Clearon Corp. v. United States , 2014 CIT 88 ( 2014 )

Slip Op. 14-88
UNITED STATES COURT OF INTERNATIONAL TRADE
:
CLEARON CORP., :
and OCCIDENTAL CHEMICAL CORP., :
:
Plaintiffs, :
:
and : Before: R. Kenton Musgrave, Senior Judge
:
JUANCHENG KANGTAI CHEMICAL CO. : Consol. Court No. 13-00073
LTD., HEBEI JIHENG CHEMICAL CO., LTD., :
and ARCH CHEMICALS, INC., :
:
Consolidated-Plaintiffs, :
:
v. :
:
UNITED STATES, :
:
Defendant, :
:
and :
:
ARCH CHEMICALS, INC., and JUANCHENG :
KANGTAI CHEMICAL CO., LTD., :
:
Defendant-Intervenors. :
:
:
OPINION AND ORDER
[On sixth administrative review of antidumping duty order on chlorinated isocyanurates, requests
for voluntary remand granted, and motions for judgment on the agency record granted in part.]
Dated: July 24, 2014
James R. Cannon, Jr. and Thomas M. Beline, Cassidy Levy Kent (USA) LLP, of
Washington, DC, for the plaintiffs.
Consol. Court No. 13-00073 Page 2
James K. Horgan, John J. Kenkel, and Gregory S. Menegaz, DeKieffer & Horgan, of
Washington, DC, for the consolidated-plaintiff and defendant-intervenor Juancheng Kangtai
Chemical Co., Ltd.
Peggy A. Clarke, Law Offices of Peggy A. Clarke, of Washington, DC, for the consolidated-
plaintiff Hebei Jiheng Chemical Co., Ltd. and the consolidated-plaintiff and defendant-intervenor
Arch Chemical Co., Ltd.
Jane C. Dempsey, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, DC, for the defendant. On the brief were Stuart F. Delery,
Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant
Director. Of counsel on the brief was David W. Richardson, Senior Attorney, Office of the Chief
Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington
DC.
Musgrave, Senior Judge: This opinion addresses challenges to Chlorinated
Isocyanurates From the People’s Republic of China, July 18, 2014. Reg. 4386 (Jan. 22, 2013), PDoc
169 (“Final Results”), the sixth administrative review of an antidumping duty (“AD”) order on
chlorinated isocyanurates1 from the People’s Republic of China (“PRC”) conducted by the
International Trade Administration of the U.S. Department of Commerce (“Commerce”). Before
the court in this consolidated action2 are three motions for summary judgment on the agency record
brought under USCIT Rule 56.2. One motion is brought by the consolidated-plaintiff and
1
The “subject merchandise” are all chlorinated isocyanurates. These are derivatives of
cyanuric acid and consist of three primary compositions, trichloroisocyanuric acid, sodium
dichloroisocyanurate, and sodium dichloroisocyanurate. Subject merchandise are available in
powder, granular, and tableted forms and are created in three steps, first making the intermediate
inputs cyanuric acid, caustic soda and chlorine gas, second combining these inputs, and third
“shaping the finished products.” Issues and Decision Memorandum for the Final Results (Jan. 14,
2013), PDoc 164 (“I&D Memo”) at cmt. 1.
2
Juancheng Kangtai Chemical Co., Ltd. v. United States, Court No. 13-00056 and Arch
Chemicals, Inc. et al v. United States, Court No. 13-00061, have been consolidated into this action,
now styled Clearon Corporation et al v. United States, Consol. Court No. 13-00075. See Order
(Apr. 22, 2013), ECF No. 20.
Consol. Court No. 13-00073 Page 3
defendant-intervenor Arch Chemicals Inc. (“Arch”), an importer of the subject merchandise, and by
the consolidated-plaintiff Hebei Jiheng Chemical Co., Ltd. (“Jiheng”), a producer and exporter of
the subject merchandise from the PRC.3 A second motion is brought by the consolidated-plaintiff
and defendant-intervenor Juancheng Kangtai Chemical Co., Ltd. (“Kangtai”), a producer and
exporter of the subject merchandise from the PRC.4 The third motion is brought by the plaintiffs
Clearon Corp. and Occidental Chemical Corp., U.S. producers of domestic like product (together
“Clearon”).5 Collectively, the motions contest ten aspects of the Final Results: Commerce’s (1)
calculation of the selling, general, and administrative expense financial ratio (“SG&A ratio”) using
data pertinent to the Philippines, (2) alleged use of a 2011 financial statement not on the record, (3)
treatment and calculation of intra-company transportation of intermediate products, (4) application
of new methodology for valuing ammonia gas and sulfuric acid by-products, (5) selection of the
Philippines as the primary surrogate country, and the surrogate value selection for (6) chlorine, (7)
hydrogen gas, (8) sodium hydroxide, (9) electricity, and (10) urea.
Commerce asks the court to grant voluntary remand for three of its determinations,
namely (1) its calculation of the SG&A ratios using Philippine data, (2) its calculation of
3
Mot. for Judgment on the Agency R. pursuant to Rule 56.2 by Consol. Plaintiffs Arch
Chemicals, Inc. and Hebei Jiheng Chemical Co., Ltd. (Aug. 15, 2013), ECF No. 27 (“Arch & Jiheng
Rule 56.2 Mot.”). Arch had also intervened herein on the side of the defendant. See Arch’s Mot.
to Int. as a Matter of Right, Court No. 13-00073 (Apr. 16, 2013), ECF No. 12.
4
Mot. for Judgment on the Agency R. pursuant to Rule 56.2 by Consol. Pl.’s Juancheng
Kangtai Chemical Co., Ltd. (Aug. 15, 2013), ECF No. 30 (“Kangtai Rule 56.2 Mot.”). Kangtai had
also intervened herein on the side of the defendant. Kangtai’s Mot. to Int. as a Matter of Right,
Court No. 13-00073 (Apr. 24, 2013), ECF No. 21.
5
Mot. for Judgment on the Agency R. pursuant to Rule 56.2 by Pl.’s Clearon Corp. and
Occidental Chemical Corp. (Aug. 15, 2013), ECF No. 31 (“Clearon Rule 56.2 Mot.”).
Consol. Court No. 13-00073 Page 4
intra-company transportation of intermediate products, and (3) its by-product valuation
methodology, and it opposes the remaining issues of the three Rule 56.2 motions.6 Arch and Kangtai
contest three aspects of Clearon’s Rule 56.2 motion, and in doing so argue that Commerce’s
surrogate value selection for urea and hydrogen gas was the best available information on the record
and that Clearon failed to exhaust administrative remedies concerning its by-product claims.7
For the reasons below, the court grants the three voluntary remand requests and also
orders remand on the issue of surrogate country selection from the Final Results.
I. Jurisdiction and Standard of Review
Final administrative AD review determinations are evaluated under 19 U.S.C.
§1516a(b)(1)(B)(i). Commerce’s determinations, findings, or conclusions are sustained unless they
are found to be “unsupported by substantial evidence on the record, or otherwise not in accordance
with law.” NSK Ltd. v. United States, 481 F.3d 1355, 1359 (Fed. Cir. 2007), citing 19 U.S.C.
§1516a(b)(1)(B)(i)); see also United States v. Eurodif S.A., 555 U.S. 305, 316 n.6 (2009).
Substantial evidence is “more than a mere scintilla”, it is “such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion.” Universal Camera Corp. V. NLRB, 340
U.S. 474, 477 (1951), citing Consol. Edison Co. v. N.L.R.B., 305 U.S. 197, 229 (1938).
6
Def’s Resp. to Pl.’s and Consol. Pl.’s Rule 56.2 Mot.’s for Judgment on the Agency R.
(Feb. 24, 2014), ECF No. 49 (“Def’s Resp.”).
7
See Def. Int. Arch Chemicals, Inc. Resp. to Pl.’s Clearon and Occidental’s Rule 56.2 Mot.
For Judgment on the Agency R. (Feb. 24, 2014), EFC No. 46 (“Arch Resp.”); see also Def. Int.
Kangtai Chemicals, Co., Ltd. Resp. to Pl.’s Clearon and Occidental’s Mot. For Judgment on the
Agency R. (Feb. 24, 2014), EFC No. 50 (“Kangtai Resp.”).
