Appvion, Inc. v. United States , 100 F. Supp. 3d 1374 ( 2015 )

Slip Op. 15-104
UNITED STATES COURT OF INTERNATIONAL TRADE
________________________________
APPVION, INC., :
:
Plaintiff, : Before: Nicholas Tsoucalas,
: Senior Judge
v. :
: Court No.: 14-00143
UNITED STATES, :
: PUBLIC VERSION
Defendant, :
And :
:
PAPIERFABRIK AUGUST KOEHLER SE, :
:
Defendant-Intervenor. :
:
_____________________ :
OPINION
[Plaintiff’s Motion for Judgment on the Agency Record is denied
and Commerce’s Final Results are affirmed.]
Dated: ______________
September 17, 2015
Gilbert B. Kaplan and Daniel L. Schneiderman, King & Spalding LLP,
of Washington, D.C., for Plaintiff.
Joshua E. Kurland, Trial Attorney, U.S. Department of Justice,
Commercial Litigation Branch, of Washington, D.C., for Defendant.
With him on the brief were Reginald T. Blades, Jr., Assistant
Director, Jeanne E. Davidson, Director, and Benjamin C. Mizer,
Principal Deputy Assistant Attorney General. Of counsel on the
brief was Nanda Srikantaiah, Office of the Chief Counsel for Trade
Enforcement & Compliance, U.S. Department of Commerce of
Washington, D.C.
F. Amanda DeBusk and Matthew R. Nicely, Hughes Hubbard & Reed LLP,
of Washington, D.C., for Defendant-Intervenor.
Court No. 14-00143 Page 2
Tsoucalas, Senior Judge: This case concerns the
Defendant United States Department of Commerce’s (“Commerce”)
Final Results of the fourth administrative review (“AR4”) of the
antidumping order on lightweight thermal paper (“LWTP”) from
Germany. Lightweight Thermal Paper From Germany: Final Results of
Antidumping Duty Administrative Review; 2011–2012,(“Final
Results”) 79 Fed. Reg. 34,719 (June 18, 2014); Issues and Decision
Memorandum for the 2011-2012 Final Results of the Administrative
Review on Lightweight Thermal Paper from Germany, (“IDM for AR4”)
A-428-840, (June 11, 2014). The period of review (“POR”) is
November 1, 2011, through October 31, 2012. Final Results, 79
Fed. Reg. at 34,719.
Plaintiff, Appvion Inc., (“Appvion”) filed the instant
suit disputing Commerce’s determination that certain sales were
within the ordinary course of trade and that the application of
Adverse Facts Available (“AFA”) was not warranted. Compl., June
19, 2014, ECF No. 7. Appvion has filed a Motion for Judgment on
the Agency Record. Pl.’s Mot. for J. on the Agency R. (“Pl.’s
Br.”), Dec. 22, 2014, ECF No. 28. Commerce and Defendant-
Intervenor, Papierfabrik August Koehler SE (“Koehler” or
“Defendant-Intervenor”) oppose Appvion’s Motion. Def.’s Mem. in
Opp’n to Pl.’s Rule 56.2 Mot. for J. Upon Agency R. (“Def.’s Br.”),
May 29, 2015, ECF No. 39; Def.-Intervenor’s Resp. in Opp’n to Pl.’s
Rule 56.2 Mot. for J. on the Agency R., May 28, 2015, ECF No. 36.
Court No. 14-00143 Page 3
For the following reasons, Appvion’s Motion for Judgment on the
Agency Record is denied, and Commerce’s Final Results are affirmed.
BACKGROUND
Appvion is a manufacturer of domestic like product and
participated in the review that gave rise to the Final Results.
Compl. at ¶4. Koehler is a foreign exporter/producer of LWTP in
Germany, whose paper was subject to a 6.50% weighted average
dumping margin pursuant to the Antidumping Duty Orders:
Lightweight Thermal Paper From Germany and the People’s Republic
of China, 73 Fed. Reg. 70,959, 70,959-60 (Nov. 24, 2008).
A brief synopsis of the third administrative review
(“AR3”) is necessary to place the instant review in context. In
AR3, Koehler engaged in a fraudulent transshipment scheme where it
sold 48-gram thermal paper that was destined for consumption in
Germany through various intermediaries in third countries, in
order to manipulate prices of paper shipped directly to its German
customers. Issues and Decision Memorandum for the Final Results
of the 2010-2011 Administrative Review on Lightweight Thermal
Paper from Germany (“IDM for AR3”) at 2, A-428-840, Apr. 10, 2013.
The manipulated prices would affect the calculation of normal value
that would be used in determining the antidumping margin. Id.
