China Mfrs. Alliance, LLC v. United States

Slip Op. 19-115
UNITED STATES COURT OF INTERNATIONAL TRADE
CHINA MANUFACTURERS ALLIANCE,
LLC and DOUBLE COIN HOLDINGS
LTD., et al.,
Plaintiffs, Before: Timothy C. Stanceu, Chief Judge
v. Consol. Court No. 15-00124
UNITED STATES,
Defendant.
OPINION
[Sustaining a remand redetermination issued in response to court order in an action contesting
the final results of an administrative review of an antidumping duty order on pneumatic
off-the-road tires from the People’s Republic of China]
Dated: September 3, 2019
Daniel L. Porter, Curtis, Mallet-Prevost, Colt & Mosle LLP, of Washington, D.C., for
plaintiffs China Manufacturers Alliance, LLC and Double Coin Holdings Ltd. With him on the
brief were James P. Durling, Matthew P. McCullough, and Tung A. Nguyen.
Ned H. Marshak, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of
Washington, D.C., for plaintiffs Guizhou Tyre Co., Ltd. and Guizhou Tyre Import and Export
Co., Ltd. With him on the brief were Brandon M. Petelin, Dharmendra N. Choudhary, Andrew
T. Schutz, and Jordan C. Kahn.
John J. Todor, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, D.C., for defendant. With him on the brief were Chad A.
Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin E.
White, Jr., Assistant Director. Of counsel was James H. Ahrens II, Attorney, Office of the Chief
Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce, of Washington,
D.C.
Stanceu, Chief Judge: In this consolidated case, plaintiffs contested a final determination
of the International Trade Administration, U.S. Department of Commerce (“Commerce” or the
Consol. Court No. 15-00124 Page 2
“Department”) concluding the fifth periodic administrative review of an antidumping duty order
on certain off-the-road pneumatic tires (“OTR tires”) from the People’s Republic of China
(“China” or the “PRC”).
Before the court is the Department’s decision (the “Second Remand Redetermination”)
responding to the court’s order in China Mfrs. Alliance, LLC. v. United States, 43 CIT __,
357 F. Supp. 3d 1364 (2019) (“CMA II”). Final Results of Redetermination Pursuant to Ct.
Remand (Apr. 16, 2019), ECF No. 231-1. The court sustains the Second Remand
Redetermination because it complies with the court’s order in CMA II and because no party has
commented in opposition.
I. BACKGROUND
Background on this case is presented in the court’s prior opinions and supplemented
briefly herein. CMA II, 43 CIT at __, 357 F. Supp. 3d at 1366-68; China Mfrs. Alliance, LLC v.
United States, 41 CIT __, 205 F. Supp. 3d 1325 (2017) (“CMA I”).
A. The Parties
Plaintiffs China Manufacturers Alliance, LLC and Double Coin Holdings Ltd.
(collectively, “Double Coin”), and plaintiffs Guizhou Tyre Co., Ltd. and Guizhou Tyre Export
and Import Co., Ltd. (collectively, “GTC”) were the mandatory respondents in the fifth review.
They are the plaintiffs in this litigation. Defendant is the United States.
B. The Contested Decision
The contested administrative decision is Certain New Pneumatic Off-the-Road Tires
From the People’s Republic of China: Amended Final Results of Antidumping Duty
Administrative Review; 2012-2013, 80 Fed. Reg. 26,230 (Int’l Trade Admin. May 7, 2015)
(“Amended Final Results”). Commerce issued the Amended Final Results to correct a
Consol. Court No. 15-00124 Page 3
ministerial error in its earlier decision, Certain New Pneumatic Off-the-Road Tires From the
People’s Republic of China: Final Results of Antidumping Duty Administrative Review;
2012-2013, 80 Fed. Reg. 20,197 (Int’l Trade Admin. Apr. 15, 2015) (“Final Results”). In the
Amended Final Results, Commerce assigned GTC a weighed average dumping margin of
11.41%. Commerce determined that Double Coin was a member of the “PRC-wide entity,”
concluding that Double Coin had failed to establish its independence from the government of the
PRC and assigned it the rate it determined for that entity, which was 105.31%.
II. DISCUSSION
A. Jurisdiction and Standard of Review
The court exercises jurisdiction pursuant to section 201 of the Customs Courts Act of
1980, 28 U.S.C. § 1581(c) (2012), which grants the Court of International Trade jurisdiction of
any civil action commenced under 19 U.S.C. § 1516a.1 The court “shall hold unlawful any
determination, finding, or conclusion found . . . to be unsupported by substantial evidence on the
record, or otherwise not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i).
