ELKAY MANUFACTURING COMPANY, Plаintiff, v. UNITED STATES, Defendant, and Guangdong Dongyuan Kitchenware Industrial Company, Ltd., Defendant-Intervenor.
Court No. 13-00176
United States Court of International Trade
Dec. 22, 2014
Slip Op. 14-150 | 1369
Gregory S. Menegaz, J. Kevin Horgan, and John J. Kenkel, DeKieffer & Horgan, PLLC, of Washington, D.C., for consolidated plaintiff and defendant-intervenor Guangdong Dongyuan Kitchenware Industrial Company, Ltd.
Patricia M. McCarthy, Assistant Director, and Richard P. Schroeder, Trial Attorney, Civil Division, Commercial Litigation Branch, U.S. Department of Justice, of Washington, D.C., for defendant United States. With him on the brief were Stuart F. Delery, Assistant Attorney General, and Jeanne E. Davidson, Director. Of counsel on the brief was Whitney M. Rolig, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce.
OPINION AND ORDER
STANCEU, Chief Judge:
In this consolidated action, plaintiffs Elkay Manufacturing Company (“Elkay“) and Guangdong Dongyuan Kitchenware Industrial Company, Ltd. (“Dongyuan“) contest a determination (“Final Determination“) that the International Trade Administration, U.S. Department of Commerce (“Commerce” or the “Department“) issued upon the affirmative conclusion of an antidumping duty investigation of drawn stainless steel sinks (“subject merchandise“) from the People‘s Republic of China (“China” or the “PRC“). Both plaintiffs challenge aspects of the Department‘s calculation of the normal value of subject merchandise.1
Dongyuan, a Chinese manufacturer and exporter of stainless steel sinks and one of the two producer/exporters that Commerce investigated individually, challenges the Department‘s use of import data from Thailand to determine a surrogate value for the cold-rolled stainless steel coil that Dongyuan used as the primary material in producing subject merchandise. Compl. ¶¶ 11-15 (June 12, 2013), ECF No. 9 (Court No. 13-00199) (“Dongyuan Compl.“). Elkay, a U.S. producer and the petitioner in the investigation, challenges the Department‘s method of accounting for selling, general, and administrative (“SG & A“) expenses in the normal value determinations for the two individually-investigated producer/exporters.2 Compl. ¶¶ 11-14
Before the court are Dongyuan‘s and Elkay‘s motions for judgment on the agency record pursuant to USCIT Rule 56.2. Elkay‘s Mot. for J. on the Agency R. (Oct. 21, 2013), ECF No. 26 (“Elkay Mot.“); Dongyuan‘s Rule 56.2 Mot. for J. Upon the Agency R. (Oct. 21, 2013), ECF No. 27 (“Dongyuan Mot.“). Also before the court is a request by defendant United States for a partial voluntary remand to allow Commerce to reconsider the use of the Thai import data for determining a surrogate value for cold-rolled stainless steel coil. Def.‘s Resp. to Pl.‘s Rule 56.2 Mot. for J. on the Agency R. 1 (Feb. 28, 2014), ECF No. 40 (“Def. Opp‘n“). The court grants the Department‘s partial voluntary remand request and in addition directs Commerce to reconsider its method of accounting for SG & A expenses in the normal value calculations.
I. BACKGROUND
The decision contested in this case concluded an antidumping duty less-than-fair-value investigation. See Drawn Stainless Steel Sinks From the People‘s Republic of China: Investigation, Final Determination, 78 Fed.Reg. 13,019 (Int‘l Trade Admin. Feb. 26, 2013) (“Final Determination“), as amended, 78 Fed.Reg. 21,592 (Int‘l Trade Admin. Apr. 11, 2013). In response to a petition by Elkay, Commerce initiated the investigation, which examined imports of subject merchandise made during the period of July 1, 2011 through December 31, 2011 (“period of investigation” or “POI“). Drawn Stainless Steel Sinks From the People‘s Republic of China: Initiation of Antidumping Duty Investigation, 77 Fed.Reg. 18,207 (Int‘l Trade Admin. Mar. 27, 2012). On May 14, 2012, Commerce selected for individual investigation as “mandatory respondents” two Chinese producer/exporters—Dongyuan and a combined entity Commerce identified as consisting of Zhongshan Superte Kitchenware Co., Ltd. (“Superte“) and a related invoicing company, Foshan Zhaoshun Trade Co., Ltd. (“Zhaoshun“) (collectively identified as “Superte/Zhaoshun“). Final Determination, 78 Fed.Reg. at 13,019 n. 2.
