CP KELCO OY and CP Kelco US, Inc., Plaintiffs, v. UNITED STATES, Defendant, and Ashland Specialty Ingredients, G.P., Defendant-Intervenor.
Court No. 13-00079
United States Court of International Trade
April 15, 2014
Slip Op. 14-42 | 1315
GOLDBERG, Senior Judge
CONCLUSION
Having found that the Court may exercise personal jurisdiction over SDT Air, the Court denies SDT Air‘s Motion to Dismiss (ECF No. 18). The Court also declines to dismiss, stay, or transfer the action in favor of the Louisiana action.
IT IS SO ORDERED.
Stephen C. Tosini, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for defendant. On the brief were Stuart F. Delery, Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Jr., Assistant Director, and L. Misha Preheim, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice. Of counsel on the brief was Joanna V. Theiss, Attorney, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of Washington, DC.
Edward M. Lebow, Haynes and Boone, LLP, of Washington, DC, argued for defendant-intervenor Ashland Specialty Ingredients, G.P. With him on the brief was Nora L. Whitehead.
OPINION AND ORDER
GOLDBERG, Senior Judge:
This is a trade case brought under Section 201 of the Customs Courts Act of 1980,
PROCEDURAL BACKGROUND
In August 2011, Commerce initiated an administrative review of an antidumping order on carboxymethylcellulose from Finland. Initiation of Antidumping and Countervailing Duty Administrative Reviews, 76 Fed.Reg. 53,404, 53,405 (Dep‘t Commerce Aug. 26, 2011).1 The next year, the Aqualon Company, a petitioner, alleged Kelco had sold its goods for less-than-fair value at prices that differed “significantly among purchasers, regions, and periods of time.” Letter from Haynes & Boone LLC to Hon. John Bryson, PD 56 at bar-code 3077453-01 (May 25, 2012), ECF No. 30 (July 2, 2013) (“Pet‘r‘s Allegation“). This practice is known as “targeted dumping.” In view of its allegation, Aqualon asked Commerce to compute Kelco‘s margins using a methodology that accounts for targeted dumping among an exporter‘s sales. Id. at 1-2.2
Commerce initially declined to conduct a targeted dumping inquiry when calculating Kelco‘s margins. Instead, the agency followed standard procedure and assigned Kelco a 5.86% dumping margin in the preliminary results. See Purified Carboxymethylcellulose from Finland, 77 Fed. Reg. 47,036, 47,038, 47,042 (Dep‘t Commerce Aug. 7, 2012) (“Preliminary Results“). Later, however, Commerce inquired whether Kelco had engaged in targeted dumping and discovered targeted dumping by time period. Commerce then reassessed Kelco‘s margins using an alternative methodology and assigned an 11.62% rate. Post-Prelim. Targeted Dumping Analysis Mem. at 3-4, PD 68 at bar-code 3112119-01 (Dec. 21, 2012), ECF No. 30 (July 2, 2013) (“Post-Preliminary Analysis“). The agency confirmed its findings from the targeted dumping inquiry in the final results, settling on a 12.06% dumping margin. Purified Carboxymethylcellulose from Finland, 78 Fed.Reg. 11,817, 11,817 (Dep‘t Commerce Feb. 20, 2013) (“Final Results“).
Kelco filed a summons with this court to challenge the margin. Summons, ECF No. 1. In the accompanying complaint, Kelco alleges Commerce‘s targeted dumping inquiry was neither in accordance with the law nor grounded in substantial evidence. Compl. ¶¶ 19-27, ECF No. 4. Kelco implies that Commerce should use its normal methodology to calculate the dumping margin on remand. See id. at 7 (prayer for relief).
LEGAL BACKGROUND
To understand how Commerce‘s targeted dumping inquiry shaped Kelco‘s mar-
Commerce may also use the A-T methodology to set margins, but in limited circumstances. In investigations, Commerce may apply A-T only if it finds a “pattern of export prices ... for comparable merchandise that differ significantly among purchasers, regions, or periods of time,” and alternative methodologies inadequately explain the pattern.
Hence Commerce‘s method for discovering targeted dumping bears critically on an exporter‘s margins. The method, widely known as the “Nails test,” proceeds as follows. In the first step, called the “standard deviation test,” Commerce determines “the volume of the allegedly targeted group‘s (i.e., purchaser, region, or time period) sales of subject merchandise that are at prices more than one standard deviation below the weighted-average price of all sales under review, targeted and non-targeted.” Id. at Issue 2. Standard deviations are calculated on a product-specific basis by control number (“CONNUM“). If more than thirty-three percent of allegedly targeted sales are at least one standard deviation below the average price of all reviewed sales in a given CONNUM, Commerce moves to step two. Id.
