BEIJING TIANHAI INDUSTRY CO., LTD., Plaintiff, v. UNITED STATES, Defendant, and Norris Cylinder Company, Defendant-Intervenor.
Court No. 12-00203
United States Court of International Trade
Oct. 14, 2015
Slip Op. 15-114
EATON, Judge
Panels in which the wooden core is replaced by other materials such as a layer or layers of particle board, fibre-board, wood waste glued together, asbestos or cork.
Def.‘s Br. at Attachment B at 1. The merchandise‘s base layers consist of wood of a thickness of less than two millimeters. Plaintiff does not allege that the merchandise contains a core of “blocks, laths, or battens.” Moreover, the merchandise here is composed of wood and thus cannot fit within the second category of the “similar laminated wood” definition. Because Composite‘s merchandise does not meet the requirements outlined by the HTSUS and its respective explanatory notes with regards to what constitutes “similar laminated wood,” the court concludes that Composite‘s merchandise cannot be classified as being a “similar laminated wood” under heading 4412.
As such, Composite‘s merchandise is not classifiable under Heading 4412. Plaintiff has not provided the court with a narrative to support its classification under any other heading in Chapter 44 of the HTSUS, thus the only remaining heading under which the subject merchandise may be classified is heading 4421. Heading 4421 covers “other articles of wood” but excludes any that are “specified or included in the preceding headings.” 4421 Explanatory Note. Accordingly, since the subject merchandise in the instant case cannot be classified under any other heading in chapter 44, the court concludes that the merchandise is properly classified under heading 4421.
posite‘s merchandise at issue is properly classified under subheading 4421.90.97.
CONCLUSION
For the foregoing reasons, the court denies Plaintiff‘s motion for summary judgment, grants Defendant‘s cross-motion for summary judgment, and holds that Com-
Douglas G. Edelschick, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant. With him on the brief were Joyce R. Branda, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin E. White, Jr., Assistant Director. Of counsel on the brief was Michael T. Gagain, Attorney, Office of the Chief Counsel for Trade Enforcement & Compliance, United States Department of Commerce.
Edward M. Lebow, Haynes and Boone, LLP, of Washington, DC, argued for defendant-intervenor.
OPINION and ORDER
EATON, Judge:
Before the court is plaintiff Beijing Tianhai Industry Co., Ltd.‘s (“Tianhai” or “plaintiff“) motion for judgment on the agency record, pursuant to
BACKGROUND
In 2011, responding to a petition filed by defendant-intervenor Norris Cylinder Company (“Norris” or “defendant-intervenor“) alleging targeted dumping, the Department initiated an antidumping duty investigation of high pressure steel cylinders from the PRC (“subject merchandise“) and selected plaintiff, a producer and exporter of subject merchandise from the PRC, as a mandatory respondent. See High Pressure Steel Cylinders from the PRC, 76 Fed.Reg. 33,213, 33,213 (Dep‘t of Commerce June 8, 2011) (initiation of anti-dumping
During its investigation, Commerce found that the statute permitted the use of an alternative methodology (i.e., A-T) to determine if targeted dumping had occurred, and to calculate plaintiff‘s dumping margin. See Issues & Dec. Mem. at cmt. IV. The Department issued its Preliminary Determination of sales at less than fair value on December 15, 2011. See High Pressure Steel Cylinders From the PRC, 76 Fed.Reg. 77,964 (Dep‘t of Commerce Dec. 15, 2011) (preliminary determination of sales at less than fair value) (“Preliminary Determination“). In its preliminary investigation, Commerce used the targeted dumping test that has come to be known as the Nails test.2 After applying the test, the Department determined that there was “a pattern of prices for comparable merchandise that differ[ed] significantly by time period.” Preliminary Determination, 76 Fed.Reg. at 77,968.
To preliminarily determine the presence of dumping and to calculate plaintiff‘s antidumping duty rate, the Department used the A-T methodology because it found that its normally used average-to-average (“A-A“) methodology3 could not properly account for the differing pattern of sales prices. Id. When making its dumping determination, the Department applied the A-T methodology, with zeroing,4 to all of plaintiff‘s U.S. sales during the POI. See id.
