Opinion
Restani, Judge:
This matter is before the court on cross-motions for judgment on the agency record pursuant to USCIT R. 56.2. Plaintiffs, the Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland Cement and National Cement Company of California (collectively “the Committee”) and defendant-intervenor, CEMEX, S.A. (“CEMEX”), challenge the results of the first administrative review of the antidump-ing order in Gray Portland Cement and Clinker from Mexico, 58 Fed. Reg. 25,803 (Dep’t Comm. 1993) (final admin, review). The issues presented are whether pre-sale home market transportation costs should have been deducted in the calculation of foreign market value (“FMV”), whether the value-added tax (“VAT”) adjustment was proper, whether best information available (“BIA”) should have been applied to CEMEX, and whether the BIA rate chosen was proper.
Background
On August 30, 1990, the International Trade Administration of the United States Department of Commerce (“Commerce”) issued an anti-dumping order covering entries of gray portland cement and clinker from Mexico. Gray Portland Cement and Clinker from Mexico, 55 Fed. Reg. 35,443 (Dep’t Comm. 1990) (antidumping duty order). A margin of 58.38 percent was applied to CEMEX. Id.
On September 18, 1991, Commerce initiated its first administrative review of the antidumping order, covering entries from April 12,1990 through July 31, 1991. On March 6,1992, the Committee filed a complaint with Commerce alleging that during the review period CEMEX [907]*907created fictitious home market sales within the meaning of 19 U.S.C. §§ 1677b(a)(l), (5) (1988). See Pis.’ Conf. App., App. B.
On April 28, 1993, Commerce issued the final determination of the first review, applying a revised dumping margin of 30.44 percent for CEMEX and reaching a negative determination on the fictitious market issue. 58 Fed. Reg. at 25,803-04, 25,810.1 On May 13, 1993, CEMEX filed an action challenging the final determination. On May 19, 1994, the Committee filed a separate action challenging Commerce’s final determination as to respondent CEMEX. These actions were consolidated on June 16, 1993.
On November 30, 1993, the Committee moved for judgment on the agency record pursuant to USCIT R. 56.2. See USCIT R. 56.2. On April 18,1994, CEMEX cross-moved for judgment on the agency record.2 On the same date, CEMEX also moved to strike certain sections of the Committee’s brief relating to the Committee’s fictitious market argument.
The Committee had initially raised four arguments in its motion for judgment on the agency record: a/ CEMEX created a fictitious market; b/ Commerce erred in calculating CEMEX’s cost of production by offsetting CEMEX’s interest expense with a hypothetical monetary position gain; c/ Commerce erred in calculating FMV by deducting CEMEX’s pre-sale home market transportation expenses; and d/ Commerce erred in adjusting for VAT by adding an absolute tax to the United States Price (“USP”).3
The Committee has withdrawn its fictitious market and monetary position gain arguments as a result of Commerce’s second review, Gray Portland Cement and Clinker from Mexico, 58 Fed. Reg. 47,253, 47,255 (Dep’t Comm. 1993) (final) (excluding CEMEX’s home market sales of Type II cement from calculation of FMV because outside ordinary course of trade), and the Federal Circuit’s holding in Ad Hoc Comm. of AZ-NM-TX-FL Producers of Gray Portland Cement v. United States, 13 F.3d 398 (Fed. Cir. 1994) (finding no inherent authority for ITA to deduct pre-sale home market transportation expenses from FMV).4 Thus the remaining issues presented by the Committee are: a/ the limits [908]*908on deduction of home market pre-sale transportation costs following Ad Hoc, and b/ VAT adjustment.5
CEMEX raises two arguments in its motion for judgment on the agency record: a/ Commerce erred in applying adverse BIA to the reclassified ESP sales, and b/ Commerce improperly applied BIA in calculating added materials costs for further manufactured concrete products.
Standard of Review
On a motion for judgment on the agency record, the scope of review of Commerce’s determination is whether it is “unsupported by substantial evidence on the record, or otherwise not in accordance with law.” 19 U.S.C. § 1516a(b)(l)(B) (1988). Substantial evidence is “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Matsushita Elec. Indus. Co. v. United States, 750 F.2d 927, 933 (Fed. Cir. 1984) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)).
