CHANG CHUN PETROCHEMICAL CO. LTD., Plaintiff, v. UNITED STATES, Defendant, and Sekisui Specialty Chemicals America, LLC, Defendant-Intervenor.
Court No. 11-00095
United States Court of International Trade
April 10, 2013
Slip Op. 13-49.
Melissa M. Devine and L. Misha Preheim, Trial Attorneys, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, for Defendant. With them on the brief were Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, and Claudia Burke, Assistant Director. Of counsel on the brief was Jonathan M. Zielinski, Senior Attorney, Office of the Chief Counsel for Import Administration, United States Department of Commerce.
Daniel J. Plaine, Thomas M. Johnson, Jr., Andrea F. Farr, and James F. Doody, Gibson Dunn & Crutcher, LLP, of Washington, DC, for Defendant-Intervenor.
OPINION & ORDER
CARMAN, Judge:
Plaintiff Chang Chun Petrochemical Company Limited (“Plaintiff” or “CCPC“) contests the final determination by the United States Department of Commerce (“Defendant” or “Commerce“) in the investigation of an antidumрing duty order on polyvinyl alcohol (“PVA“) from Taiwan. See Polyvinyl Alcohol from Taiwan, 76 Fed.Reg. 5,562 (Dep‘t of Commerce Feb. 1, 2011) (final determination of sales at less than fair value) (“Final Determination“), P.R.1 157, and accompanying Issues and Decision Memorandum, A-583-841 (Jan. 26, 2011) (“I & D Memo“), P.R. 153. Pursuant to its motion for judgment on the agency record challenging Commerce‘s Final Determination, Plaintiff seeks a remand to the agency for reconsideration of Commerce‘s decision to apply the targeted dumping methodology to CCPC‘s sales. Mot. for J. on the Agency R. 56.2, ECF No. 23.
Upon review of the underlying record and motion papers, the Court sustains in part and remands in part Commerce‘s Final Determination. Commerce did not provide an explanation of why the transaction-to-transaction method cannot be used in this investigаtion as required by the
PROCEDURAL HISTORY
This case has a long procedural history, whereby the issues in the instant case arose from the timing of the interrupted investigation. Therefore, an outline of the relevant dates and corresponding events will contextualize the current issues. The subject product is polyvinyl alcohol (“PVA“), which is a water-soluble synthetic polymer, from the Republic of China (“Taiwan“).
In 1997, Commerce promulgated a targeted dumping regulation which supplemented the targeted dumping statute. See
In September of 2004, Celanese Chemicals America, LLC (“Celanese“)—now known as Sekisui Specialty Chemicals America LLC (“Sekisui“), defendant-intervenor in this case, and a domestic producer of PVA—filed a petition against PVA from Taiwan that is the underlying administrative proceeding at issue. Celanese alleged all three types of targeted dumping4—for customer, region and time period—concerning CCPC, plaintiff in this case and the only known producer of PVA in Taiwan during the period of investigation from July 2003 to June 2004. On October 4, 2004, Commerce initiated a less than fair value investigation on PVA from Taiwan. Polyvinyl Alcohol from Taiwan, 69 Fed.Reg. 59,204 (Dep‘t of Commerce Oct. 4, 2004) (initiation of antidumping duty investigation), P.R. 28.
On October 22, 2004, the International Trade Commission (“ITC” or “Commission“) preliminarily determined that the domestic PVA industry was not materially injured or threatened with material injury. Polyvinyl Alcohol from Taiwan, 69 Fed.Reg. 63,177 (Int‘l Trade Comm‘n Oct. 29, 2004) (preliminary determination). Consequently, Commerce terminated its investigation. Petitioner timely appealed the
In January of 2007, the court issued a decision in PVC Case I and remanded it to the Commission for reconsideration. See Celanese Chems. Ltd. v. United States, 31 C.I.T. 279 (2007) (“PVC Decision I“).6 Three months later, the Commission reversed its negative injury determination on remand. In November of 2008, the court sustained the Commission‘s remand results. Celanese Chems. Ltd. v. United States, 32 C.I.T. 1250 (2008) (“PVC Decision II“).7 Defendant and defendant-intervenors timely appealed the court‘s affirmation of the Commission‘s remand results, but the appeals court upheld PVC Decision II without opinion. Celanese Chems. Ltd. v. United States, 358 Fed.Appx. 174 (Fed. Cir. 2009).
