Jinxiang Yuanxin Import & Export Co., Ltd. v. United States , 2013 CIT 77 ( 2013 )

Slip Op. 13-77
UNITED STATES COURT OF INTERNATIONAL TRADE
___________________________________
:
JINXIANG YUANXIN IMPORT & :
EXPORT CO., LTD., :
:
Plaintiff, :
:
v. :
:
UNITED STATES, : Before: Richard K. Eaton, Judge
:
Defendant, : Court No. 11-00145
:
and : Public Version
:
FRESH GARLIC PRODUCERS :
ASSOCIATION, CHRISTOPHER :
RANCH, L.L.C., THE GARLIC :
COMPANY, VALLEY GARLIC, and :
VESSEY AND COMPANY, INC., :
:
Defendant-Intervenors. :
___________________________________ :
OPINION and ORDER
[Plaintiff’s motion for judgment on the agency record is granted, in part, and the Department of
Commerce’s final determination rescinding plaintiff’s new shipper review is remanded.]
Dated: June 18, 2013
John J. Kenkel, deKieffer & Horgan, of Washington, D.C., argued for plaintiff. With him
on the brief were Gregory S. Menegaz and J. Kevin Horgan.
Melissa M. Devine, Trial Attorney, Commercial Litigation Branch, Civil Division, United
States Department of Justice, of Washington, D.C., argued for defendant. With her on the brief
were Stuart F. Delery, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and
Reginald T. Blades, Jr., Assistant Director. Of counsel on the brief was George H. Kivork,
Attorney, Office of the Chief Counsel for Import Administration, United States Department of
Commerce, of Washington, D.C.
John M. Herrmann, Kelley Drye & Warren, LLP, of Washington, D.C., argued for
defendant-intervenors. With him on the brief was Michael J. Coursey.
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Eaton, Judge: Before the court is the motion for judgment on the agency record, pursuant
to USCIT Rule 56.2, of plaintiff Jinxiang Yuanxin Import & Export Co. (“plaintiff” or
“Yuanxin”), an exporter of fresh, whole garlic from the People’s Republic of China (“PRC”).
By its motion, Yuanxin challenges the Department of Commerce’s (“Commerce” or the
“Department”) rescission of its new shipper review under the antidumping duty order on fresh
garlic from the PRC, after finding that Yuanxin’s sole U.S. export was not a bona fide sale. See
Garlic From the PRC, 76 Fed. Reg. 19,322 (Dep’t of Commerce Apr. 7, 2011) (rescission of
antidumping duty new shipper reviews) (“Rescission”), and the accompanying Final Bona Fides
Memorandum (Dep’t of Commerce Mar. 31, 2011) (“Bona Fides Mem.”); Fresh Garlic from the
PRC, 59 Fed. Reg. 59,209 (Dep’t of Commerce Nov. 16, 1994) (antidumping duty order)
(“Order”). The period of review (“POR”) was November 1, 2008 through October 31, 2009.
Yuanxin claims that “Commerce unlawfully rescinded the new-shipper review . . . [and
that the] Department’s determination with respect to the issue of whether Yuanxin’s sale was
bona fide was not supported by substantial evidence on the record and was otherwise contrary to
law.” Pl.’s Mem. in Supp. of Mot. for J. on the Agency R. 1 (ECF Dkt. No. 34) (“Pl.’s Br”).
Defendant United States (“defendant”), on behalf of Commerce, urges that the determination be
sustained. Def.’s Mem. in Opp. to Pl.’s Mot. for J. on the Agency R. 1 (ECF Dkt. No. 49)
(“Def.’s Mem.”). Defendant-intervenors, the Fresh Garlic Producers Association and its
individual members (Christopher Ranch, L.L.C., The Garlic Company, Valley Garlic, and
Vessey and Company, Inc.) (“defendant-intervenors”), argue that plaintiff’s contentions are
without merit, and that the court should sustain the determination in its entirety. Def.-Ints.’
Resp. in Opp. to Pl.’s Mot. for J. on the Agency R. 1 (ECF Dkt. No. 56) (“Def.-Ints.’ Resp.”).
Court No. 11-00145 3
The court has jurisdiction pursuant to 28 U.S.C. § 1581(c) (2006) and 19 U.S.C. §
1516a(a)(2)(B)(iii) (2006).
For the reasons set forth below, plaintiff’s motion is granted, in part, and defendant’s
Rescission of Yuanxin’s new shipper review is remanded.
BACKGROUND
In 1994, Commerce issued an antidumping duty order on imports of fresh garlic from the
PRC. Order, 59 Fed. Reg. at 59,209. Because Yuanxin, a new exporter, did not participate in
the underlying antidumping investigation or in any prior administrative review, it is subject to
the PRC-wide antidumping duty rate unless it can secure an individual rate through a new
shipper review.
Yuanxin is a processor and exporter of garlic from the PRC that made one sale of single-
clove1 whole garlic into the United States during the POR.2 Bona Fides Mem. at 4. Yuanxin
sold its merchandise through a U.S. reseller3 (“the Reseller”) that had not formerly purchased
garlic. Def.’s Mem. 3. The Reseller did not purchase any other garlic during or subsequent to
the POR. Def.’s Mem. 4. The Reseller immediately transferred the garlic to a U.S. wholesaler4
1
Single-clove garlic (also known as solo garlic, monobulb garlic, single bulb
garlic, or pearl garlic) has the same flavor as multi-clove garlic, but consists of a single clove per
bulb, instead of multiple cloves. See generally MEREDITH, THE COMPLETE BOOK OF GARLIC: A
GUIDE FOR GARDENERS, GROWERS, AND SERIOUS COOKS 294–95 (2008). It originates in Yunnan
province in Southern China. Id.
2
The sale consisted of [[ ]] kilograms of single-clove garlic from the PRC
with a total value of [[ ]] or a weighted-average unit value (“AUV”) of [[ ]] per
kilogram. Bona Fides Mem. at 4.
3
The U.S. reseller was [[ ]], a sporting and athletic
goods manufacturer. Bona Fides Mem. at 8.
4
The U.S. wholesaler was [[ ]]. Bona Fides Mem. at 8.
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(“the Wholesaler”) that had previously purchased single-clove garlic from another exporter
during the preceding period of review. Bona Fides Mem. at 8.
