Syntex Agribusiness, Inc. v. United States International Trade Commission

659 F.2d 1038, 68 C.C.P.A. 141, 1981 CCPA LEXIS 180

• Court: Court of Customs and Patent Appeals
• Decided: August 27, 1981
• Docket: Appeal No. 81-8
• Status: Published

Opinions

Miller, Judge.

Syntex Agribusiness, Inc. (“Syntex”) petitions for a writ of mandamus to compel the United States International Trade Commission (“ITC”) to institute an investigation under section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337). The petition is denied.

BACKGROUND

The article involved in this petition is calcium pantothenate (“cal pan”), the calcium salt of pantothenic acid, which is one of the essential B vitamins and is required in minute amounts in human and animal diet to maintain health and normal growth. Cal pan is a derivative of petroleum.

The optical isomers of cal pan are capable of rotating a beam of polarized light either to the right, dextrorotatory or "d,” or to the left, levorotatory or “1.” Mixtures of equal parts of “d” and “1” forms are optically inactive and known as racemic or dl-cal pan. It is only the “d” form that has biological activity and is a source of the vitamin d-pantothenic acid.

Both d-cal pan and dl-cal pan are commercially available compounds resulting from the reaction of pantothenic acid and a suitable calcium compound as a source of calcium, with the manufacture of d-cal pan requiring extra processing compared to the manufacture of dl-cal pan. D-cal pan is commercially manufactured principally for use in human nutrition as an ingredient of multivitamin tablets. In animal nutrition, the product is sold principally in the 'racemic mixture wherein the biological activity is derived only from the d portion of the mixture.

There are two industries in the cal pan market. One is devoted to the manufacture of cal pan which meets the requirements of animal nutrition, i.e., racemic or dl-cal pan.

The other is devoted to the manufacture of cal pan which meets the requirements for human nutrition, i.e., d-cal pan.¹

On October 20, 1972, Syntex’s predecessor, Hoffman-Taff, Inc., filed a complaint with ITC, then the Tariff Commission, and an investigation (No. AA 1921-131) under section 160 of the Antidumping Act of 1921, as amended (19 U.S.C. 160), was conducted. In a release dated December 7, 1973, ITC notified the Secretary of the Treasury that a domestic industry was being injured by reason of imports from Japan of cal pan sold at less than fair value. As a result of the ITC’s determination, cal pan from Japan sold at less than fair value became subject to special dumping duties.

Subsequent to the 1973 dumping decision, Syntex ceased manufacturing d-cal pan and allegedly sustained severe losses in the manu - facture of dl-cal pan.

On June 1, 1979, Syntex filed a complaint with ITC alleging unfair practices in the import trade of cal pan from Japan in violation of section 337. Syntex also alleged that the Department of Treasury, U.S. Customs Service, failed to timely assess dumping duties, which failure aided and abetted the foreign producers or importers. In response, ITC took the position that the alleged acts and effects were solely within the purview of section 160 and voted, on June 27, 1979, to not institute a section 337 investigation. On July 30, 1979, ITC referred the complaint to the Treasury Department, which has responsibility for enforcing the Antidumping Act.

On October 24, 1979, Syntex filed a revised complaint with ITC. Therein, all references to the Department of Treasury, U.S. Customs Service, and failure to implement the Antidumping Act of 1921, as amended, are omitted. The revised complaint contains only allegations of Sherman Act monopolization and of a conspiracy between a Japanese manufacturer, Alps Pharmaceutical Co., Ltd., and an American importer, Mitsui and Company, to restrain trade.

On November 20, 1979, ITC voted to not institute a section 337² investigation. However, it recontacted the Treasury Department concerning enforcement of the 1977 ITC determination because there had been no reply to ITC’s July 30, 1979, referral.

On December 27, 1979, the Treasury Department responded to ITC’s July 30, 1979, referral, saying that: (a) Syntex’s original complaint was within the purview of the antidumping act; (b) assessments were fairly current regarding cal pan exports of two Japanese companies, Alps Pharmaceutical and Nippon Roche; (c) there were insufficient records to determine dates of entry for 335 unliquidated entries; (d) additional information from Syntex was requested to determine the propriety of continuing to use home market sales as a basis for determining foreign market value since, in the case of below-cost sales, constructed value may be required; and (e) the Trade Agreements Act of 1979 requirements for annual review of antidumping findings and deposits of estimated duties should provide greater protection to U.S. industries.

