Elkay Manufacturing Co. v. United States , 180 F. Supp. 3d 1245 ( 2016 )

Slip Op. 16-69
UNITED STATES COURT OF INTERNATIONAL TRADE
ELKAY MANUFACTURING
COMPANY,
Plaintiff,
v.
UNITED STATES, Before: Timothy C. Stanceu, Chief Judge
Defendant, Consol. Court No. 13-00176
and
GUANGDONG DONGYUAN
KITCHENWARE INDUSTRIAL
COMPANY, LTD.,
Defendant-intervenor.
OPINION
Dated: July 14, 2016
[Affirming an agency redetermination in an antidumping duty investigation, submitted in
response to a court order]
Joseph W. Dorn and P. Lee Smith, King & Spalding LLP, of Washington, D.C., for
plaintiff and consolidated defendant-intervenor Elkay Manufacturing Company.
Gregory S. Menegaz and J. Kevin Horgan, deKieffer & Horgan, PLLC, of Washington,
D.C., for consolidated plaintiff and defendant-intervenor Guangdong Dongyuan Kitchenware
Industrial Company, Ltd.
Patricia M. McCarthy, Assistant Director, and Richard P. Schroeder, Trial Attorney,
Civil Division, Commercial Litigation Branch, U.S. Department of Justice, of Washington, D.C.,
for defendant United States. With them on the brief were Stuart F. Delery, Assistant Attorney
General, Jeanne E. Davidson, Director. Of counsel on the brief was Whitney M. Rolig, Attorney,
Office of Chief Counsel for Trade Enforcement and Compliance, U.S. Department of
Commerce, Washington, D.C.
Consol. Court No. 13-00176 Page 2
Stanceu, Chief Judge: In this consolidated action, plaintiffs Elkay Manufacturing
Company (“Elkay”) and Guangdong Dongyuan Kitchenware Industrial Company, Ltd.
(“Dongyuan”) contested an affirmative determination (“Final Determination”) that the
International Trade Administration, U.S. Department of Commerce (“Commerce” or the
“Department”) issued upon concluding an antidumping duty investigation of drawn stainless
steel sinks (“subject merchandise”) from the People’s Republic of China (“China” or the
“PRC”). Both plaintiffs challenged aspects of the Department’s calculation of the normal value
of subject merchandise. 1
Before the court is the Department’s decision on remand (“Remand Redetermination”)
issued in response to the court’s opinion and order in Elkay Mfg. Co. v. United States, 38 CIT __,
34 F. Supp. 3d 1369 (2014) (“Elkay I”). The court affirms the Remand Redetermination.
I. BACKGROUND
The court presumes familiarity with the court’s opinion in Elkay I, id. Below, the court
summarizes that background and addresses developments since the issuance of that opinion.
A. The Investigation and the Antidumping Duty Order
In March 2012, Commerce initiated an antidumping duty investigation of imports of
drawn stainless steel sinks (“drawn sinks”) from China covering the period of July 1, 2011 to
December 31, 2011. Drawn Stainless Steel Sinks From the People’s Republic of China:
Initiation of Antidumping Duty Investigation, 77 Fed. Reg. 18,207 (Int’l Trade Admin.
Mar. 27, 2012) (“Initiation”). Elkay, a U.S. producer of drawn sinks, was a petitioner in the
investigation. See Drawn Stainless Steel Sinks From the People’s Republic of China:
1
Each plaintiff is also a defendant-intervenor in this consolidated action. Order
(June 28, 2013), ECF No. 16 (Court No. 13-00199) (granting Elkay’s Mot. for Intervention);
Order (July 09, 2013), ECF No. 21 (granting Dongyuan’s Mot. for Intervention).
Consol. Court No. 13-00176 Page 3
Antidumping Duty Investigation, 77 Fed. Reg. 60,673 (Int’l Trade Admin. Oct. 4, 2012)
(“Prelim. Determination”), and accompanying Decision Memorandum for Preliminary
Determination for the Antidumping Duty Investigation of Drawn Stainless Steel Sinks from the
People’s Republic of China, A-570-983, at 1 (Sept. 27, 2012) (Admin.R.Doc. No. 337),
available at http://enforcement.trade.gov/frn/summary/PRC/2012-24549-1.pdf (last visited
Apr. 19, 2016) (“Prelim. Decision Mem.”). Dongyuan, a Chinese producer and exporter of
drawn sinks, was one of two mandatory respondents investigated by the Department. See
Prelim. Decision Mem. 5.
In the Final Determination, Commerce ruled that imports of subject merchandise from
China are being, or are likely to be, sold in the United States at less than fair value and issued an
antidumping duty order assigning weighted-average dumping margins of 27.14% to Dongyuan,
39.87% to the other mandatory respondent, Superte/Zhaoshun, 2 and a simple average of the two
rates, 33.51%, to the “separate rate” respondents, i.e., respondents that demonstrated
independence from the government of the PRC. See Drawn Stainless Steel Sinks from the
People’s Republic of China: Investigation, Final Determination, 78 Fed. Reg. 13,019, 13,019-23
(Int’l Trade Admin. Feb. 26, 2013) (“Final Determ.”); Drawn Stainless Steel Sinks from the
People’s Republic of China: Amended Final Determination of Sales at Less Than Fair Value and
2
The other mandatory respondent in the investigation was “a combined entity Commerce
identified as consisting of Zhongshan Superte Kitchenware Co., Ltd. (‘Superte’) and a related
invoicing company, Foshan Zhaoshun Trade Co., Ltd. (‘Zhaoshun’) (collectively identified as
‘Superte/Zhaoshun’).” Elkay Mfg. Co. v. United States, 38 CIT __, __, 34 F. Supp. 3d 1369,
1371 (2014) (citing Drawn Stainless Steel Sinks from the People’s Republic of China:
Investigation, Final Determination, 78 Fed. Reg. 13,019, 13,019 n.2 (Int’l Trade Admin.