In November 2009, Commerce received a timely request for a new shipper review from
Yuanxin. See Fresh Garlic from The PRC (Nov. 25, 2009) (request for new shipper review)
(P.R. Doc. 2; C.R. Doc. 2). On January 5, 2010, the Department initiated new shipper reviews
for three exporters of fresh garlic from the PRC, including Yuanxin. Fresh Garlic From the
PRC, 75 Fed. Reg. 343–44 (Dep’t of Commerce Jan. 5, 2010) (initiation of new shipper
reviews).
On November 12, 2010, Commerce issued its Preliminary Results, finding that it did not
have a basis to conclude that Yuanxin’s sale was not bona fide, and setting the company’s
dumping margin at $0.75 per kilogram. Fresh Garlic From the PRC, 75 Fed. Reg. 69,415,
69,417, 69,422 (Dep’t of Commerce Nov. 12, 2010) (preliminary results of new shipper reviews
and preliminary rescission, in part) (“Prelim. Results”), and accompanying Preliminary Bona
Fides Analysis Mem. at 5. (“Prelim. Bona Fides Mem.”). Also, in the Preliminary Results,
however, “Commerce expressed its concern . . . that the [average unit value (“AUV”)] of
Yuanxin’s sale was the [[ ]] AUV out of the [[ ]] Chinese entries,” and that
“Yuanxin’s sale quantity was [[ ]] percent [[ ]] than the average quantity of all such
entries.” Def.’s Mem. 5. The Department “also expressed concern as to” the unusual nature of
the Reseller’s sale to the Wholesaler. Def.’s Mem. 5. Commerce therefore concluded that
“given the concerns regarding the price, quantity, and atypicality of the product and transaction,
we plan to continue to examine all factors relating to the bona fide nature of Yuanxin’s sale
throughout the remainder of this [new shipper review].” Prelim. Bona Fides Mem. at 6.
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After the Preliminary Results were issued, the Department sent a supplemental
questionnaire to Yuanxin to solicit additional information about its sale and about the nature of
single-clove garlic. Rescission, 76 Fed. Reg. at 19,324. Yuanxin submitted a response to the
questionnaire and provided supplementary evidence concerning the bona fides of its sale. Pl.’s
Third Supp. Questionnaire Resp. (Feb. 14, 2011) (C.R. Doc. 46) (“Pl.’s 3d Resp.”).
Additionally, information about single-clove garlic was placed on the record by plaintiff and by
the Department. Rescission, 76 Fed. Reg. at 19,324.
On April 7, 2011, after reviewing additional briefing from plaintiff and defendant-
intervenors and the new record evidence, Commerce determined that Yuanxin’s sale was not
bona fide and rescinded the company’s new shipper review. Rescission, 76 Fed. Reg. at 19,324.
In the Rescission, Commerce concluded,
[b]ased on the Department’s complete analysis of all the information on the
record of this review regarding the bona fides of Yuanxin’s . . . sale, the
Department finds Yuanxin’s sale to be not bona fide because (1) Yuanxin’s sale
price is so high as to be commercially unreasonable and not indicative of future
sales, (2) Yuanxin’s sales quantity is not representative of the garlic industry, and
(3) the structure of Yuanxin’s U.S. sale is of an unusual nature.
Rescission, 76 Fed. Reg. at 19,324.
STANDARD OF REVIEW
“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) (2006).
DISCUSSION
I. Legal Framework
Under 19 U.S.C. § 1675(a)(2)(B), Commerce shall, upon request, conduct administrative
reviews “for new exporters and producers.” 19 U.S.C. § 1675(a)(2)(B). The purpose of these
Court No. 11-00145 6
new shipper reviews is to determine whether exporters or producers, whose sales have not been
previously examined, are (1) entitled to their own duty rates under an antidumping order, and (2)
if so, to calculate those rates. See Hebei New Donghua Amino Acid Co. v. United States, 29 CIT
603, 604, 374 F. Supp. 2d 1333, 1335 (2005). When performing these new shipper reviews, “[i]t
is Commerce’s practice . . . to determine whether the new exporters and producers have
conducted bona fide or commercially reasonable transactions.” Shandong Chenhe Int’l Trading
Co. v. United States, 34 CIT __, __, Slip Op. 10-129, at 5 (2010) (citing 19 C.F.R. §
351.214(b)(2) (2009); Hebei New Donghua, 29 CIT at 608, 374 F. Supp. 2d at 1338). In doing
so, “Commerce normally employs a totality of the circumstances test to determine whether the
transaction is ‘commercially reasonable’ or ‘atypical of normal business practices.’” Id. at __,
Slip Op. 10-129, at 6 (quoting Hebei New Donghua, 29 CIT at 610, 374 F. Supp. 2d at 1339).
To determine whether a sale is atypical of normal business practices, the Department will
look at all of the circumstances surrounding the sale. See Catfish Farmers of Am. v. United
States, 33 CIT __, __, 641 F. Supp. 2d 1362, 1368 (2009) (“If the weight of the evidence
indicates that a sale is not typical of a company’s normal business practices, the sale is not
consistent with good business practices, or ‘the transaction has been so artificially structured as
to be commercially unreasonable,’ the Department finds that it is not a bona fide commercial
transaction and must be excluded from review.” (citation omitted)).
“In evaluating whether or not a sale is ‘commercially reasonable,’ Commerce has
considered the following factors, among others: (1) the timing of the sale, (2) the price and
quantity[,] (3) the expenses arising from the transaction, (4) whether the goods were resold at a
profit, (5) and whether the transaction was at an arm’s length basis.” Hebei New Donghua, 29
CIT at 610, 374 F. Supp. 2d at 1339 (citing Windmill Int’l Pte., Ltd. v. United States, 26 CIT 221,
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228, 193 F. Supp. 2d 1303, 1310 (2002); Am. Silicon Techs. v. United States, 24 CIT 612, 616,
110 F. Supp. 2d 992, 995 (2000)). When weighing these factors, Commerce’s overarching goal
is to determine “whether the sale(s) under review are indicative of future commercial behavior.”
