Jacobi Carbons AB v. United States , 313 F. Supp. 3d 1308 ( 2018 )

Slip Op. 18-46
UNITED STATES COURT OF INTERNATIONAL TRADE
JACOBI CARBONS AB AND JACOBI
CARBONS, INC.,
Plaintiffs,
and
NINGXIA HUAHUI ACTIVATED
CARBON CO., LTD., et al.,
Plaintiff-Intervenors,
Before: Mark A. Barnett, Judge
v.
Consol. Court No. 15-00286
UNITED STATES,
Defendant,
and
CALGON CARBON CORP. AND CABOT
NORIT AM., INC.,
Defendant-Intervenors.
OPINION AND ORDER
[Sustaining Commerce’s determination with respect to economic comparability.
Remanding Commerce’s determinations with respect to significant production of
comparable merchandise, surrogate value selections, and the irrecoverable value
added tax adjustment.]
Dated: April 19, 2018
Daniel L. Porter and Tung A. Nguyen, Curtis, Mallet-Prevost, Colt & Mosle LLP, of
Washington, DC, argued for Plaintiffs Jacobi Carbons AB and Jacobi Carbons, Inc.
Gregory S. Menegaz and Alexandra H. Salzman DeKieffer & Horgan PLLC, of
Washington, DC, argued for Plaintiff-Intervenors Carbon Activated Tianjin Co., Ltd., Jilin
Bright Future Chemicals Co., Ltd., Ningxia Mineral and Chemical Ltd., Shanxi DMD
Corp., Shanxi Industry Technology Trading Co., Ltd., Shanxi Sincere Industrial Co.,
Ltd., Tancarb Activated Carbon Co., Ltd., and Tianjin Maijin Industries Co., Ltd. With
them on the brief was J. Kevin Horgan.
Consol. Court No. 15-00286 Page 2
Jeffrey S. Grimson, Kristin H. Mowry, Jill A. Cramer, Sarah M. Wyss, Yuzhe PengLing,
and James C. Beaty, Mowry & Grimson, PLLC, of Washington, DC, for Plaintiff-
Intervenor Ningxia Huahui Activated Carbon Co., Ltd.
Francis J. Sailer and Dharmendra N. Choudhary, Grunfeld, Desiderio, Lebowitz,
Silverman & Klestadt LLP, of Washington, DC, for Plaintiff-Intervenors Ningxia
Guanghua Cherishmet Activated Carbon Co., Ltd, Beijing Pacific Activated Carbon
Products Co., Ltd., Datong Municipal Yunguang Activated Carbon Co., Ltd, and
Cherishmet Inc.
Antonia R. Soares, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, DC, argued for Defendant. With her on the brief
were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson,
Director, and Reginald T. Blades, Jr., Assistant Director. Of counsel on the brief was
Emma T. Hunter, Attorney, Office of the Chief Counsel for Trade Enforcement and
Compliance, U.S. Department of Commerce, of Washington, DC.
R. Alan Luberda and Melissa M. Brewer, Kelley Drye & Warren LLP, of Washington,
DC, argued for Defendant-Intervenors Calgon Carbon Corp. and Cabot Norit Americas,
Inc. With them on the brief were John M. Herrmann, David A. Hartquist, and Scott M.
Wise.
Barnett, Judge: This matter is before the court following the U.S. Department of
Commerce’s (“Commerce” or the “agency”) redetermination upon remand in this case.
See Final Results of Redetermination Pursuant to Court Remand (“Remand Results”),
ECF No. 105-1.
Plaintiffs Jacobi Carbons AB and Jacobi Carbons, Inc. (together, “Jacobi”), and
Plaintiff-Intervenors 1 (collectively, with Jacobi, “Plaintiffs”), initiated this case challenging
1 Plaintiff-Intervenors include: Ningxia Huahui Activated Carbon Co., Ltd. (“Huahui”);
Carbon Activated Tianjin Co., Ltd., Jilin Bright Future Chemicals Company, Ltd., Ningxia
Mineral and Chemical Limited, Shanxi DMD Corporation, Shanxi Industry Technology
Trading Co., Ltd., Shanxi Sincere Industrial Co., Ltd., Tancarb Activated Co., Ltd., and
Tianjin Maijin Industries Co., Ltd. (collectively, “CATC”); and Ningxia Guanghua
Cherishmet Activated Carbon Co., Ltd., Beijing Pacific Activated Carbon Products Co.,
Ltd., Cherishmet Inc., and Datong Municipal Yunguang Activated Carbon Co., Ltd.,
(collectively, “Cherishmet”). The court consolidated cases filed by Huahui, CATC, and
Cherishmet under lead Court No. 15-286. See Order (Dec. 16, 2015), ECF No. 39.
Consol. Court No. 15-00286 Page 3
Commerce’s final results in the seventh administrative review (“AR7”) of the
antidumping duty order on certain activated carbon from the People’s Republic of China
(“PRC” or “China”). See Certain Activated Carbon from the People’s Republic of China,
80 Fed. Reg. 61,172 (Dep’t Commerce Oct. 9, 2015) (final results of antidumping duty
admin. review; 2013-2014) (“Final Results”), ECF No. 37-3, and accompanying Issues
and Decision Mem., A-570-904 (Oct. 2, 2015) (“I&D Mem.”), ECF No. 37-4. 2 Plaintiffs
challenged Commerce’s (1) selection of Thailand as the primary surrogate country, (2)
selection of Thai surrogate values to value financial ratios and carbonized material, and
(3) reduction of Jacobi’s constructed export price (“CEP”) by an amount for
irrecoverable value added tax (“VAT”). See generally Confidential Pls. Jacobi Carbons
AB and Jacobi Carbons, Inc.’s Mot. for J. on the Agency R. and Pls.’ Br. in Supp. of
their Mot. for J. on the Agency R. (“Jacobi Rule 56.2 Mem.”), ECF No. 51; Pls. Carbon
Activated Tianjin Co., Ltd., Jilin Bright Future Chemicals Company, Ltd., Ningxia Mineral
and Chemical Limited, Shanxi DMD Corporation, Shanxi Industry Technology Trading
Those parties had also intervened in this case. See Order (Oct. 26, 2015), ECF No. 22;
Order (Nov. 17, 2015), ECF No. 28; Order (Nov. 20, 2015), ECF No.33. Accordingly,
those parties are referred to by the court as “Plaintiff-Intervenors” rather than
“Consolidated Plaintiffs.”
2 The administrative record filed in connection with the Final Results is divided into a
Public Administrative Record (“PR”), ECF No. 37-1, and a Confidential Administrative
Record (“CR”), ECF No. 37-2. Parties submitted joint appendices containing all record
documents cited in their Rule 56.2 briefs. See Public Joint App. (“PJA”), ECF Nos. 85,
85-1 to 85-4; Confidential Joint App. (“CJA”), ECF No. 86. The administrative record
associated with the Remand Results is contained in a Public Remand Record (“RR”),
ECF No. 106-2. Parties submitted a joint appendix containing record documents cited
in their Remand briefs. See Joint App. to Parties’ Comments on Remand Results
(“RJA”), ECF No. 114. Parties also submitted supplemental documents pursuant to
court request. See Confidential Submission of Admin. R. Documents (“Suppl. Conf.
RJA”), ECF No. 119; Confidential Submission of Admin. R. Evidence Discussed at Oral
Arg. (“2nd. Suppl. Conf. RJA”), ECF No. 120.
Consol. Court No. 15-00286 Page 4
Co., Ltd., Shanxi Sincere Industrial Co., Ltd., Tancarb Activated Carbon Co., Ltd., and
Tianjin Maijin Industries Co., Ltd. Mot. for J. on the Agency R., ECF No. 59; Pls. Carbon
Activated Tianjin Co., Ltd., Jilin Bright Future Chemicals Company, Ltd., Ningxia Mineral
and Chemical Limited, Shanxi DMD Corporation, Shanxi Industry Technology Trading
Co., Ltd., Shanxi Sincere Industrial Co., Ltd., Tancarb Activated Carbon Co., Ltd., and
Tianjin Maijin Industries Co., Ltd. Mem. in Supp. of Mot. for J. on the Agency R. (“CATC
Rule 56.2 Mem.”), ECF No. 59-2 (incorporating Jacobi’s arguments and providing
additional arguments on all issues); Pl.-Int. Ningxia Huahui Activated Carbon Co., Ltd.’s
Rule 56.2 Mot. for J. on the Agency R., ECF No. 58 (incorporating Jacobi’s arguments
regarding surrogate country and surrogate value selection, adopting Jacobi’s arguments
regarding VAT and making additional arguments thereto); Mot. of GDLSK Pl.-Ints. for J.
on the Agency R. under USCIT Rule 56.2 and Mem. of Law in Supp. of GDLSK Pls.’
Rule 56.2 Mot. for J. on the Agency R., ECF No. 60 (adopting all arguments made by
Jacobi and providing additional argument regarding VAT).
On April 7, 2017, the court remanded Commerce’s surrogate country selection
(in particular, its determinations vis-à-vis economic comparability and significant
production of comparable merchandise), and Commerce’s irrecoverable VAT
adjustment for further explanation or reconsideration, and deferred considering
Plaintiffs’ arguments regarding Thai surrogate values pending the results of
Commerce’s remand redetermination. See Jacobi Carbons AB v. United States
(“Jacobi (AR7) I”), 41 CIT ___, 222 F. Supp. 3d 1159 (2017). 3 Commerce filed its
3 The court’s opinion in Jacobi (AR7) I presents background information on this case,
familiarity with which is presumed.
Consol. Court No. 15-00286 Page 5
remand redetermination on August 10, 2017. See Remand Results. Therein,
Commerce retained Thailand as the primary surrogate country and further explained its
VAT calculation. See id.Jacobi, CATC, and Cherishmet filed comments opposing the Remand Results.
See Jacobi’s Comment on Commerce’s Remand Redetermination (“Jacobi Opp’n
Cmts”), ECF No. 108; Consol. Pls. Carbon Activated Tianjin Co., Ltd., Jilin Bright Future
Chemicals Company, Ltd., Ningxia Mineral and Chemical Limited, Shanxi DMD
Corporation, Shanxi Industry Technology Trading Co., Ltd., Shanxi Sincere Industrial
Co., Ltd., Tancarb Activated Carbon Co., Ltd., and Tianjin Maijin Industries Co., Ltd.
Comments in Opp’n to U.S. Department of Commerce’s Remand Redetermination
(“CATC Opp’n Cmts”), ECF No. 107; GDLSK Pls.’ Comment on Commerce’s Remand
Redetermination, ECF No. 109 (adopting Jacobi’s comments). Defendant and
Defendant-Intervenors filed comments in support of the Remand Results. See Def.’s
Reply to Pls.’, Consol. Pls.’, and Pl-Ints.’ Respective Comments on the Remand
Redetermination (“Gov. Supp. Cmts”), ECF No. 112; Def.-Ints.’ Responsive Comments
in Supp. of U.S. Department of Commerce’s Remand Redetermination (“Def-Ints. Supp.
Cmts”), ECF No. 113. On February 15, 2018, the court held oral argument on the
irrecoverable VAT issue. See Order (Jan. 26, 2018), ECF No. 117; Docket Entry, ECF
No. 121.
For the following reasons, the court sustains Commerce’s economic
comparability determination but remands its determinations regarding significant
production of comparable merchandise, surrogate value selections, and the
irrecoverable VAT adjustment.
Consol. Court No. 15-00286 Page 6
JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction pursuant to § 516A(a)(2)(B)(iii) of the Tariff Act of 1930,
as amended, 19 U.S.C. § 1516a(a)(2)(B)(iii) (2012), 4 and 28 U.S.C. § 1581(c). The
court will uphold an agency determination that is supported by substantial evidence and
otherwise in accordance with law. 19 U.S.C. § 1516a(b)(1)(B)(i). “The results of a
redetermination pursuant to court remand are also reviewed for compliance with the
court’s remand order.” SolarWorld Americas, Inc. v. United States, 41 CIT ___, ___,
273 F. Supp. 3d 1314, 1317 (2017) (quoting Xinjiamei Furniture (Zhangzhou) Co. v.
United States, 38 CIT ___, ___, 968 F. Supp. 2d 1255, 1259 (2014)(internal quotation
marks omitted).
DISCUSSION
I. Relevant Legal Framework for Nonmarket Economy Proceedings
An antidumping duty is “the amount by which the normal value exceeds the
export price (or the constructed export price) for the merchandise.” 19 U.S.C. § 1673.
When an antidumping duty proceeding involves a nonmarket economy country,
Commerce determines normal value by valuing the factors of production 5 in a surrogate
country, see 19 U.S.C. § 1677b(c)(1), and those values are referred to as “surrogate
values.” In selecting surrogate values, Commerce must use “the best available
information” that is, “to the extent possible,” from a market economy country or
4 All further citations to the Tariff Act of 1930, as amended, are to Title 19 of the U.S.
Code, and all references to the U.S. Code are to the 2012 edition, unless otherwise
stated.
5 The factors of production include, but are not limited to: “(A) hours of labor required,
(B) quantities of raw materials employed, (C) amounts of energy and other utilities
consumed, and (D) representative capital cost, including depreciation.” 19 U.S.C.
§ 1677b(c)(3).
Consol. Court No. 15-00286 Page 7
countries that are economically comparable to the nonmarket economy country and
“significant producers of comparable merchandise.” Id. § 1677b(c)(1),(4). In selecting
its surrogate values, Commerce generally prefers publicly-available and “non-
proprietary information from producers of identical or comparable merchandise in the
surrogate country.” 19 C.F.R. § 351.408(c)(1),(4). Commerce’s practice “is to select, to
the extent practicable, [surrogate values] which are product-specific, representative of a
broad-market average, publicly available and contemporaneous with the POR [“period
of review”], and tax and duty exclusive.” I&D Mem. at 25.
Commerce generally values all factors of production in a single surrogate
country. 6 Commerce has adopted a four-step approach to selecting a primary surrogate
country. See Import Admin., U.S. Dep’t of Commerce, Non-Market Economy Surrogate
Country Selection Process, Policy Bulletin 04.1 (2004), http://enforcement.trade.gov/
policy/bull04-1.html (last visited April 10, 2018) (hereinafter “Policy Bulletin 04.1”).
Pursuant to Policy Bulletin 04.1,
(1) the Office of Policy (“OP”) assembles a list of potential surrogate
countries that are at a comparable level of economic development to the
[non-market economy] country; (2) Commerce identifies countries from the
list with producers of comparable merchandise; (3) Commerce determines
whether any of the countries which produce comparable merchandise are
significant producers of that comparable merchandise; and (4) if more than
one country satisfies steps (1)–(3), Commerce will select the country with
the best factors data.
6 See 19 C.F.R. § 351.408(c)(2) (excepting labor). But see Antidumping Methodologies
in Proceedings Involving Non-Market Economies: Valuing the Factor of Production:
Labor, 76 Fed. Reg. 36,092 (Dep’t Commerce June 21, 2011) (expressing a preference
to value labor based on industry-specific labor rates from the primary surrogate
country).