Koehler did not voluntarily disclose the transshipment scheme
during AR3. Id. at 12. Koehler discontinued the transshipment
scheme on [[ ]]. Pl.’s Confidential App. Koehler’s
Court No. 14-00143 Page 4
Supplemental Resp. at 25, May 15, 2013, ECF No. 30. As a result,
Commerce applied total AFA to Koehler in AR3. IDM for AR3 at 6.
Commerce’s decision was affirmed by this Court. Papierfabrik
August Koehler SE v. United States, 38 CIT ____, 7 F. Supp. 3d 1304
(2014), appeal filed and docketed, Papierfabrik August Koehler SE
v. United States, Appeal No. 15-1489 (Fed. Cir. Mar. 25, 2015).
In AR4, however, Koehler acknowledged that the
transshipments began prior to the POR and ended during AR4. Pl.’s
Confidential App., Koehler Section A Response at 15-17, Feb. 25,
2012. In contrast to AR3, in AR4 Koehler fully disclosed the
transshipment sales channel, Channel 2, and its related sales data
in its reporting of home market sales during AR4. See id. at 15-
17, 24, and Ex. A-7. Koehler sold LWTP through three sales channels
to its German customers during AR4: Channel 1 (direct shipments),
Channel 2 (transshipped sales), and Channel 3 (consignment sales).
IDM for AR 4, at 3.
During AR4, Appvion contended that sales of KT 48 (a
grade of thermal paper) products through Channels 1 and 3 were
outside the ordinary course of trade. Id. Appvion claimed that
the sales were made at artificial prices that were “aberrationally
low and not determined by commercial considerations nor market-
based supply and demand, in part because of the particular manner
in which Koehler established prices for these sales.” Id. Appvion
also argued that the application of AFA was warranted. Id. at 18.
Court No. 14-00143 Page 5
In the Final Results, Commerce determined that the sales
were not outside the ordinary course of trade and concluded that
Koehler did not make sales of subject merchandise at less than
normal value. Id. at 6-7; Final Results 79 Fed. Reg. at 34,719.
Accordingly, Commerce found that Koehler’s LWTP was subject to a
zero percent weighted-average dumping margin for the POR. Final
Results 79 Fed. Reg. at 34,720. Furthermore, Commerce found no
basis to apply AFA. IDM for AR4 at 19. Appvion filed the instant
action disputing Commerce’s Final Results and a Motion for Judgment
on the Agency Record. Compl. at 1-6; Pl.’s Br. at 1-45.
JURISDICTION AND STANDARD OF REVIEW
This Court has jurisdiction pursuant to section 201 of
the Customs Courts Act of 1980, 28 U.S.C. § 1581(c) (2012), and
section 516A(a)(2)(B)(iii) of the Tariff Act of 1930, as amended,
19 U.S.C. § 1516a(a)(2)(B)(iii) (2012). 1
In reviewing a challenge to Commerce's final
determination in an antidumping administrative review, the Court
will uphold Commerce's determination unless it is “unsupported by
substantial evidence on the record, or otherwise not in accordance
with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). Substantial evidence
means “more than a mere scintilla” of “such relevant evidence as
a reasonable mind might accept as adequate to support a
1 Further citations to the Tariff Act of 1930, as amended, are to the relevant
provisions of Title 19 of the U.S. Code, 2012 edition.
Court No. 14-00143 Page 6
conclusion.” Universal Camera Corp. v. NLRB, 340 U.S. 474, 477, 71
S. Ct. 456, 459, 95 L. Ed. 456, 462 (1951)(quoting Consol. Edison
Co. v. NLRB, 305 U.S. 197, 229, 59 S. Ct. 206, 217, 83 L. Ed. 126,
140 (1938)). To determine if substantial evidence exists, the
court reviews the record as a whole, including whatever “fairly
detracts from its weight.” Id. at 488, 71 S.Ct. at 464, 95 L. Ed.
at 467. The mere fact that it may be possible to draw two
inconsistent conclusions from the record does not prevent
Commerce's determination from being supported by substantial
evidence. Am. Silicon Techs. v. United States, 261 F.3d 1371,
1376 (Fed. Cir. 2001); see also Consolo v. Fed. Mar. Comm'n, 383
U.S. 607, 620, 86 S. Ct. 1018, 1026, 16 L. Ed. 2d 131, 141 (1966).
