Tianjin Wanhua Co. v. United States

Slip Op. 16-28
UNITED STATES COURT OF INTERNATIONAL TRADE
TIANJIN WANHUA CO., LTD.,
Plaintiff,
Before: Leo M. Gordon, Judge
v.
Consol. Court No. 14-00183
UNITED STATES,
Defendant.
OPINION
[Final results of administrative review sustained.]
Dated: March 29, 2016
David J. Craven, Riggle and Craven of Chicago, IL for Plaintiff Tianjin Wanhua Co.,
Ltd.
Peter J. Koenig, Ludmilla Savelieff, and Nicholas Galbraith, Squire Patton Boggs
of Washington, DC for Plaintiff Shaoxing Xiangyu Green Packing Co., Ltd.
John D. Greenwald, Jonathan M. Zielinski, and Thomas M. Beline, Cassidy Levy
Kent (USA) LLP, of Washington, DC for Plaintiff-Intervenors DuPont Teijin Films China
Limited, DuPont Hongi Films Foshan Co., Ltd., and DuPont Teijin Films Hongji Ningbo
Co., Ltd.
Jane C. Dempsey, Trial Attorney, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice of Washington, DC for Defendant United States. On the brief
with her were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Jeanne
E. Davidson, Director, Patricia M. McCarthy, Assistant Director and David F.
D’Alessandris, Trial Attorney. Of counsel on the brief was Michael T. Gagain, Attorney,
Office of the Chief Counsel for International Trade for Trade Enforcement and
Compliance, U.S. Department of Commerce of Washington, DC.
J. Michael Taylor, Stephen A. Jones, and Mark T. Wasden, King & Spalding LLP
of Washington, DC for Defendant-Intervenor Terphane, Inc.
Consol. Court No. 14-00183 Page 2
Ronald I. Meltzer, Patrick J. McLain, David M. Horn, and Jeffrey I. Kessler, Wilmer,
Cutler, Pickering, Hale and Dorr, LLP of Washington, DC for Defendant-Intervenor
Mitsubishi Polyester Film, Inc. and SKC, Inc.
Gordon, Judge: This action involves an administrative review conducted by the
U.S. Department of Commerce (“Commerce”) of the antidumping duty order covering
polyethylene terephthalate film, sheet, and strip from China. See Polyethylene
Terephthalate Film, Sheet, and Strip from the People’s Republic of China, 79 Fed. Reg.
37,715 (Dep’t of Commerce July 2, 2014) (final results admin. review) (“Final Results”);
see also Issues and Decision Memorandum for the Final Results of the Antidumping Duty
Administrative Review on Polyethylene Terephthalate Film, Sheet, and Strip from the
People’s Republic of China, A-570-924 (Dep’t of Commerce June 24, 2014), available at
http://enforcement.trade.gov/frn/summary/prc/2014-15574-1.pdf (last visited this date)
(“Decision Memorandum”). Before the court are Plaintiff Tianjin Wanhua Co., Ltd.’s
(“Wanhua”) and Consolidated Plaintiff Shaoxing Xiangyu Green Packing Co., Ltd.’s
(“Green Packing”) USCIT Rule 56.2 motions for judgment on the agency record. Mem in
Supp. of Mot. for J. on the Agency R. Submitted By Pl. Tianjin Wanhua Pursuant to
R. 56.2 of the Rs. of the U.S. Ct. of Int’l Trade, ECF No. 46 (“Wanhua Br.”); Pl. Shaoxing
Xiangyu Green Packing Co., Ltd. R. 56.2 Mem. for J. on the R., ECF No. 48
(“Green Packing Br.”); see also Reply to Resp. of Def. United States to Mot. for J. on the
Agency R. Submitted by Pl. Tianjin Wanhua Pursuant to R. 56.2 of the Rs. of the U.S. Ct.
of Int’l Trade, ECF No. 68; Reply Br. of Pl. Shaoxing Xiangyu Green Packing Co., Ltd.,
ECF No. 70. Plaintiff-Intervenors DuPont Teijin Films China, Limited, DuPont Hongji Films
Foshan Company, Limited, and DuPont Teijin Films Hongji Ningbo Company, Limited join
Consol. Court No. 14-00183 Page 3
in support of the Rule 56.2 Motions for Judgment on the Agency Record filed by Wanhua
and Green Packing. See Statement in Lieu of USCIT R. 56.2 Mot. 1-2, ECF No. 47.