Consol. Court No. 15-00286 Page 8
Jiaxing Brother Fastener Co., Ltd. v. United States, 822 F.3d 1289, 1293 (Fed. Cir.
2016) (citation omitted); see also Policy Bulletin 04.1.
When calculating export price and constructed export price, Commerce may
deduct “the amount, if included in such price, of any export tax, duty, or other charge
imposed by the exporting country on the exportation of the subject merchandise to the
United States, other than an export tax, duty, or other charge described in section
1677(6)(C) of this title.” 7 19 U.S.C. § 1677a(c)(2)(B). Such price adjustments must be
“reasonably attributable to the subject merchandise.” 19 C.F.R. § 351.401(c).
In 2012, Commerce reconsidered its unwillingness to apply § 1677a(c)(2)(B) to
certain NME countries, including China, 8 and, henceforth, considers whether the PRC
“has imposed an export tax, duty, or other charge upon export of the subject
merchandise during the period of investigation or the period of review,” including, for
example, “an export tax or VAT that is not fully refunded upon exportation.”
Methodological Change for Implementation of Section 772(c)(2)(B) of the Tariff Act of
1930, as Amended, In Certain Non–Market Economy Antidumping Proceedings, 77
Fed. Reg. 36,481, 36,482 (Dep't Commerce June 19, 2012) (“Methodological Change”)
(internal quotation marks omitted). If it has, Commerce will “reduce the respondent's
export price and constructed export price accordingly, by the amount of the tax, duty or
charge paid, but not rebated.” Id. at 36,483. When the VAT is “a fixed percentage of
the price,” Commerce “will adjust the export price or constructed export price downward
7 Section 1677(6)(C), which concerns “export taxes, duties, or other charges levied on
the export of merchandise to the United States specifically intended to offset the
countervailable subsidy received,” is not relevant here.
8 For a more detailed overview of Commerce’s policy change with respect to NMEs, see
Jacobi (AR7) I, 222 F. Supp. 3d at 1184-85.
Consol. Court No. 15-00286 Page 9
by the same percentage.” Id. “[B]ecause these are taxes affirmatively imposed by the
Chinese . . . government[],” Commerce “presume[s] that they are also collected.” Id.
II. Economic Comparability
In briefing their original Rule 56.2 motions, Plaintiffs argued that Commerce erred
when it excluded the Philippines as a potential surrogate country solely on the basis of
economic comparability and declined to consider its significant production of
comparable merchandise and data quality. See Jacobi Rule 56.2 Mem. at 9-13; CATC
Rule 56.2 Mem. at 5 (asserting that “[Commerce] cannot lawfully make one criterion a
threshold requirement . . . .”). The court upheld Commerce’s sequential surrogate
country selection methodology, but found that its economic comparability determination
in this matter lacked reasoned analysis. Jacobi (AR7) I, 222 F. Supp. 3d at 1171-75,
1176-79. The court remanded the Final Results “for Commerce to provide a reasoned
explanation as to why the range of GNI data reflected on OP’s list demonstrates
economic comparability to the PRC, including why the Philippines’ GNI does not.” Id. at
1179 (citation omitted).
A. Commerce’s Redetermination
On remand, Commerce explained its formulation of the GNI range generally, and
in this proceeding specifically. See Remand Results at 3-15. Commerce’s “long-
standing practice” is to use per capita gross national income (“GNI”) data reported in the
World Bank’s annual World Development Report as the indicator of each country’s
economic development. Id. at 3 (citations omitted). Although the statute only requires
Commerce to seek a surrogate market economy country whose economic development
is “comparable” to the subject nonmarket economy (“NME”), when possible, the agency
Consol. Court No. 15-00286 Page 10
“selects a surrogate country at the same level of economic development as the NME
country.” Id. at 4. Commerce considers those countries that occupy a “relatively narrow
per capita GNI range that is centered on the per capita GNI of the NME country” to have
attained the same level of economic development. Id.
Commerce likens per capita GNI ranges to a flight of stairs. Id. at 5. “[E]ach
(flat) step . . . is associated with a [relatively narrow] range of per capita GNI,” whereas
“the staircase itself . . . is associated with a relatively broad range of per capita GNI.” Id.
The staircase metaphor demonstrates that
(a) the level of economic development increases with per capita GNI if the
difference or jump in per capita GNI is big enough to take one from step to
step, and (b) different countries can be at the same level of economic
development, even if their per capita GNIs differ, so long as those
differences are small enough that one stays on the same step.
Id. Commerce defines each step for each subject NME country “using a relatively
narrow range of per capita GNI [that is] centered on the country at issue.” Id. at 6.
The annual release of the World Development Report triggers Commerce’s
reconsideration of the surrogate countries on OP’s list. Id. at 10. Commerce first
“examines the per capita GNI data for the PRC and the change in per capita GNI from
the year before, and compares the change in the PRC’s per capita GNI to the
respective changes in the per capita GNIs of the existing set of surrogate countries,”
and “determine[s] whether it is necessary to re-center the GNI range in light of the year-
to-year GNI changes.” Id. Because of “the PRC’s rapid GNI growth rate,” Commerce
usually must re-center the list. Remand Results at 10. From 2009 to 2013, the PRC’s
per capita GNI grew from $3,590 to $6,560, an 82% increase. Id. at 10-11 (citations
Consol. Court No. 15-00286 Page 11
omitted). 9 Commerce subsequently “reevaluated the GNI range and expanded it at
roughly the same rate.” Id. at 10.
Commerce does not explicitly state how OP determines the precise per capita
GNI range associated with each “step” that it uses to formulate its list. See id. at 12-13
(simply noting that once it has “preliminarily determined” the per capita GNI range,
Commerce searches for suitable countries to include on the list). Commerce notes that
the GNI range associated with each step or “level” generally increases as economic
development increases. Id. at 11; see also id. at 12 (noting that “the World Bank’s
general premise of more expansive income ranges for higher per capita income is
informative to [Commerce’s] analysis”). 10 However, Commerce does explain that,
pursuant to judicial precedent, it attempts to balance the list by including three countries
above and below the PRC’s per capita GNI, for a total of six countries. Remand Results
at 13; see also id. at 9-10 & n.30 (citing Dorbest Ltd. v. United States, 35 CIT ___, ___,
755 F. Supp. 2d 1291, 1297-98 & n.17 (2011) (faulting Commerce for establishing a per
9 Table 1 in the Remand Results shows that, from 2009 to 2013, the per capita GNI
income of the highest country on the list increased 57 percent, from $5,770 to $9,060;
the per capita GNI of the lowest country on the list increased 121 percent, from $1,790
to $3,960; and the GNI range (i.e. the difference between the highest and lowest
country on the list) increased 28 percent, from $3,980 to $5,100. Remand Results at
10-11, Table 1.
10 Commerce notes that the World Bank relies on four income groups to classify a
country’s level of economic development. Remand Results at 11. Relevant here, the
World Bank’s upper middle income group, in which the PRC is included, reflects per
capita GNIs ranging from $4,126 to $12,745. Id. According to Commerce, the $5,100
per capita GNI range reflected in OP’s surrogate country list “is roughly consistent” with
the $8,619 World Bank range (i.e., $12,745 minus $4,126), indicating the
reasonableness of Commerce’s range. Id. at 11-12. Commerce does not rely on the
World Bank’s income groups, however, because they “are not sufficiently ‘centered’ on
the NME countries that are subject to [the agency’s antidumping] proceedings.” Id. at
12.
Consol. Court No. 15-00286 Page 12
capita GNI range that only included countries with incomes below China’s to determine
economic comparability)). Commerce may rebalance the list when a country changes
from having a per capita GNI higher than the PRC’s to one that is lower, and vice versa.
Remand Results at 13. When a surrogate country’s per capita GNI tracks China’s per
capita GNI, and is “actively used—and advocated for by interested parties[,] . . . there is
a strong inclination to continue relying on them” provided that country’s per capita GNI
remains within the selected range. Id. Countries that are not selected as surrogate
countries are reevaluated and may be replaced on the list. Id. When considering new
countries to add to the list, Commerce considers the surrogate value requirements for
the subject merchandise, data quality and availability, the “economic diversity of the
manufacturing sector,” and the “specificity of the import data relied on to value the
[factors of production].” Id. at 14. 11
The list is non-exhaustive, and is intended to provide interested parties with a
“manageable set of potential surrogate countries” to focus on. Id. at 14, 15. When an
interested party proposes an alternative country with a per capita GNI within the range
of countries on the list, Commerce affords that country the same consideration as
others on the list. Id. at 14. When an interested party proposes a country with a per
capita GNI outside the selected range, Commerce will consider the country only if its
data quality and availability, and significant producer status, outweigh its deficient
economic comparability, id. at 14-15, and only when none of the countries at the same
11For example, Dominica and Iraq have per capita GNIs close to that of China, but their
less diversified economies render them nonviable surrogates in light of the above-
mentioned considerations. Remand Results at 14.
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level of economic development (i.e., within Commerce’s per capita GNI range) present
viable surrogate country options, id. at 7-8. 12
As to the Philippines’ economic proximity to China, Commerce explains that,
from 2009 to 2013, the “absolute difference between the PRC[’s] per capita GNI and the
Philippines[’] per capita GNI grew” from $1,800 to $3,290. Id. at 16 & n. 45 (citations
omitted). Thus, “it was only a matter of time before the PRC—regardless of whatever
‘bright line’ or range is used to define a level of economic development . . .—would
eventually move into a level of economic development different than that of the
Philippines.” Id. at 16. Because of the growing difference between the two countries’
per capita GNI, there were more market economy countries falling between the per
capita GNIs of the Philippines and China. Id. at 16. Stated differently,
[f]rom 2000 to 2013, the PRC’s GNI per capita [had] grown 605 percent, or
an average of 16 percent a year, while the Philippines [had] grown 166
percent, or an average of 8 percent per year. As the per capita GNI of the
PRC has increased and outpaced that of the Philippines, which steadily
fell behind in terms of GNI, [Commerce] has sought other countries to fill
the void left by the Philippines.
Id. at 31 & n.108 (citations omitted). In this segment of the proceeding, OP identified
three other countries with per capita GNIs lower than China’s, but higher than the
Philippines’, to include on the list. Id. at 16. 13 Those countries were “likely to have good
data availability and quality, i.e., the specificity of these countries’ data are more likely to
assist the team in its valuation of the inputs.” Id. at 17 & n.46 (quoting Req. for
12 This may occur when none of the countries on the list are significant producers of
comparable merchandise or have suitable sources of surrogate value data. See
Remand Results at 7.
13 Ukraine, with a 2013 per capita GNI of $3,960, occupied the lowest point on the list.
Remand Results at 11 and 12; see also Gov. Supp. Cmts at 13 n.4 (noting that
Commerce erred in identifying Indonesia instead of the Ukraine in the Remand Results
as the country with the lowest per capita GNI on the list).
Consol. Court No. 15-00286 Page 14
Surrogate Country and Surrogate Value Comments and Information (July 25, 2014),
Attach. 1 at 2), RJA Tab 1, PR 64, ECF No. 114.
Because Commerce identified a country on the list (Thailand) that it determined
was a significant producer of comparable merchandise, and had good data availability
and quality, Commerce affirmed its prior opinion that the Philippines is “not an
appropriate surrogate country for purposes of [AR7].” Remand Results at 17-18.
B. Commerce’s Redetermination as to Economic Comparability is Sustained
Section 1677b(c)(4)(A) does not define the phrase “economic comparability” or
require a particular methodology to determine which countries are economically
comparable to the nonmarket economy country in question. See 19 U.S.C.
§ 1677b(c)(4); Jiaxing Brother Fastener Co., Ltd. v. United States, 38 CIT ___, ___, 961
F. Supp. 2d 1323, 1328 (2014), aff’d 822 F.3d 1289. Thus, “Commerce may perform its
duties in the way it believes most suitable,” provided its determinations are supported by
reasoned analysis and substantial evidence. Jiaxing Brother, 822 F.3d at 1298 (internal
quotation marks and citation omitted). With respect to economic comparability,
Commerce’s Remand Results meet those requirements. As detailed above, Commerce
has complied with the court’s instruction to better explain why its GNI range reflects
economic comparability to the PRC, including why the Philippines’ GNI does not. See
Jacobi (AR7) I, 222 F. Supp. 3d at 1179; Remand Results at 3-18. Commerce’s
decision to exclude the Philippines from the list of countries is supported by substantial
evidence demonstrating the widening disparity between the two countries’ level of
economic development. See Remand Results at 16 & n.45; id. at 31 & n.108. Plaintiffs’
contrary arguments are unavailing.
Consol. Court No. 15-00286 Page 15
Jacobi first contends that Commerce unreasonably determined that the
Philippines was not at the same level of economic development on the basis of its
“arbitrarily narrow GNI range.” Jacobi Opp’n Cmts at 3. According to Jacobi,
Commerce did not expand the GNI range as China’s per capita GNI increased, but
actually narrowed the range for 2013. Id. at 4-5. Specifically, between 2011 and 2013,
Jacobi asserts, Commerce narrowed the spread between China’s per capita GNI and
the lowest per capita GNI 14 on the surrogate list from 55.3 percent to 39.6 percent. Id.
at 5 (citing Remand Results at 10-11, Table 1).
The Remand Results show that as China’s per capita GNI increased from 2009
to 2013, Commerce increased the total per capita GNI range in U.S. dollar terms from
$3,980 to $5,100. Remand Results at 10-11, Table 1. 15 Commerce’s expansion of its
14 In other words, according to Jacobi, the difference between China’s per capita GNI
and the lowest per capita GNI on the list, expressed as a percentage of China’s per
capita GNI, decreased from 2011 to 2013. Jacobi Opp’n Cmts at 5.
15 Jacobi points to the fact that the total GNI range decreased from $5,430 in 2011 to
$5,100 in 2013. Jacobi Opp’n Cmts at 5. Generally speaking, however, from 2009 to
2013, the GNI range increased as China’s per capita GNI increased. See Remand
Results at 10-11, Table 1. Jacobi also raises arguments about whether Commerce
relied on absolute percentage differences from China’s GNI or absolute value
differences. Jacobi Opp’n Cmts at 5-7. At oral argument on Jacobi’s Rule 56.2 Motion,
“Defendant explained that OP relied on absolute percentage differences from China’s
GNI to determine the GNI range; Ukraine, at 39.7 [percent] of China's GNI represented
the low end of the range; and the Philippines’ GNI, which was less than 50 percent of
China’s GNI, thus fell outside the range.” Jacobi (AR7) I, 222 F. Supp. 3d at 1178
(internal quotation marks, citation, and alteration omitted). In the Remand Results,
Commerce notes that “the absolute percentage difference between the GNI of the PRC
and the Philippines is 66.93 percent, not 50 percent, which is not within the GNI range
on a percentage basis as argued by Jacobi.” Remand Results at 31; see also Gov.
