Laizhou Auto Brake Equipment Co. v. United States , 32 Ct. Int'l Trade 711 ( 2008 )

Slip Op. 08-71
UNITED STATES COURT OF INTERNATIONAL TRADE
Before: Nicholas Tsoucalas, Senior Judge
________________________________________
LAIZHOU AUTO BRAKE EQUIPMENT COMPANY; :
LONGKOU HAIMENG MACHINERY CO., LTD.; :
LAIZHOU LUQI MACHINERY CO., LTD.; :
LAIZHOU HONGDA AUTO REPLACEMENT :
PARTS CO., LTD.; :
HONGFA MACHINERY (DALIAN) CO.; and :
QINGDAO GREN (GROUP) CO. :
:
Plaintiffs, :
: Court No.: 06-00430
and :
:
LONGKOU TLC MACHINERY CO., LTD. :
:
Plaintiff-Intervenor, :
:
v. :
:
UNITED STATES OF AMERICA, :
:
Defendant, :
:
and :
:
COALITION FOR THE PRESERVATION OF :
AMERICAN BRAKE DRUM AND ROTOR :
AFTERMARKET MANUFACTURERS :
:
Defendant-Intervenor. :
________________________________________:
June 26, 2008
Held: The United States Department of Commerce’s Final
Determination sustained in part, remanded in part.
Trade Pacific PLLC, (Robert G. Gosselink) for Laizhou Auto Brake
Equipment Company; Longkou Haimeng Machinery Co., Ltd.; Laizhou
Luqi Machinery Co., Ltd.; Laizhou Hongda Auto Replacement Parts
Co., Ltd.; Hongfa Machinery (Dalian) Co.; and Qingdao Gren (Group)
Co.; Plaintiffs.
Court No. 06-00430 Page 2
Gregory G. Katsas, Acting Assistant Attorney General, Commercial
Litigation Branch, Civil Division, United States Department of
Justice, Jeanne Davidson, Director, Commercial Litigation Branch,
Civil Division, United States Department of Justice, Patricia M.
McCarthy, Assistant Director, Commercial Litigation Branch, Civil
Division, United States Department of Justice (Courtney Sheehan);
Of Counsel: Melanie A. Frank, Office of Chief Counsel, Department
of Commerce, for the United States, Defendant.
Porter, Wright, Morris & Arthur, LLP, (Leslie Alan Glick) for The
Coalition for the Preservation of American Brake Drum and Rotor
Aftermarket Manufacturers, Defendant-Intervenor.
OPINION
TSOUCALAS, Senior Judge: This matter is before the Court on a
motion for judgment upon the agency record brought by the
Plaintiffs pursuant to USCIT Rule 56.2.1
Plaintiffs challenge numerous aspects of the U.S. Department
of Commerce’s final determination with respect to the eighth
antidumping administrative review of the antidumping order in Brake
Rotors From the People’s Republic of China: Final Results and
Partial Rescission of the 2004/2005 Administrative Review and
Notice of Rescission of 2004/2005 New Shipper Review (“Final
Determination”), 71 Fed. Reg. 66304 (Nov. 14, 2006). Plaintiffs
contend certain aspects of Commerce’s determination is contrary to
law, constitutes an abuse of discretion and is not supported by
substantial evidence on the record. See Revised Mem. of P. & A. in
1
Plaintiff-Intervenor Longkou TLC Machinery Co., Ltd. filed
a notice of dismissal on July 18, 2007 and is not a party to this
case.
Court No. 06-00430 Page 3
Supp. of Pls.’ Mot. for J. upon the Agency R. (“Pls.’ Br.”).2 For
the reasons set forth below, the Court sustains the Final
Determination in part, and remands it in part.
BACKGROUND
Laizhou Auto Brake Equipment Company (“LABEC”); Longkou
Haimeng Machinery Co., Ltd. (“Haimeng”); Laizhou Luqi Machinery
Co., Ltd. (“Luqi”); Laizhou Hongda Auto Replacement Parts Co., Ltd.
(“Hongda”); Hongfa Machinery (Dalian) Co. (“Hongfa”); and Qingdao
Gren (Group) Co. (“Gren”) (collectively “Plaintiffs”) contest
aspects of the U.S. Department of Commerce’s Final Determination.
Plaintiffs are producers and exporters of the subject merchandise
covered by the antidumping duty order on brake rotors from the
People’s Republic of China.
On April 1, 2005, Commerce published a notice of opportunity
to request an administrative review of the antidumping duty order
of brake rotors from China for the period April 1, 2004 through
March 31, 2005 (“the period of review” or “POR”). See Antidumping
or Countervailing Duty Order, Finding, or Suspended Investigation;
Opportunity to Request Administrative Review, 70 Fed. Reg. 16799.
On May 27, 2005, Commerce initiated the eighth administrative
review of brake rotors from China for twenty-seven individually
2
Unless otherwise noted, reference to all documents herein
shall refer to the public version of those documents.
Court No. 06-00430 Page 4
named firms. See Notice of Initiation of Antidumping and
Countervailing Duty Administrative Reviews and Request for
Revocation in Part (“Initiation Notice”), 70 Fed. Reg. 30694.
On June 7, 2005, Commerce issued a letter to all firms named
in the Initiation Notice indicating that “[d]ue to the large number
of requests for administrative review and the Department’s
experience regarding the resulting administrative burden to review
each company for which a request has been made, the Department is
considering to exercise its authority to select respondents by
sampling,” and requiring that each company subject to this
administrative review submit certain business information. Letter
to All Interested Parties, Public Record (“PR”) Doc. No. 5.