Hebei New Donghua, 29 CIT at 613, 374 F. Supp. 2d at 1342; see also Shandong Chenhe, 34
CIT at __, Slip Op. 10-129, at 6; Tianjin Tiancheng Pharm. Co. v. United States, 29 CIT 256,
258, 366 F. Supp. 2d 1246, 1249 (2005). In addition,
[f]or Commerce, a primary indication that a sale (or series of sales) is not bona
fide is evidence that the sales price is unusually high in comparison to the prices
of other sales of subject merchandise during the POR. Underlying this sales price
inquiry is the idea that a respondent might arrange for a high sales price in order
to avoid the imposition of a significant antidumping duty margin.5
Zhengzhou Huachao Indus. Co. v. United States, 37 CIT __, __, Slip. Op. 13-61, at 6–7
(2013) (citing Jinxiang Chengda Imp. & Exp. Co. v. United States, 37 CIT __, __, Slip
Op. 13-40, at 4–5 (2013)).
II. The Department’s Use of the Customs Data in Its Price Analysis Was Not
Supported by Substantial Evidence
Commerce began its analysis of Yuanxin’s sale by examining the company’s sales price
to its Reseller. To this end, following the Preliminary Results, the Department placed on the
record a copy of the U.S. Customs and Border Protection (“Customs”) data run containing all
entries of merchandise exported to the United States from the PRC during the POR under U.S.
5
An antidumping duty margin is “the amount by which the normal value exceeds
the export price or constructed export price of the subject merchandise.” 19 U.S.C. §
1677(35)(A). In other words, “[i]f the price of an item in the home market (normal value) is
higher than the price for the same item in the United States (export price), the dumping margin
comparison produces a positive number, indicating that dumping has occurred.” Qingdao Sea-
line Trading Co., Ltd. v. United States, 36 CIT __, __, Slip Op. 12-39, at 5 n.3. (2012).
Therefore, if a respondent is able to enter its merchandise at a high sales price, the difference
between the sales price and the price in the home market will be low, resulting in a low dumping
margin.
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Harmonized Tariff Schedule (“HTSUS”) category 0703.20.0010 for “Garlic, Fresh Whole
Bulbs,” a category that includes both single-clove and multi-clove fresh, whole garlic bulbs.
Bona Fides Mem. at 4. The Customs data yielded an AUV of [[ ]] per kilogram for the
[[ ]] entries under this HTSUS heading. Bona Fides Mem. at 6. Commerce then compared
Yuanxin’s sales price of [[ ]] to the Customs AUV of [[ ]] and found that Yuanxin’s
price was abnormally high because it was “more than [[ ]] times higher than the [Customs]
AUV, making its entry [[ ]] under this HTSUS heading.” Bona Fides
Mem. at 6.
Plaintiff objects to the Department’s comparison of the company’s sales price for single-
clove garlic to the prices in the Customs data because those prices were for multi-clove garlic.
Yuanxin argues that this comparison departs from Commerce’s “consistent policy” in other
reviews of not conducting comparisons with the Customs AUV when products are determined to
be unique. Pl.’s Br. 12, 20–21. In support of its position, plaintiff first cites to the review for
Jinxiang Hejia Co., Ltd. (“Hejia”), the only other review conducted for a sale of single-clove
garlic. See Fresh Garlic from the PRC, 74 Fed. Reg. 50,952 (Dep’t of Commerce Oct. 2, 2009)
(final results and final rescission, in part, of new shipper reviews), and accompanying Issues &
Decision Mem. (“Hejia Issues & Dec. Mem.”). In that review, Commerce determined that,
“[a]lthough Hejia’s sale of single-clove garlic entered at a significantly higher price than the
AUV for [the other entries under the same tariff heading], this comparison may not be
meaningful for purposes of this bona fides analysis because [the tariff heading] includes
substantial entries of multi-clove garlic which, both parties concede, have prices significantly
lower than Hejia’s price for single clove garlic.” Hejia Issues & Dec. Mem. at 4–5. Based on
this finding, the Department disregarded its comparison of the sales price of Hejia’s single-clove
Court No. 11-00145 9
garlic to the AUV of garlic entered under HTSUS 0703.20.0010. Commerce relied instead on
the parties’ concession, supported by record evidence of single-clove garlic prices, that prices for
single-clove garlic should be higher than those for multi-clove garlic.
Plaintiff further claims that Commerce used a similar “unique products” analysis in three
other administrative reviews—Fish Fillets, Stainless Steel, and Wooden Bedroom Furniture.
Pl.’s Br. 28–29. In each of these reviews, the Department approved prices that were higher than
the average for the products entered under the same HTSUS heading. The Department found
that the higher prices were justified because each product under review was distinct from the
remaining entries made under the same heading. Yuanxin claims similar treatment, arguing that
“the AUV price in the Customs database is inappropriate [because] Yuanxin sold a product that
is at a level far above that of normal multi-clove garlic.” Pl.’s Br. 28.
In response, Commerce acknowledges that in the Preliminary Results it stated that the
distinction between single-clove and multi-clove garlic “le[d] us to deviate from our typical
procedure of relying on [Customs] data as a point of comparison for the new shipper’s price.”
Bona Fides Mem. at 6, 4 (“In the Preliminary Results, although all entries were made under the
same HTSUS number, the Department did not compare Yuanxin’s sale to the POR AUV based
on the understanding at the time that single-clove garlic is distinct from multi-clove garlic, with
significantly different prices.”). Thus, for the Preliminary Results, Commerce noted that,
[a]lthough Yuanxin’s sale of single-clove garlic entered at a significantly different
price than the AUV for [other entries in the Customs data], this comparison may
not be meaningful for purposes of this bona fides analysis because [the HTSUS
heading] includes substantial entries of multi-clove garlic . . . [and] there are no
other U.S. prices of single-clove garlic on the record to compare with the sale in
question.
Prelim. Bona Fides Mem. at 4–5.
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After the Preliminary Results, however, “the Department . . . re-examined whether
Yuanxin’s sale of single-clove garlic should be considered a sale sufficiently distinct from a sale
of multi-clove garlic for purposes of [the] bona fides analysis.” Bona Fides Mem. at 6.