Supp. Cmts at 12 n.3 (calculating the absolute percentage difference). Nevertheless,
Commerce did not rely on the absolute percentage difference to determine the GNI
range. See Remand Results at 10-15. Instead, Commerce relied on the “absolute
difference,” i.e., the difference between China’s and the Philippines’ respective per
capita GNIs expressed as dollar values, to determine that the Philippines is not at the
same level of economic development. See id. at 16. As with any real-world data set,
Consol. Court No. 15-00286 Page 16
GNI range need not exactly mirror China’s economic growth; mathematical precision is
not required. Cf. Dorbest, 755 F. Supp. 2d at 1298 (“Commerce does not have to
achieve mathematical perfection in its choice of countries to act as bookends for its
initial selection [of the GNI range].”). Rather, as China’s per capita GNI increases,
countries occupying a broader range of per capita GNIs may generally be considered to
be at the same level of economic development, and the increased range reflects that
principle. See Remand Results at 11-12.
Jacobi also contends that Commerce’s determination that the Philippines is not
at the same level of economic development as the PRC is “factually incorrect,” because
“the Philippines was as economically comparable to China in 2013 as in previous years
when Commerce found the Philippines to be at the same level of economic
development.” Jacobi Opp’n Cmts at 6 (emphasis omitted). Jacobi made a similar
argument in the proceedings before remand, see Jacobi Rule 56.2 Mem. at 14-15, to
which the Government responded that it “is not required . . . to use the same surrogate
country that it used in previous reviews,” and it “selects the primary surrogate country
for each segment of a proceeding based on the record of that particular segment,” Gov.
Rule 56.2 Resp. at 29.
In Jacobi (AR7) I, the court explained that
[the Government] is correct that nothing in the statute requires it to
consider any particular country as a surrogate country. [E]ach
the statistics cited by the Parties may be examined through multiple lenses to suggest
various trends or to dispute those trends. For purposes of the court’s review, the
question is not whether there is a perfect alignment of every data point regardless of the
lens through which it is examined, but whether the data, as a whole, reasonably support
the agency’s conclusion. In this case, as discussed herein, the data reasonably
supports the agency’s finding that the Philippines is no longer at the same level of
economic development as China.
Consol. Court No. 15-00286 Page 17
administrative review is a separate exercise of Commerce's authority that
allows for different conclusions based on different facts in the record.
Accordingly, the validity of Commerce’s decision to exclude the
Philippines from its list of potential surrogate countries for AR7 depends
on the validity of Commerce's compilation of the list generally.
222 F. Supp. 3d at 1176-77 (internal quotation marks and citations omitted). As
discussed above, Commerce’s compilation of the list is reasonably based on its
examination of annual changes to China’s per capita GNI and re-centering of the list
based on China’s rapid economic expansion. See Remand Results at 10. Contrary to
Jacobi’s contention, see Jacobi Opp’n Cmts at 7, Commerce’s explanation that the GNI
range for a particular economic step increases with higher levels of economic
development is not inconsistent with Commerce’s exclusion of the Philippines because,
as this court has recognized, Commerce properly may “narrow a list of countries within
a band for purposes of administrative feasibility,” Juangcheng Kangtai Chem. Co., Ltd.
v. United States, Slip Op. 15-93, 2015 WL 4999476, at *7-8 (CIT Aug. 21, 2015)
(internal quotation marks omitted); see also Remand Results at 10. Commerce’s
decision to limit OP’s list of potential surrogates to six countries represents “precisely
the type of discretion left within the agency’s domain.” Baoding Yude Chem. Indus. Co.,
Ltd. v. United States, 25 CIT 1118, 1126, 170 F. Supp. 2d 1335, 1343 (2001)
(Commerce’s statutory obligation to select the best information available, for which
“[t]here are no set rules,” provides Commerce with the discretion to make certain
determinations based on the record before it, provided those determinations are
supported by substantial evidence); see also Remand Results at 15 (explaining that
OP’s list “is intended to initiate a process whereby parties can focus their attention on a
manageable set of potential surrogate countries”) (emphasis added). Commerce’s
Consol. Court No. 15-00286 Page 18
decision to exclude the Philippines is supported by substantial evidence demonstrating
the widening gap between its per capita GNI and China’s, and the apparent availability
of other suitable countries. See Remand Results at 16 & n.45, 17 & n.46, and 31 &
n.108 (citations omitted). That Jacobi may draw a different conclusion from the
evidence does not mean that Commerce’s decision is not supported by substantial
evidence. See Matsushita Elec. Indus. Co. v. United States, 750 F.2d 927, 933 (Fed.
Cir. 1984).
Finally, CATC contends that Commerce has not provided a “predictable or
reasonable” method of assessing economic comparability. CATC Opp’n Cmts at 1. 16
CATC points to the difference between China’s percentage change in per capita GNI
and the percentage change in the GNI band from 2009 to 2013 to support its argument
that Commerce has not expanded the GNI range at roughly the same rate as China’s
increase. CATC Opp’n Cmts at 2. 17 To be sure, the percentage change in the GNI
16 CATC also asserts that Commerce’s “failed explanation of its GNI band . . .
underscores [CATC’s] argument that [Commerce] has unlawfully and unreasonably
considered economic comparability as the primary surrogate country factor to the
exclusion of . . . significant production and quality of data.” CATC Opp’n Cmts at 1-2.
According to CATC, this treatment of economic comparability “undermin[es] the plain
meaning of the statute and the over-arching purpose of using the ‘best available
information.’” Id. at 2. This is a reformulation of CATC’s argument that Commerce
cannot lawfully treat economic comparability as a threshold consideration in its
examination of potential surrogate countries. See CATC Rule 56.2 Mem. at 5. The
court rejected that argument in Jacobi (AR7) I. See Jacobi (AR7) I, 222 F. Supp. 3d at
1172 (citations omitted); see also id. at 1175 n. 14 (rejecting “CATC’s argument that the
statutory mandate to use the ‘best available information’ elevates Commerce’s data
criterion such that it ‘is, at a minimum, equally as critical’ as the economic comparability
and significant production criteria” as “a red herring”).
17 CATC also points the court to data spanning 2002 to 2014 and included in
Commerce’s remand redetermination in the eighth administrative review (“AR8”) of this
proceeding. CATC Opp’n Cmts at 3 (citation omitted). Defendant-Intervenors urge the
court to strike CATC’s comments with instructions to re-file without the AR8 information,
or to disregard them. Def-Ints. Supp. Cmts at 8 n.2.
Consol. Court No. 15-00286 Page 19
band differs from the percentage change in China’s per capita GNI. See Remand
Results at 10-11, Table 1 (showing that, from 2009 to 2013, China’s per capita GNI
increased 82 percent, whereas the GNI range increased 28 percent). As discussed
above, however, the expansion of the GNI range need not exactly match China’s
increasing per capita GNI for Commerce’s development of the surrogate country list to
be reasonable. Moreover, it would be inappropriate for this court to impose that type of
bright-line requirement. As the Government notes, “[t]he GNI data on which the
surrogate country list is based is a fluid measurement that can change from year to
year.” Gov. Supp. Cmts at 13.
In sum, Commerce has provided a reasoned explanation of how it generated the
surrogate country list, including why it considers those countries on the list to be at the
same level of economic development as the PRC, and why the Philippines is not, which
explanation is supported by substantial evidence. 18
USCIT Rule 12(f) provides that the court may strike “an insufficient defense or
any redundant, immaterial, impertinent, or scandalous matter.” The court has broad
discretion in disposing of motions to strike. Beker Indus. Corp. v. United States, 7 CIT
199, 200, 585 F. Supp. 663, 665 (1984). Nevertheless, “motions to strike are not
favored by the courts and are infrequently granted.” Jimlar Corp. v. United States, 10
CIT 671, 673, 647 F. Supp. 932, 934 (1986) (citation omitted).
Information submitted as part of Commerce’s remand redetermination in AR8 is
irrelevant to the court’s disposition of this action, which, by statute, turns on whether the
agency’s decision is supported by substantial evidence on the record of AR7, and is
otherwise in accordance with law. See 19 U.S.C. § 1516a(a)(2), (b)(1)(B). Accordingly,
the court will disregard CATC’s contention that information submitted in AR8 supports
its argument that Commerce’s decision in AR7 is unsustainable; however, striking those
arguments is not merited. See Jimlar Corp., 10 CIT at 673, 647 F. Supp. at 934(granting a motion to strike is an “extraordinary remedy,” and should only occur when
“there has been a flagrant disregard of the rules of court”).
18 Assuming the Philippines is not at the same level of economic development, Jacobi
also contends that Commerce still should have considered it as a potential surrogate
country because it “was at a comparable level of economic development,” and “there
are serious defects that disqualify all countries in the potential surrogate country list.”
Consol. Court No. 15-00286 Page 20
III. Significant Producer of Comparable Merchandise
In briefing its original Rule 56.2 motion, Jacobi argued that, during the period of
review, the Philippines was the largest producer of activated carbon, Thailand was not a
significant producer, and Commerce had impermissibly found that “any country with
non-zero production” was a significant producer. Jacobi Rule 56.2 Mem. at 18-19, 21.
CATC argued that Commerce had impermissibly “found that countries with any amount
of exports of activated carbon are presumed to be equally significant producers.” CATC
Rule 56.2 Mem. at 6.
In the Issues and Decision Memorandum, Commerce had identified Thailand as
a significant producer on the basis of its total export quantities. I&D Mem. at 7.
Commerce explained that it “prefer[s] to consider quantity, rather than value, in
determining whether a country is a significant producer” because “the fact that a country
is not a net exporter of a particular product, in value terms, does not necessarily mean
that the country is not a significant producer of that good, given that the country could
import more higher-valued products than it exports.” Id. (emphasis added). The court
found several faults with Commerce’s reasoning:
First, Commerce does not explain whether Thailand actually imports more
higher-valued goods than it exports. Second, Commerce relied on
Jacobi Opp’n Cmts at 8; see also id. at 10-11 (asserting that that none of the countries
on the list, including Thailand, are significant producers of comparable merchandise,
and none have quality data).
This court previously found Commerce’s sequential surrogate country selection
method to be a reasonable means of implementing its surrogate country selection
criteria. See Jacobi (AR7) I, 222 F. Supp. 3d at 1172. Nonetheless, because
Commerce’s selection of Thailand as the primary surrogate country rests on its
determinations that Thailand is a significant producer of comparable merchandise and
has suitable surrogate value data, which determinations are unsustainable at this time,
see infra, as a factual matter, Commerce’s primary surrogate country selection remains
an open question.
Consol. Court No. 15-00286 Page 21
Thailand’s total exports—not net exports—to find that it is a “significant
producer.” Thus, Commerce’s rationale for disfavoring net value as a
measure of significant production does little to support (or explain) its
preference for considering total export quantities. Finally, Commerce’s
reasoning fails to persuade that reliance on total exports, devoid of
evidence of influence on world trade, is a permissible method of
interpreting the term “significant producer,” and, thus, identifying
significant producer countries.
Jacobi (AR7) I, 222 F. Supp. 3d at 1181 (citing Chevron U.S.A., Inc. v. Nat. Res. Def.
Council, Inc., 467 U.S. 837, 843 (1984); Fresh Garlic Prod. Ass’n v. United States, 39
CIT ___, ___, 121 F. Supp. 3d 1313, 1338-39 (2015)). The court also rejected the
Government’s post hoc argument that Thailand’s ranking on a list of activated carbon-
exporting countries demonstrated significant production absent evidence of “the
significance of that ranking in terms of its effect on global trade.” Id. at 1181-82.
A. Commerce’s Redetermination
On remand, Commerce changed its basis for finding Thailand to be a significant
producer of comparable merchandise. Commerce now relies on financial statements as
providing evidence of domestic Thai production of comparable merchandise and
Consol. Court No. 15-00286 Page 22
Thailand’s status as a net exporter (in quantity terms) of the subject merchandise. 19
Remand Results at 20-24. 20
Commerce first points to financial statements from two Thai manufacturers of
activated carbon, C. Gigantic Carbon Co., Ltd. (“Gigantic”) and Carbokarn Co., Ltd.
(“Carbokarn”) as evidence of “significant production of comparable merchandise in
Thailand” and which, according to Commerce, “in and of itself, establishes that Thailand
is a significant producer.” Remand Results at 20-21 & nn. 63-65. 21 Commerce
19 Commerce appears to contend that evidence of domestic production alone satisfies
the significant producer criterion, but that evidence regarding Thailand’s status as a net
exporter provides further support for its finding. See Remand Results at 20-21 (financial
statements from domestic producers of identical merchandise “demonstrates that there
is significant production of comparable merchandise in Thailand”); id. at 24 (stating
same); id. at 37 (“Thailand is a significant producer . . . based on the domestic
production of activated carbon . . . .); id. at 40 (“[D]omestic production . . . provides the
best indication that Thailand is a significant producer of comparable merchandise.”); id.
at 21-22 (evidence of net exports “also demonstrates that Thailand can be considered a
significant producer of comparable merchandise”); id. at 41 (“In sum, the meaning of
the term ‘significant,’ the evidence of domestic production of activated carbon, and the
net exports of Thailand all support our finding here.”). But see id. at 24 (“While we are
not relying on export or net export quantity in determining that Thailand is a significant
producer, the record demonstrates that Thailand is not only a significant exporter of
comparable merchandise, but also a net exporter of comparable merchandise, a metric
that [Commerce] may rely on in its significant producer analysis.”) (emphasis added).
20 Commerce also discusses Thailand’s ranking on a list of activated carbon-exporting
countries and its concomitant asserted influence on global trade of the subject
merchandise. Remand Results at 23-24. Commerce did so in response to the court’s
concern that the agency’s prior discussion of Thailand’s ranking on a list of activated
carbon exporting countries lacked evidence regarding “the significance of that ranking in
terms of its effect on global trade.” Jacobi (AR7) I, 222 F. Supp. 3d at 1182 (citing
Fresh Garlic Prod. Assoc. v. United States, 40 CIT ___, ___, 180 F. Supp. 3d 1233,
1243 (2016); see also Remand Results at 23. However, because Commerce does not
support its significant producer determination with this evidence, the court accords it no
further consideration. See Remand Results at 24, 39 (“[G]lobal trade analysis is not a
basis [Commerce] is using to determine whether Thailand is a significant producer of
comparable merchandise.”).
21 Commerce cites to “Petitioners’ Surrogate Value Submission” to substantiate
Gigantic’s financial information. Remand Results at 20 n.63; see also Pet’rs’ Final Pre-
Prelim. Submission of Surrogate Value Information (March 31, 2015), Attach. 3, RJA
Consol. Court No. 15-00286 Page 23
separately notes that record evidence “indicates that Carbokarn is the ‘biggest
manufacturer of coconut shell based activated carbon in the world market.’” Remand
Results at 37 & n.125 (quoting DJAC 2nd Surrogate Value Cmts, Ex. 8) (responding to
arguments that Carbokarn’s reported sales include non-comparable merchandise).
