US Magnesium LLC v. United States

Slip Op. 15-52
UNITED STATES COURT OF INTERNATIONAL TRADE
US MAGNESIUM LLC,
Plaintiff,
v. Before: Leo M. Gordon, Judge
UNITED STATES, Consol. Court No. 14-00038
Defendant.
OPINION
[Motion for judgment upon the agency record denied; final results of administrative review
sustained.]
Dated: June 1, 2015
Stephen A. Jones and Jeffery B. Denning, King and Spalding of Washington, DC
for Plaintiff US Magnesium LLC.
David A. Riggle and David J. Craven, Riggle and Craven of Chicago, Illinois for
Plaintiff and Defendant-Intervenor Tianjin Magnesium Metal Co., Ltd.
Eric E. Laufgraben, Trial Attorney, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice of Washington, DC for Defendant United States. With him on
the brief were Joyce R. Branda, Acting Assistant Attorney General, Jeanne E. Davidson,
Director, Claudia Burke, Assistant Director. Of counsel on the brief was Aman Kakar,
Attorney, U.S. Department of Commerce, Office of the Chief Counsel for Trade
Enforcement and Compliance of Washington, DC.
Gordon, Judge: This action involves an administrative review conducted by the
U.S. Department of Commerce (“Commerce”) of the antidumping duty order covering
pure magnesium from the People’s Republic of China. See Pure Magnesium From the
People’s Republic of China, 79 Fed. Reg. 94 (Dep’t of Commerce Jan. 2, 2014) (final
results admin. review) (“Final Results”); see also Issues and Decision Memorandum for
Consol. Court No. 14-00038 Page 2
the Final Results of the Antidumping Duty Administrative Review on Pure Magnesium
from the People’s Republic of China, A-570-832 (Dep’t of Commerce Dec. 26, 2013)
(“Decision Memorandum”), available at http://enforcement.trade.gov/frn/summary/prc/
2013-31412-1.pdf (last visited this date). Before the court is US Magnesium LLC’s (“US
Magnesium”) motion for judgment on the agency record. See US Magnesium’s R. 56.2
Br. in Support of Mot. for J. on the Agency R. (July 29, 2014), ECF No. 40 (“US Mag.
Br.”); see also Def.’s Opp. to Pl.’s and Def.-Intervenor’s R. 56.2 Mots. for J. upon the
Agency R. (Oct. 24, 2014), ECF No. 43; Resp. of Pl. Tianjin Magnesium Metal Co., Ltd.,
to the Mot. Pursuant to R. 56 of the Rs. of the U.S. Ct. of Int’l Trade by US Magnesium
LLC (Nov. 14, 2014), ECF No. 47; US Magnesium’s Reply to the Resps. of Def. and Def.-
Intervenor (Dec. 15, 2014), ECF No. 55 (“US Mag. Reply”).1 The court has jurisdiction
pursuant to Section 516A(a)(2)(B)(iii) of the Tariff Act of 1930, as amended, 19 U.S.C.
§ 1516a(a)(2)(B)(iii) (2012),2 and 28 U.S.C. § 1581(c) (2012).
US Magnesium challenges (1) Commerce’s financial statement selection,
(2) Commerce’s refusal to apply adverse facts available to Tianjin Magnesium Metal Co.
Ltd. (“TMM”), and (3) Commerce’s surrogate valuation of magnesium scrap. US Mag. Br.
1
Tianjin Magnesium Metal Co. Ltd. raises several conditional arguments in its motion for
judgment on the agency record, requesting judicial review if the court remands any of the
issues raised by US Magnesium. Mem. in Support of the Mot. for J. on the Agency R.
Submitted by Pl. Tianjin Magnesium Metal Co., Ltd., Pursuant to R. 56.2 of the Rs. of the
U.S. Ct. of Int’l Trade 3-12 (July 10, 2014), ECF No. 33. Having not remanded any of US
Magnesium’s issues, the court does not address Tianjin Magnesium Metal Co. Ltd.’s
motion.
2
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.
Consol. Court No. 14-00038 Page 3
at 5-39. For the reasons set forth below, the court sustains the Final Results on each of
the issues challenged by US Magnesium.
