Zhejiang Native Produce & Animal By-Products Import & Export Group Corp. v. United States , 33 Ct. Int'l Trade 791 ( 2009 )

Slip Op. 09-61
UNITED STATES COURT OF INTERNATIONAL TRADE
_____________________________
:
ZHEJIANG NATIVE PRODUCE AND :
ANIMAL BY-PRODUCTS IMPORT & :
EXPORT GROUP CORP., JIANGSU :
KANGHONG NATURAL HEALTHFOODS :
CO., LTD., AND ANHUI HONGHUI :
FOODSTUFF (GROUP) CO., LTD., :
: Before: Richard K. Eaton, Judge
:
: Court No. 06-00234
Plaintiffs, :
:
v. :
:
:
UNITED STATES, :
:
Defendant, :
:
and :
:
THE AMERICAN HONEY PRODUCERS :
ASSOCIATION AND THE SIOUX :
HONEY ASSOCIATION, :
:
Def.-Ints. :
_____________________________:
OPINION
[United States Department of Commerce’s Final Results of
Redetermination are sustained.]
Dated: June 19, 2009
Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP (Bruce M.
Mitchell, Ned H. Marshak, Elaine F. Wang), for plaintiffs.
Tony West, Assistant Attorney General; Jeanne E. Davidson,
Director, Reginald T. Blades, Jr., Assistant Director, United
States Department of Justice Commercial Litigation Branch, Civil
Division,(Jane C. Dempsey); Office of the Chief Counsel for
Import Administration, United States Department of Commerce,
(Sapna Sharma), of counsel, for defendant.
Court No. 06-00234 Page 2
Kelley Drye & Warren (Michael J. Coursey, R. Alan Luberda), for
defendant-intervenors.
Eaton, Judge: In Zhejiang Native Produce and Animal By-
Products Import & Export Group Corp. v. United States, 32 CIT __,
Slip Op. 08-68 (June 16, 2008) (not reported in the Federal
Supplement) (“Zhejiang I”), this court sustained, in part, and
remanded the final results of the United States Department of
Commerce’s (“Commerce” or the “Department”) third administrative
review of the antidumping duty order on honey from the People’s
Republic of China (“PRC”) for the period of review (“POR”)
beginning on December 1, 2003 through November 30, 2004. See
Honey from the PRC, 71 Fed. Reg. 34,893 (Dep’t of Commerce June
16, 2006) (final results) and the accompanying Issues and
Decision Memorandum (Dep’t of Commerce June 9, 2006) (“Issues &
Dec. Mem.”) (collectively, “Final Results”).
Commerce has now issued the Final Results of Redetermination
Pursuant to Court Remand (Dep’t of Commerce Dec. 18, 2008)
(“Remand Results”). Plaintiffs Zhejiang Native Produce and
Animal By-Products Import & Export Group Corp., Jiangsu Kanghong
Natural Healthfoods Co., Ltd., and Anhui Honghui Foodstuff
(Group) Co., Ltd. (collectively, “plaintiffs”) have filed their
comments in response to the Remand Results. See Pls.’ Comments
Resp. Remand Results (“Pls.’ Comments”). In addition, Commerce
has filed its response to those comments, and defendant-
Court No. 06-00234 Page 3
intervenors the American Honey Producers Association and the
Sioux Honey Association have filed their respective responses, as
well. See Def.’s Resp. Pls.’ Comments (“Defs.’ Resp.”); Def.-
Ints.’ Comments Remand Results (“Def.-Ints.’ Comments”).
Jurisdiction lies pursuant to 28 U.S.C. § 1581(c) and 19
U.S.C. § 1516a(a)(2)(B)(iii). As explained in Zhejiang I,
certain of the issues in this action have been litigated
previously in this Court.1 Zhejiang I, 32 CIT at __, Slip Op.
08-68 at 3. For the reasons set forth below, the court sustains
the Remand Results.
