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Nec Corp. v. United States and Department of Commerce

August 07, 1998


Appealed from: United States Court of International Trade judge Donald C. Pogue

Before Newman, Circuit Judge, Skelton, Senior Circuit Judge, and Plager, Circuit Judge.

The opinion of the court was delivered by: Plager, Circuit Judge.

This challenge to the Department of Commerce's ("Commerce's") administration of the antidumping laws arises in a somewhat unusual way: plaintiffs-appellants NEC Corporation and HNSX Supercomputers, Inc. (collectively "NEC") seek to enjoin Commerce from conducting an antidumping investigation involving certain supercomputers from Japan. NEC alleges that the deciding officials in Commerce had preJudged the outcome, and therefore were Constitutionally disqualified from proceeding with the investigation. The Court of International Trade denied NEC's petition for an injunction and declaration of rights, and Commerce proceeded to complete its investigation, following which, as NEC feared, Commerce determined that the proposed sales of the Japanese supercomputers were being made at less-than-fair value. NEC appeals the decision of the Court of International Trade denying the petition for injunction and declaratory judgment. *fn1



In order to appreciate the gravamen of NEC's complaint, it is necessary to examine in some detail the history of the challenged procurement, and the involvement of various political officials and actors. Though the parties dispute exactly what happened, and the meaning to be attributed to some of the events, the following facts seem to have been established.

The story begins with the decision by the University Corporation for Atmospheric Research ("UCAR") to procure advanced supercomputers for its National Center for Atmospheric Research ("NCAR"). In March 1995, UCAR solicited bids for advanced supercomputers from three supercomputer manufacturers-Federal Computing Corporation ("FCC"); Cray Research, Inc. ("Cray"); and Fujitsu Limited. FCC offered to provide NEC supercomputers, while the other two manufacturers offered to supply their own.

UCAR is a research consortium funded in part by the National Science Foundation ("NSF"), an agency of the United States Government. Under the terms of its Cooperative Agreement with NSF, UCAR was required to obtain NSF approval for the supercomputer acquisition. As part of this approval process, NSF requested that UCAR obtain evidence that NEC's *fn2 offer did not involve dumping, as that term is understood under United States antidumping laws. *fn3 In response to that directive, UCAR commissioned a study by Dr. Lloyd Thorndyke to analyze NEC's offer. Dr. Thorndyke ultimately concluded that there was no dumping, although he did not consider the effect of research and development costs in his analysis.

Meanwhile, the Department of Commerce decided to look into the matter. Even though NSF did not request that Commerce undertake an antidumping analysis of the UCAR procurement, Commerce undertook a preliminary analysis of NEC's bid. As part of that process, Susan Esserman, Assistant Secretary of Commerce for Import Administration, assembled a team of Import Administration ("IA") officials on April 3, 1996 to collect and analyze NEC's bid data. Three weeks later, on April 24, 1996, Ms. Esserman convened an interagency meeting to obtain technical information on supercomputers and hear a presentation by NSF on the UCAR procurement.

On May 13, 1996, Ms. Esserman, by now Commerce's Acting General Counsel, convened another interagency meeting with senior officials of NSF and other agencies to discuss the results of Commerce's preliminary analysis. The fact of this meeting and what transpired there is one of the sources of contention among the parties.

A few days later, on May 17, 1996, Stuart Eizenstat, Under Secretary for International Trade, and Ms. Esserman met with officials of the National Economic Council to discuss the matter. At that meeting, Mr. Eizenstat and Ms. Esserman provided a short, factual briefing on the UCAR procurement and the IA inquiry.

At about the same time, Brian Mannion, Grants and Agreements Officer at NSF, decided to reiterate to UCAR NSF's concern about the possibility of dumping, based on the meetings with Commerce. In a letter dated May 17, 1996, Mr. Mannion informed UCAR of the results of those meetings:

UCAR has provided NSF with several documents that addressed the "antidumping" issue. Subsequently, officials at the Department of Commerce, which has statutory responsibility for administering relevant provisions of the antidumping laws, have advised NSF that they have performed a "constructive analysis" of the proposal with the best performance characteristics. They have reached the preliminary Conclusion that the proposal does not constitute an offer at "fair value."

NSF accordingly encouraged UCAR to give the antidumping issue "due consideration" before concluding final negotiations.

Undeterred by NSF's letter, on May 20, 1996, UCAR announced that it had selected NEC's bid to supply a system of four FCC 32 processor SX-4 vector supercomputers. (Each computer would cost about $13.25 million for the first year of the procurement.). According to UCAR, the NEC systems "provide a distinct technical advantage compared to the systems offered by the other vendors."

On the same day, Commerce transmitted to NSF a letter from Acting Assistant Secretary Paul Joffe to Dr. Neal Lane, Director of NSF (this became known as "the Joffe letter"). In that letter, Mr. Joffe stated:

Using standard methodology prescribed by the antidumping law, we estimate that the cost of production of one of the foreign bidders is substantially greater than the funding levels projected by NCAR's request for proposals. In antidumping law terms, this means that the "dumping margin," that is, the amount by which the fair value of the merchandise to be supplied exceeds the export price, is likely to be very high.

