Qingdao Qihang Tyre Co. v. United States , 352 F. Supp. 3d 1345 ( 2018 )


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  •                                           Slip Op. No. 18-176
    UNITED STATES COURT OF INTERNATIONAL TRADE
    QINGDAO QIHANG TYRE CO., LTD.,
    et al.,
    Plaintiffs,
    Before: Timothy C. Stanceu, Chief Judge
    v.
    Consol. Court No. 16-00075
    UNITED STATES,
    Defendant.
    OPINION
    [Sustaining decisions in a determination issued in response to court order in a review of an
    antidumping duty order on off-the-road tires from the People’s Republic of China]
    Dated:December , 2018
    Ned H. Marshak, Grunfeld Desiderio Lebowitz Silverman & Klestadt, LLP, of
    Washington, D.C., for plaintiffs Qingdao Qihang Tyre Co., Ltd. and Qingdao Free Trade Zone
    Full-World International Trading Co., Ltd. With him on the brief were Brandon M. Petelin and
    Jordan C. Kahn.
    Richard P. Ferrin, Drinker Biddle & Reath, LLP, of Washington, D.C., for plaintiffs
    Trelleborg Wheel Systems (Xingtai) Co., Ltd., Xuzhou Xugong Tyres Co., Ltd., Xuzhou
    Hanbang Tyre Co., Ltd., and Armour Rubber Co. Ltd. With him on the brief was Douglas J.
    Heffner.
    R. Kevin Williams, Clark Hill PLC, of Chicago, Ill., for plaintiff Weihai Zhongwei
    Rubber Co., Ltd.
    John J. Todor, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S.
    Department of Justice, of Washington, D.C., for defendant. With him on the brief were Chad A.
    Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin E.
    White, Jr., Assistant Director. Of counsel on the brief was Paul K. Keith, Attorney, Office of the
    Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce.
    Stanceu, Chief Judge: Plaintiffs contested an administrative determination the
    International Trade Administration, U.S. Department of Commerce (“Commerce” or the
    Consol. Court No. 16-00075                                                                Page 2
    “Department”), issued to conclude a periodic review of an antidumping duty order on off-the-
    road (“OTR”) tires from the People’s Republic of China (“China” or the “PRC”).1
    Before the court is the determination (the “Remand Redetermination”) Commerce issued
    in response to this court’s opinion and order in Qingdao Qihang Tyre Co. v. United States,
    42 CIT __, 
    308 F. Supp. 3d 1329
    (2018) (“Qingdao Qihang”). See Final Results of Redeterm.
    Pursuant to Court Remand (July 24, 2018), ECF No. 74 (“Remand Redeterm.”). The Remand
    Redetermination: (1) under protest, recalculates export price (“EP”) and constructed export price
    (“CEP”) for the mandatory respondents to eliminate its previous downward adjustments for
    Chinese irrecoverable value-added tax (“VAT”); (2) redetermines a surrogate value for inputs of
    reclaimed rubber production inputs; and (3) recalculates the surrogate value for foreign inland
    freight. Remand Redeterm. 2. It then recalculates the margins for the two mandatory
    respondents and the reviewed, but not individually examined, “separate rate respondents.” 
    Id. at 21.
    The court sustains the three decisions, and the redetermined margins, to which no party
    objects.
    I. BACKGROUND
    The background of this consolidated action is set forth in the court’s prior Opinion and
    Order, which is summarized and supplemented herein. See Qingdao Qihang, 42 CIT at __,
    308 F. Supp. 3d at 1333-34.
    1
    Consolidated under the lead case, Qingdao Qihang Tyre Co. v. United States, Court No.
    16-00075, are Qingdao Free Trade Zone Full-World Int’l Trading Co. v. United States, Court
    No. 16-00076; Trelleborg Wheel Systems (Xingtai) Co. v. United States, Court No. 16-00077;
    Xuzhou Xugong Tyres Co. v. United States, Court No. 16-00079; and Weihai Zhongwei Rubber
    Co. v. United States, Court No. 16-00084. See Order (Aug. 31, 2016), ECF No. 24.
    Consol. Court No. 16-00075                                                                         Page 3
    