STANDARD OF REVIEW
The court reviews the Remand Results under the substantial
evidence and in accordance with law standard set forth in 19
U.S.C. § 1516a(b)(1)(B)(i) (“The court shall hold unlawful
any determination, finding, or conclusion found . . . to be
unsupported by substantial evidence on the record, or otherwise
1
These include: a challenge to Commerce’s second
administrative review of the antidumping duty order on Chinese
honey (for the period of review from December 1, 2002 through
November 30, 2003) in Shanghai Eswell Enter. Co. v. United
States, 31 CIT __, Slip Op. 07-138 (Sept. 13, 2007) (not reported
in the Federal Supplement) and in Wuhan Bee Healthy Co. v. United
States, 31 CIT __, Slip Op. 07-113 (July 20, 2007)(not reported
in the Federal Supplement); and a challenge to Commerce’s first
administrative review of the antidumping duty order on Chinese
honey (for the period of review from December 1, 2001 through May
31, 2002) in Wuhan Bee Healthy Co. v. United States, 29 CIT 587,
374 F. Supp. 2d 1299 (2005).
Court No. 06-00234 Page 4
not in accordance with law . . . .”).
DISCUSSION
I. Calculation of Surrogate Values
In determining whether the subject merchandise is being, or
is likely to be, sold at less than fair value, 19 U.S.C.
§ 1677b(a) requires Commerce to make “a fair comparison . . .
between the export price2 or constructed export price3 and normal
value.” When merchandise that is the subject of an antidumping
investigation is exported from a nonmarket economy (“NME”)4
2
The “export price” is “the price at which the subject
merchandise is first sold . . . by the producer or exporter of
the subject merchandise outside of the United States to an
unaffiliated purchaser in the United States or to an unaffiliated
purchaser for exportation to the United States,” as adjusted. 19
U.S.C. § 1677a(a).
3
“Constructed export price” is “the price at which the
subject merchandise is first sold . . . in the United
States . . . by or for the account of the producer or exporter of
such merchandise or by a seller affiliated with the producer or
exporter, to a purchaser not affiliated with the producer or
exporter,” as adjusted. 19 U.S.C. § 1677a(b).
4
A “nonmarket economy country” is “any foreign country
that [Commerce] determines does not operate on market principles
of cost or pricing structures, so that sales of merchandise in
such country do not reflect the fair value of the merchandise.”
19 U.S.C. § 1677(18)(A). “Because it deems China to be a
nonmarket economy country, Commerce generally considers
information on sales in China and financial information obtained
from Chinese producers to be unreliable for determining, under 19
U.S.C. § 1677b(a), the normal value of the subject merchandise.”
Shanghai Foreign Trade Enters. Co. v. United States, 28 CIT 480,
481, 318 F. Supp. 2d 1339, 1341 (2004). Therefore, because the
subject merchandise comes from the PRC, Commerce constructed
normal value by valuing the factors of production using surrogate
(continued...)
Court No. 06-00234 Page 5
country, such as the PRC, Commerce, under most circumstances,
determines normal value by valuing the factors of production used
in producing the merchandise using surrogate data, to which it
adds
an amount for general expenses and profit
plus the cost of containers, coverings, and
other expenses. . . .[T]he valuation of the
factors of production shall be based on the
best available information regarding the
values of such factors in a market economy
country or countries considered to be
appropriate by the administering authority.
19 U.S.C. § 1677b(c)(1).
A. Calculation of Surrogate Financial Ratios: Expenses for
Jars and Corks
In determining normal value, Commerce uses ratios5 to
4
(...continued)
data from India. See 19 U.S.C. § 1677b(c)(4).
5
As this Court has explained:
[t]o calculate the SG&A ratio, the Commerce
practice is to divide a surrogate company’s
SG&A costs by its total cost of
manufacturing. For the manufacturing
overhead ratio, Commerce typically divides
total manufacturing overhead expenses by
total direct manufacturing expenses.