Plaintiffs’ responded to Commerce’s request on June 24, 2005.3 See
Letters from Law Firm of Trade Pacific, Confidential Record (“CR”)
Doc. Nos. 5, 7, 8, 10 and 12; Pls.’ Br. at 4. On October 14, 2005,
Commerce instructed interested parties that it had decided to use
a probability-proportional-to-size (“PPS”) sampling methodology to
limit the number of respondents in the review (“Sample Proposal
Letter”).4 See Sample Proposal Letter, PR Doc. No. 91. Commerce
indicated in the Sample Proposal Letter that it intended to include
3
Commerce sent another letter on September 15, 2005
requesting additional information to which Plaintiffs responded
on September 19, 2005. Pls.’ Br. at 5.
4
Commerce stated that it intended to individually review
four respondents. See Sample Proposal Letter.
Court No. 06-00430 Page 5
in the calculation of the sample rate any respondent margins based
on facts available, including adverse fact available, zero and de
minimis rates.
After receiving comments on its proposed sampling method from
several of the Plaintiffs, Commerce announced in a letter dated
November 10, 2005 (“Sample Decision Letter”), that it decided to
apply the PPS methodology previously described in its Sample
Proposal Letter.5 See Sample Decision Letter, PR Doc. No. 98.
Commerce noted that it would individually review five companies,
adding that “if a respondent selected for review fails to
participate in the review, the Department will not choose another
respondent in its place.” On November 16, 2005, Commerce conducted
its sampling and chose the five companies to be individually
examined.6 See Released Letter to Interested Parties, PR Doc. No.
100.
Ultimately, the administrative review covered sixteen
5
Plaintiffs LABEC, Haimeng, Hongda, Hongfa and Luqi
submitted comments on October 24, 2005, among other things,
contesting the inclusion in the sample rate of any respondent
margins that were based on facts available. See Repondents
Comments re Sampling Methodology Letter, PR Doc. No. 96.; Pls.’
Br. at 7.
6
Among the five companies chosen were Plaintiffs Hongfa
and Haimeng. Plaintiffs LABEC, Luqi, Hongda and Gren were not
among the sampled group. The three companies chosen for the
sampled group who are not a party to this case are Qingdao Meita
Automotive Industry Co., Ltd.; Yantai Winhere Auto-Part
Manufacturing Co., Ltd.; and Xiangfen Hengtai Brake Systems Co.,
Ltd. See Preliminary Results at 26737; Complaint at 3.
Court No. 06-00430 Page 6
participating firms, including all of the Plaintiffs. See Brake
Rotors From the People’s Republic of China: Preliminary Results and
Partial Rescission of the 2004/2005 Administrative Review and
Preliminary Notice of Intent to Rescind of 2004/2005 New Shipper
Review (“Preliminary Results”), 71 Fed. Reg. 26736 (May 8, 2006).7
In the Preliminary Results, Commerce assigned an adverse facts
available rate of 43.32% to mandatory respondent Hengtai Brake
Systems Co., Ltd. (“Hengtai”), based on Hengtai’s failure to
provide Commerce with accurate and complete data. Commerce
included that 43.32% adverse facts rate in the calculation of the
sample antidumping duty rate (the “sample rate”) for the non-
sampled respondents (including Plaintiffs LABEC, Hongda, Luqi and
Gren). In its Final Determination Commerce confirmed the adverse
facts available rate was warranted as to Hengtai and again included
that 43.32% adverse facts rate in the calculation of the group
sample rate assigned to the non-sampled respondents. See 71 Fed.
Reg. 66304.
Plaintiffs seek judgment on the agency record under USCIT Rule
56.2 with respect to six issues. Three issues involve Commerce’s
valuation of certain factors of production (i.e., pig iron, steel
7
Of the twenty-seven firms named in the Initiation Notice,
only eighteen had shipments of subject merchandise into the U.S.
during the POR, and two of those were participating in an on-
going new shipper review. The resulting administrative review,
therefore, covered sixteen firms, including all the Plaintiffs.
See Preliminary Results, 71 Fed. Reg. at 26737.
Court No. 06-00430 Page 7
scrap, and labor wage rate), and three issues involve certain
decisions Commerce undertook with regard to the calculation and
application of a sample antidumping rate.
JURISDICTION
The Court has jurisdiction over this matter pursuant to 19
U.S.C. § 1516a(a)(2) and 28 U.S.C. § 1581(c).
STANDARD OF REVIEW
In reviewing Commerce’s antidumping duty determination, the
Court will uphold such determination unless it is “unsupported by
substantial evidence on the record, or otherwise not in accordance
with law.” 19 U.S.C. § 1516a(b)(1)(B)(i) (2000). Substantial
evidence is “more than a mere scintilla. It means such relevant
evidence as a reasonable mind might accept as adequate to support
a conclusion.” Universal Camera Corp. v. NLRB, 340 U.S. 474, 477
(1951) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229
(1938)). Substantial evidence “is something less than the weight
of the evidence, and the possibility of drawing two inconsistent
conclusions from the evidence does not prevent an administrative
agency's finding from being supported by substantial evidence.”
Consolo v. Federal Maritime Comm'n, 383 U.S. 607, 620 (1966)
(citations omitted).
Court No. 06-00430 Page 8
DISCUSSION
I. Analysis of Surrogate Value Issues
In an antidumping investigation, Commerce must determine
whether the subject merchandise is being, or is likely to be, sold
at less than fair value in the United States by comparing the
export price with the normal value of the merchandise. See 19
U.S.C. § 1677b(a). In cases involving exports from a nonmarket
economy (“NME”), Commerce must determine normal value “on the basis
of the value of the factors of production utilized in producing the
merchandise.”8 19 U.S.C. § 1677b(c)(1).