On October 4, 2012, Commerce issued a preliminary determination (“Preliminary Determination“) that imports of subject merchandise from China are being, or are likely to be, sold in the United States at less than fair value. Drawn Stainless Steel Sinks From the People‘s Republic of China: Antidumping Duty Investigation, 77 Fed.Reg. 60,673, 60,673 (Int‘l Trade Admin. Oct. 4, 2012) (“Prelim. Determination“). Commerce calculated preliminary weighted-average dumping margins of 54.25% for Dongyuan, 63.87% for Superte/Zhaoshun, and a simple average of the two rates, 59.06%, for “separate-rate” respondents, i.e., those producer/exporters not selected for individual examination that had demonstrated independence from the government of China. Id. at 60,674.
Commerce published its Final Determination on February 26, 2013 and issued an accompanying Issues and Decision Memorandum (“Decision Memorandum“).3 See Final Determination, 78 Fed.Reg. at 13,019; Issues & Decision Mem. for the Final Determination in the Antidumping Duty Investigation of Drawn Stainless
Elkay initiated an action challenging the Final Determination by filing a summons on May 6, 2013 and a complaint on June 5, 2013. Summons, ECF No. 1; Elkay Compl. ¶ 1. Dongyuan initiated a separate action challenging the Final Determination by filing a summons on May 13, 2013 and a complaint on June 12, 2013. Summons, ECF No. 1 (Ct. No. 13-00199); Dongyuan Compl. ¶ 1. The court consolidated these cases on August 30, 2013.4 Order, ECF No. 25.
Elkay and Dongyuan filed their motions for judgment on the agency record and accompanying briefs on October 21, 2013. Elkay‘s Mot.; Rule 56.2 Br. of Elkay Mfg. Co. in Supp. of its Mot. for J. on the Agency R., ECF No. 29 (“Elkay Br.“); Dongyuan Mot.; Consol. Pl. Guangdong Dongyuan Kitchenware Mem. in Supp. of Mot. for J. on the Agency R., ECF No. 31 (“Dongyuan Br.“). On February 28, 2014, defendant filed a consolidated response in opposition to both motions, Def. Opp‘n 1, and Dongyuan filed a response opposing Elkay‘s 56.2 motion, Def.-Intervenor Guangdong Dоngyuan Kitchenware Resp. Br. in Opp‘n to Pl.‘s Rule 56.2 Mem., ECF No. 39 (“Dongyuan Opp‘n.“). Elkay and Dongyuan each filed replies on April 4, 2014. Consol. Pl. Guangdong Dongyuan Kitchenware Reply Br. in Supp. of Mot. for J. on the Agency R., ECF No. 44 (“Dongyuan Reply“); Reply Br. of Elkay Mfg. Co. in Supp. of its Mot. for J. on the Agency R., ECF No. 45 (“Elkay Reply“).