Finally, to determine a surrogate ratio for
profit, Commerce divides before-tax profit by
the sum of direct expenses, manufacturing
overhead and SG&A expenses. These ratios are
converted to percentages (“rates”) and
multiplied by the surrogate values assigned
by Commerce for the direct expenses,
manufacturing overhead and SG&A expenses.
(continued...)
Court No. 06-00234 Page 6
calculate amounts for “general expenses and profit,” calculating
separate values for selling, general and administrative expenses;
manufacturing overhead; and profit. See Wuhan Bee Healthy Co. v.
United States, 31 CIT __, __, Slip Op. 07-113 at 41-42 (July 20,
2007) (not reported in the Federal Supplement) (citation and
quotation omitted); 19 U.S.C. § 1677b(c)(1)(B).
In the Final Results, Commerce did not include expenses for
jars and corks as direct material costs in the calculation of the
materials, labor and energy (“MLE”) denominator in the
Department’s financial ratio calculations. See Zhejiang I, 32
CIT at ___, Slip Op. 08-68 at 30-31; Remand Results at 2.6
Commerce stated that the financial statements of the
Mahabaleshwar Honey Producers’ Cooperative (“MHPC”)7 indicated
5
(...continued)
Wuhan Bee Healthy Co. v. United States, 31 CIT __, __, Slip Op.
07-113 at 42 n.15 (July 20, 2007) (not reported in the Federal
Supplement) (citing Shanghai Foreign Trade Enters. Co. v. United
States, 28 CIT 480, 482, 318 F. Supp. 2d 1339, 1341 (2004)).
6
In the calculation of surrogate financial ratios, the
denominator should include the expenses of all direct material
costs. See Persulfates from the PRC, 68 Fed. Reg. 6,712 (Dep’t
of Commerce Feb. 10, 2003) (notice of final results), and
accompanying Issues and Decision Memorandum, at Comm. 9 (Dep’t of
Commerce Feb. 3, 2003).
7
In the Final Results, Commerce determined that the
information from the 2004-2005 financial statements of the MHPC
was “the best and most contemporaneous available information for
valuing the financial ratios.” Issues & Dec. Mem. at 19
(footnote omitted). The court upheld Commerce’s determination to
use the MHPC financial statements in Zhejiang I. See 32 CIT at
___, Slip Op. 08-68 at 25.
Court No. 06-00234 Page 7
that these items were being purchased and sold by MHPC, rather
than being consumed in the sale of honey: “Respondents failed to
provide evidence that the ‘jars and corks’ were consumed as
packing8 in the manner described.” Issues & Dec. Mem. at 23.
The court in Zhejiang I found no reason to deviate from its
finding in Shanghai Eswell with regard to this issue.9 Zhejiang
I, 32 CIT at __, Slip Op. 08-68 at 32-33 (citing Shanghai Eswell
Enter. Co. v. United States, 31 CIT __, Slip Op. 07-138 at 24-25
8
The Department refers to “packing” and “packaging”
interchangeably. It is not clear to the court that the words, as
used in MHPC’s financial statements, are necessarily referring to
the same thing.
9
First, the court observes . . . that the
chart specifically pertains to honey sale and
collection. Next, the court notes that the
chart contains line items for 250 gram, 500
gram and 1 kilogram jars; 53 millimeter and
38 millimeter corks; and honey machines in
both the “Sale” column and the “Purchase”
column. The line item for 100 gram jars
appears only in the “Sale” column. The chart
is therefore ambiguous. While it is possible
that MHPC buys and sells jars [with] corks
that are either empty or filled with
something other than honey, there is no
evidence in the MHPC financial statement
tending to support such a conclusion.
Without further explanation the court cannot
accept as adequate Commerce’s reliance solely
on the line items for jars and corks being
separate from other line items, to support
its conclusion that they are not direct
materials associated with finished honey.