Commerce next explains that it may rely on “other criteria in lieu of evidence of
domestic production,” such as net exports of comparable merchandise. Id. at 21 &
nn.66-67 (citing Policy Bulletin 04.1). In 2013 and 2014, Thailand had net exports of
activated carbon in the amount of 2,035,309 kilograms. 22 Id. at 21-22 & nn.70-71 (citing
DJAC Surrogate Country Cmts). According to Commerce, Thailand’s net exports (in
Tab 4, PR 320-321, ECF No. 114 (supplying Gigantic’s 2013 financial statement).
Commerce cites to “Datong Juqiang’s Surrogate Value Submission” to substantiate
Carbokarn’s financial information. Remand Results at 20-21 n.64; see also Second
Surrogate Value Submission by DJAC (“DJAC 2nd Surrogate Value Cmts”), Ex. 8, RJA
Tab 5, PR 322-323, ECF No. 114 (supplying Carbokarn’s 2013 financial statement).
Commerce goes on to state that “[i]n 2013, [Gigantic] had activated carbon sales of
165,415,855 Baht and in 2010, [Carbokarn] had activated carbon sales of 306,799,179
Baht.” Remand Results at 21 n.65 (citations omitted). The figure Commerce provides
as reflecting Carbokarn’s 2010 sales is not found in DJAC’s submission, which, as
stated above, contains Carbokarn’s 2013 financial statement. Rather, Carbokarn’s
2010 financial statement was appended to Commerce’s preliminary surrogate value
memorandum. See Surrogate Values for the Prelim. Results (Apr. 29, 2015), Attach.
10, PJA Tab 18, PR 336-39, ECF No. 85-3. That document substantiates Commerce’s
assertion regarding the amount of activated carbon Carbokarn sold in 2010. See id.For 2013, Carbokarn’s financial statement reflects sales of 469,739,739.45 Baht and
total revenue of 500,363,415.32 Baht, 93.89 percent of which is accounted for by the
company’s “[m]anufacture, export and import [of] charcoal water filter, charcoal, and
chemical products.” See DJAC 2nd Surrogate Value Cmts, Ex. 8.
22 Commerce characterizes this figure as Thailand’s net exports for “the POR (2013-
2014).” See Remand Results at 21. However, this figure is derived from Thailand’s
exports and imports for the two years ending March 2013 and March 2014. In other
words, it is the sum of Thailand’s combined 2013 and 2014 exports (14,426,415
kilograms) minus its combined 2013 and 2014 imports (12,391,106 kilograms). See
Surrogate Country Comments by DJAC (November 12, 2014) (“DJAC Surrogate
Country Cmts”), Ex. 1, RJA 3, PR 180, ECF No. 114.
Consol. Court No. 15-00286 Page 24
quantity terms) 23 represent further evidence that Thailand is a significant producer of
comparable merchandise. See id. at 22.
B. Commerce’s Redetermination as to Significant Production is Remanded
Neither the statute nor Commerce's regulations define “significant
producer.” See 19 U.S.C. § 1677b; 19 C.F.R. § 351.408; Policy Bulletin 04.1 at 3.
Because the term is undefined and ambiguous, the court must assess whether
Commerce's interpretation of significant producer is based on a permissible construction
of the statute. Chevron, 467 U.S. at 843; Apex Frozen Foods Private Ltd. v. United
States, 862 F.3d 1337, 1344 (Fed. Cir. 2017). Commerce’s explanation on remand
suggests two measures of significant production: (1) domestic production of identical
merchandise; and (2) net exports (by quantity).
Jacobi and CATC each challenge Commerce’s reliance on evidence of domestic
production as a measure of significant production. See Jacobi Opp’n Cmts at 13-16;
CATC Opp’n Cmts at 5-6. CATC also contends that Commerce has not demonstrated
that its reliance on Thailand’s net exports is a reasonable interpretation of significant
producer. See CATC Opp’n Cmts at 5 (“[T]he fact that Thailand has some production
(whether measuring by exports or the unknown financial statement quantity) does not
make it a significant producer merely because [Commerce] says it is significant. . . .
23 Commerce explains that it prefers to consider quantity because several factors may
“distort” value determinations, such as “the relationship between the seller and
customer, terms of sale, the volume of specific transactions, or market distortions.”
Remand Results at 22. Commerce also notes that the statute directs Commerce to
consider “aggregate quantity” and not value when “determining whether a given
comparison market is viable.” Remand Results at 22 & n.74 (citing 19 U.S.C.
§ 1677b(a)(1)(B)(ii)(II)).
Consol. Court No. 15-00286 Page 25
[Commerce] may be given a measure of discretion in determining the definition of
significant producer, but [its] definition must be reasonable.”).
As discussed more fully below, each of Commerce’s bases suffer from the same
flaw: a lack of reasoning as to why the chosen measures and particular amounts of
domestic production or net exports represent significant production. Without some
basis for reviewing Commerce’s conclusions, the court is unable to ensure that the
agency’s interpretation is not “arbitrary, capricious, or manifestly contrary to statute.”
Apex Frozen Foods, 862 F.3d at 1346 (citation omitted); see also NMB Singapore Ltd.
v. United States, 557 F.3d 1316, 1319 (Fed. Cir. 2009) (“Commerce must explain the
basis for its decisions; while its explanations do not have to be perfect, the path of
Commerce's decision must be reasonably discernable to a reviewing court.”) (citations
omitted). Cf. Policy Bulletin 04.1 at 3 (although “fixed standards . . . have not been
adopted,” the significant producer determination “should be made consistent with the
characteristics of world production of, and trade in, comparable merchandise (subject to
the availability of data on these characteristics).”).
Domestic Production
Commerce seeks to ground its determination that domestic production,
evidenced by financial statements, constitutes significant production in agency and
judicial precedent; to wit, Commerce explains that it
has [] previously stated that, if comparable merchandise is produced, a
country qualifies as a producer of comparable merchandise. Therefore, if
the record contains evidence of domestic production of comparable
merchandise, then this evidence directly addresses the requirement of
significant production of comparable merchandise under [19 U.S.C.
§ 1677b(c)(4)]. Such evidence may include the financial statements of a
commercial producer of comparable merchandise in the surrogate
country.
Consol. Court No. 15-00286 Page 26
Remand Results at 20 & nn. 61-62 (citing Sebacic Acid from the People’s Republic of
China, 62 Fed. Reg. 65,674, 65,676 (Dep’t Commerce Dec. 15, 1997) (final results of
antidumping admin. review; 1995-1996) (“Sebacic Acid”); Dorbest Ltd. v. United States,
30 CIT 1671, 1683-84, 462 F. Supp. 2d 1262, 1274 (2006) (upholding the Department's
selection of India as a significant producer using the financial statements of Indian
companies). Commerce then identifies the Carbokarn and Gigantic financial statements
as evidence of significant production, see Remand Results at 20-21, but that finding
does not follow from its explanation of legal precedent.
Sebacic Acid is an example of Commerce exercising broad discretion to
determine what constitutes comparable merchandise for purposes of selecting its
primary surrogate country. See 62 Fed. Reg. at 65,676. While “evidence of domestic
production of comparable merchandise” may “directly address[] the requirement of
significant production,” Remand Results at 20 (emphasis added), nothing in
Commerce’s Sebacic Acid ruling suggests that it fulfills the requirement without more.
Commerce’s Dorbest citation is also unavailing. Therein, the court affirmed
Commerce’s finding that India is a significant producer of merchandise comparable to
wooden bedroom furniture (the subject merchandise) on the basis of evidence that
included nine Indian surrogate financial statements in addition to directories of hundreds
of Indian furniture producers and information on the value of Indian furniture output.
See Dorbest, 30 CIT at 1683, 462 F. Supp. 2d at 1274. Thus, Dorbest does not support
Commerce’s determination that evidence of domestic production in the form of financial
statements, “in and of itself, establishes that Thailand is a significant producer.” See
Remand Results at 21.
Consol. Court No. 15-00286 Page 27
Additionally, Commerce’s reference to the Thai Baht value of Gigantic’s and
Carbokarn’s respective sales does not save its determination. Read in context,
Commerce’s citation to Gigantic’s and Carbokarn’s respective sales appears solely to
demonstrate the fact of domestic production. See Remand Results at 21 n.65; id. at 24
n.83. Commerce does not explain whether, or why, Gigantic’s and Carbokarn’s sales
are “significant,” and has, therefore, failed to articulate a “rational connection between
the facts found and the choice made.”24 Motor Vehicle Mfrs. Ass’n v. State Farm Mut.
Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quoting Burlington Truck Lines v. United States,
371 U.S. 156, 168 (1962)). This omission is important because reliance on evidence of
domestic production, without explaining its significance, reads the word “significant” out
of the statute. It is well settled “that a statute must, if possible, be construed in such a
fashion that every word has some operative effect.” United States v. Nordic Village Inc.,
503 U.S. 30, 36 (1992). Commerce’s discretion to interpret the terms of the
antidumping dumping statute does not include the discretion “to interpret them out of
existence.” Hussey Copper, Ltd. v. United States, 19 CIT 1081, 1084, 895 F. Supp.
311, 314 (quoting Smith-Corona Group v. United States, 713 F.2d 1568, 1571 (Fed. Cir.
1983).
Finally, the Government’s attempt to rely on Commerce’s passing reference to
Carbokarn’s status as “one of the largest manufacturers of coconut shell based
activated carbon in the world market” is unpersuasive. Gov. Supp. Cmts at 18 (citing,
inter alia, Remand Results at 37). Most importantly, Commerce did not rely on
24 Nor does Commerce explain its reliance on Carbokarn’s 2010 sales, as opposed to
its POR sales. See supra note 21 (noting that Commerce identified Carbokarn’s 2010
sales but cited to its 2013 financial statement).
Consol. Court No. 15-00286 Page 28
Carbokarn’s status, see Remand Results at 18-24, and the court may only sustain the
agency's decision “on the same basis articulated in the order by the agency itself,”
Burlington Truck Lines, 371 U.S. at 168–69. Rather, Commerce referenced
Carbokarn’s status in its response to Jacobi’s contention that “Carbokarn’s 2013 sales
include chemical products,” i.e., “non-comparable merchandise.” Remand Results at 37
(internal citation omitted). 25 Accordingly, record evidence of domestic production in the
form of financial statements, absent any discussion of its significance, fails to
adequately substantiate Commerce’s finding that Thailand is a significant producer.
Net Exports
Commerce points to agency policy, legislative history, and judicial precedent to
support its consideration of net exports as a measure of significant production. Remand
Results at 21 & nn.67-69 (citing Policy Bulletin 04.1; Conference Report to the 1988
25 Commerce points to Carbokarn’s status in an apparent attempt to buttress its finding
that the company’s reference to “chemical products” in its description of its business as
the “[m]anufacture, export and import [of] charcoal water filter, charcoal, and chemical
products” means activated carbon. See Remand Results at 37; DJAC 2nd Surrogate
Value Cmts, Ex. 8. Commerce’s logic is unclear. Commerce explains that
“International Labor Organization and Thai industry statistics categorize a manufacturer
of activated carbon” as a “‘manufacturer of other chemicals and chemical products.’”
Remand Results at 37 & n.126 (citations omitted). From there, Commerce contends
that “it is reasonable to conclude that while Carbokarn’s Financial Statement
Submission Form indicates that it is a ‘(m)anufacture(r), export(er) and import(er of)
charcoal water filter, charcoal, and chemical products,’ as a manufacturer of activated
carbon, the company would also categorize itself as a manufacturer of ‘other
chemicals.’” Remand Results at 37 & n.127 (citations omitted). Commerce’s internal
and record citations fail to reference a document that supports the agency’s proposition.
Moreover, Commerce appears to surmise that because Carbokarn’s production of
activated carbon would be correctly referenced in the broader categories of charcoal
water filter, charcoal and chemical products or other chemicals, these broad categories
may be relied upon as representative of the narrower category of activated carbon. The
basis for such an assumption is not explained and, in any case, there is no discussion
of why Gigantic’s and Carbokarn’s particular sales values render the companies’
production “significant.”
Consol. Court No. 15-00286 Page 29
Omnibus Trade & Competitiveness Act, H.R. Conf. Rep. No. 576, 590, 100th Cong. 2nd
Sess. (1988), reprinted in 134 Cong. Rec. H2031 (daily ed. April 20, 1988); Calgon
Carbon Corp. v. United States, 40 CIT ___, ___, 190 F. Supp. 3d 1224, 1243, n.25
(2016)). However, Commerce offers little explanation for its interpretation. 26
Commerce’s Policy Bulletin 04.1 does explain that when sufficient data from
“major producing countries” is unavailable, “‘significant producer’ could mean a country
that is a net exporter.” Policy Bulletin 04.1 (emphasis added). This guidance, however,
does not suggest that positive net exports per se satisfies the significant producer
criterion.
The legislative history states that “[t]he term ‘significant producer’ includes any
country that is a significant net exporter and, if appropriate, Commerce may use a
significant net exporting country in valuing factors.” H.R. CONF. REP. 100-576, 590,
1988 U.S.C.C.A.N. 1547, 1623. The legislative history does not define “significant net
exporter, see id., but, in any event, Commerce does not characterize Thailand as a
“significant net exporter” and instead relies solely on its status as a net exporter, see
Remand Results at 21, 23, 24.
In Calgon Carbon, the court noted that “the legislative history [did] not purport to
create an exhaustive definition of significant producer,” and affirmed as reasonable
“Commerce’s interpretation of significant producer, which looked to whether the country
26 Commerce does explain that it prefers to rely on quantity rather than value because
of certain distortions that may arise when relying on value. Remand Results at 22.
Commerce’s reliance on quantity is reasonable, but that does not explain why the
existence of net export quantities is a reasonable interpretation of significant producer.
Consol. Court No. 15-00286 Page 30
exported comparable merchandise.” 190 F. Supp. 3d at 1243 n.25 (citations omitted). 27
Yet, in Jacobi (AR7) I, the court remanded Commerce’s significant producer
determination, in part, because the agency had “fail[ed] to persuade that reliance on
total exports, devoid of evidence of influence on world trade, is a permissible method of
interpreting the term ‘significant producer.’” 222 F. Supp. 3d at 1181 (citing Chevron,
467 U.S. at 843; Fresh Garlic, 121 F. Supp. 3d at 1338-39); 28 cf. Shandong Rongxin
Imp. & Exp. Co. v. United States, 35 CIT ___, ___, 774 F. Supp. 2d 1307, 1315-16
(2011) (rejecting Commerce’s interpretation of significant producer as any subject
merchandise-exporting country because the agency relied on speculation to link exports
27 The Calgon Carbon court further noted that Thailand had net exports of activated
carbon in the amount of 862,000 kilograms, which was not obviously “insignificant,” and
total POR exports in the amount of 6,555,094 kilograms. 190 F. Supp. 3d at 1243 n.25
(citations omitted). However, Commerce’s basis for finding Thailand a significant
producer in that case rested purely on evidence of exports in any amount. See Final
Results of Redetermination Pursuant to Court Remand at 35, Consol. Court No. 14-
00326, ECF No. 97 (“We find the fact that a country exports comparable merchandise to
other countries to be a strong indication that the country is a significant producer of such
merchandise.”).