II. DISCUSSION
The court exercises jurisdiction under
A. The Court Grants Defendant‘s Request for a Voluntary Remand so that Commerce May Reconsider the Use of Thai Import Data to Value Cold-Rolled Stainless Steel Coil
During the antidumping investigation, Commerce identified Colombia, Indonesia, Peru, the Philippines, South Africa, Thailand, and Ukraine as countries comparable to the PRC in terms of economic development and found that all of these countries, excluding the Philippines, were significant producers of merchandise comparable to the merchandise under consideration. Decision Mem. for Prelim. Determination for the Antidumping Duty Investigation of Drawn Stainless Steel Sinks from the People‘s Republic of China 6 (Sept. 27, 2012) (Admin.R.Doc. No. 337) (“Prelim. Decision Mem.“). Noting that cold-rolled stainless steel coil is the chief raw material used to produce the subject merchandise, Commerce chose Thailand as the primary surrogate country for the Preliminary Determination, finding that “Thailand provides the most specific information to value each respondent‘s most significant input (i.e., stainless steel).” Id. at 7. Comparing Thai import data published in the Global Trade Atlas (“GTA“) to available GTA import data from the Philippines and Indonesia, which Superte/Zhaoshun proposed for use but which Commerce considered less specific to the input to be valued, Commerce chose Thai import data. Id. at 7, 16-17. Commerce excluded from the GTA Thai import database the imports from various countries that Commerce found to maintain broadly available subsidies. Id. at 17. Commerce also excluded imports from countries on which Thailand imposes antidumping duties. Id. In the Final Determination, Commerce continued to select Thailand as the primary surrogate country with which to value the cold-rolled stainless steel coil inputs and continued to make the exclusions from the import database.7 See Decision Mem. 8-10.
In response to Dongyuan‘s challenge, defendant requests a voluntary remand so that Commerce may consider whether the Thai import data used in the Final Determination were aberrational. Def. Opp‘n 7, 15-16. To address that question, defendant would compare the Thai GTA import data with GTA import data from other potential surrogate countries, namely Colombia, Indonesia, Peru, South Africa, Ukraine, and the Philippines. Id. at 15-16. Defendant explains that Commerce did not place on the record information pertaining to potential surrogate countries other than Indonesia, the Philippines, and Thailand and that a remand would allow Commerce to “place the missing GTA data on the record.” Id. at 16. Defendant elaborates that “[g]ranting a remand will enable the parties to make arguments concerning the omitted evidence[] and will enable Commerce to address those arguments in the first instance.” Id.
Dongyuan opposes defendant‘s voluntary remand request, arguing that Commerce did not compile the list of surrogate countries based on average unit values (“AUVs“) of imports in the surrogate countries and that there is no record basis on which to conclude that the other potential surrogate countries have “usable data.”8 Dongyuan‘s Reply 6-9. Dongyuan submits that the court should not permit Commerce to undergo the “burdensome and unreasonable task,” id. at 9, of recreating a record of world import prices of all surrogate countries listed on the surrogate country list or permit Commerce to “cherry-pick off-the-record data that it has concluded would bolster its Final Determination,” id. According to Dongyuan, allowing Commerce to reopen the record and examine import data from other surrogate countries would allow Commerce to “defend petitioners’ proposed high import AUVs after the close of the factual record and after that factual record is briefed by supplementing the record post-investigation.” Id. at 10. Dongyuan requests that the court instead rule that the existing “administrative record cannot support a finding that fairly traded Thai import statistics are non-aberrant,” id. at 22, and instruct Commerce “to disregard Thai import AUVs in selecting the ‘best available information’ for the surrogate value for Dongyuan Kitchenware‘s cold-rolled steel,” id.
The court will grant the Department‘s voluntary remand request so that Commerce may reconsider its use of the Thai import data to value the steel coil input and reopen the record to admit additional data. The court rejects Dongyuan‘s position that the court, instead of granting the voluntary remand request, should issue a remand order that prohibits Commerce from using the Thai data to value the steel coil input.9
B. The Court Orders a Remand on the Department‘s Treatment of SG & A Labor Expenses
Although Commerce has discretion in determining the best method for constructing normal value (whether or not in the non-market economy context), it must exercise its discretion consistently with the purpose of the antidumping statute, that is, to “determine margins ‘as accurately as
Elkay‘s challenge concerns the method Commerce used to account for certain non-production labor—specifically, the labor that the two investigated respondents expended in performing SG & A functions—in calculating the normal value of the subject merchandise of those respondents. Elkay claims that Commerce failed to include in the normal value calculation the total cost of the “hours of labor required,” as required by
The Department‘s regulations provide that “[f]or manufacturing overhead, general expenses, and profit, the Secretary normally will use non-proprietary information gathered from producers of identical or comparable merchandise in the surrogate country.”