Zhejiang I, 32 CIT at ___, Slip Op. 08-68 at 32-33 (citing
Shanghai Eswell Enter. Co. v. United States, 31 CIT __, Slip Op.
07-138 (Sept. 13, 2007) (not reported in the Federal
Supplement)(citations and footnote omitted)).
Court No. 06-00234 Page 8
(Sept. 13, 2007) (not reported in the Federal Supplement)
(“Shanghai Eswell”)). The court thus rejected as unsupported by
substantial evidence Commerce’s findings regarding expenses for
jars and corks and remanded this question to Commerce. Id. at
__, Slip Op. 08-68 at 33.
In its Remand Results, Commerce states:
In accordance with the Court’s instruction,
and after careful examination of the record,
and consistent with the Department’s finding
in the Shanghai Eswell Remand, as affirmed by
the Court, the Department has revised the
financial ratio calculations to include
MHPC’s reported expenses for jars and corks
as direct materials used to produce finished
honey.
Remand Results at 3 (citation omitted). As a result, the
Department revised the calculation of the surrogate financial
ratios to include expenses for jars and corks in the MLE
denominator.
In their response to the Remand Results, plaintiffs state
that they “agree with the Department[’s]. . . determination that
in calculating surrogate value financial ratios, jars and corks
should be included as ‘direct material costs’ in the materials,
labor and energy denominator.” Pls.’ Comments 2. No other party
has objected to the Department’s finding. Accordingly, the court
sustains Commerce’s inclusion of jar and cork expenses in its
calculation of surrogate financial ratios.
Court No. 06-00234 Page 9
B. Calculation of Labor Costs
The cost of labor is another factor of production used to
determine normal value. To calculate the labor wage rate in NME
countries, Commerce, pursuant to its regulations, employs a
regression-based analysis using data from multiple countries.
See Dorbest Ltd. v. United States, 30 CIT __, __, 462 F. Supp. 2d
1262, 1291 (2006); see 19 C.F.R. § 351.408(c)(3) (“For labor, the
Secretary will use regression-based wage rates reflective of the
observed relationship between wages and national income in market
economy countries. The Secretary will calculate the wage rate to
be applied in nonmarket economy proceedings each year. The
calculation will be based on current data, and will be made
available to the public.”).
In Zhejiang I, plaintiffs challenged the Department’s use of
this methodology, primarily because it was based on a basket of
countries not economically comparable to China, which
“contradicts the statute’s language that the factors of
production be valued using data from economically comparable
countries pursuant to 19 U.S.C. § 1677b(c)(4).” 32 CIT at __,
Slip Op. 08-68 at 34-35 (quotation omitted). On remand the court
instructed Commerce to reconsider its analysis
with specific reference to the reliance on
data from countries whose level of
development is not comparable to the PRC, and
how its insistence that it need not alter its
database for the wage rate calculation
conforms to its behavior in other cases.
Court No. 06-00234 Page 10
Zhejiang I, 32 CIT at __, Slip Op. 08-68 at 44.
On remand the Department “recalculated the regression
analysis to include all countries for which data are available
and suitable, pursuant to the country data selection criteria
established in Antidumping Methodologies: Market Economy Inputs,
Expected Non-Market Economy Wages, Duty Drawback; and Request for
Comments, 71 Fed. Reg. 61,716 (Dep’t of Commerce October 19,
2006) (“Selection Criteria”). . . .” Remand Results at 6.
Commerce thus revised its labor rate regression to include all
countries in its analysis that meet the Department’s Selection
Criteria. Id. Plaintiffs state that they “do not challenge the
Department’s redetermination.” Pls.’ Comments 2. Nor does any
other party object to Commerce’s findings. Consequently, the
court sustains Commerce’s redetermination regarding the selection
of data10 to calculate the labor wage rate.