Defendant responds opposing Wanhua and Green Packing’s Rule 56.2 motions. Def.’s
Resp. to Pls.’ R. 56.2 Mots. for J. on the Agency R., ECF No. 51 (“Def.’s Resp.”);
Defendant-Intervenors Mitsubishi Polyester Film, Inc. and SKC, Inc. respond in support
of the Final Results. See Def.-Intervenors’ Br. in Opp. to Pls.’ Mots. for J. on the
Agency R., ECF No. 58. Defendant-Intervenor Terphane, Inc. confirms that it agrees with
and incorporates the arguments made by Defendant in its response to Plaintiffs’ Rule 56.2
motions. See Letter in Lieu of Resp. Br. 1, ECF No. 57. The court has jurisdiction pursuant
to Section 516A(a)(2)(B)(iii) of Tariff Act of 1930, as amended, 19 U.S.C.
§ 1516a(a)(2)(B)(iii) (2012),1 and 28 U.S.C. § 1581(c) (2012).
Wanhua challenges Commerce’s surrogate country selection and decision to
deduct value added tax (“VAT”) from Wanhua’s export price. Green Packing also
challenges the surrogate country selection, as well as Commerce’s surrogate valuation
for recycled polyethylene terephthalate chip (“PET chip”) without applying Green
Packing’s proposed by-product offset. For the reasons set forth below, the court sustains
the Final Results on each issue.
I. Standard of Review
For administrative reviews of antidumping duty orders, the court sustains
Commerce’s “determinations, findings, or conclusions” unless they are “unsupported by
1
Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of
Title 19 of the U.S. Code, 2012 edition.
Consol. Court No. 14-00183 Page 4
substantial evidence on the record, or otherwise not in accordance with law.” 19 U.S.C.
§ 1516a(b)(1)(B)(i). More specifically, when reviewing agency determinations, findings,
or conclusions for substantial evidence, the court assesses whether the agency action is
reasonable given the record as a whole. Nippon Steel Corp. v. United States, 458 F.3d
1345, 1350-51 (Fed. Cir. 2006). Substantial evidence has been described as “such
relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.” DuPont Teijin Films USA v. United States, 407 F.3d 1211, 1215 (Fed. Cir.
2005) (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)). Substantial
evidence has also been described as “something less than the weight of the evidence,
and the possibility of drawing two inconsistent conclusions from the evidence does not
prevent an administrative agency’s finding from being supported by substantial evidence.”
Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620 (1966). Fundamentally, though,
“substantial evidence” is best understood as a word formula connoting reasonableness
review. 3 Charles H. Koch, Jr., Administrative Law and Practice § 9.24[1] (3d ed. 2015).
Therefore, when addressing a substantial evidence issue raised by a party, the court
analyzes whether the challenged agency action “was reasonable given the circumstances
presented by the whole record.” Jane C. Bergner, Steven W. Feldman, the late Edward
D. Re, and Joseph R. Re, 8-8A, West’s Fed. Forms, National Courts § 13342 (5th ed.
2015).
Separately, the two-step framework provided in Chevron, U.S.A., Inc. v. Natural
Res. Def. Council, Inc., 467 U.S. 837, 842-45 (1984), governs judicial review of
Commerce's interpretation of the antidumping statute. See United States v. Eurodif S.A.,
Consol. Court No. 14-00183 Page 5
555 U.S. 305, 316 (2009) (Commerce’s “interpretation governs in the absence of
unambiguous statutory language to the contrary or unreasonable resolution of language
that is ambiguous.”).
