Zhejiang Native Produce & Animal By-Products Import & Export Group Corp. v. United States

Slip Op. 08-68
UNITED STATES COURT OF INTERNATIONAL TRADE
_____________________________
:
ZHEJIANG NATIVE PRODUCE AND :
ANIMAL BY-PRODUCTS IMPORT & :
EXPORT GROUP CORP., JIANGSU :
KANGHONG NATURAL HEALTHFOODS :
CO., LTD., AND ANHUI HONGHUI :
FOODSTUFF (GROUP) CO., LTD., :
: Before: Richard K. Eaton, Judge
:
: Court No. 06-00234
Plaintiffs, :
:
v. :
:
:
UNITED STATES, :
:
Defendant, :
:
and :
:
THE AMERICAN HONEY PRODUCERS :
ASSOCIATION AND THE SIOUX :
HONEY ASSOCIATION, :
:
Def.-Ints. :
_____________________________:
OPINION
[The final results of United States Department of Commerce
sustained in part and remanded.]
Dated: June 16, 2008
Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP (Bruce M.
Mitchell, Ned H. Marshak, Paul G. Figueroa), for plaintiffs.
Gregory A. Katsas, Acting Assistant Attorney General; Jeanne E.
Davidson, Director, Patricia M. McCarthy, Assistant Director,
United States Department of Justice Commercial Litigation Branch,
Civil Division,(Jane Chang Dempsey); Office of the Chief Counsel
for Import Administration, United States Department of Commerce,
(Mildred Stewart), of counsel, for defendant.
Court No. 06-00234 Page 2
Kelley Drye Collier Shannon (Michael J. Coursey, R. Alan
Luberda), for defendant-intervenors.
Eaton, Judge: This matter is before the court on the motion
for judgment upon the agency record of plaintiffs Zhejiang Native
Produce and Animal By-Products Import & Export Group Corp.,
Jiangsu Kanghong Natural Healthfoods Co., Ltd., and Anhui Honghui
Foodstuff (Group) Co., Ltd. (collectively, “plaintiffs”). See
Pls.’ Mem. Supp. R. 56.2 Mot. J. Agency R. (“Pls.’ Mem.”).
Defendant the United States and defendant-intervenors the
American Honey Producers Association and the Sioux Honey
Association oppose the motion. See Def.’s Mem. Opp’n Pls.’ Mot.
J. Agency R. (“Def.’s Opp’n”); Def.-Ints.’ Br. Opp’n Pls.’ Mot.
J. Agency R. (“Def.-Ints.’ Opp’n”).
By their motion, plaintiffs challenge the final results of
the United States Department of Commerce’s (“Commerce” or the
“Department”) third administrative review of the antidumping duty
order on honey from the People’s Republic of China (“PRC”) for
the period of review (“POR”) beginning on December 1, 2003, and
ending on November 30, 2004. See Honey from the PRC, 71 Fed.
Reg. 34,893 (Dep’t of Commerce June 16, 2006) (final results) and
the accompanying Issues and Decision Memorandum (Dep’t of
Commerce June 9, 2006), Administrative Record (“AR”) 265 (“Issues
& Dec. Mem.”) (collectively, “Final Results”). Jurisdiction lies
pursuant to 28 U.S.C. § 1581(c) (2000) and 19 U.S.C.
Court No. 06-00234 Page 3
§ 1516a(a)(2)(B)(iii).
Certain of the issues in this action have been litigated
previously in this Court.1 For the reasons set forth below, the
court grants, in part, and denies, in part, plaintiffs’ motion
and remands certain of the Final Results to Commerce.
STANDARD OF REVIEW
The court reviews the Final Results under the substantial
evidence and in accordance with law standard set forth in 19
U.S.C. § 1516a(b)(1)(B)(i). (“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 . . . .”). “Substantial evidence is
‘such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.’” Huaiyin Foreign Trade Corp.
(30) v. United States, 322 F.3d 1369, 1374 (Fed. Cir. 2003)
(quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)).
1
These include: a challenge to Commerce’s second
administrative review of the antidumping duty order on Chinese
honey (for the period of review from December 1, 2002 through
November 30, 2003) in Shanghai Eswell Enter. Co. v. United
States, 31 CIT __, Slip Op. 07-138 (Sept. 13, 2007) (not reported
in the Federal Supplement) and in Wuhan Bee Healthy Co., Ltd. v.
United States, 31 CIT __, Slip Op. 07-113 (July 20, 2007)(not
reported in the Federal Supplement); and a challenge to
Commerce’s first administrative review of the antidumping duty
order on Chinese honey (for the period of review from December 1,
2001 through May 31, 2002) in Wuhan Bee Healthy Co., Ltd. v.
United States, 29 CIT 587, 374 F. Supp. 2d 1299 (2005).
Court No. 06-00234 Page 4
It “requires more than a mere scintilla, but is satisfied by
something less than the weight of the evidence.” Altx, Inc. v.
United States, 370 F.3d 1108, 1116 (Fed. Cir. 2004) (quotations
and citations omitted). The existence of substantial evidence is
determined “by considering the record as a whole, including
evidence that supports as well as evidence that ‘fairly detracts
from the substantiality of the evidence.’” Huaiyin Foreign Trade
Corp. (30) v. United States, 322 F.3d at 1374 (quoting Atl.
Sugar, Ltd. v. United States, 744 F.2d 1556, 1562 (Fed. Cir.
1984)). The possibility of drawing two equally justifiable, yet
inconsistent conclusions from the record does not prevent the
agency’s determination from being supported by substantial
evidence. See Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620
(1966); Altx, Inc., 370 F.3d at 1116.
Moreover, “[a]s long as the agency’s methodology and
procedures are reasonable means of effectuating the statutory
purpose, and there is substantial evidence in the record
supporting the agency’s conclusions, the court will not impose
its own views as to the sufficiency of the agency’s investigation
or question the agency’s methodology.” Ceramica Regiomontana,
S.A. v. United States, 10 CIT 399, 404-405, 636 F. Supp. 961, 966
(1986), aff’d, 810 F.2d 1137 (Fed. Cir. 1987) (”Ceramica”).
Court No. 06-00234 Page 5
DISCUSSION
I. Legal Framework for Calculating Surrogate Values
In determining whether the subject merchandise is being, or
is likely to be, sold at less than fair value, 19 U.S.C.
§ 1677b(a) requires Commerce to make “a fair comparison . . .
between the export price2 or constructed export price3 and normal
value.” When merchandise that is the subject of an antidumping
investigation is exported from a nonmarket economy (“NME”)4
country, such as the PRC, Commerce, under most circumstances,
determines normal value by valuing the factors of production used
2
The “export price” is “the price at which the subject
merchandise is first sold . . . by the producer or exporter of
the subject merchandise outside of the United States to an
unaffiliated purchaser in the United States or to an unaffiliated
purchaser for exportation to the United States,” as adjusted. 19
U.S.C. § 1677a(a).
3
“Constructed export price” is “the price at which the
subject merchandise is first sold . . . in the United
States . . . by or for the account of the producer or exporter of
such merchandise or by a seller affiliated with the producer or
exporter, to a purchaser not affiliated with the producer or
exporter,” as adjusted. 19 U.S.C. § 1677a(b).
4
A “nonmarket economy country” is “any foreign country
that [Commerce] 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.”
19 U.S.C. § 1677(18)(A). “Because it deems China to be a
nonmarket economy country, Commerce generally considers
information on sales in China and financial information obtained
from Chinese producers to be unreliable for determining, under 19
U.S.C. § 1677b(a), the normal value of the subject merchandise.”
Shanghai Foreign Trade Enters. Co. v. United States, 28 CIT 480,
481, 318 F. Supp. 2d 1339, 1341 (2004). Therefore, because the
subject merchandise comes from the PRC, Commerce constructed
normal value by valuing the factors of production using surrogate
data from India. See 19 U.S.C. § 1677b(c)(4).