In step two, the “gap test,” the agency considers by CONNUM the sales that passed the standard deviation test. Commerce first calculates the difference between the weighted-average price of allegedly targeted sales and the next higher weighted-average price of sales to a non-targeted group (the “target gap“). Next, Commerce calculates the average difference, weighted by sales volume, between prices to non-targeted groups (the “non-target gap“).4 Finally, the agency compares the target gap to the non-target gap. If the target gap exceeds the non-
Commerce takes a similar approach when it applies the A-T methodology in reviews. Id. Unlike the law governing investigations, however, the law governing reviews does not specify which comparative methodology Commerce must use to calculate margins. Instead, the statute explains only how to compute normal values when using the A-T method in reviews.
In this case, Commerce applied the Nails test to Kelco‘s sales during an administrative review. The agency concluded that some of Kelco‘s sales constituted targeted dumping. Commerce also found—though obliquely—that Kelco‘s targeted sales comprised more than a de minimis share of its total U.S. sales. I & D Mem. at Issue 2. After determining that the A-T methodology yielded higher margins than the A-A approach, Commerce recalculated Kelco‘s margins using A-T. Commerce assigned Kelco a 12.06% margin in the Final Results, up from 5.86% in the Preliminary Results. See Public Mem. of Law in Supp. of Pls.’ 56.2 Mot. J. on Agency R. 4-5, ECF No. 28 (“Pls.’ Br.“).
STANDARD OF REVIEW
The court must review Commerce‘s determinations to ensure they are supported “by substantial evidence on the record” and “in accordance with law.”
The agency‘s interpretation of relevant statutes is “in accordance with law” if it passes the two-step test announced in Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984). Under Chevron, the court first determines
An agency action also fails to accord with law if it is arbitrary. See U.S. Steel Corp. v. United States, 37 CIT ___, 953 F.Supp.2d 1332, 1336 (2013); Thai Plastic Bags Indus. Co. v. United States, 37 CIT ___, 949 F.Supp.2d 1298, 1302 (2013). Under Motor Vehicle Manufacturers Ass‘n v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29 (1983), an agency rule is arbitrary if “the agency relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, ... or is so implausible that it could not be ascribed to the product of agency expertise.” Id. at 43. See also Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 167-68 (1962) (invalidating exercise of agency discretion where agency failed to explain basis of its action).
DISCUSSION
The court evaluates Kelco‘s claims in light of these standards. First, the court considers whether Commerce was authorized by statute to conduct a targeted dumping inquiry during the administrative review. See Pls.’ Br. 1-2. The law shows that Commerce was so authorized.
Second, the court assesses whether the method Commerce used to discover targeted dumping was based in substantial evidence and in accordance with law. See id. The court holds that Commerce‘s targeted dumping inquiry was valid in all respects but one: Commerce‘s de minimis test—which functioned either as an additional step of the Nails inquiry or as a guidepost in the agency‘s discretionary analysis—was arbitrary and contrary to law.
I. Commerce Acted in Accordance with Law When It Conducted a Targeted Dumping Inquiry During the Review
Kelco first argues that Commerce was not permitted to conduct a targeted dumping inquiry during the administrative review. Though not so phrased in its brief, Kelco relies almost exclusively on the interpretive maxim expressio unius est exclusio alterius to support its claim. See Pls.’ Br. 7-12; Pls.’ Reply Br. 1-9, ECF No. 45 (“Reply Br.“). Translated from Latin, the maxim means “to express or include one thing implies the exclusion of the other,” suggesting that if Congress grants a right or privilege in one situation, then Congress intentionally withholds that right or privilege in other situations. Black‘s Law Dictionary 620 (8th ed. 2004). In this vein, Kelco asserts that while the statute expressly permits Commerce to conduct targeted dumping inquiries in investigations, the law does not authorize such inquiries in administrative reviews. Consequently, Congress must have intended to prohibit targeted dumping inquiries in reviews, and Commerce acted contrary to law by applying its targeted dumping analysis to Kelco. Pls.’ Br. 9-12; see also
The court cannot agree. Under Chevron, the court must invalidate agency actions that contradict a statute‘s unambiguous instructions. See Chevron, 467 U.S. at 842-43. But the statute at issue here does not clearly prohibit targeted dumping inquiries in reviews. The court notes first that
Even so, Kelco contends the interpretive maxim expressio unius precludes using the targeted dumping inquiry in reviews.