In the Final Determination, the Department continued to use the Nails test and continued to find that there was a pattern of sales that differed significantly by time period.5 Issues & Dec. Mem. at cmt. IV. Commerce again used the A-T methodology to determine if dumping had in fact occurred and to calculate the antidumping rate. See id. The Department also continued to apply its zeroing methodology to all of plaintiff‘s U.S. sales. See id. In the Final Determination, the Department calculated a weighted-average dumping margin of 6.62% for Tianhai during the POI.
Following issuance of the Final Determination, plaintiff moved for judgment on the agency record pursuant to
The court also found insufficient Commerce‘s explanation for why the observed pricing pattern between the targeted and non-targeted time periods could not be accounted for using either of the general methodologies prescribed by statute, i.e., A-A or transaction-to-transaction (“T-T“), and thus, that the A-T methodology, an exception to the general methodologies, should be employed. See id. at —, 7 F.Supp.3d at 1331-32; see also
STANDARD OF REVIEW
“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.”
DISCUSSION
I. LEGAL FRAMEWORK
A. Statutory Framework
“[I]n ‘situations where comparable merchandise differ[s] significantly among purchasers, regions, or periods of time,‘” Commerce may determine if dumping has occurred by using the A-T methodology. See JBF RAK LLC v. United States, 790 F.3d 1358, 1361 (Fed.Cir.2015) (alteration in original) (quoting U.S. Steel Corp. v. United States, 621 F.3d 1351, 1359 (Fed.Cir.2010)); See
The Department is also permitted to determine whether dumping has occurred, and to set an exporter‘s margin, by using the T-T methodology, by which it may “compar[e] the normal values of individual transactions to the export prices . . . of individual transactions for comparable merchandise.”
In addition to the A-A and T-T methodologies, the statute provides for an exception to the general methodologies, the A-T methodology, to be used to “determine whether the subject merchandise is being sold in the United States at less than fair value,” and, if so, to calculate a dumping margin. See
(i) there is a pattern of export prices (or constructed export prices) for comparable merchandise that differ significantly among purchasers, regions, or periods of time, and
(ii) the administering authority explains why such differences cannot be taken into account using [A-A or T-T].
B. The Nails Test
Here, before Commerce could take advantage of the exception provided in the statute and employ the A-T methodology it first had to conclude that there was a pattern of sales prices that differed significantly over time. See
II. REMAND RESULTS
Although Commerce adequately identified a pattern of sales that differed over
The court, in BTIC I, further observed that:
In creating an explanation requirement in
19 U.S.C. § 1677f-1(d)(1)(B)(ii) , Congress anticipated that “pattern[s] of prices that differ significantly among purchasers, regions, or time periods,” could sometimes be accounted for without resorting to A-T. Accordingly, Congress required the Department to explain why A-A and T-T cannot account for a pattern of disparate prices before using A-T. Thus, if no explanation other than the bare-bones invocation of the differing natures of the [A-A] and [A-T] methodologies would suffice to satisfy19 U.S.C. § 1677f-1(d)(1)(B)(ii) , as defendant and defendant-intervenor would have it, that statutory provision would be superfluous.
Id. at —, 7 F.Supp.3d at 1332 (quoting SAA, H.R. Doc. No. 103-316, at 843, reprinted in 1994 U.S.C.C.A.N. at 4178 (“Before relying on this methodology, however, Commerce must establish and provide an explanation why it cannot account for such differences through the use of an average-to-average or transaction-to-transaction comparison.“)).
Here, in the Remand Results, Commerce stated that it could not use the T-T method because this determination involved a less-than-fair-value investigation in a nonmarket economy country10 “in which the Department used a factors of production method to determine normal value,” and normal value was “thus based . . . on the valuation of [Tianhai‘s] factors of production using surrogate values rather than on home market or third country transactions.” Remand Results at 4-5. In other words, Commerce elaborated, “there simply is no corresponding home market or third country sales database that would allow [the Department] to compare [Tianhai‘s] individual home market or third country transactions to its individual U.S. sales transactions.” Remand Results at 5. Thus, no T-T comparison was possible. Because, as Commerce points out, there were no usable transactions in the
Next, Commerce found that the price differences, for purposes of the first step of the Nails test, could not be determined using the A-A methodology. See Remand Results at 5-6. When making this finding, Commerce stated:
To satisfy the second part of the statutory test, i.e., to explain why the differences cannot be taken into account using the [A-A] method, in the underlying investigation, we calculated the estimated weighted-average dumping margins using both the [A-A] method and the [A-T] method. In this specific case, we find that the price differences cannot be taken into account using the [A-A] method, as evidenced by the fact that [Tianhai‘s] estimated weighted-average dumping margin crossed the de minimis threshold specified in [
19 U.S.C. § 1673b(b)(3) 11] (i.e., two percent ad valorem) when we applied the [A-T] method instead of the [A-A] method. In other words, [Tianhai‘s] estimated weighted-average dumping margin calculated using the [A-A] method was below the de minimis threshold, and [Tianhai‘s] estimated weighted-average dumping margin calculated using the [A-T] method was 6.62 percent. In light of [the] fact that the estimated weighted-average dumping margin crosses the de minimis threshold specified in [§ 1673b(b)(3) ] when the [A-T], rather than the [A-A], comparison method is applied, the Department finds that the [A-A] method cannot account for the price differences.