When reviewing substantial evidence issues from non-market economy
proceedings involving Commerce's selection of the “best available” pricing and cost data
from “surrogate” economies/companies, 19 U.S.C. § 1677b(c), the court's “duty is ‘not to
evaluate whether the information Commerce used was the best available, but rather
whether a reasonable mind could conclude that Commerce chose the best available
information.’” Zhejiang DunAn Hetian Metal Co. v. United States, 652 F.3d 1333, 1341
(Fed. Cir. 2011) (quoting Goldlink Indus. Co. v. United States, 30 CIT 616, 619,
431 F. Supp. 2d 1323, 1327 (2006)); see also Downhole Pipe & Equip., L.P. v. United
States, 776 F.3d 1369, 1379 (Fed. Cir. 2015); CITIC Trading Co. v. United States, 27 CIT
356, 366 (2003) (“[W]hile the standard of review precludes the court from determining
whether [Commerce’s] choice of surrogate values was the best available on an absolute
scale, the court may determine the reasonableness of Commerce’s selection of surrogate
prices.”); Dorbest Ltd. v. United States, 30 CIT 1671, 1675-76, 462 F. Supp. 2d 1262,
1269-70 (2006) (“The term ‘best available’ is one of comparison, i.e., the statute requires
Commerce to select, from the information before it, the best data for calculating an
accurate dumping margin. . . . This ‘best’ choice is ascertained by examining and
comparing the advantages and disadvantages of using certain data as opposed to other
data.”).
Consol. Court No. 14-00183 Page 6
II. Discussion
A. Exhaustion
Wanhua challenges Commerce’s decision to adjust Wanhua’s U.S. prices to
account for Chinese VAT as contrary to 19 U.S.C. § 1677a(c)(2)(B). Wanhua Br. at
11-13. Green Packing challenges Commerce’s selection of Indonesia as the primary
surrogate country, arguing that the South African data for the most important input was
superior to the Indonesian data when measured against Commerce’s announced
selection criteria. Green Packing Br. at 10-12. Neither Wanhua nor Green Packing raised
these arguments in their administrative case briefs. See Case Br. of Tianjin Wanhua Co.,
Ltd. 17-18 (Dep’t of Commerce Feb. 12, 2014), PD 255 (presenting a factual argument
against export price adjustment but no legal argument); Case Brief of Shaoxing Xiangyu
Green Packing Co., Ltd. (Dep’t of Commerce Feb. 11, 2014), PD 254 (stating that “South
Africa has the best quality of data, as compared to the others” and Commerce “should
use South Africa as the surrogate country in the final determination” without any further
elaboration or citation to the record). Defendant urges the court to disregard these
arguments as unexhausted. Def.’s Resp. at 10-11, 25-28.
The court agrees with Defendant that requiring exhaustion is appropriate in these
circumstances. The U.S. Court of International Trade must require exhaustion of
administrative remedies “where appropriate.” 28 U.S.C. § 2637(d). “This form of non-
jurisdictional exhaustion is generally appropriate in the antidumping context because it
allows the agency to apply its expertise, rectify administrative mistakes, and compile a
record adequate for judicial review—advancing the twin purposes of protecting
Consol. Court No. 14-00183 Page 7
administrative agency authority and promoting judicial efficiency.” Carpenter Tech. Corp.
v. United States, 30 CIT 1373, 1374-75, 452 F. Supp. 2d 1344, 1346 (2006) (citing
Woodford v. Ngo, 548 U.S. 81, 88-90 (2006)). The court “generally takes a ‘strict view’ of
the requirement that parties exhaust their administrative remedies before the Department
of Commerce in trade cases.” Corus Staal BV v. United States, 502 F.3d 1370, 1379
(Fed. Cir. 2007).
An important corollary to the exhaustion of administrative remedies is Commerce’s
own regulatory requirement that parties raise all issues within their administrative case
briefs. 19 C.F.R. § 351.309(c)(2) (2015) (“The case brief must present all arguments that
continue in the submitter's view to be relevant to the final determination.”); Mittal Steel
Point Lisas Ltd. v. United States, 548 F.3d 1375, 1383 (Fed. Cir. 2008) (parties are
“procedurally required to raise the[ir] issue before Commerce at the time Commerce [is]
addressing the issue”). This requirement works in tandem with the exhaustion
requirement and promotes the same twin purposes of protecting administrative agency
authority and promoting judicial efficiency.
Both Wanhua and Green Packing had the opportunity during this proceeding to
raise their arguments in their case briefs, and both chose not to do so. By declining to
develop or argue these issues, Wanhua and Green Packing signaled that neither issue
warranted attention from Commerce. In so doing, Wanhua and Green Packing
undermined Commerce’s ability to analyze both issues in the Decision Memorandum and
in turn deprived the court of a fully developed record on the contested issues.