I. Standard of Review
For administrative reviews of antidumping duty orders, the court sustains
Commerce’s “determinations, findings, or conclusions” unless they are “unsupported by
substantial evidence on the record, or otherwise not in accordance with law.” 19 U.S.C.
§ 1516a(b)(1)(B)(i). More specifically, when reviewing agency determinations, findings,
or conclusions for substantial evidence, the court assesses whether the agency action is
reasonable given the record as a whole. Nippon Steel Corp. v. United States, 458 F.3d
1345, 1350-51 (Fed. Cir. 2006). Substantial evidence has been described as “such
relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.” DuPont Teijin Films USA v. United States, 407 F.3d 1211, 1215 (Fed. Cir.
2005) (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)). Substantial
evidence has also been described as “something less than the weight of the evidence,
and the possibility of drawing two inconsistent conclusions from the evidence does not
prevent an administrative agency’s finding from being supported by substantial evidence.”
Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620 (1966). Fundamentally, though,
“substantial evidence” is best understood as a word formula connoting reasonableness
review. 3 Charles H. Koch, Jr., Administrative Law and Practice § 9.24[1] (3d ed. 2015).
Therefore, when addressing a substantial evidence issue raised by a party, the court
analyzes whether the challenged agency action “was reasonable given the circumstances
Consol. Court No. 14-00038 Page 4
presented by the whole record.” 8A West’s Fed. Forms, National Courts § 3:6 (5th ed.
2015).
II. Discussion
A. Financial Statement Selection
Commerce calculates dumping margins by determining “the amount by which the
normal value exceeds the export price or constructed export price of the subject
merchandise.” 19 U.S.C. § 1677(35)(A). In the non-market economy context, Commerce
calculates normal value using data from surrogate countries to value the factors of
production. Id. § 1677b(c)(1)(B). Commerce must use the “best available information” in
selecting surrogate data from “one or more” surrogate market economy countries. Id.
§ 1677b(c)(1)(B), (4). The surrogate data must “to the extent possible” be from a market
economy country or 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 stated regulatory
preference to “normally . . . value all factors in a single surrogate country.” 19 C.F.R.
§ 351.408(c)(2) (2015). Commerce here chose the Philippines as the primary surrogate
country. Decision Memorandum at 4-10.
Pursuant to its regulations, Commerce relies upon financial statements from
surrogate producers of “identical or comparable merchandise” to determine surrogate
values for manufacturing overhead, general expenses, and profit. 19 C.F.R.
§ 351.408(c)(4). Commerce’s choice of financial statements is guided by a regulatory
preference for publicly available information. Id. Beyond that, Commerce generally
Consol. Court No. 14-00038 Page 5
considers the quality, specificity, and contemporaneity of the available financial
statements. Issues and Decision Memorandum for the Final Results in the Antidumping
Duty Administrative Review of Polyethylene Terephthalate Film, Sheet, and Strip from the
People’s Republic of China, A-570-924, at 4 (Dep’t of Commerce Feb. 14, 2011),
available at http://enforcement.trade.gov/frn/summary/prc/2011-3909-1.pdf (last visited
this date).
In its preliminary determination Commerce used financial statements from two
Philippine companies to calculate TMM’s financial ratios: SOH Technologies Corp. and
RU Foundry and Machine Shop Corporation (“RU Foundry”). Decision Memorandum for
Preliminary Results of 2011-2012 Antidumping Administrative Review: Pure Magnesium
from the People’s Republic of China, A-570-832, at 20-21 (Dep’t of Commerce May 31,
2013), available at http://enforcement.trade.gov/frn/summary/prc/2013-13702-1.pdf (last
visited this date) (“Prelim. Decision Memorandum”). Commerce selected RU Foundry
because US Magnesium “placed on the record a description of RU Foundry’s line of work,
which included production of aluminum, (considered to be a comparable production
process to production of [the subject merchandise]).” Decision Memorandum at 22.
TMM, however, argued in its administrative case brief that RU Foundry’s financial
statements indicated that RU Foundry did not in fact produce comparable merchandise.