The court does not see it that way. As the Supreme Court explained, expressio unius arguments “ha[ve] force only when the items expressed are members of an associated group or series, justifying the inference that items not mentioned were excluded by deliberate choice, not inadvertence.” Barnhart v. Peabody Coal Co., 537 U.S. 149, 168 (2003) (internal quotation marks omitted). Admittedly, the provisions here appear in a series. Section 1677f-1(d)(1)(B) permits targeted dumping inquiries in investigations, but § 1677f-1(d)(2) provides no such authority for reviews. Nevertheless, § 1677f-1(d)(2) mandates how Commerce must average normal values when using the A-T method to calculate margins in reviews. This implies that the legislature intended to allow A-T to be used in reviews. It thus makes little sense that Congress would prohibit targeted dumping inquiries in reviews, because the inquiry‘s sole purpose is to help Commerce decide whether to apply the A-T methodology in a given case. The inference to be drawn, if any, is that Congress would allow the targeted dumping inquiry in reviews, not the opposite. See Barnhart, 537 U.S. at 168.
FAG Italia S.p.A. v. United States, 291 F.3d 806 (Fed.Cir.2002), does not mandate a different result. See Pls.’
In this vein, Kelco argues Commerce misinterpreted statutory silence in § 1677f-1(d)(2) to permit targeted dumping inquiries in reviews. The comparison to FAG Italia, however, is inapt. In FAG Italia, the same provision that authorized duty absorption inquiries also limited those inquiries to the second and fourth years following an order. See
Kelco‘s case is more akin to NTN Bearing than to FAG Italia. In NTN Bearing, Commerce used cost data from the respondents’ affiliates to calculate respondents’ inventory carrying costs and difference in merchandise (“difmer“) adjustment. Id. at 1371-72. The statute, however, expressly authorized Commerce to use affiliate data for other purposes, including to calculate a respondent‘s production costs and constructed normal value.
B. Commerce‘s Decision to Conduct a Targeted Dumping Inquiry in the Review Was Reasonable
Nor was the agency‘s decision to conduct a targeted dumping inquiry an unreasonable interpretation of the statute. See Chevron, 467 U.S. at 843-44. As discussed above, the statute permits Commerce to use A-T in reviews. See
Kelco nevertheless argues that the agency‘s interpretation was invalid because antidumping investigations and reviews serve different purposes. See Reply Br. 7-8 (citing Union Steel v. United States, 713 F.3d 1101, 1109 (Fed.Cir.2013)). In investigations, Commerce examines overall pricing patterns to decide whether to impose antidumping duties. Reviews, by contrast, exist to determine the amount of those duties. Because the targeted dumping inquiry focuses on “overall pricing patterns,” Kelco argues the inquiries are appropriate only in investigations. Id. at 8.
Kelco‘s own citation refutes this argument. In Union Steel—a case Kelco offers to illustrate the difference between investigations and reviews—the Federal Circuit upheld Commerce‘s decision to use the A-A methodology in investigations and the A-T methodology without offsets in reviews. Union Steel, 713 F.3d at 1108-09. But as discussed previously, the targeted dumping inquiry is simply a threshold analysis Commerce conducts before applying A-T to calculate dumping margins. It does not follow that Congress would prohibit targeted dumping inquiries in reviews when the inquiry‘s purpose is to help Commerce decide whether to apply A-T in a given case. The policy differences between investigations and reviews do not render the agency‘s interpretation of the statute unreasonable.
Because Commerce‘s interpretation passes both steps of Chevron, the court holds that the decision to conduct a targeted dumping inquiry during the review accorded with law.
II. Commerce‘s Method for Discovering Targeted Dumping Was Not in Accordance with Law
Kelco next claims that Commerce‘s method for discovering targeted dumping was neither grounded in substantial evidence nor in accordance with law. This argument breaks into three subparts. First, Kelco argues the Nails test is itself arbitrary and unsupported by substantial evidence. Second, Kelco alleges Commerce did not base in substantial evidence its decision to apply the Nails test to Kelco. Third, Kelco claims Commerce acted arbitrarily by refusing to excuse Kelco‘s targeted sales from A-T treatment under
A. The Nails Test Itself Is Neither Arbitrary Nor Unsupported in Evidence
Kelco argues the Nails test as applied in administrative reviews is arbitrary and unsubstantiated in evidence. In particular, Kelco alleges Commerce failed to explain how the Nails test‘s standard deviation metric and thirty-three and five percent thresholds unmask targeted dumping. Pls.’ Br. 13-14.