In the Final Determination, Commerce used the same three financial statements to calculate the three SG & A/interest expense ratios but applied a different method. This method resulted in an average SG & A/interest ratio that was substantially lower than the average ratio calculated in the Preliminary Determination. Decision Mem. 15. The financial statements of all three Thai companies reported production labor costs separately from certain other labor costs, which were itemized and categorized among the sales or administrative expenses in the surrogate financial statements. See Pet‘r‘s Submission of Surrogate Values Ex. 10 (Aug. 13, 2012) (Admin.R.Doc. No. 262) (“Elkay‘s Surrogate Values Submission“) (including financial statements from Stainless Steel Home Equipment Manufacturing Co., Ltd. and Diamond Brand Co., Ltd.); Dongyuan‘s Rebuttal Surrogate Values for the Prelim. Results Exs. 4-6 (Aug. 20, 2012) (Admin.R.Doc. No. 296) (including financial statements from Advance Stainless Steel Co., Ltd.). The record indicates that Commerce excluded a number of the labor costs identified in the financial statements as sales or administrative expenses (and described by Commerce as “SG & A labor costs“) from the numerators of the three SG & A/interest expense ratios and included these costs in the denominators of those ratios.11 See Factor Valuations for the
The rationale Commerce provided in the Decision Memorandum for the decision to change the SG & A/interest expense ratio calculation relied in part on the surrogate labor rate with which Commerce valued the labor hours reported by the two investigated respondents. Decision Mem. 15. For the Preliminary Determination, Commerce valued the two respondents’ reported labor hours using a surrogate labor rate derived from 2005 data from Chapter 6A of the International Labor Organization (“ILO“) Yearbook of Labor Statistics. Prelim. Factor Valuation Mem. 5-6. The record indicates that the ILO labor rate Commerce applied in the Preliminary Determination was 141.2162 Thai Bhat (“THB“) per hour. Id. at Attach. 4.
Following the Preliminary Determination, Dongyuan submitted for admission to the record certain data on the labor cost of “[m]anufacture of other fabricated metal products not enumerated elsewhere” contained in the “Industrial Census 2007” published by Thailand‘s National Statistics Office (“NSO“). Dongyuan‘s Final Surrogate Value Submission—Part I, Ex. SV-1 (Nov. 26, 2012) (Admin.R.Doc. No. 373) (“Dongyuan‘s Final Surrogate Value Submission“). For the Final Determination, Commerce applied the NSO labor rate as a surrogate labor rate to value the examined respondents’ reported labor hours. Decision Mem. 11. Commerce concluded that the NSO data were superior to the ILO data, finding “that the 2007 NSO data for labor cost of ‘manufacturing of other fabricated metal products’ (ISIC Rev.3 Code: 2899) is the best information available on the record to calculate the labor cost of the two respondents in the final determination.” Id. Commerce explained that “[t]his is because the 2007 NSO data are the most product-specific and contemporaneous[] and provide a broader market average among all the data parties placed on the record.” Id. According to the Decision Memorandum, the hourly rate obtained from the NSO data was 54.61 THB per hour. Id. at 12. It appears from the record that the rate as adjusted for inflation and applied was 63.1158 THB per hour. See Final Factor Valuations Mem. 3 (“The SV [surrogate value] for labor is 63.12 THB/hr.“) & Attach. 1 (showing an applied rate of 63.1158); see also Dongyuan‘s Final Surrogate Value Submission, Ex. SV-1. The surrogate labor rate applied in the Final
According to the Decision Memorandum, Dongyuan аrgued during the investigation that “[t]he Department should treat selling, general and administrative (‘SG & A‘) labor line items (sales, administrative and managerial staff and directors’ salaries) in the surrogate financial statements as manufacturing labor, not SG & A labor, in its financial ratio calculations because the underlying ILO Chapter 6A data and the NSO Industrial Census data include these expenses.” Decision Mem. 14. In the Final Determination, Commerce agreed with Dongyuan‘s proposed change, stating that “[a]fter examining the record, we agree with Dongyuan that the NSO data include total labor costs (i.e., manufacturing and SG & A) ....” Id. at 15.