Consol. Court No. 13-00073 Page 5
In determining if Commerce’s interpretation of a statute is in accordance with law,
the court applies a two-step analysis set forth by Chevron U.S.A., Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837, 842-43 (1984). First, the court examines whether “Congress has
directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of
the matter; for the court, as well as the agency must give effect to the unambiguously expressed
intent of Congress.” Id. Second, if the statute is silent to the specific issue or the legislative intent
is not clear, the court must determine “whether the agency’s answer is based upon a permissible
construction of the statute.” Id. at 843-44. See also, e.g., Wheatland Tube Co. v. United States, 495
F.3d 1355, 1359-60 (Fed. Cir. 2007). The court provides the agency deference on interpreting the
statutes the agency administers and has found that “[a]ny reasonable construction of the statute is
a permissible construction.” Timken Co. v. United States, 354 F.3d 1334, 1342 (Fed. Cir. 2004),
citing Torrington v. United States, 82 F.3d 1039, 1044 (Fed. Cir. 1996).
II. Background
Commerce initiated the review covering four producers/exporters of the subject
merchandise from the PRC and selected Jiheng and Kangtai as the two mandatory respondents in
the review.8 Commerce’s Office of Policy issued a Surrogate Country Memorandum as part of the
review which included the following “non-exhaustive” list of six potential surrogate countries that
it determined were “most likely to have good data availability and quality” and were “at a level of
8
See Initiation of Antidumping Administrative Reviews, 76 Fed. Reg. 45227, 45229 (July
28, 2011). The review covered Jiheng, Kangtai, Nanning Chemical Industry Co., Ltd., and
Zhucheng Taisheng Chemical Co., Ltd. for the period of June 1, 2010 through May 31, 2011.
Consol. Court No. 13-00073 Page 6
economic development comparable to [the PRC] in terms of per capita gross national income” for
the review based on figures from the World Bank’s 2011 World Development Report:
Per Capita GNI,
Country 2009 ($USD)
PRC 3,590
Philippines 1,790
Indonesia 2,230
Ukraine 2,800
Thailand 3,760
Columbia 4,930
South Africa 5,770
See Memorandum to Mark Hoadley, Request for a List of Surrogate Countries for an Administrative
Review of the Antidumping Duty Order on Chlorinated Isocyanurates from the People’s Republic
of China (Sep. 9, 2011), PDoc 37 (“Surrogate Country Memorandum”), referencing World
Development Report 2011, World Bank. Commerce asked the parties to comment on the surrogate
country selection and provide it with information for valuing factors of production. In response, the
parties submitted surrogate country comments and surrogate value data from India, Thailand, the
Philippines, and South Africa.9
Commerce published its preliminary results and selected South Africa as the primary
surrogate country for valuing factors of production, finding it was the largest exporter of comparable
9
In its comments Kangtai offered Thailand and the Philippines as potential surrogate
countries and noted that India had been the surrogate country for the first five reviews, that
Commerce had removed India from the potential surrogate list, and that Commerce rarely selects
a surrogate country that is not included in the list. See Kangtai’s Sur. Country Cmts. (Dec. 19, 2011),
PDoc 58 at 2-3. Arch commented that Thailand and the Philippines were the best surrogate
countries options. See Arch Sur. Country Cmts. (Jan. 9, 2012), PDoc 55 at 2. Clearon commented
that South Africa was the best surrogate choice. See Clearon Sur. Country Cmts. (Dec. 19, 2011),
PDoc 57 at 3. See also, Jiheng Sur. Value Sub. (Jan. 9, 2012), PDoc 65; Clearon Sur. Value Sub.
(Jan. 9, 2012), PDoc 66; Kangtai Sur. Value Sub. (Jan. 9, 2012), PDocs 69, 70; Kangtai Sur. Value
Sub. for Final Results, (Sept. 5, 2012), PDocs 116, 117.
Consol. Court No. 13-00073 Page 7
merchandise among the countries on the potential surrogate list. For factors of production (“FOPs”)
where data was not placed on the record from South Africa or other countries on the list, Commerce
relied on India data stating that it was the only alterative on the record, and that “even though India
is not on the list of possible surrogate countries in the Surrogate Country Memorandum, India is a
significant producer of comparable merchandise that has the data needed to calculate certain
surrogate values.” See Chlorinated Isocyanurates From the People’s Republic of China: Preliminary
Results of Antidumping Duty Administrative Review, 77 Fed. Reg. 41746, 41479 (July 16, 2012)
(“Preliminary Results”) (citation omitted).
Commerce received comment and rebuttal briefs from the parties including a brief
from Kangtai claiming India should be selected as the primary surrogate country or in the alternative
South Africa should be selected. See Kangtai Rebuttal Brief at 1-2 (Dec. 10, 2011), PDoc 159.
Commerce then issued its Final Results and choose the Philippines as the primary surrogate country,
finding that it is economically comparable to the PRC, that it is a significant producer of comparable
merchandise, and that the record now contained Philippine surrogate value data for all but one factor
of production (steam). I&D Memo at cmt. 2. Responding to Kangtai’s argument that India was the
appropriate surrogate country, Commerce stated that when selecting a primary surrogate country it
will normally first look to the potential surrogate list in the Surrogate Country Memorandum, and
that “the list did not include India because India’s per capita GNI did not fall within the range of
countries proximate to the PRC.” Id.Consol. Court No. 13-00073 Page 8
III. Claims
The first claim of Arch, Jiheng and Kangtai challenges Commerce’s decision to treat
employment and retirement benefits as SG&A instead of labor expenses when calculating the
financial ratios. The parties aver that Commerce’s determination is not supported by substantial
evidence, that Commerce failed to provide an adequate explanation for its determination, and that
its decision resulted in the double-counting of certain labor costs contrary to Commerce’s stated
policy. See Arch & Jiheng Rule 56.2 Mot. at 21-24; see also Kangtai Rule 56.2 Mot. at 31-38.
Second, Kangtai argues Commerce erred in calculating the financial ratio by relying a 2011 financial
statement not on the record. Kangtai Rule 56.2 Mot. at 38-39.
In the third claim, Arch and Jiheng argue Commerce acted contrary to law by
applying a new methodology for valuing intra-company transportation when calculating normal
value in the Final Results without providing notice, or giving the parties an opportunity to comment,
or providing the parties an opportunity to place requisite information on the record. The parties
further claim Commerce failed to provide a reasoned explanation for the change in methodology.
Arch & Jiheng Rule 56.2 Mot. at 31-35.
Fourth, Clearon, Kangtai, Arch and Jiheng challenge Commerce’s valuation of the
subject merchandise’s by-product offsets, ammonia gas and recovered sulfuric acid, which are
converted to produce ammonium sulfate. All parties claim Commerce changed its methodology for
by-product valuation from the Preliminary Results to the Final Results without providing a reasoned
explanation or support for its change in practice. Clearon contends that Commerce failed to account
for the costs associated with converting ammonium gas to ammonium sulfate, that it ignored the
language of its own questionnaire, that it disregarded its regulations, and that it permitted Jiheng and
Consol. Court No. 13-00073 Page 9
Kangtai to reduce their antidumping duty margins by withholding data. Clearon Rule 56.2 Mot. at
20-25. Arch and Jiheng claim Commerce made the change without providing the parties notice and
an opportunity to comment and place requisite information on the record. Arch & Jiheng Rule 56.2
Mot. at 8-12, 24. Kangtai alleges that the determination was unlawful and unreasonable, that no
party argued for the change in methodology, and that Commerce should apply the methodology it
used in the Preliminary Results. See Kangtai Rule 56.2 Mot. at 38-40; Kangtai Resp. at 6-8; Cons.
Pl. Kangtai Chemicals, Inc. Reply Br. in Support of its Mot. for Judgment on the Agency R. (April
23, 2014), EFC No. 59 (“Kangtai Reply”) at 9-11.
In the fifth claim, Kangtai challenges Commerce’s surrogate country selection
methodology and contends that India is economically comparable to the PRC. Kangtai argues that
Commerce’s reliance on per capita GNI to determine economic comparability is unreasonable, and
that the methodology it applied to select economially comparable countries, as well as its decision
to eliminate India from the list of economically comparable countries, is not supported by substantial
evidence and is not in accordance with law. Kangtai Rule 56.2 Mot. at 6-11; Kangtai Reply at 1-9.