The letter also stated that Commerce had "significant concern that importation of the NCAR supercomputer system would threaten the U.S. supercomputer industry with material injury within the meaning of the antidumping law." Thus, Commerce apparently concluded based on its analysis that all the conditions for assessing an antidumping duty were present.

This was confirmed in another letter sent by Mr. Joffe to Dr. Lane, which included a "Predecisional Memorandum" outlining Commerce's methodology. The Predecisional Memorandum estimated NEC's dumping margin to be in the range of 163.38% to 280%. Commerce's analysis was not based on actual NEC pricing data. Instead, it was based on information gleaned from various governmental sources, including the Thorndyke study and NEC financial statements. At NSF's suggestion, Commerce gave NSF authorization to forward a copy of the Predecisional Memorandum to NEC, UCAR and NCAR.

Commerce then made a copy of the Joffe letter available to the press and public, including NEC's competitor Cray. The letter was reproduced in Inside U.S. Trade, an industry periodical, on May 24, 1996. The Predecisional Memorandum, which had been given only limited distribution within the Government, was published in Inside U.S Trade several months later. No one admitted to having leaked it.

On June 5, 1996, Robert LaRussa succeeded Mr. Joffe as Acting Assistant Secretary of Commerce for Import Administration. Prior to that time, Mr. LaRussa had no involvement with the UCAR procurement. Two days later, Gary Taverman, an Office Director of Enforcement Group I within the IA, briefed Mr. LaRussa on IA's involvement in the UCAR procurement. At that time, Mr. LaRussa also read the Joffe letter, but seemingly he did not read the Predecisional Memorandum itself. From then until submission of this case, Mr. LaRussa had no communication with either Mr. Eizenstat or Ms. Esserman relating to the preparation, dissemination, purpose or content of the Predecisional Memorandum or regarding Cray's petition, discussed infra. What advice Mr. Eizenstat did give Mr. LaRussa related to general procedures in pending investigations.

At this point congressional involvement became part of the mix. On June 5, 1996, three officials of Commerce -- Mr. Joffe, now a Senior Advisor to the Assistant Secretary for IA, Stephen J. Powell, Chief Counsel for IA, and Mr. Taverman -- met with staff members from the House of Representatives Ways and Means Committee to discuss the UCAR procurement. At that meeting, Mr. Taverman explained Commerce's antidumping analysis. He prefaced his remarks by indicating that the results were just an "estimate" taken from public information and other governmental sources. Mr. Taverman stressed that Commerce had not made a dumping determination. The three had a similar meeting with the House Science Committee the next day.

On June 11, 1996, Ms. Esserman, Mr. Powell, Mr. Joffe, Mr. Taverman, and Mr. LaRussa met with Representative David E. Skaggs, at his request, to discuss the UCAR procurement. Representative Skaggs represents the congressional district in which UCAR and NCAR are located. At that meeting, Mr. Taverman again explained Commerce's analysis, but this time in very general terms.

Not long after, on June 20, 1996, Mr. William F. Rawson, Vice President for Finance and Administration of UCAR, responded to Mr. Mannion's letter of May 17. In his letter, Mr. Rawson indicated that UCAR had asked NEC to comment upon Commerce's May 20, 1996, Predecisional Memorandum. UCAR had also, according to Mr. Rawson, previously retained its own experts to independently verify Commerce's analysis. Based on UCAR's own analysis, it concluded that NEC's offer was not at less-than-fair value and that an award to NEC would fully comply with its Cooperative Agreement with NSF.

The move in NEC's favor was short lived. Faced with the conflicting reports from UCAR and Commerce, Dr. Lane wrote Secretary of Commerce Michael Kantor requesting his comments on UCAR's report. Dr. Lane asked Secretary Kantor to inform NSF whether or not Commerce intended to self-initiate an official investigation.

On July 29, 1996, Cray filed an antidumping petition with Commerce and the International Trade Commission ("Commission" or "ITC") against vector supercomputers from Japan. Cray executives and its attorneys had previously met with IA staff for pre-petition counseling. Commerce responded on August 19, 1996, by initiating the supercomputer investigation. See Vector Supercomputers from Japan, 61 Fed. Reg. 43,527 (Dep't Commerce 1996) (initial antidumping investigation). The investigation was assigned to IA's Office of Antidumping and Countervailing Duty Enforcement Group II.

In light of Commerce's initiation of an antidumping duty investigation, NSF decided to hold off approval of a contract award to NEC. Dr. Lane, in a press release, stated that he felt it would be "inappropriate for NSF to approve this procurement until the dumping issue has been resolved," and "inconsistent with the responsible stewardship of taxpayer monies." His sentiments reflected those expressed by some in Congress. See H.R. Rep. No. 104-628, at 124-29; 142 Cong. Rec. H6905-02, H6906-07 (1996).

NEC responded by writing to Mr. Eizenstat informing him that NEC had requested that Commerce's Inspector General ("IG") investigate the circumstances surrounding Commerce's involvement in the UCAR procurement, including the release of confidential NEC data to Cray. NEC also requested that Commerce stay its investigation of NEC pending the outcome of the IG's investigation. To allow the investigation to go forward in light of these accusations, according to NEC, "would constitute an egregious and irreparable denial of due process." Mr. Eizenstat referred the letter to ...

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