According to the statute, Commerce must value factors of
production “based on the best available information regarding the
values of such factors in a market economy country or countries
considered to be appropriate.” 19 U.S.C. § 1677b(c)(1). The
statute does not define “best available information.”
In this review Commerce calculated normal value by multiplying
8
The relevant portion of 19 U.S.C. § 1677b(c)is set forth
below:
(c) Nonmarket economy countries
(1) In general
If- (A) the subject merchandise is exported from a nonmarket
economy country, and
(B) the administering authority finds that available information
does not permit the normal value of the subject merchandise to be
determined under subsection (a) of this section,
the administering authority shall determine the normal value of
the subject merchandise on the basis of the value of the factors
of production utilized in producing the merchandise.
Court No. 06-00430 Page 9
the reported per unit factor quantities by publicly available
Indian surrogate values. See Def.’s Resp. in Opp’n to Pls.’ Mot.
for J. upon the Agency R. (“Commerce Br.”) at 28. Commerce notes
that it considered the “quality, specificity, and contemporaneity
of the data.” Id.
Plaintiffs contest Commerce’s Final Determination with respect
to three factors of production: (i) pig iron, (ii) steel scrap,
and (iii) labor wage rate.
A. Selection of Import Data to Value Pig Iron
In order to value pig iron, Commerce used publicly available
import statistics obtained from the World Trade Atlas (“WTA”)
relating to India. Commerce selected Harmonized Tariff System
(“HTS”) subheading 7201.10.00 for this product, which covers non-
alloy pig iron containing less than 0.5% phosphorus. See Issues
and Decision Memorandum for the Final Results in the 2004/2005
Administrative Review and New Shipper Review of Brake Rotors from
the People’s Republic of China (the “Issues and Decision
Memorandum”) at 23.
Plaintiffs argue that Commerce’s valuation is unsupported by
substantial evidence and contrary to law. Specifically, Plaintiffs
contend that Commerce should have used the publicly-available
information that Plaintiffs submitted from four Indian steel
producers for valuation, which in total purchased and consumed
Court No. 06-00430 Page 10
681,675.70 metric tons of pig iron during the POR. See Pls.’ Br.
at 24. Plaintiffs note that during the POR India imported
approximately 6,860 metric tons of pig iron under this HTS
subheading.9 Id. at 24.
Additionally, Plaintiffs point to prior decisions of the Court
to argue that (i) in order for Commerce to use import data “there
must be reason to believe that the industry in question would use
imported inputs,” Dorbest Ltd. v. United States, 462 F. Supp. 2d
1262, 1278 (2006), and (ii) Commerce may use import statistics as
the basis for a surrogate value only “after concluding that they
{the import statistics} are based on commercially and statistically
significant quantities,” Polyethylene Retail Carrier Bag Committee
v. United States, 29 CIT 1418, 1444 (2005) (alteration in original)
(citing Shanghai Foreign Trade Enter. Co. v. United States, 318 F.
Supp. 2d 1339, 1352-53 (2004)). See Pls.’ Br. at 26.
In defense of its position, Commerce explains that it used the
WTA data because it was “contemporaneous with the period of review
and . . . specific to the inputs used in the production of subject
merchandise.” Commerce Br. at 30-31. Commerce further explains
that it did not use the alternative surrogate value data proposed
by Plaintiffs because “it was not specific to the types of
9
Plaintiffs point out that the amount encompassed in
their alternative data is about 100 times the quantity imported
into India during the same period. See Pls.’ Br. at 24.
Court No. 06-00430 Page 11
materials used by the Chinese producers in the review.”10 Id. at
31. Commerce adds that the raw material values reported for one of
the Indian companies related to “inter plant transfers,” which
raises questions as to whether these sales were arms-length
transactions. Id. at 32. Lastly, Commerce notes that the WTA data
“represent a broader, overall more representative data source”
because it was collected from imports into all of India, as opposed
to collected from a few select companies. Id.
In examining the record and considering the arguments the
Court finds that Commerce’s determination, that the WTA data
constituted the best available information for valuing pig iron,
was reasonable and based on substantial evidence on the record. In
the process, Commerce determined that a relatively smaller amount
of data that was representative (in both contemporaneity and
specificity to the raw material at issue) was preferable in this
case to a larger amount of data whose representativeness was
dubious. Plaintiffs’ arguments supporting their alternative data
as a better valuator of pig iron fall in one of two categories: (i)
the amount of steel imported into India is objectively low and
therefore likely to be commercially insignificant; and (ii) the
Indian companies data is of a much larger sample size and therefore
10
Commerce noted that two of the Indian companies did not
specify the types of pig iron consumed in the production of their
merchandise. Commerce Br. at 32.
Court No. 06-00430 Page 12
is better. As Commerce has demonstrated, both contentions are
flawed.
Commerce answers Plaintiffs’ argument that the volume of
import trade is too small to be significant by noting correctly
that “a smaller volume of trade may still be commercially or
statistically significant if it includes values that are
representative of the product in question.” Commerce Br. at 33.
Here, Commerce has sufficiently detailed the representativeness of
the WTA data set. Additionally, in its Issues and Decision
Memorandum, Commerce notes that the volume of non-alloy pig iron
imported into India “significantly exceeds the volume of pig iron
consumed by several of the respondents.” See Issues and Decision
Memorandum at 25.