The final five claims challenge Commerce’s surrogate value selections for various
factors of production. In the sixth claim, Clearon avers Commerce’s surrogate value selection for
hydrogen gas is unsupported by substantial evidence and contrary to law. Clearon argues that the
Philippine GTA import data Commerce used to value Jiheng’s hydrogen gas by-product is
aberrational and unreliable, and that Commerce should have instead relied on domestic data from
India. Clearon Rule 56.2 Mot. at 16-20. Seventh, Kangtai claims that Commerce’s surrogate value
selection for chlorine was not the best available information on the record and that it was not
supported by substantial evidence. Kangtai avers that selected surrogate value was based on a small
Consol. Court No. 13-00073 Page 10
quantity of imports into the Philippines and that Commerce should have instead used Indian chlorine
and caustic soda data to value chlorine. Kangtai Rule 56.2 Mot. at 11-27. In the eighth claim
Clearon alleges that Commerce erroneously determined urea was not produced in the Philippines,
and that instead of relying upon Philippine GTA import statistics to value urea Commerce should
have used Philippine Bureau of Agricultural Statistics data. Clearon contends Commerce’s rejection
of the Philippine Bureau of Agricultural Statistics domestic prices for urea is not supported by
substantial evidence and is contrary to law. Clearon Rule 56.2 Mot. at 11-16. Ninth, Jiheng and
Kangtai claim that Commerce’s reliance on the Philippine Doing Business in the Camarines Sur
rates to value electricity is not supported by substantial evidence on the record, and that the
Philippine Meraloc data is the best available information on the record to value electricity. Kangtai
Rule 56.2 Mot. at 40-42; Arch & Jiheng Rule 56.2 Mot. at 15-21. In the tenth claim Kangtai
challenges Commerce’s surrogate value selection for sodium hydroxide. Kangtai argues that
Commerce should have made a downward adjustment to reflect Kangtai’s lower consumption of
sodium hydroxide, and that Commerce’s decision not to adjust the value is unsupported by
substantial evidence. Kangtai’s Rule 56.2 Mot. at 27-31.
Defendant intervenors Arch and Kangtai support Commerce’s determination in
opposing three aspects of Clearon’s Rule 56.2 Motion. Arch and Kangtai both oppose Clearon’s
contention that Commerce’s did not use the best available information for its surrogate value
selection for urea and argue that Commerce’s determination is supported by substantial evidence.
Kangtai Resp. at 2-6; Arch Resp. at 3-5. The two parties also argue Clearon failed to exhaust
administrative remedies concerning its claim that the two parties responses were insufficient for the
proper by-product valuation of ammonium sulfate. Kangtai Resp. at 7-8; Arch Resp. at 8-10. Arch
Consol. Court No. 13-00073 Page 11
further opposes Clearon’s claim that the selected surrogate value for hydrogen gas was not the best
available information on the record and argues Commerce’s determination was supported by
substantial evidence. Arch Resp. at 5-8.
IV. Statutory and Regulatory Framework
In an AD administrative review Commerce determines if the subject goods will likely
be sold at a less than fair value in the United States. In making this determination, Commerce
calculates the “dumping margin” by subtracting the foreign product’s price in the United States, the
“export price”, from the price in the producer’s home country, the “normal value”. See 19. U.S.C.
§1675(a)(2)(A); 19 U.S.C. §1673; 19 U.S.C. §1677(35)(A). When determining the normal value
of subject goods from a nonmarket economy (“NME”) such as the PRC, Commerce makes its
calculation based on “surrogate values” which are the “value of the factors of production” from
surrogate market economy country data. See 19 U.S.C. §1677b(c)(1).
To value factors of production Commerce must use the “best available information”
from the production and sales data it obtains from the parties in the administrative review on the
record. 19 U.S.C. §1677b(c)(1). Commerce uses “to the extent possible” data from “one or more”
surrogate market economy countries that are (1) “at a level of economic development comparable
to that of the nonmarket economy country” and (2) “significant producers of comparable
merchandise.” 19 U.S.C. §1677b(c)(4). Commerce has a regulatory preference for valuing all
factors of production, with the exception of labor, from one surrogate country. 19 C.F.R.
§351.408(c)(2).
Consol. Court No. 13-00073 Page 12
V. Discussion
A. Commerce’s Requests for Voluntary Remand
The first three issues before the court concern Commerce’s requests for voluntary
remand for three of its determinations in the Final Results. First, Commerce requests voluntary
remand to address party comments in the first instance concerning its financial ratio calculation
using Philippine data. Second, it seeks remand to explain its changed methodology for determining
the by-product valuation of ammonia gas and sulfuric acid. In its third request Commerce seeks
remand to explain its change in methodology for its treatment and calculation of intra-company
transportation of intermediate products.
The court has discretion over whether to grant remand when, as in the instance case,
an agency requests the remand without confessing error to reconsider its position, and such requests
are generally granted if the agency’s concerns are found to be substantial and legitimate. SKF USA
Inc. v. United States, 254 F.3d 1022, 1028-29 (Fed. Cir. 2001) (“SKF I”); see also Nucor Corp. v.
United States, 33 CIT 207, 292, 612 F. Supp. 2d 1264, 1336 (2009). Concerns have been found to
be substantial and legitimate when (1) the agency has a compelling justification for the remand, (2)
the justification for the remand is not outweighed by the need for finality, and (3) the scope of the
remand is appropriate. Ad Hoc Shrimp Trade Action Comm. v. United States, 37 CIT___, 882 F.
Supp. 2d 1377, 1381 (2013), referencing Shakeproof Assembly Components Div. of Ill. Tool Works,
Inc. v. United States, 29 CIT 1516, 1522-26, 412 F. Supp. 2d 1330, 1336-39 (2005). Requests that
are frivolous or made in bad faith, including those that compromise legitimate concerns for finality,
Consol. Court No. 13-00073 Page 13
are based on non-binding policy statements, or are merely legal tactics applied to avoid judicial
review, may be denied.10
1. Calculation of Financial Ratio
Kangtai, Arch, and Jiheng contend Commerce failed to follow its stated practice for
adjusting financial statements and this resulted in the improper calculation of the financial ratio in
the Final Results. The parties argue that the ILO wage rate Commerce used to value the labor FOP
includes labor, retirement, and employee benefit expenses, and that these expenses will be double
counted if Commerce does not adjust the financial ratio to correctly reflect the financial statements.
Kangtai Rule 56.2 Mot. at 31-38; Arch & Jiheng Rule 56.2 Mot. at 21-24. In its first remand
request, Commerce does not admit that it erred in its calculation of the SG&A financial ratio, but
contends that as a result of the number of possible surrogate countries that existed after the
Preliminary Results, Kangtai, Arch, and Jiheng did not get the opportunity to comment on the
calculation and Commerce did not have the opportunity to respond to comments. Commerce asks
to address these comments in the first instance and accordingly “respectfully request[s] the Court
remand the financial ratio calculation issue for Commerce to reconsider the SG&A financial ratio
calculation in light of the comments concerning the alleged overstatement of labor in the normal
value calculation”. It claims that the court would not “be able review Commerce’s determination,
10
See Gleason Indus. Products, Inc. v. United States, 31 CIT 393, 396 (2007), referencing
Corus Staal, BV v. U.S. Dep’t of Commerce, 27 CIT 388, 391, 259 F. Supp. 2d 1253, 1257 (2003)
(suggesting ”merely a change in policy” will not justify a voluntary remand over an interested
party’s objection), and Lutheran Church--Missouri Synod v. Fed. Communications Comm’n, 141
F.3d 344, 349 (D.C. Cir. 1998) (refusing to grant a “novel, last second motion to remand” which was
based on a prospective policy statement that did not bind the FCC and stating that “the Commission
has on occasion employed some rather unusual legal tactics when it wished to avoid judicial review,
but this ploy may well take the prize”).
Consol. Court No. 13-00073 Page 14
if the interested parties and Commerce have not in the first instance raised, considered and addressed
the arguments.” Def’s Resp. at 51-52.
Commerce has a substantial and legitimate concern for requesting remand.
Correcting a possibly inaccurate determination of normal value is a compelling reason for a remand
request.11 The need for finality in this instance is also not outweighed by the concern of protecting
the administrate review from material inaccuracy. Further, Commerce has limited its request to the
financial ratio calculation and this scope is appropriate. It does not appear Commerce’s substantial
and legitimate concern is frivolous or in bad faith, and Commerce’s request for remand to reconsider
the SG&A financial ratio calculation is granted. On remand, Commerce is requested to address the
arguments as raised in the parties’ briefs before the court.