DISCUSSION
1. Ordinary Course of Trade
Antidumping duties are equal to the “amount by which
the normal value exceeds the export price (or the constructed
export price) for the merchandise.” 19 U.S.C. § 1673. The
antidumping statute defines normal value as the price of the
subject merchandise “at a time reasonably corresponding to the
time of the sale used to determine the export price or constructed
export price,” 19 U.S.C. § 1677b(a)(1)(A), where the price is “the
price at which the foreign like product is first sold . . . for
consumption in the exporting country, in the usual commercial
quantities and in the ordinary course of trade . . . .” 19 U.S.C.
Court No. 14-00143 Page 7
§ 1677b(a)(1)(B)(i). In order for Commerce to include particular
sales in its calculation of normal value, the sales must have been
made in the ordinary course of trade. U.S. Steel Corp. v. United
States, 37 CIT ____, 953 F. Supp. 2d 1332, 1341 (2013). In turn,
the “ordinary course of trade” means:
the conditions and practices which, for a
reasonable time prior to the exportation of
the subject merchandise, have been normal in
the trade under consideration with respect to
merchandise of the same class or kind. The
administering authority shall consider the
following sales and transactions, among
others, to be outside the ordinary course of
trade:
(A) Sales disregarded under section
1677b(b)(1) of this title [sales below
the cost of production].
(B) Transactions disregarded under section
1677b(f)(2) of this title [sales between
affiliated persons where the amount
representing the element of value does not
fairly reflect the amount usually reflected in
sales of merchandise under consideration in
the market under consideration].
19 U.S.C. § 1677(15). Other than for the aforementioned
subsections (A) and (B), the Tariff Act provides “little assistance
in determining what is outside the scope of that definition.” NSK
Ltd. v. United States, 25 CIT 583, 599, 170 F. Supp. 2d 1280, 1296
(2001). The Court has held that “the statutory provision defining
what is considered outside the ordinary course of trade is
unclear.” Id. Accordingly, the Court has found that Commerce has
discretion to determine what sales are outside the ordinary course
Court No. 14-00143 Page 8
of trade. U.S. Steel, 37 CIT at ____, 953 F.Supp.2d at 1341.
Commerce may consider sales or transactions to be outside the
ordinary course of trade “if . . . based on an evaluation of all
of the circumstances particular to the sales in question, that
such sales or transactions have characteristics that are
extraordinary for the market in question.” 19 C.F.R. §
351.102(b)(35) (2015). Examples of sales that Commerce might
consider as being outside the ordinary course of trade are sales
or transactions involving off-quality merchandise or merchandise
produced according to unusual product specifications, merchandise
sold at aberrational prices or with abnormally high profits,
merchandise sold pursuant to unusual terms of sale, or merchandise
sold to an affiliated party at a non-arm’s length price. Id. In
determining whether home market sales are in the ordinary course
of trade, Commerce must “evaluate not just ‘one factor taken in
isolation but rather . . . all the circumstances particular to the
sales in question.’” Cemex, S.A. v. United States, 133 F.3d 897,
900 (Fed. Cir. 1998) (quoting Murata Mfg. Co. v. United States, 17
CIT 259, 264, 820 F. Supp. 603, 607 (1993)). “In applying its
totality of the circumstances test, Commerce does not give
particular weight to any single factor. Instead, Commerce
determines which factor may be more or less significant based on
the case at hand.” U.S. Steel, 953 F. Supp. 2d at 1342 (citing
Murata, 17 CIT at 263, 820 F.Supp. at 606). “An analysis of these
Court No. 14-00143 Page 9
factors should be guided by the purpose of the ordinary course of
trade provision which is ‘to prevent dumping margins from being
based on sales which are not representative’ of the home market.”
Id. (quoting Monsanto Co. v. United States, 12 CIT 937, 940, 698
F. Supp. 275, 278 (1988)).
Very low prices or profits may be indicative of sales
outside the ordinary course of trade; however, the mere fact of
such low prices or profits does not necessarily mean that such
sales are outside the ordinary course of trade, as Commerce must
evaluate all the circumstances particular to the sales in question.
See Cemex, S.A. v. United States, 19 CIT 587, 592, (not reported
in Federal Supplement) (1995), aff’d, Cemex, S.A. v. United States,
133 F.3d at 900; see also, NTN Bearing Corp. of America, 25 CIT
664, 681, 155 F. Supp. 2d 715, 732 (2001), rev’d on other grounds
sub nom. Fag Italia S.p.A. v. United States, 402 F.3d 1356 (2005).
Commerce’s decision is “entitled to deference from this
Court.” Mantex, Inc. v. United States, 17 CIT 1385, 1403, 841 F.
Supp. 1290, 1306 (1993). “The Plaintiff has the burden of proving
whether sales used in Commerce’s calculations are outside the
ordinary course of trade or not . . . .” Nachi-Fujikoshi Corp. v.