Discussion
A. Deduction of Pre-sale Home Market Transportation Expenses:
As provided under 19 U.S.C. § 1677b(a)(4)(B),
[i]n determining [FMV], if it is established to the satisfaction of the administering authority that the amount of any difference between the [USP] and the [FMV] (or that the fact that the [USP] is the same as the [FMVD is wholly or partly due to—
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(B) other differences in circumstances of sale; * * *
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then due allowance shall be made therefor.
19 U.S.C. § 1677b(a)(4)(B) (1988). Commerce’s implementing regulation generally requires a direct relationship between the expenses and the particular sales at issue before FMV may be adjusted. 19 C.F.R. § 353.56(a) (1993). For ESP comparisons, a circumstances of sale (“COS”) adjustment is permitted for indirect expenses. Id. § 353.56(b)(2); see Consumer Prods. Div. v. Silver Reed America. Inc., 753 F.2d 1033, 1035-36 (Fed. Cir. 1985).6 The regulation also provides for an ESP offset cap that, for ESP comparison purposes, caps the COS adjustment for indirect expenses at the level of indirect expenses incurred in the United States market. 19 C.F.R. § 353.56(b)(2).
The court first considers the Committee’s claim that Commerce improperly deducted pre-sale home market transportation expenses7 in calculating FMV The Committee argues that the Federal Circuit’s hold[909]*909ing in Ad Hoc precludes Commerce from deducting any pre-sale home market transportation costs in calculating FMV for PP or ESP comparisons. Commerce responds that a remand is required for it to conform its analysis to the holding of Ad Hoc, but also that Ad Hoc does not prohibit Commerce from invoking the COS provision contained in 19 U.S.C. § 1677b(a)(4) to deduct pre-sale home market transportation costs from FMV CEMEX supports Commerce’s view.
The Federal Circuit in Ad Hoc presented the issue on review as: “[W]hether the [FMV] provision of the antidumping statute, 19 U.S.C. § 1677b, authorizes a deduction from [FMV] of pre-sale transportation costs within the exporting country for goods sold within that country.” Ad Hoc, 13 F.3d at 400. In Ad Hoc, Commerce had deducted pre-sale home market transportation costs from FMV in a purchase price (“PP”) comparison pursuant to its “inherent authority” to fill “gaps” in the antidumping statute. Id. at 400-01. The Federal Circuit stated, “That Congress included a deduction for transportation costs from USP but not from FMV leads us to conclude that Congress did not intend pre-sale home-market transportation costs to be deducted from FMV” Id. at 402.
This is admittedly abroad statement, but recently in Torrington Co. v. United States, 850 F. Supp. 7 (Ct. Int’l Trade 1994), the court concluded that Ad Hoc only applies to calculation of FMV in PP comparisons (where the distinction between direct and indirect expenses is most relevant).8 850 F. Supp. at 10. The Torrington court further stated that the Ad Hoc court “specifically noted that it was not ruling on whether the ITA has authority to adjust FMV for pre-sale inland freight pursuant to the [COS] provision.” Id. The Torrington court, however, did not consider whether Commerce may make such a deduction for PP comparison purposes under the COS provision. In the present case, the Committee argues that the Torrington court misinterpreted the holding in Ad Hoc and that the COS provision is not applicable.