Accordingly, Commerce requested additional information and briefing from the parties about
single-clove garlic, and placed new evidence about single-clove garlic on the record. Plaintiff
was also asked to “describe the growing process of both single-clove garlic and multi-clove
garlic . . . [and] . . . highlight the differences between the two growing processes,” and to address
whether “single-clove garlic a differen[t] species than multi-clove garlic.” Pl.’s 3d Resp. 3.
Plaintiff responded that “[s]ingle-clove garlic and multi-clove garlic are the same
species” and “[t]he growing process of single-clove garlic is the same [as] multi-clove garlic
except that the harvest timing of single-clove garlic is two months earlier than the multi-clove
garlic.” Pl.’s 3d Resp. 3. Based on this response, the Department found “that there is no reason
on the record in this case to disregard its long-standing practice of examining [Customs]-derived
AUVs [for fresh, whole garlic bulbs] as the most appropriate representation of the price of
subject merchandise.” Bona Fides Mem. at 6. In other words, in contrast to Hejia (where
Commerce found that it was reasonable that the sales price for Hejia’s single-clove garlic was
much higher than the prices for entries of multi-clove garlic entered under the same HTSUS
heading), here the Department believes it had enough evidence to support a comparison between
Yuanxin’s sales price and the Customs data for sales of other fresh, whole garlic bulbs, even
though those bulbs were multi-clove rather than single-clove. Specifically, in this review,
Commerce found that (1) single- and multi-clove garlic are the same species; (2) the growing
process is the same except that single-clove garlic is harvested two months earlier; (3) the
physical differences, i.e., number of cloves, “does not affect the garlic bulb’s ultimate end-use”;
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and (4) “there is no evidence on the record that the ‘market’ for single-clove-garlic in the United
States is distinct from the market for fresh whole garlic in general.” Bona Fides Mem. 6.
Therefore, the Department found it was reasonable to compare Yuanxin’s U.S. sales price to the
prices for other entries of whole garlic from the PRC during the POR.
As to its departure from the analysis it performed for Hejia, the other shipper of single-
clove whole garlic during the previous POR, Commerce argues that “[i]n Hejia, Commerce
found that a comparison using the AUV for whole garlic . . . was not meaningful for purposes of
a bona fides analysis because both parties conceded that entries of multi-clove garlic had prices
significantly lower than Hejia’s price for single-clove garlic.” Def.’s Mem. 30. In contrast, here,
Commerce had record evidence that it claims demonstrates that single- and multi-clove garlic are
similar enough to allow a comparison between the prices of the two. Therefore, unlike in Hejia,
the Department “did not need to depart from its typical methodology and use a range of prices as
it has done in cases when matching identical merchandise has been difficult.” Def.’s Mem. 30.
As to plaintiff’s claim that Commerce should have employed the analysis in Fish Fillets,
Stainless Steel, and Wooden Bedroom Furniture, Commerce first counters that “to the extent that
Yuanxin relies upon Commerce’s analysis of proprietary information contained in these reviews,
the Court should disregard Yuanxin’s arguments [because t]hese memoranda and the proprietary
information contained therein are not available to the public and were not placed upon the record
of this case.” Def.’s Mem. 29. Thus, Commerce urges the court to reject plaintiff’s reliance on
the three administrative reviews, information about which is not available to the public, and
instead sustain Commerce’s use of the Customs AUV. Def.’s Mem. 29–32.
In addition, contrary to plaintiff’s position, the Department argues that the three reviews
cited by plaintiff “demonstrate that Commerce’s preference is to use the AUV derived from
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[Customs] data, but that, in truly exceptional circumstances, Commerce may depart from its
longstanding practice.” Def.’s Mem. 29. Here, the Department maintains that it “correctly
determined that such exceptional circumstances did not apply.” Def.’s Mem. 29. According to
Commerce, this is because, unlike in Hejia, here there is no record evidence that indicates that
single-clove garlic is a “niche product,” like the specialized steel product in Stainless Steel, “or
an import with multiple inputs or special ‘physical characteristics.’ Furthermore, the HTSUS
category used by Commerce covers only fresh whole garlic, and not a myriad of different
products as was the case in Stainless Steel and Furniture.” Def.’s Mem. 31–32. Thus, the
Department asserts that “Commerce reasonably determined that it was not faced with a
complicated and unique product . . . that make[s] matching the new shipper’s sales to the
Customs data problematic.” Def.’s Mem. 32 (citing Bona Fides Mem. at 7–9).
III. Commerce Must Explain Its Departure from the Practice It Established in Hejia
As has been seen, the Department concluded that, when compared to the Customs AUV
of [[ ]], Yuanxin’s sales price of [[ ]] was unusually high, and therefore indicative of
a non-bona fide sale. In addition, Commerce found that Yuanxin’s sales price was not only high
when compared to the Customs AUV, but was actually the [[ ]] under either the whole or
peeled garlic category. Bona Fides Mem. at 6.
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The court finds, however, that the use of this comparison is at odds with the
Department’s practice established in Hejia,6 and that the departure from this practice was not
adequately explained. In Hejia, Commerce found that single-clove garlic was “unique” and
therefore a comparison with entries of multi-clove garlic was not appropriate.
Commerce . . . concluded in the Final Results that Hejia’s one-time sale was a
bona fide commercial transaction. In defending the relatively high price of its
sale, Hejia argued that prices for single-clove garlic are significantly higher than
those for multi-clove garlic. To support its argument, Plaintiff placed on the
record sales offers of single-clove garlic to Germany, Great Britain, and Japan, all
for single-clove garlic at prices significantly higher than the multi-clove variety.
Thus, the Department rejected the contention by Defendant-Intervenors . . . that
Hejia’s sale was not reflective of future sales and determined that the agency
“[did] not have a basis for concluding that [Hejia’s] price is aberrationally high
for single-clove garlic in the United States.”
Jinxiang Hejia Co. v. United States, 35 CIT __, __, Slip Op. 11-112, at 6 (2011) (citations
omitted). Although the Department insists that it made its finding in Hejia that single-clove
garlic commands a higher price than multi-clove garlic based on the concession of the parties, it
is apparent from the passage quoted above that it also based its finding on record evidence.
