La Molisana, S.p.A. v. United States

Slip Op. 18 - 76
UNITED STATES COURT OF INTERNATIONAL TRADE
:
LA MOLISANA S.p.A, :
:
Plaintiff, :
:
v. : Before: R. Kenton Musgrave, Senior Judge
: Court No. 16-00047
:
UNITED STATES, :
:
Defendant, :
:
and :
:
NEW WORLD PASTA CO. and :
DAKATA GROWERS PASTA CO., :
Defendant-Intervenors. :
:
OPINION AND ORDER
[Sustaining remand results on 18th administrative review of certain pasta from Italy.]
Decided: June 21, 2018
David J. Craven, Travis & Rosenberg, of Chicago, IL, for the plaintiff.
Elizabeth A. Speck, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, DC, for the defendant. On the brief were Chad A. Readler,
Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Jr.,
Assistant Director. Of Counsel was Natan P.L. Tuban, Attorney, Office of the Chief Counsel for
Trade Enforcement and Compliance, U.S. Department of Commerce.
Paul C. Rosenthal and David C. Smith, Kelley Drye & Warren LLP, of Washington, DC, for
the defendant-intervenors.
Musgrave, Senior Judge: This opinion concerns the results of remand of the 18th
administrative review (“AR”) of the antidumping duty order on certain pasta from Italy pursuant to
Court No. 16-00047 Page 2
the prior opinion on the matter. See Slip Op. 17-111 (Aug. 23, 2017).1 Familiarity with that decision
is here presumed. To the International Trade Administration, U.S. Department of Commerce
(“Commerce” or “Department”), two issues were remanded: (1) whether Commerce failed to provide
meaningful opportunity for addressing the agency’s differential pricing analysis; and (2) whether
Commerce erred in requiring the plaintiff La Molisana S.P.A (“La Molisana” or “LM”) to report its
pasta sales product shapes in conformity with the existing identities and categories of shapes on
Commerce’s pasta shape classification list. On remand Commerce reconsidered the record and
arguments presented by La Molisana on both issues.
I
The “Final Results of Redetermination Pursuant to Court Remand”
(“Redetermination”), now on the record (R-PDoc 3), addressed La Molisana’s arguments with
respect to the differential pricing issue as raised in its administrative case brief, PDoc 208 (Oct. 6,
2015), and via response to La Molisana’s comments on the draft remand results, R-PDoc 2 (Nov.
1, 2017), by noting that the Apex Frozen Foods decisions’ upholding2 of the application of zeroing
when using the average-to-transaction comparison methodology of 19 U.S.C. §1677f-1(d)(1)(B)
disposed of La Molisana’s methodological arguments, and with respect to La Molisana’s seasonality-
of-product argument the Redetermination states that there was no analysis or evidence on the record
1
See also Certain Pasta From Italy: Final Results of Antidumping Administrative Review;
2013-2014, 81 Fed. Reg. 8043 (Feb. 17, 2016), and the accompanying issues and decision
memorandum, PDoc 228, as amended by Certain Pasta From Italy: Amended Final Results of
Antidumping Duty Administrative Review; 2013-2104, 8l Fed. Reg. 12690 (Mar. 10, 2016).
2
Apex Frozen Foods v. United States, 862 F.3d 1322 (Fed. Cir. 2017) (7th Review); Apex
Frozen Foods v. United States, 862 F.3d 1327 (Fed. Cir. 2017) (8th Review).
Court No. 16-00047 Page 3
to support it. The Redetermination also notes that the court had recently found no statistical error
inherent when the entire population of respondents’ sales in the United States market is analyzed for
differential pricing and held the use of “widely accepted thresholds” for the Cohen’s d coefficient
not arbitrary. Redetermination at 13-16, noting Xi’an Metals & Minerals Import & Export Co. v.
United States, 41 CIT ___, ___, 256 F. Supp. 3d 1346, 1364 (2017).