Kangtai alleges that Commerce further erred in its financial ratio calculation by
relying on a 2011 financial statement for Mabuhay Vinyl Corporation (“MVC”), a Philippine
producer of sodium hypochlorite, that is not on the record. Kangtai Rule 56.2 Mot. 38-39,
referencing App’x III.45, Surrogate Value Memorandum (“surrogate value chart”). Although
Commerce references MVC’s “2011” financial statement in the surrogate value chart, this reference
11
Kangtai argues the court should not grant remand for Commerce to “consider these
comments” on the “alleged overstatement of labor”, but instead asks for remand to Commerce “to
make the adjustments it said it would make but failed to execute” in the review which are consistent
with its Labor Methodologies and its final determinations in Stainless Steel Sinks and Certain Steel
Nails. Kangtai Reply at 20-21, referencing Drawn Stainless Steel Sinks From the People’s Republic
of China: Investigation, Final Determination, 78 Fed. Reg. 13019 (Feb. 26, 2013) and
accompanying issues and decision memorandum at cmt. 4, and Certain Steel Nails From the
People’s Republic of China: Final Results of the Fourth Antidumping Duty Administrative Review,
79 Fed. Reg. 19316 (Apr. 8, 2014) and accompanying issues and decision memorandum at cmt. 2.
In response, Commerce asks in its remand request to address the comments made by both Jiheng and
Kangtai concerning the SG&A financial ratio. The language of the request is appropriate and
encompasses the concerns Kangtai raise in its comments on this issue.
Consol. Court No. 13-00073 Page 15
is merely a typographical error. The record supports Commerce’s claimed reliance on the 2010
MVC financial statement12 in its calculation of the financial ratio.
The court recognizes a presumption of administrative legality and regularity in AD
cases, and presumes that if the 2011 MVC had been submitted to Commerce it would have been
included on the record.13 There is no indication in the papers before the court that a 2011 MVC
financial statement was ever submitted to Commerce, nor do any of the parties argue that it ever was
part of the administrative record. Commerce cites to its reliance on the 2010 MVC financial
statement in its Final Results,14 and the numbers stated by Commerce in the surrogate value chart
correspond to the numbers in the 2010 MVC financial statement.15 The record accordingly does not
support Kangtai’s assertions that Commerce used a 2011 MVC financial statement, and Commerce’s
explanation with respect to the financial statement that it did rely upon is reasonable.
12
Jiheng Sur. Value Sub. (Jan. 9, 2012), PDoc 65 at Tab 4 (“2010 MVC Financial
Statement”).
13
See 19 U.S.C. §1516a(b)(2)(A) (documents presented or obtained by Commerce are
included as part of the administrative record); see also Bohler-Uddeholm Corp. v. United States, 20
CIT 1336, 1343, 946 F. Supp. 1003, 1009 n.18 (1996) (citations omitted).
14
I&D Memo at cmt. 13, referencing 2010 MVC Financial Statement.
15
See, e.g., the identical figures in: the 2010 MVC Financial Statement “Consolidated
Statements of Income -- Net Sales” section and the “Sales” line of the surrogate value chart
(1,217,602,316 PHPs); the 2010 MVC Financial Statement “Consolidated Statements of Income --
Cost of Sales” section and the “Cost of Sales” line in the surrogate value chart (863,303,184 PHPs);
the 2010 MVC Financial Statement “Consolidated Statements of Income -- Direct Labor” section
and the “Direct Labor” line on the surrogate value chart (26,437,846 PHPs).
Consol. Court No. 13-00073 Page 16
2. Change in Methodologies
In its second and third requests Commerce seeks voluntary remand to explain its
change in methodology, consider comments by the parties, and collect additional relevant
information if necessary, for its valuation of the by-products ammonia gas and sulfuric acid and its
calculation of intra-company transportation. Def’s Resp. at 53-54. Although adherence to previous
methodology may be required in some instances, a change in Commerce’s practice or methodology
may be permitted in an administrative review if the change is for an adequate cause, if Commerce
provides a reasoned explanation, and in making this change Commerce provides parties with timely
notice and sufficient opportunity to provide the information required by the revised methodology.16
a. Calculation of Intra-Company Transportation of Intermediate Products
Commerce requests remand “to reconsider and explain its treatment and calculation
of intra-company transportation” of intermediate products in response to Arch and Jiheng’s
challenge of its methodology, and its concern is both substantial and legitimate. See Def’s Resp.
at 54, referencing I&D Memo at cmt. 16. In the Final Results, Commerce changed the methodology
it applied for valuing the intra-company transportation of intermediate products, treating it as a
separate factor of production rather than considering it to be included in overhead as it did in its
Preliminary Results, without justifying this change. Id. The need for an agency to adequately
16
See, e.g., Arch Chemicals, Inc. v. United States, 33 CIT 954, 963-64 (2009); Anshan Iron
& Steel Co., Ltd. v. United States, 27 CIT 1234, 1241-42 (2003); Fujian Mach. and Equip. Imp. &
Exp. Corp. v. United States, 25 CIT 1150, 1169-70, 178 F. Supp. 2d 1305, 1326-27 (2001); Hussey
Copper, Ltd. v. United States, 17 CIT 993, 998, 834 F. Supp. 413, 419 (1993); Shikoku Chemicals
Corporation v. United States, 16 CIT 382, 388, 795 F. Supp. 2d 417, 421 (1991).
Consol. Court No. 13-00073 Page 17
address a departure from past practice is a compelling justification for a remand request.17 The
concern addressed by Commerce in its request, ensuring consistency in AD proceedings, is not
outweighed by the need for finality.18 Explaining a change in methodology for the calculation of
one FOP is an appropriate scope for a remand request. There is no indication Commerce’s
substantial and legitimate concern is frivolous or in bad faith. Commerce’s remand request is
granted. On remand, Commerce is requested to collect additional relevant information if necessary,
provide the parties an opportunity to comment on any new additional information, and provide an
explanation that addresses the parties comments either in their briefings if no additional information
is collected or as may be submitted to Commerce.
b. By-Product Valuation Methodology
Commerce claims that it changed its by-product valuation methodology for ammonia
gas and sulfuric acid from the Preliminary Results to the Final Results without providing an
explanation for the change.19 Clearon, Kangtai, and Arch all challenged the determination in their
17
See SKF USA Inc. v. United States, 31 CIT 951, 959, 491 F. Supp. 2d 1354, 1362 (2007)
(“it is within Commerce’s expertise and discretion to update its methodology for both increased
accuracy and ease of use”) (citation omitted); see also Shakeproof Assembly, supra, 29 CIT at 1522,
412 F. Supp. 2d at 1336, referencing Atchison, Topeka & Santa Fe Ry. Co. v. Wichita Bd. Of Trade,
412 U.S. 800, 808 (1973) (“it is an established principle of administrative law that an agency has
a ‘duty to explain its departure from prior norms’).
18
See Allied Tube & Conduit Corp. v. United States, 29 CIT 502, 508, 374 F. Supp. 2d 1257,
1262 (2005) (“Commerce must explain why it chose to change its methodology and demonstrate that
such change is in accordance with law and supported by substantial evidence”) (citation omitted);
see also Hussey Copper, Ltd., 17 CIT at 998, 834 F. Supp. at 419 (requiring remand on the ground
that Commerce “failed to adequately articulate the reasons for its departure from its normal
practice”).
19
Commerce claims it valued ammonia gas and sulfuric acid with individual surrogate
values for each by-product in the Preliminary Results, and in the Final Results valued the two by-
(continued...)
Consol. Court No. 13-00073 Page 18
motions,20 and Commerce “respectfully requests a voluntary remand . . . to consider these comments,
provide an explanation and collect additional relevant information if necessary.” Def’s Resp. at 53-
54, referencing SKF I, supra, 254 F.3d at 1029. Kangtai, however, opposes its request for remand
arguing that contrary to Commerce’s claims the record contains the information necessary for
valuing the two by-products, as evidenced by Commerce’s calculation of the surrogate value costs
in the Preliminary Results. It asks the court to restore the Preliminary Results’ treatment of
Kangtai’s by-product on remand. Kangtai Reply at 9-10, referencing Def’s Resp. at 53-54.21
Kangtai also opposes remand on the grounds that Commerce excessively delayed briefing on the
issue and that it did not properly brief the merits of its request. Id. at 10-11.
19
(...continued)
products by using the value of the down-stream product ammonium sulfate. See Def’s Resp. at 53-
54, referencing Preliminary Results; see also I&D Memo at cmt. 14 (stating “[w]e are adjusting the
manner in which we calculate the by-product offsets for both Jiheng and Kangtai to conform to the
Department’s recent practice. [Commerce] considers this by-product methodology more reasonable
than the by-product methodology employed for the Preliminary Results because it is consistent with
the information [Commerce] requests in our questionnaire . . .” and acknowledging it did not have
information necessary on the record to calculate the by-product offsets).
20
Clearon claimed that by using the value of the downstream product ammonia sulfate in
its calculation Commerce overstated the value of the by-products, ammonia gas and sulfuric acid.