Commerce explained that it intended to account for SG & A labor by applying to the hours of labor reported by each examined respondent a surrogate labor rate that included both manufacturing and SG & A labor costs. Id. Commerce also stated that “[u]sing a surrogate financial ratio that includes SG & A labor costs in addition to the NSO-based surrogate labor rate would double-count those costs in normal value because both include an amount for SG & A labor.” Id. Commerce concluded its discussion by stating that “to avoid double-counting SG & A labor, we have determined to exclude labor costs from the SG & A surrogate financial ratiоs for the final determination.” Id.
Elkay argues that Commerce should be required to calculate the SG & A/interest expense ratios as Commerce did in the Preliminary Determination—by placing in the numerator of the SG & A/interest expense ratios all SG & A expenses reported in the surrogate companies’ financial statements, including SG & A labor costs. Elkay Br. 12. Elkay submits that although “the NSO labor rate was an average based on compensation for all types of labor, including both production and non-production labor,” id. at 8-9, the “labor rate was only applied to production labor hours,” id. at 9, and not to the non-production labor expended in performing SG & A functions. Elkay asserts that because Commerce “applied the revised surrogate labor rate to a labor FOP that includes only production hours, Commerce failed to capture any SG & A labor costs in the calculation of normal value.” Id. at 6.
There can be no dispute that Commerce intentionally used an average ratio for SG & A and interest expenses that captured less than the full amount of the SG & A expenses as reported in the surrogate financial statements. It also appears from the record that the labor hours reported as a factor of production by both investigated respondents included only hours of production labor.14 But it does not necessarily follow, as Elkay argues,
1. The Principal Conclusion Underlying the Department‘s Decision to Adjust the SG & A/Interest Expense Ratios is Not Supported by Substantial Record Evidence
In recounting the Department‘s reasons for making the adjustments, the Decision Memorandum states a finding that the NSO data include “total labor costs (i.e., manufаcturing and SG & A) ....”15 Decision Mem. 15. From this finding, Commerce reached the conclusion that “[u]sing a surrogate financial ratio that includes SG & A labor costs in addition to the NSO-based surrogate labor rate would double-count those costs in normal value because both include an amount for SG & A labor.” Id. Referring implicitly to the specific adjustment that it made to the surrogate financial ratios, Commerce further concluded that this adjustment was necessary in order “to avoid double-counting SG & A labor.” Id. As the court discusses below, the record lacks substantial evidence to support the Department‘s conclusion that “double-counting” of SG & A labor expenses required the specific downward adjustments to the SG & A/interest expense ratios that Commerce found necessary when calculating the normal value for the merchandise of Dongyuan and Superte/Zhaoshun.16 The court, therefore,
The financial statement of Stainless Steel Home Equipment Manufacturing Co., Ltd. (“Stainless Steel“), one of the three surrogate companies, lists “Salaries and bonuses” under the category of “Cost of Administration” and “Wages of producing” under the category
Record evidence indicates that the NSO labor rate is derived from data on “remuneration” paid to “[p]ersons engaged” in the “manufacture of other fabricated metal products.” Dongyuan‘s Final Surrogate Value Submission, Ex. SV-2 (containing the NSO‘s description of its methodology and definitions). The NSO defined “[p]ersons engaged” to include: (1) “[u]npaid workers” who are “owners or business partners who managed or participated in the management of the establishment;” (2) “[o]peratives” that “were directly engaged in the production or other related activities of the establishment and received pay;” and (3) “other employees” referring to “all employees other than operatives,” including “administrative, technical and clerical personnel such as salaried managers and directors, laboratory and research workers, clerks, typists, book-keepers, administrative supervisors, salesman and the like.” Id. The NSO‘s definitions specify that excluded from the “persons engaged” are: (1) “managers or directors paid solely for their attendance at meeting[s] of the board of director[s];” (2) “[p]ersons from other establishment[s] working at this establishment;” (3) “[h]ome workers;” (4) “[p]ersons who were on leave for military services or one who had obtained long leave or were on strike“; and (5) “[p]ersons who were employed to work occasionally such as laborer[s] and sale agents who do not receive regular pay.” Id.