Court No. 06-00234 Page 6
in producing the merchandise using surrogate data, to which it
adds
an amount for general expenses and profit
plus the cost of containers, coverings, and
other expenses. . . .[T]he 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).
A. Calculation of Surrogate Value of Raw Honey
In choosing surrogate values, Commerce is directed to meet
the “best available information” standard. 19 U.S.C.
§ 1677b(c)(1). Commerce has stated that it considers several
factors, “including quality, specificity, and contemporaneity of
the source information” in seeking to meet the standard. Issues
& Dec. Mem. at 10. The Department prefers “whenever possible, to
use countrywide data, and only resorts to company-specific (or
regional) information when countrywide data are not available.
In addition, the Department prefers to rely on publicly available
data.” Id. at 11. Prior cases have upheld this methodology to
find the best available information. See, e.g., Wuhan Bee
Healthy Co. v. United States, 31 CIT at __, Slip Op. 07-113 at 28
(July 20, 2007) (not reported in the Federal Supplement) (“Wuhan
II”).
Commerce calculated the surrogate value of raw honey using
Court No. 06-00234 Page 7
data from the website of EDA Rural Systems Pvt. Ltd. (“EDA”),5
which Commerce adjusted for inflation for the purported purpose
of making the data contemporaneous to the POR. Issues & Dec.
Mem. at 10. Plaintiffs argue that Commerce’s selection of data
to calculate surrogate value was not supported by substantial
evidence in the record.
In its Final Results, Commerce found that the adjusted EDA
data constituted the best available information on the record.
“In selecting the EDA data, the Department finds that these raw
honey pricing data are the best information currently available
because they are publicly available, quality data, and specific
to the raw honey beekeeping industry in India.” Issues & Dec.
Mem. at 11.
We note that the EDA data are from a
published, publicly available source, the
website, www.litchihoney.com. With respect
to quality, we find that the EDA data source
is highly documented, including numerous
specific price points over a six-year period
for multiple types of honey from many
suppliers, and includes detailed information
on production, inputs, and beekeepers.
Regarding specificity, we note that the
prices quoted in the EDA data are specific to
the raw honey beekeeping industry in the
state of Bihar in India, which the Department
found to be a significant producer of honey
in India. Regarding reliability, the
5
“[T]he EDA data are from a published, publicly
available source, the website, www.litchihoney.com.” Issues &
Dec. Mem. at 11. The website is maintained by EDA Rural Systems
Pvt. Ltd., “an organization that provides business development
services to the honey and beekeeping sector in India.” Wuhan II,
31 CIT at __, Slip Op. 07-113 at 26.
Court No. 06-00234 Page 8
Department finds that the data collection
methods for the EDA data are documented with
respect to data sources, distribution, and
collection practice.
Issues & Dec. Mem. at 11 (citations omitted).
Plaintiffs contend that, rather than using the EDA data,
Commerce should have calculated the price of raw honey based on
an average of the prices derived from three news articles found
in Indian publications, i.e., the Tribune of India (“Tribune”),
Business Line Internet Edition (“Money”), and Hindu Online
(“Sunderbans”). Plaintiffs insist that, had Commerce used their
preferred evidence, Commerce would have found that the price of
raw honey declined during the POR and that the price of raw honey
was substantially lower than Commerce found. See Pls.’ Mem. 2.
1. Evidence Regarding Price Decline
Plaintiffs first argue that Commerce erred by adjusting the
EDA data upward to account for inflation when there was
“overwhelming evidence on the record confirming that raw and
processed honey prices in India declined during 2004 (POR 3) from
their peak in mid-year 2003.” Pls.’ Mem. 14. Plaintiffs argue
that Commerce ignored record evidence of a price decline,
primarily by not taking into account the Tribune, Money, and
Sunderbans articles. See Pls.’ Mem. 15-16. Specifically, they
contend that data from these articles show that raw honey prices
were significantly lower in this administrative review (December
Court No. 06-00234 Page 9
1, 2003 through November 30, 2004) than in the second
administrative review (December 1, 2002 through November 30,
2003), and lower in the second half of the third POR (June 2004
through November 2004) than in the first half of that period
(December 1, 2003 through May 2004). Pls.’ Mem. 15-16.
At the administrative level, Commerce determined that none
of plaintiffs’ proposed sources contained data as “reliable or
appropriate” as the EDA data. Issues & Dec. Mem. at 12. As a
result, Commerce found that plaintiffs had not shown evidence of
a price decline. See Issues & Dec. Mem. at 12.
First, Commerce addressed the Tribune article, dated
December 15, 2003, which states a price for raw honey at 65
rupees per kilogram in 2003:
As an initial matter, we note that the
Tribune article may represent data from a
state only slightly larger than that
represented by the EDA data, and therefore
the EDA data are as representative as the
prices in the Tribune article. However, the
Department also finds that the EDA data are
more detailed in that they contain multiple
price points over discrete periods of time
for specific types of honey and contain
exhaustive information on the source of these
data. The Department determines for these
final results that the EDA data are a more
reliable source to value raw honey because
the Department finds that the data collection
methods for the EDA data are documented with
respect to data sources, distribution, and
collection practice.
Issues & Dec. Mem. at 13-14.
Commerce also reviewed the other two articles. The
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Sunderbans article, dated March 5, 2004, valued raw honey at 40
rupees per kilogram and the Money article, dated January 26,
2004, valued it at 50 rupees per kilogram. Issues & Dec. Mem. at
4. Commerce found that, unlike the EDA data which pertains to
the second-largest honey producing state in India, “the
exceptionally limited nature of the Sunderbans and Money
articles’ data renders them unrepresentative of Indian prices as
a whole in comparison with the broader EDA data.” Issues & Dec.
Mem. at 14. Commerce stated,
[T]he Department deemed the Money article not
representative of prices in India, because
the data reported by the article are from a
single honey processing society, the Chandram
Honey Producers Society. According to the
article, the society sold 3,000 kg of honey
in the previous year (2003). The same
concerns hold for the Sunderbans article,
which was placed on the record after the
Preliminary Results. The Sunderbans article
refers to prices in a single region of India,
West Bengal, not alleged to be a major honey
producing state.
Issues & Dec. Mem. at 13. The Department concluded: “In light of
the various price points on the record, the Department cannot
agree with respondents that record evidence makes it self-evident
that the Indian honey market suffered a significant price decline
during the POR.” Issues & Dec. Mem. at 12.
The court finds that Commerce did not act unreasonably in
finding the EDA data to be more reliable. A review of the record
reveals that the EDA data are more detailed and more reliable
Court No. 06-00234 Page 11
than the news articles plaintiffs placed on the record.6 For
instance, the EDA data do include “numerous specific price points
over a six-year period for multiple types of honey from many
suppliers,” include “detailed information on production, inputs,
and beekeepers,” and the data collection methods “are documented
with respect to data sources, distribution, and collection
practice.” See Issues & Dec. Mem. at 11. Thus, Commerce was
justified in finding that the Tribune article was not “unusable
as a source for valuing raw honey,” and that the EDA data are the
“best available information” because they are more detailed and
more reliable than the data in the Tribune article, and because
the EDA data contain many price points over discrete periods of
time for specific types of honey and contain detailed information
on the source of these data. Issues & Dec. Mem. at 13-14.
Further, unlike the EDA data, the Sunderbans and Money
articles were not as representative of prices in India because
the prices were from a single honey processing society (in the
6
Plaintiffs also urged the court to review the Factors
of Production Valuation Memorandum for the fourth period of
review (for the period December 1, 2004 through November 30,
2005), in which, plaintiffs claim, “the Department expressly
acknowledged that raw honey prices in India experienced a ‘steady
decline through 2004 and the first five months of 2005.’” Pls.’