It requests remand so that Commerce may collect appropriate information and adjust the value to
include only the by-products. Clearon Rule 56.2 Mot. at 20-25. Arch, Jiheng, and Kangtai argued
that Commerce changed its methodology without providing an explanation and that it should value
the by-products individually as it had done in previous review. Kangtai Rule 56.2 Mot. at 39-40;
Arch & Jiheng Rule 56.2 Mot. at 24-31.
21
Kangtai argued in its Motion for Judgment on the Agency Record that by valuing the
offset based on the surrogate value for inputs, Commerce did not select the “best available
information” for the by-product offset and that its determination was unlawful and unsupported by
substantial evidence. It also claimed that no party asked for the change and that Commerce
conceded it was missing the information to effect its change. Kangtai Rule 56.2 Mot. at 39-40.
Consol. Court No. 13-00073 Page 19
Kangtai’s contention that Commerce did not properly brief the merits of its request
lacks merit. In its remand request Commerce explained its change in methodology from the
Preliminary Results to the Final Results. The court may reasonably deduce from the request that
Commerce desires to reconsider its by-product methodology determination in light of the comments
made Kangtai, Arch and Clearon, obtain additional information if necessary, and permit the parties
to comment if additional information is collected.22
Commerce’s concern is substantial and legitimate. Commerce provides evidence that
it changed its methodology, and, as discussed above, addressing a change in methodology is a
compelling justification for requesting a remand. The need for finality is not outweighed by the
need for Commerce to ensure an accurate and consistent review result.23 Here, Commerce is not
attempting to “delay the day of reckoning” or asking for a “do-over anytime it wishes”24 instead, its
request to address a seeming departure from its past practice is consistent with the applicable
statutory objective of “[securing] the just, speedy and inexpensive determination of every action and
proceeding”. See USCIT Rule 1. Commerce further appropriately limited the scope of its request
to address a change in one methodology, the valuation of by-products, and it does not appear its
22
Def’s Rep. at 53-54. See, e.g., Albemarle Corp. v. United States, 37 CIT ___, Slip Op. 13-
106 (Aug. 15, 2013).
23
Cf. Civil Aeronautics Board v. Delta Air Lines, Inc., 367 U.S. 316, 321 (1961) (noting
the significance of the public interest in reaching what, ultimately, appears to be the right result in
weighing a reconsideration request) (citation omitted); see also SKF USA Inc. v. United States, 630
F.3d 1365, 1373-74 (Fed. Cir. 2011) (Commerce has an obligation to provide an explanation and
address important factors raised by comments from petitioners and respondents), referencing Timken
U.S. Corp. v. United States, 421 F.3d 1350, 1358 (Fed. Cir. 2005), and Nat’l Mining Ass’n v. Mine
Safety & Health Admin., 116 F.3d 520, 549 (D.C. Cir. 1997).
24
Corus Staal BV v. United States, 29 CIT 777, 783, 387 F. Supp. 2d 1291, 1297 (2005)
aff’d, 186 F. App’x 997 (Fed. Cir. 2006).
Consol. Court No. 13-00073 Page 20
substantial and legitimate concern is frivolous or made in bad faith. The court grants Commerce’s
remand request.25 On remand, Commerce is requested to collect additional relevant information if
necessary, provide the parties an opportunity to comment on any new additional information, and
provide an explanation that addresses the parties comments either in their briefings if no additional
information is collected or as may be submitted to Commerce.
B. Primary Surrogate Country Selection
Kangtai requests remand concerning Commerce’s choice of the Philippines as the
primary surrogate country. It argues that contrary to Commerce’s findings, India is an economically
comparable country to the PRC and that India should have been selected as the surrogate country
for the review. Supporting its claim Kangtai avers that Commerce’s sole reliance on per capita GNI
to determine economic comparability is unreasonable, that Commerce misapplied its surrogate
country selection methodology, and that the range of per capita GNIs Commerce determined to be
proximate and economically comparable to the PRC is not supported by substantial evidence.
Kangtai Rule 56.2 Memo at 6-11(citations omitted).
25
Kangtai states the court must deny remand “to consider the issues anew and gather new
information because [Commerce] . . . ultimately never answered the question of why [Commerce’s]
longstanding practice to value the immediate by-products generated in production of the subject
merchandise should be abandoned” and because Commerce “unilaterally decided not to provide any
reason whatsoever supported by the record that would have justified change in its practice.” Kangtai
Reply at 10. The language of the remand request is appropriate. Commerce requests remand to
address the shortcomings in the Final Results that Kangtai points out: a lack of explanation for a
change in by-product methodology. In passing, this court notes Kangtai and Arch allege that the
issue is not properly raised here, as Clearon failed to exhaust administrative remedies concerning
its contention that the respondents responses were insufficient for the proper by-product valuation
of ammonium sulfate. For this court to comment on these allegations at this point would be
premature.
Consol. Court No. 13-00073 Page 21
As discussed above, when valuing factors in AD reviews for NMEs Commerce must
select data that are the “best available information” on the record. Commerce is also required under
19 U.S.C. §1677b(c)(4) to use “to the extent possible” surrogate country data that comes from one
or more market economy countries that are (1) at “a level of economic development comparable to
that of the nonmarket economy country” and (2) “significant producers of comparable merchandise”.
In making its surrogate country selection Commerce as a matter of policy applies a four-step
procedural approach that is a “sequential consideration of the statutory elements”. See Import
Administration Policy Bulletin 04.1: Nonmarket Economy Surrogate Country Selection Process
(Mar. 1, 2004) (italics added), available at http://ia.ita.doc.gov/policy/bull04-1.html (last visited July
10, 2014) (“Policy Bulletin 4.1”). First, Commerce’s Office of Policy creates a list of potential
surrogate countries that are at a “comparable level of economic development” to the NME country
at issue (“potential surrogate country list”). Second, Commerce determines which countries on the
potential surrogate country list are also producers of “comparable merchandise” to the merchandise
subject to the AD order. Third, Commerce determines if any of the countries that satisfy steps one
and two are also “significant” producers of the merchandise. Fourth, if more than one country exists
in the selection process, Commerce chooses the country with the “best factors data” quality by
evaluating the data’s availability, reliability, and adequacy. Commerce generally selects a country
from the potential surrogate country list, but will “go off” list if it determines all of the final listed
countries lack sufficient data. Commerce also has a regulatory preference for valuing all surrogate
values from one surrogate country. See 19 C.F.R. §351.408(c)(2).
Following this sequential approach Commerce listed the Philippines, Indonesia,
Ukraine, Thailand, Columbia, and South Africa in its Surrogate Country Memorandum as those
Consol. Court No. 13-00073 Page 22
countries it considered to be “economically comparable to [the PRC] and most likely to have good
data availability and quality” based on the 2011 World Development Report from the World Bank.
See Surrogate Country Memorandum, referencing World Development Report 2011, World Bank.
1. Per Capita GNI as Indicator of Economic Comparability
Kangtai first challenges Commerce’s sole reliance on per capita GNI to identify
economically comparable countries to the PRC, arguing Commerce’s reliance on the measure is
unreasonable and contrary to law.26 Kangtai contends that Commerce has used India as the primary
surrogate country in the past 20 reviews, and that although it is aware that Commerce “always
included its form language about economic comparability and GNI even when consistently selecting
India as the primary surrogate country”, per capita GNI is a crude benchmark for determining
economic comparability that does not consider all factors that contribute to determining if a country
has a comparable significant industry. Kangtai Reply at 1; Kangtai Rule 56.2 Mot. 7-8. To support
its claims Kangtai argues, without citation to the record, that “in modern times, [the PRC], India and
the United States are compared frequently and generally as leading world economies”, that India is
“one of the world’s largest countries with one of the largest economies”, and that “it is self-evident
that India is more economically developed than the Philippines but only due to its large population
its per capita GNI ranking falls below the Philippines.” Kangtai Rule 56.2 Mot. at 7-8.
The court finds Kangtai’s arguments unpersuasive, and Commerce’s reliance on per
capita GNI reasonable and in accordance with law. In the Final Results Commerce explained that
its selection of economically comparable countries for the review was consistent with its “long-
26
Kangtai Rule 56.2 Mot. at 7, referencing 19 U.S.C. §1516a(b)(1)(B)(I) and Chevron
U.S.A., Inc., supra, 467 U.S. 837 (1984).