On February 12, 1980, ITC voted to dismiss Syntex’s revised complaint of October 24, 1979, in accordance with 19 CFK 210.12.³ The decision was based on section 337(b)(3) which, according to ITC, gave it discretion to institute an investigation “when the Commission had reason to believe that the matter before it was based in part on alleged acts and effects which were within the purview of [the anti-dumping laws] and in part on alleged acts and effects which may, independently from or in conjunction with those within the purview of such section, establish a basis for relief under [section 337] * *

Also on February 12, 1980, ITC voted to institute a preliminary investigation under section 603 of the Trade Act of 1974 (19 USC 2482) of certain aspects of the cal pan market in the United States.

On January 21, 1980, Syntex had filed a petition in this court for a writ of mandamus to compel ITC to institute a section 337 investigation based on its revised October 24, 1979, complaint. On February 21, 1980, Syntex moved that the court stay its consideration of the mandamus petition until ITC completed the section 603 investigation. On March 20, 1980, Syntex appealed to this court from ITC’s dismissal of its revised complaint of October 24,1979, stating the same grounds as those in its mandamus petition. On April 1, 1980, this court denied Syntex’s motion for stay and dismissed its petition for a writ of mandamus on the ground that, as a result of the ongoing section 603 investigation, ITC might institute a section 337 investigation, in which case Syntex’s petition for writ of mandamus would be moot; or, if ITC decided to not institute a section 337 investigation, Syntex could then petition for mandamus. In denying Syntex’s motion to stay, the court pointed out that Syntex did not assert a legal right to an immediate section 337 investigation and that it had acquiesced in the ITC’s actions relating to the section 603 investigation. Syntex Agribusiness, Inc. v. United States International Trade Commission, 617 F. 2d 290 (CCPA1980).

On July 31, 1980, this court dismissed Syntex’s March 20, 1980, appeal on the ground that there had been no final determination by ITC, which is essential for jurisdiction of the court.

On September 19, 1980, ITC notified Syntex that, as a result of its section 603 investigation, it had been determined that there were no section 337 unfair methods of competition. ITC terminated its section 603 investigation and informed Syntex that it would not reconsider its determination.

On January 7, 1981, Syntex filed this petition for writ of mandamus to compel ITC to institute an investigation on the following grounds:

(a) ITC erroneously dismissed Syntex’s revised complaint of October 24, 1979, seeking a section 337 investigation;

(b) ITC erroneously instituted a section 603 preliminary investigation; and

(c) ITC’s decision that there is no section 337 violation is arbitrary, capricious, and an unreasonable abuse of discretion or otherwise not in accordance with law.

OPINION

The issue is whether Syntex’s revised complaint, filed October 24, 1979, was a “complaint” within the meaning of section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337). This revised Complaint is identical to its earlier filed complaint, except that it omits all references to the antidumping act and contains only allegations of Sherman Act monopolization and conspiracy between the Japanese manufacturer and the American importer to restrain trade. Syntex’s revised complaint states:

* * * Respondent, and possibly others, beginning since December 1973 and up to and including the date of the filing of this complaint, have individually, in concert with each other and with others who may be identified by the Commission or who may subsequently become known to the Complainant, conspired, combined, confederated, and agreed with each other and with others who may be identified by the Commission or who may subsequently become known to the Complainant, intentionally and purposefully, attempted to and have: (a) destroyed efficiently and economically operated domestic industries in the United States, or monopolized trade and commerce in these foods in the United States, and (c) [sic(b)] substantially injured efficiently and economically operated domestic industries * * * by forcing the domestic producers of calcium pantothenate to bid and sell at a loss. The effects of these violations of the law are to and have discouraged domestic producers from manufacturing calcium pantothenate to the substantial injury of trade and commerce in the United States generally and specifically in the manufacture and sale of calcium pantothenate.