Mem. 16 and n. 12 (footnote omitted). This Memorandum is not
part of the record in this action. Id. at 16, n. 12. Non-record
evidence regarding a price decline put forth by plaintiffs in
this way cannot properly be considered as a supplement to the
record. See Hynix Semiconductor Inc. v. United States, 26 CIT
1154, 1154, Slip Op. 02-117 at 3 (Sept. 30, 2002) (not reported
in Federal Supplement).
Court No. 06-00234 Page 12
Money article) or from a single region of India that is not a
major honey producing state (in the Sunderbans article). Issues
& Dec. Mem. at 13. The EDA data, on the other hand, are more
representative of country-wide prices because they come from a
large honey producing state. Issues & Dec. Mem. at 12. Given
the evidence on the record, Commerce reasonably relied on the EDA
data, which does not reveal a price decline during the POR.
Plaintiffs have thus failed to meet their burden to put forth
evidence demonstrating a price decline. See Tianjin Mach. Imp. &
Exp. Corp. v. United States, 16 CIT 931, 937, 806 F. Supp. 1008,
1015 (1992).
Plaintiffs next contend that the price of honey derived from
the EDA data is not supported by substantial evidence because
there was other, more contemporaneous evidence on the record.
Plaintiffs argue that the EDA data (which cover sales from
December 2002 through June 2003) are entirely outside the period
of review (December 1, 2003 through November 30, 2004), and are
based solely on prices from the first half of 2003 (five months
prior to the beginning of the third period of review) when honey
prices reached their peak. Pls.’ Mem. 19. Accordingly,
plaintiffs insist that the EDA data “do not reflect the honey
market conditions in India during [the] POR,” and that, because
the record contains “reliable, contemporaneous, publicly
available surrogate prices for raw honey, the Department
Court No. 06-00234 Page 13
committed a reversible error in relying on stale surrogate data .
. . .” Pls.’ Mem. 19-20.
Commerce states in response that contemporaneousness is but
one factor it considers, and where the alternate data is not
exactly contemporaneous with the POR, the factor of
contemporaneousness does not carry as much weight. See Def.’s
Opp’n 17 (quoting Hebei Metals & Minerals Imp. & Exp. Corp. v.
United States, 29 CIT 288, 301, 366 F. Supp. 2d 1264, 1275 (2005)
(“Hebei II”)).
The court finds that plaintiffs have failed to show that the
price derived from the EDA data is not supported by substantial
evidence. The EDA data are taken from a six-month period
beginning a year prior to the period of review. The pricing
data’s distance from the period of review is, however, not
outweighed by plaintiffs’ alternative data, which itself is not
entirely contemporaneous with the period of review. See Hebei
II, 29 CIT at 301, 366 F. Supp. 2d at 1275. (“While the
contemporaneity of data is one factor to be considered by
Commerce, three months of contemporaneity is not a compelling
factor where the alternative data is only a year-and-a-half
distant from the [period of investigation (“POI”)].”) (citation
omitted). That is, the Tribune and Money articles provide data
for 2003 but only the month of December 2003 is within the period
of review. For their part, plaintiffs have not shown that their
Court No. 06-00234 Page 14
proposed data is superior to the EDA data in other respects. As
the court has discussed, the EDA data have many more price points
and relate to a state that is a significant honey producer.
Plaintiffs’ data, on the other hand, are not as representative,
are less detailed, have fewer price points, and are less well-
documented. Therefore, the court agrees with Commerce that the
EDA data are the best available information as the EDA data are
“publicly available, quality data, and specific to the raw honey
beekeeping industry in India.” Issues & Dec. Mem. at 11.
Therefore, while the evidence offered by plaintiffs may be more
contemporaneous than the EDA data, it cannot be said that
Commerce unreasonably found that that factor alone was not
determinative. Thus, the court finds that Commerce’s decision
that the EDA data were the best available information is
supported by substantial evidence.
2. Plaintiffs’ Proposed Benchmark
Plaintiffs also claim that the use of the EDA data is
unsupported by substantial evidence because it results in values
for raw honey that are higher than the average export price of
processed honey. Pls.’ Mem. 9-10. Plaintiffs rely on a
“benchmark price” for exported honey (based upon data from World
Trade Atlas and India Infodrive)7 to compare Commerce’s
7
These sources compile and disseminate official import
statistics.
Court No. 06-00234 Page 15
calculated surrogate values for raw honey to the average export
prices for processed honey. According to plaintiffs, this
comparison demonstrates that raw honey costs based on the EDA
data are artificially high. Plaintiffs insist that this
comparison is valid because it is “unlikely that Indian exporters
would sell honey below the costs incurred by middlemen purchasing
raw honey as an input.” Def.’s Opp’n 13. In other words,
plaintiffs argue that the Final Results are “anomalous” because
the normal value calculated using the EDA Data is higher than
their proposed benchmark for exported honey prices.
With respect to plaintiffs’ argument for use of a benchmark,
Commerce found that “export data may not accurately reflect the
market value of the goods within the country of exportation. The
Department’s stated preference is not to use export data.” Issues
& Dec. Mem. at 12 (citations omitted). “[E]xport prices may be
driven not by the cost of production or market pricing in the
exporting country, but by the prices or other market factors in
the countries to which the product was exported.” Def.-Ints.’
Opp’n 11. As a result, for Commerce, plaintiffs’ proposed
benchmark comparison does not necessarily demonstrate that export
prices move in tandem with domestic prices in a way that would be
useful in its analysis. Moreover, Commerce stated:
[T]he WTA data and Infodrive data rely on
values under [Harmonized Tariff Schedule] HTS
subheading 04900000, which is a basket
category composed of both raw and processed
honey shipments. The Department does not use
Court No. 06-00234 Page 16
data based on this subheading to value raw
honey precisely because it is a basket
category. The Department has also indicated
in prior cases that it prefers not to use
Infodrive data to derive surrogate values or
to use as a benchmark to evaluate other
potential surrogate values because it does
not account for all of the imports that fall
under a particular HTS subheading.
Issues & Dec. Mem. at 12. (footnote and quotation omitted).
Commerce has at least some discretion in deciding what is
the best available information. Hangzhou Spring Washer Co. v.
United States, 29 CIT 657, 666-667, 387 F. Supp. 2d 1236, 1245-46
(2005) (“Hangzhou”); Shakeproof Assembly Components Div. of Ill.
Tool Works, Inc. v. United States, 23 CIT 479, 481, 59 F. Supp.
2d 1354, 1357 (1999)(“Shakeproof”)(“The statute requires Commerce
to use the best available information, but does not define that
term . . . . If Congress had desired to restrict the material on
which Commerce could rely, it would have defined the best
available information.”) (footnote and citation omitted). This
Court’s role is to evaluate whether Commerce’s choice of
information is reasonable. Hangzhou, 29 CIT at 667, 387 F. Supp.
2d at 1246.
Commerce found the EDA data to be the best available
information, and plaintiffs’ “benchmark” argument has not shown
that Commerce’s choice was unreasonable. It might seem odd that
the price of honey used by the Department should exceed
plaintiffs’ benchmark. However, plaintiffs have failed to show
Court No. 06-00234 Page 17
how their benchmark, based on export prices, is a useful
comparison with domestic prices, because they have failed to
demonstrate that the benchmark price bears any relationship to
the domestic price. For example, plaintiffs have made no effort
to show that the market factors affecting domestic prices are the
same for export prices. Nor have plaintiffs shown that there is
a correlation between the domestic and export prices for honey.
Thus, the proposed benchmark, standing alone, fails to provide
convincing evidence that Commerce’s selection of the EDA data as
the best surrogate value source was unreasonable.
B. Selection of Data Source for Calculation of Surrogate
Financial Ratios
Title 19 U.S.C. § 1677b (c)(1)(B) requires that the
calculation of normal value include amounts for “general expenses
and profit.” Accordingly, Commerce “usually calculates” separate
values for: selling, general and administrative (“SG&A”)
expenses; manufacturing overhead; and profit, using ratios
derived from financial statements of companies that produce
identical or comparable merchandise in the surrogate country.