As to the alternative data set pertaining to the Indian
companies, Commerce adequately detailed the numerous reasons why
that data was not preferable. Commerce explained, for instance,
that a few of the Indian companies did not specify the types of pig
iron consumed in the production process and therefore Commerce
could not be confident that the data from the Indian companies is
specific to the type of pig iron consumed in the production of the
subject merchandise here.11 Commerce Br. at 32.
11
Plaintiffs contention that “it is not clear . . . that
the ‘pig iron’ being imported into India under HTS 7201.10.00 is
similar to the pig iron consumed by the mandatory respondents,”
(continued...)
Court No. 06-00430 Page 13
Lastly, Plaintiffs’ reliance on Dorbest for the proposition
that in order for Commerce to use import data “there must be reason
to believe that the industry in question would use imported inputs”
is misplaced, as the quoted language is taken out of context.
Dorbest, 462 F. Supp. 2d at 1278. Commerce need only show why
domestic data is not reliable, or less reliable than the import
data, which it has done here.12
It is clear that a larger data set, in and of itself, is not
necessarily better in valuing factors of production than a smaller
one. As is the case here, representativeness and reliability are
two important factors that distinguish one data set from another.
The representativeness and reliability of the WTA data set is
discussed above, and the record here shows that as a data set it
was contemporaneous with the period of review, specific to the
inputs used in the production process, and was broadly collected
11
(...continued)
is not convincing. Reply Mem. in Supp. of Mot. for J. upon the
Agency R. (“Pls.’ Reply Br.”) (confidential version) at 20. The
facts Plaintiffs cite, without anything more, do not weaken
Commerce’s determination as to the representativeness of the
data. See id. at 20-21.
12
Dorbest states that “[i]f it is unlikely that the domestic
industry would use imported inputs, and there is domestic data
available, then Commerce’s choice of import data to value factor
inputs may not be reasonable.” 462 F. Supp. 2d at 1279. Contrary
to Plaintiffs’ contention, there is no prerequisite that Commerce
establish in all cases that the industry in question would use
imported inputs. Commerce has established here that the domestic
data, although available, is less reliable than the WTA import
data, and therefore it is not the best available information.
Court No. 06-00430 Page 14
from imports into all of India as opposed to from a few companies.
Plaintiffs’ proposed data set, in contrast, was collected from a
handful of companies and was found lacking in specificity to the
inputs used in the production process.
The Court must therefore conclude that the WTA import data is,
whatever its failings, the best available information for
calculating this factor of production. For all the reasons above,
the Court is satisfied that Commerce’s determination here is
reasonable and based on substantial evidence on the record.
B. Valuation of Steel Scrap
Commerce valued the industrial metal scrap that Plaintiffs
purchased and consumed in the production of brake rotors using HTS
classification 7204.10.00, which covers “cast iron scrap.”13 See
Issues and Decision Memorandum at 28. Commerce explains that it
used the cast iron scrap category because the foreign producers
indicated in their submissions that they consumed “steel scrap,
including scrapped and rejected rotors, as well as casting
strands/handles (extrusions from the actual rotor that are removed)
and filings from the lathing process.” Commerce Br. at 33 citing
Plaintiffs Haimeng and Hongfa’s Questionnaire Responses, CR Doc.
13
Commerce notes that this was an option suggested by
certain of the Plaintiffs as an alternative to the “other ferrous
scrap” classification they sought during the administrative
proceedings. Commerce Br. at 33.
Court No. 06-00430 Page 15
Nos. 63, 64. Commerce further explains that because “the scrap was
comprised of casting strands and handles, as well as scrapped and
rejected rotors (which in this case are made from gray cast iron),”
it selected the HTS classification corresponding to cast iron
scrap. Commerce Br. at 33. Commerce concludes that “because these
are cast iron brake rotors the most relevant steel scrap to value
for this factor of production would be cast iron steel scrap.” Id.
at 34.
Lastly, Commerce argues that “the basket category proposed by
plaintiffs would not include cast iron scrap - the predominant
scrap used in the production of these cast iron rotors.” Id. at 35.
Plaintiffs argue that Commerce should have used HTS
classification 7204.49.00, which covers “other ferrous scrap” to
value the steel scrap purchased by Plaintiffs. Pls.’ Br. at 32.
Plaintiffs argue that the “other ferrous scrap” category is more
specific to the factor of production being valued and “is of better
quality because it covers a larger volume of imports.” Id.
The crux of Plaintiffs’ argument is that Commerce is
incorrectly “focusing on the production process rather than on the
specific factor to be valued.” Pls.’ Reply Br. at 13. Plaintiffs
admit that the brake rotor production process includes the
reintroduction of scrapped and rejected rotors but contend that
“the issue is not what types of scrap generally are used in the
production process [but] [r]ather . . . what type of scrap did the
Court No. 06-00430 Page 16
respondents report in the factor field ‘STLSCRAP,’ which Commerce
needs to value in the calculation of normal value.” Id. Plaintiffs
state that there is no such thing as “cast iron steel scrap” and
argue that this “misunderstanding exposes the irrationality of
Commerce’s conclusion that an iron scrap price would ever be a
preferred surrogate price for valuing steel scrap.” Id. at 15.
Plaintiffs, by way of support, point to the fact that Commerce
itself states in its brief that invoices obtained during the
verification process indicated that the input was “steel scrap.”14
See id. at 16; Commerce Br. at 35. Furthermore, Plaintiffs contend
that Commerce’s statement that cast iron scrap is the predominant
scrap used in the production process is “patently false.” Pls.’