Furthermore, Commerce’s regulatory requirement that parties raise all issues within their
Consol. Court No. 14-00183 Page 8
administrative case briefs carries the force of law, and the court cannot simply ignore it.
Exhaustion is therefore appropriate.
Wanhua asserts in a footnote that the “pure question of law” exception to the
exhaustion requirement applies here. Wanhua Br. at 11 n.2. There is no merit in this
argument. First, the court does not entertain substantive arguments raised in footnotes.
Am. Tubular Prods., LLC v. United States, 38 CIT ___, ___, Slip Op. 14-116 at 25-26
(2014) (citing SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1320 (Fed. Cir.
2006); see also Calvert v. Wilson, 288 F.3d 823, 836 (6th Cir. 2002) (explaining that courts
generally consider arguments raised in footnotes to be waived, and citing sources);
City of Emeryville v. Robinson, 621 F.3d 1251, 1262 n.10 (9th Cir. 2010) (deeming an
issue waived where the party “fail[ed] to address the issue in its opening brief except in a
footnote”). Second, the court simply notes that the pure question of law exception is just
not likely to apply in this context. It only might apply for a clear statutory mandate that
does not implicate Commerce’s interpretation of the statute under the second step of
Chevron. See, e.g., Agro Dutch Indus. Ltd. v. United States, 508 F.3d 1024, 1032
(Fed. Cir. 2007) (applying pure question of law exception to Chevron step 1 issue). Even
when the statute is clear, however, it is always preferable to have the agency's
interpretation of the statute it is entrusted to administer set forth on the administrative
record. See 2 Richard J. Pierce, Jr., Administrative Law Treatise § 14.3 (5th ed. 2010)
(describing the primary jurisdiction doctrine and its relationship to Chevron); see also
Agro Dutch, 508 F.3d at 1029 n. 4 (noting that Commerce had opportunity to, and did, put
forth its interpretation on administrative record in two instances). In this case the statute
Consol. Court No. 14-00183 Page 9
does not define the phrase at the center of Wanhua’s legal challenge. See 19 U.S.C.
§ 1677a(c)(2)(B) (using the phrase “export tax, duty or other charge imposed” without
clarification). The pure question of law exception therefore cannot apply in this instance
because its application would undermine the very purposes the exhaustion requirement
is designed to promote. See Fuwei Films (Shandong) Co. v. United States, 35 CIT ___,
___, 791 F. Supp. 2d 1381, 1384-85 (2011).
To conclude, the court does not reach Wanhua’s unexhausted challenge
Commerce’s decision to adjust Wanhua’s U.S. prices to account for Chinese VAT as
contrary to 19 U.S.C. § 1677a(c)(2)(B) and Green Packing’s unexhausted challenge to
Commerce’s surrogate country selection. Each of those matters is sustained.
B. Surrogate Country Selection
In an antidumping duty administrative review, Commerce determines whether
subject merchandise is being, or is likely to be, sold at less than fair value in the United
States by comparing the export price (the price of the goods sold in the United States)
and the normal value of the merchandise. 19 U.S.C. §§ 1675(a)(2)(A), 1677b(a). In the
non-market economy context, Commerce calculates normal value using data from
surrogate countries to value the factors of production. Id. § 1677b(c)(1)(B). Commerce
must use the “best available information” in selecting surrogate data from “one or more”
surrogate market economy countries. Id. § 1677b(c)(1)(B), (4). The surrogate data must
“to the extent possible” be from a market economy country or countries that are (1) “at a
level of economic development comparable to that of the nonmarket economy country”
and (2) “significant producers of comparable merchandise.” Id. § 1677b(c)(4). Commerce
Consol. Court No. 14-00183 Page 10
has a stated regulatory preference to “normally . . . value all factors in a single surrogate
country.” 19 C.F.R. § 351.408(c)(2).
When choosing among potential surrogate countries that are at a level of economic
development comparable to the non-market economy country and are significant
producers of comparable merchandise, Commerce evaluates the relative availability and
reliability of surrogate value data sourced from each potential country. Commerce is
guided by a general regulatory preference for publicly available, non-proprietary
information. 19 C.F.R. § 351.408(c)(1), (4). Beyond that, Commerce generally considers
the quality, product specificity, and contemporaneity of the available surrogate value data.