6
Commerce may establish a new practice in a single review, provided that the
Department has adequately explained both why it is deviating from a former practice (if it had an
established practice), and why the new practice is appropriate. See Huvis Corp. v. United States,
570 F.3d 1347, 1353 (Fed. Cir. 2009) (upholding this Court’s decision that sustained the
Department’s use of a new practice, stating “Commerce need only show that its methodology is
permissible under the statute and that it had good reasons for the new methodology.”);
Torrington Co. v. United States, 68 F.3d 1347, 1356 (Fed. Cir. 1995) (upholding Commerce’s
“new practice” of deducting indirect home-market transportation expenses from foreign market
value in cases in which United States price is calculated on the basis of exporter’s sales price);
Dorbest Ltd. v. United States, 35 CIT __, __, 789 F. Supp. 2d 1364, 1370 (2011) (“Where
Commerce adopts a practice that substantially deviates from precedent, it must at least
acknowledge the change and show that there are good reasons for the new policy. The new
practice must also be within the scope of authority granted to Commerce by the relevant
statute.”) (citations omitted); cf. AIMCOR v. United States, 23 CIT 1000, 1012, 86 F. Supp. 2d
1248, 1259 (1999) (“Because these general policy statements do not set forth any reasons why
Commerce believed it appropriate to depart from its former practice, its allegedly new ‘practice’
. . . , without more, cannot serve as a basis for refusing to [use the practice advocated by
plaintiffs].”).
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Having done so, in order to depart from the practice established in Hejia, the burden is on
Commerce to explain this departure. See Mueller Comercial de Mexico, S. de R.L. de C.V. v.
United States, 35 CIT __, __, 807 F. Supp. 2d 1361, 1367–68 (2011) (“[I]f the Department
chooses to depart from [its] practice it is required to provide a reasonable explanation for doing
so.” (citing Allegheny Ludlum Corp. v. United States, 24 CIT 452, 459, 112 F. Supp. 2d 1141,
1148 (2000))); PSC VSMPO-AVISMA Corp. v. United States, 35 CIT __, __, 755 F.Supp.2d
1330, 1339 (2011). The Department has not provided an adequate explanation here. In other
words, the court finds that Commerce has failed to explain why it departed from its practice of
treating single-clove garlic as a product commanding a higher price than multi-clove garlic.
While Yuanxin itself provided some evidence that demonstrates that the two types of
whole garlic are similar, the Department did not address the question of whether single-clove
garlic commands a higher price than other types of garlic, and whether the pricing is affected by
the unique nature of the single-clove garlic. See Hejia Issues & Dec. Mem. at 5 (“[E]ntries of
multi-clove garlic . . . , both parties concede, have prices significantly lower than Hejia’s price
for single clove garlic.”). Although the Department cites its longstanding practice of comparing
the price of a newly-shipped product to the AUV of products entered under the same HTSUS
heading, it fails to acknowledge the practice it established in Hejia.
In its brief pricing discussion, the Department relies on its finding that there is no
evidence of a distinct market for single-clove garlic. Bona Fides Mem. 6. Commerce, however,
cannot rely on an absence of evidence of a niche market to overcome its obligation to follow its
past practice in which it found that single-clove garlic commands a higher price. See, e.g., Bona
Fides Mem. at 6 (“[T]here is no evidence on the record that the ‘market’ for single-clove-garlic
in the United States is distinct from the market for fresh whole garlic in general.” (emphasis
Court No. 11-00145 15
added)). This is particularly the case because the Department made no effort to determine
whether there is a distinct market for single-clove garlic. Thus, although Commerce issued a
supplemental questionnaire following publication of the Preliminary Remand Results, its
questions did not seek information relating to a distinct market for the single-clove variety.
Rather, Commerce’s questions were confined to physical characteristics, growing processes, and
Yuanxin’s reasons for “decid[ing] to purchase single-clove garlic.” Pl.’s 3d Resp. 2–3.
Because the Department asked no questions about a separate market for single-clove
garlic, plaintiff was not alerted that it should place on the record information that would counter
the Department’s conclusion that there was “no evidence on the record that the market for
single-clove garlic in the United States is distinct from the market for fresh whole garlic in
general.” Bona Fides Mem. at 6. Thus, the Department’s statement that the record contained no
niche market information is an inadequate explanation of its decision not to continue to use the
practice it established in Hejia.
As to Commerce’s claim that Fish Fillets, Stainless Steel, and Wooden Bedroom
Furniture cannot form the basis for an argument before the court because the bona fides
memoranda for these reviews were neither available to the public nor placed on the record in this
review, the court finds this claim unconvincing. This Court has reviewed arguments based on
these three reviews in the past, and the availability of the underlying confidential memoranda
was not an impediment to its analysis. See Jinxiang Chengda, 37 CIT at __, Slip Op. 13-40, at
11 (“In those reviews, according to plaintiff, Commerce found that the Customs data did not
provide a useful comparison because the products under review were unique, and thus not
comparable to the products represented by the Customs data, even though the unique products
fell under the same tariff heading as the other products in the data.”). Moreover, the Department
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itself has fully described its reasons for the treatment accorded the products discussed in those
reviews. Therefore, plaintiff’s arguments relating to these three reviews are not barred.
Finally, here, plaintiff placed at least some evidence on the record indicating that a niche
market existed for single-clove garlic. In particular, plaintiff provided Indian offer prices for
single-clove garlic during the POR that reflected an average offer price of $1.28 per kilogram.
Bona Fides Mem. at 5. While lower than the sales prices at the high end of the Customs data, the
average of the Indian offer prices is certainly higher than the AUV from the Customs data of
[[ ]] per kilogram. Thus, because it failed to make any effort to determine if there is
indeed a distinct market for single-clove garlic, the Department has not adequately explained its
departure from the practice it established in Hejia. Therefore, the question must be remanded.
IV. The Department’s Comparison Between Yuanxin’s U.S. Sales Price & Its Third-
Country Sales Was Not Supported by Substantial Evidence
As part of its sales price analysis, Commerce also compared Yuanxin’s U.S. sales price to
the prices for the sales the company made to third countries (i.e., other than to the United States)
both during and after the POR. In doing so, the Department found that, although “[t]he price of
Yuanxin’s U.S. sale mirrors the price of [its] third country sales of single-clove garlic during the
POR . . . , after the POR, the prices of these third country sales dropped by [[ ]].” Bona
Fides Mem. at 5. Based on these observations, Commerce found that, “[a]ssuming the price of
Yuanxin’s U.S. sales continued to mirror the price of its third country sales, Yuanxin’s
subsequent hypothetical post-POR U.S. single-clove garlic sales prices would then also decrease
by [[ ]].” Bona Fides Mem. at 5. For this reason, Commerce concluded that “Yuanxin’s
POR sales of single-clove garlic do not appear to be a good indicator of future sales.” Bona
Fides Mem. at 5.