This court cannot accept so broad an interpretation of the Federal Circuit’s holding in Ad Hoc as the Committee would have. As noted in Torrington, 850 F. Supp. at 10, the Federal Circuit in Ad Hoc stated that “[although intervenors urge that we affirm the Court of International Trade judgment under the ‘circumstances of sale’ provision, we decline the invitation. It is well settled that an agency’s action may not be upheld on grounds other than those relied on by the agency. ” Ad Hoc, 13 F.3d at 401 n.8 (citing SEC v. Chenery Corp., 332 U.S. 194, 196 (1947)). Thus, the Ad Hoc court did not address the applicability of the COS provision to home market transportation costs in the calculation of FMV
Furthermore, to apply Ad Hoc more broadly, that is, to both ESP and PP COS adjustments and perhaps to post-sale transportation expenses, [910]*910as full application of the Ad Hoc rationale might,9 would disregard Commerce’s longstanding practice of deducting home market transportation costs under the COS provision.10 This is a practice to which Congress has apparently acquiesced.11 If, despite prior practice and Congressional inaction, the Ad Hoc court had intended to prohibit Commerce from deducting any home market transportation costs in calculating FMV for both ESP and PP comparisons, it would have made this intent clear. Instead, the court discussed, without disapproval, Commerce’s ESP-COS procedures where, as indicated, indirect expenses, such as most pre-sale transportation costs, are deductible from FMV to the extent of the USP level of expenses. See Ad Hoc, 13 F.3d at 400; 19 C.F.R. § 353.56(b)(2). Therefore, the Ad Hoc court’s conclusion can only be read properly in the context of the narrow question before it, that is, without a determination as to whether they are directly related to sales, may pre-sale transportation costs be deducted from FMV in the context of PP comparisons. Ad Hoc’s answer to that question is “No.”
In other post-Ad Hoc cases treating pre-sale home market transportation expenses, where Commerce had not conducted a COS analysis, the court has remanded the case to Commerce with instructions to determine whether ITA had the statutory authority to deduct the transportation expenses from FMV in PP comparisons. E.g., Torrington, 850 F. Supp. at 10, 12; Federal-Mogul Corp. v. United States, Slip Op. 94-40, at 8 (Mar. 7, 1994); Timken Co. v. United States, Slip Op. 94-41, at 5-6 (Mar. 7, 1994). Commerce has now fully analyzed this issue and applied COS methodologies in the PP context following remand of Ad Hoc. The court agrees that the statute, as well as Ad Hoc, leaves Commerce free to apply its COS methodology to pre-sale transportation costs in the PP context. See supra discussion of 19 U.S.C. § 1677(b), prior practice and legislative history.
The court now turns to the application of COS analysis to the facts of record here. In the present case, eleven of CEMEX’s sales at issue are classified as ESP sales.12 All parties have agreed from the outset that the pre-sale home market transportation costs may be deducted as indirect expenses under the COS provision for ESP sales comparisons (although [911]*911the Committee also argues, somewhat inconsistently, that the holding in Ad Hoc now prevents this). See discussion supra.
For those sales classified as PP transactions,13 the issue is whether the pre-sale home market transportation expenses are direct expenses, and thus may be deducted in calculation of FMV CEMEX asserts that the pre-sale home market transportation expenses are tied directly to the PP sales at issue,14 and are properly deducted from FMV under the COS provision. The regulations, however, do not provide any guidance in determining what constitutes “direct” expenses.15 Furthermore, the case law to date has not specifically addressed deduction of pre-sale home market transportation expenses as direct or indirect expenses under the COS provision. On remand Commerce shall address this issue.16
In sum, as Ad Hoc held, Commerce does not have the “inherent authority” to deduct pre-sale home market transportation expenses in the calculation of FMV Instead, the statute permits such expenses to be deducted as indirect expenses under the COS provision for ESP comparisons, subject to the ESP offset cap. For PP comparisons these expenses may be deducted from FMV under the COS provision if the expenses are determined to be directly related to the sales at issue. Therefore, the court remands this issue for Commerce to determine to what extent the pre-sale home market transportation costs at issue may be deducted as a COS adjustment in calculation of FMV
B. VAT Adjustment:
The Committee challenges whether Commerce’s treatment of the Mexican VAT in this case was appropriate. The Committee argues that the court should remand the issue to Commerce to adjust USP by the VAT amount that would have been collected on the merchandise if the sales were home market sales. Commerce concedes that in Federal-Mogul Corp. v. United States, 834 F. Supp. 1391, 1396 (Ct. Int’l Trade 1993), the court rejected the manner in which Commerce had been interpreting Zenith Elecs. Corp. v. United States, 988 F.2d 1573, 1582 n.4 (Fed. Cir. 1993), when making a VAT adjustment. Commerce thus agrees that the court should remand this case for VAT adjustment, as does CEMEX. The court further instructs Commerce that it shall apply its new VAT [912]*912methodology as approved in Torrington Co. v. United States, 853 F. Supp. 446, 448-49 (Ct. Int’l Trade 1994).