Decision Memorandum at 3, 6-7.
The administrative record below included surrogate data for each factor of
production sourced from two economically comparable significant producers of
comparable merchandise: Indonesia and South Africa. Id. at 6-7. Commerce chose
Indonesia, explaining that the Indonesian financial surrogate data “pertain to the
production of identical merchandise, while the South African [data] pertain to the
production of only comparable merchandise.” Decision Memorandum at 13-14.
Wanhua challenges Commerce’s selection of Indonesia over South Africa.
Specifically, Wanhua argues that Commerce’s failure to reject the sole Indonesian
financial surrogate, PT Argha Karya Prima Industry, Tbk (“Argha”), is inconsistent with
past practice. According to Wanhua, Argha’s annual report is incomplete under
Indonesian law, and Argha probably enjoyed the benefit of “broadly-available
non-industry-specific export subsidies.” Wanhua Br. at 4-9. Wanhua insists that
Consol. Court No. 14-00183 Page 11
Commerce has a stated practice of rejecting incomplete annual reports, id. at 5-6 (citing
Wire Decking from the People’s Republic of China, 75 Fed. Reg. 32,905 (Dep’t of
Commerce June 10, 2010) (final LTFV determ.); Lightweight Thermal Paper from the
People’s Republic of China, 73 Fed. Reg. 57,329 (Dep’t of Commerce Oct. 2, 2008) (final
LTFV determ.); Certain New Pneumatic Off-the-Road Tires from the People’s Republic
of China, 73 Fed. Reg. 40,485 (Dep’t of Commerce July 15, 2008) (final LTFV determ.)),
as well as those sourced from subsidized companies, id. at 8 (citing Certain Frozen
Warmwater Shrimp from the People’s Republic of China, 72 Fed. Reg. 52,049 (Dep’t of
Commerce Sept. 12, 2007) (final results admin. review).
In the court’s view, although this particular surrogate value selection is not without
its issues, Commerce did not act inconsistent with past practice when it used Argha’s
financial statement. To clarify Commerce’s actual practice, Commerce has rejected
incomplete financial statements of potential surrogate companies because those
statements did not include data necessary for calculating financial ratios. Here, however,
as Commerce explained, the record includes a complete financial statement from Argha
contained within an incomplete annual report:
Wanhua argues that the Department needs a complete annual report on the
record in order to calculate surrogate financial ratios. Wanhua cites three
antidumping duty administrative reviews in support of its argument.
However, the Department agrees with Petitioners that Wanhua has failed
to support its claim that Argha Karya’s financial statements are incomplete.
First, in Wire Decking/PRC (2010), the Department was faced with partial
financial statements (not a partial annual report) from an Indian producer
that did not include key data necessary to calculate SVs. Specifically, the
financial statements did not contain schedules A through D accompanying
the balance sheet. Thus, the Department was unable to calculate surrogate
financial ratios. In this case, Argha Karya’s financial statements include the
Consol. Court No. 14-00183 Page 12
schedules necessary for the calculation of surrogate financial ratios.
Second, in Thermal Paper/PRC (2008), the Department declared a set of
financial statements incomplete because they did not include a fixed asset
schedule. The fixed asset schedule is necessary as it supports the
Department’s use of a depreciation expense in its calculation of financial
ratios. Argha Karya’s financial statements on the record of the instant review
include this schedule. Third, in OTR Tires/PRC (2008), the Department
disregarded certain financial statements from the calculation of surrogate
financial ratios because the financial statements did not contain the
auditor's statements, extensive data on the income statement, and
accompanying schedules, or were not legible. Argha Karya’s financial
statements on the record of this administrative review include an auditor’s
statement, the income statements are complete, the necessary schedules
(as previously stated) are present, and the financial statements are legible.
Decision Memorandum at 11 (footnotes omitted). Unlike the administrative decisions
Wanhua cites in its brief, Argha’s financial statement contains all the data necessary for
calculating financial ratios. Id. Commerce therefore reasonably distinguished this case
from other instances in which it rejected incomplete financial statements. See id.