Wuhan II, 31 CIT at __, Slip Op. 07-113 at 41-42 (citation and
quotation omitted).
Here, Commerce determined that the information from the
2004-2005 financial statements of the Mahabaleshwar Honey
Producers’ Cooperative (“MHPC”) was “the best and most
Court No. 06-00234 Page 18
contemporaneous available information for valuing the financial
ratios.” Issues & Dec. Mem. at 19 (footnote omitted). Commerce
states that it chose the MHPC financial statements because they
contain a chairman/president’s report, auditor’s notes, and
itemized costs associated with honey production and sales,
specifically separating MHPC’s honey production and sales from
MHPC’s other business functions. Issues & Dec. Mem. at 19.
Plaintiffs argue that Commerce’s use of MHPC financial
statements, rather than those of Apis (India) Natural Products
(“Apis”) caused the results to be unsupported by substantial
evidence and not in accordance with law. The court has
previously addressed two of plaintiffs’ specific arguments in
Wuhan II and in Shanghai Eswell Enter. Co. v. United States, 31
CIT __, Slip Op. 07-138 (Sept. 13, 2007) (not reported in the
Federal Supplement) (“Shanghai Eswell”) where it sustained
Commerce’s decision to rely on the MHPC financials rather than
Apis’s:
The court finds that Commerce was justified
in determining that the 2003-2004 MHPC
financial statement8 was the best available
information to value factory overhead, SG&A
expenses and profit. It is apparent from the
Final Results that Commerce examined both the
MHPC and Apis financial statements and
compared their quality, specificity and
8
The issues in this litigation are substantially the
same although here Commerce relied on the 2004-2005 MHPC
financial statements for the Final Results, not the 2003-2004
MHPC financial statements at issue in previous cases. See Issues
& Dec. Mem. at 19.
Court No. 06-00234 Page 19
contemporaneity. It then concluded based on
this examination that “the Apis financial
statement . . . is not a reliable source for
calculating the surrogate financial ratios
because it is neither complete, nor
sufficiently detailed to provide a reliable
source for surrogate values.” As Commerce
observed, the “Apis statement does not
include any auditor notes, nor does it appear
to include complete schedules or details on
Apis’ operations.” The MHPC’s statement, on
the other hand, “include[s] a complete annual
report, and auditors report, and complete
profit and loss and business statement that
segregate MHPC’s honey and fruit canning
businesses.” Unlike Apis’s statement, MHPC’s
statement details its honey operations with
both narrative text and schedules indicating,
for example, the number of kilograms of honey
produced by particular MHPC members and the
price per kilogram. The court thus finds
that Commerce’s determination that the MHPC
financial statement was the best available
information to value financial ratios was
reasonable.
Shanghai Eswell, 31 CIT at __, Slip Op. 07-138 at 11-12 (quoting
Wuhan II, 31 CIT at __, Slip Op. 07-113 at 47-48 (citations
omitted)).
Although the MHPC and Apis financial statements at issue
here are for different years than those in previous cases and
thus contain different numbers, their form and presentation are
the same. Because the plaintiffs present identical arguments
here, as in previous cases, the court follows the holdings in
Shanghai Eswell and Wuhan II that the MHPC financial statements
constitute the best available information.9 See 19 U.S.C.
9
The period of review was different in this POR
(December 1, 2003 through November 30, 2004) than in Shanghai
Court No. 06-00234 Page 20
§ 1677b (c)(1).
In addition, the court in Shanghai Eswell rejected two other
arguments identical to those presented here, that: MHPC as a
cooperative is not a “true market economy entity”; and, that its
financial statements are tainted by expenses related to non-
subject merchandise. Pls.’ Mem. 27, 35, 37. As in Shanghai
Eswell, the court finds that “the Final Results demonstrate that
Commerce took into consideration MHPC’s status as a cooperative
when making its determination that its financial statement was
more reliable than Apis’s financial statement.” Shanghai Eswell,
31 CIT __, Slip Op. 07-138 at 13. The Shanghai Eswell Court
found no evidence that MHPC’s status as a cooperative rendered
its financial statement unreliable: “[a]n examination of the
record demonstrates that, other than certain unpaid loans,
plaintiffs can rely on no record evidence to support their claim
[that MHPC’s financial data are distorted by non-market forces].”
Id. at __, Slip Op. 07-138 at 13. In Shanghai Eswell, as here:
“Without supporting with record evidence their claim that unpaid,
personal loans made by MHPC to its members actually affected
MHPC’s financial statement, plaintiffs’ generalized statement
does not undermine Commerce’s finding that MHPC’s status as a
Eswell and Wuhan II (December 1, 2002 through November 30, 2003),
but the issues are substantially the same. See Shanghai Eswell,
31 CIT __, Slip Op. 07-138 at 2; Wuhan II, 31 CIT at __, Slip Op.
07-113 at 1300.
Court No. 06-00234 Page 21
cooperative did not render its financial statement unreliable.”
Id. at __, Slip Op. 07-138 at 14.
Plaintiffs also claim that MHPC’s financial statement was
distorted by its fruit canning division because “there is not a
clear division of costs between MHPC’s honey and fruit canning
operations in some of the schedules used by the Department,” and
that some expenses in the Department’s calculations, such as bank
interest, travel expenses, building appreciation and
depreciation, included expenses for both the honey and the fruit
canning divisions. Pls.’ Mem. 38. The Shanghai Eswell Court
addressed this issue, finding that plaintiffs failed to
demonstrate that Commerce ignored evidence that the MHPC
financial statement was distorted by its fruit canning division:
[W]hile acknowledging that MHPC produced non-
subject merchandise in addition to the
subject honey, Commerce found that MHPC’s
financial statement sufficiently
distinguished the costs associated with the
honey and fruit canning divisions such that
Commerce could derive surrogate financial
ratios based solely on honey data.
Shanghai Eswell, 31 CIT at __, Slip Op. 07-138 at 14-15.
Commerce specifically found that “the asset value of non-subject
operations accounts for only a minor portion of MHPC’s total
asset value.” Issues & Dec. Mem. at 20. Moreover, “Commerce
calculated a profit only from the honey processing division.”
Def.’s Opp’n 23. The Shanghai Eswell Court then found that its
examination of the MHPC financials confirmed the Department’s
Court No. 06-00234 Page 22
findings. Shanghai Eswell, 31 CIT at __, Slip Op. 07-138 at 16.
Because plaintiffs present nothing new with respect to their
arguments, the court follows the holdings in Shanghai Eswell that
the plaintiffs have not demonstrated that the MHPC financial
statements were unreliable, either because of MHPC’s status as a
cooperative or because of expenses related to non-subject
merchandise.
In addition to those made in previous cases, plaintiffs
present two arguments not previously litigated in an effort to
demonstrate that the MHPC financials were unreliable. First,
plaintiffs complain that the MHPC financials lacked a raw
material cost for honey, resulting in Commerce having to
extrapolate the raw material cost. Pls.’ Mem. 33. Plaintiffs
argue that, by doing so, the determination relied on “unsupported
assumptions.” Pls.’ Mem. 33-34.
In answer to plaintiffs’ claims, Commerce states that
the MHPC financial statements provide
adequate information to approximate the cost
of goods sold, based on the reported amounts
of “honey collected” and “honey sold.”
Contrary to respondents’ assertions, the
necessity of making certain assumptions in
ascertaining the cost of raw honey consumed
and the subsequent profit calculation do not
make the data unusable.
Issues & Dec. Mem. at 19-20 (footnote omitted). That is,
Commerce insists that it was able to calculate an accurate raw
material cost as follows: “(total cost of honey
Court No. 06-00234 Page 23
purchases/quantity purchased) x (sum of the quantities sold &
lost during production).”10 Factors of Production Valuation Mem.
for the Preliminary Results and Partial Rescission of Antidumping
Duty Admin. Review of Honey from the PRC dated December 9, 2005,
AR 229, Att. 12.11 Commerce found “that the current calculation
methodology provides for a reasonable derivation of the cost of
goods sold and profit ratio.” Issues & Dec. Mem. at 20.