ITC, although acknowledging that Syntex’s October 24, 1979, complaint contains allegations of conspiracy, states that the complaint “contained almost no factual support for such allegation” and that the complaint was not properly filed under 19 CFR 210.20(a) (2) and (3),⁴ because “the Syntex complaint did not provide an adequate factual basis for its conspiracy and monopoly claims, and therefore was not properly filed within the meaning of the applicable rules.” In the absence of definition of the term “complaint” in section 337 or elsewhere in the Tariff Act of 1930, as amended, and in light of the procedures for Investigations of Alleged Unfair Practices in Import Trade set forth in 19 CPE, 210.1 et seq., as authorized by sections 333 and 335 of the Tariff Act of 1930 (19 U.S.C. 1333 and 1335), it is clear that Syntex’s revised complaint must comply with 19 CFR 210.20, which sets forth the requirements for a section 337 complaint.⁵ See Sealed Air Corp. v. U.S. International Trade Commission, 645 F. 2d 976, 987, 209 USPQ 469, 479 (CCPA 1981). Specifically, since Syntex alleges monopolization and conspiracy by Alps and Mitsui, its complaint must comply with 19 CFR 210.20(a)(2) by including a statement of the facts constituting the alleged acts of monopolization and conspiracy.

In sections 8-10 of its revised complaint, Syntex refers to some 23 exhibits in support of the monopolization and conspiracy allegations.⁶ Section 8 contains manufacturing, sales, and inventory information in the domestic cal pan industry and lists several exhibits. Syntex asserts that from the data in these exhibits, it is—

abundantly clear that the U.S. industry is being eliminated and that the demands of the marketplace are being met essentially by imports from Japan.

As heretofore noted, prior to the time when cal pan imports from Japan were being sold at less than fair value, there were five companies actively engaged in the manufacture of racemic or dl-cal pan and one of these, the Complainant’s predecessor company, was also engaged in the manufacture of d-cal pan.

Today the Complainant is the only current U.S. producer of racemic or dl-cal pan and there are no U.S. companies producing d-cal pan.

Included in section 8 are data showing Syntex’s “significant and continued losses during its Fiscal Years 1972-75,” a period during which it “increased its average sales prices approximately 17.5% while concurrently the U.S. Wholesale Price Index increased approximately 50% * * * .”

Also included in section 8 are data comparing prices for Japanese cal pan, based on 1972 prices adjusted for increases in the Japanese Wholesale Price Index, to prices at which it believes Japanese cal pan was actually being sold. From these data Syntex concludes:

* * * that d-cal pan has been sold at unreasonably low prices subsequent to the Tariff Commission decision of December 7, 1973. It is submitted that the allegations are corroborated by those filed Appraisement Reports required under Section 209 of the Trade Act.

Unfortunately, it is obvious that the assessment of dumping duties has provided inadequate and, indeed, absolutely no relief because of the fact that the Complainant has been forced to terminate the manufacture of d-cal pan.

It can be reasonably anticipated that, having eliminated the U.S. competition, the import price of monopolized d-cal pan will be arbitrarily adjusted upwards in relation to the predatory pricing practices of the foreign manufacturers and importers. This anticipation is becoming a reality as noted in the import price for d-cal pan for the first month of 1979 as shown in Exhibit 13, to wit, $14.50 per kilo.

To summarize the various sales data, the revised complaint makes the following statement:

The pattern of the sale prices of feed grade dl-cal pan shows the persistent importing and selling of cal pan at unreasonably low prices, e.g., (1) during Fiscal Year 1976 the sale price of imported feed grade dl-cal pan was below Complainant’s manufacturing costs and (2) during Fiscal Year 1978 the sale price of imported feed grade dl-cal pan failed to reflect anticipated increases resulting from Japanese inflation and exchange rate advantage.