The NSO information supports a finding that the NSO rate was derived from an average remuneration paid for “persons engaged” in various production-related and non-production-related activities. It also supports a finding that the NSO rate is a much broader average than one representing only wages and salaries. The NSO definition of “[r]emuneration” includes: (1) “[w]ages/salaries;” (2) “[o]vertime, bonus, special payment, cost of living allowance and commission;” (3) “fringe benefits;” and (4) “[e]mployer‘s contribution to social security” (including as examples, payments to a “social security fund, workmen‘s compensation fund[,] and health insurance,
of “cost of production.” See Pet‘r‘s Submission of Surrogate Values Ex. 10 (Aug. 13, 2012) (Admin.R.Doc. No. 262) (“Elkay‘s Surrogate Values Submission“). In the Final Determination, Commerce regarded both of these cost line items as labor costs, not SG & A expenses, for the purpose of calculating the SG & A/interest expense ratio. Final Factor Valuations Mem., Attach. 1. In addition to “Salaries and bonuses,” the “Cost of Administration” category reported line items for “Welfare,” “Social Security,” and “Compensation Fund.” Elkay‘s Surrogate Values Submission Ex. 10. In the Final Determination, Commerce also regarded these three cost line items as labor costs. Final Factor Valuations Mem., Attach. 1.
The financial statement of Diamond Brand Co., Ltd., another one of the three surrogate companies, includes line items for salary both under a category labeled “Selling and administrative expenses” and under a category of “Administrative Expenses” as well as a line item for “Labor cost” under the “Cost of production” category. Elkay‘s Surrogate Values Submission Ex. 10. Commerce treated all of these costs as labor costs for the purpose of calculating the SG & A/interest expense ratio. Final Factor Valuations Mem., Attach. 1.
The financial statement of Advance Stainless Steel Co., Ltd., the third of the three surrogate companies, lists expenses for “Labor cost, Overtime, and Welfare” under the category of “Production Expenses” but also lists “Salary, Bonus, аnd Overtime” and “Social security and providend fund” under the category of “Selling and Administrative Expenses.” Dongyuan‘s Rebuttal Surrogate Values for the Prelim. Results Exs. 4-6 (Aug. 20, 2012) (Admin.R.Doc. No. 296). Here also, Commerce treated all of these line items costs as labor cost rather than SG & A expense. Final Factor Valuations Mem., Attach. 1.
Less clear is that the NSO labor rate is higher than it would have been had it been derived solely from data on production workers. It may be reasonable to infer that some non-production employees, e.g., high-level salaried managerial employees, receive higher remuneration than persons engaged in production. The record data, however, do not support an actual finding that the NSO labor rate was higher—or by what percentage it was higher—than it would have been had it been derived solely from Thai data on production labor rather than from a combination of Thai data on production labor and various types of non-production labor. Apparently, missing from thе record are the raw data from which the NSO rate was derived, which possibly could support such conclusions.