28 In Fresh Garlic, the court opined that
an interpretation of ‘significant producer’ countries as those whose
domestic production could influence or affect world trade would be a
permissible construction of the statute. This follows from the plain
meaning of the word ‘significant’ as something ‘having or likely to have
influence or effect.’ This definition, however, necessarily requires
comparing potential surrogate countries' production to world production of
the subject merchandise.
121 F. Supp. 3d at 1338–39 (citation omitted), quoted in Jacobi (AR7) I, 222 F. Supp.
3d at 1180. The Jacobi (AR7) I court noted that “[a]gency policy is consistent
with Fresh Garlic [].” 222 F. Supp. 3d at 1180 (quoting Policy Bulletin 04.1 at 3) (“[A]
judgement [sic] should be made consistent with the characteristics of world production
of, and trade in, comparable merchandise.”)).
Consol. Court No. 15-00286 Page 31
to substantial production). Commerce’s citation to Calgon Carbon is, therefore,
unpersuasive, and irrelevant to its decision to rely on net exports here. 29
In sum, the court does not hold that the current record does not support a
permissible interpretation of significant producer on the basis of net exports. But it is
not for the court to infer Commerce’s reasons for so finding when they are absent—and,
thus, not “reasonably discernable”—from the determination itself. See NMB Singapore
Ltd., 557 F.3d at 1319-20; Borusan Mannesmann Boru Sanayi ve Ticaret A.S. v. United
States, 41 CIT ___, ___, 222 F. Supp. 3d 1255, 1267 (2017) (“An agency’s
determination [] cannot be sustained on the basis of a rationale supplied after the fact—
whether by the agency’s litigation counsel, by another party, or by the court.”)
(emphasis added) (citations omitted).
Accordingly, the court is remanding Commerce’s significant producer
determination for further explanation or reconsideration. In the event Commerce
continues to rely on evidence of domestic production or net exports, it must explain why,
29 In responding to Jacobi’s argument that Commerce should not rely on the financial
statements because they lack any indication of quantities sold, the agency asserts that
it “considers net exports of 2,035,309 [kilograms] and 472,215,034 Baht in domestic
sales to be reflective of the fact that Thailand . . . has a viable activated carbon sector,”
such that it would supply reliable surrogate values. Remand Results at 38. As Jacobi
contends, however, “viable” is not the statutory standard, and Commerce’s use of the
term in this context is unclear. Jacobi Opp’n Cmts at 16. Additionally, Commerce’s
conclusion relies on unexplained temporal discrepancies; its net export value represents
the sum of Thailand’s 2013 and 2014 combined net exports, and its sales value
represents the sum of Gigantic’s 2013 sales and Carbokarn’s 2010 sales. See supra
notes 21, 22.
Consol. Court No. 15-00286 Page 32
with substantial supporting evidence, those metrics constitute a permissible
interpretation of significant producer. 30
IV. Surrogate Value Selections
A. Financial Ratios
In the underlying proceeding, Commerce had before it several options for valuing
financial ratios: (1) 2013 financial statements from Indonesia and the Philippines; (2)
Carbokarn’s financial statements for the years 2010, 2011, and 2013; and (3) Gigantic’s
2013 financial statement. I&D Mem. at 12. For the Preliminary Results, Commerce had
relied upon Carbokarn’s 2010 financial statement. See Decision Mem. for the Prelim.
Results of Antidumping Duty Admin. Review: Certain Activated Carbon from the
People’s Republic of China; 2013-14 (“Prelim. Mem.”) at 26, PJA Tab 17, PR 335, ECF
No. 85-3. Thereafter, DJAC placed Carbokarn’s 2011 financial statement on the record.
Second Surrogate Value Submission by Datong Juqiang Activated Carbon Co., Ltd.
(June 2, 2015) (“DJAC 2nd Surrogate Value Submission”), Ex. 1, PJA Tab 27, PR 363,
ECF No. 85-3. Although DJAC advocated for use of Philippine financial statements,
DJAC argued in the alternative that, should Commerce continue to use Thai data, it
should select Carbokarn’s 2011 statement because it is more contemporaneous than
the company’s 2010 statement. I&D Mem. at 11 (summarizing DJAC’s arguments).
For the Final Results, Commerce rejected the Indonesian and Philippine
statements because those countries did not meet the economic comparability criterion.
Id. at 12. Commerce also rejected Carbokarn’s 2013 statement as insufficiently detailed
30To that end, Commerce must also clarify whether it seeks to rely on Carbokarn’s
2010 or 2013 sales, and whether it seeks to rely on two years’ worth of net exports or
net exports for the POR.
Consol. Court No. 15-00286 Page 33
and Gigantic’s 2013 statement because it contained evidence of countervailable
subsidies. Id. at 12-13. Commerce ultimately selected Carbokarn’s 2011 statement to
value financial ratios because it was more contemporaneous with the period of review
than the 2010 statement the agency had preliminarily relied upon. Id. at 13.
Jacobi contends that Carbokarn’s 2011 statement did not support Commerce’s
selection of Thailand as the primary surrogate country because it contained evidence of
countervailable subsidies and was not contemporaneous with the POR. Jacobi Rule
56.2 Mem. at 27-30; Pls.’ Reply Brief (“Jacobi Rule 56.2 Reply”) at 14-15, ECF No. 81;
see also CATC Rule 56.2 Mem. at 7; Pls. Carbon Activated Tianjin Co., Ltd., Jilin Bright
Future Chemicals Company, Ltd., Ningxia Mineral and Chemical Limited, Shanxi DMD
Corporation, Shanxi Industry Technology Trading Co., Ltd., Shanxi Sincere Industrial
Co., Ltd., Tancarb Activated Carbon Co., Ltd., and Tianjin Maijin Industries Co., Ltd.
Reply Br. (“CATC Rule 56.2 Reply”) at 9, ECF No. 84. The Government and
Defendant-Intervenors contend that lack of contemporaneity does not preclude its use
of the Thai financial statement, and Jacobi failed to exhaust administrative remedies
with respect to the argument that Carbokarn’s 2011 statement reflects countervailable
subsidies, which also fails on the merits. Def.’s Resp. to Pls.’ Rule 56.2 Mots. for J.
Upon the Agency R. (“Gov. Rule 56.2 Resp.”) at 40-43, ECF No. 75; Confidential Def.-
Ints.’ Resp. in Opp’n to Consol. Pls.’ Mots. for J. on the Agency R. (“Def.-Ints. Rule 56.2
Resp.”) at 23-29, ECF No. 73. The court finds that a remand is required for Commerce
to further explain or reconsider its determination that the Carbokarn 2011 statement
contains no evidence of countervailable subsidies. Accordingly, the court declines to
reach the issue of Carbokarn’s statement’s lack of contemporaneity.
Consol. Court No. 15-00286 Page 34
1. Countervailable Subsidies
“[T]he Court of International Trade shall, where appropriate, require the
exhaustion of administrative remedies.” 28 U.S.C. § 2637(d). The statute “indicates a
congressional intent that, absent a strong contrary reason, the court should insist that
parties exhaust their remedies before the pertinent administrative agencies.”
Boomerang Tube LLC v. United States, 856 F.3d 908, 912 (Fed. Cir. 2017) (citation
omitted). Administrative exhaustion generally requires a party to present all arguments
in its administrative case and rebuttal briefs before raising those issues before this
court. See Dorbest Ltd v. United States, 604 F.3d 1363, 1375 (Fed. Cir. 2010); 19
C.F.R. § 351.309(c)-(d). This permits the agency to address the issue in the first
instance, prior to judicial review. See Boomerang Tube, 856 F.3d at 912-13 (trial court
erred in declining to require exhaustion and addressing an argument in the first instance
when Commerce changed its data source for calculating constructed value profit
between the preliminary and final determinations pursuant to arguments presented by
the respondent in its case brief, and petitioner had raised only one objection to the new
methodology before the agency but subsequently raised an additional argument before
the trial court); Vinh Hoan Corp. v. United States, 40 CIT ___, ___, 179 F. Supp. 3d
1208, 1226 (2016) (exhaustion “allows the agency to apply its expertise, rectify
administrative mistakes, and compile a record adequate for judicial review—advancing
the twin purposes of protecting administrative agency authority and promoting judicial
efficiency”) (citation omitted).
In the underlying proceeding, Jacobi asserted generally that Carbokarn
“benefitted from countervailable subsidies.” Jacobi’s Case Br. for POR 7 (“Jacobi Case
Consol. Court No. 15-00286 Page 35
Br.”) at 18 & nn.20-21, PJA 34, PR 381, ECF No. 85-4 (citing, inter alia, Certain Frozen
Warmwater Shrimp From Thailand, 78 Fed. Reg. 50,379 (Dep’t of Commerce Aug. 19,
2013) (final neg. countervailing duty determination). Jacobi then pointed to a line item
in Carbokarn’s 2010 financial statement to “confirm[] the basis for suspicion that
Carbokarn benefited from [a] Thai export subsidy.” Id. at 18-19. Jacobi did not address
specifically the issue of subsidies in Carbokarn’s 2011 statement in its case or rebuttal
briefs even though it was on notice that Commerce may rely on the 2011 statement due
to its placement on the record and DJAC’s alternative argument for Commerce’s use of
that statement. See id. at 18-19; Jacobi’s Rebuttal Br. for POR 7 (“Jacobi Rebuttal
Br.”), PJA Tab 36, CJA Tab 6, PR 392, CR 354, ECF No. 85-4; Boomerang Tube, 856
F.3d at 913.
Nevertheless, this is not a situation when the purposes of exhaustion would be
served by a finding that Jacobi has waived its subsidy-related argument with respect to
the 2011 financial statement. “The determinative question [regarding administrative
exhaustion] is whether Commerce was put on notice of the issue . . . .” Trust Chem Co.
Ltd. v. United States, 35 CIT ___, ___, 791 F. Supp. 2d 1257, 1268 & n.27 (2011).
Commerce appeared to understand Jacobi’s argument as pertaining to all of
Carbokarn’s statements. See I&D Mem. at 9 (referring to Jacobi’s argument “that
Carbokarn’s financial statements contain evidence of countervailable subsidies”)
(emphasis added). More importantly, Commerce reviewed Carbokarn’s 2011 financial
statement for evidence of countervailable subsidies, and made a negative determination
thereto. See id. Accordingly, the court would not be resolving this issue before the
agency has had the opportunity “to apply its expertise.” See Vinh Hoan Corp., 179 F.
Consol. Court No. 15-00286 Page 36
Supp. 3d at 1226. Cf. Weishan Hongda Aquatic Food Co., Ltd. v. United States, 41 CIT
___, ___, 273 F. Supp. 3d 1279, 1287-88 (2017) (addressing only those objections to
the use of certain financial data that “Commerce had notice of and an opportunity to
address,” and declining to address arguments that had not been presented to the
agency). 31
As to the merits of Commerce’s determination, the agency has “discretion to
avoid using prices if it has determined that subsidization occurred with respect to those
price or cost values.” I&D Mem. at 9 & n.30 (citation omitted); see also 19 U.S.C.
§ 1677b(c)(5)(2015) (affording Commerce discretion to reject surrogate values “without
further investigation if [it] has determined that broadly available export subsidies existed
or particular instances of subsidization occurred with respect to those [surrogate
values]”). 32 Cf. DuPont Teijin Films v. United States, 37 CIT ___, ___, 896 F. Supp. 2d
1302, 1311-12 (2013) (sustaining Commerce’s decision to reject financial statements
when specific line items reflected receipt of countervailable subsidies). However, “[t]he
Supreme Court has ‘frequently reiterated that an agency must cogently explain why it
has exercised its discretion in a given manner . . . .” Allied Pac. Food (Dalian) Co. Ltd.
31 There are exceptions to the requirement of exhaustion, which may be applied at the
court’s discretion, however, none are applicable here. For the reasons discussed, the
court declines to require further exhaustion of this issue.
32 Section 1677b(c)(5) came into effect during the pendency of the underlying
administrative proceeding. See Dates of Application of Amendments to the
Antidumping and Countervailing Duty Laws Made by the Trade Preferences Extension
Act of 2015, 80 Fed. Reg. 46,793, 46,795 (Dep’t Commerce Aug. 6, 2015) (clarifying
that § 1677b(c)(5) applies “to determinations made on or after August 6, 2015”). The
codification of Commerce’s discretion to reject subsidy-tainted financial statements is
not determinative, however, because the provision simply “clarifies [Commerce’s]
authority for its existing practice, and does not impose any new requirements on the
parties to [antidumping] proceedings.” Id.
Consol. Court No. 15-00286 Page 37
v. United States, 30 CIT 735, 758, 435 F. Supp. 2d 1295, 1314 (2006) (quoting Motor
Vehicle Mfrs. Ass’n, 463 U.S. at 48). Commerce has not done so here.
In the Issues and Decision Memorandum, Commerce explained that it “it is our
practice not to reject financial statements based on the grounds that the company
received export subsidies unless we have previously found the specific export subsidy
program to be countervailable,” and asserted that Jacobi failed to “cite or identify any
specific subsidy program related to the financial statements which the [agency] has
previously found to be countervailable.” I&D Mem. at 9 & nn.32-33 (citations omitted).
Jacobi, however, expressly pointed to Commerce’s Frozen Warmwater Shrimp from
Thailand determination, wherein Commerce “found that the receipt of tax coupons is . . .
countervailable.” See Issues and Decision Mem., C-549-828 (Aug. 12, 2013),
accompanying Frozen Warmwater Shrimp from Thailand (“Frozen Warmwater Shrimp
from Thailand, I&D Mem.”) at 6; Jacobi Case Br. at 18 & n.21. Moreover, Carbokarn’s
2011 statement reflected an amount for “Tax coupon receivables.” DJAC 2nd
Surrogate Value Submission, Ex. 1. Commerce’s conclusory assertion that Carbokarn’s
2011 statement “contain[s] no evidence of countervailable subsidies” fails to apprise the
court of the agency’s reasons for concluding that Carbokarn’s entry for “[t]ax coupon
receivables” bears no relation to the tax coupon program Commerce determined to be
countervailable in Frozen Warmwater Shrimp from Thailand. See NMB Singapore Ltd.,
557 F.3d at 1319. The court is, therefore, unable to ascertain whether Commerce
reasonably exercised its discretion in this area. See 19 U.S.C. § 1677b(c)(5)(2015);
Motor Vehicle Mfrs. Ass'n, 463 U.S. at 48.
Consol. Court No. 15-00286 Page 38
Defendant-Intervenors’ assertion that the tax coupon program countervailed in
Frozen Warmwater Shrimp from Thailand is specific to the shrimp industry lacks merit.
See Def.-Ints. Rule 56.2 Resp. at 26. Nothing in Commerce’s determination suggests
that the tax coupon program is industry-specific. See Frozen Warmwater Shrimp from
Thailand, I&D Mem. at 6-7. 33 Accordingly, Commerce’s determination to rely on
Carbokarn’s 2011 financial statement to value financial ratios is remanded for
reconsideration and further explanation as to whether the financial statement reflects
the receipt of countervailable subsidies or otherwise provides suitable surrogate
financial data.