Feb. 26, 2013)) (“Elkay I”).
Consol. Court No. 13-00176 Page 4
Antidumping Duty Order, 78 Fed. Reg. 21,592, (Int’l Trade Admin. Apr. 11, 2013) (“Amended
Final Determ. and Order”). 3
B. The Court’s Opinion and Order Remanding the Final Determination
In an action brought in June 2013, Elkay challenged the Department’s method of
accounting for selling, general, and administrative (“SG&A”) expenses in calculating the normal
value of the subject merchandise of the two mandatory respondents. See Compl. ¶¶ 11-14
(June 5, 2013), ECF No. 14 (“Elkay Compl.”); Elkay I, 38 CIT at __, 34 F. Supp. 3d at 1370.
In its separate (now consolidated) action, Dongyuan challenged the Department’s use of
certain import data from Thailand to determine a surrogate value for cold-rolled stainless steel
coil, the primary material used in producing the subject merchandise. Compl. ¶¶ 11-15
(June 12, 2013), ECF No. 9 (Court No. 13-00199) (“Dongyuan Compl.”). In the Final
Determination, Commerce used the Thai import data to calculate a surrogate value of $3.80 per
kilogram for this input. See Final Results of Redetermination Pursuant to Court Remand 4-5
(Apr. 22, 2015), ECF No. 64 (“Remand Redeterm.”). Defendant requested that the court order a
partial voluntary remand that would permit Commerce to reconsider the use of Thai import data
for determining a surrogate value for cold-rolled stainless steel coil and to reopen the record to
admit additional data. Elkay I, 38 CIT at __, 34 F. Supp. 3d at 1371, 1374.
3
Commerce issued the Amended Final Determination of Sales at Less than Fair Value
following a ministerial error allegation filed by one of the separate rate applicants, Jiangxi Zoje
Kitchen & Bath Industry Co., Ltd. Drawn Stainless Steel Sinks from the People’s Republic of
China: Amended Final Determination of Sales at Less Than Fair Value and Antidumping Duty
Order, 78 Fed. Reg. 21,592, 21,593 (Int’l Trade Admin. Apr. 11, 2013) (“Amended Final
Determ. and Order”). The change Commerce made in the Amended Final Determination
affected only that applicant. Id.
Consol. Court No. 13-00176 Page 5
In Elkay I, the court granted defendant’s request for a partial voluntary remand. Id.,
38 CIT at __, 34 F. Supp. 3d at 1371. The court also directed Commerce to reconsider its
method of accounting for the SG&A expenses. Id.
C. Dongyuan’s Motion for Reconsideration
Following the court’s issuance of the opinion and order in Elkay I, Dongyuan moved for
reconsideration, alleging various errors by the court. Consol. Pl. Guangdong Dongyuan
Kitchenware R. 59(a) Mot. for Reconsideration (Jan. 21, 2015), ECF No. 55. The court denied
this motion. Elkay Mfg. Co. v. United States, 39 CIT __, Slip Op. 15-33 (Apr. 20, 2015).
D. The Remand Redetermination
Commerce issued the Remand Redetermination on April 22, 2015. See Remand
Redeterm. On remand, Commerce made no change to its choice of surrogate value for cold-
rolled stainless steel coil, which therefore remained at the $3.80-per-kilogram value Commerce
calculated for the Final Determination, id. at 4-6, but changed its method of accounting for
SG&A expenses, id. at 7-10. The change increased Dongyuan’s weighted-average dumping
margin from 27.14% to 36.59%, increased Superte/Zhaoshun’s weighted-average dumping
margin from 39.87% to 50.11%, and increased the margin for the separate rate respondents,
which was the simple average of the two rates, from 33.51% to 43.35%. See id. at 25.
Elkay and Dongyuan submitted comments on the Remand Redetermination to the court
on June 23, 2015. Pl.’s Comments on the Remand Redeterm., ECF No. 69 (“Elkay’s
Comments”); Dongyuan Kitchenware’s Comments on Final Results of Remand Redeterm., ECF
No. 70 (“Dongyuan’s Comments”). Defendant filed a response to these comments on
October 15, 2015. Def.’s Resp. to Comments on Remand Redeterm., ECF No. 77 (“Def.’s
Response Comments”). In its comments, Elkay expressed agreement with the Remand
Consol. Court No. 13-00176 Page 6
Redetermination. Elkay’s Comments 1-2. Dongyuan opposes the Remand Redetermination,
objecting both to the Department’s surrogate value for stainless steel coil and to the change
Commerce made to the method of accounting for SG&A expenses. Dongyuan’s
Comments 45-46.
II. DISCUSSION
A. Jurisdiction and Standard of Review
The court exercises jurisdiction under section 201 of the Customs Courts Act of 1980,
28 U.S.C. § 1581(c), pursuant to which the court reviews actions commenced under
section 516A of the Tariff Act of 1930, as amended (the “Tariff Act”), 19 U.S.C. § 1516a,
including an action contesting a final determination that Commerce issues to conclude an
antidumping duty investigation. 4 In reviewing a final determination, the court “shall hold
unlawful any determination, finding, or conclusion found . . . to be unsupported by substantial
evidence on the record, or otherwise not in accordance with law . . . .” 19 U.S.C.
§ 1516a(b)(1)(B)(i). Substantial evidence is evidence that “a reasonable mind might accept as
adequate to support a conclusion.” Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938).
B. Commerce Permissibly Determined the Surrogate Value for Stainless Steel Coil
According to section 773(c)(1) of the Tariff Act, 19 U.S.C. § 1677b(c)(1), Commerce, as
a general matter, is to determine the normal value of subject merchandise from a nonmarket
economy (“NME”) country “on the basis of the value of the factors of production utilized in
4
Unless otherwise specified, all statutory citations made herein are to the 2012 edition of
the United States Code. The regulatory citation made herein is to the 2015 edition of the Code of
Federal Regulations.