C. Applicability of Adverse BIA to Reclassified ESP Sales:
CEMEX contests both Commerce’s application of BIA for reclassified ESP sales and the specific rate chosen. CEMEX argues that the case should be remanded for Commerce to request from CEMEX indirect selling expense information on the reclassified ESP sales. Commerce maintains that because it did not have adequate information upon which to determine the appropriate adjustments on the ESP sales, it was justified in using BIA as the basis for the deductions required by 19 U.S.C. § 1677a(e) (1988). The Committee supports Commerce’s view.
Congress has mandated that Commerce “shall, whenever a party or any other person refuses or is unable to produce information requested in a timely manner and in the form required, or otherwise significantly impedes an investigation, use the best information otherwise available.” 19 U.S.C. § 1677e(c) (1988). Similarly, the regulations provide for the use of BIA when Commerce “(1) [d]oes not receive a complete, accurate and timely response to * * * [a] request for factual information; or (2) [i]s unable to verify, within the time specified, the accuracy and completeness of the factual information submitted.” 19 C.F.R. § 353.37(a) (1993). Commerce lacks subpoena power, but the BIA provision is a means of obtaining compliance with Commerce’s requests for information. See Rhone Poulenc, Inc. v. United States, 899 F.2d 1185, 1191 (Fed. Cir. 1990).
Commerce’s initial questionnaire in the administrative review requested that CEMEX report its United States sales and identify each as a PP sale or an ESP transaction. The questionnaire clearly indicated, consistent with the definitions provided in 19 U.S.C. § 1677a(b)-(c), the distinction between PP sales and ESP sales.17 Upon learning that CEMEX had misclassified 11 ESP sales as PP transactions,18 Commerce requested that CEMEX submit documentation to verify the entry dates of the questioned sales.19 Along with the verification information requested by Commerce, CEMEX proffered additional information that had not been requested. The additional information provided Commerce with data to calculate indirect selling expenses for the sales that CEMEX had misclassified. Commerce rejected the additional information and instead applied BIA in the calculation of USP for the reclassified ESP sales.
[913]*913CEMEX claims that the use of BIA was improper in this case for three reasons: a/ Commerce had no basis to reclassify any of the reported PP sales; b/ Commerce was required to request or give CEMEX the opportunity to provide the necessary indirect selling expense information; and c/ Commerce should have used “neutral” information rather than adverse BIA.
This court cannot accept CEMEX’s argument that Commerce had no basis to reclassify the reported PP sales. CEMEX contends that Commerce’s reclassification of the 11 sales was improper because the date of sale of the reclassified sales preceded their date of entry. CEMEX points to an earlier ruling made by Commerce in the original investigation stating that Commerce “eonsider[ed] the date of shipment to be the date of sale.” Gray Portland Cement and Clinker from Mexico, 55 Fed. Reg. 29,244, 29,248 (final determ, of LTFV sales). CEMEX argues that it relied upon this classification of the “date of sale” when preparing its response to Commerce’s questionnaire. CEMEX, however, overlooked Commerce’s explicit definitions of PP sales and ESP sales contained in the questionnaire. Moreover, CEMEX misinterprets Commerce’s ruling in the original investigation, because Commerce limited its “date of sale” holding to a small class of United States sales, i.e., sales made pursuant to a long-term contract, and a subsequent “letter agreement.” Id. There is no evidence in the record showing that the sales at issue fall within this narrow class of United States sales.
CEMEX’s second argument, that Commerce was required to request or give CEMEX the opportunity to provide the necessary information, also fails. As indicated, CEMEX asserts that Commerce inappropriately resorted to BIA and that the case should be remanded directing Commerce to request indirect selling expense data from CEMEX. CEMEX insists that only a refusal to comply with an information request justifies a resort to BIA. The court finds CEMEX’s reliance upon Olympic Adhesives Inc. v. United States, 899 F.2d 1565 (Fed. Cir. 1990), Daewoo Elecs. Co. v. United States, 13 CIT 253, 712 F. Supp. 931 (1989), aff’d in part and rev’d inpart, 6 F.3d 1511 (Fed. Cir. 1993), cert. denied, 114 S. Ct. 2672 (1994), and Outokumpu Copper Rolled Prods. AB v. United States, 829 F. Supp. 1371 (Ct. Int’l Trade 1993), is misplaced.
