Ad Hoc Shrimp Trade Action Comm. v. United States

Slip Op. 09-126
UNITED STATES COURT OF INTERNATIONAL TRADE
AD HOC SHRIMP TRADE ACTION
COMMITTEE,
Before: Richard W. Goldberg,
Plaintiff, Senior Judge
v. Court No. 08-00229
UNITED STATES,
Defendant, PUBLIC VERSION
and
OCEANINVEST, S.A.,
Defendant-
Intervenor.
OPINION
[Commerce’s final antidumping duty administrative review
determination is sustained.]
Dated: October 30, 2009
Picard, Kentz & Rowe, LLP (Andrew W. Kentz and Nathaniel Maandig
Rickard) for Plaintiff Ad Hoc Shrimp Trade Action Committee.
Michael F. Hertz, Assistant Attorney General; Jeanne E.
Davidson, Director, Patricia A. McCarthy, Assistant Director,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice (Stephen C. Tosini); Office of the Chief Counsel for
Import Administration, U.S. Department of Commerce (Nithya
Nagarajan), Of Counsel, for Defendant United States.
Akin Gump Strauss Hauer & Feld, LLP (Warren E. Connelly, and
Jarrod M. Goldfeder) for Defendant-Intervenor OceanInvest S.A.
Court No. 08 – 00229 Page 2
GOLDBERG, Senior Judge: Plaintiff Ad Hoc Shrimp Trade
Action Committee (“Ad Hoc Shrimp”) is a domestic association of
producers and processors of warmwater shrimp. In this action,
Ad Hoc Shrimp contests certain aspects of the administrative
determination issued by the International Trade Administration
of the United States Department of Commerce (“Commerce”) in the
second administrative review of the antidumping duty order
covering certain frozen warmwater shrimp from Ecuador. See
Certain Frozen Warmwater Shrimp from Ecuador: Final Results and
Partial Rescission of Antidumping Duty Administrative Reviews,
73 Fed. Reg. 39,945 (Dep’t Commerce July 11, 2008) (“Final
Results”). Ad Hoc Shrimp alleges that Commerce erroneously
accepted the raw material cost information for shrimp products
reported by Defendant-Intervenor OceanInvest S.A.
(“OceanInvest”). Accordingly, Ad Hoc Shrimp claims that
Commerce’s Final Results are unsupported by substantial evidence
on the record and otherwise not in accordance with the law.
Commerce supports its determination to rely upon OceanInvest’s
reported costs in the Final Results because those costs reflect
the actual costs associated with the production of shrimp
products and because Commerce did not depart from past practice.
For the reasons that follow, the court sustains Commerce’s
determinations and denies Plaintiff’s motion for judgment on the
agency record to remand the Final Results to Commerce.
Court No. 08 – 00229 Page 3
I. JURISDICTION AND STANDARD OF REVIEW
The Court has jurisdiction over this matter pursuant to
section 516a(a)(2)(B)(iii) of the Tariff Act of 1930, as
amended, 19 U.S.C. § 1516a(a)(2)(B)(iii) (2006), and 28 U.S.C. §
1581(c) (2006).
For administrative reviews of antidumping orders, the Court
sustains Commerce’s determinations, findings, or conclusions
unless they are “unsupported by substantial evidence on the
record, or otherwise not in accordance with law.” 19 U.S.C. §
1516a(b)(1)(B)(i). Substantial evidence is “such relevant
evidence as a reasonable mind might accept as adequate to
support a conclusion.” Universal Camera Corp. v. NLRB, 340 U.S.
474, 477 (1951). When a party alleges that Commerce’s action is
not supported by substantial evidence, the Court assesses
whether the agency action is “unreasonable” given the record as
a whole. Nippon Steel Corp v. United States, 458 F.3d 1345,
1350-51 (Fed. Cir. 2006). “[T]he possibility of drawing two
inconsistent conclusions from the evidence does not prevent an
administrative agency’s finding from being supported by
substantial evidence.” Consolo v. Fed. Mar. Comm’n, 383 U.S.