In its comments here, La Molisana continues to believe that differential pricing
analysis is nothing more than “zeroing in a disguise and that ultimately it will be found to be a
violation of the United States’ WTO obligations”3, but since the issue has been upheld in other cases
La Molisana offers no further comment on the Redetermination. Suffice it to state at this point that
substantial evidence and law support the Redetermination on this issue.
II
With respect to the issue of shape classification, La Molisana in its administrative
case brief had requested reclassification of several specialty cuts, coded as category “6” in
Commerce’s shape list, to be reclassified as regular short cuts, coded as “5,” solely on the basis of
its own production line speeds. See PDoc 208. On remand, Commerce maintains that its prior final
results are correct in denying La Molisana’s request. Redetermination at 5.
The Redetermination states that Commerce has a statutory duty to uphold a stable
and consistent model match methodology; that the model match methodology for this antidumping
3
That is debatable, as it was arguably that organization that violated its obligations to this
country over this country’s extant methodology of zeroing when the WTO -- and the Antidumping
Agreement in particular -- came into being. See, e.g., Roger P. Alford, Reflections on US--Zeroing:
A Study in Judicial Overreaching by the WTO Appellate Body, 45 Colum. J. Transnat’l L. 196
(2006). Cf. Xi’an Metals, 41 CIT at __ n.10, 256 F. Supp. 3d at 1360 n.10 with Catfish Farmers of
America v. United States, 38 CIT ___, ___, Slip Op. 14-146 at 38 (2014).
Court No. 16-00047 Page 4
proceeding was developed during the original investigation and refined during the subsequent three
administrative reviews, and that its long-standing practice is that once a model-match methodology
has been established, it will not modify that methodology in subsequent proceedings unless there are
compelling reasons to do so;4 that reclassification of shapes must be supported by industry-wide and
not company-specific technical information; that company-specific information in support of a
modification of the shape list must relate to a new shape classification; and that allowing
company-specific shape reclassifications would render the model-match criteria unpredictable,
volatile, and inconsistent. Id. at 5-13, 19-31. Commerce’s main concern in this regard appears to
be the potential for manipulation of U.S. market and home market product sales, resulting in less
accurate price-to-price comparisons in the dumping margin. See id. at 13, 29.
In accordance therewith, Commerce found on remand that La Molisana had not
presented any industry changes that would warrant shape reclassification, and that the information
La Molisana did place on the record was insufficient to warrant shape reclassification. Id. at 5, 19-
20. Specifically, the Redetermination points out that only six out of the 20 shapes for which La
Molisana sought reclassification appear in La Molisana’s product catalogue in the LM Shape
4
Redetermination at 7, paraphrasing Fagersta Stainless AB v. United States, 32 CIT 889,
894, 577 F. Supp. 2d 1270, 1276 (2008) (“[o]nce Commerce has established a model-match
methodology in an antidumping [proceeding], it will not modify that methodology in subsequent
[segments] unless there are ‘compelling reasons’ to do so”). “Compelling reasons” means
“compelling and convincing evidence” that the existing model-match criteria “are not reflective of
the merchandise in question,” that there have been changes in the relevant industry, or that “there
is some other compelling reason present which requires a change.” Id. (citation omitted). See also,
e.g., Notice of Final Results of Antidumping Duty Administrative Review: Certain Pasta from Italy,
78 Fed. Reg. 9364 (Feb. 8. 2013) (“AR15”), and accompanying issues and decision memorandum
(“I&D Memo”) at cmt 1, and Notice of Final Results of Antidumping Duty Administrative Review:
Certain Pasta from Italy, 67 Fed. Reg. 300 (Jan 3. 2002) (“AR4”), and accompanying I&D Memo
at cmt 19, both of which the parties here discuss in the context of their respective positions.