In Olympic Adhesives, Commerce had resorted to BIA because it claimed that respondent through its questionnaire response failed to provide information that “unequivocally negated or established the allegation that the home market sales were fictitious.” 899 F.2d at 1574. There the court held that Commerce “may not properly conclude that resort to the best information rule is justified in circumstances where a questionnaire is sent and completely answered, just because the ITA concludes that the answers do not definitely resolve the overall issue presented.” Id.
Further, in Daewoo, Commerce had not “follow[ed] the regular procedure of providing a questionnaire containing the appropriate instructions needed to compile the required information.” 13 CIT at 265, 712 [914]*914F. Supp. at 944. Commerce chose not to use some of the calculations incorrectly reported by the respondent. Id. Thus the Daewoo court concluded that Commerce had improperly resorted to BIA because the inaccurate responses were a result of‘[Commerce’s] own failure to provide instructions as to the methods of compiling the information.” Id. at 266, 712 F. Supp. at 945.
Lastly, Commerce’s questionnaire in Outokumpu provided: ‘“[B]e aware that if we do not agree with your preference for comparison, at a later date we will have to request information on cost differences for items we select for comparison.’” 829 F. Supp. at 1375-76. The Out-okumpu respondents provided in their questionnaire several model matches between merchandise sold in the United States and in the home market, and included difference-in-merchandise data for their reported comparisons only. Id. at 1376. Petitioners claimed that Commerce erred when it failed to use BIA for missing difference-in-merchandise data. Commerce, however, had never requested further information on the comparisons it selected. Id. The Outokumpu court thus found that Commerce’s decision not to resort to BIA was appropriate. Id. at 1377.
In the present case, unlike the facts in Olympic Adhesives, Daewoo and Outokumpu, the data was not missing because Commerce had failed to make an appropriate request for it, but rather because CEMEX misclassified the data in its submission. Thus, Commerce acted reasonably in resorting to BIA for the missing data. Further, CEMEX submission of the correct indirect selling expense data to Commerce was untimely— after verification and two weeks before the final results were issued— thus preventing Commerce from verifying the information. Pursuant to 19 C.F.R. § 353.37(a), Commerce was justified in rejecting the data sub-' mitted untimely and in resorting to BIA. See, e.g., Mantex, Inc. v. United States, 841 F. Supp. 1290, 1309-10 (Ct. Int’l Trade 1993); Chinsung Indus. Co. v. United States, 13 CIT 103, 105-07, 705 F. Supp. 598, 600-02 (1989).
The final argument to be addressed is whether Commerce should have used “neutral” information because Commerce classified CEMEX as “essentially * * * a cooperative respondent.” 58 Fed. Reg. at 25,808. CEMEX maintains that if the court determines Commerce’s use of BIA was proper, Commerce should have used “neutral” information.20 Commerce used as BIA the weighted-average of all of the ESP adjustments for the ESP sales properly reported by CEMEX.
CEMEX misunderstands Commerce’s BIA methodology as well as the general purpose of the BIA provision. Commerce applies either “partial [915]*915BIA” or “total BIA.”21 Regardless of the type of BIA used, Commerce does not apply a “neutral” figure as BIA except in very unusual situations for which a respondent should not be penalized.22 The purpose of the BIA provision is to induce respondents to provide Commerce with timely, complete and accurate information so that Commerce can determine dumping margins as accurately as possible. Rhone Poulenc, 899 F.2d at 1190-91. To accept CEMEX’s contention that “neutral” information should have been applied in this case where CEMEX misclassified its sales would undermine the purpose of the BIA provision, and would allow a respondent to pick and choose among its data, a practice not permitted.