The court has considered the record evidence, summarized above, on the derivation of the NSO labor rate and on the derivation, and the magnitude, of the downward adjustments Commerce made to the three SG & A/interest expense ratios (and, accordingly, to the average SG & A/interest expense ratio applied in determining the normal value of the two investigated respondents). On this administrative record, the Department‘s reliance on the extent of any “double-counting,” Decision Mem. 15, was too much a matter of speculation. The record lacks substantial evidence to support the Department‘s conclusion that the rate Commerce applied to the hours of production labor reported by the investigated respondents overstated the value of those labor hours to such an extent as to justify the specific, compensatory adjustments that Commerce made to the SG & A/interest expense ratios.
2. The Department‘s Reliance on the Labor Methodologies Notice Does Not Justify the Downward Adjustments to the SG & A/Interest Expense Ratios
In both the Preliminary Determination and in the Decision Memorandum, Commerce based its treatment of SG & A labor expenses in part on a notice (“Labor Methodologies“) Commerce published in 2011 announcing a new methodology for valuing labor in non-market economy (NME) proceedings.17 See Antidumping Methodologies in Proceedings Involving Non-Market Economies: Valuing the Factor of Production: Labor, 76 Fed.Reg. 36,092, 36,092 (Int‘l Trade Admin. June 21, 2011) (“Labor Methodologies“). The Department‘s reasoning, and its conclusion, changed considerably from the Preliminary to the Final Determination.18
The Decision Memorandum cited the Labor Methodologies notice in support of the position that “[i]n deriving surrogate financial ratios, ‘it is the Department‘s longstanding practice to avoid double-counting costs where the requisite data are available to do so.‘” Decision Mem. 15 (citation omitted) (emphasis added to original in quoted source). Commerce noted that “in Labor Methodologies, we said that ‘the Department will adjust the surrogate financial ratios when the available record information—in the form of itemized indirect labor costs—demonstrates that labor costs are overstated.‘”20 Id. (citing Labor Methodologies, 76 Fed.Reg. at 36,093-94).
For two reasons, the Labor Methodologies notice is not an adequate justification for the decision challenged in this case. First, Commerce departed from the methodology announced in the notice by rejecting the ILO Chapter 6A data in the Final Determination in favor of the NSO data,
3. The Court Rejects Defendant‘s and Dongyuan‘s Arguments in Support of the Department‘s Decision on SG & A Labor Expenses
Before the court, defendant and Dongyuan make several arguments in favor of the Department‘s decision to adjust the SG & A/interest expense ratios. The court rejects these arguments for the reasons discussed below.
Defendant states that “[u]nfortunately, the respondents did not report SG & A labor hours” and that “[b]ased on the limitations of the data on the record, Commerce was faced with two imperfect methodologies for calculating labor.” Def. Opp‘n 6. Defendant argues that “[i]n such circumstances, Commerce has broad discretion to choose between the competing methodologies,” id. at 7, and that the court must defer to the Department‘s reasonable choice for labor and SG & A expense calculations, so long as that choice is accompanied by a reasoned explanation, id. at 15. See also Dongyuan Opp‘n 9 (“Even if there is another way to capture this cost, the Court must uphold this methodology if the Court finds it to be reasonable ....“). Regarding the choice Commerce made, defendant explains that “[a]lthough double counting was not a certainty under the record in this case, Commerce‘s actions recognized the possibility of double-counting,” Def. Opp‘n 14, and that “[a]s a result, Commerce reasonably excluded ‘labor costs from the SG & A surrogate financial ratios for the final determination,‘” id. (quoting Decision Mem. 15).