Consol. Court No. 13-00176 Page 7
producing the merchandise,” plus certain additions. 5 The statute further states that “the valuation
of the factors of production shall be based on the best available information regarding the values
of such factors in a market economy country or countries considered to be appropriate by the
administering authority.” 19 U.S.C. § 1677b(c)(1). The statute provides that Commerce, “in
valuing factors of production . . . shall utilize, to the extent possible, the prices or costs of factors
of production in one or more market economy countries that are . . . at a level of economic
development comparable to that of the nonmarket economy country, and . . . significant
producers of comparable merchandise.” Id. § 1677b(c)(4).
During the investigation, Commerce identified Colombia, Indonesia, Peru, the
Philippines, South Africa, Thailand, and Ukraine as countries comparable to China with respect
to economic development. Elkay I, 38 CIT at __, 34 F. Supp. 3d at 1373. Commerce also found
that all of these countries, except the Philippines, were significant producers of comparable
merchandise. Id.
To value cold-rolled stainless steel coil for the Final Determination, Commerce used
import data for Thailand published in the Global Trade Atlas (“GTA”), concluding that these
data were more specific to the input than GTA import data for the Philippines and Indonesia,
which also were on the record. Id. Commerce calculated a weighted average unit value
(“AUV”) from import data for six 11-digit Thai harmonized tariff schedule (“HTS”) subheadings
under two Thai HTS six-digit subheadings applying to cold-rolled stainless steel coil, subheading
7219.33 (which applies to cold-rolled stainless steel, 600 mm or more in width, of thickness
5
The International Trade Administration, U.S. Department of Commerce, considers
China to be a “nonmarket economy (‘NME’), country,” a term defined in 19 U.S.C.
§ 1677(18)(A) as “any foreign country that the administering authority determines does not
operate on market principles of cost or pricing structures, so that sales of merchandise in such
country do not reflect the fair value of the merchandise.”
Consol. Court No. 13-00176 Page 8
exceeding 1 mm and less than 3 mm) and subheading 7219.34 (same, but of a thickness of 0.5
mm or more and not exceeding 1 mm). See Remand Redeterm. 2. Commerce found that the
Thai import data in the six 11-digit subheadings “are specific to the types, finishes, and grades of
stainless steel coil Dongyuan consumed in the production of the subject merchandise.” Id. at 5
(footnote omitted). Commerce excluded from its AUV calculation the Thai imports that were
from nonmarket economy countries, the Thai imports for which the source country was
unspecified, the Thai imports from the various countries that Commerce found to maintain
broadly available subsidies, and the Thai imports from the countries upon which Thailand
imposed antidumping duties, which were Japan and Taiwan. See id. at 3 n.11. The result of the
Department’s calculation in the Final Determination was the aforementioned surrogate value of
$3.80 per kilogram. Id. at 4.
In contesting the Final Determination, Dongyuan raised various objections to the
suitability and reliability of the Thai import data, arguing that Commerce should have valued the
stainless steel coil input using Global Trade Atlas import data for the Philippines and Indonesia.
Elkay I, 38 CIT at __, 34 F. Supp. 3d at 1374 (citation omitted). In response to Dongyuan’s
claim, defendant requested a voluntary remand to place on the record import data on cold-rolled
stainless steel coil for the potential surrogate countries for which import data were not already on
the record, so that Commerce could determine whether the Thai import data were aberrational.
Id. The court granted this voluntary remand request over Dongyuan’s objection. Id.
On remand, Commerce added to the record GTA import data pertaining to Colombia,
Peru, South Africa, and Ukraine for imports of cold-rolled stainless steel made under the two six-
digit harmonized system subheadings, 7219.33 and 7219.34. Remand Redeterm. 3. Commerce
then compared the average unit values shown in the Thai import data and the AUVs obtained
Consol. Court No. 13-00176 Page 9
from import data for the other six countries (i.e., Colombia, Indonesia, Peru, Philippines, South
Africa, and Ukraine). Id. at 3-4. Before making the comparison, Commerce excluded data on
imports into these countries from nonmarket economy countries, imports from countries that
maintain generally available export subsidies, and imports for which the source country was
unspecified. Id. at 3 n.11. Commerce noted that the AUV it calculated for Thailand for the
purpose of the comparison, $2.65 per kg., was within the range of the AUVs for the other six
countries (Colombia, $2.81; Indonesia, $2.10; Peru, $3.08; Philippines, $2.70; South Africa,
$3.21; Ukraine, $3.15). Id. at 3-4. The quantity on which the Thai imports were based,
34,415,219 kg., was considerably larger than each of the import quantities for the other six
countries (with the next highest quantity being the imports into Colombia, which were
11,663,084 kg.). Id. Commerce concluded in the Remand Redetermination that the Thai import
data were not aberrational. Id. at 13-21. In opposing the Remand Redetermination, Dongyuan
challenges this finding and maintains that the Department’s chosen surrogate value, $3.80 per
kg., is unsupported by substantial record evidence. Dongyuan’s Comments 2-19.
In response to Dongyuan’s comments opposing the Remand Redetermination, the court
has considered the record import data, the reasoning Commerce presented in the Remand
Redetermination, and Dongyuan’s arguments as to why the surrogate value Commerce applied to
cold-rolled stainless steel coil was not based on the best available information. The court
concludes that the surrogate value must be sustained upon judicial review. Commerce
determined, based on record evidence, that the Thai import data it used in the Final
Determination to calculate the surrogate value of $3.80 per kilogram were more specific to the
type of cold-rolled stainless steel Dongyuan used to make the subject merchandise than were any
competing data on the record. Dongyuan does not contest this particular finding. Although the
Consol. Court No. 13-00176 Page 10
Thai data were subject to certain shortcomings, as discussed herein, Commerce nevertheless
acted within its discretion in choosing the Thai data as the “best available information.”