607, 620 (1966) (citing NLRB v. Nevada Consol. Copper Corp., 316
U.S. 105, 106 (1942)). The Court need only find evidence “which
could reasonably lead” to the conclusion drawn by Commerce, thus
Court No. 08 – 00229 Page 4
making it a “rational decision.” Matsushita Elec. Indus. Co.,
v. United States, 750 F.2d 927, 933 (Fed. Cir. 1984).
II. STATEMENT OF THE FACTS
OceanInvest produces finished, i.e. “value-added”, shrimp
products from raw shrimp delivered by farmers to OceanInvest’s
processing facility in Ecuador. The production process includes
classifying shrimp based upon its size. The size of shrimp,
referred to as the count size, is expressed in terms of the
number of individual shrimp contained in a unit of weight. For
example, a count size of 51/60 headless shrimp indicates one
pound of shrimp that contains 51 to 60 individual headless
shrimp. Individual shrimp may vary in size within the count
size classification for a value-added shrimp product.
OceanInvest pays a higher price for larger shrimp. For
instance, OceanInvest pays more for 51/60 count size than 61/70
count size because the latter contains smaller shrimp.
In February 2007, at Ad Hoc Shrimp’s request, Commerce
initiated a sales-below-cost investigation against OceanInvest.
The investigation focused on OceanInvest’s sales of frozen
warmwater shrimp in the United States during the period of
review (“POR”) from February 1, 2006 to January 31, 2007. Over
the course of the administrative review, Commerce sent
OceanInvest three sets of supplemental questionnaires inquiring
into its cost of production (“COP”) reporting. On March 6,
Court No. 08 – 00229 Page 5
2008, Commerce published the preliminary results of its
administrative review. Certain Frozen Warmwater Shrimp from
Ecuador, 73 Fed. Reg. 12,115 (Dep’t Commerce Mar. 6, 2008)
(preliminary results). In its analysis, Commerce utilized
OceanInvest’s reported costs of raw material inputs.
Ad Hoc Shrimp filed a brief contending that Commerce should
reject OceanInvest’s reported costs of raw material inputs as
distortive. After evaluating the information and explanations
provided by OceanInvest, Commerce disagreed with Ad Hoc Shrimp
and accepted OceanInvest’s reported costs in the Final Results.
Decision Memorandum, A-331-802, ARP 06-07, Admin. R. Pub. Doc
165 (July 3, 2008) available at http://ia.ita.doc.gov/frn/
summary/ECUADOR/E8-15830-1.pdf (last visited October 14, 2009)
(“Decision Mem.”). Commerce determined that the reported cost
information was consistent with OceanInvest’s normal accounting
records and reasonably reflected the costs associated with the
production and sale of the merchandise. Id. at 11.
Ad Hoc Shrimp then filed this action against Commerce under
28 U.S.C. § 1581(c). This Court allowed OceanInvest to
intervene.
III. DISCUSSION
Ad Hoc Shrimp raises two arguments to support its claim
that the Final Results are unsupported by substantial evidence
on the record or otherwise not in accordance with law. First,
Court No. 08 – 00229 Page 6
it alleges that Commerce unreasonably accepted OceanInvest’s
reported raw material input costs for value-added products
despite the fact that those costs are unreliable and reflect a
physical impossibility. Second, Ad Hoc Shrimp argues that
Commerce’s acceptance of OceanInvest’s [ ] raw material
costs for virtually identical value-added products is an
unexplained and unsupported departure from Commerce’s past
practice. The court addresses each argument in turn.
A. Commerce’s determination that OceanInvest’s reported raw
material cost information reasonably reflects its actual
production costs is supported by substantial evidence and
otherwise in accordance with the law.
When considering the imposition of an antidumping duty,
cost of production:
“shall normally be calculated based upon the records
of the exporter or producer of the merchandise, if
such records are kept in accordance with the generally
accepted accounting principles of the exporting
country…and reasonably reflect the costs associated
with the production and sale of the merchandise.”
19 U.S.C. § 1677b(f)(1)(A). Ad Hoc Shrimp does not dispute
whether OceanInvest’s records were kept in accordance with
Ecuadorian generally accepted accounting principles (“GAAP”).
