CIT Upholds ITA's Interest Expense Treatment in India Shrimp AD Review

In the February 2008 - January 2009 AD administrative review of certain frozen warmwater shrimp from India, the International Trade Administration chose to include the full amount of a bad debt the company wrote off during the period of review in the selling expenses of Indian producer Liberty Group/Liberty Frozen Foods Pvt., Ltd. although the period included only half the firm’s fiscal year.

Since in other reviews cited by Liberty, the agency appeared to have treated this expense item differently, by including a bad debt expense in selling expenses on a pro-rated basis rather than in full, the Court of International Trade ordered the ITA to explain or amend its “arbitrary” decision.

In its remand results the ITA explained that periods of review (“PORs”) shorter than a full year, in which no year-end expense was booked, required the application of pro-rated amounts, but 12-month PORs not congruent with fiscal years might also include no year-end booking of expense or income items, and would then require insertion of full year-end amounts to avoid under or over-counting. .

The court upheld the ITA's approach, finding that “when year-end expenses are recorded during the POR, it is reasonable...to include the full expense [but] when the expense is incongruous with the POR, it is reasonable and consistent for [the ITA] to avoid distortion by adjusting its policy to avoid either undercounting or overcounting.”

(See ITT’s Online Archives 11080810, for summary of preceding CIT decision ordering ITA to justify methodology.)

(Slip Op. 12-22, dated 02/21/12, Judge Pogue)