2. Contemporaneity
Jacobi asserts that Commerce’s reliance on the 2011 Carbokarn financial
statement lacks substantial evidence because the record contained POR-
contemporaneous Philippine financial statements. Jacobi Rule 56.2 Mem. at 30.
Commerce declined to consider those statements because the Philippines had failed to
satisfy the economic comparability criterion and because it found that it had “complete,
audited, publicly available,” and “otherwise suitable” data “from the primary surrogate
country.” See I&D Mem. at 12-13 (emphasis added); see also id. at 12 & n.43
(reiterating Commerce’s “practice” of using data from a secondary surrogate country
33 Commerce explained that, pursuant to the tax coupon program, the Thai government
“provides tax coupons to exporters equal to a certain percentage of the [free on board]
value of their exports,” the purpose of which “is to refund import duties paid for the
imported raw materials and other inputs used in the production of exported goods.”
Frozen Warmwater Shrimp from Thailand, I&D Mem. at 6 (footnote citations omitted).
“[T]he program is designed to act as a duty drawback or remission within the meaning
of 19 CFR [§] 351.519,” and “[e]xporters can use the tax coupons to pay other taxes
and duties.” Id. (footnote citation omitted); see also 19 C.F.R. § 351.519 (governing the
“[r]emission or drawback of import charges upon export”).
Consol. Court No. 15-00286 Page 39
only when “data from the primary surrogate country are unavailable or unreliable”)
(citation omitted). As discussed above, the “suitability” of the 2011 Carbokarn
statement remains an open question due to the potential presence of countervailable
subsidies and Thailand’s unresolved status as a significant producer. Accordingly, the
court cannot assess whether Commerce reasonably selected the Thai statement
notwithstanding its lack of POR-contemporaneity and disregarded contemporaneous
statements from a less economically comparable country. On remand, Commerce may
choose to reevaluate the relative merits of each proposed source of financial ratios. 34
B. Carbonized Material
Commerce was presented with five possible surrogate values to value Jacobi’s
carbonized material: 35
(1) GTA data for Thai HS 4402.90.10000 “of Coconut Shell”; (2) GTA data
for Thai HS 4402.90.90090 “Wood Charcoal (Including Shell Or Nut
Charcoal), Excluding That Of Bamboo: Other”; (3) Cocommunity coconut
shell charcoal price data from the Philippines; (4) Cocommunity coconut
shell charcoal price data from Indonesia; [and] (5) GTA data for
Indonesian HS 4402.90.9000.
I&D Mem. at 25. Commerce disregarded Philippine and Indonesian data because it
was not from the primary surrogate country or a country at the same level of economic
development as China, and Commerce believed it had “useable” data from the primary
34 Likewise, the court declines to resolve Jacobi’s argument that the greater number of
Philippine financial statements favored the use of Philippine data to value financial
ratios as compared to the sole Thai statement. Jacobi Rule 56.2 Mem. at 24-26.
Jacobi’s argument presumes the usability of each data source, which, as discussed,
remains an open question. See id. at 24 (“[E]ven if the court were to conclude that this
single Thai financial statement was somehow usable, Commerce’s conclusion would
still be unsupported by the evidentiary record because the evidentiary record contained
multiple usable Philippine financial statements.”).
35 “Carbonized material is a charred, intermediate input used in the production of
activated carbon.” Def.-Ints. Rule 56.2 Resp. at 34 n.18.
Consol. Court No. 15-00286 Page 40
surrogate country. Id. Commerce also disregarded Thai GTA data for wood charcoal
because Jacobi does not use wood-based charcoal in the production of activated
carbon. Id. Commerce, therefore, selected Thai HS 4402.90.10000 to value
carbonized material because it was more specific to Jacobi’s input. Id. at 25-26.
Commerce declined to examine the Thai import value for possible aberrancy on the
basis that parties had not supplied appropriate benchmark data. 36 Id. at 26-27.
Jacobi contends that Commerce should have compared the Thai and Philippine
data to select the surrogate value that yields the most accurate dumping margin. Jacobi
Rule 56.2 Mem. at 32-33; Jacobi Rule 56.2 Reply at 16-17. Jacobi further contends that
Commerce’s surrogate value selection was unreasonable because it was contrary to the
agency’s past reliance on Philippine Cocommunity data, and the Thai value is unreliable
and aberrantly high. Jacobi Rule 56.2 Mem. at 34-44; 37 Jacobi Rule 56.2 Reply at 15-
16, 19-22; see also CATC Rule 56.2 Mem. at 8-9, 17-18. CATC echoes Jacobi’s
concerns about the unreliability of Thai import data on the basis that Thai customs
officials increase the entered values of imported goods. CATC Rule 56.2 Mem. at 10-
18; CATC Rule 56.2 Reply at 11-12. The Government contends that Commerce need
not consider Philippine surrogate value data unless parties demonstrate the lack of
suitable data from economically comparable countries, and the Thai data is not aberrant
or unreliable. Gov. Rule 56.2 Resp. at 46-53. Defendant-Intervenors contend that Thai
36 A benchmark is “a product whose price roughly correlates with the price of an input
assigned a surrogate value.” Blue Field (Sichuan) Food Indus. Co., Ltd. v. United
States, 37 CIT ___, ___, 949 F. Supp. 2d 1311, 1317 (2013).
37 In particular, Jacobi refers to Commerce’s selection of Cocommunity data to value
carbonized material in the fifth and sixth administrative reviews of this proceeding.
Jacobi Rule 56.2 Mem. at 38-39 (citations omitted).
Consol. Court No. 15-00286 Page 41
import data was the best available information to value carbonized material, and
Jacobi’s arguments regarding use of Philippine data impermissibly invite the court to
reweigh the evidence. Def.-Ints. Rule 56.2 Resp. at 35-44.
As an initial matter, “each administrative review is a separate exercise of
Commerce's authority that allows for different conclusions based on different facts in the
record.” Jiaxing Brother, 822 F.3d at 1299 (quoting Qingdao Sea-Line Trading Co. Ltd.
v. United States, 766 F.3d 1378, 1387 (Fed. Cir. 2014)). Thus, Commerce’s previous
reliance on Philippine Cocommunity data to value carbonized material, without more,
does not undermine Commerce’s selection of Thai data in this segment of the
proceeding. Unlike in prior reviews, here, Commerce no longer considers the
Philippines to be at the same level of economic development as the PRC. See, e.g.,
Remand Results at 15-18. Accordingly, this is not a situation where Commerce has
failed to articulate reasons for treating similar situations in a dissimilar manner. See,
e.g., SKF USA Inc. v. United States, 263 F.3d 1369, 1382 (Fed. Cir. 2001) (“[A]n
agency action is arbitrary when the agency offer[s] insufficient reasons for treating
similar situations differently.”) (first alteration added) (citation omitted).
As to the reliability of the Thai value, Jacobi points to several annual reports by
the U.S. Trade Representative expressing its concerns regarding “the significant
discretionary authority exercised by [Thai] Customs Department officials . . . to arbitrarily
increase the customs values of imports.” Jacobi Rule 56.2 Mem. at 40 (citation
omitted); see also CATC Rule 56.2 Mem. at 10-11. CATC points to the FedEx Country
Report on Thailand stating that Thai Customs “keeps records of the highest declared
price of [imported] products,” which will be used to determine the customs value instead
Consol. Court No. 15-00286 Page 42
of the transaction value, and to Commerce’s own statements regarding concerns of
U.S. companies and government officials regarding Thai Customs’ practices. CATC
Rule 56.2 Mem. at 12-13 (citations omitted). At the administrative level, Commerce
responded to these arguments saying that although the reports speak to “the general
state of Thai customs practice, [CATC] has pointed to no evidence on the record which
demonstrates that the specific [surrogate values] relied on . . . are the result of the
alleged Thai Customs practices.” I&D Mem. at 8.
The court has addressed challenges to Commerce’s selection of Thai import data
in several other cases. Although each recognized the relevance of the reports to the
reliability of Thai import values, none remanded Commerce’s surrogate value or
surrogate country determination on the basis of the reports. See Elkay Mfg. Co. v.
United States, 40 CIT ___, ___, 180 F. Supp. 3d 1245, 1254-55 (2016), aff’d sub
nom. Guangdong Dongyuan Kitchenware Indus. Co. v. Elkay Mfg. Co., 702 F. App’x
981 (Fed. Cir. 2017) (although “evidence of manipulation was relevant to the question of
the reliability of the Thai data,” it did not “establish that Thai Customs import values are
affected generally, and significantly, by the [identified] practice,” and, thus, did not
“foreclose [Commerce’s] use of Thai import data”; Commerce reasonably “weigh[ed] the
superior specificity of the Thai import data . . . against other factors” before concluding
“that the Thai data were the best available information”); Calgon Carbon, 190 F. Supp.
3d at 1235 (the cited report is “evidence of manipulation” but “without more, the general
concerns noted in the report” do not undermine Commerce’s surrogate value selection);
Yingqing v. United States, 41 CIT ___, ___, 195 F. Supp. 3d 1299, 1306-07 (2016)
Consol. Court No. 15-00286 Page 43
(following Elkay Mfg. and explaining that Thai import data were “more specific to
Plaintiffs’ reported experience than Ukrainian and Philippine data”).
The U.S. Trade Representative’s concerns about possible upwards manipulation
of Thai customs values are relevant to the inquiry regarding the reliability and potential
aberrancy of Thai import values. However, as noted in the prior opinions cited above,
without more, the reports do not sufficiently detract from Commerce’s selection of a
particular surrogate value (or Thailand as the primary surrogate country) so as to find it
unsupported by substantial evidence. In contrast to those cases, however, that
“something more” appears to exist in this case—at least so much so as to require
further inquiry by Commerce than occurred here. Although the concerns expressed in
the trade reports do not form the sole basis of the court’s remand of this issue, they
support the need for a remand for Commerce to further explain its benchmarking
methodology or reconsider its refusal to use Philippine and Indonesian data to test for
aberrancy in light of indications that the Thai value is unusually high.
In the underlying administrative proceeding, Jacobi argued that the Thai import
value is aberrant as compared to the surrogate values used in the past six
administrative reviews; particularly, the fifth and sixth administrative reviews
(respectively, “AR5” and “AR6”). Jacobi Case Br. at 48; Jacobi Rebuttal Br. at 5-6 & n.9
(citing Jacobi’s Rebuttal Surrogate Value Comments (Dec. 9, 2014) (“Jacobi Surrogate
Value Rebuttal”), Ex. SVR-5, PJA Tab 11, PR 240-41 (surrogate value spreadsheets for
the past six reviews)). 38 In response, Commerce explained that
38In the instant litigation, Jacobi also contends that the Thai import value is aberrant on
the basis that most of the imports into Thailand under HS 4402.90.10000 are from
France, and “it is common knowledge that coconuts are not grown in France.” Jacobi
Consol. Court No. 15-00286 Page 44
[w]ith respect to benchmarking, the [agency] examines historical import
data for the potential surrogate countries for a given case, to the extent
such import data is available, and/or examines data from the same HS
category for the primary surrogate country over multiple years to
determine if the current data appear aberrational compared to historical
values. Merely appearing on the low or high end of a range of values is
not enough to make data aberrational.
I&D Mem. at 26 (footnote citations omitted). Because the record lacked Commerce’s
preferred benchmarking data, it declined to undertake any inquiry. I&D Mem. at 26-27
(declining to consider Philippine data relied upon in past reviews or the Philippine and
Indonesian data proposed in the instant review because those “countries are not as
economically comparable to the PRC”).
Commerce is required to calculate antidumping duty margins “as accurately as
possible, and to use the best information available to it in doing so.” Lasko Metal Prod.,
Rule 56.2 Mem. at 43. Jacobi urges the court to take judicial notice of the fact that
coconuts are not native to France. See id. (recognizing that “it is not possible to point to
a specific written sentence somewhere on the evidentiary record that explicitly makes
this point”).
The court previously denied Jacobi’s motion to supplement the administrative
record to add information regarding French imports into Thailand. See Jacobi (AR7) I,
222 F. Supp. 3d at 1194-95. Additionally, the Government is correct that Jacobi failed
to exhaust its administrative argument about the lack of French production of coconuts
before the agency. See Gov. Rule 56.2 Resp. at 54. Jacobi first raised this argument in
its rebuttal brief to the agency, which is insufficient. See 19 C.F.R. § 351.309(d) (“The
rebuttal brief may respond only to arguments raised in case briefs . . . . “); Qingdao, 766
F.3d at 1388 (“Commerce regulations require the presentation of all issues and
arguments in a party's case brief.”). In any event, Jacobi has not shown that judicial
notice is merited. “The court may judicially notice a fact that is not subject to reasonable
dispute because it . . . is generally known within the trial court's territorial jurisdiction; or .
. . can be accurately and readily determined from sources whose accuracy cannot
reasonably be questioned.” Fed. R. Evid. 201(b); see also 28 U.S.C. § 2641 (stating
that the Federal Rules of Evidence apply to all civil actions, with certain exceptions not
relevant here, in the U.S. Court of International Trade). Beyond the conclusory
assertion that it is a “basic geographic fact that coconuts are not native to France,”
Jacobi has not made any showing pursuant to Rule 201(b). The court therefore denies
Jacobi’s request. Accordingly, the court will not further address this aspect of Jacobi’s
argument.
Consol. Court No. 15-00286 Page 45
Inc. v. United States, 43 F.3d 1442, 1443 (Fed. Cir. 1994). To that end, “[w]hen
confronted with a colorable claim that the data that Commerce is considering is
aberrational, Commerce must examine the data and provide a reasoned explanation as
to why the data it chooses is reliable and non-distortive.” Mittal Steel Galati S.A. v.
United States, 31 CIT 1121, 1135, 502 F. Supp. 2d 1295, 1308 (2007) (citation omitted).
The $1,146.60/MT average unit value of coconut shell charcoal imports into Thailand
during the period of review and relied upon by Commerce appears to be beyond the
high end of any range before Commerce for this input. See Jacobi Case Br. at 48 &
n.87 (citing Second Surrogate Value Submission by Datong Juqiang Activated Carbon
Co., Ltd. (March 31, 2015) (“DJAC 2nd Surrogate Value Submission”), Ex. 2A, PJA Tab
15, PR 322, ECF No. 85-3 (supplying the Thai import value Commerce relied upon in
the instant review)); I&D Mem. at 25 & n.96 (citing same); Jacobi Surrogate Value
Rebuttal, Ex. SVR-5 (supplying the average source values for carbonized material
selected in AR6 and AR5, which were, respectively, $346.25/MT and $391.67/MT).
Those values are roughly consistent with the Philippine and Indonesian values placed
on the record as potential surrogate values for the instant review, which were,
respectively, $343/MT and $355.25/MT. Jacobi’s Surrogate Value Comments (Nov. 18,
2014), Ex. SV-4 at ECF p. 244, PJA Tab 9, PR 195-205, ECF No. 85-2 (supplying the
Philippine POR-average price); id. at ECF pp. 279-638 (supplying Indonesian domestic
prices for each POR-month, from which the average price of $355.25/MT is derived).