Rather, Ad Hoc Shrimp claims that Commerce’s acceptance of
OceanInvest’s reported raw material costs was not reasonable
under section 773(f)(1)(A) of the Tariff Act, 19 U.S.C. §
1677b(f)(1)(A) because those costs reflected a production
process that was physically impossible and unreliable.
Court No. 08 – 00229 Page 7
Specifically, Ad Hoc Shrimp argues that OceanInvest’s
explanation of its cost methodology is facially implausible
because it [
1
] Ad Hoc Shrimp points to record
evidence for one shrimp product, as identified by the product’s
control number (CONNUM), that suggests that the finished shrimp
product produced does not appear attainable based on the raw
material shrimp size used. See Decision Mem. at 8. However, Ad
Hoc Shrimp fails to take into account several important factors
underlying OceanInvest’s production process and accounting
system.
First, OceanInvest explained that a mix of raw shrimp
inputs, including smaller input size shrimp, can be used to
produce a larger peeled product. For example, a combination of
51/60 count size and 61/70 count size raw shrimp can be used to
produce a 51/60 count size peeled shrimp product. See Letter
from Cameron & Hornbostel LLP to U.S. Department of Commerce,
Case No. A-331-802, Admin R. Pub. Doc. 152, Non-Pub. Doc. 50, at
1-2 (Mar. 11, 2008) (third supplemental section D response)
1
Ad hoc explains that removing the shell necessarily reduces,
not increase, the weight of the raw material. Therefore, Ad Hoc
Shrimp asserts that even if all of the shell-on raw material
OceanInvest listed as being [ ] were in
fact [ ], it would still
be impossible to produce a peeled product weighing [
] per piece as OceanInvest reported.
Court No. 08 – 00229 Page 8
(“Third Supplemental Section D Response”).2 The resulting mix
would be classified as a 51/60 finished product despite the
presence of individual shrimp of varying count size.3 It is the
total number of shrimp in the finished product, not the size of
each individual shrimp, that determines the marked count size of
the product.
The record evidence demonstrates that OceanInvest used
different mixes of raw input shrimp count sizes to produce
finished products that satisfied its customers’ size
specifications. See, e.g., Admin. R. Non-Pub. Doc. 34 (first
supplemental section D response). During its investigation,
Commerce reviewed OceanInvest’s inventory tracking system and
found that OceanInvest tracks the actual mix of shrimp input
sizes that are used to produce each peeled product. Decision
Mem. at 10. This system tracked both the input shrimp size and
cost on an actual, as invoiced basis, to ensure that the final
recorded costs accurately reflected the prices paid for the
inputs. Id. at 10-11.
2
Further references to OceanInvest’s supplemental questionnaire
responses are cited to the administrative record.
3
OceanInvest elaborates that a processor could mix 51 count size
and 65 count size shrimp on a 50/50 basis and produce a one
pound box containing 59 shrimp. In an extreme example, a shrimp
processor could use 90% 61 count peeled shrimp and 10% 51 count
peeled shrimp and still produce an average count size of less
than 60, which falls within the specified 51/60 range.
Court No. 08 – 00229 Page 9
Moreover, Ad Hoc Shrimp’s “disappearing shrimp” argument is
without merit. Ad Hoc Shrimp claims that OceanInvest failed to
explain how shrimp allegedly disappeared in the production
process.4 Thus, the total number of shrimp reported by
OceanInvest, according to Ad Hoc Shrimp, does not reasonably
reflect the costs associated with its production. However,
OceanInvest explained that it was reporting the equivalent yield
of shrimp after the production process. When the shell is
peeled from the shrimp, the difference between the weight of the
shrimp before and after peeling is referred to as the “yield.”
The reported “yield” for the control number at issue was
[ ] which meant that the total weight after peeling was
[ ] of the total weight before peeling. In other words,
OceanInvest was stating that, at the end of the production
process, it had the equivalent yield of [ ]
individual shrimp, not that it had lost individual shrimp during
the course of the production.5
Ad Hoc Shrimp also misinterprets the ramifications of the
“purchasing strategy” disclosed by OceanInvest. OceanInvest
4
This claim focuses on OceanInvest’s questionnaire response that
suggests that the company started the production process with
[ ] shrimp but ended up with only [ ] shrimp.
Third Supplemental Section D Response at 2-3.