Decision Memorandum at 20-21. For the final results Commerce agreed, explaining that
the revenue sources, raw material purchases, and accounts receivables section of the
financial statement all suggest that RU Foundry manufactures beverages, and not metal
as the “Foundry” in its name implies. Id. (noting that RU Foundry “derives its revenue from
Consol. Court No. 14-00038 Page 6
‘a range of beverage products’” and “selling fruits, juices, and copra products,” that RU
Foundry’s purchases do not include “raw materials for metal production,” and that RU
Foundry’s accounts receivables include companies like “‘Eco Agri,’ ‘Puro Organic,’ and
‘Fresh Start’”). Confronted with financial statements containing “irreconcilable
contradictions as to what merchandise RU Foundry actually produces and sells,”
Commerce chose not to use the RU Foundry financial statements for the Final Results.
Decision Memorandum at 22. It is hard to fault that choice.
US Magnesium, nevertheless, challenges this decision. US Mag. Br. at 33-37. The
court is not persuaded by US Magnesium’s argument. Even if the issue of RU Foundry’s
business were arguable, and the record unclear, US Magnesium could not prevail
because the substantial evidence standard of review “contemplates [that] more than one
reasonable outcome is possible on a given administrative record.” Globe Metallurgical,
Inc. v. United States, 36 CIT ___, ___, 865 F. Supp. 2d 1269, 1276 (2012). US
Magnesium fails to demonstrate that there is one and only one reasonable conclusion to
be drawn from RU Foundry’s financial statement—that RU Foundry produces comparable
merchandise. The court therefore agrees with TMM and Defendant that Commerce’s
rejection of RU Foundry’s financial statement is reasonable on this administrative record.
Accordingly, the court sustains this aspect of the Final Results.
B. Facts Available
The statute mandates that Commerce use “facts otherwise available” when
“necessary information is not available on the record” or when, among other things, an
interested party “significantly impedes a proceeding.” 19 U.S.C. § 1677e(a). If Commerce
Consol. Court No. 14-00038 Page 7
“finds that an interested party has failed to cooperate by not acting to the best of its ability
to comply with a request for information,” Commerce may “use an inference that is
adverse” when selecting among facts available. Id. § 1677e(b). The use of “facts
otherwise available” and the application of an adverse inference are separate
determinations. Zheijang DunAn Hetian Metal Co. v. United States, 652 F.3d 1333, 1346
(Fed. Cir. 2011) (citing Nippon Steel v. United States, 337 F.3d 1373, 1381 (Fed. Cir.
2003)).
US Magnesium argues that Commerce did not consider whether TMM significantly
impeded the proceeding by failing to include a complete and accurate translation of a
Ukrainian financial statement. US Mag. Br. at 5-26. During the proceeding US Magnesium
placed on the record an alternative English translation of the same Ukrainian financial
statement. Commerce, in turn, concluded that US Magnesium’s alternative translation did
not warrant a finding that TMM significantly impeded the proceeding:
In this case, the information has been placed on the record, in the form of
Petitioner’s translation of the omitted paragraphs and, in any case, we do
not consider the information at issue to qualify as “necessary information”
given that the Department has selected the Philippines as the appropriate
surrogate country. Because the information at issue is not necessary for the
determination, and there are no other allegations or information that raise
question as to the reliability of any other information provided by TMM in
this particular review, we do not find that the party significantly impeded the
proceeding based upon the facts in this case. Accordingly, we find no basis
to apply facts available, and thus no basis to apply adverse inferences in
this case.
Decision Memorandum at 26 (footnotes omitted) (emphasis added).
When US Magnesium argues that Commerce did not consider whether TMM
significantly impeded the proceeding, see, US Magnesium Br. at 10; US Magnesium
Consol. Court No. 14-00038 Page 8
Reply at 2, US Magnesium appears to have overlooked the underlined language above.
And despite devoting almost its entire administrative case brief arguing TMM deserved a
total AFA rate, US Magnesium could only identify three apparent discrepancies within a
single exhibit among the many submitted by TMM. See Case Br. of US Magnesium, at 1-
17 (Dep’t of Commerce Aug. 8, 2013), PD 144.3 All US Magnesium submitted to support
its argument was a competing translation of the same financial statement. Id.; see
Decision Memorandum at 26 (“The record does not contain . . . information to contradict
TMM’s assertion that it provided an acceptable translation of the words.). Here,
Commerce reasonably declined US Magnesium’s invitation to find that TMM significantly
impeded the proceedings. The court therefore sustains this aspect of the Final Results as
well.