Remand Results at 5-6 (footnotes omitted). Put another way, using the Nails test, Commerce first found a difference in price pattern between the targeted and non-targeted time periods that indicated that dumping had occurred during the targeted period. Next, Commerce applied the A-A methodology, but that methodology did not yield a dumping margin that was sufficient in magnitude to result in an antidumping order. When it applied the A-T methodology, however, a larger margin was found. Because this larger margin exceeded the two-percent threshold, provided by statute as necessary for the imposition of an antidumping order when a margin is determined using A-A, Commerce concluded that the observed differences in price pattern did indeed indicate that targeted dumping had occurred, but was concealed using the A-A methodology.
With respect to this explanation, it is important to keep in mind how the Nails test fits into the analysis required by
On remand, Commerce has supplied what it claims is an adequate explanation for why A-T should be used here. Its reasoning, however, relies on a form of confirmation bias: Commerce‘s explanation is that, because substantial dumping was not found using A-A, but substantial dumping was found using A-T, it was permissible for the Department to use the alternative A-T methodology. See Remand Results at 5-6; see also Issues & Dec. Mem. at cmt. IV. This statement, however, is simply inadequate. The statute requires that the Department explain why A-A (or T-T) cannot take into account the pattern of pricing differences “among purchasers, regions, or periods of time” before it may proceed to using the A-T methodology. See
It is plain from its structure, that the statute requires more than a finding of greater dumping before the use of the A-T methodology is permitted. If, as the Department would have the court believe, Congress intended that the only requirement before the A-T methodology could be used was a finding of greater dumping using A-T itself,
Here, the Department has chosen a narrative rather than an explanation. Because Commerce has failed to satisfy the requirements of the statute, this issue must be remanded for Commerce to supply the explanation required by
As previously explained, in BTIC I, the court remanded the issue of the methodology used by the Department to determine whether dumping had occurred, and if so, to establish a dumping margin, but refrained from addressing plaintiff‘s three other arguments. Because the Federal Circuit has addressed one of the three arguments, and because the two others can be disposed of easily, they will be considered here.
A. Commerce Is Not Required to Consider Whether the Pattern Was Caused by a Valid Commercial Reason
Before the court, plaintiff argues that Commerce was required to consider whether there were alternate explanations for the alleged targeted dumping. See Pl.‘s Mem. of Law in Supp. of Mot. for J. on the Agency R. Pursuant to Rule 56.2 26-29 (ECF Dkt. No. 32) (“Pl.‘s Br.“). Plaintiff contends that (1) if the “pattern” of price differences was caused by a valid commercial reason (i.e., not dumping), then the A-T exception does not apply, and (2) in Tianhai‘s case, the pattern was, in fact, caused by a valid commercial reason, and not dumping. Pl.‘s Br. 29.
The Federal Circuit has recently addressed the issue of whether Commerce is required to consider alternate explanations for “a pattern of export prices . . . that differs significantly among . . . time periods,” and has found that it is not. See JBF RAK, 790 F.3d at 1368 (“Section 1677f-1(d)(1)(B) does not require Commerce to determine the reasons why there is a pattern of export prices for comparable merchandise that differs significantly among purchasers, regions, or time periods, nor does it mandate which comparison methods Commerce must use in administrative reviews . . . . [R]equiring Commerce to determine the intent of a targeted dumping respondent ‘would create a tremendous burden on Commerce that is not required or suggested by the statute.‘” (quoting JBF RAK LLC v. United States, 38 CIT —, —, 991 F.Supp.2d 1343, 1355 (2014))); see also Borusan Mannesmann Boru Sanayi ve Ticaret A.S. v. United States, 608 Fed.Appx. 948, 949-50 (Fed.Cir.2015) (“In light of our decision in JBF RAK, and because Borusan has merely challenged Commerce‘s failure to consider Borusan‘s alternate explanation for the observed pricing patterns, we affirm the Court of International Trade‘s judgment sustaining Commerce‘s calculation of a 3.55% dumping margin using the average-to-transaction comparison methodology.“). Thus, because the Federal Circuit has found that Commerce is not required to consider alternate explanations for an observed pricing pattern, plaintiff‘s argument, that, here, the “pattern” of price differences was caused by a valid commercial reason (i.e., not dumping), necessarily fails.