5
As OceanInvest explains, [
] Commerce did not understand OceanInvest to say that
[ ] individual shrimp before peeling are literally
equal to [ ] after peeling.
Court No. 08 – 00229 Page 10
explained to Commerce that, from time to time, it employs a
purchasing strategy whereby it [
] Third
Supplemental Section D Response at 1, 3. Under this purchasing
strategy, OceanInvest will [
] See Cost of
Production and Constructed Value Calculation Adjustments for the
Final Results, A-331-802, ARP 06-07, Admin. R. Pub. Doc. 167,
Non-Pub. Doc. 59 (July 3, 2008) (“COP Mem., Admin. R. Non-Pub.
Doc. 59”). In other words, OceanInvest will [
] OceanInvest then classifies and records the
purchased shrimp [ ] and they pay the supplier
[ ] price for the shrimp. Id. For the particular
control number at issue, OceanInvest explained that it had
engaged in this purchasing strategy [
] Third Supplemental Section D Response at 3-4.
Ad Hoc Shrimp does not assert that this purchasing strategy
violates any statute or regulation governing the calculation of
OceanInvest’s raw shrimp costs. Instead, Ad Hoc Shrimp argues
that the conduct of these transactions renders OceanInvest’s
reporting inaccurate because [
] Ad Hoc Shrimp
Court No. 08 – 00229 Page 11
argues that this purchasing practice calls into question the
rest of OceanInvest’s reported costs.
While Ad Hoc Shrimp asserts that OceanInvest [
], Commerce
found that the costs are not distortive. Pursuant to the Tariff
Act, the producer must report to Commerce the actual price paid
for raw shrimp, 19.U.S.C. §§ 1677b(e) and (f), which Commerce
found had occurred in this case. Decision Mem. at 11. In
addition, Commerce noted that this purchasing practice is
infrequent and represents only a small percentage of
OceanInvest’s overall raw material purchases.6 Id. When it did
happen, OceanInvest recorded in its accounting system [
] COP Mem., Admin. R. Non-Pub. Doc.
59. OceanInvest calculated the actual invoice cost of the raw
shrimp in their normal books and records which they used to
compute their reported costs to Commerce. Id. Commerce thereby
determined that the costs captured in the reported costs
6
Commerce explained that the record evidence demonstrates that
this purchasing practice affected [ ].
Admin. R. Non-Pub. Doc. 34 at Ex. SD-11; Admin. R. Non-Pub. Doc.
42 at Ex. 2SD-6. These [ ] represent only
[ ] percent of the [ ] individual reported peeled control
numbers, and further, peeled products as a whole account for
only [ ] percent of total shrimp production for OceanInvest
during the period of review. Def.’s Br. at 9.
Court No. 08 – 00229 Page 12
reflected OceanInvest’s actual costs incurred for its raw
material shrimp inputs, Decision Mem. at 11, [
]
Simply because Ad Hoc Shrimp argues that this “purchasing
strategy” is not a reasonable explanation for OceanInvest’s
reported information does not prevent Commerce’s determination
from being supported by substantial evidence. See Catfish
Farmers of America v. United States, Slip Op. 09-96, 2009 WL
2921300 (CIT Sep. 14, 2009) (“The administrative record for an
antidumping duty administrative review may support two or more
reasonable, though inconsistent, determinations on a given
issue.”) As part of its investigative process, Commerce
specifically requested a deeper explanation of the reported
costs for the control number at issue. Commerce reviewed how
OceanInvest reflected its payments to the farmers in its raw
material inventory system. COP Mem., Admin. R. Non-Pub. Doc.
59. It then reviewed how the costs in that system flowed in the
calculations contained in the questionnaire responses on COP
reporting that OceanInvest filed with Commerce. Id. Commerce
analyzed OceanInvest’s reported costs taking into consideration
OceanInvest’s inventory tracking system, cost methodology, and
questionnaire responses explaining this purchasing strategy.
Commerce thereby determined that the infrequent use of this
Court No. 08 – 00229 Page 13
purchasing practice did not invalidate the accuracy of
OceanInvest’s material costs. Decision Mem. at 10-11. Based on
the record evidence, Commerce reasonably concluded that this
purchasing strategy, in light of OceanInvest’s reported
information and supplemental responses, was a reasonable
explanation for OceanInvest’s reported costs.