B. Prior Judicial Proceedings
In CMA I, the court remanded the Amended Final Results to Commerce with respect to
four determinations. Only one of those determinations pertained to Double Coin: the court
rejected the Department’s decision to assign Double Coin the 105.31% rate that Commerce
determined for the PRC-wide entity and directed Commerce to assign Double Coin the
weighted-average dumping margin of 0.14% (a de minimis margin) that Commerce determined
from its examination of Double Coin’s own sales. CMA I, 41 CIT at __, 205 F. Supp. 3d
1
All citations to the United States Code herein are to the 2012 edition.
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at 1334-41. The other three determinations pertained to GTC’s margin. First, the court held
unlawful the Department’s decision to make an 8% reduction in the starting prices used to
determine export price (“EP”) and constructed export price (“CEP”) to account for what
Commerce termed “irrecoverable” value-added tax (“VAT”). Id., 41 CIT at __, 205 F. Supp. 3d
at 1344-51. The court reasoned that Commerce, based on an impermissible construction of
19 U.S.C. § 1677a(c)(2)(B), resorted to a presumption in reducing the starting prices without
reaching a finding that any specific amount actually was imposed by the government of the PRC
as an “export tax, duty, or other charge” within the meaning of that provision. Id. Second, the
court ordered Commerce to reconsider its calculations of deductions from CEP for GTC’s
brokerage and handling costs and ocean freight costs, concluding that the Department’s finding
that these calculations were free of “double counting” was not supported by substantial evidence
on the record. Id., 41 CIT at __, 205 F. Supp. 3d at 1356-58. Finally, the court ordered
Commerce to reconsider its decision not to make an inflation adjustment for GTC’s domestic
warehousing costs. Id., 41 CIT at __, 205 F. Supp. 3d at 1358-59.
In CMA II, the court ruled on the decision (“First Remand Redetermination”) Commerce
submitted to the court in response to the court’s opinion and order in CMA I. In the First
Remand Redetermination, Commerce, under protest, assigned Double Coin a weighted average
dumping margin of 0.14% (de minimis). Making several changes to its calculations, Commerce
revised GTC’s margin from 11.41% to 11.33%. CMA II, 43 CIT at __, 357 F. Supp. 3d at 1367.
CMA II sustained two of the changes to GTC’s margin calculation in the First Remand
Redetermination, changes to which neither party objected. Commerce concluded that one
element of its calculation of deductions from CEP for GTC’s brokerage and handling and ocean
freight expenses, “Shanghai Port Charges,” was double counted and made a correction for this
Consol. Court No. 15-00124 Page 5
purpose. Commerce also redetermined GTC’s surrogate warehousing expenses, adjusting for
inflation. Id., 43 CIT at __, 357 F. Supp. 3d at 1369.
In the First Remand Redetermination, Commerce, under protest, assigned Double Coin
the 0.14% margin it had calculated based on Double Coin’s own sales, in response to the court’s
order. Id., 43 CIT at __, 357 F. Supp. 3d at 1381. After Commerce submitted the First Remand
Redetermination to the court, defendant moved for a partial remand that would allow Commerce
to revisit the issue of Double Coin’s weighted-average dumping margin in light of the decision
of the Court of Appeals for the Federal Circuit in Diamond Sawblades Mfrs. Coal. v. United
States, 866 F.3d 1304 (Fed. Cir. 2017) (“Diamond Sawblades”). Id. Three issues then remained
in this litigation: (1) defendant’s motion for a partial remand to reconsider Double Coin’s rate;
(2) whether the Department’s deductions from the EP and CEP starting prices for irrecoverable
VAT were lawful; and (3) whether elements of the Department’s calculation of deductions for
GTC’s brokerage and handling costs, and ocean freight costs, other than the Shanghai Port
Charges, also were double counted.
In considering defendant’s motion for a partial remand, the CMA II opinion analyzed the
holdings in Diamond Sawblades, one of which the court considered to bear on this case. The
opinion described that holding as follows: “Diamond Sawblades holds that the Tariff Act allows
Commerce to assign the rate it assigns to the PRC-wide entity to a cooperative respondent it
selected as a mandatory respondent, provided the respondent fails to rebut the Department’s
presumption of control by the government of the PRC.” Id., 43 CIT at __, 357 F. Supp. 3d
at 1382. Without deciding the question of whether Double Coin had rebutted the Department’s
presumption of government control, the CMA II opinion concluded, for various reasons as
explained therein, that “the only rate supported by the record evidence that Commerce
Consol. Court No. 15-00124 Page 6
reasonably could apply to the PRC-wide entity—and therefore to Double Coin—were the court
to grant the requested partial remand, would be one equivalent to the 0.14% margin Commerce
already determined for Double Coin in the Remand Redetermination.” Id., 43 CIT at __, 357 F.