Dongyuan directs its first set of arguments to the amount by which the surrogate value
exceeds the values shown in import data from the other potential surrogate countries and to the
relatively small quantity upon which the surrogate value is based. Dongyuan submits that the
Department’s comparison of the quantity and value of Thai imports with data from the other six
countries “is misleading and incomplete” because the Thai data include “all of the dumped
imports into Thailand.” Id. at 3. Dongyuan points out that when the dumped imports, i.e., the
imports into Thailand from Japan and Taiwan, are excluded from the total Thai imports, the
quantity of Thai imports is reduced from 34,415,219 kg. to 2,786,140 kg. and the AUV is
increased from $2.65 per kg. to $3.61 per kg., a value Dongyuan characterizes as “not ‘in range’”
when compared to the AUVs for the other six countries. Id. at 4. According to Dongyuan, “the
Thai AUV data for this commodity steel that can be acquired anywhere in the world is aberrant
because it is far above the AUVs for the other countries, particularly for a commodity.” Id. at 6.
The court is not persuaded by Dongyuan’s argument that the AUV derived from the Thai
data was aberrant when compared to the AUVs for the other six countries. The $3.61 per kg.
AUV for non-dumped Thai imports is higher than the other six values (in descending order,
$3.21, $3.15, $3.08, $2.81, $2.70, and $2.10), but it is not so substantially higher as to be
“aberrant.” As Commerce pointed out (in responding to the argument as made by Dongyuan in
response to a draft version of the remand redetermination), “substantial variations exist from
country to country within those 6-digit AUVs, ranging from as low as two percent (between
South Africa and Ukraine) to as high as 52 percent (between Indonesia and South Africa).”
Remand Redeterm. 15. Moreover, the quantity upon which the $3.61 per kg. AUV was derived,
Consol. Court No. 13-00176 Page 11
2,786,140 kg., is within the range of the quantities upon which the other six AUVs were based,
being higher than the lowest quantity (2,254,584 kg. for South Africa). Id. at 14.
Dongyuan argues that the AUV Commerce actually used to value the input, $3.80 per
kg., was based on an aberrantly small quantity, 374,737 kg. Dongyuan’s Comments 5 (“This is
less than 1% of the 6-digit HTS import totals into all six countries and 15 times smaller than the
average import quantity into each country.”). Dongyuan views the amount as derived from only
four of the six Thai 11-digit subheadings and from individual shipment quantities that were too
small to be representative of Dongyuan’s purchases, which were much larger, totaling in the
aggregate nearly 2 million kilograms during the period of investigation. Id. at 8-9. The court
rejects this argument as well. Dongyuan has not shown that the 347,737 kg. quantity is so small
as to be commercially insignificant, and comparing this quantity with the larger 6-digit quantities
is not meaningful because the import data associated with the 347,737 kg. quantity are the only
import data on the record—from any country—that Commerce found to be “specific to the types,
finishes, and grades of stainless steel coil Dongyuan consumed in the production of the subject
merchandise.” Remand Redeterm. 5 (footnote omitted).
Specifically, Commerce found that “Dongyuan uses stainless steel coil grade 304,” an
“austenitic grade stainless steel.” 6 Id. at 5 n.20 (citations omitted). In support of its continuing
to value the stainless steel coil input using the 11-digit Thai import data, Commerce stated in the
Remand Redetermination that “[i]t is the Department’s preference to select data for an input that
is specific to the input consumed by a respondent for purposes of calculating surrogate values.”
6
Commerce explained that “[r]ecord evidence shows that there are several grades of
stainless steel coil, including martensitic, ferritic, austenitic ferritic, austenitic, and precipitation
hardening, and each grade includes a variety of finishes and chemical compositions.” Final
Results of Redetermination Pursuant to Court Remand 4 (Apr. 22, 2015), ECF No. 64 (“Remand
Redeterm.”).
Consol. Court No. 13-00176 Page 12
Id. at 5 (footnote omitted). Commerce found that the import data for Colombia, Indonesia, Peru,
the Philippines, and South Africa were available only at the level of six-digit subheadings and
“do not make any distinction for grade of stainless steel coil.” Id. at 5-6. It added that “Ukraine
reports import data under 10-digit HTS subcategories for stainless steel coil; however, the
Department cannot discern from the descriptions of those categories whether those subcategories
are of the same or similar grade [as] the stainless steel coil that Dongyuan consumed.” Id. at 6
(footnote omitted). In its comments on the Remand Redetermination, Dongyuan did not contest
the findings by Commerce that pertained to the relative specificity of the 11-digit Thai
subheadings. It was reasonable for Commerce to prefer data that has greater specificity to the
input it is valuing, even where, as here, those data pertain to a smaller (but not insignificant)
quantity than do the more general import data on cold-rolled stainless steel coil. That Dongyuan
purchased stainless steel coil in quantities larger than those on which the surrogate value was
based does not negate another critical, and uncontested, fact: of all the data on the record, only
the Thai import data contained breakouts that Commerce could relate to the grade of steel
Dongyuan used in making the subject merchandise.
Dongyuan argues, further, that the Thai import statistics were not the best available
information upon which to base a surrogate value because “[t]he dominance of the Thai imports
by non-market, subsidized, and dumped imports necessarily affects the pricing of the fairly
traded steel in Thailand, rendering the GTA data unreliable and unrepresentative.” Dongyuan’s
Comments 11. Dongyuan maintains that Commerce excluded the vast majority of Thai import
trade data (a percentage Dongyuan describes, variously, as 92%, id. at 5, and as 93% or 94%, id.
at 12) “because of dumping orders, export subsidies, or government involvement in the country
of export (i.e., NME [non-market economy] status of the exporting country).” Id. Dongyuan
Consol. Court No. 13-00176 Page 13
draws the conclusion that the remaining 6-8% was not the “best available information” within
the meaning of 19 U.S.C. § 1677b(c)(1) because “[i]n comparison” the Philippine and
Indonesian import data “do not evidence pervasive market distortion.” Id.