Dеfendant‘s argument is unconvincing because it is based on a mischaracterization of the principal conclusion as stated in the Decision Memorandum: Commerce concluded that double-counting would occur absent the adjustments it made to the ratios, and this was the basis upon which Commerce determined that those adjustments were appropriate to avoid the double-counting it found to exist. See Decision Mem. 15 (“Using a surrogate financial ratio that includes SG & A labor costs in addition to the NSO-based surrogate labor rate would double-count those costs in normal value because both include an amount
Further to its argument that Commerce made a reasonable choice given two imperfect alternatives, defendant argues that “Elkay has not established that its preferred methodology—retaining the SG & A labor costs in the SG & A financial ratio calculation ... while using NSO data that indisputably includes SG & A labor—would have provided a more accurate surrogate value for labor.” Def. Opp‘n 14 (citation omitted). Defendant argues further that Elkay “wholly ignores the facial risk of double-counting that would be created by its proposed approach.” Id.
Defendant‘s argument fails because the court must evaluate the Department‘s decision according to the applicable standard of review and cannot sustain a decision not grounded in substantial record evidence. The argument is also misguided in positing that Commerce had only the two choices defendant describes. Commerce had other choices, including choices that did not involve use of the NSO data or choices not involving the particular adjustments it made to the SG & A/interest expense ratios.
In support of the Final Determination, Dongyuan argues that the Department‘s methodology captured SG & A labor expenses because the NSO rate “applied to the production labor is artificially higher than the labor rate would be because it includes more labor expenses than production labor would normally cover.” Dongyuan Opp‘n 8-9. As the court discussed previously, the record shows that the NSO rate was dеrived from an average remuneration paid for “persons engaged” in various production-related and non-production-related activities and that it is a broader representation of labor cost than one limited to wages and salaries. But even if the NSO rate were presumed to be higher than it would be if it had not included non-production labor (a presumption for which the record lacks substantial evidence), the record would not support the Department‘s conclusion that the adjustments the Department made to the SG & A/interest expense ratios were appropriate adjustments for the double-counting of SG & A labor that the Department found would occur absent those adjustments.
4. On Remand, Commerce Must Reconsider its Decision to Adjust the SG & A/Interest Expense Ratios
On remand, Commerce must reconsider its decision to adjust the SG & A/interest expense ratios and the particular way in which it accomplished those adjustments. Additionally, because Commerce grounded its decision in part on its choice of a surrogate labor cost, it may consider on remand alternative data sources with which to value the labor hours reported by the two investigatеd respondents.
III. CONCLUSION AND ORDER
For the reasons discussed in the foregoing, the court remands the final determination (“Final Determination“) of the International Trade Administration, U.S. Department of Commerce (“Commerce” or the “Department“) in Drawn Stainless Steel Sinks From the People‘s Republic of China: Investigation, Final Determination, 78 Fed.Reg. 13,019 (Int‘l Trade Admin. Feb. 26, 2013), as amended, 78 Fed.Reg. 21,592 (Int‘l Trade Admin. Apr. 11, 2013). Therefore, upon consideration of all papers and proceedings in this case, and upon due deliberation, it is hereby
ORDERED that Commerce shall issue, within ninety (90) days of the date of this Opinion and Order, a new determination upon remand (“Remand Redetermination“) that conforms to this Opinion and Order and reconsiders the use of surrogate information from Thailand to value cold-rolled stainless steel coil when determining the normal value of Dongyuan‘s subject merchandise; it is further
ORDERED that if Commerce places additional surrogate value data on the record on remand, Commerce must provide parties to this litigation the opportunity to submit comments concerning those data and the Department‘s decision addressing the valuation of cold-rolled stainless steel coil; it is further
ORDERED that in the Remand Redetermination, Commerce shall reconsider its method of accounting for selling, general, and administrative (“SG & A“) labor costs in its calculation of normal value and, as necessary, revise the antidumping duty margins for both the investigated and separate rate respondents; it is further
ORDERED that Elkay Manufacturing Company and Guangdong Dongyuan Kitchenware Industrial Co., Ltd. each may file comments on the Remand Redetermination within thirty (30) days from the date on which the Remand Redetermination is filed with the court; and it is further
ORDERED that defendant may file a response within fifteen (15) days from the date on which the last of any such comments is filed with the court.
Timothy C. Stanceu
Chief Judge