Supp. 3d at 1388. The court observed that “Commerce never requested any information from the
government of the PRC or from any part of the PRC-wide entity other than Double Coin.” Id.,
43 CIT at __, 357 F. Supp. 3d at 1387. The court also observed that only four exporters or
producers of OTR tires specifically were included in the fifth review. Id. Two of these were the
mandatory, and fully cooperating, respondents, i.e., Double Coin and GTC, and the other two
were unexamined respondents Commerce found to have demonstrated independence from the
PRC government, both of which were assigned the rate determined for GTC. Id. Noting that
Double Coin was the only Chinese exporter or producer of OTR tires that Commerce considered
to be part of the PRC-wide entity and that can be identified from the record as actually being in
the fifth review, the court concluded that “the only record information relevant to determining a
rate for the PRC-wide entity was the information pertinent to Double Coin.” Id., 43 CIT at __,
357 F. Supp. 3d at 1388. The court reasoned that because Commerce already had assigned the
0.14% de minimis rate to Double Coin in the First Remand Redetermination and “does not seek
to reconsider the 105.31% rate it assigned to the PRC-wide entity (except with respect to Double
Coin), granting defendant’s motion for a partial remand would serve no purpose.” Id.
For the First Remand Redetermination, Commerce retained the 8% reduction in GTC’s
EP and CEP starting prices for what Commerce considered to be irrecoverable value-added tax.
The court set aside that decision as unlawful in CMA II. Citing Qingdao Qihang Tyre Co. v.
United States, 42 CIT __, __, 308 F. Supp. 3d 1329, 1338-47 (2018), which was issued after
CMA I was decided, the court concluded that the statutory interpretation under which Commerce
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made deductions from EP and CEP starting prices for irrecoverable VAT “contravenes the plain
meaning, statutory history, and legislative history” of 19 U.S.C. § 1677a(c)(2)(B). CMA II,
43 CIT at __, 357 F. Supp. 3d at 1375. After discussing provisions in the Tariff Act that
addressed domestic taxes such as value-added taxes separately from the export taxes falling
within the scope of § 1677a(c)(2)(B), the court concluded that “Congress had a specific intent
with respect to VAT imposed by an exporting country on subject merchandise or the materials
used to produce it.” Id. “Congress did not intend that irrecoverable VAT, i.e., VAT that was not
refunded or avoided by reason of exportation of the good, would increase a dumping margin
(although it did intend that recoverable VAT, in some circumstances not present here, could
reduce a dumping margin.)” Id. “In addition, Commerce erred in finding, without any
evidentiary support, that Chinese irrecoverable VAT is a tax not imposed on the domestic good.”
Id. CMA II ordered Commerce to “take the appropriate corrective action to remove from the
calculation of GTC’s margin its downward EP and CEP adjustments for VAT.” Id.
CMA II held that substantial evidence on the record was not available to support the
Department’s finding in the First Remand Redetermination that only one cost category of the
brokerage and handling and ocean freight costs, i.e., the Shanghai Port Charges, were double
counted. Id., 43 CIT at __, 357 F. Supp. 3d at 1379. The court ordered Commerce to ensure that
no costs are double counted either as between brokerage and handling costs and ocean freight
costs, or as between ocean freight costs and U.S. inland freight costs. Id.
C. The Second Remand Redetermination
In the Second Remand Redetermination, Commerce recalculated GTC’s weighted
average dumping margin, reducing it from 11.33%, as determined in the First Remand
Redetermination, to 4.59%. Second Remand Redetermination 14. Commerce, under protest,
Consol. Court No. 15-00124 Page 8
eliminated its deductions for irrecoverable VAT and, reconsidering its calculations of GTC’s
brokerage and handling and ocean freight costs, eliminated additional cost elements it
determined to have been double counted. The court addresses each of these changes below.
1. Elimination of Irrecoverable VAT Adjustment in Calculating GTC’s Dumping Margin
In CMA II, the court directed Commerce to recalculate EP and CEP without making a
reduction in the EP and CEP starting prices for irrecoverable VAT. Commerce, in response,
eliminated its irrecoverable VAT deduction. Commerce stated that “[w]e respectfully disagree
with the court’s decision in China Mfr. Alliance II [CMA II] concerning the irrecoverable VAT
adjustment used in GTC’s weighted-average margin calculation,” Second Remand
Redetermination 4, but provided no explanation of why it disagreed with the analysis of the VAT
issue in CMA II.