In discussing several exhibits relating to Japanese cal-pan, the revised complaint states:

During Calendar Year 1978 there were actual sales of imported feed grade dl-cal pan at $3.85 and $3.90 per kilo. However, based upon prior sales of Japanese cal pan that are adjusted to reflect the changes in the Japanese Wholesale Price Index and the conversion rate changes of the yen in relation to the dollar, Japanese feed grade dl-cal pan should have sold in Calendar Year 1978 as follows:

$9.43 per kilo based on 1973 sales

$4.73 per kilo based on 1975 sales

$5.97 per kilo based on 1977 sales

It is submitted that the history of the sales of Japanese dl-cal pan shows an erratic pattern of pricing which is incomprehensible and unreasonable. Further, it is represented that there is reasonable grounds to believe or suspect that the aforesaid sales do not reflect the total costs for manufacturing cal pan.

In conclusion,⁷ section 8 of the revised complaint “submits that there is reason to believe that the Respondents, and possibly others, have conspired to destroy the cal pan industry in the United States for purposes of enjoying the illegitimate gains of monopolization.”

In sections 9 and 10 of its revised complaint, Syntex discusses several exhibits, including its annual report and data concerning its percent return on sales and the loss of market share by U.S. producers in the d-cal pan and dl-cal pan markets. In section 9, Syntex concludes that unreasonably low prices of Japanese cal pan are the direct cause of its losses and low profits. In section 10, Syntex states that “as a direct consequence of the importation and selling of cal pan at said unreasonably low prices, there are now no U.S. producers of d-cal pan and the only surviving producer of racemic dl-cal pan [Syntex] is struggling to attain sales which amount to approximately 30% of the U.S. market.”

The above review of Syntex’s revised complaint discloses no facts which show the alleged acts of either monopolization or conspiracy. Rather, Syntex has merely alleged that the cost of basic materials for making cal pan, as well as labor costs, must be approximately the same in the U.S. and Japan and that the methods of manufacturing must be the same, so that the lower prices must be predatory; fi rther, that since the distributor in the United States of Japanese cal pan would maximize its profits by charging at the rate Syntex charged for competitive preducts, it must be presumed that the reason it did not do so was conspiratorial — to drive competition out of the market; that once this was accomplished, it can be presumed that the price for the Japanese cal pan would be increased. Syntex asserts that this anti-competitive activity has driven it from the d-cal pan market and substantially injured its position in the dl-cal pan market. However, Syntex’s complaint is no more than a theory built on supp rsitions and assumes that Japanese companies could not be substantially more efficient than Syntex. Also there is no unremediable damage to Syntex from dismissal of its complaint since it can always file a new complaint.

Although we recognize that antitrust claims are diflmult to substantiate and that the Congress enacted the Trade Act of 1974 with the objective of helping U.S. businesses compete in the world market-piece, we, nevertheless, must hold that ITC’s dismissal of Syntex’s October 24, 1979, complaint was correct. The allegations set forth in the revised complaint regarding less-than-fair-market-value pricing might support an antidumping claim, but no more. They clearly do not support a monopolization or conspiracy claim.

Because of our disposition of Syntex’s petition for a writ of mandamus on the basis of failure to comply with 19 CFR 210.20(a)(2), it is unnecessary to consider the relationship between investigations conducted under section 603 and those under section 337. We note, however, that, although it is clear that section 603 investigations may be used for preliminary matters in conjunction with section 337 investigations, there appears to be no basis — statutory or otherwise— for substituting a section 603 investigation for a section 337 investigation.

ITC’s section 603 investigation was conducted on its own initiative following dismissal of Syntex’s complaint. The report of the investigation shows that outdated technology and problems with government regulations were the major contributing factors that caused Syntex to cease production of d-cal pan; that, although one Japanese company, Daiichi (not named in Syntex’s complaint), had acquired for a time what could be considered a monopoly share of the d-cal pan market, there were new producers who could be expected to erode Daiichi’s market share; also that Daiichi’s prices did not immediately lower upon entry of competitors into the d-cal pan market, a finding consistent with absence of, rather than presence of, anticompetitive behavior. With respect to the dl-cal pan market, the investigation report discloses numerous producing competitors, with Alps at no time holding a monopoly share of the market.

Finally, the report shows that better technology was to be found in Japan; that competition was increasing from new entrants into the market in the United States and abroad; and that deficiencies existed in Syntex’s cost analysis. Although not required by statute to do so in light of Syntex’s defective complaint, ITC made a substantial and conscientious effort to determine whether there was a reasonable basis to go forward with a section 337 investigation on its own initiative, as provided by section 337 (b)(1).