Reply Br. at 16, n.3.
Finally, in Plaintiffs’ Reply Brief they contend that in the
two subsequent administrative reviews of brake rotors from China
(i.e., the final results of the ninth review and the preliminary
results of the tenth review), Commerce has valued the steel scrap
under subheading 7204.49.00 (“other ferrous scrap”) of the HTS, as
Plaintiffs argue should have been done in this review.15 See id.
14
Commerce notes that invoices obtained during its
verification process “indicated that the input was ‘steel scrap’
and did not indicate the exact type of scrap.” Commerce Br. at
35.
15
See Brake Rotors From the People’s Republic of China:
Final Results of Antidumping Duty Administrative and New Shipper
(continued...)
Court No. 06-00430 Page 17
at 16-17.
In reviewing the record and arguments of both sides, the Court
finds that Commerce failed to adequately explain its decision to
value the steel scrap at issue here, if it is in fact “steel”
scrap, under HTS classification 7204.10.00. The parties here agree
generally on the type of scrap Plaintiffs use in the production
process (i.e., some combination of cast iron scrap (from casting
strands, handles and rejected rotors) and steel scrap). It is not
clear, however, in what proportion each is used, nor if both should
even be considered in this factor of production valuation of what
both parties refer to as “steel” scrap. Commerce does not address
Plaintiffs’ argument that the scrap composed of scrapped and
rejected rotors is not properly accounted for here, nor does it
support with evidence its statement that cast iron scrap is the
predominant scrap used in the production process.
The Court therefore remands back to Commerce to specifically
address and adequately explain (i) whether the rejected rotors,
casting strands/handles, etc., reintroduced into the production
process should be properly accounted for in this specific factor of
15
(...continued)
Reviews and Partial Rescission of the 2005/2006 Administrative
Review (the “Ninth Review”), 72 Fed. Reg. 42386 (August 2, 2007);
Brake Rotors From the People’s Republic of China: Preliminary
Results of the 2006/2007 Administrative and New Shipper Reviews
and Partial Rescission of the 2006/2007 Administrative Review
(the “Tenth Review”), 73 Fed. Reg. 6700 (February 5, 2008).
Court No. 06-00430 Page 18
production analysis; (ii) the composition of the predominant scrap
used in the production process; (iii) Plaintiffs’ argument that
Commerce should be solely focusing on the type of scrap the
respondents reported in the factor field “STLSCRAP”; and (iv)
whether it has in fact reassessed its position in subsequent
reviews as to the proper HTS classification of the scrap at issue
here.
C. Calculation of Labor Rate
When constructing the “normal value” of products from NMEs
under 19 U.S.C. § 1677b(c), Commerce is required to value the
“hours of labor required” as a factor of production. Commerce’s
regulations provide that when valuing labor rates for NMEs it will
use regression-based wage rates reflective of the
observed relationship between wages and national income
in market economy countries. [Commerce] will calculate
the wage rate to be applied in nonmarket economy
proceedings each year. The calculation will be based on
current data, and will be made available to the public.
19 C.F.R. § 351.408(c)(3). Consistent with this statute Commerce
publishes a single set of labor wage rates that are applicable to
all NMEs during the period. See Commerce Br. at 36.
In order to better understand the issue and arguments involved
here an abbreviated timeline of the relevant events is necessary:
• May 23, 2005: Commerce initiated the underlying administrative
Court No. 06-00430 Page 19
review in this case;
• June 30, 2005: Unrelated to the administrative review here,
Commerce sought comments on its regression-based methodology
for calculating NME wage rates (See Expected Non-Market
Economy Wages: Request for Comment on Calculation Methodology,
70 Fed. Reg. 37761);
• May 8, 2006: Commerce published the Preliminary Results,
applying to the margin calculation for the mandatory sampled
respondents a surrogate PRC wage rate of $0.97 per hour;
• October 19, 2006: Commerce published its antidumping
methodologies announcement. See Antidumping Methodologies:
Market Economy Inputs, Expected Non-Market Economy Wages, Duty
Drawback; and Request for Comments, (the “Antidumping
Methodologies Announcement and Requests for Comments”) 71 Fed.
Reg. 61716;
• November 14, 2006: Commerce published the Final Determination
continuing to apply a surrogate PRC wage rate of $0.97 per
hour; and
• February 2, 2007: finalized rates that took into account the
new methodology were released. Commerce Br. at 37, n.6.
Plaintiffs argue that Commerce knowingly used a surrogate
hourly rate that did not represent the best available information
at the time, adding that when Commerce issued its Final
Court No. 06-00430 Page 20
Determination it “already had settled on significant revisions” to
its methodology. Pls.’ Br. at 38. Plaintiffs contend that
Commerce’s Antidumping Methodologies Announcement and Requests for
Comments, published approximately one month before the Final
Determination in this case, “announced significant, overarching,
and final changes in its NME labor rate calculation methodology.”
Id. at 39.
In support of its determination Commerce argues that in this
case it applied the labor wage rate that was published and in
effect at the time of the Final Determination and that this rate
was therefore the best available information at the time.16 See
Commerce Br. at 36. Specifically, in this review Commerce relied
on the 2003 wage rate data because “such rates were the most
current data available as of November 2005.” Id. at 38. In
response to Plaintiffs’ arguments, Commerce notes that the new
methodology and rates were not final and effective until February
2007 (i.e., after the Final Determination), and thus Commerce
reasonably decided to apply the new rate prospectively.17 See id.