C. Surrogate Value for Magnesium Scrap
For the preliminary results Commerce selected Philippine HTS 8104.20
(“Magnesium Waste and Scrap”) to value TMM’s scrap input. Prelim. Decision
Memorandum at 18-19 (“Philippine data for imports of magnesium scrap under HTS
subcategory 8104.20 represent the best, and only, information available to value the
scrap inputs used by TMM’s supplier in the production of subject merchandise during the
POR.”). In the final results, however, Commerce acknowledged that the selection of
Philippine data was no longer a reasonable choice on the administrative record.
3
“PD” refers to a document contained in the public administrative record.
Consol. Court No. 14-00038 Page 9
Commerce explained that TMM submitted “benchmark” data showing that the
Philippine scrap surrogate data point exceeded the values of Indonesian, South African,
Thai, and Colombian imports under HTS 8104.19, which covered the finished subject
merchandise as well as the magnesium TMM used to produce its scrap. The Philippine
scrap surrogate data point also exceeded the values of Indonesian, South African, and
Thai imports for pure (99.8% or greater) unwrought magnesium under HTS 8104.11. Id.
at 12-16. These “benchmark” prices rendered the Philippine scrap value unreasonable.
According to Commerce, scrap should not be more valuable than both the subject
merchandise and the material used to produce the scrap. Id. at 15. Without a usable
surrogate value from the primary surrogate country (Philippines), Commerce applied its
standard selection criteria (specificity, contemporaneity, public availability,
representativeness, and whether prices exclude taxes and duties) to the other available
secondary surrogate country data on the administrative record. Id. at 12-20; see also
Surrogate Value Memorandum, at 2-4 (Dep’t of Commerce Dec. 26, 2013), PD 165.
The administrative record included data from various countries under three HTS
subheadings: HTS 8104.20 (covering scrap magnesium); HTS 8104.19 (covering subject
merchandise and input that created TMM’s scrap); HTS 8104.11 (covering pure
magnesium). Commerce easily settled on HTS 8104.20 as best covering TMM’s “scrap.”
Id. at 20.
Among the available secondary surrogate country-specific HTS 8104.20 data,
Commerce rejected Thai and South African data points as non-contemporaneous and
unreliable. Decision Memorandum at 18-19. For the remaining Serbian, Ukrainian, and
Consol. Court No. 14-00038 Page 10
Bulgarian HTS 8104.20 data, Commerce explained that each were “publicly available,
non-export, tax-exclusive, and obtained from the preferred GTA data-source,” but that
“the Serbian HTS 8104.20 import data provide the most robust dataset and, therefore,
represent the best available information to value scrap magnesium.” Id. at 20.
Commerce’s choice of Serbian HTS 8104.20 as the “best available” surrogate value on
this administrative record represents a reasonable application of Commerce’s surrogate
value selection criteria.
US Magnesium does not challenge Commerce’s rejection of the Philippine
surrogate value as unreasonable when measured against the non-Philippine benchmark
data. US Magnesium instead challenges Commerce’s use of the Serbian HTS 8104.20
data point as an unreasonable departure from past practice. According to US Magnesium,
once Commerce “established a benchmark” price, it should have also selected that
benchmark price as the surrogate value, i.e., “cap” the scrap value at the benchmark
price. US Mag. Br. at 27-31. Thus, US Magnesium argues that Commerce should have
selected the Indonesian, South African, Thai, and Colombian HTS 8104.19 data points,
either individually or in some combination. US Mag. Reply at 18-19.
Commerce acknowledged that its recent practice “is to continue to utilize the scrap
value in question as the [surrogate value], but to cap this value at the price of the primary
product.” Decision Memorandum at 15. Commerce has not always applied a cap. See
Issues and Decision Memorandum for the Final Determination in the Less-Than-Fair-
Value Investigation of Certain Steel Nails from the People’s Republic of China, A-570-
909, at 38 (Dep’t of Commerce June 6, 2008), available at
Consol. Court No. 14-00038 Page 11
http://enforcement.trade.gov/download/nme-sep-rates/prc-nails/prc-nails-final-memo.pdf
(last visited this date). Where Commerce has applied a cap, it has not always selected
the benchmark for use as a cap. See Issues and Decision Memorandum for the Final
Results of the Antidumping Duty New Shipper Reviews on Certain Frozen Fish Fillets
from the Socialist Republic of Vietnam, A-552-801, at 35-37 (Dep’t of Commerce June
24, 2013), available at http://enforcement.trade.gov/frn/summary/vietnam/2013-15882-
1.pdf (last visited this date) (using a benchmark to reject a proposed scrap surrogate
value, but constructing a cap value using different record data) (“Fish Filets”).