Consol. Court No. 13-00073 Page 23
standing and predictable practice of selecting economically comparable countries on the basis of
GNI”.27 Commerce is provided substantial deference in both the interpretations of its AD statutes
and the methodology it applies to fulfill its statutory mandate, and under the second prong of
Chevron its interpretation will be sustained if it is found to be reasonable.28 Commerce is not
required by statute or regulation to select the same surrogate country it did in previous reviews, or
the country with largest economy, or the most populated country, as Kangtai suggests. Rather, in
each segment of the proceeding Commerce must value the factors of production from a surrogate
country that is at a level of economic development comparable to that of the NME and a significant
producer of comparable merchandise. See 19 U.S.C. §1677b(c)(4); see also 19 C.F.R. §351.408(b)
(italics added). The applicable statute does not expressly define the phrase “level of economic
development comparable ” or what methodology Commerce must use in evaluating the criterion.
19 U.S.C. §1677b(c)(4). 19 C.F.R. §351.408(b) states that although other information may be
considered when Commerce determines if a country is at a level of economic development
comparable to the NME under 19 U.S.C. §1677b(c)(2)(B) or 19 U.S.C. §1677b(c)(4)(A), primary
emphasis will be placed on per capita GDP as the measure of economic comparability. Commerce
later amended its methodology and explained that it now “uses per capita GNI, rather than per
capita GDP, because while the two measures are very similar, per capita GNI is reported across
27
I&D Memo at cmt. 2, referencing Magnesium Metal From the People’s Republic of
China: Final Results of the 2008-2009 Antidumping Duty Administrative Review of the Antidumping
Duty Order, 75 Fed. Reg. 65450 (Oct. 25, 2010), and accompanying issues and decision
memorandum at cmt. 4.
28
United States v. Eurodif S.A., supra, 555 U.S. at 316; accord Timken Co., supra, 354 F.3d
at 1342 (“any reasonable construction of the statute is a permissible construction”), citing
Torrington, supra, 82 F.3d at 1044, and SKF I, supra, 254 F.3d at 1027.
Consol. Court No. 13-00073 Page 24
almost all countries by an authoritative source (the World Bank), and because the Department
believes that the per capita GNI represents the single best measure of a country’s level of total
income and thus level of economic development.” Antidumping Methodologies in Proceedings
Involving NonMarket Economy Countries: Surrogate Country Selection and Separate Rates, 72 Fed.
Reg. 13246, 13246 n.2 (Mar. 21, 2007) (req. for cmts.).
Kangtai suggests that instead of using GNI to measure economic comparability,
Commerce should have considered the chemical industry under review. Pointing to Indian data
available for the subject merchandise Kangtai argues that India “has, and has had, a large and
established chemicals industry from which to draw surrogate values - far more established than the
other countries under consideration” and that “[N]o other country comes close to this amount of
quality data.”29 The metric proffered by Kangtai, however, only addresses the second prong of the
surrogate country criteria which requires a country be a “significant producer of comparable
merchandise” without addressing economic comparability.30
The court in Jiaxing Brother recently addressed arguments similar to those raised
by Kangtai. There the plaintiff claimed India’s steel industry was more comparable to the PRC’s
than it was to the selected surrogate country, Thailand, regardless of the per capita GNI of each of
the countries. It averred that Commerce’s use of GNI as a measure of economic comparability was
29
Kangtai claims that there is no good substitute for India that complies with Commerce’s
policy of selecting a country that provides both “good data availability and quality”, and that both
Commerce and the interested parties have voiced difficulties about finding surrogate values for the
subject merchandise beyond those which come from the India data. Kangtai 56.2 Mot. at 7-9
(citations omitted).
30
See Jiaxing Brother Fastener Co. v. United States, 38 CIT___, Slip Op. 14-12 (Feb. 6,
2014) (hereinafter “Jiaxing Brother”) at 10, referencing 19 U.S.C. §1677b(c)(4)(B).
Consol. Court No. 13-00073 Page 25
unreasonable and that it should have instead applied an industry-sensitive approach to determine
economic comparability. See Jiaxing Brother, supra, Slip Op. 14-12 at 9-10. The court questioned
how the industry-sensitive approach offered by the plaintiff would be administrable across all NME
cases, noting the approach both “leaves open to debate which metrics Commerce should utilize to
identify economically comparable countries” and makes identifying a surrogate country early in the
proceedings “difficult if not impossible.” See id. at 11. Determining that Commerce’s use of per
capita GNI was a reasonable interpretation of its statutory mandate to identify and select a surrogate
country at a “level of economic development comparable” to the NME, the court found that per
capita GNI is a “consistent, transparent, and objective metric to identify and compare a country’s
level of economic development.” Id. at 10. The Jiaxing Brother decision is persuasive on this issue
and Commere’s use of GNI as a measure of economic comparability in the instant review is
reasonable interpretation of the statute and is in accordance with law.
2. Application of Methodology for Selecting a Primary Surrogate Country
Kangtai claims Commerce erred in applying its surrogate country selection
methodology resulting in the improper elimination of India as a surrogate country. Kangtai
unconvincingly argues the court is split on this issue. It contends that the Amanda Foods31 and Ad
Hoc Shrimp32 decisions correctly interpreted the statue by requiring a “weighing” of the three criteria
- economic comparability, significant producer of comparable merchandise, and data availability –
31
Amanda Foods (Vietnam) Ltd. v. United States, 33 CIT 1407, 647 F. Supp. 2d 1368 (2009)
(hereinafter “Amanda Foods”).
32
Ad Hoc Shrimp Trade Action Comm. v. United States, 36 CIT ___, 882 F. Supp. 2d 1366,
1375 (2012) (hereinafter “Ad Hoc Shrimp”).
Consol. Court No. 13-00073 Page 26
while the Jiaxing Brother and Foshan Shunde 33 decisions, which Commerce followed in the instant
review, misconstrued the statute by approaching per capita GNI ranking as threshold statutory
criterion. Kangtai Reply at 3-9.
The court is not split on the application of the surrogate country eligibility criteria
as Kangtai suggests. All four cases approach the selection process by treating the per capita GNI
ranking as a threshold statutory criterion that must be met before the other criteria are considered.
The cases are, however, distinguishable as they address issues in two different stages of the
surrogate country selection process. In Foshan Shunde and Jiaxing Brother, as in this matter, the
court addressed the argument that a country which did not meet the threshold per capita GNI
ranking criterion and was not on the potential surrogate country list in the Surrogate Country
Memorandum, should still be considered economically comparable to the NME.34 In Amanda Foods
and Ad Hoc Shrimp, the court addressed challenges to Commerce’s surrogate country selection
between two countries listed on the Surrogate Country Memorandum which had met the threshold
per capita GNI ranking criterion.
The plaintiff in Amanda Foods challenged Commerce’s selection of Bangladesh as
the primary surrogate country for Vietnam, and contended Commerce erred in applying Policy
33
Foshan Shunde Yongjian Housewares & Hardwares Co. v. United States, 37 CIT ___, 896
F. Supp. 2d 1313 (2013) (hereinafter “Foshan Shunde”).
34
See id. at 1318-25 (plaintiffs unsuccessfully argued that Commerce’s selection of a
country listed on the potential surrogate country list in the Surrogate Country Memorandum,
Indonesia, was unreasonable and accordingly unsupported by substantial evidence and that
Commerce should have instead selected India, a country not on the list); see also Jiaxing Brother,
supra, Slip Op. 14-12 at 4-14 (plaintiffs unsuccessfully argued that Commerce’s selection of a
country listed on the potential surrogate country list in the Surrogate Country Memorandum,
Thailand, was unreasonable and accordingly unsupported by substantial evidence and that
Commerce should have instead selected India, a country not on the list).
Consol. Court No. 13-00073 Page 27
Bulletin 4.1 in its surrogate country selection by not addressing the GNI differential between
Vietnam and Bangladesh as compared to the differential between Vietnam and another country on
the potential surrogate country list, India. The court ordered remand, finding that Commerce did
not provide more than conclusory reasoning of why the GNI discrepancy between two countries on
the potential surrogate list did not affect Commerce’s final surrogate country selection:
Nor has Commerce explained why the difference between Bangladesh and Vietnam,
in per capita GDP, is not relevant in this case or why the difference in economic
similarity to Vietnam is outweighed by the differences in quality data between
Bangladesh and India. Rather, without explanation, Commerce has adopted a policy
of treating all countries on the surrogate country list as being equally comparable to
Vietnam. As Commerce’s chosen designation has not been supported by any
justification or evidence at all, it is not supported by substantial evidence.