C. Calculation of Brokerage and Handling
In the Final Results, in calculating surrogate values,
Commerce used a simple average of two surrogate values to
10
The only question dealing with Commerce’s cost of labor
regulations addressed by this opinion relates to which countries
should be included in Commerce’s regression analysis. The court
does not have before it issues dealing with the validity of the
regression analysis, and therefore has made no finding with
respect thereto. Cf. Allied Pac. Food (Dalian) Co. v. United
States, 32 CIT __, __ 587 F. Supp. 2d 1330, 1361 (2008)
(concluding “that 19 C.F.R. § 351.408(c)(3) is contrary to 19
U.S.C. § 1677b(c) and therefore invalid.”).
Court No. 06-00234 Page 11
calculate domestic brokerage and handling. See Remand Results at
18. Commerce calculated this average using data provided by
Essar Steel Limited (“Essar Steel”) and Pidilite Industry
(“Pidilite”). Commerce explained that the simple average
“achieves the most representative surrogate value in lieu of a
honey-specific brokerage and handling value.” Remand Results at
18 (citation omitted). Moreover, the Department explained in the
Final Results that “it calculated the surrogate value using the
Essar Steel and Pidilite data because together they constitute
the best available information for valuing brokerage and handling
based on the quality and specificity of the data.” Remand
Results at 18.
In Zhejiang I, plaintiffs challenged the Department’s use of
the Pidilite data, arguing that only the Essar Steel data should
be used because: “(1) the Essar data is more contemporaneous; and
(2) the Pidilite data has an aberrationally high brokerage and
handling value based on a very low sales quantity.” Zhejiang I,
32 CIT at __, Slip Op. 08-68 at 40 (citation and quotation
omitted).
The Zhejiang I court found that “Commerce acted within its
discretion when it concluded that, in the absence of data more
specific to honey, the several months’ difference in
contemporaneousness was not material, and thus that the Pidilite
data should not be excluded on that basis alone.” 32 CIT at ___,
Court No. 06-00234 Page 12
Slip Op. 08-68 at 42. However, the court also found that:
Commerce’s determination that use of a simple
average of the data constituted the best
available information for valuing brokerage
and handling, . . . does not appear to be
supported by substantial evidence. Commerce
states that the Pidilite data constitutes the
best available information for valuing
brokerage and handling because of the data’s
“quality and specificity.” The Department at
no point, however, explains how the data
meets either one of these standards.
Id. at __, Slip Op. 08-68 at 42.
On remand, the Department “continues to find that the
combination of both Pidilite and Essar Steel comprise the best
available information in terms of quality and specificity.”
Remand Results at 19.
The Department explained that “lacking a honey-specific
brokerage and handling value, the brokerage and handling costs of
Essar Steel’s hot-rolled carbon steel flat products, and
Pidilite’s carbazole violet pigment, are equally applicable to
determine a surrogate brokerage and handling value.” Remand
Results at 19 (citation omitted). “[W]ithout additional record
evidence to suggest that hot-rolled steel was more comparable to
honey than carbazole violet pigment, the selection of either
Pidilite’s or Essar’s data over the other would not be supported
by substantial evidence.” Def.’s Resp. 5 (citation omitted).
In objecting to the use of the Pidilite data on remand,
plaintiffs make three primary arguments: (1) that Commerce has
not shown that the Pidilite data is as representative as the
Court No. 06-00234 Page 13
Essar Steel data; (2) that the Pidilite data should not be used
because it consists of only 19 shipments, while the Essar Steel
data represents 446 shipments;11 and (3) that the Pidilite data
itself is marred by the presence of “clearly anomalous” value
derived from a single shipment. See Pls.’ Mem. 3-6. Despite
plaintiffs’ arguments to the contrary, the Department has
supported with substantial evidence both the use of the Pidilite
data and the use of a simple average.