In March of 2010, the Commission notified Commerce of the affirmative preliminary injury determination, and accordingly, Commerce resumed its investigation. See Letter from Commission to Commerce, Re: Polyvinyl from Taiwan: Investigation No. 731-TA-1088 (Preliminary) (Remand), dated Mar. 25, 2010, P.R. 54. In September оf 2010, Commerce issued its preliminary determination of dumping, Polyvinyl Alcohol from Taiwan, 75 Fed. Reg. 55,552 (Dep‘t of Commerce Sept. 13, 2010) (preliminary determination of sales at less than fair value and postponement of final determination) (“Preliminary Determination“), P.R. 127, and five months later its final determination of dumping, Final Determination, 76 Fed.Reg. at 5,562. The antidumping order was published in mid-March. Polyvinyl Alcohol from Taiwan, 76 Fed.Reg. 13,982 (Dep‘t of Commerce Mar. 15, 2011) (antidumping order) (“AD Order“), P.R. 162.
In December of 2008, during the time that the injury determination was being litigated and the administrative investigation was on hold, Commerce issued an interim final rule8 which removed the targeted dumping regulation—
At the heart of this case is whether Commerce properly applied the proper regulation. Plaintiff brings this action seeking review of Commerce‘s lack of explanation regarding its application of the targeted dumping regulation.
STANDARD OF REVIEW
The Court has jurisdiction pursuant to
DISCUSSION
Plaintiff‘s challenges can be boiled down to two issues. The first issue is whether Commerce applied the proper regulation to the instant investigation. Specifically, which regulation was applied—the regulation in effect at the time the investigation was initiated (the “2004 Regulation“) or the regulation in effect at the time the investigation was concluded (the “2011 Regulation“)? The second issue is whether Commerce properly applied the regulation to the instant investigation. Specifically, was Commerce‘s determination to apply the average to transaction methodology to all of CCPC‘s sales rather than just to the targeted sales supported by substantial evidence on the record or otherwise in accordance with law?
I. Statutory & Regulatory Framework
A. Statutory Framework
The dumping statute authorizes three methods10 to determine “whether the subject merchandise is being sold in the United States at less than fair value” in an investigation: average-to-average, transaction-to-transaction, and average-to-transaction. See
The first statutory requirement is for Commerce to find targeted dumping in at least one of three ways: to a customer, in a region or during a period of time. See id. The second statutory requirement is for Commerce to provide an explanation why the two general methodologies—average-to-average or transaction-to-transaction—are insufficient. While the statute prefers the two general methodologies over the exception methodology, it is silent as to when to apply the general two methodologies. See id. Further, the statute is also silent as to the body of sales to which Commerce will apply the exception methodology. When a statute is silent, Commerce is “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 U.S.A., Inc. v. Nat‘l Res. Def. Council, Inc., 467 U.S. 837, 843 (1984) (internal quotations omitted)).
B. Regulatory Framework
In May of 1997, exercising its gap-filling authority, Commerce promulgated a targeted dumping regulation. First, to fill the statutory gap, Commerce listed preferences between the general comparison methodologies in investigations, using the average-to-average “normally” and using the transaction-to-transaction “only in unusual situаtions.” See
II. Contentions of the Parties
A. Plaintiff‘s Contentions
Plaintiff CCPC contends that Commerce did not properly apply the 2004 Regulation to this investigation but rather impermissibly retroactively applied the 2011 Regulation, ignoring “temporal limitations” to apply new policies to CCPC. See Mem. of Points and Authorities in Supp. of Pl. Chang Chun Petrochemical Co. Ltd.‘s C.I.T. Rule 56.2 Mot. for J. Upon the Agency R. (“Pl.‘s Mot.“) at 8-9, ECF No. 24. CCPC avers that Commerce improperly applied a later-developed standard to this investigation when it applied the average-to-trаnsaction methodology to all of the sales, instead of only to the targeted sales. See Pl.‘s Mot. at 20. While conceding that “the term ‘normally’ does confer some discretion,” CCPC asserts that “[t]he term ‘normally’ imposes a limitation on the discretion of Commerce, a limitation that Commerce itself recognized when it went to the trouble of issuing the [Withdrawal Notice] to remove the regulations and the [word] ‘normally’ . . . contained therein.” Reply Br. in Supp. of Pl. Chang Chun Petrochemical Co. Ltd.‘s Mot. for J. Upon the Agency R. (“Pl.‘s Reply“) at 7, ECF No. 36.