These arguments do not advance Kelco‘s case. Under State Farm, an agency rule is arbitrary if “the agency ... relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, ... or is so implausible that it could not be ascribed to the product of agency expertise.” 463 U.S. at 43. The Nails test avoids these pitfalls because it identifies targeted dumping as described by statute. Under
Commerce‘s thirty-three and five percent thresholds are also valid. If thirty-three percent of allegedly targeted prices fall one standard deviation below average prices by CONNUM, then the agency concludes that a “pattern of export prices” existed. See I & D Mem. at Issue 2; Mid Continent Nail, 34 CIT at ___, 712 F.Supp.2d at 1378. Next, Commerce takes the sales that pass the standard deviation test and determines whether they pass the gap test. I & D Mem. at Issue 2. If sales that pass the gap test comprise five percent of the exporter‘s sales to the alleged target, Commerce concludes that prices “differ[ed] significantly” among purchasers, regions, or periods of time. Mid Continent Nail, 34 CIT at ___, 712 F.Supp.2d at 1378-79. The court has held that these thirty-three and five percent thresholds together identify targeted dumping as defined in
B. Commerce‘s Application of the Nails Test to Kelco Was Neither Unsupported in Evidence nor Contrary to Law
Next, Kelco argues that Commerce‘s choice to deploy the Nails test in the review below was contrary to law and unsupported in evidence. It notes that Commerce returned to “case-by-case adjudication” to find targeted dumping after the agency withdrew a targeted dumping regulation in 2008. Pls.’ Br. 14; see Withdrawal of Regulatory Provisions Governing Targeted Dumping in Antidumping Duty Investigations, 73 Fed.Reg. 74,930, 74,931 (Dep‘t Commerce Dec. 10, 2008) (interim final rule) (the “Withdrawal“).10 Consequently, Commerce needed to conduct “a specific analysis as to the facts of the present case in order to determine whether the Nails test was the most appropriate way to unmask any alleged ... targeted dumping.” Pls.’ Br. 14. Kelco says Commerce never undertook this “specific analysis.”
These arguments fail to persuade. Under the substantial evidence standard, the court must uphold Commerce‘s choice if it was based on “relevant evidence [that] a reasonable mind might accept as adequate to support a conclusion.” Consol. Edison Co., 305 U.S. at 229. Commerce‘s decision to apply the Nails test to Kelco clears this hurdle. In the Preliminary Results, Commerce noted that petitioner Aqualon based its allegation of targeted dumping on record evidence. See Preliminary Results, 77 Fed.Reg. at 47,037-38; Pet‘r‘s Allegation 3-7.11 Even so, Commerce initially refused to administer the targeted dumping test to afford the “parties an opportunity to meaningfully comment on the Department‘s implementation of this recently adopted methodology in the context of this administrative review.” Preliminary Results, 77 Fed.Reg. at 47,038.
After receiving comments, Commerce decided to run the targeted dumping analysis as Aqualon had petitioned. In the Post-Preliminary Analysis, the agency acknowledged its authority to use A-T under
Commerce again explained how it applied the Nails test in the I & D Memo, adding that the Court of International Trade had upheld the Nails test as reasonable. I & D Mem. at Issue 2. The agency
Kelco, by contrast, does not identify any specific conclusions Commerce made that were unsupported by evidence or logic. In its brief, Kelco faults Commerce for failing “to state what facts it looked at and how those facts supported” the agency‘s choice to employ the Nails test during the review. Pls.’ Br. 15. Yet Kelco does not suggest what more Commerce could have done to shore up its decision. It does not, for example, offer any factors independent of the Nails inquiry that would corroborate whether Kelco had perpetrated targeted dumping. Nor did Kelco propose anything better at oral argument, where it made a vague pitch for Commerce to issue supplemental questionnaires before undertaking a Nails inquiry. Oral Argument at 17:43. Having considered these arguments and the record, the court finds Commerce‘s decision to use the Nails test below was based in substantial evidence and in accordance with law.
C. Commerce‘s Use of the De Minimis Test Was Arbitrary
Finally, Kelco argues Commerce acted arbitrarily by applying an ill-defined de minimis test to Kelco‘s targeted sales. In reviews of other antidumping orders, Commerce declined to apply the A-T methodology where targeted sales constituted a small fraction—or a de minimis portion—of an exporter‘s total U.S. sales. See Pls.’ Br. 15-16. Here, Commerce held Kelco‘s targeted sales were more than de minimis but did not explain what ”de minimis sales” means. The agency consequently applied the A-T methodology to compute Kelco‘s margins. Kelco says Commerce should have offered some definition of de minimis sales before finding that its sales exceeded the de minimis threshold. See id. at 17-18.
