Commerce Erred When Including Nonsubject R&D Expenses in AD Calculation, Exporter Argues

The Commerce Department erred by including both research and development expenses for non-subject goods and "compensation for payment" expenses for non-subject merchandise in the general and administrative (G&A) expense calculation during an antidumping duty review, exporter Nagase and Co. said in a Nov. 24 complaint. Filing its case at the Court of International Trade, Nagase also pushed back against the Commerce Department's calculation of the assessment rate (Nagase & Co., Ltd. v. United States, CIT #21-00574).

The case contests the final results in the first administrative review of the antidumping duty order on glycine from Japan. Nagase, along with its affiliated producer Yuki Gosei Kogyo Co., served as one mandatory respondent in the review. Nagase challenged Commerce's final determination in the review that the exporter dumped glycine into the U.S. market at a rate of 27.71%.

In the review, Commerce included Nagase's R&D expenses for goods other than glycine in its G&A expense ratio, holding that the worksheets submitted by the manufacturer "show that it is an 'after the fact' allocation of company-wide R&D costs to broad product categories using headcount or hours." When it did this, Commerce relied only on YGK's accounting practices from before the period of review -- practices that have since changed, the complaint said. Doing so violated the law because it made a factual finding that is unsupported by record evidence and ran contrary to the agency's past practice of excluding R&D expenses for non-subject merchandise, Nagase said.

During the period of review, Nagase had to compensate a customer for losses over a delay in the relevant government authority's approval of a pharmaceutical product for which the customer had consigned production. Nagase submitted evidence showing that this payment was unrelated to the production of glycine and unsuccessfully argued to Commerce that, as such, it should be dropped from the G&A expense ratio. The agency classified the one-time charge as a "cost of doing business."

Nagase, however, said this expense was for YGK's "consigned production of a non-subject pharmaceutical product for a non-glycine customer, and did not relate to the general operations of the company as a whole," it said. "The Department, however, failed to address this evidence in the Final Results." This failure to consider the whole record stands in violation of the law, the complaint alleged.

Commerce also "inadvertently duplicated and reported" the incorrect U.S. duty amounts for Nagase's constructed export price sales, the complaint said. As a result, "the assessment rate calculated by the Department for Nagase’s CEP sales is grossly inflated on its face and therefore not in accordance with law," the complaint said. "To avoid an extreme over-collection of AD duties, principles of equity support correcting the incorrectly calculated assessment rate."