Jiangsu Zhongji Lamination Materials Co., (HK) Ltd. v. United States , 2020 CIT 30 ( 2020 )

Slip Op. 20-
UNITED STATES COURT OF INTERNATIONAL TRADE
JIANGSU ZHONGJI LAMINATION
MATERIALS CO., (HK) LTD., JIANGSU
ZHONGJI LAMINATION MATERIALS
CO., LTD., JIANGSU ZHONGJI
LAMINATION MATERIALS STOCK CO.,
LTD. AND JIANGSU HUAFENG
ALUMINIUM INDUSTRY CO., LTD.,
Plaintiffs,
v. Before: Gary S. Katzmann, Judge
Court No. 18-00091
UNITED STATES,
Defendant,
and
ALUMINIUM ASSOCIATION TRADE
ENFORCEMENT WORKING GROUP AND
ITS INDIVIDUAL MEMBERS,
Defendant-Intervenors.
OPINION
[The court sustains Commerce’s Remand Results.]
Dated:0DUFK
Jeffrey S. Grimson, Jill A. Cramer, Sarah M. Wyss, and James C. Beaty, Mowry & Grimson,
PLLC, of Washington, DC, for plaintiffs.
Aimee Lee, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department
of Justice, of New York, for defendant. With her on the brief were Joseph H. Hunt, Assistant
Attorney General, Jeanne E. Davidson, Director, and Tara K. Hogan, Assistant Director. Of
counsel on the brief was Vania Wang, Office of the Chief Counsel for Trade Enforcement &
Compliance, U.S. Department of Commerce, of Washington, DC.
John H. Herrmann and Joshua R. Morey, Kelley Drye & Warren, LLP, of Washington, DC, for
defendant-intervenors.
Court No. 18-00091 Page 2
Katzmann, Judge: The court returns to a case in which aluminum foil exporters -- Jiangsu
Zhongji Lamination Materials Co. (HK) Ltd., Jiangsu Zhongi Lamination Materials Co., Ltd.,
Jiangsu Zhongji Lamination Materials Stock Co., Ltd., and Jiangsu Huafeng Aluminum Industry
Co., Ltd., (collectively, “Plaintiffs”) -- brought an action against the United States (“the
Government”) to challenge the Department of Commerce’s (“Commerce”) selection of surrogate
values for exports in a nonmarket economy in an antidumping duty investigation on aluminum foil
from the People’s Republic of China (“PRC”). Jiangsu Zhongji Lamination Materials Co., (HK)
v. United States, 43 CIT __, 396 F. Supp. 3d 1334 (2019). The court found unpersuasive Plaintiffs’
challenges to Commerce’s determination on several grounds but granted Commerce’s request for
a remand to recalculate the irrevocable value-added tax (“VAT”) 1 adjustment using a different sale
price. Id. at 1357. Before the court now is Commerce’s Final Results of Redetermination Pursuant
to Court Remand (Dep’t Commerce Nov. 13, 2019), ECF No. 69 (“Remand Results”). The
Government, as well as the Aluminum Association Trade Enforcement Working Group and its
individual members (“Defendant-Intervenors”), ask the court to sustain the Remand Results.
Def.’s Resp. to Comments on Remand Results at 3, Dec. 23, 2019, ECF No. 74 (“Def.’s Resp.”);
Def.-Inters.’ Letter in Lieu of Responsive Comments Addressing Pls.’ Comments on Def.’s Final
Results of Redetermination at 2, Dec. 20, 2019, ECF No. 72 (“Def-Inter.’s Br.”). Plaintiffs request
that the court narrowly sustain the resulting VAT recalculation but argue that other statements by
Commerce in the Remand Results went beyond the scope of the court’s order in Jiangsu Zhongji,
396 F. Supp. 3d at 1337. Pls.’ Comments on the Dep’t of Commerce Final Results of
1 A VAT is “a consumption tax placed on a product whenever value is added at each stage of the
supply chain, from production to the point of sale. The amount of VAT that the user pays is on the
cost of the product, less any of the costs of materials used in the product that have already been
taxed.” Value-Added Tax, Investopedia (March 3, 2020, 10:58 AM),
https://www.investopedia.com/terms/v/valueaddedtax.asp.