Court No. 16-00047 Page 5
Exhibits, and that La Molisana had not provided descriptions or pictures for 14 of the 20 shapes for
which it had requested reclassification.5 Redetermination at 4. La Molisana’s comments disagree
that information is “missing” from the record, as the issue here is only the throughput rate, not
whether a cut is short or long, e.g., R-PDoc 2 at 2-3, but be that as it may, the administrative position
expressed in the Redetermination is that the information on the record does not support
reclassification regardless, as the information is company-specific (e.g., production speed), and, as
mentioned, Commerce’s policy is only to consider company-specific information when it relates to
new shapes not already on the existing shape classification list. Commerce then reiterated that all
of La Molisana’s proposed reclassifications pertained to shapes that were already identified on the
shape list. E.g., Redetermination at 5 (“all of the shapes that La Molisana sought to reclassify are
on the Department’s shape list”).
As Commerce points out, Prodotti Alimentary Meridionali, S.R.L. v. United States,
27 CIT 547, 548-50 (2003) (“PAM”), upheld the shape model match methodology as reasonable.
PAM considered argument over two shapes, short cuts and soup cuts (or soupettes), that were listed
on the shape list as category 5 and category 7, respectively, and that were “produced on the same
machine.” PAM at 548. Because their production speeds were “very similar”, the PAM plaintiff
requested Commerce to “merge” the two product categories. That was effectively an “industry-
wide” request, but Commerce declined. Because the same pasta shapes could be produced on
different machines, the court agreed with Commerce that the similarities in machine type used
5
See LM Resp. to Sections B & C of the Initial Questionnaire (“IQ”) (Dec. 2, 2014), CDocs
38-54, at Exs. B-1 & C-1; see also LM Resp. to Sec. A of the IQ (Nov. 5, 2015), PDocs 34-39, at
Ex. A-13(a).
Court No. 16-00047 Page 6
should not be determinative. Further, “[e]ven if certain products are produced on the same machines
at similar speeds, that does not necessarily establish that they are the same product, even if they
might be used in a similar manner.” Id. at 549. Therefore, the PAM plaintiff had “not demonstrated
a flaw in the model match methodology which requires its amendment.” Id.
Although it was in the context of the record presented thereat that PAM held the
model-match methodology reasonable, and the matter at bar is the inverse of that case, the result here
is ultimately the same. Commerce’s position is that AR15’s acknowledgment of the 75 percent
throughput rate to distinguish pasta shape for specialty long and short pasta cuts was only a part of
the description of the development of the model-match methodology in the original investigation and
its refinement in subsequent reviews, which circumstance “does not indicate that it is [only]
production speed, [as opposed to] sales characteristics, [that] distinguishes special and regular cuts,
as La Molisana claims” nor does it “validate La Molisana’s use of its line speeds to reclassify shapes
that are already on the Department’s shape list.” Redetermination at 12. Commerce also contends
La Molisana’s description of AR4’s acceptance of reclassifying the certain pasta shapes considered
therein is inaccurate, as that administrative review considered shapes that were not already listed on
the shape classification list. See Def’s Resp. to Comments at 9-10, quoting Redetermination at 24
(quoting AR4 I&D Memo at cmt 18).6
6
Inter alia:
We have developed a list of pasta cuts and their corresponding shapes in which
standard and specialty cuts are segregated based on line speed. However, we
understand that there may be discrepancies between the shape category list we
provide respondents in the questionnaire and their own production which would
result in a different classification of certain cuts or the manufacturer may produce
certain cuts not listed by the Department. Therefore, the instructions to the
(continued...)
Court No. 16-00047 Page 7
The first contention obscures that La Molisana’s focus is solely upon the 75 percent
production speed demarcation; the other three considerations of the shapes methodology are not
relevant to that argument. Cf. New World Pasta Co. v. United States, 28 CIT 290, 309 n.22, 316 F.