Although plaintiffs insist that Commerce relied on
unwarranted assumptions in its calculation of raw material costs,
they identify nothing that would lead the court to agree with
them. While the MHPC financials lack a raw material cost, they
do contain amounts for “honey collected” and “honey sold.”
Plaintiffs make no argument that these amounts are not accurate.
Therefore, Commerce’s straightforward calculation does indeed
10
Plaintiffs also argue that it is Commerce’s practice to
“reject a surrogate producer’s financial statement which does not
permit a calculation of the raw materials costs.” Pls.’ Mem. 33
(citing Certain Preserved Mushrooms from the PRC, 63 Fed. Reg.
72,255, 72,265 (Dep’t of Commerce Dec. 31, 1998) (notice)
(“Mushrooms”)). Mushrooms, however, is inapposite, because in
that decision, unlike the present case, the needed data was
difficult to isolate in the financials. Mushrooms, 63 Fed. Reg.
at 72,265 (“The packing material amount is almost as large as the
raw materials amount. The raw materials schedule does not
include cans or jars in the listing of the major raw materials.
Accordingly, we have made the reasonable assumption that
Saptarishi Agro included the costs of containers in the packing
materials amount, and we are unable to break out this amount
further.”).
11
The Department did not change this method of
calculation in the Final Results. See Factors of Production
Valuation Memorandum for the Final Results of Antidumping Duty
Admin. Review of Honey from the PRC dated June 9, 2006, AR 266.
Court No. 06-00234 Page 24
seem to be a reasonable method of approximating the cost of goods
sold. Because Commerce has demonstrated that the MHPC financial
statements are equal to or superior to those of Apis in most
material respects (i.e., they are more complete, more detailed,
and more reliable), and because the Department has shown that it
can make a reasonable calculation of the cost of honey, the court
sustains its cost of goods sold calculation.
Finally, plaintiffs complain that MHPC, as a cooperative, is
not required to comply with Indian Generally Accepted Accounting
Principles (“GAAP”) requirements and thus that its financial
statements cannot be certain to conform to Indian GAAP. Pls.’
Mem. 37. As noted above, the court previously addressed the
argument that, as a cooperative, MHPC is not a true market entity
such that its financial statements could not be reliable.
In response to the argument regarding Indian GAAP, Commerce
stated:
. . . the Department finds that the
respondents’ claim that the Apis financial
statements comport with Indian GAAP, while
MHPC’s does not, is based on the respondents’
assessment rather than an auditor’s official
certification and we therefore accord it
little weight, especially given the Court’s
acceptance of the Department’s reliance on
MHPC in prior reviews.
Issues & Dec. Mem. at 20 (citation omitted). In fact, plaintiffs
cite to no evidence on the record demonstrating that the MHPC
financials do not comply with Indian GAAP. Moreover, they fail
to demonstrate how Indian GAAP reporting differs from the method
Court No. 06-00234 Page 25
used in compiling the MHPC financials. Because plaintiffs have
pointed to no record evidence that: (1) the MHPC financials were
not kept in accordance with Indian GAAP; or (2) that, even if the
MHPC financials were not kept in accordance with Indian GAAP, how
they would be less reliable than those of Apis, the court cannot
credit plaintiffs’ argument.
Plaintiffs have failed to show that the Apis financial
statement was more reliable than that of MHPC, and as a result
have failed to make the case that the MHPC statement is not the
best information available. See 19 U.S.C. § 1677b (c)(1).
Therefore, it cannot be said that Commerce’s choice to rely on
the MHPC financial statement is unsupported by substantial
evidence or not in accordance with law. See Ceramica, 10 CIT at
404-405, 636 F. Supp. at 966. The court sustains Commerce’s
choice.
C. Calculation of the Surrogate Financial Ratios
In determining normal value, Commerce uses ratios12 to
12
As this Court has explained:
[t]o calculate the SG&A ratio, the Commerce
practice is to divide a surrogate company’s
SG&A costs by its total cost of
manufacturing. For the manufacturing
overhead ratio, Commerce typically divides
total manufacturing overhead expenses by
total direct manufacturing expenses.
Finally, to determine a surrogate ratio for
(continued...)
Court No. 06-00234 Page 26
calculate amounts for “general expenses and profit,” calculating
separate values for SG&A expenses; manufacturing overhead; and
profit. See Wuhan II, 31 CIT at __, Slip Op. 07-113 at 41-42
(citation and quotation omitted).
1. Calculation on a LIFO Versus FIFO Basis
To determine the denominator in the financial ratios,
Commerce must use a closing value for inventory, an element in
calculating the cost of materials consumed. As addressed above,
plaintiffs have taken issue with the Department’s reliance on the
MHPC financial statements, in part because they did not include a
raw material cost for honey. “As a result, the Department
assumed that MHPC has no ending inventory at all and imposed a
‘last in, first out’ (“LIFO”) valuation of MHPC’s raw materials,
by valuing all production using current honey purchases without
regard to the value of raw materials in beginning stock.” Pls.’
Mem. 40. Plaintiffs claim that a LIFO method of valuing
12
(...continued)
profit, Commerce divides before-tax profit by
the sum of direct expenses, manufacturing
overhead and SG&A expenses. These ratios are
converted to percentages (“rates”) and
multiplied by the surrogate values assigned
by Commerce for the direct expenses,
manufacturing overhead and SG&A expenses.
Wuhan II, 31 CIT at __, Slip Op. 07-113 at 42 n. 15, (citing
Shanghai Foreign Trade Enters. Co. v. United States, 28 CIT 480,
482, 318 F. Supp. 2d 1339, 1341 (2004)).
Court No. 06-00234 Page 27
inventory “does not make sense in the case of an input such as
honey, where there would be an incentive to use the oldest raw
material first.” Pls.’ Mem. 40. Plaintiffs contend that honey
is perishable, meaning that its value would decrease over time,
necessitating the use of a first-in-first-out (“FIFO”)
methodology.
Commerce rejected plaintiffs’ claim that it should use a
FIFO approach to “calculate the cost of goods sold on the basis
that honey is a perishable product.” Issues & Dec. Mem. at 22.
In doing so the Department stated, “Respondents have provided no
evidence to support their claim that honey is perishable; thus,
the Department finds no reason to alter its inventory valuation
methodology, which was applied in the Preliminary Results and
previous segments of this order.” Issues & Dec. Mem. at 22.
While it may seem obvious that honey is perishable, the
discussion at oral argument made clear that there is considerable
dispute over how long it can be stored.13 What is clear, though,
is that there is nothing on the record indicating how long raw
honey can be kept in inventory. That being the case, any
conclusion with respect to plaintiffs’ claims would be
speculation. Commerce’s determination must be based on record
evidence and not speculation. See Anshan Iron & Steel Co. v.
13
See generally Transcript of Oral Argument, Court No.
06-00234 (Nov. 29, 2007).
Court No. 06-00234 Page 28
United States, 28 CIT 1728, 1734, n. 2, 358 F. Supp. 2d 1236,
1241, n. 2 (2004) (“Speculation is not support for a finding . .
. .”) (quotation and citation omitted). Because plaintiffs have
not shown by record evidence that Commerce reached the wrong
conclusion with respect to ending inventory, it is within
Commerce’s discretion to use a LIFO methodology to value
inventory. See Wuhan II, 31 CIT at __, Slip Op. 07-113 at 49
(quoting Shakeproof, 268 F. 3d at 1382 (“The critical question is
whether the methodology used by Commerce is based upon the best
available information and establishes antidumping margins as
accurately as possible.”)). The court thus finds that Commerce
was reasonable in applying the LIFO approach.