Court No. 18-00091 Page 3
Redetermination Pursuant to Ct. Remand at 3, Dec. 13, 2019, ECF No. 71 (“Pls.’ Br.”). The court
sustains Commerce’s Remand Results.
BACKGROUND
The relevant legal and factual background of the proceedings involving Plaintiffs has been
set forth in greater detail in Jiangsu Zhongji, 396 F. Supp. 3d at 1340–46. Information pertinent
to the Remand Results now before the court is set forth below.
In March 2017, Defendant-Intervenors submitted to Commerce an antidumping petition
concerning imports of certain aluminum foil from the PRC. Letter on Behalf of Petitioners to the
Dep’t re: Petitioners for the Imposition of Antidumping and Countervailing Duties (Mar. 9, 2017),
P.R. 1–11. Commerce commenced an antidumping investigation, Certain Aluminum Foil from
the People’s Republic of China: Initiation of Less-Than-Fair-Value Investigation, 82 Fed. Reg.
15,691 (Dep’t Commerce Mar. 30), P.R. 35, and selected Plaintiffs as a mandatory respondent,
Mem. Re: Resp’t Selection (May 22, 2017), P.R. 177.
Commerce issued its final determination on March 5, 2018, in which it (1) used South
Africa as the primary surrogate country; (2) valued ocean freight using data from Descartes; (3)
used Harmonized Tariff Schedule (“HTS”) subheading 7602.00 for aluminum waste and scrap
instead of subheading 7601.20 for unwrought aluminum; (4) based the VAT adjustment on the
reseller’s price, rather than the price from the producer to the reseller; and (5) rejected Plaintiffs’
claims that deferral beyond the deadline voided the preliminary determination. See Certain
Aluminum Foil from the People’s Republic of China: Final Determination of Sales at Less Than
Fair Value, 83 Fed. Reg. 9,282 (Dep’t Commerce Mar. 5, 2018), P.R. 454 (“Final Determination”),
and accompanying issues and decision memorandum at 7–8 (Dep’t Commerce Feb. 26, 2018),
P.R. 451 (“IDM”).
Court No. 18-00091 Page 4
Plaintiffs filed a complaint to challenge the Final Determination on May 7, 2018. ECF No.
8. They argued that Commerce had (1) selected the wrong primary surrogate country; (2) used
inferior data to value international freight; (3) used the incorrect HTS classification; (4) calculated
the VAT adjustment based on the wrong transaction; and (5) deferred its preliminary determination
beyond the statutory deadline. Id. at 8–10. After briefing by the parties, the court held oral
argument on July 16, 2019. ECF No. 61. As noted, the court sustained Commerce’s
determinations for all but its VAT calculation, which the court remanded on Commerce’s request.
Jiangsu Zhongji, 396 F. Supp. 3d at 1357. Commerce released the draft of its remand results, in
which it recalculated the VAT adjustment, on October 15, 2019. Remand Results at 3. Plaintiffs
provided comments on the draft remand results on October 22, 2019. Id. The Government then
filed Commerce’s Remand Results on November 13, 2019 and the administrative record on
November 20, 2019. ECF Nos. 69–70. Plaintiffs filed comments on the Remand Results on
December 13, 2019. Pls.’ Br. Defendant-Intervenors filed a letter with the court in lieu of
comments on December 20, 2019. Def-Inters.’ Br. The Government filed its response to
Plaintiffs’ comments on December 23, 2019. Def.’s Resp.
JURISDICTION AND STANDARD OF REVIEW
This court has jurisdiction over this action pursuant to 28 U.S.C. § 1581(c) and 19 U.S.C.