Significantly, [Commerce’s] Policy Bulletin states that each Surrogate Country
Memorandum must explain how the chosen country satisfies each element of the
statutory criteria. In accordance with [Commerce’s] own policy, therefore, the
Surrogate Country Memorandum must explain why its chosen surrogate country is
at a level of economic development comparable to Vietnam. The memorandum in
this case does not do so. Accordingly, the court cannot find on this record that
Commerce’s surrogate country selection is supported by substantial evidence.
Amanda Foods, supra, 33 CIT at 1413, 1415, 647 F. Supp. 2d at 1376-78 (citations omitted; italics
added).
In Ad Hoc Shrimp the plaintiff argued Commerce should choose Thailand rather than
India from the potential surrogate country list as the primary surrogate country for the PRC. The
court evaluated Commerce’s policy of treating all countries on the potential surrogate list as
equivalent in terms of economic comparability and ordered remand after finding Commerce’s
selection of India was not supported by a reasonable reading of the record:
Commerce’s policy of disregarding relative GNI differences among potential
surrogates for whom quality data is available and who are significant producers of
comparable merchandise is not reasonable, because it arbitrarily discounts the value
Consol. Court No. 13-00073 Page 28
of economic comparability relative to the remaining eligibility criteria (i.e.,
significant production of comparable merchandise and quality of data). While it is
true, as Commerce emphasizes, that the most economically comparable country
would not be a reasonable surrogate choice if the dataset from that country was
inadequate, this is equally true of the remaining criteria. Thus, for example, the most
economically comparable country would be an unreasonable surrogate choice if it
were not a significant producer of comparable merchandise, and the country with the
absolute best dataset would similarly be an unreasonable surrogate choice if it were
not economically comparable to the NME in question. Indeed, Commerce’s own
policy suggests that none of the three surrogate country eligibility criteria --
economic comparability, significant production of comparable merchandise, and
quality data -- is preeminent.
Because none of Commerce’s three surrogate country eligibility criteria is
preeminent, it follows that relative strengths and weaknesses among potential
surrogates must be weighed by evaluating the extent to which the potential
surrogates satisfy each of the three criteria. If, for example, one potential surrogate
has superior data quality and another is closer in GNI to the NME in question,
Commerce must weigh these differences when selecting the appropriate surrogate.
An unexplained and conclusory blanket policy of simply ignoring relative GNI
comparability within a particular range of GNI values does not amount to a
reasonable reading of the evidence in support of a surrogate selection where more
than one potential surrogate within that GNI range is a substantial producer of
comparable merchandise for which adequate data is publicly available. Rather, in
such situations, Commerce must explain why its chosen surrogate’s superiority in
one of the three eligibility criteria outweighs another potential surrogate’s
superiority in one or more of the remaining criteria.
Ad Hoc Shrimp, supra, 36 CIT at ___, 882 F. Supp. 2d at 1374-75 (citations omitted; italics added).
Kangtai’s attempt to demonstrate a split in the court’s jurisprudence is misplaced.
The issue before the court in Amanda Foods and Ad Hoc Shrimp was not the initial placement of a
country on the potential surrogates list as it was in Foshan Shunde and Jiaxing Brother, but rather
the merits of each of the potential surrogates on the list relative to each other.35 Commerce complied
35
See Commerce Policy Bulletin 4.1; see also, e.g., Ad Hoc Shrimp Action Committee v.
United States, Slip Op. 14-59, 38 CIT ___ (May 29, 2014) at 11 n.17 (discussing the application of
the per capita GNI threshold statutory criterion versus a later weighing of the three criteria):
[I]mportantly, Bangladesh’s relatively less similar GNI to that of [the NME] (when
(continued...)
Consol. Court No. 13-00073 Page 29
with the applicable statute and regulation in applying the surrogate country methodology in the
review.
Kangtai also unconvincingly argues that the surrogate country selection methodology
Commerce applies results in “a surrogate country list that changes from review to review” and that
it contravenes the importance of the AD law which is selecting a “reliable, consistent surrogate for
[the PRC]”. It claims that it was prevented from receiving notice of Commerce’s change in
surrogate country and that parties have no way of predicting what the normal value of their products
will be in each segment of the review. Kangtai Rule 56.2 Mot. at 10-11; Kangtai Reply at 2-3.
As discussed above, Commerce is not required by statute or regulation to select the
same potential surrogate countries or final surrogate country in each review, nor is it required to
select the same surrogate country from the Preliminary Results to the Final Results. In each review,
parties are given opportunities to present and comment on surrogate country selection and are
presumed aware of the possible countries that may be selected as well as of the possibility that the
selected surrogate country may change from review to review. This is true for the present review
where Kangtai commented on the surrogate country selection after being informed early in the
proceedings of the potential countries that may be selected. See Surrogate Country Memorandum
at 5; see Request for Surrogate Country Cmts. (Oct. 28, 2011), PDoc 37; see generally Kangtai Sur.
35
(...continued)
compared with India’s GNI) does not affect Commerce’s determination that all three
potential surrogate countries independently fell within the range of economic
comparability to [the NME], and therefore that data from all three countries would
satisfy that threshold statutory requirement. The appropriateness of placing
Bangladesh on the initial potential surrogates list (based on Commerce’s finding that
Bangladesh’s GNI fell within the range of economic comparability to [the NME])
is uncontested . . . [and] Commerce’s initial placement of Bangladesh on the
potential surrogates list is not the issue before the court.
Consol. Court No. 13-00073 Page 30
Country Cmts. (Dec. 19, 2011), PDoc 58; Kangtai Sur. Value Sub. (Jan. 9, 2012), PDocs 69, 70;
Kangtai Sur. Value Sub. for Final Results (Sept. 5, 2012), PDocs 116, 117.36 Although, Kangtai
may not be completely certain of the country Commerce will choose as a surrogate, as a participant
in previous administrative reviews it is aware of the process and methodology Commerce follows,
and that the surrogate country selection occurs as part of a retroactive process where Commerce
applies duties to entries after they have been sold.
3. Range of GNI Used by Commerce to Determine Economically Comparable Countries
Kangtai next challenges the range of GNI Commerce used to make its surrogate
country selection and to determine that India was not a level of economic development comparable
to the PRC. Arguing Commerce’s decision to eliminate India was not supported by substantial
evidence, Kangtai claims that Commerce has failed to provide any analysis explaining why countries
are economially comparable to the PRC “if they are within a particular range of GNI, as opposed
to a larger or smaller range” or why the range “changed from year to year”.37
36
Kangtai argues The Omnibus Trade Act Report is evidence that Congress voiced similar
fairness concerns about the retroactive application of factors of production in the surrogate country
selection methodology. See Kangtai Rule 56.2 Mot. at 10-11, citing Omnibus Trade Act Report S.
Rep. No. 100-71 at 106 (1987). However; Kangtai’s argument is based on a selective reading of the
report, which addresses concerns that imports from the PRC not be unfairly disadvantaged by the
methodology when “price differences can be accounted for in whole or in part by quality differences
in the imported merchandise”:
The Committee is particularly concerned that the imports from certain nonmarket
economy countries, such as the People[‘]s Republic of China, not be unfairly
disadvantaged by the use of the new methodology [the factors of production
methodology] where price difference can be accounted for in whole or in part by
quality differences in the imported merchandise. [Commerce] should ensure that, in
computing the trade-weighted average price, it only uses prices that are in fact from
arms-length sales to unrelated parties.
37
Kangtai Reply at 1, referencing Consol. Edison Co., supra, 305 U.S. at 229. See Kangtai
(continued...)
Consol. Court No. 13-00073 Page 31
Commerce is granted broad discretion in its selection of surrogate countries for AD
proceedings, and the court “will not impose its choice of which economy is more comparable . . .
provided the choice made by Commerce is sufficiently reasonable and supported by evidence.” See
19 U.S.C.§1516a(b)(1)(B); see also Technoimportertexport and Peer Bearing Co. v. United States,
15 CIT 250, 255, 766 F. Supp. 1169, 1175 (1991) (citation omitted). Commerce is not required to
set a fixed range of GNIs into which potential surrogate countries must fall, but it must provide a
reasoned explanation which permits the court to determine the process by which it reached its result
was logical and rational, and this explanation must be supported by the administrative record.38
Commerce created the potential surrogate country list for the segment of the review
at issue without explanation. The Surrogate Country Memorandum which contains the potential
surrogate country list states:
With regard to the first statutory requirement, the six countries on the non-exhaustive
list below are at a level of economic development comparable to [the PRC] in terms
of per capita gross national income (GNI). Per capita is the primary basis for
determining economic comparability.
This list provides you the countries that are economically comparable to [the PRC]
and the most likely to have good data availability and quality. You may also
37
(...continued)
Compl. ¶ 14 (“[t]he Department’s conclusion that India was not at a level of economic development
comparable to [the PRC] was not supported by substantial evidence”), referencing 19 U.S.C.