    A. The Agency Decision Contested in this Litigation
    The contested administrative decision (“Final Results”), which concluded the sixth
    periodic administrative review of certain pneumatic off-the-road tires from China, was published
    as Certain New Pneumatic Off-the-Road Tires From the People’s Republic of China: Final
    Results of Antidumping Duty Administrative Review; 2013-2014, 81 Fed. Reg. 23,272 (Int’l
    Trade Admin. Apr. 20, 2016) (“Final Results”). Incorporated by reference in the Final Results is
    a final “Issues and Decision Memorandum” containing explanatory discussion. Issues and
    Decision Memorandum for Final Results of Antidumping Duty Administrative Review: Certain
    New Pneumatic Off-the-Road Tires from the People’s Republic of China; 2013-2014 (Int’l Trade
    Admin. Apr. 12, 2016) (P.R. Doc. 334), available at
    https://enforcement.trade.gov/frn/summary/prc/2016-09165-1.pdf (last visited Dec. 18, 2018)
    (“Final I&D Mem.”).
    B. The Parties in this Consolidated Case
    The plaintiffs in this litigation include the two mandatory respondents in the sixth review,
    Xuzhou Xugong Tyres Co., Ltd., Armour Rubber Co. Ltd., and Xuzhou Hanbang Tyre Co., Ltd.
    (collectively, “Xugong”), which Commerce treated as a single entity for purposes of the review,
    and Qingdao Qihang Tyre Co., Ltd. (“Qihang”). The other plaintiffs are the following reviewed,
    but not individually examined, separate rate respondents: Qingdao Free Trade Zone Full-World
    International Trading Co., Ltd., Trelleborg Wheel Systems (Xingtai) Co., Ltd., and Weihai
    Zhongwei Rubber Co., Ltd.2
    
    2
    Titan Tire Corporation and United Steel, Paper and Forestry, Rubber, Manufacturing,
    Energy, Allied Industrial and Service Workers International Union, AFL-CIO, CLC were
    defendant-intervenors in this litigation, see Order (May 31, 2016), ECF No. 18, but withdrew on
    September 29, 2017. See Order (Sept. 29, 2017), ECF No. 66.
    Consol. Court No. 16-00075                                                                Page 4
    
    C. Procedural History
    Commerce issued an antidumping duty order (the “Order”) on certain off-the-road tires
    from China (the “subject merchandise”) in 2008. Certain New Pneumatic Off-the-Road Tires
    From the People’s Republic of China: Notice of Amended Final Affirmative Determination of
    Sales at Less Than Fair Value and Antidumping Duty Order, 73 Fed. Reg. 51,624 (Int’l Trade
    Admin. Sept. 4, 2008). Commerce initiated the review at issue in this litigation, which was the
    sixth administrative review of the Order, on October 30, 2014. Initiation of Antidumping and
    Countervailing Duty Administrative Reviews, 79 Fed. Reg. 64,565 (Int’l Trade Admin. Oct. 30,
    2014). The sixth administrative review pertained to entries of subject merchandise made during
    the period of review of September 1, 2013 through August 31, 2014. Final Results, 81 Fed. Reg.
    at 23,272.
    Commerce published the Final Results on April 20, 2016. 
    Id. In the
    Final Results,
    Commerce assigned individually-determined weighted-average dumping margins to Xugong and
    Qihang. 
    Id. at 23,273.
    Having selected these exporters/producers of OTR tires as “mandatory”
    respondents, i.e., respondents it intended to examine individually, Commerce assigned a
    weighted-average dumping margin of 65.33% to Xugong and a weighted-average dumping
    margin of 79.86% to Qihang in the Final Results. 
    Id. Commerce assigned
    a weighted average of
    these two margins, 70.55%, to respondents that it did not select for individual examination but
    that Commerce found to have qualified for a “separate rate” based on demonstrated
    independence from the government of China. 
    Id. The Department
    submitted the Remand Redetermination to the court on July 24, 2018.
    Remand Redeterm. Plaintiffs collectively filed comments on the Remand Redetermination on
    August 10, 2018. All Plaintiffs’ Comments on Remand Redetermination (Aug. 10, 2018), ECF
    Consol. Court No. 16-00075                                                                        Page 5
    