2. Recalculation of GTC’s Ocean Freight Surrogate Value
Commerce obtained a surrogate value for GTC’s export brokerage and handling costs
from a World Bank publication, Doing Business 2014: Indonesia, Indonesia being the surrogate
country Commerce used for surrogate values in the review. CMA II, 43 CIT at __,
357 F. Supp. 3d at 1375. Commerce valued GTC’s trans-Pacific ocean freight using shipping
price quotes published online by Descartes Systems Group, Inc. (“Descartes”). Id., 43 CIT at __,
357 F. Supp. 3d at 1376. It also used Descartes price data to derive a value for U.S. inland
freight. Id. In CMA II, the court ordered Commerce to “ensure that no costs are double counted
either as between (1) brokerage and handling (based on the Doing Business report) and ocean
freight (based on the Descartes quotes), or (2) ocean freight (based on the Descartes quotes) and
U.S. inland freight (based on the Descartes price lists).” Id., 43 CIT at __, 357 F. Supp. 3d
at 1379. The court concluded in CMA II that Commerce did not explain why seven charges
Consol. Court No. 15-00124 Page 9
identified as ocean freight charges in Descartes price quotes were not accounted for again in the
U.S. inland freight charges. These were the Automated Manifest System (“AMS”) Charge,
Chassis Usage Charges, International Ship and Port Security Charges, ISD Handling Charges,
Traffic Mitigation Fee, Clean Truck Fee, and Documentation Charges. Id., 43 CIT at __,
357 F. Supp. 3d at 1378.
Commerce stated in the Second Remand Redetermination that, pursuant to the court’s
order in CMA I, it reopened the record to solicit information on potential double counting.
Second Remand Redetermination 6. On the basis of the expanded record, Commerce eliminated
the Shanghai Port Charge from the ocean freight calculation. Id. Upon re-examining the record,
Commerce concluded in the Second Remand Redetermination that no additional double counting
of costs occurred between the brokerage and handling and the ocean freight cost categories. Id.
at 8. Also, Commerce noted that, after the Shanghai Port Charge was removed from the ocean
freight surrogate value, no party argued that additional double counting occurred between
brokerage and handling costs and ocean freight costs. Id.
In examining potential double counting between ocean freight charges and U.S. inland
freight charges, Commerce concluded that four of the seven charges listed above appeared on
only one of the twenty-four ocean freight price quotes Commerce used and therefore did not
appear to be customary charges. Commerce eliminated this price quote from its calculation.
Commerce then considered whether the remaining three types of charges—AMS Charges,
Documentation Charges, and Traffic Mitigation Fees—were duplicated in the data it used for
inland freight charges. Id. at 9-10.
Of the three charges in question, Commerce concluded that only the Traffic Mitigation
Fees are reasonably attributable to inland freight expenses and removed these fees from its
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calculation of international freight expense. Commerce cited record evidence from the first
remand in concluding that the Traffic Mitigation Fees are “charged to truck freight carriers upon
pick-up of cargo from the port, to fund operations of the port to allow for off-peak hour pick up
of freight from the ports of Los Angeles and Long Beach to mitigate traffic congestion,” id. at 12
(footnote omitted), and are “reasonably attributable to U.S. inland freight expenses,” id. at 13.
Commerce cited record information—specifically, the Descartes logistics and supply
chain glossary—in concluding that the Automated Manifest System Charge is an ocean freight
expense related to arrival of cargo at the port of destination. Id. at 11. The record information
indicates that the charge is for the providing electronic transmission of manifest information
from the vessel to Customs and Border Protection. Id. The record supports the Department’s
conclusion that the charge is not related to U.S. inland movement of freight and therefore was
not double counted.
Commerce stated that “Documentation Charges” appear on approximately half of the
Descartes quotes for ocean freight charges. Id. at 11-12. Commerce reiterated its finding from
the First Remand Redetermination that these charges relate to documents such as the master bill
of lading, which covers all containers aboard an ocean-going vessel, and to U.S. destination
document fees. Id. at 12. Commerce concluded that evidence did not support a finding that
these documentation charges related to inland freight, id., a conclusion the record supports.
In summary, the court concludes that Commerce’s findings and conclusions pertaining to
possible double counting were supported by substantial evidence on the augmented record and
comply with the court’s order in CMA II.
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II. CONCLUSION
The court concludes, for the reasons discussed above, that the Second Remand
Redetermination complies with the court’s order in CMA II. Judgment sustaining the
determinations therein will enter accordingly.
/s/ Timothy C. Stanceu
Timothy C. Stanceu, Chief Judge
Dated: September 3, 2019
New York, New York