§ 1516a(a)(2)(B)(i). The standard of review in antidumping duty proceedings is set forth in 19
U.S.C. § 1516a(b)(1)(B)(i): “[t]he Court shall hold unlawful any determination, finding, or
conclusion” of Commerce that is “unsupported by substantial evidence on the record, or otherwise
not in accordance with law.” “The results of a redetermination pursuant to court remand are also
reviewed ‘for compliance with the court’s remand order.’” Xinjiamei Furniture (Zhangzhou) Co.
Court No. 18-00091 Page 5
v. United States, 38 CIT __, __, 968 F. Supp. 2d 1255, 1259 (2014) (quoting Nakornthai Strip Mill
Public Co. v. United States, 32 CIT 1272, 1274, 587 F. Supp. 2d 1303, 1306 (2008)).
DISCUSSION
Commerce’s Remand Results are consistent with the court’s remand order and previous
opinion. See Jiangsu Zhongji, 396 F. Supp. 3d 1334. In the Final Determination, Commerce based
its VAT calculation on the U.S. price of Zhongji’s merchandise on resale by its affiliate, Zhongji
HK. The Government acknowledged that this methodology was inconsistent with its ultimate
methodology deployed in Fine Furniture (Shanghai) Ltd. v. United States, 42 CIT __, __, 321 F.
Supp. 3d 1282, 1288 (2018), where it was determined on remand that the tax neutrality of the
dumping margin calculation required that Commerce base the VAT calculation on the sale by the
producer to the affiliated reseller. Def.'s Resp. to Mot. for J. Upon the Agency R. at 39–40, Feb.
25, 2019, ECF Nos. 33–34. Accordingly, here, the court granted the Government’s request for a
remand. Jiangsu Zhongji, 396 F. Supp. 3d at 1357. See SFK USA, Inc. v. United States, 254 F.3d
1022, 1029 (Fed. Cir. 2001) (where the agency requests a remand, “the reviewing court has
discretion over whether to remand”).
On remand, Commerce instead based its VAT calculation on the price at which Zhongji
sold the merchandise to its affiliated reseller, Zhongji HK, consistent with its methodology in Fine
Furniture. Remand Results at 5. The VAT calculation is based on the sale price between the
affiliated entities because there is no VAT markup between Zhongji and Zhongki HK. Id. at 8.
As Commerce explained, therefore, this “means the Chinese government bases its final assessment
of Zhongji’s VAT on its selling price to Zhongji HK.” Id. Using the correct sales price as the
basis for the VAT adjustment, Commerce decreased Plaintiffs’ dumping margin for the period of
investigation from 48.64 percent to 48.30 percent. Remand Results at 10. Plaintiffs and
Court No. 18-00091 Page 6
Defendant-Intervenors agree that Commerce made the appropriate adjustment. Pls.’ Br. at 1
(“Defendant has complied with the [c]ourt’s order with respect to the recalculation and made the
appropriate adjustment.”); Def.-Inters.’ Br. at 2 (“Defendant-Intervenors agree that Defendant’s
Remand Results effectuate this [c]ourt’s remand instructions.”). The court is likewise persuaded
that, in accordance with this court’s order and opinion, Commerce “recalculate[d] [Plaintiffs’]
VAT adjustment using the correct sale price,” and correctly adjusted the dumping margin. Jiangsu
Zhongji, 396 F. Supp. 3d at 1346.
Although Plaintiffs agree with Commerce’s recalculation, they take issue with
Commerce’s statement in the Remand Results that:
This cost, therefore, functions as an “export tax, duty, or other charge,” because the
firm does not incur it but for exportation of the subject merchandise, and under
Chinese law must be recorded as a cost of exported goods. It is for this “export tax,
duty, or other charge” that Commerce makes a downward adjustment to U.S. price
under section 772(c) of the [Tariff] Act [of 1930].