Plaintiff proffers that “[a] review of all Commerce proceedings between early 1996 and late 2008 in which targeted dumping was found reveals that Commerce‘s normal practice was to limit the application of the average-to-transaction methodology only to those sales that constitute targeted dumping,” and accordingly went against its own precedent in this case. Id. at 22 (emphasis in original). Thus, Plaintiff postulates that Commerce bootstrapped its post-Withdrawal Notice policy in the instant investigation “to negate the limitation contained” in the 2004 Regulation.
B. Defendant‘s Contentions
Defendant Commerce contends that it properly applied the 2004 Regulation to this investigation. See Def.‘s Opp‘n at 14-5. Commerce argues that it interprets its own regulation to provide itself with discrеtion to apply the average-to-transaction method to all sales and not only to targeted sales, “when appropriate.” Id. at 5, 15-6. Commerce explains that “the word ‘normally’ contained in [
Further, Commerce elucidates that the Withdrawal Notice “did not promulgate any new rеgulations to replace subsection (f), and did not adopt any new methodologies to be applied in targeted dumping situations.” Id. at 21. Defendant avers that it did apply the 2004 Regulation when determining which sales should be compared using the average-to-transaction comparison methodology, id. at 19, and “provided more than adequate explanation for its decision to apply average-to-transaction comparisons” to all of CCPC‘s U.S. sales, id. at 25. Commerce advances that “this was not a retroactive application of a new rule, but rather, the contemporaneous application of a current practice that is consistent with the applicable regulation.” Id. at 24; see also, I & D Memo at 7. Accordingly, “Commerce reasonably determined that it was appropriate to follow its current practice, which is based upon statutory interpretation and policy goals.” Def.‘s Opp‘n at 24.
C. Defendant-Intervenor‘s Contentions
Defendant-Intervenor Sekisui Specialty Chemicals America, LLC sets forth essentially the same contentions as the Defendant. Sekisui reiterates that Commerce acted within its sound discretion, as provided by the 2004 Regulation, in applying the average-to-transaction methodology to all of CCPC‘s U.S. sales, and “did not apply the regulatory guidance set forth in the Withdrawal Notice, retrospectively or otherwise.” Resp. Br. of Sekisui Specialty Chemicals America, LLC in Opp‘n to Chang Chun Petrochemical Co. Ltd.‘s Mot. for J. Upon the Agency R. (“Def.-Int.‘s Opp‘n“) at 16, ECF No. 30.
III. Application of the Regulations
The regulation in effect at the time this investigation was initiated included the targetеd dumping provision,
When analyzing proper application of the statutory and regulatory
A. Did Commerce Apply the Proper Regulation
The first issue for the Court to address is whether Commerce applied the proper regulation to this investigation. Specifically, was the 2004 Regulation or the 2011 Regulation applied? Plaintiff contends that the 2011 Regulation was impermissibly retroactively applied to the investigation rather than the 2004 Regulation. Pl.‘s Mot. at 8-9. The investigation was originally initiated in 2004, while the 2004 Regulation was still in effect, then placed on hold during the litigation of a separate issue, and finally resumed and decided in 2010, when the 2011 Regulation had become effective. All parties agree that the 2004 Regulation should have been applied to this investigation, but Plaintiff complains that Commerce instead improperly applied the 2011 Regulation and that corresponding policy. See Pl.‘s Reply at 2, 4; Def.‘s Opp‘n at 6, Def.-Int.‘s Opp‘n at 18.
There is ample evidence on the record that Commerce was aware that the regulation had changed during the course of the investigation and applied to this investigation the regulation in effect at the time the investigation was initiated—the 2004 Regulation—rather than the regulation that was in effect at the time the investigation was concluded—the 2011 Regulation. See Def.‘s Opp‘n at 14-15, Targeted Dumping Memo at 7-8, I & D Memo at 1-7. The petition alleged all three types of targeted dumping—customer, region, and time period—which triggered the targeted dumping provision in the 2004 Regulation. See Targeted Dumping Memo at 4. Upon review of the record, the Court finds that Commerce applied the proper regulation—the 2004 Regulation—to the instant investigation.
B. Did Commerce Properly Apply the Regulation
The more involved issue for the Court to address is whether Commerce properly applied the 2004 Regulation. Specifically, was Commerce‘s determination to apply the average-to-transaction methodology to all of CCPC‘s sales, rather than to just the targeted sales, supported by substantial evidenсe on the record or otherwise in accordance with law? As discussed above, because the petition alleged three types of targeted dumping,
1. 19 C.F.R. § 351.414(f)(1)
Commerce satisfied the first requirement of this subsection,
The Court recognizes that in an investigation, the regulations list a preference for the average-to-average method and that the transaction-to-transaction method will be used “only in unusual situations, such as when there are very few sales of subject merchandise and the merchandise sold in each market is identical or very similar or is custom-made.”