As the court noted above, however, the incomplete annual report is not without its
issues. As Wanhua explains,
The annual report was not complete, missing a substantial portion of the
report. The record, as shown by the table of contents of the Argha annual
report, indicates that the Argha annual report was missing pages 1 through
78. (Exhibit SVSI-1 to Wanhua’s Resubmitted Surrogate Values for the
Final Results, PD 228 at bar code 3178117-02, page 8 (Feb. 3, 2014).) The
Department acknowledges that an annual report in Indonesia is required to
contain multiple documents discussing the operations of the company. (Def.
Resp. at 7.) The Government of Indonesia considers such information of
sufficient relevance that it requires that it be included in all annual reports.
(Rule Number X.K.6: Obligation to submit Annual Report for Issuers of
Public Companies as provided as part of Exhibit SVSI-4 to Wanhua’s
Resubmitted Surrogate Values for the Final Results, PD 230 at bar code
3178117-04, pages 12-20 (Feb. 3, 2014).) These points are not in dispute.
Consol. Court No. 14-00183 Page 13
Wanhua Reply Br. at 3. Wanhua further explains that it was the domestic interested
parties that submitted the incomplete document. Id. Commerce appears to have given
the domestic interested parties a pass, not following up or inquiring about the missing
pages of the annual report, e.g., asking where and how it was obtained, why the pages
were missing, or requiring the domestic interested parties to supply a complete version.
There is a further difficulty with the Argha annual report. Commerce has a general
policy of disregarding import prices from Indonesia (as surrogate values for input prices)
because Commerce has found in other proceedings that Indonesia maintains broadly
available, non-industry specific export subsidies. Decision Memorandum at 11-12.
Commerce makes a general inference “that all exports to all markets from Indonesia may
be subsidized,” and Commerce consequently “disregards import prices from Indonesia.”
Id. at 12 (emphasis added). Wanhua argues that Argha is primarily an export-oriented
business, and given Commerce’s general inference “that all exports to all markets from
Indonesia may be subsidized” Commerce should have reasonably inferred that subsidies
likely tainted Argha’s operations. Wanhua Br. 8-9. Commerce sidesteps this problem by
noting that Commerce is utilizing financial data from an Indonesian company, not import
prices of goods from Indonesia into some other country, and that nowhere in the
incomplete Argha annual report is there any reference to a subsidy. Decision
Memorandum at 11-12. Wanhua questions the reasonableness of Commerce’s
inference, from an incomplete annual report, that Argha did not benefit from subsidies.
Wanhua Br. at 9.
Consol. Court No. 14-00183 Page 14
This is a good argument. The Argha annual report has obvious issues that test the
reasonableness of its selection as the best available information to calculate Wanhua’s
margin. The court notes, however, that the question ultimately is not whether the
incomplete Argha annual report in isolation is a good or bad surrogate value selection,
but more specifically, whether Commerce’s choice of that data set is reasonable
(supported by substantial evidence) when compared with the other available data sets.
Dorbest, 30 CIT at 1675-76, 462 F. Supp. 2d at 1269-70 (“The term ‘best available’ is one
of comparison, i.e., the statute requires Commerce to select, from the information before
it, the best data for calculating an accurate dumping margin. . . . This ‘best’ choice is
ascertained by examining and comparing the advantages and disadvantages of using
certain data as opposed to other data.”).
Turning to the data set that Wanhua favors, the South African AstraPak’s financial
statement was also a suboptimal choice. Whereas Argha produced “identical”
merchandise, AstraPak produced “comparable” but not identical merchandise. Decision
Memorandum at 13-14. Wanhua, unfortunately fails to address this deficiency, devoting
all its energies on the disadvantages of the Argha annual report. See Wanhua Br. at
9-10; Wanhua Reply Br. at 1-5. Missing is an analysis of the consequence of
“comparable” vs. “identical” merchandise on the margin calculation, e.g., what
complexities or difficulties would or would not be engendered. So although the court may
agree that the Argha annual report has weaknesses as a surrogate dataset, the court
cannot evaluate those weaknesses against the noted weaknesses of the AstaPak dataset
because Wanhua did not provide any comparative analysis. This is important. For the
Consol. Court No. 14-00183 Page 15
court to remand for Commerce to use the AstraPak dataset, Wanhua needed to establish
that AstraPak, when compared with Argha, is the one and only reasonable surrogate
selection on this administrative record, not simply that AstraPak may have constituted
another possible reasonable choice. Globe Metallurgical, Inc. v. United States, 36 CIT
___, ___, 865 F. Supp. 2d 1269, 1276 (2012) (substantial evidence review “contemplates
[that] more than one reasonable outcome is possible on a given administrative record”).