The Thai value is, thus, more than three times the average of the Philippine values
Consol. Court No. 15-00286 Page 46
selected in AR5 and AR6 and the Philippine and Indonesian values suggested as
surrogate values in AR7. 39
Commerce dismissed this data for benchmarking purposes on the basis that the
Philippines and Indonesia “are not as economically comparable to the PRC.” I&D Mem.
at 26-27. However, Commerce’s reason for disregarding the proffered benchmarks has
been regularly rejected by the court. See Juancheng Kangtai, 2015 WL 4999476, at
*22 (lack of economic comparability is an insufficient reason for disregarding data to test
for aberrancy); CS Wind Vietnam Co., Ltd. v. United States, 38 CIT ___, ___, 971 F.
Supp. 2d 1271, 1280 (2014) (data from non-economically comparable countries are
relevant to test for aberrancy in import values, particularly when imports into the
surrogate country are from non-economically comparable countries); Xinjiamei Furniture
(Zhangzhou) Co., Ltd. v. United States, Slip Op. 13-30, 2013 WL 920276, at *6 (CIT
March 11, 2013) (rejecting Commerce’s argument that export data from non-
economically comparable countries were inappropriate benchmarks; although “the
prices might not satisfy the requirements for surrogate values, they are sufficient to call
into question the reliability of the [import] data”); Peer Bearing Co.-Changshan v. United
39 The Government’s assertion that appearing “at the high or low end of a range of
values does not render that data aberrational” is unpersuasive. Gov. Rule 56.2 Resp. at
50 (citing I&D Mem. at 26; Camau Frozen Seafood Processing Imp. Exp. Corp. v.
United States, 37 CIT ___, ___, 929 F. Supp. 2d 1352, 1356 n.9 (2013)); see also
Camau, 929 F. Supp. 2d 1356 n.9 (Bangladeshi labor data was not aberrant when it
occupied “the lowest price in a range of prices” and comparison prices “form a nearly
straight line continuum from the Bangladeshi data on the low end to the Philippine . . .
data on the high end”). Cf. Elkay Mfg., 180 F. Supp. 3d at 1252 (Thai data was not
aberrant when it was the highest ($3.61) in a range of six other values from $2.10 to
$3.21). In contrast to the ranges reflected in Camau and Elkay Mfg., here, the Thai
import value is roughly three times the proffered benchmark values, all of which were
similar.
Consol. Court No. 15-00286 Page 47
States, 35 CIT ___, ___, 752 F. Supp. 2d 1353, 1372 (2011) (rejecting the
Government’s argument that U.S. data was unhelpful for benchmarking purposes and
noting that it corroborated information from economically comparable countries that also
suggested the selected value was aberrational); 40 Clearon Corp. v. United States, Slip
Op. 15-91, 2015 WL 4978995, at *7 (CIT Aug. 20, 2015) (stating that Commerce has
failed to adequately explain its chosen benchmarks, and data from countries not on
Commerce’s surrogate country list may be useful for benchmarking purposes).
Like these other cases, the court is unable to discern Commerce’s rationale for
limiting its benchmarking inquiry to historical data from potential surrogate countries—
i.e., those countries it considers presently to be at the same level of economic
development as China. See I&D Mem. at 26. Commerce noted in the Remand Results
that its list of potential surrogate countries is subject to annual change based on
changes to China’s per capita GNI. See Remand Results at 10. 41 Thus, historical data
40 On remand, Commerce initially declined to recalculate the surrogate value and
instead applied adverse facts available. Peer Bearing Co.-Changshan v. United States,
36 CIT ___, ___, 853 F. Supp. 2d 1365, 1370 (2012). The CIT remanded again, and,
on remand, Commerce, under protest, selected the relevant surrogate value from a
different economically comparable country, which it noted was “considerably closer in
value to the benchmark value established by U.S. import data.” Peer Bearing Co.-
Changshan v. United States, Slip Op. 13-116, 2013 WL 4615134, at *4 (CIT Aug, 30,
2013), vacated on other grounds, 766 F.3d 1396 (Fed. Cir. 2014) (holding that the CIT
erred in remanding Commerce’s application of facts available with an adverse
inference).
41 The changeability of Commerce’s list of potential surrogate countries is also
demonstrated by changes Commerce made to the list in the underlying proceeding
when it determined to rely on 2013 GNI data instead of 2012 GNI data. Compare
Request for Surrogate Country and Surrogate Value Comments and Information (July
25, 2014) (“Commerce SC Letter”), Attach. 1, PJA Tab 43, PR 64, ECF No. 85-4
(initially listing South Africa, Colombia, Bulgaria, Thailand, Ecuador, and Indonesia as
economically comparable countries on the basis of 2012 data), with Prelim. Mem. at 14-
15 (preliminarily determining that Bulgaria, Ecuador, Romania, South Africa, Thailand,
and Ukraine as economically comparable on the basis of 2013 data).
Consol. Court No. 15-00286 Page 48
from a current potential surrogate country may derive from a time when that country
was not at the same level of economic development as the PRC. Commerce provides
no explanation why such data, in its view, might be a useful benchmark, while historical
data from a country that Commerce then considered to be at the same level of
economic development as the PRC may not be considered for benchmarking purposes
simply because the country is, at present, no longer at the same level of economic
development.
Further, economic comparability and, thus, the usefulness of proffered
benchmarks, is a matter of degree. See Calgon Carbon, 190 F. Supp. 3d at 1234
(Commerce reasonably declined to use U.S. data as a benchmark when the United
States’ GNI is almost ten times higher than China’s); Blue Field (Sichuan), 949 F. Supp.
2d at 1317 (noting that benchmarks need not derive from economically comparable
countries, but may “become less informative” depending on the degree of economic
difference between the countries). Here, Commerce dismissed benchmark data not
because the countries are not economically comparable to the PRC, but because they
“are not as economically comparable to the PRC” as the countries on OP’s list. I&D
Mem. at 27; see also Remand Results at 17 (noting that “the Philippines is less
[economically] comparable to the PRC . . . relative to the six other countries” on the
surrogate country list) (emphasis added). Commerce’s conclusory dismissal of such
proposed benchmark data “misreads the statute, which directs Commerce to value
factors of production using the best available information from countries at a level of
economic development comparable to that of China,” but “does not prohibit Commerce
from considering, for corroboration purposes, record evidence consisting of prices for a
Consol. Court No. 15-00286 Page 49
commodity in a market economy country when determining which information from
countries at a level of economic development comparable to China is the best available
information.” Peer Bearing Co.-Changshan, 752 F. Supp. 2d at 1372 (citing 19 U.S.C.
§ 1677b(c)(1),(4)).
Accordingly, this issue is remanded for Commerce to reconsider or further
explain its position with respect to the proposed benchmarks and, if appropriate, to
reconsider its surrogate value selection in light of the proposed benchmark data. 42 If,
on remand, Commerce concludes that the Thai value is aberrational, the agency
should, consistent with its practice, consider “all relevant price information on the
record, including any appropriate benchmark data, . . . to accurately value the input in
question.” I&D Mem. at 26. Such “relevant price information” may, therefore, include
data from countries not on the surrogate country list. See Mittal Steel, 31 CIT at 1135,
502 F. Supp. 2d at 1308 (“If the Filipino data which meets Commerce's surrogate
criteria nonetheless proves to be unusable, or demonstrably aberrational, Commerce
should examine data sources that it has outside of those from the surrogate countries.”);
Policy Bulletin 04.1 (explaining that Commerce’s policy is to rely on data from less
economically comparable countries only when none of the countries on OP’s surrogate
country list supply suitable data). 43
42 The court notes that Commerce has discretion to reopen the record for the purpose of
examining the Thai value for aberrancy. See Essar Steel Ltd. v. United States, 678
F.3d 1268, 1278 (Fed. Cir. 2012) (“The decision to reopen the record is best left to the
agency, in this case Commerce.”).
43 As noted above, Jacobi separately argues that Commerce failed to compare the Thai
and Philippine data sets to determine which of the two values for carbonized material
yielded the most accurate dumping margin. Jacobi Rule 56.2 Mem. at 32-33 (citing,
inter alia, Clearon Corp., 2015 WL 4978995, at *4). Clearon Corp. addressed
Commerce’s evaluation of data considerations as part of its surrogate country selection
Consol. Court No. 15-00286 Page 50
V. Irrecoverable VAT
A. The Final Results and Court’s Review Thereof
In the Issues and Decision Memorandum, Commerce explained that
[i]n a typical VAT system, companies do not incur VAT expense for
exports; they receive on export a full rebate of the VAT they pay on
purchases of inputs used in the production of exports (“input VAT”), and,
in the case of domestic sales, the company can credit the [input VAT]
against the VAT they collect from customers [“output VAT”].
I&D Mem. at 16. In the PRC, however, “some portion of the input VAT that a company
pays on purchases of inputs used in the production of exports is not refunded.” Id.Commerce referred to this unrefunded input VAT as “irrecoverable VAT.” See id. at 16-
17. Commerce further explained that its adjustment for irrecoverable VAT consists of
two steps: “(1) determining the irrecoverable VAT on subject merchandise, and (2)
reducing U.S. price by the amount determined in step one.” Id. at 17. Step one
consists of applying “(1) the FOB [‘free on board’] value of the exported good . . . to the
difference between (2) the standard VAT levy rate and (3) the VAT rebate rate
applicable to exported goods.” Id. “The first variable, export value, is unique to each
methodology, not the selection of a particular surrogate value. 2015 WL 4978995, at
*4-5. The court opined that when “the party proposing a non-listed country” as the
primary surrogate country “demonstrat[es] that no country on the surrogate country list
provides the scope of ‘quality’ data that [Commerce] requires in order to make a primary
surrogate country selection,” the agency “must consider the quality of the data” from the
non-listed country relative to its “economic disparity.” Id. To the extent that Clearon
Corp.’s instruction applies to surrogate value selection, the court defers the issue of
whether Commerce must compare or otherwise consider the Philippine Cocommunity
data as a surrogate value pending Commerce’s reconsideration of the potential
aberrancy of the chosen Thai value. See Mittal Steel, 31 CIT at 1135, 502 F. Supp. 2d
at 1308 (Commerce should consider data not from countries on the surrogate country
list when its chosen data is “demonstrably aberrational”).
Consol. Court No. 15-00286 Page 51
respondent while the rates in (2) and (3), as well as the formula for determining
irrecoverable VAT, are each explicitly set forth in Chinese law and regulations.” Id.In step one, Commerce “determined the irrecoverable VAT on subject
merchandise by first determining the amount of tax levied on inputs and raw materials
(used in the production of exports).” Id. In other words, Commerce defined the
“standard VAT levy rate” by way of reference to the input VAT rate. Because the PRC
levied a 17 percent VAT on inputs and raw materials used in the production of activated
carbon, for which there was no export rebate, Commerce concluded that “the
irrecoverable rate is equal to the full VAT percentage.” Id.; see also Jacobi’s Suppl.
Sect. C Resp. (Oct. 21, 2014) (“Jacobi Suppl. SCQR”), Ex. SC-54, 44 CJA Tab 2, CR
124, 133, RJA Tab 2, PR 157-58, ECF Nos. 86,114; Jacobi Suppl. SCQR, Ex. SC-55. 45
With regard to step two, when Jacobi’s entered values were less than an “estimated
customs value,” 46 Commerce decided to apply the irrecoverable VAT rate to the
“estimated customs value as the best proxy for an FOB China port value.” I&D Mem. at
18.
DJAC proposed, and Commerce rejected, a calculation methodology based on
“VAT paid on the sale of its product, not a VAT rebate on inputs.” Id. at 20 & n.80 (citing
44 Exhibit SC-54 consists of an Order of the President of the PRC regarding the
application of VAT regulations to foreign enterprise. Jacobi Suppl. SCQR, Ex. SC-54.
Pursuant thereto, the purchase of domestic or imported goods incurs 17 percent VAT.
See Jacobi Suppl. SCQR, Ex. SC-54 (Arts. 1, 2(1)).
45 Exhibit SC-55 consists of a June 19, 2007 Circular of the Ministry of Finance and the
State Administration of Taxation of the People’s Republic of China on Adjusting the Tax-
refund Rate for Some Export Commodities. See Jacobi Suppl. SCQR, Ex. SC-55. It
explains that activated carbon is ineligible for an export rebate. See id.46 Commerce defined “estimated customs value” as an “ex-factory net U.S. price plus
foreign movement expenses.” I&D Mem. at 18.
Consol. Court No. 15-00286 Page 52
Jacobi Suppl. SCQR, Ex. SC-56); 47 see also id. at 15 (summarizing DJAC’s proposal). 48
Commerce reasoned that the “irrecoverable VAT adjustment does not entail deducting
VAT paid on the sale of activated carbon, but rather the portion of VAT paid on inputs to
produce activated carbon that is not rebated by the PRC Government.” Id. at 20.
DJAC’s proposal relied on “a form of sales tax” that applies when the finished goods are
ineligible “for a VAT rebate upon exportation” and foreign sales of which are therefore
treated as domestic sales. Id. at 20 & nn.82-83 (citing Jacobi Suppl. SCQR at 28-30,
Ex. SC-56).
In briefing their original Rule 56.2 motions, Plaintiffs argued that Commerce
lacked authority to deduct irrecoverable VAT from Jacobi’s CEP because it is not a
statutory “export tax or other charge,” and Commerce’s method of calculating the VAT
adjustment was not supported by substantial evidence. See, e.g., Jacobi Rule 56.2
Mem. at 44-45; CATC Rule 56.2 Mem. at 18. As to Plaintiffs’ substantial evidence
arguments, Jacobi challenged Commerce’s application of the VAT adjustment to an
47 Exhibit SC-56 consists of a “Notice from the State Administration of Taxation of the
People’s Republic of China Concerning the Refund (Exemption) of Tax of Exported
Commodities” issued on July 12, 2006. See Jacobi Suppl. SCQR, Ex. SC-56. The
notice states that exported goods that are ineligible for a refund or exemption of VAT
will incur an “output tax payable” which “shall be calculated by regarding them as
domestically sold goods or they shall be subject to value added tax.” Id. Chinese law
permits sellers of domestic goods to offset the input VAT incurred from the output VAT
collected before remitting any payable tax amount to the Chinese government. See id.,
Ex. SC-54 (Art. 4).
48 At oral argument, the Government explained that DJAC’s proposal entailed
calculating the amount of VAT already included in its FOB value, rather than calculating
an amount based on a rate applied to its FOB value. For example, a FOB value of
$1,000 consists of $145.30 in VAT in addition to a sales price of $854.70; i.e., 854.70
multiplied by 0.17 equals 145.30, and 854.70 plus 145.30 equals 1,000. According to
DJAC, therefore, Commerce should have used the lower figure of $854.70 as the base
upon which it calculated VAT. See Oral Arg. at 5:45-8:21 (reflecting a time stamp from
the recording).