Ad Hoc Shrimp also claims that Commerce’s determination in
the Final Results is not reasonable under section 773(f)(1)(A)
of the Tariff Act, 19 U.S.C. § 1677b(f)(1)(A) because agency
practice requires accurate product-specific costs in addition to
accurate aggregate costs. Pl.’s Br. 10 (citing Certain
Preserved Mushroom from Indonesia, 63 Fed. Reg. 72,268, 72,276
(Dep’t Commerce Dec. 31, 1998) (“The fact that the inaccurate
standards for each major cost element add up to a total that is
closer to the actual total costs does not support the claim that
individual standard costs are reliable.”)). This argument
reiterates Ad Hoc Shrimp’s previous argument regarding
[ ] because Ad Hoc
Shrimp frames the issue not as whether OceanInvest’s costs
reported were accurate, but instead focuses on the reported
count size information. It alleges Commerce unreasonably
accepted product-specific raw material count size information
[ ]
Court No. 08 – 00229 Page 14
However, the record indicates that Commerce did not accept
OceanInvest’s reported costs only because they were reported
accurately on an aggregate basis. OceanInvest followed
Commerce’s normal practice and reported the model-specific
average shrimp costs incurred during the period of review for
each category of products. See Decision Mem. at 10. Moreover,
OceanInvest [ ]
Commerce understood how OceanInvest recorded raw material costs
and sizes in its accounting system. Commerce concluded that it
is reasonable to accept OceanInvest’s explanation that different
raw shrimp inputs could produce “value-added products of the
same finished count size although a POR average cost is used for
each raw shrimp input in calculating production costs.” Id.In summary, Commerce’s determination that OceanInvest’s
reported raw material cost information for value-added products
reasonably reflects its actual production costs is supported by
substantial evidence and is in accordance with the law.
Pursuant to section 773(f)(1)(A) of the Tariff Act, 19.U.S.C. §
1677b(f)(1)(A), Commerce relied on OceanInvest’s recorded
information because it was kept in accordance with the home
country GAAP. This Court has consistently upheld Commerce’s
reliance on a company’s costs as recorded in its financial
statements “as long as those statements were prepared in
accordance with the home country’s GAAP and do not significantly
Court No. 08 – 00229 Page 15
distort the firm’s actual costs.” Solvay Solexis S.P.A. v. U.S,
628 F.Supp.2d 1375, 1379 (CIT 2009); see also Cinsa, S.A. de
C.V. v. United States, 21 CIT 341, 343, 966 F.Supp. 1230, 1235
(1997); FAG U.K. Ltd. V. United States, 20 CIT 1277, 1290, 945
F.Supp. 260, 271 (1996). Ad Hoc Shrimp fails to demonstrate
that the reported costs are significantly distorted. Commerce
gained an understanding of how OceanInvest uses mixtures of
different count sizes of raw material to produce the same
finished products. It also found that OceanInvest’s inventory
system tracks the specific mix of actual shrimp inputs for each
finished product. Moreover, Commerce understood that, in rare
instances, OceanInvest used raw material that it recorded as
[ ] and found that
OceanInvest reported the actual prices it paid. Based upon the
record evidence, Commerce reasonably determined that OceanInvest
reported the actual raw material costs needed to produce the
value-added products and that these costs were not distortive.
B. Commerce’s acceptance of OceanInvest’s different raw
material costs for similar value-added products is not
inconsistent with the Agency’s practice.
Ad Hoc Shrimp argues that Commerce erroneously accepted
[ ] raw material costs for virtually identical finished
shrimp products in violation of Commerce’s settled practice.
Specifically, Ad Hoc Shrimp indicates that, for two sets of
control numbers, OceanInvest reported different raw material
Court No. 08 – 00229 Page 16
count sizes [ ] for the same
peeled shrimp products differing only in terms of container
weight or presentation, two physical characteristics that Ad Hoc
Shrimp alleges have no bearing on raw material costs. Ad Hoc
Shrimp asserts that, under established practice, identical
products must have identical costs reported for them.