Court No. 11-00145 17
Plaintiff objects to this conclusion, stating that “while Commerce found an apples-to-
apples comparison of Yuanxin’s sales to all markets in the [POR], it impermissibly made
comparisons after the POR and then speculated that future Yuanxin prices to the U.S. would
mirror the decline in price in third markets.” Pl.’s Br. 23. Under the “best available
information” framework,7 according to plaintiff, “Commerce [should] reject any analysis outside
Yuanxin’s POR since it has third-country data within the POR.” Pl.’s Br. 23.
In response, defendant counters that “Commerce put the subject sale within the context of
Yuanxin’s normal established business practice with this third-country customer.” Def.’s Mem.
23. Furthermore, Commerce’s goal in a new shipper review is to determine “whether the sale(s)
under review are indicative of future commercial behavior.” Hebei, 29 CIT at 613, 374 F. Supp.
2d at 1342. Therefore, the Department argues that it was “entirely appropriate for Commerce to
compare Yuanxin’s third-country sales price of [[ ]] during the [POR] with its sales price
of [[ ]] to this same country after the [POR], and to determine that the drop in price for
Yuanxin’s third-country sales demonstrated that Yuanxin’s sales during the [POR] were not
reliable indicators of future prices.” Def.’s Mem. 23. In other words, because the prices for
plaintiff’s sales to third countries dropped significantly after the POR, Commerce concluded that
7
The “best available information” framework is part of Commerce’s surrogate
valuation analysis conducted to determine whether merchandise is being, or is likely to be, sold
at less-than-fair value. See 19 U.S.C. § 1677b(c)(1) (directing Commerce, when calculating
normal value, to value the factors of production “based on the best available information
regarding the values of such factors in a market economy country”). Thus, it is not part of the
Department’s bona fides sales framework, which relies on a “totality of the circumstances”
analysis. See Def.-Ints.’ Resp. 23 (“Yuanxin argues that Commerce is compelled to rely on the
‘best information available’ in reaching its determinations, and that Commerce should limit its
analysis to information that is specific to the POR. Those arguments, however, are not consistent
with Commerce’s well-established practice of considering the ‘totality of the circumstances’ of a
transaction in evaluating its bona fides.” (citations omitted)). Therefore, it is unclear why
plaintiff grounds its arguments in the “best available information” framework.
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Yuanxin’s U.S. sales prices would not remain constant following the POR because future prices
would “mirror” Yuanxin’s third-country sales and thus decline as well.
With respect to Commerce’s methodology, this Court has often affirmed the procedure of
considering a plaintiff’s third-country sales as one part of its bona fide analysis. See, e.g.,
Shandong Chenhe, 34 CIT at __, Slip Op. 10-129, at 17–18; Hebei New Donghua, 29 CIT at
615, 374 F. Supp. 2d at 1343; Tianjin Tiancheng, 29 CIT at 269, 366 F. Supp. 2d at 1258(“[T]hird-country sales were relevant to the determination and demonstrated that Plaintiff had
priced the product in a manner more reflective of the AUV data during the POR.”).
As to the facts presented here, Commerce compared the third-country sales prices to
Yuanxin’s U.S. sales price and found that they were comparable during the POR. It then
reasoned that Yuanxin’s sales prices to the United States would decrease in the future because
they would continue to mirror those of its third-country sales. While Commerce’s analysis of
Yuanxin’s third-country sales was reasonable, its conclusion that Yuanxin’s future pricing would
necessarily follow that of its third-country sales borders on conjecture. That is, it was reasonable
to compare Yuanxin’s U.S. sales price of [[ ]] to its third-country sales price of [[ ]]
and to conclude that they were roughly comparable during the POR. The record, however, is
bare of evidence indicating that these prices are tied together such that they will rise or fall
proportionally in the future.
Moreover, even if the Department’s conclusion that prices would drop proportionally was
justified, Commerce’s purpose in a new shipper review is not to establish a sales price that will
remain constant. Rather, using its totality of the circumstances analysis, the Department’s
purpose is to determine whether the transaction or transactions under review are commercially
reasonable and thus indicative of future commercial behavior. Here, there is nothing on the
Court No. 11-00145 19
record suggesting that the post-POR third-country sales were other than commercially
reasonable. Thus, standing alone, the Department’s prediction that “Yuanxin’s subsequent
hypothetical post-POR U.S. single-clove garlic sales prices would then also decrease by
[[ ]]” says nothing about the commercial reasonableness of plaintiff’s sale during the
POR, nor does it say anything about the commercial reasonableness of future sales, even if they
are made at a lower price. Bona Fides Mem. at 5. Thus, Commerce’s unconvincing third-
country sales analysis is not supported by substantial evidence, nor is it sufficiently probative to
be considered as part of the Department’s totality of the circumstances analysis. On remand,
however, the Department shall take into account its third-country sales price comparison, which
shows that Yuanxin’s third-country sales were at a relatively high price that was roughly equal to
its U.S. sales price.
V. Other Aspects of Commerce’s Analysis
Because decisions with respect to certain other aspects of the Department’s finding that
Yuanxin’s price was abnormally high will depend on the remand results, the court will reserve
on their consideration until the review of those results. In like manner, questions concerning
Commerce’s finding that plaintiff’s sole entry was of an unusually small quantity will be
reviewed following remand because only then will it be known whether the quantity comparison
was valid.