16
Commerce noted that the labor rate here was determined
based on a methodology that had been in existence for nearly ten
years. See Antidumping Duties; Countervailing Duties, 62 Fed.
Reg. 27296, 27367 (May 19, 1997).
17
Specifically, Commerce noted that the revised methodology
was never applied to the 2003 data because the new methodology
was finalized in 2007 (i.e., subsequent to its Final
Determination) when Commerce revised the calculations utilizing
(continued...)
Court No. 06-00430 Page 21
at 36-37. Additionally, Commerce stresses that the notice and
comment period did not end with the Change in Methodology
Announcement but that an additional request for comments was
published on January 9, 2007. See id. at 37, n.6.
The Court finds that Commerce’s decision to use the labor wage
rate that was published and in effect at the time of the Final
Determination was based on the best available information. As
Commerce points out, the new methodology was not finalized at the
time of the Final Determination and therefore Commerce’s decision
to refrain from applying that methodology until it was finalized
was reasonable. It is not dispositive here that Commerce’s
methodology was being revised because of improvements that Commerce
was planning to enact in the future. The revision process included
a period of requesting comments on the new methodology, and until
that comment period was complete, and the resulting comments
assessed, the new methodology cannot necessarily be said to
constitute the best available information. Therefore, Plaintiffs
may not presume that the Antidumping Methodologies Announcement and
Requests for Comments necessitated an application of the non-
finalized new rate and methodology in this case.
At the time the new methodology is finalized and effective it
becomes the best available information, but until that point,
17
(...continued)
the 2004 wage rate data. See Commerce Br. at 38.
Court No. 06-00430 Page 22
Commerce must be granted some discretion to assess the advantages
and disadvantages of applying a work-in-progress methodology in
place of an existing one which is in the process of improvement.
The Court does not address Plaintiffs’ argument regarding the
Dorbest Limited v. United States, 462 F. Supp. 2d 1262 (Oct. 31,
2006) and Wuhan Bee Healthy Co., Ltd. and Presstek Inc. v. United
States, 31 CIT __ (July 20, 2007) decisions, nor the specific facts
and arguments involved in those opinions. See Pls.’ Reply Br. at
22-23. Under the narrow facts and circumstances in this case, the
Court is satisfied that Commerce’s determination to apply the labor
wage rate that was published and in effect at the time of the Final
Determination was based on the best available information.
II. Analysis of Sampling Approach Issues
In determining weighted average dumping margins Commerce needs
to determine the individual weighted average dumping margin for
each known exporter and producer of the subject merchandise. See
19 U.S.C. § 1677f-1(c)(1). If it is not practicable to make an
individual weighted average dumping margin determination “because
of the large number of exporters or producers involved in the
investigation or review,” Commerce may limit its examination to a
reasonable number of exporters or producers by conducting “a sample
of exporters, producers, or types of products that is statistically
valid based on the information available to the administering
Court No. 06-00430 Page 23
authority at the time of selection.” 19 U.S.C. § 1677f-1(c)(2).
A. Inclusion in the Sample Rate of Respondent Margins based
on Adverse Facts Available
In arriving at the sample rate for non-selected respondents
Commerce included the adverse facts available rate of 43.32% it
assigned to mandatory respondent Hengtai, due to Hengtai’s failure
to provide Commerce with accurate and complete data. In assigning
this rate to Hengtai, Commerce exercised its authority under
section 776(b) of the Tariff Act, which provides that:
[i]f the administering authority . . . finds
that an interested party has failed to
cooperate by not acting to the best of its
ability to comply with a request for
information . . . the administering authority
. . . in reaching the applicable determination
under this subtitle, may use an inference that
is adverse to the interests of that party in
selecting from among the facts otherwise
available.
19 U.S.C. § 1677e(b). In addition, the Statement of
Administrative Action accompanying the Uruguay Round Agreements Act
(“SAA”) states that “[w]here a party has not cooperated, Commerce
. . . may employ adverse inferences about the missing information
to ensure that the party does not obtain a more favorable result by
failing to cooperate than if it had cooperated fully.” H.R. REP . NO .
103-316 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4199.
Plaintiffs argue that since Commerce made no finding that
Court No. 06-00430 Page 24
LABEC, Hongda, Luqi, and Gren (i.e., the four Plaintiffs not
selected for the sampled group) were uncooperative in this
proceeding, the antidumping statute does not permit Commerce to
assign these companies a sample rate based in whole or in part on
adverse facts available.18 See Pls.’ Br. at 13-14.
Commerce notes that it calculated the sample rate in this case
by “weight-averaging the individual rates of all five of the
mandatory respondents, including two de minimis rates, one rate
based on ‘adverse facts available’ and two additional calculated
rates.” Commerce Br. at 22-23. Additionally, Commerce stresses
that it is not applying adverse facts available to the voluntary
respondents, but instead it is “applying a statistically valid
sample rate that is representative of producers as a whole.” Id.
at 23. The Court agrees.
Computing a statistically valid sample rate that is
representative of the population as a whole may include the margins
determined for all selected respondents, even if that sample rate
happens to be composed in part on a respondent’s rate which is
based on adverse facts available. Accordingly, assigning a sample
18
The result was a weighted-average sample rate of 8.9%.
This sample rate was based in part on the 43.32% adverse fact
available rate that Commerce assigned to uncooperative mandatory
respondent Hengtai. Commerce, in accordance with § 1677f-
1(c)(2)(A), applied this weighted-average rate to all non-
selected voluntary respondents. See Commerce Br. at 23; Pls.’ Br.
at 11; Final Determination.