B. Commerce‘s Application of Zeroing Was Reasonable
Plaintiff also argues that, even if the use of the A-T methodology were appropriate, the Department was not permitted to employ its zeroing methodology. See Pl.‘s Br. 29-35. According to plaintiff: (1) “the statute is ambiguous with respect to the application of the zeroing methodology“; (2) Commerce has an “established policy . . . that it will not apply zeroing in antidumping duty investigations“; and (3) because (1) and (2) are true, “Commerce must provide an independent justification for the application of its zeroing methodology.” See Pl.‘s Br. 30-31. Plaintiff thus maintains that Commerce cannot justify the application of zeroing simply because the Department has selected the “exception” methodology (i.e., the A-T methodology). Pl.‘s Br. 31.
The [World Trade Organization‘s (“WTO“)13] decision was limited; it found that Commerce‘s use of zeroing methodology with respect to [A-A] comparisons in antidumping duty investigations was inconsistent with the United States’ international obligations. The Executive Branch responded by discontinuing its zeroing practice in new and pending investigations using [A-A] comparison methodology. Commerce, did not, however, alter its practice with respect to the use of zeroing methodology in anything other than investigations using [A-A] comparisons . . . . Commerce‘s modification was limited to changes that were necessary to comply with the WTO decision.
Union Steel v. United States, 713 F.3d 1101, 1110 (Fed.Cir.2013) (citations omitted). In other words, the Department did not abandon zeroing in A-A investigations after concluding that zeroing led to an unfair result, or provided an inaccurate result, but rather, because it was obliged to do so by our trading partners. See id.
The Union Steel Court also found that Commerce‘s decision to use or not use the zeroing methodology reasonably reflects unique goals in differing comparison methodologies. In average-to-average comparisons, as used in investigations, Commerce examines average export prices; zeroing is not necessary because high prices offset low prices within each averaging group. When examining individual export transactions, using the average-to-transaction comparison methodology, prices are not averaged and zeroing reveals masked dumping. This ensures the amount of antidumping duties assessed better reflect the results of each average-to-transaction comparison. Commerce‘s differing interpretation is reasonable because the comparison methodologies compute dumping margins in different ways and are used for different reasons. Id. at 1109 (footnote omitted). Therefore, the Federal Circuit has found zeroing to be reasonable in at least some A-T situations. Plaintiff acknowledges these findings of the Federal Circuit in Union Steel, yet maintains that the case did not establish that Commerce was entitled to use zeroing whenever the A-T method is employed. See Pl.‘s Reply Br. 14 (ECF Dkt. No. 50) (“Pl.‘s Reply Br.“). Rather, plaintiff maintains that “the proper focus of the inquiry into whether zeroing is appropriate should be the type of proceeding and purpose it serves as opposed to the sales comparison method being employed.” Pl.‘s Reply Br. 14. Put another way, for plaintiff, the Union Steel Court did not necessarily hold that zeroing could be used in A-T comparisons in targeted dumping investigations as well as in reviews.
The court cannot agree. As the court noted in BTIC I, “the Federal Circuit has ‘repeatedly addressed zeroing and has held
See Corus Staal BV v. Dep‘t of Commerce, 395 F.3d 1343, 1347 (Fed.Cir.2005).
In the Final Determination, Commerce provided the following explanation for its application of zeroing here:
Our interpretation [that
19 U.S.C. § 1677(35) ] permits zeroing in the [A-T] methodology, as in this investigation, and permits offsetting in the [A-A] methodology reasonably accounts for differences inherent in the distinct comparison methodologies.. . . .