VI. The Department’s Determination That the Nature of Yuanxin’s Sale Was Atypical
Was Supported by Substantial Evidence
Although the Department’s findings as to Yuanxin’s sales price and quantity will be
affected by the remand results, Commerce’s findings concerning the nature of the garlic sale
need not wait. As the final part of Commerce’s bona fide analysis, the Department examined the
Court No. 11-00145 20
nature of Yuanxin’s transaction. Bona Fides Mem. at 8. In the Preliminary Results, “the
Department noted that Yuanxin sold [its] single-clove garlic to [the Reseller] who then resold it
to [the Wholesaler], . . . but that Yuanxin had not provided price or quantity information on the
resale transaction between [the Reseller] and [the Wholesaler].” Bona Fides Mem. at 8. After
the Preliminary Results, however, the Department received additional information regarding both
of the transactions which “the Department finds indicative that Yuanxin’s sale was atypical of
normal business practices.” Bona Fides Mem. at 8.
In particular, the Reseller “provided additional information regarding the details of its
sale of subject merchandise to [the Wholesaler]” and reported that the Reseller “had no prior
experience in the garlic industry . . . but that it wanted to get into the business of trading garlic.”
Bona Fides Mem. at 8. Indeed, the Reseller was a sporting and athletic goods manufacturer.
The Department also found that the Wholesaler, the company that ultimately received the garlic,
“is the same company that purchased [[ ]] [during the prior
POR and] . . . that [the Wholesaler], an importer with at least some prior experience as an
importer of single-clove garlic specifically . . . contacted [the Reseller] in the early summer of
2009 so that it might find an exporter of single-clove garlic.” Bona Fides Mem. at 8.
Furthermore, here Yuanxin itself acted as the importer of record, and the Reseller’s only
connection with the transaction was “that it took possession of the garlic upon arrival at the port.
After paying for the ocean freight, [the Reseller] reported that it released the bill of lading to [the
Wholesaler] . . . [and] that it is unable to provide further information on the shipment after the
release of the bill of lading.” Bona Fides Mem. at 8. In an attempt to explore the issues
surrounding the second sale from the Reseller to the Wholesaler, the Department issued a
questionnaire to the Wholesaler, but the Wholesaler did not respond. Bona Fides Mem. at 8.
Court No. 11-00145 21
Based on the information submitted by the Reseller, Commerce found it “highly unusual
that [the Wholesaler], a company with previous experience not only [[
]] from the PRC, but also participating in antidumping proceedings before the
Department,[8] would seek out a company with no experience whatsoever in the garlic industry to
locate a PRC supplier.” Bona Fides Mem. at 8. In addition, while the Wholesaler had acted as
the importer of record for its previous [[ ]], in this
review the Wholesaler asked the Reseller “to act as its intermediary to import the subject
merchandise into the United States.” Bona Fides Mem. at 8. Because the Wholesaler did not
respond to its questionnaire, however, “the Department [was] unable to determine why [the
Wholesaler] decided to structure its purchase of single-clove garlic in this manner, which so
clearly differs from its [[ ]].” Bona Fides Mem. at 8;
Bona Fides Mem. at 9 (“[The Wholesaler’s] failure to provide information makes it impossible
for the Department to fully explore whether the circumstances of Yuanxin’s sale were typical of
normal business practices or otherwise commercially reasonable.”). Hence, while Commerce
stated that it “lacks any understanding of why [the Wholesaler] would choose to import through
[the Reseller],” it found that “[t]he structure of Yuanxin’s [new shipper review] sale . . . is
unusual, and apparently inefficient, in light of [the Wholesaler’s] previous [[
]].” Bona Fides Mem. at 9.
Yuanxin objects to this conclusion. First, plaintiff insists that “[t]here is no nexus
between Yuanxin and [the Wholesaler]. Presumably, Yuanxin and [the Wholesaler] did not
know each other, since [the Wholesaler] ask[ed] [the Reseller] to find a supplier in China of
single-clove garlic. Thus, Yuanxin had no role in [the Reseller] selling to [the Wholesaler].”
8
In particular, the Wholesaler participated in the [[
]] before Commerce. Bona Fides Mem. at 8.
Court No. 11-00145 22
Pl.’s Br. 31. For this reason, “Yuanxin’s sale is the only one for which it can take responsibility
and which Commerce can appropriately analyze,” and “Commerce provides no authority to
support its decision that it can ignore the sale by the exporter, and go downstream to analyze
subsequent sales.” Pl.’s Br. 32–33.
Further, plaintiff contends that “Commerce cites not a single objection to the sale
between Yuanxin and [the Reseller]. The silence is deafening concerning this transaction. . . .
The record is clear: there is no evidence on the record even remotely suggesting that Yuanxin’s
sale to [the Reseller] was anything less than normal.” Pl.’s Br. 32. Therefore, according to
plaintiff, “[s]ince Commerce’s concern is only with the second transaction between [the
Reseller] and [the Wholesaler], its decision was not based on substantial evidence on the record
and not reasonabl[y] determined.” Pl.’s Br. 3.
In response, defendant argues that “Yuanxin does not reference record evidence to
support its conclusions regarding the relationship between Yuanxin and [the Wholesaler]; it
states only that, given the nature of the sales transactions, ‘[p]resumably, Yuanxin and [the
Wholesaler] did not know each other.’” Def.’s Mem. 38 (quoting Pl.’s Br. 31). Additionally,
relying on Hebei and Chenhe, defendant points out that “this Court has affirmed Commerce’s
examination of the downstream customer’s behavior and commercial transactions—
circumstances that are beyond the scope of the United States sales in question—in Commerce’s
bona fides analysis.” Def.’s Mem. 38 (citing Hebei, 374 F. Supp. 2d at 1343–44; Shandong
Chenhe, 34 CIT at __, Slip Op. 10-129, at 6).
As to plaintiff’s contention that Commerce did not find anything objectionable about the
first sale (i.e., that between Yuanxin and its U.S. customer, the Reseller), Commerce counters
that it did, in fact, identify issues with Yuanxin’s sale to the Reseller: “Commerce found the
Court No. 11-00145 23
structure of Yuanxin’s sale to [the Reseller] to be ‘unusual’ and ‘inefficient, in light of [the
Wholesaler’s] previous [[ ]].’” Def.’s Mem. 38 (quoting Bona Fides
Mem. at 9); Def.-Ints.’ Resp. 31 (“Yuanxin’s assertion that ‘there is no evidence on the record
even remotely suggesting that Yuanxin’s sale to [the Reseller] was anything less than normal’ is
contradicted by the Department’s Final Bona Fides Memo. In particular, the Department’s
analysis highlights the unusual circumstances whereby [the Reseller] (a company that ‘had no
experience in the garlic industry’ at the time it began interacting with Yuanxin) was approached
by [the Wholesaler] (a company ‘with previous experience not only [[
]] from the PRC, but also participating in antidumping proceedings before the
Department’) to identify a supplier. Thus, the Department’s analysis clearly does identify
unusual circumstances in the Yuanxin to [the Reseller] transaction, both when analyzed
individually as well as when analyzed in relation to [the Wholesaler’s] [[
]].”) (citations omitted).