United States, 16 CIT 606, 608, 798 F. Supp. 716, 718 (1992).
Appvion argues that direct sales of matching 48 gram
products were outside the ordinary course of trade and should not
have been included in the calculation of normal value, because the
Court No. 14-00143 Page 10
sales had extraordinary characteristics. Pl.’s Br. at 9. Appvion
argues that the sales were exceptional and should be excluded,
because they were the only sales vetted through [[
]] to eliminate dumping. Id. at 10.
Appvion further contends that the sales were outside the ordinary
course of trade, because they were made at artificially low prices
or profit levels, while higher market-priced sales were concealed
through transshipments (Channel 2). Id. at 9-10. Appvion calls
this Koehler’s “two-tier pricing mechanism.” Id. at 19. Appvion
came to this conclusion by aggregating sales between Channels 1
(direct shipments) and 3 (consignment sales) and comparing them
against Channel 2 (transshipped sales). Def.’s Br. at 10.
Commerce contends that when the sales are disaggregated,
it did not find “aberrationally low” profits earned on Channel 1
and 3 sales, rather, it found that variations in price and
profitability were due to market factors as opposed to the
transshipment scheme. Id. at 11. Appvion does not point to any
authority questioning the reasonableness of Commerce’s decision to
disaggregate the channels. Pl.’s Br. at 1-44. Accordingly, the
court finds that Commerce’s decision to disaggregate the channels
was reasonable given that Koehler identified them as separate sales
channels. Pl.’s Confidential App. Koehler’s Resp. to Section A
Questionnaire at 15, Feb. 25, 2012.
Court No. 14-00143 Page 11
Appvion argues that sales of the 55-gram product
(another grade of LWTP) “form a commercial benchmark” against which
to evaluate Koehler’s pricing for the matching product. Pl.’s Br.
at 14. Appvion assumes that sales of the “48-gram product would
carry a substantial price premium (on a per weight basis) over
sales of a 55-gram product, because one kilogram of the 48-gram
product has 15% more square meters of paper than one kilogram of
the 55-gram product.” Id. Nevertheless, Commerce properly
considered various factors that may explain the difference in
price: there is “significant demand” for KT 55 products in
Koehler’s home market, as the KT 55 product is thicker and
stronger; transport costs are [[
]]; and [[ ]] for the KT 55 product
allow for [[ ]]. Def.’s Br. at
23-24. Thus, Commerce cited evidence in the record showing that
pricing patterns may be influenced by a variety of factors. See
id. Accordingly, Commerce’s decision not to use KT 55 as a
commercial benchmark was reasonable and supported by substantial
evidence.
Appvion further alleges that a dramatic price increase
among Channels 1 and 3 direct sales after the transshipment scheme
ended in June 2012 confirms that the sales at issue were made
outside the ordinary course of trade. Pl.’s Br. at 14-15. The
court disagrees. When the sales were disaggregated, Commerce did
Court No. 14-00143 Page 12
not find a dramatic price increase after the transshipment scheme
ended. Pl.’s Confidential App. Price and Profitability Analysis
at Fig. 2, June 11, 2014.
Further, after the transshipment scheme was discontinued
in [[ ]] Channel 1 prices [[ ]] only in [[
]], which is [[ ]] after the scheme was
discontinued. Id. at 3. This suggests that the price increase
was not connected to the transshipment scheme. See id. There is
a consistency in prices between Channels 2 and 3, as the Channel
3 customer replaced the [[ ]] Channel 2 customer after
the transshipment scheme ended in [[ ]]. See id. at Fig.
2. The prices were similar both during and after the transshipment
scheme ended in [[ ]]. See id. Correspondingly, Channel 1
sales were made to [[ ]] and showed more variation
in price. See id. at 5. This suggests that the price differences
between sales could be attributed to [[ ]].
See id.
Appvion counters that Channel 3 (consignment) sales are
irrelevant to its ordinary course of trade argument, because
[[ ]] of matching 48-gram products
during the transshipment period. Pl.’s Br. at 25. Appvion’s
argument, however, is inconsistent, because it claims that Channel
3 sales are irrelevant, yet it argues for an aggregated price
analysis of Channels 1 and 3. Id. at 21, 25. Channel 3 sales are
Court No. 14-00143 Page 13
relevant, because they relate to Appvion’s claim of a dramatic
increase in price when the transshipment scheme was discontinued.
Commerce’s disaggregated profitability analysis reveals
that “Channel 1 profits, while ranging from [[
]] than the Channel 2 profits, were not so
different as to be ‘aberrational.’” Pl.’s Confidential App. Price
and Profitability Analysis at 8.