2. Honey Sales Commissions
Commerce calculated the SG&A surrogate ratio “based on
publicly available information in the MHPC financial statement,
which included ‘honey sale[s] commissions’ paid by MHPC to
salesman [sic] to sell honey.” Pls.’ Mem. 41. Plaintiffs
contend honey sales commissions were “impermissibly double
counted because any commissions reported by Respondents, as a
matter of law, were deducted from the U.S. sales price.” Pls.’
Mem. 41. According to plaintiffs:
In calculating the United States side of the
dumping equation, the Department deducts an
amount for “commissions” from the Plaintiffs’
U.S. sales prices. In contrast, in
Court No. 06-00234 Page 29
calculating normal value in the instant
proceeding, the Department calculated the
SG&A surrogate ratio based on publicly
available information in the MHPC financial
statement, which included “honey sale[s]
commissions” paid by MHPC to salesman [sic]
to sell honey.
Pls.’ Mem. 41 (citations omitted). Thus, plaintiffs contend that
Commerce’s calculation of the SG&A ratio is contrary to law.
In the Final Results, Commerce rejected this argument,
insisting, “the Department has determined that because sales
commissions represent standard selling expenses, these
commissions should be included in the surrogate SG&A
calculation.” Issues & Dec. Mem. at 23 (citations omitted).14
That is, according to the Department, because standard selling
expenses relate to both home market sales and United States
sales, no adjustment need be made for them either to normal value
14
Standard selling expenses stand in contrast to direct
selling expenses. Under Commerce’s regulations, “direct selling
expenses” include “commissions . . . that result from, and bear a
direct relationship to, the particular sale in question.” 19
C.F.R. § 351.410(c) (2008). In a market economy proceeding,
Commerce is required to make a “circumstances-of-sale” adjustment
to (A) either export price or constructed export price; and (B)
normal value to account for differences in direct selling
expenses incurred in the United States and foreign markets. See
19 U.S.C. § 1677a(d)(1)(A) (providing for the reduction in the
price used to establish constructed export price by the amount of
any commissions for selling the subject merchandise in the United
States); 19 U.S.C. § 1677b(a)(6)(C)(iii) (providing for
adjustment to normal value for differences in circumstances of
sale). The purpose of the adjustment is to ensure that export
price and normal value are being compared on an “equivalent
basis” when Commerce makes its dumping determination. See Imp.
Admin. Antidumping Manual, Ch. 8 at 16 (Jan. 22, 1998) (available
at http://www.ia.ita.doc.gov).
Court No. 06-00234 Page 30
or constructed export price.
The court cannot accept plaintiffs’ argument. While
plaintiffs contend that there has been “double counting” with
respect to sales commissions, they have failed to demonstrate
that the expenses they describe as “commissions” are direct
selling expenses and not the kind of standard selling expenses
that are not deducted when calculating the SG&A ratio.
Plaintiffs cite to no record evidence to substantiate their
claims as to how these “commissions” should be characterized.
This failure is fatal to their claims. Commerce has the
discretion to characterize evidence as long as its determination
is supported with substantial evidence. See Saudi Iron and Steel
Co. (Hadeed) v. United States, 11 CIT 880, 889, 675 F. Supp.
1362, 1371 (1987) (finding substantial evidence supported
Commerce’s characterization of the transfer of equipment as a
lease/purchase rather than as a loan).
Because plaintiffs have not shown that the expenses claimed
to be commissions should be treated as being directly related to
home market sales, the court upholds Commerce’s finding.
3. Jars and Corks
Plaintiffs also argue that in calculating the financial
ratios, Commerce improperly “failed to capture all direct
materials in the calculation of the denominator [of the
Department’s financial ratio calculations], particularly jars and
Court No. 06-00234 Page 31
corks for retail-packed honey and honey machine purchases.”
Pls.’ Mem. 43.15 Plaintiffs claim that MHPC sells its processed
honey in jars, meaning that the jars should be considered direct
materials. Plaintiffs’ position is based on: (1) the listing in
MHPC’s financial statements of jar and cork expenses along with
its other honey-related expenses (such as honey collection, honey
sales commissions, and honey boxes purchases); (2) a lack of
evidence demonstrating that the jars and corks were used in
MHPC’s fruit canning division; and (3) the observation that the
MHPC financial statements do not show purchases of steel drums or
other honey containers. Pls.’ Mem. 43-44. According to
plaintiffs, “the only reasonable explanation is that MHPC sells
its honey in jars and corks.” Pls.’ Mem. 44.
In the Final Results, Commerce stated that MHPC’s financial
statements indicate that these items were being purchased and
sold by MHPC, rather than being consumed in the sale of honey:
“Respondents failed to provide evidence that the ‘jars and corks’
were consumed as packing16 in the manner described.” Issues &
15
In the calculation of surrogate financial ratios, the
denominator should include the expenses of all direct material
costs. See Persulfates from the PRC, 68 Fed. Reg. 6,712 (Dep’t
of Commerce Feb. 10, 2003) (notice of final results), and
accompanying Issues and Decision Memorandum, at Comm. 9 (Dep’t of
Commerce Feb. 3, 2003).
16
The Department refers to “packing” and “packaging”
interchangeably. It is not clear to the court that the words, as
used in MHPC’s financial statements, are necessarily referring to
the same thing.
Court No. 06-00234 Page 32
Dec. Mem. at 23.
The Department notes that the costs and
revenues associated with “jars and corks” are
independently itemized on the MHPC financial
statements——specifically apart from the lines
[sic] items labeled “honey sales” and
“packaging.” Without supporting evidence to
suggest that the items are associated with or
incorporated into the sale of subject
merchandise, the Department must treat the
financial statement line items as they have
been reported in the MHPC financial
statement——independent of sales and
packaging. Thus, consistent with previous
segments of this order, the Department will
continue to deduct only those packing
expenses identified in the line item
“packing” in the MHPC annual report, and will
not adjust the surrogate financial statements
to include the expenses for “jars and corks.”
Issues & Dec. Mem. at 23.
Both parties made identical arguments in Shanghai Eswell.
See 31 CIT at __, Slip Op. 07-138 at 22-26. After again
reviewing the chart on page 15 of the MHPC financial statement,
which contains the line items in question, and again finding it
nondeterminative, the court finds no reason to deviate from its
finding in Shanghai Eswell pertaining to this issue.
First, the court observes . . . that the
chart specifically pertains to honey sale and
collection. Next, the court notes that the
chart contains line items for 250 gram, 500
gram and 1 kilogram jars; 53 millimeter and
38 millimeter corks; and honey machines in
both the “Sale” column and the “Purchase”
column. The line item for 100 gram jars
appears only in the “Sale” column. The chart
is therefore ambiguous. While it is possible
that MHPC buys and sells jars [with] corks
that are either empty or filled with
something other than honey, there is no
Court No. 06-00234 Page 33
evidence in the MHPC financial statement
tending to support such a conclusion.
Without further explanation the court cannot
accept as adequate Commerce’s reliance solely
on the line items for jars and corks being
separate from other line items, to support
its conclusion that they are not direct
materials associated with finished honey.
Shanghai Eswell, 31 CIT __, Slip Op. 07-138 at 24-25 (citations
and footnote omitted); see also Pls.’ App. 12 at 15 (MHPC Main
Journal Business Statement). The court thus rejects as
unsupported by substantial evidence Commerce’s findings regarding
expenses for jars and corks and remands this question to
Commerce.
D. Calculation of Labor Costs
The cost of labor is another factor of production used to
determine normal value. To calculate the labor wage rate in NME
countries, Commerce, pursuant to its regulations, employs a
regression-based analysis using data from multiple countries:
Commerce treats the wage rate differently
from all other factors of production[.] [F]or
labor, Commerce employs regression-based wage
rates reflective of the observed relationship
between wages and national income in market
economy countries . . . . Using this
regression analysis, Commerce determines the
relationship between countries’ per capita
Gross National Product [(“GNI”)]17 and their
17
While per capita GNP and per capita GNI are not
precisely the same, both courts and the Department use them
interchangeably. See Dorbest Ltd. v. United States, 30 CIT __,
__, 462 F. Supp. 2d 1262, 1291 (2006); Antidumping Methodologies:
(continued...)
