of raw materials and other inputs (J) Working capital or other funds needed to maintain production

The regulations promulgated under the authority of 19 U.S.C. § 1675c(b)(4), list the same categories, and basically track the language of the statute. In addition, the regulations require that the “expenditures be related to the production of the same product that is the subject of the related order or finding with the exception of expenses incurred by associations that relate to a specific case.” 19 C.F.R. § 159.61(c). This language was added to prevent companies that manufactured multiple products to claim all their expenditures on facilities and equipment, even if those expenses had little or no connection with the manufacture of the particular product involved in the antidumping or countervailing order or finding. See Distribution of Continued Dumping and Subsidy Offset to Affected Domestic Producers, Final Rule, 66 Fed. Reg. 48546 (Sept. 21 2001).

The product covered by the order is “natural honey, artificial honey containing more than 50 percent natural honey by weight, preparations of natural honey containing more than 50 percent natural honey by weight, and flavored honey” and “includes all grades and colors of honey whether in liquid, creamed, comb, cut comb, or chunk form, and whether packaged for retail or bulk form.” 66 Fed . Reg. 63670, 63672. Because honey is a raw material or input for “artificial honey containing more than 50 percent natural honey by weight, [and] preparation of natural honey contain more than 50 percent natural honey by weight, and flavored honey,” based on the factual scenario you present, the packers may be able to claim the domestic and imported honey they purchase as a qualifying expenditure under 19 U.S.C. § 1675c(b)(4)(I),-- “[a]cquisition of raw materials or other inputs.” We note that the plain language of 1675c(b)(4) does not distinguish between a domestic or foreign expenditure, e.g. the statute does not require that an acquisition under 1675c(b)(4)(I), be of domestic raw materials or other inputs. You argue that allowing beekeepers to claim expenses incurred in “producing” the honey and allowing packers to claim expenses in the purchase of that honey which is processed and packed amounts to a double-counting of expenditures. In essence, you argue that since the packers do not “produce” the honey, they should not be able to claim the honey has a qualifying expenditure when they further process or pack the honey.

First, the plain words of the statute provide for the acquisition of raw material and other inputs as a qualifying expense. Second, the prerequisite to filing a claim under the CDSOA, and thereby claiming qualifying expenditures, is establishing that the company is an affected domestic producer. The term “affected domestic producer” means:
any manufacturer, producer, farmer, rancher, or worker representative (including associations of such persons) that— (A) was a petitioner or interested party in support of the petition with respect to which an antidumping duty order, a finding under the Antidumping Act of 1921, or a countervailing duty order has been entered, and (B) remains in operation.
Companies, businesses, or persons that have ceased the production of the product covered by the order or finding or who have been acquired by a company or business that is related to a company that opposed the investigation shall not be an affected domestic producer.

19 U.S.C. § 1675c(b)(1). See also, 19 C.F.R. § 159.61(b). Thus, in order to file a claim a company must, among other things, continue to produce the product covered by the order.

The domestic industry found by the ITC for purposes of determining standing included both beekeepers and packers and the inputs included for that industry included several categories of honey both as an input and a product. Thus, packers are producers of honey within the meaning of the antidumping order and therefore, may claim as a qualifying expenditure, the honey they acquire to make creamed, colored, and flavored honeys.

Issue 2

You also argue that the packer’s qualifying expenditures should be limited to those funds expended on the processing and packing of domestic honey. “The first step in interpreting a statute is to examine the text of the statute.” United States v. Alvarez-Sanchez, 311 U.S. 350, 356 (1994). “Where the content of the statute is clear and unambiguous, that language must ordinarily be regarded as conclusive.” Norfolk and Western Railway, Co. v. United States, 869 F. Supp. 974, 979(Ct. Int’l Trade 1994)(internal citation and quotation omitted). “When the text of a statute is ambiguous, the statute must be interpreted to conform to the goals and purposes Congress intended the statute to address.” Norfolk and Western Railway, 869 F. Supp. at 979 (internal citation omitted). The plain language of statute, see 19 U.S.C. § 1675c(b)(4), supra, which defines the term “qualifying expenditure”, does not specify whether qualifying expenditures should be for the production expenses of domestic articles. The Act of October 28, 2000 includes the following congressional findings:

(1)Consistent with the rights of the United States under the World Trade Organization, injurious dumping is to be condemned and actionable subsidies which cause injury to domestic industries must be effectively neutralized.

(2) United States unfair trade laws have as their purpose the restoration of conditions of fair trade so that jobs and investment that should be in the United States are not lost through false market signals.

(3) The continued dumping or subsidization of imported products after the issuance of antidumping orders or findings or countervailing duty orders can frustrate the remedial purpose of the laws by preventing market prices from returning to fair levels

(4) Where dumping and subsidization continues, domestic producers will be reluctant to reinvest or rehire and may be unable to maintain pension and health care benefits that conditions of fair trade would permit. Similarly, small businesses and American farmers and ranchers may be unable to pay down accumulated debt, to obtain working capital, or to otherwise remain viable.

(5) United States trade laws should be strengthened to see that the remedial purpose of those laws is achieved.

Pub.L. 106-387, § 1(a)(Title § 1002), Oct. 28, 2000, 114 Stat. 1549, 1549A-72.

You argue that allowing expenditures to be claimed on the packing of foreign produced honey would be “contrary to the spirit of the Byrd Amendment, which as stated above, is to help ensure that jobs and investments remain in the United States.” In addition, citing to the petitioners’ questionnaire in the antidumping cases, you argue that Commerce limited its consideration of packers’ operations to the value added as a result of the processing and packing of domestically produced honey, and that CBP should adopt the same position. First, the purpose of the value analysis was to determine whether there was standing for the petitioners. Under the CDSOA, as discussed in Issue 1, standing is determined by whether a claimant is an affected domestic producer. Second, the ITC, in determining that packers should be included in the domestic industry, recognized that the packers pack and process imported honey, including honey from Argentina and China. See Investigation Report, supra 7,8, I-9, III-2.

Further, holding that the packers may not claim expenditures for packing and processing imported honey, for the reasons set forth above, would in essence be holding that the packers processing and packing operations of imported honey are detrimental to domestic industry or do not constitute domestic production, which is not within CBP’s authority to determine.

Since packers are considered a part of the domestic industry, limiting the type of honey they may pack and process defeats the remedial purpose of the Byrd Amendment which is clear from the congressional findings above. If the honey imported by the packers causes injury to domestic industry, then an appropriate petition should be filed with the ITC.

The statute does not indicate that qualifying expenditures are limited to the production expenses of domestic articles; therefore, packers may claim as qualifying expenditures, funds they have expended in the packing and processing of imported honey.

Holding

1. Insofar as the honey produced by the honey packers falls within the scope of the antidumping and countervailing duty orders, the purchase price of the honey purchased by the honey packers is a qualifying expenditures under 19 U.S.C. § 1675c(b)(4).

2. Insofar as the statute does not differentiate between domestic and foreign expenditures in the production of a domestic article, honey packers may claim as qualifying expenditures, funds they have spent on the packing and processing of imported honey.

Sincerely,

Myles Harmon, Director
Commercial Rulings Division

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