Supp. 2d 1338, 1355 n.22 (2004) (“line speed is a shorthand for shape”). The second contention is
imprecise.7 The defendant intervenors provide a rather fuller response, in contending that AR4
6
(...continued)
questionnaire specifically state that if the respondent sold any pasta cuts which the
Department does not list, the respondent should provide a description and picture of
the pasta type, the production line on which it is produced, the standard production
capacity of that line (e.g., pounds per hour), and the line speed, for the pasta type in
question.
In its questionnaire response, we noted that there were certain cuts which PAM added
to its production which were either not listed by the Department or PAM considered
the cut to be a shape different than the one listed by the Department (i.e., PAM
classified a cut to be a standard cut whereas the Department categorized it as a
specialty cut). Therefore, we specifically requested from PAM the company-specific
line speed data necessary to classify those cuts in question. PAM submitted the line
speed data and contended that certain shapes should be classified as a specialty rather
than standard (or vice versa). We accepted the shape classifications that PAM
claimed based upon the PAM line speed data that it provided.
AR4 I&D Memo at cmt. 18.
7
Noted here, in AR15 Commerce described a certain respondent’s characterization of AR4
as “inaccurate” through the following explanation:
In the fourth review, the Department verified the physical differences, cost
differences, and throughput rate differences between the Teflon-die production
technology and the older, more traditional bronze-die production technology for
Ferrara products. . . . The Department had not previously reviewed the differences
between these two production technologies in prior reviews where the model match
methodology was developed. In the final results of the fourth review, the
Department allowed Ferrara to use a five-digit CONNUM, instead of a four-digit
CONNUM[,] to account for the differences between bronze-die pasta and Teflon-die
pasta for purposes of model matching. . . . However, all companies used the same
(continued...)
Court No. 16-00047 Page 8
“wrongly” implied pasta shapes might be re-classified based on a company’s own line speed,
wherein Commerce explicitly stated: “For those cuts which PAM believed were specialty cuts yet
the Department considered a regular cut (or vice versa), [PAM] provided the line speed data. We
reviewed this information and accepted the revised shape classification as provided by PAM.” AR4
I&D Memo at cmt 19. Cf. also notes 6 & 7. The court expresses no opinion on the “correctness”
of AR4, but the defendant intervenors are themselves correct in arguing that AR4 apparently stands
apart from every other review by inclusion of this language. The court thus agrees that AR4 cannot
be construed to amount to an administrative practice. Cf. Huvis Corp. v. United States, 31 CIT 1803,
1811, 525 F. Supp. 2d 1370, 1378-79 (2007) (more than two instances required for a specific
administrative action to evolve into a practice), citing Shandong Huarong Machinery CO. v. United
States, 30 CIT 1269, 1293 n.23, 435 F. Supp. 2d 1261, 1282 n.23 (2006).
In the final analysis, La Molisana’s comments here, on PAM and on AR4 and AR15,
do not persuade that the results of redetermination can be concluded unsupported by substantial
evidence on the record and not in accordance with law under the “reasonableness” standard of
reviewing Commerce’s methodologies. See, e.g., Apex Frozen Foods Private Ltd. v. United States,
862 F.3d 1337, 1350 (Fed. Cir. 2017); JBF RAK LLC v. United States, 790 F.3d 1358, 1364 (Fed.
Cir. 2015). La Molisana does not dispute the “industry-wide” shape classification list itself, and it
7
(...continued)
shape codes in the CONNUMs. Thus, in the reviews cited by Granoro, the change
accepted by the Department was based on the differences between bronze die and
Teflon-die production methods and outcomes. Although we found that the physical
and cost differences of products produced using these two different methods merited
separate treatment, this was not a change to the reported variables used to create the
CONNUM that we use for model matching purposes.
Id. (italics added).