The petition for writ of mandamus is denied.

Before Markey, Chief Judge, Rich, Baldwin, Miller, and Nies, Associate Judges.

1 According to Syntex:

Domestic industry sources are in close agreement that the U.S. cal pan market is at a level of about 1,450 metric tons, d equivalent. Based on the Commission’s [ITC’sl measure of domestic sales in 1973 and 1974 — 1,217 and 1,219 metric tons, respectively — U.S. demand for cal pan has increased roughly by 230metrictonsor an average annual rate of 2.6 to 3.1 percent. The value of the U.S. market on the basis of current prices is estimated at $13 million.

Total V .S. imports of cal pan more than tripled during 1974-79, increasing from about 687,000 pounds in 1974 to 2.5 million pounds in 1979. Japan is the dominant source country, accounting for roughly % to % of total imports in every year since 1975.

Cal Pan U.S. Market

[1,000 lbl

Imports

Year Total -- U.S.

Japan Other products

2,677 500 187 1,990 1974.

3,190 1,900 600 690 1979.

2 Syntex states that, in regard to the 1973 ITC dumping determination, it had “formed an opinion and belie! that the Department of Treasury, U.S. Customs Service-was not assessing dumping dutiesin accordance with the Antidumping Act of 1921, as amended”; also that it informed ITC on June 27, 1979 (the same day ITC voted to not institute a section 337 investigation) that “approximately 335 entries of cal pan some dating back to 1974 were unliquidated * *

3 19 CFR 210.12 provides:

Institution of investigation.

Within thirty (30) days after receipt of a complaint or, in exceptional circumstances, as soon after such period as possible, the Commission shall determine whether the complaint is properly filled and, if so. shall institute an investigation. The investigation shall be instituted by notice published in the Federal Register, which notice will define the scope of the investigation. If the Commission determines that a complaint is not properly filed, the complaint shall be dismissed and the Commission shall notify the complainant in writing of its action with the reasons therefor.

4 19 CFR 210.20(a)(2) and (3) provide:

The complaint.

(a) Content* of complaint. In addition to conforming with the requirements of § 201.8 of this chapter and § 210.5(a), § 210.5(b), and § 210.5(c) of this part, the complaint shall—

(2) Include a statement of the facts constituting the alleged unfair methods of competition and unfair acts;

(3) Describe specific instances of alleged unlawful importations or sales;

5 Syntax does not argue the validity of the quoted provisions of 19 CFR 230.20.

6 Syntex also cites, in its brief in support of its petition for a -writ of mandamus, the results of a review of antidumping findings by the U.S. Department of Commerce, International Trade AdministraUon, 45 Fed. Reg. 59933 (September 11, 1980), which show the following price margins (percentage of price reduction from the foreign market value) during particular periods for certain manufacturers and exports of Japanese cal pan to December 31, 1979:

Period Percent

Alps Pharmaceutical Co., Ltd.Apr. 1, 1978 to Mar. 31, 1979. 14.42

Apr. 1, 1979 to Dec. 31, 1979. 0

Mitsui & Co./Alps.Apr. 1,1978 to Mar. 31, 1979. 24.54

Apr. 1, 1979 to Dec. 31, 1979. 18.87

Fallek Chemical/Alps....Apr. 1,1978 to Mar. 31, 1979..

Apr. 1, 1979 to Dec. 31, 1979. 25.13

Syntex points out that from Apr. 1,1979 through Dec. 31,1979, a period spanning the filing date of its June 1 1979, complaint, Alps showed no price margin and argues that, along with price margins that reflect “well settled unfair trade practices,” this “strongly suggests the appearance of market, manipulation”; also that such evidence is sufficient support of its petition for ITC to institute a section 337 investigation. However, Syntex did not include this information in its revised complaint. Whether this* information alone would be sufficient to constitute a monopolization or conspiracy claim is not an issue before us.

7 Syntex also submitted data allegedly showing that, except for labor costs, the variable costs of producing cal panin Japan would be approximately the same as in the U.S.; further, that Japanese cal pan sold for less than Syntax's variable costs.