Under Commerce’s methodology, OceanInvest must calculate
its COP on a control number-specific basis. The control number
identifies a shrimp product by the physical characteristics that
Commerce determines can have a material effect on product prices
and costs.7 In the shrimp investigations, Commerce identified 14
distinct physical characteristics, including container weight
and presentation, that could have such an effect. Thus, under
Commerce’s methodology, if the container weight or presentation
differs, the control number differs. Each product that has a
different control number is a different product for cost
calculation purposes, no matter how physically similar those
products may be as a practical matter.
The products at issue do not “share the same physical
characteristics” as defined by Commerce because they differ in
container weight or presentation. Accordingly, they are not
identical products and do not require identical material costs.
7
Different physical characteristics include form (raw or
cooked), head status (head-on or headless), count size, and
shell status (shell-on or peeled).
Court No. 08 – 00229 Page 17
The record indicates that different mixes of shrimp count sizes
as inputs can produce the same value-added product that differ
only in container sizes or presentations. See, e.g., Admin. R.
Non-Pub. Doc. 42 (second supplemental section D response).
Therefore, Commerce’s methodology permits different raw material
count size and cost information for shrimp products differing
only in their container size or their presentation.
Moreover, the court is not convinced that Commerce’s
acceptance of OceanInvest’s different raw material costs for
certain shrimp products differing only in container weight or
presentation deviates from past practice. Ad Hoc Shrimp argues
that Commerce deviated from its past practice by accepting
OceanInvest’s reported raw material costs in the second
administrative review even though the costs suffer from the same
deficiency as the costs that Commerce rejected in the first
administrative review. See Certain Frozen Warmwater Shrimp from
Ecuador: Final Results of Antidumping Duty Administrative
Review, 72 FR 52070 (Dep’t Commerce Sept. 12, 2007) (first
administrative review). However, Commerce’s refusal to accept
OceanInvest’s raw material costs in the first administrative
review concerned separate issues. In the first administrative
review, Commerce determined that OceanInvest had made errors in
calculating its raw shrimp costs which OceanInvest then
corrected. See Decision Memorandum, A-331-802, AR 04-06 (Sep. 5
Court No. 08 – 00229 Page 18
2007), available at 2007 WL 2773557 (issues and decision
memorandum to first administrative review). OceanInvest had
reported its costs based on finished shrimp count size rather
than input shrimp count size. Id. at cmt. 6. It also
incorrectly reported the last purchase price in the month in
which a shrimp product was actually produced rather than
calculate the weighted average cost of raw material that it
purchased in the entire POR. Id. In other words, Commerce
found that OceanInvest’s reported costs were distorted for
reasons separate from OceanInvest’s COP reporting in the second
administrative review.
In both administrative reviews, Commerce followed its
practice of requiring a respondent to report costs on a product-
specific basis and also of relying upon a respondent’s normal
books and records. Moreover, in the first administrative
review, Commerce stated that a respondent must calculate its raw
shrimp costs based on the physical characteristics as defined by
Commerce. Id. (emphasis added). Under Commerce’s methodology,
if the container weight or presentation differs, the control
number differs. Thus, in both reviews, Commerce was to treat
container weight and presentation as separate physical
characteristics in the control number. Therefore, Commerce’s
acceptance of OceanInvest’s reported costs in the Final Results
was reasonable because those costs comported with Commerce’s
Court No. 08 – 00229 Page 19
normal practice, which is the statutorily preferred methodology
pursuant to section 773(f)(1)(A) of the Tariff Act, 19.U.S.C. §
1677b(f)(1)(A).
IV. CONCLUSION
Commerce’s determination that OceanInvest’s reported raw
material cost information for value-added products reasonably
reflects its actual production costs is supported by substantial
evidence and otherwise in accordance with the law. Commerce’s
acceptance of OceanInvest’s different raw material costs for
similar finished shrimp products does not depart from agency
practice. For the foregoing reasons, the Court sustains
Commerce’s final determination and denies Ad Hoc Shrimp’s motion
for judgment on the agency record.
/s/ Richard W. Goldberg
Richard W. Goldberg
Senior Judge
Date: October 30, 2009
New York, New York