Although Commerce’s application of adverse BIA in this case was appropriate, Commerce requests that the court remand the case for correction of selection of adverse BIA. Commerce asserts that the use as BIA of the weighted-average of all the ESP adjustments to ESP sales properly reported by CEMEX resulted in Commerce, (a) not using actual expense data timely reported by CEMEX for certain ESP adjustments for these ESP sales, and (b) including certain adjustments that could not have been applicable to these ESP sales. See Def.’s Mem. Opp’n Def.-Int.’s Mot. J. Agency R. at 19. CEMEX argues that Commerce: a/ disregarded verified price adjustment information pertaining to the reclassified sales, and b/ included unrelated expenses in BIA applied to the reclassified sales. See Def.-Int.’s Mem. Supp. Points Raised Def.-Int.’s Compl. at 41,43. As the request made by Commerce to correct its selection of BIA is consistent with CEMEX’s claim, the court remands this issue for Commerce to reconsider what corrections are appropriate.
D. Application of Adverse BIA for Added Materials Costs:
CEMEX reasserts the argument that because Commerce labeled CEMEX a “cooperative” respondent, Commerce should have used “neutral” information instead of adverse BIA for added materials costs. CEMEX further contends that if adverse BIA was to be used, Commerce should have used as BIA the highest individually reported added materials costs per cubic yard of concrete, while applying the specific conver[916]*916sion factor23 reported by CEMEX on a product-by-product basis, to arrive at the added materials costs per cement ton. Specifically, CEMEX argues that Commerce should be required to use CEMEX’s data that was later verified, and should limit its use of BIA to the one component of the added materials costs that CEMEX did not report.24 CEMEX maintains that this measure “would reasonably reflect the actual costs of added materials.” Def.-Int.’s Mem. Supp. Points Raised Def.Int.’s Compl. at 47. Commerce argues that it was within its discretion in selecting “partial BIA” to apply the highest information reported by CEMEX for other products in place of the information not reported.
In calculating the value-added adjustment to ESP for CEMEX’s further manufactured sales through Sunward Materials, Commerce did not accept any of the average added materials costs CEMEX supplied. Commerce instead used BIA for the necessary added materials cost adjustments. For the phoenix division, BIA was based upon the highest individually calculated added materials cost per cement ton, for any product made at the division for which CEMEX had properly reported product-specific costs. For the Tucson Division, Commerce followed the same approach. 58 Fed. Reg. at 25,809.
As previously discussed, in the “partial BIA” context, “neutral” BIA is applied only to a respondent who has substantially complied and there is also an inadvertent or unavoidable gap in the record, or when a minor or insignificant adjustment is involved. See supra note 22. In the present case, CEMEX failed to provide actual added materials cost data and the adjustments at issue were significant.
CEMEX asserts that, at least, Commerce should have used the highest available data on costs per yard of concrete, multiplied by the product-specific conversion factor supplied. Commerce instead filled in missing added materials cost data in “per cement ton” terms by taking CEMEX’s highest end result for added materials costs, yielding a higher BIA rate than would result from the approach advocated by CEMEX. Commerce has previously applied this method to other products. See, e.g., Pressure Sensitive Plastic Tape from Italy, 54 Fed. Reg. 13,091, 13,092 (Dep’t Comm. 1989) (final).
CEMEX asserts, however, that here this results in a margin of over 1000% for the products involved because of the wide variation in the amount of cement used in particular products. While Commerce may use “adverse” BIA here, the result of Commerce’s selection may be needlessly distortive. Accordingly, this matter will be remanded to [917]*917determine if the method recommended by CEMEX would result in a sufficiently adverse, but non-distortive, BIA choice.25
Conclusion
Commerce’s methodology for determining FMV in this case is not in accordance with law. Thus, the court remands the case for Commerce to consider CEMEX’s claimed deductions for its pre-sale home market transportation costs under the COS provision. Also, Commerce’s methodology for determining the VAT adjustment in this case is not in accordance with law. Accordingly, the court remands the case directing Commerce to apply its new VAT adjustment methodology. Commerce’s decision to use adverse BIA for the reclassified sales and added materials costs is supported by substantial evidence in the record and is otherwise in accordance with law, but Commerce shall reconsider its selection of particular BIA data for both the reclassified sales and added materials costs.
Remand results are due within forty-five days. Objections are due twenty days thereafter. Responses may be filed twelve days later.