Pls.’ Br. at 2 (quoting Remand Results at 7). According to Plaintiffs, “this [c]ourt did not reach
the merits of the statutory authority for Commerce to make a VAT adjustment and it was not part
of the [c]ourt’s remand.” Id. at 2. Plaintiffs note that the court did not reach the lawfulness of the
irrevocable VAT adjustment in its order and opinion because it concluded that Plaintiffs had not
exhausted available remedies. Id. at 2–3 (citing Jiangsu Zhongji, 396 F. Supp. 3d at 1354, n.7).
The Government counters that, in the above passage, “Commerce described the
foundational basis of Commerce’s current and most up-to-date VAT practice, consistent with the
remand order” because Commerce “found it appropriate to explain how the recalculation and [Fine
Furniture, 321 F. Supp. 3d 1282,] fits within Commerce’s current VAT practice.” Def.’s Resp. at
5.
Court No. 18-00091 Page 7
The issue of whether Commerce has accurately interpreted the statute and whether the
irrecoverable VAT adjustment is itself unlawful is not before the court. The court made clear in
its order and opinion that Plaintiffs had not properly raised their challenge to the lawfulness of the
VAT adjustment in the administrative proceedings below. Jiangsu Zhongji, 396 F. Supp. 3d at
1354, n.7. 2 Nor have Plaintiffs properly raised a challenge to the legality of the VAT adjustment
in the remand proceedings. The exhaustion doctrine, applied previously by the court in its opinion
and order, extends to remand proceedings. Mittal Steel Point Lisas Ltd. v. United States, 548 F.3d
1375 (Fed. Cir. 2008) (applying the exhaustion doctrine to remand proceedings). “The prescribed
avenue for challenging remand results requires that a party first file comments on the draft results
at the administrative level, setting forth the party’s objections.” Taian Ziyang Food Co. v. United
States, 37 CIT __, __, 918 F. Supp. 2d 1345, 1361 (2013) (citing Mittal Steel, 548 F.3d at 1383–
84). See also ArcelorMittal USA LLC v. United States, 43 CIT __, __, 399 F. Supp. 3d 1271,
1282–83 (2019). While Plaintiffs noted the possibility of future objections in the comments on
the draft remand results, they failed to set forth arguments with any specificity such that Commerce
could alter the language of the draft remand results prior to issuing the final Remand Results. 3
The court interprets Commerce’s statement merely as an explanation of its position on its
current practice, in line with that of Fine Furniture. The court remains no better situated now than
2
The court concluded that Plaintiffs had “failed to exhaust [] available remedies with respect to
the validity of the VAT deduction, [and] the court is poorly situated to address arguments that
Commerce did not consider and that the parties discussed in only cursory fashion in their briefs
and at oral argument.” Jiangsu Zhongji, 396 F. Supp. 3d at 1354, n.7.
3
In its comments on the draft remand results, Plaintiffs stated that “Commerce has complied with
the [c]ourt’s directive and has relied on the price field that is consistent with Commerce’s stated
methodology,” but in a footnote asserted that they “reserve[] the right for further argument related
to the lawfulness of the irrecoverable VAT deduction in any subsequent proceedings that may
occur.” Comments of Jiangsu Zhongji Lamination Materials Co., (HK) Ltd. et al. on Draft Remand
Results of Redetermination Pursuant to Ct. Order, Oct. 22, 2019, P.R. 14.
Court No. 18-00091 Page 8
in its prior opinion “to address arguments that Commerce did not consider and that the parties
discussed in only cursory fashion” regarding the lawfulness of the irrevocable VAT adjustment.
Jiangsu Zhongji, 396 F. Supp. 3d at 1354, n.7. In short, the court affirms the Remand Results
without reaching matters not properly preserved for consideration.
CONCLUSION
The court sustains Commerce’s Remand Results.
SO ORDERED.
/s/ Gary S. Katzmann
Gary S. Katzmann, Judge
Dated: 0DUFK
New York, New York