Dongyuan’s contention that the Thai import data Commerce did not exclude are so
pervasively distorted as to be unreliable (and therefore inferior to the Philippine and Indonesian
import data) rests on speculation rather than record evidence. In attributing the distortions
inherent in the data Commerce excluded to the data Commerce did not exclude, Dongyuan fails
to present an argument grounded in record evidence. Faced with imperfect sets of data,
Commerce permissibly chose the Thai data, concluding that “the Indonesian and Philippine data
for stainless steel coil do not constitute the best information available to value stainless steel coil
because the data from those countries were only available at the 6-digit HTS level and do not
make any distinction for grade of stainless steel coil.” Remand Redeterm. 5.
Further to its argument that the Thai import data are distorted, Dongyuan contends that
the domestic Thai market for cold-rolled steel coil is distorted by government subsidies provided
to POSCO Thainox (“POSCO”), which produces stainless steel in Thailand. Dongyuan’s
Comments 14-19. Dongyuan submits that POSCO is the only manufacturer and distributor of
cold-rolled stainless steel coil in Thailand and that it received both generally available export
subsidies and specific subsidies under Thailand’s Investment Promotion Act (“IPA”) for “the
business relating to the manufacturing of cold-rolled stainless steel.” Id. at 15. Dongyuan
objects that Commerce failed to follow its policy of disregarding prices that it has “reason to
believe or suspect” are subsidized. Id. at 16. For evidence of the distortion of the domestic
stainless steel market, Dongyuan relies on a 2011 POSCO financial statement disclosing that
under the IPA “‘the Company was granted certain promotional privileges in the business relating
Consol. Court No. 13-00176 Page 14
to the manufacturing of cold-rolled stainless steel’ . . . including the ‘exemption from import
duty on imported machinery and equipment’ which the Department has found countervailable.”
Dongyuan’s Comments 15-16 (citing 2011 POSCO Annual Report) (footnote omitted).
Commerce did not consider the POSCO financial statement to be sufficient record
evidence upon which it could conclude “that the cold-rolled steel market in Thailand as a whole
is distorted because of this subsidization.” Remand Redeterm. 17. Although acknowledging in
the Remand Redetermination that “we found sections of the IPA to be countervailable in a
previous determination,” Commerce noted that “we never initiated a countervailing duty
investigation of POSCO itself, nor have we made a determination that POSCO is a public
authority whose presence in the cold-rolled steel market is so dominant that it distorts import
prices into Thailand.” Id. (citing Certain Frozen Warmwater Shrimp From Thailand; Final
Negative Countervailing Duty Determination, 78 Fed. Reg. 50,379 (Aug. 19, 2013)). Commerce
also stated that it had “never made a determination that the Thai government owns or controls the
majority or a substantial portion of the market for cold-rolled stainless steel via POSCO or any
other entity.” Id. at 18.
The court rejects the argument Dongyuan bases on the POSCO financial statement.
Despite the record evidence that POSCO received one or more government subsidies, Commerce
still could conclude based on the record evidence that the Thai market as a whole was not so
distorted by the subsidization that data on the value of imports into Thailand were unsuitable for
use in determining the surrogate value. Dongyuan validly points out that Commerce generally
declines to use surrogate value data based on prices it suspects are subsidized, but Dongyuan has
not demonstrated that Commerce ignored record evidence compelling a conclusion that these
Consol. Court No. 13-00176 Page 15
import values were distorted by the government subsidies such that they did not qualify as the
best available information for valuing the stainless steel coil.
Dongyuan argues that the values reflected in the Thai import data are unreliable because
Thai customs officials “regularly impose[] arbitrarily high Customs values to its imports,
thereby . . . . increasing the prices published in its import data.” Dongyuan’s Comments 29.
Dongyuan cites a report of the United States Trade Representative stating that the Thai “Customs
Department Director General retains the authority and discretion to arbitrarily increase the
customs value of imports.” Id. at 30 (citation omitted). It also cites a FedEx Country Report
stating that Thai Customs use the “highest declared price of products imported” to “establish and
distribute the indicative price of some products” and that “this indicative price will be used
instead of the transaction value to determine the custom value,” which “could happen across all
sectors” when customs officials “are concerned about the accuracy of the price declared on the
invoice.” Id. at 31 (citation omitted). Concluding that that these reports of manipulation of
customs values by the Thai government did not “address any of the raw material inputs that are
consumed by the respondents,” Commerce considered the record evidence insufficient to support
a conclusion that “the steel input data relied on in this investigation was subject to the
manipulation alleged.” Remand Redeterm. 19.
The evidence of manipulation was relevant to the question of the reliability of the Thai
data, but, as Commerce concluded, it does not establish that Thai Customs import values are
affected generally, and significantly, by the practice the U.S. Trade Representative identified.
The record evidence of manipulation of customs values does not rise to such a level that
Commerce was left with no choice but to foreclose any use of Thai import data to determine a
surrogate value for a production input. As the court discussed previously, Commerce must make
Consol. Court No. 13-00176 Page 16
selections from among imperfect data sets. On this record, Commerce was faced with the need
to weigh the superior specificity of the Thai import data (as compared to other record import
data) against other factors, as it did here. The record, considered as a whole, contained
substantial evidence to support the Department’s finding that the Thai import data were the best
available information.