Court No. 06-00430 Page 25
rate to a group which was calculated including an adverse facts
available rate is not an application of adverse facts available as
to that group, and is in accordance with Commerce’s statutory
authority to sample.19
It is important to note that Commerce is not cherry picking
here, nor is there anything arbitrary about the way it is
constructing this sample. As stated above, the overall sample rate
was based on a weighted-average which happened to include two de
minimis rates along with the rate based on adverse facts available.
This Court therefore need not address Plaintiffs’ contention that
Commerce’s approach “punishes fully cooperative parties by
assigning them a rate unfairly inflated by the non-cooperation of
[another] party,” as this is more a moral argument than a legal
one. Pls.’ Br. at 12-13. A sample rate by its nature cannot meet
the precision of an individualized rate as to any given party.
Therefore, companies that would otherwise have received an
individualized rate lower than the sample rate will in a sense be
19
Commerce notes that 19 U.S.C. § 1677f-1(c)(2) directs it
to obtain a “statistically valid” sample while § 1677e(b)
authorizes the use of “adverse inferences” where a respondent is
non-cooperative. Commerce argues that its determination here
“reads these two provisions consistently rather than in conflict,
is reasonable, and should be sustained by the Court,” and cites
to the deference standard under Chevron U.S.A., Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837 (1984) and its
progeny. Commerce Br. at 25. As the Court agrees with Commerce’s
alternate argument supra, that this is not a case of applying
adverse facts as contemplated under 19 U.S.C. § 1677e(b), this
argument need not be addressed.
Court No. 06-00430 Page 26
punished while those that would otherwise have received a higher
rate will benefit.20 This element is an inherent and accepted part
of any sample.
Lastly, Plaintiffs state that there is a distinction between
determining a statistically valid dumping rate and selecting from
a statistically valid pool of respondents. See Pls.’ Reply Br. at
5; 19 U.S.C. § 1677f-1(c)(2). Plaintiffs argue that Commerce’s
statutory obligation is to the latter, and conclude, therefore,
that “Commerce’s action [including an adverse facts available rate
to calculate the sample rate] rests on its false assumption that
the law requires a ‘statistically valid’ dumping rate to result
from the ‘statistically valid’ pool of respondents.”21 Pls.’ Reply
Br. at 5. While Plaintiffs initial distinction is an accurate
statement in and of itself, the conclusion they draw from it is
erroneous. Suffice it to say that the point of requiring selection
from a statistically valid pool of respondents is to arrive at a
statistically valid dumping rate.
20
It is important to note that Plaintiffs’ “punishment”
argument would apply to any rate factored into the sample rate
that would be higher than its own individualized rates.
21
Plaintiffs contend that “[t]he law does not require that
the sample rate be the most statistically valid rate available.”
Pls.’ Reply Br. at 5 (emphasis added). The implication appears
to be that Commerce may throw out any rates based on adverse
facts and still calculate a statistically valid group rate,
albeit not the most statistically valid group rate.
Court No. 06-00430 Page 27
B. Not Allowing for Voluntary Respondents
As stated above, if it is not practicable to make an
individual weighted average dumping margin determination, Commerce
may limit its review to “a sample of exporters, producers, or types
of products that is statistically valid based on the information
available to the administering authority at the time of selection.”
19 U.S.C. § 1677f-1(c)(2). However, Congress provided that where
Commerce limits its examinations to a sample it
shall establish an . . . individual weighted
average dumping margin for any exporter or
producer not initially selected for individual
examination . . . who submits to the
administering authority the information
requested from exporters or producers selected
for examination, if - (2) the number of
exporters or producers who have submitted such
information is not so large that individual
examination of such exporters or producers
would be unduly burdensome and inhibit the
timely completion of the investigation.
19 U.S.C. § 1677m(a) (emphasis added); Pls.’ Br. at 16.
Plaintiffs argue that “[b]y formally announcing in advance
that it would not accept any voluntary respondents,” Commerce
violated the intent and language of the statute. Pls.’ Br. at 17.
Plaintiffs stress that Commerce decided not to allow voluntary
respondents even before the ultimate number of respondents was
known. See id. This decision, Plaintiffs contend, “rendered
nugatory the law’s Section 782(a) voluntary respondent provision,
and illegally truncated a two-step ‘sample respondents/consider
voluntary respondents’ process into a one-step decision.” Id.
Court No. 06-00430 Page 28
Plaintiffs point to the fact that Commerce calculated
individual company-specific rates for twelve companies in the 2001-
2002 review, twelve companies in the 2002-2003 review, and fourteen
companies in the 2003-2004 review. See id. at 16. These previous
reviews, Plaintiffs contend, demonstrate that “the five respondents
individually examined by Commerce in the underlying proceeding were
far from ‘particularly high,’” and therefore Commerce should have
“endeavored to calculate individual rates for as many more
companies as possible.” Id.
Commerce defends its determination by stressing that “the
agency itself is the only entity with the ability to assess its
administrative capacity and resources.” Commerce Br. at 13.
Additionally, Commerce notes that “[t]he fact that in prior reviews
of the brake rotors antidumping order, Commerce was able to
individually investigate every company that sought a review,
including all of the plaintiffs, has no bearing on plaintiffs’
present challenge.” Id. at 14.
As to Plaintiffs’ argument objecting to the advance
announcement to not accept any voluntary respondents, Commerce
counters by contending that if it “selects the maximum number of
companies that it can feasibly review, there is no requirement or
reason that [it] should refrain from giving notice of this fact to
parties.” Id. at 17.