Court No. 16-00047 Page 9
further agrees that a “stable and consistent model-match methodology” is desirable. Its argument
is simply for recognition of the purported fact that certain of its shapes, which appear on the shape
classification list as having been produced at line speeds corresponding to “special” cut categories
or designations, had actually been produced at line speeds corresponding with “standard” (or regular)
cut line speed categories or designations. See, e.g., LM Comments at 2-3 (“[t]hat application of this
methodology means that a particular shape might be classified one way for one producer and another
way for another producer does not mean that the methodology has changed -- it simply means that
the underlying facts changed, and [that] the methodology produced a different result); id. at 5
(“[t]here may be ‘discrepancies between the shape category list we provide respondents in the
questionnaire and their own production which would result in a different classification of certain
cuts’ ”) (quoting AR4 I&D Memo at cmt 18; emphasis removed).
Unfortunately for La Molisana, Commerce’s policy is firm with respect to company-
specific requests for reclassification of shapes already identified on the shape list. Of course, costs
are a metaphysical aspect of the physical characteristics of a good-- they are undoubtedly what drove
the “dividing line” of the shape list between regular and specialty cuts for model matching purposes
in the first place8 -- and Commerce acknowledges that slower line speeds have higher manufacturing
costs associated with them. Hence, insistence that certain shapes remain within the respective
categories associated with slower “specialty” line speeds when record evidence supports actual
production of those shapes at higher “standard” cut line speeds might seem to imply that the
determination is unsupported by substantial evidence of record. Nonetheless, as indicated, La
8
See, e.g., AR15 I&D Memo at cmt 1 (describing the use of a 75 percent throughput rate to
distinguish pasta shape for specialty long and short pasta cuts in the original investigation).
Court No. 16-00047 Page 10
Molisana’s argument is contrary to Commerce’s stated policy, and the court must defer to
Commerce’s concerns regarding the potential for manipulation. La Molisana argues Commerce’s
reasoning faulty, i.e., that
with respect to the other items that make up the control number, volitional decisions
by the Pasta Manufacturer enter into whether or not a product is assigned a specific
code. The quality code is impacted by the decision by the producer as to the specific
blend of wheat used (or even by the label placed on the bag), the additive code by the
decision whether or not to use an additive, and the enrichment code by the decision
whether or not to use an enrichment. Each of these is based on a volitional choice by
the producer. To the extent that line speed is a volitional choice, it is no different than
any of these other criteria. In fact, even the “shape code” would be “subject to
manipulation” by the simple step of giving the existent product a “new name” and
seeking its classification based on company specific line speeds. (Elbow Macaroni,
the exemplar for “standard short”, could be renamed L-Bro Macaroni and thus have
its classification reconsidered.)
More critically, the reason that product is divided between Special and Standard cuts
is the reality that special cuts are costlier to manufacture. (See 4th POR I&D at Issue
18. ) Slowing down the line speed would result in a higher cost of production. It is
axiomatic that a producer will, therefore, operate at the fastest production speed to
minimize the costs of production. A specialty cut, because of the slower line speed,
will have a higher cost, as reflected in the Section D data and will be sold at a higher
price as reflected in the Section B and C data.
LM Comments at 7-8 (italics added).
All of which may well be true. But it is insufficient to address Commerce’s concerns
regarding the potential for manipulation, via company-specific reclassifications of existing shape
categories on the shape list, of U.S. market sales and home market sales comparisons. Commerce
might just as readily have concluded the pasta shapes for which La Molisana sought reclassification
to be “new” shapes due to line speed, cf. note 7, but the court cannot reweigh the evidence or
substitute judgment therefor. See, e.g., Usinor v. United States, 28 CIT 1107, 1111, 342 F. Supp.
2d 1267, 1272 (2004). In short, La Molisana does not persuade the remand results are erroneous.
Court No. 16-00047 Page 11
Conclusion
After considering the arguments on the results of redetermination, La Molisana does
not persuade that the Redetermination is unsupported by substantial evidence on the record or
otherwise not in accordance with law. Judgment will enter accordingly.
So ordered.
/s/ R. Kenton Musgrave
R. Kenton Musgrave, Senior Judge
Dated: June 21, 2018
New York, New York