C. The Method Commerce Applied to Value SG&A Expenses In the Remand Redetermination
Was Not Contrary to Law
In determining normal value according to Section 773(c)(1) of the Tariff Act, Commerce
includes among the factors of production the hours of labor required to produce the subject
merchandise. 19 U.S.C. § 1677b(c)(3)(A) (“[T]he factors of production utilized in producing
merchandise include, but are not limited to . . . hours of labor required . . . .”). The statute further
provides that Commerce, after calculating the total value of the factors of production (including
labor), is to add “an amount for general expenses and profit plus the cost of containers,
coverings, and other expenses.” Id. § 1677b(c)(1). In this litigation, Elkay claimed that the
Department’s method of determining the normal value of the subject merchandise of the two
mandatory respondents did not capture the value of the labor component of these respondents’
selling, general and administrative expenses, i.e., the “SG&A labor.” See Elkay I, 38 CIT at __,
34 F. Supp. 3d at 1376.
Commerce typically calculates surrogate values for factory overhead expenses, for
SG&A and interest expenses, and for profit, by calculating and applying “financial ratios”
derived from the financial statements of one or more producers of comparable merchandise in
the primary surrogate country. See 19 C.F.R. § 351.408(c)(4). For the Final Determination,
Commerce calculated surrogate SG&A expenses for the two mandatory respondents by using
information obtained from the financial statements of three Thai companies (Stainless Steel
Consol. Court No. 13-00176 Page 17
Home Equipment Manufacturing Co., Ltd, Diamond Brand Co., Ltd., and Advance Stainless
Steel Co., Ltd.). Elkay I, 38 CIT at __, 34 F. Supp. 3d at 1377. From these three financial
statements, Commerce calculated separate ratios for each Thai company that represented an
SG&A expense combined with interest expense, and then averaged the three ratios to derive a
single SG&A/interest expense ratio for use in determining the normal value of the subject
merchandise of the two investigated respondents. 7 Id.
1. Commerce Permissibly Calculated an SG&A/Interest Expense Ratio Using All Financial
Statement Data on SG&A Expenses
In deriving an average SG&A/interest expense ratio for the Final Determination,
Commerce adjusted the individual ratios to exclude certain expenses that it considered to
represent a labor cost component of the reported SG&A expenses. 8 Id.; see Remand
Redeterm. 6-7 (explaining that in the Final Determination “ . . . the Department excluded certain
labor costs identified in the three surrogate financial statements as ‘SG&A labor costs’ from the
numerators of the SG&A ratios and included those costs in the denominators of those ratios to
avoid double-counting those costs in the calculation of normal value (‘NV’).”) (footnote
omitted). Regarding “double counting,” Commerce considered the rate by which it valued the
hours of labor as a factor of production to include already the labor associated with SG&A
7
Commerce calculates the SG&A/interest expense ratio as the sum of all SG&A and
interest expenses (numerator) divided by the sum of all materials, labor, energy, and factory
overhead expenses (denominator). See Antidumping Manual, Ch. 10 at 18 (Intl. Trade Admin.
2009); see Factor Valuations for the Final Determination, Attach. 1 (final surrogate value
worksheets) (Feb. 19, 2013) (Admin.R.Doc. No. 422) (“Final Factor Valuations Mem.”).
8
The financial statements of all three Thai companies reported certain labor costs
separately from production labor costs, itemizing these non-production labor costs as sales or
administrative expenses. See Remand Redeterm. 8 & 8 n.37 (citing Pet’r’s Submission of
Surrogate Values, Ex. 10 (Aug. 13, 2012) (Admin.R.Doc. No. 262) (including financial
statements of Stainless Steel Home Equipment Manufacturing Co., Ltd. and Diamond Brand Co.,
Ltd.); Dongyuan’s Rebuttal Surrogate Values for the Prelim. Results, Ex. 5 (Aug. 20, 2012)
(Admin.R.Doc. No. 296) (including financial statement of Advance Stainless Steel Co., Ltd.)).
Consol. Court No. 13-00176 Page 18
functions as well as manufacturing labor. Elkay I, 38 CIT at __, 34 F. Supp. 3d at 1379.
Commerce had obtained that rate from “data on the labor cost of ‘[m]anufacture of other
fabricated metal products not enumerated elsewhere’ contained in the ‘Industrial Census 2007’
published by Thailand’s National Statistics Office (‘NSO’).” Id., 38 CIT at __, 34 F. Supp. 3d
at 1378 (citation omitted). Commerce considered this “NSO” labor rate to be more product-
specific and more contemporaneous than other record data on labor rates and, therefore, the best
available information for valuing labor hours. Id. In addition to the NSO data, the record
contained 2005 data from Chapter 6A of the International Labor Organization (“ILO”) Yearbook
of Labor Statistics, which Commerce had used to value the mandatory respondents’ hours of
manufacturing labor in the Preliminary Results. See id.
In Elkay I, the court invalidated, as unsupported by substantial record evidence, the
Department’s determination that the specific downward adjustments Commerce made to the
SG&A/interest expense ratios were justifiable as a compensation for “double-counting” of
SG&A labor expenses. Id., 38 CIT at __, 34 F. Supp. 3d at 1380-82. The court held that “[t]he
record lacks substantial evidence to support the Department’s conclusion that the rate Commerce
applied to the hours of production labor reported by the investigated respondents overstated the
value of those labor hours to such an extent as to justify the specific, compensatory adjustments
that Commerce made to the SG&A/interest expense ratios.” Id., 38 CIT at __, 34 F. Supp. 3d
at 1382. The court reasoned that “[o]n this administrative record, the Department’s reliance on
the extent of any ‘double-counting’ was too much a matter of speculation.” Id. (citation
omitted).
Reconsidering its decision on remand, Commerce recalculated the SG&A ratios to delete
the “double counting” adjustment. Commerce concluded that it had “erroneously” removed
Consol. Court No. 13-00176 Page 19
SG&A labor expenses from the calculation of the SG&A financial ratios. Remand Redeterm. 22.