If Commerce does “cap” a surrogate scrap value, Commerce uses the cap value
in place of the unreasonable scrap surrogate value. See Issues and Decision
Memorandum for the Final Determination in the Less-Than-Fair-Value Investigation of
Multilayered Wood Flooring from the People’s Republic of China, A-570-970, at 89 (Dep’t
of Commerce Oct. 11, 2011), available at
http://enforcement.trade.gov/frn/summary/prc/2011-26932-1.pdf (last visited this date)
(“valuing” respondent’s scrap using an average of the surrogate values for the inputs used
to create the byproduct) (“Wood Flooring”); Decision Memorandum at 17 (describing the
scrap value in Wood Flooring as “cap”). Most important, when Commerce has applied a
cap, Commerce derived the cap value from the primary surrogate country price data for
the input that created the scrap. See Decision Memorandum at 17 (explaining when
Commerce has applied a cap).
Here, there was no reasonable surrogate value from the primary surrogate country
from which Commerce could establish a cap. Commerce looked to the Philippine HTS
Consol. Court No. 14-00038 Page 12
provision covering the input that created TMM’s scrap (HTS 8104.19). During the period
of review, however, the Philippines had no imports under HTS 8104.19 (the category
covering the input that created the scrap), and there were no Philippine alternatives on
the record. Id. at 15. As Commerce explained, “because the instant record lacks a value
for finished unwrought magnesium from the Philippines from which an appropriate cap
may be determined (i.e., Philippine price data for imports of HTS 8104.19), we are unable
to cap the SV in question and must instead look to the other available SV information on
the record.” Id. This therefore is not a circumstance, as US Magnesium contends, in which
Commerce unreasonably departed from past practice, but instead a circumstance in
which Commerce attempted to identify the “best available information” for TMM’s scrap
surrogate given a lack of available usable data from the primary surrogate country.
19 U.S.C. § 1677b(c)(1).
US Magnesium also argues that Commerce failed to explain why imports under
Serbian HTS 8104.20 are specific to TMM’s scrap, which, according to US Magnesium,
is a necessary finding because that provision is a basket category that may include
imports of lower-quality and lower-priced scrap. US Mag. Br. at 31-33. Although everyone
agrees that HTS 8104.20 covers TMM’s scrap, US Magnesium infers that perhaps the
Serbian scrap provision, as a basket category, might also contain non-comparable scrap,
rendering it a poor surrogate value choice. Id. Perhaps it does, but this remains just one
of many possible inferences that could be drawn about this tariff heading. See Daewoo
Elecs. Co. v. Int’l Union of Elec., Elec., Technical, Salaried & Mach. Workers, AFL-CIO,
6 F.3d 1511, 1520 (Fed. Cir. 1993) (“The question is whether the record adequately
Consol. Court No. 14-00038 Page 13
supports the decision of [Commerce], not whether some other inference could reasonably
have been drawn.”). If US Magnesium believed Serbian HTS 8104.20 was a poor choice,
US Magnesium should have developed the administrative record with information
substantiating its inference that the Serbian scrap provision contains lots of low-quality,
non-comparable scrap. See QVD Food Co. v. United States, 658 F.3d 1318, 1324 (Fed.
Cir. 2011) (“[T]he burden of creating an adequate record lies with [interested parties] and
not with Commerce.”).
As Commerce has provided a reasonable explanation for applying its standard
selection criteria to the available secondary surrogate country data, as well as for
declining to apply the benchmarks as a cap, the court sustains Commerce’s selection of
Serbian HTS 8104.20 to value TMM’s scrap input.
III. Conclusion
For the foregoing reasons, US Magnesium’s motion for judgment on the agency
record is denied. Judgment will be entered accordingly.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: June 1, 2015
New York, New York