The Court finds that Commerce’s determination to limit review
Court No. 06-00430 Page 29
in advance to five of the sixteen companies was in this case within
the bounds of its statutory authority.
Since it is not disputed that Commerce has the statutory
authority to sample, the two questions in need of answering are
(i) whether Commerce is authorized to make an advanced assessment
of the anticipated resources that it can devote to a given review
and announce any constraints accordingly (here, limiting individual
reviews to the five mandatory sampled respondents); and (ii)
whether in this case Commerce reasonably selected the maximum
number of companies that it can feasibly review.
The Court agrees with Commerce that it is within its
authority to make an advanced assessment of the anticipated
resources that it can devote to a given administrative review and,
having made such an assessment, may announce any administrative
limitations. The United States Court of Appeals for the Federal
Circuit has recognized that “agencies with statutory enforcement
responsibilities enjoy broad discretion in allocating investigative
enforcement resources.” Torrington v. United States, 68 F.3d 1347,
1351 (citing Heckler v. Chaney, 470 U.S. 821, 831 (1985)).
Commerce, like any organization seeking efficient operations, plans
for the proper management of its time and resources. There is no
statutory requirement for Commerce to apply a pro forma bifurcated
approach as Plaintiffs contend.
As to the second question, the Court finds that Commerce’s
Court No. 06-00430 Page 30
determination to limit review in this case to five companies is
reasonable. The record does not show, and Plaintiffs did not
demonstrate, that Commerce could have conducted more individual
examinations without undue burden and without inhibiting the timely
completion of the investigation. It is not enough to merely point
to past reviews which included more companies, as administrative
capacity and resources may change from year to year.
C. Sample Rate as Applied to Plaintiffs Not Supported or
Representative
Commerce calculated the sample rate in this review by “weight-
averaging the individual rates of all the selected respondents,
chosen through a statistically valid, random sampling exercise, and
applied that weighted-average rate to the non-selected voluntary
respondents,” including Plaintiffs. Commerce Br. at 19.
Plaintiffs argue that the Final Determination rate assigned to
LABEC, Hongda, Luqi and Gren was contrary to law because the record
evidence demonstrates that the rate assigned through the sample is
not representative of the companies’ actual level of dumping. See
Pls.’ Br. at 20. Plaintiffs contend that Commerce “should have
used the U.S. sales and [factors of production] data and/or the
quantity and value data submitted by each of the companies as the
best available information to calculate company-specific margins.”
Id. at 19. Plaintiffs add that Commerce “ignored this information,
and examined the sales and [factors of production] data only of
Court No. 06-00430 Page 31
those companies selected through Commerce’s sampling exercise.”
Id. at 20.
Plaintiffs also point to § 1677m(e) of the statute which
states that Commerce “shall not decline to consider information
that is submitted by an interested party . . . but does not meet
all the applicable requirements established by the administering
authority” if certain criteria is met. Id. at 19-20.
Plaintiffs’ argument, accurately restated by Commerce, is that
“although [Plaintiffs] were not selected for the review, Commerce
should have nevertheless relied upon [Plaintiffs’ respective]
company-specific submissions for purposes of calculating their
antidumping margins.” Commerce Br. at 19. Commerce correctly
points out that Plaintiffs argument is contrary to § 1677m of the
statute which, as discussed supra, allows Commerce the authority to
decline individual reviews when conducting such reviews would be
unduly burdensome and inhibit the timely completion of the
investigation. See § 1677m(a)(2).
In response to Plaintiffs’ § 1677m(e) argument, Commerce
correctly counters that this provision of the statute does not
apply, as “Commerce did not reject plaintiffs’ submission for
failure to meet applicable requirements; rather, it determined not
to conduct individual reviews (including calculation of an
individual antidumping rate) as a result of lack of administrative
resources.” Commerce Br. at 20. Additionally, Commerce stresses
Court No. 06-00430 Page 32
that “[t]he mere submission of an initial questionnaire response
normally will not provide a basis for determining an antidumping
rate” and that “[i]n many cases, there are multiple additional
submissions and verification of data.” Commerce Br. at 21-22.
The Court finds that Commerce’s determination to apply the
weighted-average sample rate to the non-selected voluntary
respondents, including Plaintiffs, was reasonable and in accordance
with Commerce’s statutory authority. Since it is reasonable for
Commerce to select the maximum number of companies that it can
feasibly review based on administrative resources available (which
can be a number less than the total number of companies seeking
review), then it must be understood that companies not selected for
review will not have individual rates applied.
Conducting an administrative review, as Commerce points out,
is not as simple as Plaintiffs would suggest and additional
submissions and/or verification can be required. See Commerce Br.
at 21-22. The Court agrees with Commerce’s assessment that
“Plaintiffs’ approach would create an untenable result that negates
Commerce’s authority and ability to internally manage its
administrative resources.” Id. at 22. As Commerce correctly
states it, Plaintiffs would have this Court impose a standard under
which Commerce would be required to either: (i) conduct a review
for every respondent that claims to have submitted complete sales
and production data, regardless of the agency’s decision to limit
Court No. 06-00430 Page 33
the number of producers examined; or (ii) rely upon potentially
incomplete and unverified questionnaire responses for determining
all voluntary respondent rates. See id. This standard is contrary
to the statute.
CONCLUSION
In accordance with the foregoing, the Court affirms Commerce’s
determination in part and remands in part.
/s/ Nicholas Tsoucalas ___
NICHOLAS TSOUCALAS
SENIOR JUDGE
Dated: June 26, 2008
New York, New York