The court therefore must sustain Commerce’s surrogate dataset choice.
C. PET By-product
As described above, Commerce in non-market economy cases uses data sourced
from a surrogate country to value a respondent’s factors of production. 19 U.S.C.
§ 1677b(c)(1)(B). Factors of production include raw material inputs utilized to
manufacture the subject merchandise. Id. § 1677b(c)(3). Commerce typically assigns a
surrogate value to recycled inputs like it would any other raw material input. Decision
Memorandum at 16. Commerce’s policy, though, is to avoid double counting by offsetting
the cost of production by the value of recycled inputs (or the value of by-product sold)
when a respondent demonstrates that the cost of its recycled inputs are already
accounted for elsewhere. Id. at 19.
Wanhua uses recycled PET as an input to produce the subject merchandise, which
Commerce valued as it would any other factor of production. During the period of review,
however, Wanhua recovered some PET by-product material from its own production of
subject merchandise. Wanhua sold some of that PET by-product and reintroduced some
into later production runs. Wanhua requested that Commerce offset the surrogate value
Consol. Court No. 14-00183 Page 16
for the recycled PET input to account for the fact that it used some of its own recycled
PET as the input. Wanhua supported its request with internal records detailing specific
quantities of sold and reintroduced PET by-product. After considering Wanhua’s
submissions, Commerce granted Wanhua’s requested offset. Issues and Decision
Memorandum for the Preliminary Results of the Antidumping Duty Administrative Review
on Polyethylene Terephthalate Film, Sheet, and Strip from the People’s Republic of
China, A-570-924, at 24-25 (Dep’t of Commerce Dec. 18, 2013), available at
http://enforcement.trade.gov/ frn/summary/prc/2013-30919-1.pdf.
Like Wanhua, Green Packing captures PET by-product materials created during
the manufacture of subject merchandise. Like Wanhua, Green Packing claims that it sells
some of that by-product and uses some of that by-product as an input to produce the
subject merchandise. But unlike Wanhua, Green Packing did not provide Commerce with
any information to substantiate its claims about how the recycled PET chip it produces
relates to the recycled PET chip it used to manufacture the subject merchandise. As a
result, Commerce selected a surrogate value for Green Packing’s recycled PET chip input
but declined to grant Green Packing an offset. Decision Memorandum at 21-25.
Green Packing now challenges Commerce’s treatment of Green Packing’s
recycled PET chip input as unreasonable. Green Packing’s main argument is that
Commerce double counted the cost of the recycled PET input, since the recycled PET
chip input is a by-product of the manufacturing process. Green Packing asserts that
Commerce should have either assigned a zero value to the recycled PET input or granted
a by-product offset to avoid this double counting. In support of its position, Green Packing
Consol. Court No. 14-00183 Page 17
points to DuPont Teijin Films China Ltd. v. United States, 38 CIT ___, 7 F. Supp. 3d 1338
(2014) (“DuPont”), a decision that rejected Commerce’s explanation for applying a
surrogate value to an input obtained from earlier production runs without also granting an
offset.
The court does not agree that Commerce should have assigned a zero to Green
Packing’s recycled PET chip input. As Commerce explained below, Green Packing did
not provide any details regarding the quantities of recycled PET chip that it produced and
reintroduced as an input. Commerce could not in the absence of such detail “exclude the
reintroduced PET chips from its NV calculation (or assign a zero value to them) on the
basis that they are completely balanced out by the recyclable PET waste by-product
generated.” Decision Memorandum at 16-17. As Commerce explained, “[t]here is no
record evidence to indicate that the quantity of reintroduced PET chips will be equivalent
to, or closely match, the recyclable PET waste by-product generated during any given
period.” Id. Green packing also listed recycled PET chip as an ingredient necessary to
produce the subject merchandise, meaning that assigning a zero to that input would, as
Commerce noted, “be equivalent to removing that input altogether from the calculation of
[normal value].” Id. at 17.