The court finds that Commerce’s profitability analysis
was reasonable. See id. Even assuming arguendo that the sales
were made at abnormally low prices and profits, the sales are not
necessarily outside the ordinary course of trade. The mere fact
of abnormally low prices and profits is not enough to put sales
outside of the ordinary course of trade, as Commerce examines all
the circumstances particular to the sales in question. Cemex, 133
F.3d at 900 (quoting Murata, 17 CIT at 264, 820 F.Supp. at 607).
Moreover, here, none of the other factors associated with sales
outside the ordinary course of trade are present, as there were no
sales involving: off quality merchandise; merchandise produced
according to unusual specifications; merchandise sold pursuant to
unusual terms of sale; or merchandise sold to an affiliated party
at a non-arm’s length price. 19 C.F.R. § 351.102(b)(35). Thus,
Commerce’s determination was reasonable.
Court No. 14-00143 Page 14
Lastly, Appvion argues that Commerce’s interpretation of
the pricing data for KT 48 F20 (another grade of LWTP) is
unsupported and irrational. Pl.’s Br. at 31. Appvion’s argument,
however, does nothing to change the fact that under a disaggregated
analysis, Commerce did not find a dramatic price increase after
the transshipment scheme ended. Pl.’s Confidential App. Price and
Profitability Analysis at Fig. 2.
2. Adverse Facts Available
Commerce may apply AFA where “an interested party has
failed to cooperate by not acting to the best of its ability to
comply with a request for information.” 19 U.S.C. § 1677e(b).
“Compliance with the ‘best of its ability’ standard is determined
by assessing whether respondent has put forth its maximum effort
to provide Commerce with full and complete answers to all inquiries
in an investigation.” Nippon Steel Corp. v. United States, 337
F.3d 1373, 1382 (Fed. Cir. 2003). Commerce enjoys broad discretion
when considering whether to apply AFA. See PAM, S.p.A. v. United
States, 582 F.3d 1336, 1339-40 (Fed. Cir. 2009). This discretion
does not require that Commerce show that an importer cooperated to
the best of its ability every time it determines that AFA should
not be applied. AK Steel Corp. v. United States, 28 CIT 1408,
1417, 346 F. Supp. 2d 1348, 1355 (2004). Cooperating to the best of
its ability means that the company must: take reasonable steps to
keep and maintain full and complete records documenting the
Court No. 14-00143 Page 15
information that a reasonable importer should anticipate being
called upon to produce; have familiarity with all the records it
maintains; and conduct prompt, careful, and comprehensive
investigations of all relevant records. Nippon, 337 F.3d at 1382.
In AR3, Commerce found that Koehler failed to cooperate
to the best of its ability and significantly impeded the review by
not fully reporting its home market sales. IDM for AR3 at 9.
Consequently, Commerce applied AFA in that review. Id. By
comparison, in AR4, Koehler fully disclosed its home market sales
information including the transshipment scheme, and Commerce
confirmed this through verification. IDM for AR4, at 15. Appvion,
however, contends that the transshipment scheme affected Koehler’s
entire accounting system with fraud such that any verification by
Commerce cannot be trusted. Pl.’s Br. 40-41.
Appvion heavily relies on the Court’s holding in Tianjin
Magnesium Int’l Co., Ltd. v. United States, 844 F. Supp. 2d 1342,
1347 (2012), in support of its contention. The Court takes issue
with Appvion’s contention. In Tianjin, this Court concluded that
the application of AFA was warranted where the respondent submitted
false documents two months after their falsity had been established
in a failed verification. Id. The instant case is distinguishable,
because, here, Koehler fully disclosed its home market sales
information including the transshipment scheme, and Commerce
confirmed this through verification. Pl.’s Confidential App.,
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Koehler Section A Response at 15-17, 24, and Ex. A-7. Furthermore,
Koehler put forth maximum effort to provide Commerce with full and
complete answers to the request for information. See Nippon, 337
F.3d at 1382. Moreover, there is no indication that Koehler was
unfamiliar with its records or that it failed to maintain full and
complete records or that it did not conduct a prompt, careful, and
comprehensive investigation. See id. The court finds that
Commerce’s decision not to apply AFA here was reasonable.
3. Conclusion
For the foregoing reasons, Plaintiff’s Motion for
Judgment on the Agency Record is denied and Commerce’s Final
Results are affirmed. Judgment will be entered accordingly.
/s/ Nicholas Tsoucalas
Nicholas Tsoucalas
Senior Judge
Dated: September 17, 2015
New York, New York