First, Commerce has shown that the Pidilite data is as
representative as the Essar Steel data. As noted, there are no
brokerage and handling values for honey on the record. Thus, the
Department looked elsewhere. The Essar Steel data represents
values for steel; those for Pidilite, brokerage and handling
costs for carbazole violet pigment. Each of these products is
far removed from honey, however, no party questions the use of
the Essar Steel data.
That being the case, it is difficult to see how the Pidilite
data is less representative of honey than the Essar Steel data.
Both data sets are relatively contemporaneous to each other and
to the POR. See Zhejiang I, 32 CIT at __, Slip Op. 08-68 at 42.
While the Essar Steel data represents many price points, the
nineteen price points for the Pidilite data is not a de minimis
11
See Factors of Production Valuation Mem. for the
Preliminary Results and Partial Rescission of Antidumping Duty
Admin. Review of Honey from the PRC dated December 9, 2005,
Administrative Record 229, Att. 15.
Court No. 06-00234 Page 14
number. Thus, the court agrees with Commerce that:
in terms of specificity, the Department finds
that neither of the products shipped by Essar
Steel nor Pidilite is more or less comparable
to honey, and thus the brokerage and handling
costs of both are equally relevant. In terms
of quality, the Department finds that neither
Essar Steel nor Pidilite are more or less
reliable than the other, and thus are both
equally reliable.
Remand Results at 19.
Commerce’s decision to use the Pidilite data even though it
represents fewer data entries than the Essar Steel data is also
not unreasonable. The mere fact that there are fewer data points
does not necessarily render the Pidilite data unreliable, and
plaintiffs have provided no specific reason pointing to the
data’s unreliability.
Finally, plaintiffs’ insistence that the Pidilite data
should either be adjusted or disregarded altogether because of
the presence of one “clearly anomalous” data entry is
unconvincing. Again, beyond pointing out that the price for one
entry is far greater than the other 18 price points, plaintiffs
give no reason why that price point should be excluded. The
court thus agrees with Commerce that plaintiffs “fail[] to cite
to any record evidence demonstrating that the price values for
the 19 shipments ‘skewed’ the data and fails to identify any
record evidence establishing the ‘normal’ brokerage and handling
value for carbazole violet pigment” which would demonstrate that
a “particular shipment value was aberrational.” Def.’s Resp. 5.
Court No. 06-00234 Page 15
Accordingly, the court finds that because there is no record
evidence supporting a conclusion that Commerce should exclude a
particular Pidilite shipment value, or exclude Pidilite’s data as
a whole, Commerce’s inclusion of Pidilite’s data to calculate the
brokerage and handling value is reasonable. The court thus finds
that the Department has provided substantial evidence to support
its use of the Pidilite data.
Further, the court sustains Commerce’s decision to use a
simple average of the Pidilite and Essar Steel data. Commerce
explained that it found these two sets of data to be equally
probative for determining the surrogate brokerage and handling
value, and plaintiff has not demonstrated that its preference of
using Essar Steel data alone will yield a more reliable result
than the average of the Essar Steel and Pidilite data. Without
additional record evidence to suggest that hot-rolled steel was
more comparable to honey than carbazole violet pigment, the
selection of either Pidilite’s or Essar Steel’s data over the
other would not be supported by substantial evidence. This Court
has held that “[w]here there exist[ ] on the record ‘alternative
sources of data that would be equally or more reliable ... it is
within Commerce's discretion to use either set of data.’” Wuhan
Bee Healthy Co. v. United States, 29 CIT 587, 592-93, 374 F.
Supp. 2d 1299, 1304 (2005) (quoting Geum Poong Corp. v. United
States, 26 CIT 322, 326, 193 F. Supp. 2d 1363, 1369 (2002)).
Court No. 06-00234 Page 16
Using the same reasoning Commerce acted within its discretion by
including both sets of data and averaging them.
CONCLUSION
For the foregoing reasons, the court sustains the
Department’s Remand Results.
/s/Richard K. Eaton
Richard K. Eaton
Dated: June 19, 2009
New York, New York