Commerce explained that “[n]otwithstanding that the record shows that the NSO labor rate was
derived from an average remuneration paid for persons engaged in various manufacturing and
non-manufacturing activities, it does not follow that the labor expenses calculated using the NSO
labor rate capture all labor expenses.” Id. at 8. Commerce further explained that “[t]his is
because under the factors of production (‘FOP’) methodology for calculating NV, labor expenses
capture the labor cost only for manufacturing—obtained by multiplying a respondent’s reported
direct and indirect labor hours to manufacture subject merchandise by the surrogate labor rate
(e.g., the NSO labor rate or the ILO Chapter 6A labor rate).” Id. Commerce noted that “[t]he
respondents did not report labor hours associated with the selling and administrative staff” and,
as the court held in Elkay I, “there is not substantial evidence to find that the NSO labor rate is
high enough to compensate for those unreported hours.” Id. at 8-9. Rather than presume that the
NSO labor rate it applied to hours of labor indirectly captured the SG&A expense (as Commerce
appeared to have done in the Final Determination), Commerce stated in the Remand
Redetermination that it had decided to “treat the SG&A labor costs as SG&A expenses in each
company’s surrogate financial ratio calculation.” Id. at 10 (footnote omitted.). Commerce cited
the fact that in all three of the Thai companies’ financial statements, which Commerce used to
calculate the SG&A expense ratios, “the salary for selling and administrative staff and/or welfare
benefits were unambiguously classified under a separate section (e.g., selling and administrative
expenses) from the cost-of-production or cost-of-good[s]-sold section (which included labor
costs),” id. at 8, and “it is the Department’s practice to treat labor in its financial ratio
calculations in the same manner the surrogate company disaggregates its labor costs,” id. at 9.
Consol. Court No. 13-00176 Page 20
The court sustains the Department’s valuation of SG&A expenses in the Remand
Redetermination. The record evidence supports the Department’s finding that the method used
in the Final Determination applied a surrogate labor rate only to hours of direct and indirect
manufacturing labor, not SG&A labor. Therefore, the labor component of the SG&A expenses
could have been included within the normal value calculation only indirectly, through a surrogate
labor rate that overstated the value of manufacturing labor as a means of compensation. But as
the court concluded in Elkay I, and as Commerce implicitly acknowledges in the Remand
Redetermination, the record does not contain substantial evidence supporting a finding that the
rate Commerce used to value the manufacturing labor is overstated in such a way as to effect a
defensible compensation for this omission. The recalculation Commerce made upon remand,
which determined an SG&A/interest expense ratio based on the full reported SG&A expenses of
the three Thai producers, corrects the error the court identified in Elkay I.
Dongyuan opposes the Department’s decision on remand, arguing that the Department’s
recalculation “contains both the value of SG&A labor in the labor rate and the value of SG&A
labor in the financial ratios” and thus “SG&A labor is being double-counted.” Dongyuan’s
Comments 40. Dongyuan offers two reasons why it believes the Department failed to make an
adjustment necessary to avoid the double counting of non-production labor expenses.
First, Dongyuan argues that the NSO 2007 labor rate unquestionably is higher than it
would be had it been based solely on production labor. Id. at 38-40. Dongyuan submits that the
court, and the Department on remand, were incorrect to “doubt the double-counting of SG&A
labor because it cannot be exactly quantified.” Id. at 41. Dongyuan argues, further, that the
amount of double counting is equivalent to the “cost of the non-production labor,” which is
quantified in the “disaggregated labor costs in the financial statements.” Id. at 41-42. The
Consol. Court No. 13-00176 Page 21
premise of this argument is not supported by the evidence of record. In the Remand
Redetermination, Commerce did not base its decision to refrain from making an adjustment to
the SG&A ratio on a finding that the NSO labor rate would be no higher were it based solely on
manufacturing labor. Indeed, there was no way for Commerce to determine from the record
what an NSO labor rate would have been had the basis for the rate been limited in that way. 9
Instead, Commerce found on remand that record evidence did not allow it to conclude that it
could capture adequately the cost of SG&A labor by applying the NSO labor rate to production
labor (and only to production labor), as a substitute for including the full reported SG&A costs in
the SG&A/interest expense financial ratio. This finding was central to the Department’s decision
on remand not to make the adjustment Dongyuan advocates, and the court, therefore, must
consider whether the finding is a valid one. The court concludes that the finding is supported by
substantial evidence on the record. That evidence included, significantly, the evidence that the
three Thai companies separately reported certain labor expenses that are associated with SG&A
functions and that the Department’s methodology applied the surrogate labor rate only to hours
of manufacturing labor.
Second, Dongyuan argues that in failing to make an adjustment to avoid double counting,
Commerce acted contrary to the policy announced in its 2011 “Labor Methodologies” notice. Id.
at 42-44. In the notice Dongyuan cites, Commerce announced a change in its methodology in
which it would value hours of labor using ILO Chapter 6A data, which Commerce considered to
9
As the court concluded in Elkay I, “[t]he record data . . . do not support an actual
finding that the NSO labor rate was higher—or by what percentage it was higher—than it would
have been had it been derived solely from Thai data on production labor rather than from a
combination of Thai data on production labor and various types of non-production labor.”
Elkay I, 38 CIT at __, 34 F. Supp. 3d at 1382. Commerce specifically expressed its agreement
with this conclusion in the Remand Redetermination. Remand Redeterm. 10.
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reflect all costs related to labor “including wages, benefits, housing, training, etc.,” instead of
ILO Chapter 5B data, which “reflects only direct compensation and bonuses.” Antidumping
Methodologies in Proceedings Involving Non-Market Economies: Valuing the Factor of
Production: Labor, 76 Fed. Reg. 36,092, 36,093 (Int’l Trade Admin. June 21, 2011) (“Labor
Methodologies”). To address concerns that this change could result in overstating labor costs,
the notice states that “the Department will adjust the surrogate financial ratios when the available
record information – in the form of itemized indirect labor costs – demonstrates that labor costs
are overstated.” Id., 76 Fed. Reg. at 36,093-94. The notice further states that “[s]pecifically,
when the surrogate financial statements include disaggregated overhead and selling, general, and
administrative expense items that are already included in the ILO’s definition of Chapter 6A
data, the Department will remove these identifiable costs items.” Id., 76 Fed. Reg. at 36,094.