Green Packing also argues that the manufacturing overhead surrogate value
accounts for its recycled PET chip input. Commerce explained, however, that the
manufacturing overhead is a percentage applied to the total cost of all raw material inputs.
The overhead cost therefore only accounts for recycled PET chip to the extent that
recycled PET chip is included in the total raw material cost. As Commerce detailed below:
Consol. Court No. 14-00183 Page 18
The Department calculates overhead by multiplying the surrogate overhead
ratio by a respondent’s cost of manufacturing, which is comprised of raw
materials, labor, and energy. Therefore, the overhead ratio is applied to all
three components of the cost of manufacturing. Even if the labor and energy
expenses associated with Respondents’ recycling process have been
reported, overhead would be understated if the overhead ratio is not
multiplied by the total value of all of the materials used in production,
including the reintroduced PET chips. This is why the Department, in
calculating a respondent’s overhead costs, must determine SVs for all
inputs, including recycled inputs such as reintroduced PET chips.
Decision Memorandum at 18. Consequently, in the court’s view, Commerce reasonably
assigned a non-zero surrogate value to Green Packing’s recycled PET chip input.
As for Green Packing’s proposed offset, the court agrees with Green Packing that
in certain circumstances the only accurate way to account for by-product reintroduced as
an input into later production runs may be to offset the cost of production by the amount
of by-product used. This is exactly what Commerce did for Wanhua. Unlike Wanhua,
though, Green Packing chose not to paper the record with evidence to substantiate its
request for an offset. “The interested party that is in possession of the relevant information
has the burden of establishing . . . the amount and nature of a particular adjustment.”
19 C.F.R. § 351.401(b)(1) (2015); see also QVD Food Co. v. United States, 658 F.3d
1318, 1324 (Fed. Cir. 2011) (“‘[T]he burden of creating an adequate record lies with
[interested parties] and not with Commerce.’” (quoting Tianjin Mach. Imp. & Exp. Corp. v.
United States, 16 CIT 931, 936, 806 F. Supp. 1008, 1015 (1992))). Here, Green Packing
simply asserted, without evidentiary support, that the amount of by-product produced and
the amount of by-product re-entered into production process were, without exception, the
same figure. In the court’s view, Commerce reasonably concluded that Green Packing
Consol. Court No. 14-00183 Page 19
failed to demonstrate that it was entitled to a by-product offset. Decision Memorandum at
21-23.
The court notes that DuPont does not compel a different outcome here. In DuPont,
Commerce applied a surrogate value to the recycled PET input for the first time in the
final results. The court in DuPont provided Commerce with the choice on remand of either
assigning zero for the recycled PET input surrogate value or offsetting that value so as to
“reasonably avoid[]” double counting. DuPont, 38 CIT at ___, 7 F. Supp. 3d at 1344-48.
Commerce opted for the latter methodology. DuPont Teijin Films China Ltd. v. United
States, 39 CIT ___, ___, Slip Op. 15-19 at 2-3 (2015). Here, unlike DuPont, Commerce
applied a surrogate value to Green Packing’s recycled PET input in the preliminary
determination. Green Packing consistently declined Commerce’s invitations to provide
information that would enable Commerce to calculate an appropriate offset. Decision
Memorandum at 21-23. Commerce therefore reasonably concluded that Green Packing
did not demonstrate its entitlement to an offset.
Lastly, the court does not see any merit in Green Packing’s challenge to the
surrogate value Commerce ultimately selected for the recycled PET chip input. As
explained above, the input in question is recycled PET chip, not PET waste film.
Commerce used the average value of imports under Indonesian HTS 3907.60.90, which
covers both primary PET chip and PET scrap that is transformed into primary form.
Decision Memorandum at 19-20. Green Packing’s proposed alternative, Indonesian
HTS 3915.10, by its own terms only applies to waste products. Commerce therefore
Consol. Court No. 14-00183 Page 20
reasonably selected Indonesian HTS 3907.60.90, which as Commerce explained was
more specific to the recycled PET chip input in question. Id. at 20.
III. Conclusion
For the foregoing reasons, the court sustains Commerce’s application of a VAT
adjustment to Wanhua’s export price, Commerce’s surrogate country selection, and
Commerce’s surrogate valuation of Green Packing’s recycled PET chip input. Judgment
will be entered accordingly.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: March 29, 2016
New York, New York