    No. 76 (“Pls.’ Comments”). The United States filed a reply to plaintiffs’ comments on August
    24, 2018. Defendant’s Response to Comments on Remand Redetermination (Aug. 24, 2018),
    ECF No. 78 (“Def.’s Reply”). The plaintiffs in this litigation submitted a single set of comments
    in support of the decisions made in the Remand Redetermination. Pls.’ Comments 1. Defendant
    United States also supports the Remand Redetermination. Def.’s Reply 1.
    II. DISCUSSION
    A. Jurisdiction and Standard of Review
    The court exercises jurisdiction under section 201 of the Customs Courts Act of 1980,
    28 U.S.C. § 1581(c) (2012),3 pursuant to which the court reviews actions commenced under
    section 516A of the Tariff Act of 1930 (the “Tariff Act”), as amended 19 U.S.C. § 1516a,
    including an action contesting a final determination that Commerce issues to conclude an
    antidumping duty administrative review. In reviewing a final determination, the court “shall
    hold unlawful any determination, finding, or conclusion found . . . to be unsupported by
    substantial evidence on the record, or otherwise not in accordance with law.” 19 U.S.C.
    § 1516a(b)(1)(B)(i).
    B. The Court’s Rulings in Qingdao Qihang
    In Qingdao Qihang, the court directed Commerce to submit a redetermination that
    addresses the following three decisions in the Final Results, each of which the court held
    unlawful: (1) downward adjustments Commerce made to the prices of Xugong and Qihang that
    are used to determine EP and CEP, to account for Chinese irrecoverable VAT, Qingdao Qihang,
    42 CIT at __, 308 F. Supp. 3d at 1335-47; (2) the surrogate value for the reclaimed rubber
    manufacturing input, which Commerce based on Global Trade Atlas import data from Thailand,
    
    3
    Citations to the United States Code are to the 2012 edition.
    Consol. Court No. 16-00075                                                                   Page 6
    
    
    id., 42 CIT
    at __, 308 F. Supp. 3d at 1347-49; and (3) the surrogate value Commerce obtained
    from the World Bank’s Doing Business 2015: Thailand report for valuing foreign inland freight,
    
    id., 42 CIT
    at __, 308 F. Supp. 3d at 1349-52.
    C. The Department’s Remand Redetermination
    In the Remand Redetermination, Commerce, under protest, recalculated EP and CEP for
    Xugong’s and Qihang’s sales without making downward adjustments for Chinese irrecoverable
    VAT. Remand Redeterm. 8. As a justification for its protest, Commerce stated that “[w]e
    respectfully disagree with the Court’s finding that Commerce impermissibly construed section
    772(c)(2)(B) of the Act [19 U.S.C. § 1677a(c)(2)(B)] with respect to irrevocable [sic] VAT, and
    maintain that our current practice, as 
    described supra
    , is consistent with the statute and thus in
    accordance with law.” 
    Id. As part
    of the description of the current practice, Commerce stated
    that “[i]n the Final Results, we determined that adjusting for irrecoverable VAT, which equates
    to an export tax, is consistent with section 772(c)(2)(B) of the Act, as it reduces the gross U.S.
    price charged to the customer (which would otherwise include the unrefunded VAT in the
    amount charged to the U.S. customer) to a net price received.” 
    Id. at 5.
    Commerce added that
    “[m]oreover, this deduction is consistent with Commerce’s longstanding policy that dumping
    margin calculations be tax-neutral.” 
    Id. The court
    sustains the Department’s decision to correct its calculations of EP and CEP by
    removing its downward adjustments for “irrecoverable VAT.” While sustaining this decision,
    the court does not sustain or otherwise approve the reasoning Commerce included in the Remand
    Redetermination in an attempt to convince the court that the decision on VAT in Qingdao
    Qihang was incorrect.
    Consol. Court No. 16-00075                                                                    Page 7
    