. . . . As such, we find that the petitioner is correct that the intent of [
19 U.S.C. § 1677f-1(d)(1) ] is not effectuated if offsets are used under the alternative [A-T] methodology. This is so because record evidence shows that for [Tianhai], the [A-A] methodology masks differences in the patterns of prices between the targeted and non-targeted groups by averaging low-priced sales to the targeted group with high-priced sales to the non-targeted group.
Issues & Dec. Mem. at cmt. IV. This explanation comports with the Federal Circuit‘s holding in Union Steel. See Union Steel, 713 F.3d at 1107 (“Commerce‘s decision to modify its zeroing practice has previously been sustained by this court. In U.S. Steel, the court sustained Commerce‘s decision to cease zeroing when making average-to-average comparisons in antidumping duty investigations while recognizing Commerce intended to continue zeroing in other circumstances. The court relied upon the differences among various types of comparison methodologies, recognizing that
In [A-A] comparisons, as used in investigations, Commerce examines average export prices; zeroing is not necessary because high prices offset low prices within each averaging group. When examining individual export transactions, using the [A-T] comparison methodology, prices are not averaged and zeroing reveals masked dumping. This ensures the amount of antidumping duties assessed better reflect the results of each [A-T] comparison. Id. at 1109. This explanation also fits to the facts of this case.
Therefore, for the foregoing reasons, plaintiff‘s arguments regarding zeroing are unconvincing and the court finds that Commerce‘s application of zeroing was reasonable in this case.
C. Commerce‘s Application of the A-T Methodology Was Reasonable Despite the Small Number of Tianhai‘s Targeted Sales
Last, Tianhai asks the court to consider the issue of “whether it was reasonable for Commerce to apply its targeted dumping remedy to 100%14 of [Tianhai‘s] reported sales database when only 5.04% of [Tianhai‘s] sales were identified as being target-ed.”
The Chevron line of cases provides guidance to courts when a statute is silent or ambiguous. See Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). “[A]gencies are entitled to formulate policy and make rules ‘to fill any gap left, implicitly or explicitly, by Congress.‘” SKF USA Inc. v. United States, 254 F.3d 1022, 1030 (Fed.Cir.2001) (quoting Chevron, 467 U.S. at 843). Relying on these cases, and because of the gap in the targeted dumping provision left by Congress, this Court has held that the Department‘s policies filling that gap are entitled to deference so long as they are reasonable. See Timken Co. v. United States, 38 CIT —, n. 7, 968 F.Supp.2d 1279, 1286 n. 7 (2014), aff‘d, 589 Fed.Appx. 995 (Fed.Cir.2015).
Here, although plaintiff‘s “fairness” argument may have some surface appeal, it cannot be said that Commerce‘s determination was unreasonable. Both the statute and the legislative history of
Because Commerce is entitled to deference with respect to its interpretation of how broadly the margin will be applied, the Department may apply the rate to all of plaintiff‘s sales if it is reasonable to do so. See Chevron, 467 U.S. at 843-44. Plaintiff cites to nothing in the
Thus, although it remains to be seen if Commerce can provide an adequate explanation for using the A-T methodology in this case, should it do so, its authority to apply the resulting margin to all of plaintiff‘s sales is not in doubt.
CONCLUSION and ORDER
For the foregoing reasons, it is hereby
ORDERED that Commerce‘s Final Results of Redetermination are remanded; it is further
ORDERED that, on remand, Commerce shall issue a redetermination that complies in all respects with this Opinion and Order, is based on determinations that are supported by substantial record evidence, and is in all respects in accordance with law; it is further
ORDERED that, on remand, should the Department continue to find the application of the A-T methodology to be appropriate, it must provide an adequate explanation, in accordance with
ORDERED that the Department may, in its discretion, reopen the record to solicit any additional information it deems necessary to make its determinations; and it is further
ORDERED that the remand results shall be due on December 14, 2015; comments to the remand results shall be due thirty (30) days following filing of the remand results; and replies to such comments shall be due fifteen (15) days following filing of the comments.
RICHARD K. EATON
Judge
MACLEAN-FOGG CO., et al., Plaintiffs, v. UNITED STATES, Defendant, and Aluminum Extrusions Fair Trade Committee, Defendant-Intervenor.
Court No. 11-00209
United States Court of International Trade
Oct. 23, 2015
Slip Op. 15-119
DONALD C. POGUE, Senior Judge
JUDGMENT
This case having been duly submitted for decision; and the court, after due deliberation, having rendered a decision