Court No. 06-00234 Page 34
wage rates; Commerce approximates the wage
rate of the PRC by using the PRC’s GNI as the
variable in the equation that was the result
of the regression.
Dorbest Ltd. v. United States, 30 CIT __, __, 462 F. Supp. 2d
1262, 1291 (2006) (citations omitted) (“Dorbest I”); see 19
C.F.R. § 351.408(c)(3) (“For labor, the Secretary will use
regression-based wage rates reflective of the observed
relationship between wages and national income in market economy
countries. The Secretary will calculate the wage rate to be
applied in nonmarket economy proceedings each year. The
calculation will be based on current data, and will be made
available to the public.”)
Plaintiffs’ primary challenge to the Department’s labor rate
calculation is that it is contrary to law because “the
Department’s use of a regression analysis based on a group of
market economy countries . . . contradicts the statute’s language
that the factors of production be valued using data from
economically comparable countries pursuant to 19 U.S.C.
17
(...continued)
Market Economy Inputs, Expected Non-Market Economy Wages, Duty
Drawback; and Request for Comments, 71 Fed. Reg. 61,716, 61,723
(Dep’t of Commerce Oct. 19, 2006) (“The [World Bank] WB defines
GNI per capita as equivalent to gross national product (“GNP”)
per capita, which is the dollar value of a country’s financial
output of goods and services in a year divided by its
population.”) (quotation omitted); Floor-Standing, Metal-Top
Ironing Tables and Certain Parts Thereof from the PRC, 68 Fed.
Reg. 44,040, 44,042 (Dep’t of Commerce July 25, 2003) (notice)
(referring to GNI as “the current World Bank term for what was
previously termed “Gross National Product”).
Court No. 06-00234 Page 35
§ 1677b(c)[(4)] . . . .” Pls.’ Mem. 45. Section 1677b(c)(4)
requires that:
The administering authority, in valuing
factors of production [to determine normal
value of the subject merchandise exported
from a nonmarket economy], 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. . . .18
Plaintiffs argue that the 2003 labor calculation was “based
on a basket of countries not economically comparable to China.”
Pls.’ Mem. 46. Commerce determined that the PRC’s wage rate was
$0.97 per hour in contrast to that of India, an economically
comparable country, whose wage rate is $0.23 per hour. Issues &
Dec. Mem. at 28, 30.
The Department insists that its use of data from a wide
range of market economy countries enhances the “accuracy,
predictability, and stability of the wage rate.” Issues & Dec.
Mem. at 29.
Due to the variability of wage rates in
countries with similar per capita GNI, were
the agency to select a single surrogate
country, or even a small group of surrogate
countries, to value labor wage rates, the
result would vary widely depending upon the
economically comparable countries selected.
Thus, the regulations, as implemented,
provide for a more accurate and more
18
The statute further states that, to the extent
possible, the surrogate countries used to determine the wage rate
be “significant producers of comparable merchandise.” 19 U.S.C.
§ 1677b(c)(4)(B).
Court No. 06-00234 Page 36
predictable result by utilizing data from
multiple countries.
Issues & Dec. Mem. at 28 (citations omitted). In other words,
Commerce bases its case on the idea that its regression analysis
would yield inaccurate results if it depended only on data from
countries that are economically comparable to the PRC.
Commerce’s argument seems to refer to the validity of using
data from a wide range of market economy countries within the
regression model, but does not explain how its regulations,19
which rely on per capita GNI, rather than surrogate data from
market economy countries at a level of development comparable to
that of the nonmarket economy, meet the requirements of the
antidumping statute. Issues & Dec. Mem. at 28-29.
Thus, Commerce appears to be side-stepping the issue raised
by plaintiffs. In other words, in valuing all other factors of
production, Commerce follows the statute and “prices or costs”
the factors of production using values found in surrogate
countries that are economically comparable to the NME country
under investigation. Indeed, as has been seen, here Commerce
valued raw honey using surrogate data from India. In its
response to the issue raised by plaintiffs, however, the
Department attempts to justify the use of data in the methodology
19
The regulation describes the methodology by which the
Department calculates expected NME wages: “For labor, the
Secretary will use regression-based wage rates reflective of the
observed relationship between wages and national income in market
economy countries.” 19 C.F.R. § 351.408(c)(3).
Court No. 06-00234 Page 37
prescribed by its regulations, but not the regulations
themselves. Because Commerce has failed to explain how its
regulations comport with the statute, this matter is remanded for
the Department to supply that explanation. “Commerce is obliged
to adequately explain how its chosen methodology achieves the
required result [of determining antidumping margins as accurately
as possible].” Shandong Huarong Machin. Co. v. United States, 29
CIT 484, 489, Slip Op. 05-54 at 10 (May 2, 2005) (not reported in
Federal Supplement) (citing NTN Bearing Corp. v. United States,
14 CIT 623, 634, 747 F. Supp. 726, 736 (1990)).
Plaintiffs also take issue with the implementation of the
regulations themselves. In doing so, plaintiffs challenge the
exclusion of data from countries that they claim meet the
Department’s selection criteria, that is, “all countries for
which the requisite data are available.” Issues & Dec. Mem. at
30. Specifically, plaintiffs cite to the decision in Dorbest I,
30 CIT __, __, 462 F. Supp. 2d 1262, and ask that the court issue
the same instructions to Commerce in this proceeding, i.e., that
on remand, Commerce is to either
(a) justify why its data set constitutes the
best available information; or (b)
incorporate those countries meeting its
criteria into the data set; and (c)
reconsider its use of its methodology or an
alternative method for determining the labor
rate for the PRC in this case.
Pls.’ Mem. 45. The Department notes that its regression
analysis, which does not include “all countries for which the
Court No. 06-00234 Page 38
requisite data are available” is “the same as that used for the
past several years, and is sufficiently robust to conduct a
meaningful regression analysis.” Issues & Dec. Mem. at 30. To
recalculate the regression analysis with a different basket of
countries would “amount to a significant change” in the current
methodology requiring a public notice and comment process. Id.20
As this Court held in Wuhan II, Commerce errs when it excludes
countries that meet its selection criteria from the data set:
Commerce’s argument that the data set in
question must be developed through notice-
and-comment rulemaking appears to be
inconsistent with Commerce’s past practice.
Commerce has in the past updated and expanded
the number of countries within the data set
without resorting to notice and comment
rulemaking. In fact, during the
investigation here, Commerce used a basket of
fifty-six countries, but during the voluntary
remand, used a basket of only fifty-four. No
notice-and-comment rulemaking was used to
effect the change. Commerce has also, over
time, expanded its data set of countries from
forty-five countries to fifty-six countries
without vetting its choices through notice-
and-comment rulemaking.
Wuhan II, 31 CIT at __, Slip Op. 07-113 at 39 (quoting Dorbest I,
20
Commerce did indeed announce a revised methodology in a
notice published on October 19, 2006. See Antidumping
Methodologies: Market Economy Inputs, Expected Non-Market Economy
Wages, Duty Drawbacks; and Request for Comments, 71 Fed. Reg.
61,716, 61,721-23 (Dep’t of Commerce Oct. 19, 2006). Under the
revised methodology, the basket of countries “will include data
from all market economy countries that meet the criteria
described [in the notice] and that have been reported within 1
year prior to the Base Year,” which is the most recent reporting
year of the data required for the regression methodology. Id. at
61,721-61,722.
Court No. 06-00234 Page 39
30 CIT at __, 462 F. Supp. 2d at 1295). Indeed,
“Commerce has acknowledged . . . the desirability of a broader
data set in its own justification for the creation and
utilization of a regression model for wage rates . . . .”