2. 19 C.F.R. § 351.414(f)(2)
Only after
i. Normally Requires Reasoning
The Court will first consider Plaintiff‘s аrgument regarding the permissible discretion afforded by the word “normally” in the targeted dumping regulation. A regulation differs from a policy because it is binding on an agency. Commerce is granted “due deference for its reasonable interpretation of its own regulations.” Dorbest Ltd. v. United States, 462 F.Supp.2d 1262, 1270 (2006). However, Commerce‘s “wide latitude in its decision-making” does not exempt Commerce from “articulating its reasoning.” A. Hirsh, 729 F.Supp. at 1362. “Failure of the decision-maker to provide the court with the basis of its determination precludes the court from fulfilling its statutory obligation on review,” and such a failure is contrary to law. Id. at 1362, 1365.
With these principles in mind, the Court gives deference to Commerce‘s decision while also requiring Commerce to comply with its own regulatory language limiting application of the average-to-transaction method to all sales only in non-normal situations. In order to determine whether Commerce‘s decision was supported by substantial evidence, the Court looks on the record for a reasoned analysis or explanation for Commerce‘s decision as to why this case was not normal and thus justified universal application of the average-to-transaction method to all of Plaintiff‘s sales. The record, however, appears to be void of this requisite reasoned analysis or explanation.
In the case at hand, Commerce proclaimed that:
The use of the qualifier “normally” in
19 C.F.R. § 351.414(f)(2) (2004) indicates that we have the discretion to depart from limiting the application of the average-to-transaction methodology to those sales that constitute targeted dumping if we find it appropriate. We preliminarily determine that such a departure is appropriatе in this investigation. After this investigation was initiated, we withdrew this regulation because we recognized that the regulation may have established thresholds or other criteria that have prevented the use of this comparison methodology to unmask dumping, contrary to Congressional intent. . . . Since the publication of the Withdrawal Notice, . . . we have refined our practice in cases involving targeted dumping to better reflect Congressional intent. Specifically, if the criteria of [the targeted dumping statute] are satisfied, [Commerce] will apply average-to-transaction comparisons for all sales in calculating the weighted average dumping margin.
Targeted Dumping Memo at 6-7 (internal citations omitted). Immediately following its declaration that departure from the norm is warranted in this invеstigation, Commerce explains its new policy of universal application of the average-to-trans-
Commerce made a determination that was crucial to Plaintiff‘s dumping margin, which requires Commerce to support its determination with substantial evidence on the record and to articulate its reasoning so the Court can meaningfully review Plaintiff‘s challenge. Because Commerce has not provided a reasoned analysis or explanation for its decision that this situation requires a departure from the norm, the Court cannot review whether Commerce‘s decision was reasonable. Accordingly, the Court holds that Commerce‘s lack of reasoned analysis or explanation regarding why this investigation does not constitute a normal situation means that its determination is not in accordance with law. The Court therefore remands this case to Commerce to properly apply the 2004 Regulation, including the limitation on targeted dumping methodology, and to fully explain the manner in which it applies the regulation based on the record and the law applicable at the time the investigation was initiated.
ii. Policy Is Not Binding
The Court will next address Plaintiff‘s poliсy argument. During the promulgation of the targeted dumping regulation, as discussed above, Commerce offered two examples of what it did not consider “normal” situations, and when the average-to-transaction method would thus be applied to all sales: when “targeted dumping by a firm is so pervasive that the average-to-transaction method becomes the best benchmark for gauging the fairness of that firm‘s pricing practices,” Proposed Rules, 61 Fed.Reg. at 7,350, and when “the targeted dumping practice is so widespread it may be administratively impractical to segregate targeted dumping pricing from the normal pricing behavior of a company,” Final Rule, 62 Fed.Reg. at 27,375. These two examples formed Commerce‘s average-to-transaction application policy undеr the 2004 Regulation, which was the policy in place at the time the investigation was initiated. Commerce explains that “[i]n the past, when applying [
In March of 2010, Commerce articulated its new policy shift, from its old policy of limiting the application of the average-to-transaction methodology to only targeted sales to its new policy of expanding the application of the average-to-transaction methodology to all U.S. sales whenever it found targeted dumping. Commerce claimed that it will “now apply the аverage-to-transaction methodology to all sales regardless of whether the sales are targeted . . . [because] application of the average-to-transaction method to all sales . . . is a reasonable [interpretation of the statute] and is more consistent with [Commerce‘s] approach to selection of the appropriate comparison method under [
Plaintiff asserts that Commerce improperly applied this later-devel-
[t]he fact that Commerce changed its policy is irrelevant, as Commerce is entitled to change its views, and a new administrative policy based on a reasonable statutory interpretation is nonetheless entitled to Chevron deference.