Dongyuan argues that Commerce must follow the policy it established in Labor
Methodologies in this case by removing the disaggregated SG&A labor expenses identified in
the surrogate financial statements from the SG&A/interest expense ratio. Dongyuan’s
Comments 44. This argument is unpersuasive because the adjustment contemplated in the Labor
Methodologies notice is made when Commerce uses the ILO Chapter 6A data, which Commerce
did not do here, deciding instead to use a source that resulted in application of a much lower
labor rate than one obtained from ILO Chapter 6A data. See Elkay I, 38 CIT at __, 34 F.
Supp. 3d at 1383-84. As the court stated in Elkay I, “[t]he notice creates ‘the rebuttable
presumption that Chapter 6A data better accounts all direct and indirect labor costs.’” Id.,
38 CIT at __, 34 F. Supp. 3d at 1383 (quoting Labor Methodologies, 76 Fed. Reg. at 36,093).
As the court observed in Elkay I, “Commerce departed from the methodology announced in the
notice by rejecting the ILO Chapter 6A data in the Final Determination in favor of the NSO
Consol. Court No. 13-00176 Page 23
data . . . .” Id. Dongyuan, understandably, does not argue that Commerce was obligated to
achieve consistency with the Labor Methodologies notice by reverting to the ILO Chapter 6A
data, which it used to value labor hours in the Preliminary Results.
2. Commerce Acted within its Discretion in Declining to Reopen the Record to Admit
Additional Surrogate Data for Valuing Labor Hours
Finally, Dongyuan argues that if Commerce cannot or will not make an adjustment to
eliminate double counting by removing SG&A labor expenses from the SG&A/interest expense
ratio, “the Department must changes [sic] its labor source and methodology” for determining
labor expenses. Dongyuan’s Comments 44. Dongyuan adds that it “has suggested returning to
ILO [Chapter] 5B data, which only covers production labor.” Id. at 45.
The court disagrees that Commerce must change its source of data for valuing labor
hours. The court previously ordered a remand that allowed Commerce to consider “alternative
data sources with which to value the labor hours reported by the two investigated respondents.”
Elkay I, 38 CIT at __, 34 F. Supp. 3d at 1385. In the Preliminary Determination, Commerce
preliminarily chose to value labor using ILO Chapter 6A data. Issues & Decision Mem. for the
Final Determination in the Antidumping Duty Investigation of Drawn Stainless Steel Sinks from
the People’s Republic of China, A-570-983, at 11 (Feb. 19, 2013) (Admin.R.Doc. No. 417),
available at http://enforcement.trade.gov/frn/summary/PRC/2013-04379-1.pdf (last visited
Apr. 19, 2016). Following the Preliminary Determination, Dongyuan placed on the record labor
costs from the NSO data. Id. In the Final Determination, Commerce determined that the NSO
data were the best available information on the record to value labor because they were more
product-specific, were more contemporaneous, and represented a broader market average than
the alternative ILO Chapter 6A data. Id. at 12-14.
Consol. Court No. 13-00176 Page 24
Although derived from data on the value of non-production labor as well as production
labor, the NSO data, unlike ILO data, are specific to fabrication of metal products. See Elkay I,
38 CIT at __, 34 F. Supp. 3d at 1381 (citing Dongyuan’s Final Surrogate Value Submission,
Ex. SV-2 (containing the NSO’s description of its methodology and definitions)). In the Remand
Redetermination, Commerce explained that the ILO Chapter 5B data undercount manufacturing
labor expenses because they reflect “only direct compensation and bonuses” and not “indirect
labor costs items (such as employee pension benefits and worker training).” Remand
Redeterm. 22.
Moreover, the ILO Chapter 5B data are not on the record of the investigation, no party
having submitted them for the Department’s consideration. Dongyuan submitted the NSO 2007
data as a possible substitute for the ILO Chapter 6A data, which Commerce used for the
Preliminary Results and which are less favorable to Dongyuan’s position than are the NSO data.
Not having submitted the ILO Chapter 5B data for the record during the investigation, Dongyuan
is in a difficult position in advocating the use of these data on remand.
Ordinarily, the decision of whether or not to reopen a record following an order
remanding an agency decision is a matter within the agency’s discretion. See Essar Steel Ltd. v.
United States, 678 F.3d 1268, 1278 (Fed. Cir. 2012). Following the court’s remand order, the
Department determined that it accurately could calculate respondents’ labor costs using the NSO
labor rate and that it was unnecessary to consider using ILO Chapter 5B data, which are not on
the record, to value labor. Remand Redeterm. 24. Commerce has the discretion to reopen or not
reopen the record in the circumstances presented here. Essar Steel, 678 F.3d at 1278 (“The
decision to reopen the record is best left to the agency, in this case Commerce.”). Because the
selection of the NSO data as the best available information on the current record is supported by
Consol. Court No. 13-00176 Page 25
substantial evidence, and because the data source advocated by Dongyuan is not on that record,
the court declines to disturb the exercise of the Department’s discretion not to reopen the record
for admission of another source of data for valuing manufacturing labor, such as the ILO Chapter
5B data.
III. CONCLUSION
For the reasons discussed in the foregoing, the court affirms the decision on remand
entitled Final Results of Redetermination Pursuant to Court Remand (Apr. 22, 2015), ECF
No. 64. The court will enter judgment accordingly.
/s/ Timothy C. Stanceu
Timothy C. Stanceu
Chief Judge
Dated: July 14, 2016
New York, New York