    As Qingdao Qihang explained, the VAT at issue in this case is not the type of tax
    described by 19 U.S.C. § 1677a(c)(2)(B), which addresses an “export tax, duty, or other charge
    imposed by the exporting country on the exportation of the subject merchandise to the United
    States.” The record in this case does not support the notion that China imposed an export tax, or
    anything resembling one, on the subject merchandise.
    The tax at issue here is a domestic value-added tax that, as Commerce itself does not
    dispute, is included in the prices of certain materials used in producing subject merchandise. See
    Final I&D Mem. at 22. This “input” VAT is included in the price of materials used to make
    OTR tires, and the record does not demonstrate that it is incurred only on production for export
    sales. See Qingdao Qihang, 42 CIT at __, 308 F. Supp. 3d at 1337 (“The questionnaire
    responses of both mandatory respondents constitute record evidence that the VAT incurred by
    these respondents resulted from purchases of some of the material inputs used in OTR tire
    production.” (citations omitted)). That some of this value-added tax might not be fully refunded
    upon subsequent exportation of the finished good does not convert this value-added tax to an
    export tax, duty, or other charge imposed on the exportation of the good. There is no evidentiary
    support in the record for the proposition that irrecoverable VAT does not occur on domestic
    sales. Nevertheless, Commerce appears to presume, without evidentiary support, that Chinese
    irrecoverable VAT “amounts to an export tax, duty, or other charge imposed on exported
    merchandise that is not imposed on domestic sales.” 
    Id., 42 CIT
    at __, 308 F. Supp. 3d at 1343
    n.8 (emphasis in Qingdao Qihang) (quoting Final I&D Mem. at 22); see Jiangsu Senmao
    Bamboo and Wood Indus. Co., Ltd. v. United States, 42 CIT __, __, 
    322 F. Supp. 3d 1308
    , 1344
    (2018).
    Consol. Court No. 16-00075                                                                Page 8
    
    As Qingdao Qihang also explained, Congress was familiar with the concepts of
    recoverable VAT and, necessarily, of irrecoverable VAT, and addressed them in provisions of
    the Tariff Act other than 19 U.S.C. § 1677a(c)(2)(B). Simply stated, recoverable VAT, in certain
    circumstances (not present here), may reduce a dumping margin. But Congress did not intend
    that VAT, whether or not recoverable, would ever increase a dumping margin. In
    § 1677a(c)(2)(B), Congress addressed export taxes, duties, and other charges imposed on the
    exportation of the good, not value-added taxes, which Congress addressed elsewhere in the
    statute, using distinctly different language. Further, Qingdao Qihang explained why the
    Department’s “tax-neutral” rationale is misguided. See Qingdao Qihang, 42 CIT at __, 308 F.
    Supp. 3d at 1342-44.
    Reconsidering its surrogate values for reclaimed rubber, Commerce determined that
    Romanian import price data, obtained from the Global Trade Atlas, constituted the best available
    information. 
    Id. at 11-13.
    Commerce also redetermined its surrogate value for foreign inland
    freight, using the World Bank’s Doing Business 2016: Thailand report in place of the 2015
    version of that report that Commerce used in the Final Results. 
    Id. at 17-20.
    The changes made from the Final Results lowered Qihang’s dumping margin from
    79.86% to 13.93% and Xugong’s dumping margin from 65.33% to 23.45%. 
    Id. at 21.
    Because
    the margin in the Final Results for separate rate respondents not individually examined was the
    weighted average of the dumping margins calculated for Qihang and Xugong, the Department
    recalculated that margin in the Remand Redetermination to 20.03%. 
    Id. These decisions
    comply
    with the court’s decision in Qingdao Qihang, are supported by the record evidence, and are in
    accordance with law.
    Consol. Court No. 16-00075                                                               Page 9
    III. CONCLUSION
    For the reasons discussed above, the court sustains the Remand Redetermination.
    Judgment will enter accordingly.
    /s/Timothy C. Stanceu
    Timothy C. Stanceu, Chief Judge
    Dated: December 21, 2018
    New York, New York
    

Document Info

Docket Number: Consol. 16-00075

Citation Numbers: 2018 CIT 176, 352 F. Supp. 3d 1345

Judges: Stanceu

Filed Date: 12/21/2018

Precedential Status: Precedential

Modified Date: 10/19/2024