Saha Thai Steel Pipe (Public) Co., Ltd. v. United States, 635 F.3d 1335, 1342 (Fed. Cir. 2011) (citing Rust v. Sullivan, 500 U.S. 173, 186-87 (1991)); see also U.S. Steel Corp. v. United States, 621 F.3d 1351 (Fed. Cir. 2010) (upholding Commerce‘s methodological change with respect to investigations because it supplied a reasonable explanation for its new interpretation). Regardless of Commerce‘s flexibility to adopt a new policy, it was required to make a decision in this case pursuant to the regulation that was in place at the time the case originated. Although Plaintiff challenges Commеrce‘s shift in policy, case law does not support relief on that ground.
CONCLUSION
For the foregoing reasons, it is hereby
ORDERED that this case is remanded to Commerce to provide an explanation, pursuant to
ORDERED that this case is remanded to Commerce to provide a reasoned analysis or explanation, pursuant to
ORDERED that the stay entered by the Court on Plaintiff‘s motion for oral argument (ECF No. 40) is hereby lifted; and it is further
ORDERED that Plaintiff‘s motion for oral argument (ECF No. 37) is hereby denied; and it is further
ORDERED that the results of the redetermination on remand shall be filed no later than Thursday, May 30, 2013; and it is further
ORDERED that Plaintiff may file comments on such remand results, not to exceed 20 pages, and that such comments shall be filed no later than Thursday, June 27, 2013; and it is further
ORDERED that Defendant and Defendant-Intervenor may file replies to Plaintiff‘s comments, not to exceed 15 pages, and that such replies shall be filed no later than Thursday, July 25, 2013.
Gregory W. Carman
Judge
Notes
(f) Targeted dumping—(1) In general. Notwithstanding paragraph (c)(1) of this section, the Secretary may apply the average-to-transaction method, as described in paragraph (e) of this section, in an antidumping investigation if:
(i) As determined through the use of, among other things, standard and appropriate statistical techniques, there is targeted dumping in the form of 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 Secretary determines that such differences cannot be taken into account using the average-to-average method or the transaction-to-transaction method and explains the basis for that determination.
(2) Limitation of average-to-transaction method to targeted dumping. Where the criteria for identifying targeted dumping under paragraph (f)(1) of this section are satisfied, the Secretary normаlly will limit the application of the average-to-transaction method to those sales that constitute targeted dumping under paragraph (f)(1)(i) of this section.
(b) Description of methods of comparison—(1) Average-to-average method. The “average-to-average” method involves a comparison of the weighted average of the normal values with the weighted average of the export prices (and constructed export prices) for comparable merchandise.
(2) Transaction-to-transaction method. The “transaction-to-transaction” method involves a comparison of the normal values of individual transactions with the export prices (or constructed export prices) of individual transactions for comparable merchandise.
(3) Average-to-transaction method. The “average-to-transaction” method involves a comparison of the weighted average of the normal values to the export prices (or constructed export prices) of individual transactions for comparable merchandise.
(d) Determination of less than fair value
(1) Investigations
(A) In general
In an investigation under part II of this subtitle, the administering authority shall determine whether the subject merchandise is being sold in the United States at less than fair value—
(i) by comparing the weighted аverage of the normal values to the weighted average of the export prices (and constructed export prices) for comparable merchandise, or
(ii) by comparing the normal values of individual transactions to the export prices (or constructed export prices) of individual transactions for comparable merchandise.
(B) Exception
The administering authority may determine whether the subject merchandise is being sold in the United States at less than fair value by comparing the weighted average of the normal values to the export prices (or constructed export prices) of individual transactions for comparable merchandise, if—
(i) there is a pattern of export prices (or constructed export prices) for comparablе 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 method described in paragraph (1)(A)(i) or (ii).
(c) Preferences. (1) In an investigation, the Secretary normally will use the average-to-average method. The Secretary will use the transaction-to-transaction method only in unusual situations, such as when there are very few sales of subject merchandise and the merchandise sold in each market is identical or very similar or is custom-made.