Additionally, the Department points out that Yuanxin, and not the Reseller, acted as the
importer of record, “and that [the Reseller] acted as a middleman between an established
exporter [(Yuanxin)] and an experienced importer [(i.e., the Wholesaler)], even though [the
Reseller] had no previous experience in the garlic industry.” Def.’s Mem. 38–39. Hence, “[i]t
was the entire series of events, including Yuanxin’s sale to [the Reseller] and [its] particular role
in the importation and sale of the garlic, that called into question the nature of the transaction.”
Def.’s Mem. 39. Therefore, according to Commerce, “[i]t was . . . reasonable for Commerce to
find that, considering the experiences of the companies involved in the transaction, the evidence
in totality indicates that the sale was not based on normal business practices.” Def.’s Mem. 39.
Court No. 11-00145 24
Commerce has the authority to consider a variety of factors in determining whether a
transaction is commercially reasonable. See Hebei New Donghua, 29 CIT at 616–17, 374 F.
Supp. 2d at 1343–44 (sustaining Commerce’s consideration of a customer’s post-sale behavior);
Windmill, 26 CIT at 231–32, 193 F. Supp. 2d at 1313–14. To prevent an exporter from unfairly
benefitting from an atypical sale to obtain a low dumping margin, Commerce may review any
relevant evidence that suggests that a U.S. sale was commercially unreasonable or atypical of
future business practice. See Tianjin Tiancheng, 29 CIT at 260, 366 F. Supp. 2d at 1250.
Therefore, plaintiff’s assertion that “Yuanxin’s sale is the only one . . . which Commerce can
appropriately analyze” is incorrect. In other words, it was entirely within Commerce’s authority
to consider the sale between the Reseller and Wholesaler as one aspect of its bona fide analysis.
Furthermore, as noted, plaintiff is also incorrect that Commerce found no issues with the
sale between Yuanxin and the Reseller. Indeed, even in the Preliminary Bona Fides
Memorandum, the Department was concerned with the structure of Yuanxin’s sale. Prelim.
Bona Fides Mem. at 5–6. Thus, the peculiar circumstances presented here could be considered
by Commerce in its totality of the circumstances analysis, and it was not unreasonable for
Commerce to find that the sales arrangement involved here was atypical. Indeed, Yuanxin does
not attempt to explain why a sporting goods manufacturer acted as a middleman for its sale to the
Wholesaler, a company that had previously purchased single-clove garlic directly from Hejia.
Therefore, the court finds reasonable Commerce’s conclusion that the circumstances surrounding
Yuanxin’s sale were “atypical of normal business practice.”
CONCLUSION and ORDER
In sum, the Department has not explained its departure from the practice it established in
Hejia and has not supported with substantial evidence its determination that it was appropriate to
Court No. 11-00145 25
compare Yuanxin’s sales price and quantity for its single-clove garlic to the sales prices and
quantities for multi-clove garlic in the Customs data. In addition, while Commerce’s analysis of
Yuanxin’s third-country sales was reasonable, its conclusion about Yuanxin’s future pricing
based on these third-country sales was not reasonable, nor was it supported by substantial
evidence. The Department, however, reasonably considered the nature of Yuanxin’s transaction
as part of its totality of the circumstances analysis. Its conclusion that the circumstances
surrounding Yuanxin’s transaction were atypical of normal business practices and indicative of a
non-bona fide sale was supported by substantial evidence.
For the foregoing reasons, it is hereby
ORDERED that plaintiff’s motion for judgment on the agency record is granted, in part,
and Commerce’s final determination rescinding plaintiff’s new shipper review is remanded; it is
further
ORDERED that, on remand, Commerce shall issue a redetermination that complies in all
respects with this Opinion and Order, is based on determinations that are supported by
substantial record evidence, and is in all respects in accordance with law; it is further
ORDERED that, on remand, if Commerce wishes to rely upon a comparison of
Yuanxin’s sales price to the AUV from the Customs data, it must explain its departure from the
practice it established in Hejia, and demonstrate with substantial evidence (1) that Yuanxin’s
single-clove garlic is not a unique product when compared to multi-clove garlic, (2) that there is
not a distinct market for single-clove garlic, and (3) that factors relating to product uniqueness
and distinct market do not affect the price that single-clove garlic commands. In addition, the
Department shall take into account plaintiff’s arguments relating to Fish Fillets, Stainless Steel,
and Wooden Bedroom Furniture, as well as the evidence relating to the relatively high offer
Court No. 11-00145 26
prices for single-clove garlic in India and the high prices for plaintiff’s third-country sales; it is
further
ORDERED that, in the event that a comparison of Yuanxin’s sales price to the AUV
from the Customs data is found invalid, the Department must use another methodology to
determine the commercial reasonableness of Yuanxin’s sales price; it is further
ORDERED that the Department determine, based upon the methodology used for its
price analysis, a reasonable methodology for examining the quantity of Yuanxin’s sale; it is
further
ORDERED that, regardless of the sales price determination it reaches, Commerce must
support with substantial evidence its sales quantity findings; it is further
ORDERED that the Department shall reopen the record to solicit information regarding
whether single-clove garlic is a unique product, whether there is a distinct or specialized market
for single-clove garlic, and whether these facts affect the price that single-clove garlic
commands; it is further
ORDERED that the Department may reopen the record to solicit information for any
other purpose; it is further
ORDERED that the remand results shall be due on September 10, 2013; comments to the
remand results shall be due thirty (30) days following filing of the remand results; and replies to
such comments shall be due fifteen (15) days following filing of the comments.
/s/ Richard K. Eaton
Richard K. Eaton
Dated: June 18, 2013
New York, New York