§1677b(c)(1) and 19 U.S.C. §1677b(c)(2)(B) (requiring that the Department select surrogate values
from “one or more market economy countries that are at a level of economic development
comparable to that of” the PRC).
38
See, e.g., Dorbest Ltd. v. United States, 30 CIT 1671, 1677, 462 F. Supp. 2d 1262,
1269-70 (2006); see also Ad Hoc Shrimp, supra, 36 CIT at ___, 882 F. Supp. 2d. at 1374, citing
Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359, 374 (1998) (“not only must an agency’s
decreed result be within the scope of its lawful authority, but the process by which it reaches that
result must be logical and rational”).
Consol. Court No. 13-00073 Page 32
consider other countries on the case record if the record provides you adequate
information to evaluate them.
Surrogate Country Memorandum. While dismissing Kangtai’s argument that India is economically
comparable to the PRC in its Final Results, Commerce again made its determination without
explanation:
In the Preliminary Results [Commerce] stated that, for the purpose of selecting a
surrogate country, Colombia, Indonesia, the Philippines, South Africa, Thailand and
Ukraine were equally comparable to the PRC in terms of economic development.
The list is comprised of countries that are proximate to the PRC in terms of GNI . . ..
[T]he list did not include India because India’s per capita GNI did not fall within the
range of countries proximate to the PRC.
[Commerce] finds that the selection of the range of economically comparable
countries base on GNI, included in the Surrogate Country Memorandum, is
reasonable and consistent with the Tariff Act of 1930, as amended.
I&D Memo at cmt. 2.
Even assuming, arguendo, the court could accept the post hoc rationalization
Commerce provides in its Rule 56.2 response,39 Commerce fails to provide India or the PRC’s GNI
ranking, India’s GNI, or analysis, beyond conclusory statements, explaining why the GNIs of the
countries on the potential surrogate list qualify as economically comparable and proximate to the
PRC’s GNI while India’s GNI does not.40 Commerce instead has advanced an explanation that
39
See Def’s Resp. at 8 (“Although Commerce had selected India as the primary surrogate
country in all of the earlier administrative reviews of this order, India became less economically
comparable to [the PRC] over time. Indeed, given the per capita GNI data in the World Bank
Report, India’s and [the PRC]’s per capita GNI rankings had moved so far apart that Commerce
dropped India from its surrogate country list, substituting other, more comparable countries.”) & 11
(the PRC “has a large population and a GNI that is much higher than that of India”).
40
Atcor, Inc. v. United States, 11 CIT 148, 154, 658 F. Supp. 295, 300 (1987) (“[I]n
reviewing agency action, the Court must base its decision upon the administrative record. New
evidence may not be received. The Court must rely upon the rationale articulated by the agency.
(continued...)
Consol. Court No. 13-00073 Page 33
amounts to “we did it because it is our policy to do it”. This explanation is not reasonably adequate
to support a conclusion and cannot serve as a basis for Commerce’s reasoned decision-making. See
Ad Hoc Shrimp, supra, 36 CIT at ___, 882 F. Supp. 2d at 1374, referencing Consol. Edison Co.,
supra, 305 U.S. at 229 (1938).
After reviewing the record, the court also fails to find evidence on the record that
could reasonably support Commerce’s conclusion.41 The administrative record consists of “a copy
of all information presented to or obtained by [Commerce] during the course of the administrative
proceeding”. 19 U.S.C. §1516a(b)(2)(A)(i). Although Commerce can and does take into
consideration its policies and methodologies as expressed in different administrative case precedent
when making its determination, it cannot take the factual information underlying those decisions into
consideration unless those facts are properly on the record of the proceeding before it.42 Commerce
has relied upon the World Development Report to determine those countries whose GNIs it views
to be “proximate” and economically comparable to the PRC. It is therefore a part of the record. The
record, however, does to reflect its inclusion. If Commerce is in possession of such evidence then
40
(...continued)
It may not rely upon post hoc rationalizations.”), referencing Abbott v. Secretary of Labor, 3 CIT
54, 55 (1982), and ILWU Local 142 v. Donovan, 10 CIT 161 (1986).
41
PPG Indus. v. United States, 978 F.2d. 1232, 1237 (Fed. Circ. 1992) (the court evaluates
if the evidence on the record “could reasonably lead to [Commerce’s] conclusion”) (citations
omitted).
42
Gourmet Equip. Taiwan Corp. v. United States, 24 CIT 572, 577-78 (2000) (“Commerce’s
longstanding practice, upheld by this court, is to treat each segment of an antidumping proceeding,
including the antidumping investigation and the administrative reviews that may follow, as
independent proceedings with separate records and which lead to independent determinations”).
Consol. Court No. 13-00073 Page 34
it needs to incorporate it into the record so that the court may determine if that evidence could
reasonably lead to Commere’s conclusion.43
Commerce’s selection of the GNI range for economically comparable countries on
the potential surrogate country list and its determination that India does not qualify as a
economically comparable country is not supported by a reasonable analysis and record evidence.
For these reasons the court remands this issue to Commerce to (1) provide a reasonable explanation
why the range of the GNIs listed on the Surrogate Country Memorandum qualify the countries as
proximate and “economically comparable” to the PRC, including a discussion of why it believes
India’s GNI does not, if that continues to be Commerce’s determination, qualify it as an
economically comparable country, and (2) place the data on the record that it relied upon to make
its determination.
C. Surrogate Value Selections
The parties also contest Commerce’s surrogate value selection of the FOPs chlorine,
hydrogen gas, sodium hydroxide, electricity, and urea. As noted above, when valuing FOPs
Commerce must select the “best available information regarding the values of such factors in a
market economy or countries”, 19 U.S.C. §1677b(c)(1)(B), and it has regulatory preference for
valuing all FOPs from a single surrogate country. 19 C.F.R. §351.408(c)(2) (Commerce will
“normally value all factors in a single surrogate country”). Commerce is provided substantial
43
See, e.g.,Changzhou Wujin Fine Chem. Factory Co. v. United States, 701 F.3d 1367, 1377,
1379 (Fed. Cir. 2012) (stating that “[t]he grounds upon which an [agency action] must be judged are
those upon which the record discloses that [the] action was based” and “review of an administrative
decision must be made on the grounds relied on by the agency” such that “[i]f those grounds are
inadequate or improper, the court is powerless to affirm the administrative action by substituting
what it considers to be a more adequate or proper basis”) (citations omitted).
Consol. Court No. 13-00073 Page 35
discretion in its choice, but the court must be satisfied that when viewing the record as a whole a
reasonable mind could conclude the best available information was selected, and Commerce’s
selection must be supported by substantial evidence and in accordance with law. See Dorbest Ltd.,
supra, 30 CIT at 1676-77, 462 F. Supp. 2d at 1269.
For the court to determine that a reasonable mind could conclude that the surrogate
value selections for chlorine, hydrogen gas, sodium hydroxide, electricity, and urea were the best
available information Commerce must justify its selections by conducting a “fair comparison of the
data sets on the record”.44 This court is unable to make this determination considering that
Commerce has a preference for valuing all FOPs from a single country, and an evaluation of this
preference is part of Commerce’s process of comparing and selecting potential surrogate values.
Commerce may decide to select a different surrogate country on remand and in doing so will need
to analyze its surrogate value selections for the FOP anew. The court accordingly defers its
determination on these issues pending the completion of the redetermination.
IV. Conclusion
For the reasons set forth above, this matter must be, and hereby is, remanded to
Commerce for further consideration of the surrogate financial ratios, by-product valuation
methodology, intra-company transport methodology, and the surrogate country selection in light of
Clearon, Kangtai, Arch and Jehing’s arguments and all relevant intervening legal developments.
The results of remand shall be due October 21st, 2014, comments on the remand results shall be due
44
See Amanda Foods, supra, 33 CIT at 1417, 647 F. Supp. 2d at 1378-79, referencing
Olympia Indus., Inc. v. United States, 22 CIT 387, 390, 7 F. Supp. 2d 997, 1001 (1998), and Allied
Pac. (Dalian) Co. v. United States, 30 CIT 736, 757, 435 F. Supp. 2d 1295, 1313-14 (2006).
Consol. Court No. 13-00073 Page 36
30 days from the date the remand results are filed with the court, and rebuttal commentary shall be
due 15 days thereafter.
So ordered.
/s/ R. Kenton Musgrave
R. Kenton Musgrave, Senior Judge
Dated: July 24, 2014
New York, New York