Consol. Court No. 15-00286 Page 53
estimated customs value rather than its entered values. Jacobi Rule 56.2 Mem. at 45,
47-55. CATC challenged Commerce’s application of the VAT adjustment to Jacobi’s
U.S. price, and not the lesser cost of the raw materials upon which Jacobi paid VAT.
CATC Rule 56.2 Mem. at 21-22.
In Jacobi (AR7) I, the court found that the relevant statutory phrase was
ambiguous and Commerce properly may adjust for irrecoverable VAT. 222 F. Supp. 3d
at 1186-88. The court concluded that Commerce could reasonably determine that an
input VAT that is unrefunded by reason of the finished product’s exportation constituted,
at the very least, an “other charge” that is “imposed by the exporting country on the
exportation of the subject merchandise” because it remains recoverable (as a credit or
offset against output VAT) until the product is exported. 222 F. Supp. 3d at 1186-87;
accord Fushun Jinly Petrochem. Carbon Co., Ltd. v. United States, Slip Op 16-25, 2016
WL 1170876, at *11 (CIT Mar. 23, 2016); Juancheng Kangtai Chem. Co., Ltd. v. United
States, Slip Op. 17-3, 2017 WL 218910, at *12 (CIT Jan. 19, 2017); Aristocraft of Am.,
LLC v. United States, 41 CIT ___, ___, 269 F. Supp. 3d 1316, 1324-25 (2017); but see
China Mfrs. Alliance, LLC v. United States, 41 CIT ___, ___, 205 F. Supp. 3d 1325,
1346 (2017) (remanding because Commerce had failed to make a specific factual
finding regarding the “amount” of the “export tax, duty, or other charge” imposed by the
PRC as required by statute). 49 The court further found that Commerce’s determination
49The recent decision in Quingdao Qihang Tyre Co., Ltd. v. United States, Slip Op. 18-
35, 2018 WL 1635920 (CIT Apr. 4, 2018), holding that the statute is unambiguous and
does not permit Commerce to adjust for irrecoverable VAT does not lead the court to re-
examine this holding. The holding in Qingdao Qihang Tyre was premised on its
understanding that Commerce was applying the export tax, duty or other charge
language to a domestic tax. As discussed herein, in this case, Commerce is adjusting
Consol. Court No. 15-00286 Page 54
with regard to the unreliability of Jacobi’s entered values and its application of the VAT
adjustment to an estimated customs value was supported by substantial evidence.
Jacobi (AR7) I, 222 F. Supp. 3d at 1190-92. The court, however, remanded
Commerce’s VAT calculation because it was not supported by substantial evidence. Id.
at 1192-94. The court pointed to Commerce’s identification of the irrecoverable VAT as
unrefunded “VAT paid on inputs and raw materials (used in the production of exports),”
id. at 1193 (citing I&D Mem. at 16-17, 20), and reasoned that Commerce’s calculation of
irrecoverable VAT on the basis of the price of the finished good potentially overstated
the adjustment, id. at 1193-94.
B. Commerce’s Redetermination
On remand, Commerce again defined irrecoverable VAT as “VAT paid on inputs
used in the production of exports that is non-refundable.” Remand Results at 25. It
framed the issue on remand as “the percentage of irrecoverable VAT included in
Jacobi’s selling price to the United States,” and “clarif[ied] that the amount of [input] VAT
that Jaocbi actually paid to the PRC . . . is irrelevant to [its] margin calculations.” Id. at
26; see also id. at 26-27 (noting that Commerce “is concerned with deducting the
amount of irrecoverable VAT which was actually included in the selling price of activated
carbon to the United States”).
To that end, Commerce stated that Chinese law requires Jacobi to pay 17
percent VAT on inputs and exempts sales of activated carbon from any VAT rebate. Id.
at 27 & nn.94-95 (citations omitted). According to Commerce, however, the “input VAT
for an output VAT charged on the exportation of the merchandise. Qingdao Qihang
Tyre is, therefore, distinguishable.
Consol. Court No. 15-00286 Page 55
rate in itself ha[d] no bearing on [Commerce’s] margin calculation, and . . . [was] not the
basis for why [it] adjusted U.S. price in the margin calculation program for Jacobi.” Id. at
27. Rather, Commerce now stated that it made the adjustment on the basis of the 17
percent output VAT included in Jacobi’s U.S. price. Id. at 27. Commerce noted that
“Jacobi . . . reported that as a seller/exporter, the products it resells to domestic or
foreign buyers are subject to 17 percent [output] VAT, which is applied to its sales and
is included in the selling price to the United States.” Id. at 27 & nn.96-97 (citing Jacobi
Suppl. SCQR, Ex. SC-56). The 17 percent “‘output VAT’ . . . is included in Jacobi’s
U.S. prices, and constitutes the 17 percent adjustment [Commerce] made to Jacobi’s
margin calculation.” Id. at 27; see also id. at 28 (noting that Commerce “deducted the
entire 17 percent (irrecoverable VAT) from the U.S. price to arrive at a [tax neutral] U.S.
net price”). Jacobi now contends that Commerce has failed to address the court’s
concerns. Jacobi Opp’n Cmts at 18-19.
C. Commerce’s Redetermination as to the Irrecoverable VAT Adjustment is
Remanded
For the reasons discussed below, the court is compelled to remand again the
VAT adjustment to Commerce so that the agency may reconsider the record evidence
and apply a methodology that is consistent both with the record evidence and with U.S.
law. The Remand Results currently under review do not reasonably support the
application of the methodology as it is explained by the agency.
Commerce’s revised explanation for its irrecoverable VAT adjustment differs in a
material respect from the explanation offered in support of the Final Results. In the
Issues and Decision Memorandum, Commerce explained its irrecoverable VAT
calculation by way of reference to the 17 percent input VAT and the absence of an
Consol. Court No. 15-00286 Page 56
export rebate; in the Remand Results, while Commerce continued to define
irrecoverable VAT in terms of the input VAT, it explained its methodology for adjusting
for irrecoverable VAT by reference to, and as based upon, the 17 percent output VAT
applicable to Jacobi’s U.S. sales. Compare I&D Mem. at 17, with Remand Results at
27-28. 50 At oral argument, the court afforded the Government an opportunity to
reconcile this inconsistency; the Government did not and the court cannot provide such
a reconciliation for the agency.
The statute permits Commerce to deduct from CEP “[1] the amount, if included in
such price, of [2] any export tax, duty, or other charge imposed by the exporting country
on the exportation of the subject merchandise to the United States.” 19 U.S.C.
§ 1677a(c)(2)(B). Commerce’s redetermination relied on evidence that Jacobi’s U.S.
price includes output VAT. See Remand Results at 27. In so doing, Commerce’s
inconsistent explanations introduced uncertainty as to whether the adjustment is
intended to account for an unrefunded input VAT imposed on exported goods that could
be understood as an “other charge,” or instead, an output VAT collected on these
exports by application of Chinese law, which could be considered an “export tax” under
U.S. law. See 19 U.S.C. § 1677a(c)(2)(B); Methodological Change, 77 Fed. Reg. at
36,482 (providing for adjustments on the basis of “an export tax or VAT that is not fully
refunded upon exportation”) (emphasis added); Jacobi (AR7) I, 222 F. Supp. 3d at
50In so doing, Commerce relied on the same law cited by DJAC as the basis for its
adjustment. See I&D Mem. at 15 & n.56 (citing Jacobi Suppl. SCQR, Ex. SC-56); id. at
20 n.80 (citing same); Remand Results at 27 n.96 (citing same). The agency’s
calculation differs, however, in that it calculated the VAT adjustment by applying the 17
percent rate to the total U.S. price, Remand Results at 28, whereas DJAC proposed
determining the adjustment on the basis of U.S. price minus an amount for output VAT,
supra note 48.
Consol. Court No. 15-00286 Page 57
1186-87. Understanding the basis for Commerce’s adjustment is crucial to the court’s
ability to review the agency’s determination.
For that reason, at oral argument, the court asked the Government to clarify the
statutory basis for the adjustment; in other words, to reconcile its calculation
methodology with its theory underlying the irrecoverable VAT adjustment. See, e.g.,
Oral Arg. at 1:57:00-2:00:14 (inquiring whether the absence of a rebate for exported
activated carbon means that the adjustment accounts for a 17 percent export tax
corresponding to the output VAT as opposed to irrecoverable VAT corresponding to
unrefunded input VAT). 51 The Government responded that the Methodological Change
contemplates irrecoverable input and output VAT; that neither were rebated in this case;
and that, therefore, both are included in Jacobi’s U.S. price. Oral Arg. at 2:00:15-
2:02:44). The Government’s response failed to reconcile the inconsistencies in the
Issues and Decision Memorandum and the Remand Results or otherwise clarify
Commerce’s determination on the basis of the facts in this particular case. The court
remands Commerce’s redetermination for reconsideration or further explanation in
accordance with this discussion. Commerce must also address the following issues on
remand:
To the extent that Commerce continues to justify the adjustment as accounting
for irrecoverable VAT defined as unrefunded input VAT, Commerce must address
record evidence demonstrating that Jacobi, in fact, recovers the input VAT it incurs by
51This discussion occurred during the portion of the argument dedicated to the Rule
56.2 motions filed regarding Commerce’s determination in the eighth administrative
review of this proceeding (Consol. Court No. 16-185). However, the Government stated
that there are no material differences regarding its VAT calculations between the
seventh and eighth administrative reviews. Oral Arg. at 1:56:37-1:56:51.
Consol. Court No. 15-00286 Page 58
the offset it takes before remitting the output VAT it collects. See Jacobi Suppl. SCQR,
Ex. SC-54; id., Ex. SC-58, Suppl. Conf. RJA, CR 109, 119, ECF No. 119-1. Commerce
has contrasted the PRC’s VAT regime with the “typical VAT system,” in which
companies can offset input VAT against VAT collected from its customers. See
Remand Results at 25-26. The agency must, therefore, address this evidence
suggesting Jacobi’s ability to offset input VAT against output VAT collected from foreign
customers, suggesting that the input VAT is not, in fact, irrecoverable. 52 In addition,
Commerce must explain why the amount of the export tax, duty, or other charge is
properly determined on the basis of the FOB price of the output (or the estimated
customs value) rather than the value of the inputs (or some other approach that seeks
to determine the amount of input VAT actually paid to the PRC).
On the other hand, if Commerce asserts that the adjustment is based on an
export tax due to Jacobi’s collection of output VAT, Commerce must (a) address the
52 Commerce noted that the “adjustment is not intended to account for the difference
between Jacobi’s VAT payments on input products to the PRC tax authority and output
VAT payments Jacobi receives for its sales of activated carbon.” Remand Results at
28. The court understands that § 1677a(c)(2)(B) permits adjustments on the basis of an
amount of an “export tax, duty, or other charge” included in U.S. price, see 19 U.S.C.
§ 1677a(c)(2)(B), and that Jacobi’s ability to offset its input VAT against its output VAT
payable is not necessarily dispositive of whether any VAT is included in its U.S. price.
Nevertheless, Commerce’s treatment of Jacobi’s particular VAT situation appears
inconsistent with its characterization of irrecoverable VAT; to wit, Commerce’s assertion
that the “portion of the input VAT [that] . . . is not refunded” represents “a tax, duty or
other charge imposed on exports that is not imposed on domestic sales (i.e.,
irrecoverable VAT),” Remand Results at 26, overlooks the fact that sales of activated
carbon are ineligible for an export rebate and are, therefore, treated as domestic sales,
Jacobi Suppl. SCQR, Ex. SC-56. This fact appears to distinguish this case from certain
others before the court. See Qingdao Qihang Tyre, 2018 WL 1635920, at *4 (discussed
supra note 49); Aristocraft, 269 F. Supp. 3d at 1324; China Mfrs. Alliance, 205 F. Supp.
3d at 1345; Juancheng Kangtai, 2017 WL 218910, at *13. Accordingly, Commerce’s
second redetermination must address, with citations to substantial supporting evidence,
why Jacobi’s particular VAT situation merits the irrecoverable VAT adjustment.
Consol. Court No. 15-00286 Page 59
record evidence regarding Jacobi’s offset for input VAT paid on inputs taken against the
output VAT collected, and (b) explain why the VAT adjustment is properly made on the
basis of an estimated customs value instead of the FOB value on which the PRC
assesses it. In Jacobi (AR7) I, the court concluded that Commerce’s reliance on an
estimated customs value was reasonable and supported by substantial evidence. 222
F. Supp. 3d at 1191-92. 53 While there may be legitimate questions about Jacobi’s
entered values, the adjustment, by definition, relates to “the amount . . . of any export
tax, duty or other charge imposed by” the PRC on the exportation of the subject
merchandise, 19 USC § 1677a(c)(2)(B) (emphasis added), and Commerce, in the
Methodological Change, found that it “can measure a transfer of funds between [the
PRC] and companies therein, regardless of the direction the money flows,” and that
because the “taxes [are] affirmatively imposed [by China, Commerce] presume[s] that
they are also collected.” 77 Fed. Reg. at 36,483. Thus, if Commerce continues to
disregard Jacobi’s FOB values, it must explain why the reliability of Jacobi’s entered
values is pertinent when Commerce is attempting to determine the export VAT
“imposed by” the PRC. While an artificially low FOB value might lead Chinese
authorities to impose lower taxes than are otherwise appropriate, Commerce must
explain its basis for taking account of any such under-collection by China in the
calculation of the antidumping duty margin.
Finally, consistent with its discussion of “included in the price” in the
Methodological Change, 77 Fed. Reg. at 36,483, Commerce must address whether it is
53The court is free to reconsider its conclusion on this issue pending Commerce’s
second redetermination. See USCIT Rule 54(b).
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using gross or net prices to calculate the adjustment and, in so doing, address the
evidentiary support for rejecting DJAC’s proposed calculation methodology.
CONCLUSION
In accordance with the foregoing, it is hereby
ORDERED that Commerce’s Final Results are sustained with respect to the
issue of economic comparability, as set forth in Discussion Section II above; it is further
ORDERED that Commerce’s Final Results are remanded to further address the
issue of significant production, as set forth in Discussion Section III above; it is further
ORDERED that Commerce’s Final Results are remanded with respect to its
surrogate value selections, as set forth in Discussion Section IV above; it is further
ORDERED that Commerce’s Final Results are remanded to further address the
issue of irrecoverable VAT, as set forth in Discussion Section V above; it is further
ORDERED that, in the event Commerce amends the antidumping margin
assigned to Jacobi, Commerce reconsider the separate rate assigned to non-mandatory
respondents; it is further
ORDERED that Commerce shall file its second remand results on or before
July 18, 2018; it is further
ORDERED that the deadlines provided in USCIT Rule 56.2(h) shall govern
thereafter; and it is further
Consol. Court No. 15-00286 Page 61
ORDERED that any opposition or supportive comments must not exceed 6,000
words.
/s/ Mark A. Barnett
Mark A. Barnett, Judge
Dated: April 19, 2018
New York, New York