The court agrees with Kelco.12 As discussed above, agency decisions are arbitrary if they cannot “be ascribed to ... the product of agency expertise.” State Farm, 463 U.S. at 43. Administrative decisions are similarly invalid if they fail to state “the basis on which the [agency] exercised its expert discretion.” Burlington Truck Lines, 371 U.S. at 167; see also Nat‘l Org. of Veterans’ Advocates, Inc. v. Sec‘y of Veterans Affairs, 314 F.3d 1373, 1380-81 (Fed.Cir.2003) (remanding where agency did not articulate rationale for stat-
First, Commerce never explained what purpose the de minimis test serves in the statutory scheme. Under
Second, Commerce never explained the quantum of an exporter‘s sales that must be targeted to fall above or below the de minimis threshold. In the I & D Memo, Commerce said only that “the percentage of sales by quantity which was found to be targeted in this case is far too high to be considered de minimis, and so CP Kelco‘s argument [regarding the de minimis threshold] is not relevant in the context of this case.” I & D Mem. at Issue 2.13 Commerce‘s Post-Preliminary Analysis also mentioned that Commerce considered applying the A-T methodology only after finding “sufficient sales ... passed the Nails test.” Post-Preliminary Analysis at 3. But the Analysis furnished neither a qualitative nor a quantitative explanation of what a “sufficient” number of sales is.
Nor do administrative reviews under other antidumping orders define de minimis sales. See Pls.’ Br. 16. Commerce applied the de minimis analysis in a number of proceedings other than the review contested here. See Certain Frozen Warmwater Shrimp From India, 78 Fed.Reg. 42,492 (Dep‘t Commerce July 16, 2013) and accompanying I & D Mem. at cmt. 1 (applying A-T to exporter with “sufficient volume of targeted sales” but A-A to exporter with “insufficient volume of targeted sales“); Ball Bearings, 77 Fed.Reg. 73,415 and accompanying I & D Mem. at cmt. 1; Circular Welded Carbon Steel Pipes and Tubes from Turkey, 77 Fed.Reg. 72,818 (Dep‘t Commerce Dec. 6, 2012) and accompanying I & D Mem. at cmt. 1. None of these
In an effort to reduce this ambiguity, the government tries to sketch the contours of the de minimis threshold on appeal. In its brief, the government cites a de minimis provision from a dumping margin regulation to show that Kelco‘s sales were more than de minimis. Resp. Br. 18-19; see also
And so the court must return the undercooked de minimis dish to the administrative kitchen. On remand, Commerce must define the de minimis test‘s function (i.e., does the test identify a “pattern” of differing prices, does it guide the agency‘s discretion to apply A-T, or both?). Commerce must then outline the quantitative data, qualitative variables, or other information it considers when determining whether an exporter‘s targeted sales fall above or below the de minimis threshold. Finally, Commerce must use this definition to find whether Kelco‘s targeted sales pass or fail the de minimis test. Conclusory explanations of the variety found in the I & D Memo below will not be accepted.14
CONCLUSION AND ORDER
The law allowed Commerce to scrutinize Kelco‘s sales for targeted dumping during
Upon consideration of all papers and proceedings herein, it is hereby:
ORDERED that the final determination of the International Trade Administration, United States Department of Commerce (“Commerce“), published as Purified Carboxymethylcellulose from Finland, 78 Fed.Reg. 11,817 (Dep‘t Commerce Feb. 20, 2013) (final results), be, and hereby is, REMANDED to Commerce for redetermination; it is further
ORDERED that Plaintiff‘s Rule 56.2 Motion for Judgment on the Agency Record be, and hereby is, GRANTED as provided in this Opinion and Order; it is further
ORDERED that Commerce must issue a redetermination (“Remand Redetermination“) in accordance with this Opinion and Order that is in all respects supported by substantial evidence, in accordance with law, and supported by adequate reasoning; it is further
ORDERED that Commerce must fully explain the purpose of the de minimis test and provide a reasoned definition of the quantum of total sales of subject merchandise that must be targeted for Kelco to fall above or below the de minimis threshold discussed in this Opinion and Order; it is further
ORDERED that Commerce must apply the de minimis test as defined in the Remand Redetermination to Kelco‘s targeted sales and recalculate Kelco‘s dumping margins in accordance with the results of that test; it is further
ORDERED that Commerce shall have ninety (90) days from the date of this Opinion and Order in which to file its Remand Redetermination, which shall comply with all directives in this Opinion and Order; that the Plaintiff and Defendant-Intervenor shall have thirty (30) days from the filing of the Remand Redetermination in which to file comments thereon; and that the Defendant shall have thirty (30) days from the filing of Plaintiff and Defendant-Intervenor‘s comments to file comments.
RICHARD W. GOLDBERG
Senior Judge