Dorbest I, 30 CIT at __, 462 F. Supp. 2d at 33. Commerce’s
explanation that the basket of countries it used “is the same as
that used for the past several years,” and that recalculating
would “amount to a significant change” is insufficient to support
its determination. Commerce has conceded as much by modifying
its selection criteria and list of included countries in at least
two cases. See Wuhan Bee Healthy Co. v. United States, 32 CIT
__, __, Slip Op. 08-61 (May 29, 2008) (“Wuhan III”); Dorbest Ltd.
v. United States, 32 CIT __, __, Slip Op. 08-24 (Feb. 27, 2008)
(“Dorbest II”). As a result, issues relating to Commerce’s
selection of data used to calculate labor costs will be remanded.
E. Calculation of Brokerage and Handling
Finally, plaintiffs contest Commerce’s calculation of
brokerage and handling value as unsupported by substantial
evidence and not in accordance with law. For the purposes of
calculating surrogate values, Commerce “normally values brokerage
and handling using nonproprietary information gathered from
producers of identical or comparable merchandise in the surrogate
country.” Def.’s Opp’n 37 (citing 19 C.F.R. § 351.408(c)(4)).
Commerce selects this data based on its “quality, specificity and
Court No. 06-00234 Page 40
contemporaneity.” Issues & Dec. Mem. at 24-25.
Commerce used a simple average of two surrogate values for
domestic brokerage and handling:
The December 2003 - November 2004 data of
Essar Steel (Essar) originally submitted in
the anti-dumping administrative review of
hot-rolled steel flat products from India
(hereinafter “Essar” value or data). This
value of 0.17 rupees per kilogram is derived
from data on shipments totaling 4,000 metric
tons.
[The] November 2002 - September 2003 data of
Pidilite Industry (Pidilite) originally
submitted in the antidumping investigation of
carbazole violet pigment 23 from India
(hereinafter “Pidilite” value or data). This
value of 6.48 rupees per kilogram is derived
from data on shipments totaling 13 metric
tons.
Pls.’ Mem. 47 (citing Factors of Production Valuation Mem. for
the Preliminary Results and Partial Rescission of Antidumping
Duty Admin. Review of Honey from the PRC dated Dec. 9, 2005, AR
229 at 10).
Plaintiffs argue that only the Essar data should be used
because: (1) the Essar data is more contemporaneous; and (2) the
Pidilite data has an “aberrationally high brokerage and handling
value based on a very low sales quantity.” Pls.’ Mem. 48.
Commerce acknowledges that the Essar data is the most
contemporaneous data on the record, as it overlaps with the POR.
Issues & Dec. Mem. at 25. However, it states that “when
considering the quality and specificity of the data on the
record, e.g., Essar and Pidilite’s brokerage and handling values,
Court No. 06-00234 Page 41
calculating an average of the two values results in the most
appropriate value on the record in this case.” Id. (footnote
omitted). Commerce found that a simple average achieved the most
representative value considering the values reported: “[A]s there
are no honey-specific brokerage and handling values on the
record, the Department finds that a simple average of Essar and
Pidilite’s values achieves the most representative value.”
Issues & Dec. Mem. at 25.21
Moreover, the Department claims that “the Pidilite value
from the period October 1, 2002, through September 30, 2003, is
not distant enough from the POR in this case (December 1, 2003
through November 30, 2004) for it to be disqualified for use.”
Issues & Dec. Mem. at 25 (citing Hebei II, 29 CIT at 301, 366 F.
Supp. 2d at 1275 (“[t]hree months of contemporaneity is not a
compelling factor where the alternative data is only a year-and-
a-half distant from the POI.”)).
“Despite the broad latitude afforded Commerce, its
discretion is not unlimited, but must be exercised in a manner
consistent with underlying objective of [the statute]——to obtain
the most accurate dumping margins possible.” Hebei Metals &
Minerals Imp. & Exp. Co. v. United States, 28 CIT 1185, __, Slip
21
In addition, Commerce found the average of the data was
the most representative because “the values reported by Essar and
Pidilite are the actual prices paid by market economy companies
and are representative of their normal business practices.”
Issues & Dec. Mem. at 25-26.
Court No. 06-00234 Page 42
Op. 04-88 at 10 (July 19, 2004) (quotation omitted) (not reported
in Federal Supplement) (“Hebei I”); see also Shakeproof, 268
F.3d at 1382 (“In determining the valuation of the factors of
production, the critical question is whether the methodology used
by Commerce is based on the best available information and
establishes antidumping margins as accurately as possible.”).
Commerce acted within its discretion when it concluded that, in
the absence of data more specific to honey, the several months’
difference in contemporaneousness was not material, and thus that
the Pidilite data should not be excluded on that basis alone.
Commerce’s determination that use of a simple average of the data
constituted the best available information for valuing brokerage
and handling, however, does not appear to be supported by
substantial evidence. Commerce states that the Pidilite data
constitutes the best available information for valuing brokerage
and handling because of the data’s “quality and specificity.”
The Department at no point, however, explains how the data meets
either one of these standards.
“An agency must explain its rationale . . . such that a
court may follow and review its line of analysis, its reasonable
assumptions, and other relevant considerations. Explanation is
necessary . . . for this court to perform its statutory review
function.” Shanghai Eswell, 31 CIT at __, Slip Op. 07-138 at 10
(citing Int'l Imaging Materials, Inc. v. United States Int'l
Trade Comm'n, 30 CIT __, Slip Op. 06-11 at 13 (Jan. 23, 2006)
Court No. 06-00234 Page 43
(not reported in the Federal Supplement)). Such an explanation
is particularly important because, as plaintiffs point out:
The Pidilite brokerage charge is derived from
only 19 sales consisting of only 13 metric
tons of merchandise, resulting in a weighted
average brokerage fee of 6.48 Rs/kg. By
contrast the Essar brokerage charge was
derived from over 4,000 metric tons of
shipments with a weighted average brokerage
fee of 0.17 Rs/kg. Thus, the Pidilite
brokerage charge is more than 37 times
greater than the Essar value . . . .
Pls.’ Mem. 48 (citations omitted). Plaintiffs conclude that
“record evidence clearly demonstrates that the Pidilite
represents an unrepresentative and aberrational brokerage value.”
Id. Plaintiffs and the court are entitled to an explanation for
Commerce’s use of the Pidilite data, and therefore, this matter
is remanded.
Court No. 06-00234 Page 44
CONCLUSION
For the foregoing reasons, the court grants the plaintiffs’
motion for judgment on the agency record, in part, and denies it
in part. The court remands this case to Commerce for further
action consistent with this opinion.
On remand Commerce shall make specific reference to the
questions raised in this opinion, as follows. (1) Commerce
shall reconsider and explain its decision not to include expenses
for jars and corks in its financial ratio calculations as direct
expenses used for producing finished honey. If Commerce
concludes that the expenses for the jars and corks should be
taken into account in the financial ratio calculations, it shall
make the necessary adjustments. (2) Commerce shall reconsider and
explain how its regulations for determining the cost of labor
conform to the antidumping statute, with specific reference to
the reliance on data from countries whose level of development is
not comparable to the PRC, and how its insistence that it need
not alter its database for the wage rate calculation conforms to
its behavior in other cases. In the event that Commerce
concludes that its regulations do not conform to the antidumping
statute, it shall propose a method for determining the cost of
labor that does conform to the statute. (3) Commerce shall
reconsider and explain its use of the Pidilite data in
calculating the brokerage and handling value with particular
Court No. 06-00234 Page 45
reference to “quality and specificity.” Should Commerce conclude
that its use of the Pidilite data is not justified it shall
recalculate the brokerage and handling value using only the Essar
data.
/s/Richard K. Eaton
Richard K. Eaton
Dated: June 16, 2008
New York, New York