Case Information
*1 Slip Op. 17-39
UNITED STATES COURT OF INTERNATIONAL TRADE
JACOBI CARBONS AB AND JACOBI
CARBONS, INC.,
Plaintiffs,
NINGXIA HUAHUI ACTIVATED
CARBON CO., LTD., NINGXIA
GUANGHUA CHERISHMET ACTIVATED
CARBON CO., LTD., BEIJING PACIFIC
ACTIVATED CARBON PRODS. CO.,
LTD., DATONG MUNICIPAL
YUNGUANG ACTIVATED CARBON CO.,
LTD., CARBON ACTIVATED TIANJIN
CO., LTD., JILIN BRIGHT FUTURE
CHEMICALS CO., LTD., NINGXIA
MINERAL AND CHEMICAL LTD.,
SHANXI DMD CORP., SHANXI Before: Mark A. Barnett, Judge INDUSTRY TECH. TRADING CO., LTD., SHANXI SINCERE INDUSTRIAL CO., Consol. Court No. 15-00286 LTD., TANCARB ACTIVATED CARBON CO., LTD., TIANJIN MAIJIN
INDUSTRIES CO., LTD., AND
CHERISHMET INC.,
Plaintiff-Intervenors,
v.
UNITED STATES,
Defendant, and
CALGON CARBON CORP. AND CABOT
NORIT AM., INC.,
Defendant-Intervenors. *2 Court No. 15-00286 Page 2
OPINION
[Plaintiffs’ motions for judgment on the agency record are granted in part, and the determination is remanded to the Department of Commerce. Plaintiffs’ motion to supplement the administrative record is denied.]
Dated: April 7, 2017 Daniel L. Porter, Curtis, Mallet-Prevost, Colt & Mosle LLP, of Washington, DC, argued for Plaintiffs. With him on the brief were James P. Durling, Claudia D. Hartleben, and Tung Nguyen.
Gregory S. Menegaz, DeKieffer & Horgan PLLC, of Washington, DC, argued for Plaintiff-Intervenors Carbon Activated Tianjin Co., Ltd., Jilin Bright Future Chemicals Co., Ltd., Ningxia Mineral and Chemical Ltd., Shanxi DMD Corp., Shanxi Industry Technology Trading Co., Ltd., Shanxi Sincere Industrial Co., Ltd., Tancarb Activated Carbon Co., Ltd., and Tianjin Maijin Industries Co., Ltd. With him on the brief were J. Kevin Horgan, Alexandra H. Salzman, and Judith L. Holdsworth.
Jeffrey S. Grimson, Kristin H. Mowry, Jill A. Cramer, Sarah M. Wyss, Yuzhe Pengling, and James C. Beaty, Mowry & Grimson, PLLC, of Washington, DC, for Plaintiff- Intervenor Ningxia Huahui Activated Carbon Co., Ltd.
Francis J. Sailor and Dharmendra N. Choudhary, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of Washington, DC, for Plaintiff-Intervenors Ningxia Guanghua Cherishmet Activated Carbon Co., Ltd, Beijing Pacific Activated Carbon Products Co., Ltd., Datong Municipal Yunguang Activated Carbon Co., Ltd, and Cherishmet Inc.
Antonia R. Soares, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for Defendant. With her on the brief were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Jr . , Assistant Director. Of counsel on the brief was Heather Doherty, Attorney-International, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, DC. Melissa M. Brewer, Kelley Drye & Warren LLP, of Washington, DC, argued for Defendant-Intervenors Calgon Carbon Corp. and Cabot Norit Americas, Inc. With her on the brief were John M. Herrmann, David A. Hartquist, and R. Alan Luberda. Page 3
Barnett, Judge: Plaintiffs Jacobi Carbons AB and Jacobi Carbons, Inc. (together, “Jacobi”), and Plaintiff-Intervenors [1] (collectively, with Jacobi, “Plaintiffs”), move, pursuant to United States Court of International Trade (“USCIT”) Rule 56.2, for judgment on the agency record, challenging the United States Department of Commerce’s (“Defendant” or “Commerce”) Final Results in the seventh administrative review (“AR7”) of the antidumping duty order on certain activated carbon from the People’s Republic of China (“PRC”). [2] See Certain Activated Carbon from the People’s Republic of China , 80 Fed. Reg. 61,172 (Dep’t Commerce Oct. 9, 2015) (final results of antidumping duty administrative review; 2013-2014) (“ Final Results ”), PJA Tab 42, PR 414, ECF No. 85-4, and accompanying Issues and Decision Memorandum , A-570-904 (Oct. 2, 2015) (“ Final I&D Mem .”), PJA Tab 39, PR 407, ECF No. 85-4.
Page 4 Plaintiffs argue that Commerce erred in (1) rejecting the Philippines and selecting Thailand as the primary surrogate country, (2) using Thai import data as the surrogate value for carbonized material, and (3) reducing Jacobi’s constructed export price (“CEP”) by an amount for Chinese value added tax (“VAT”). See generally Confidential Pls. Jacobi Carbons AB and Jacobi Carbons, Inc.’s Mot. for J. on the Agency R. and Pls.’ Br. in Supp. of their Mot. for J. on the Agency R. (“Jacobi Mem.”), ECF No. 51; Pls. Carbon Activated Tianjin Co., Ltd., Jilin Bright Future Chemicals Company, Ltd., Ningxia Mineral and Chemical Limited, Shanxi DMD Corporation, Shanxi Industry Technology Trading Co., Ltd., Shanxi Sincere Industrial Co., Ltd., Tancarb Activated Co., Ltd., and Tianjin Maijin Industries Co., Ltd. Mot. for J. on the Agency R., ECF No. 59; Pls. Carbon Activated Tianjin Co., Ltd., Jilin Bright Future Chemicals Company, Ltd., Ningxia Mineral and Chemical Limited, Shanxi DMD Corporation, Shanxi Industry Technology Trading Co., Ltd., Shanxi Sincere Industrial Co., Ltd., Tancarb Activated Co., Ltd., and Tianjin Maijin Industries Co., Ltd. Mem. in Supp. of Mot. for J. on the Agency R. (“CATC Mem.”), ECF No. 59-2 (incorporating Jacobi’s arguments and providing additional arguments on all issues); Pl.-Intervenor Ningxia Huahui Activated Carbon Co., Ltd.’s Rule 56.2 Mot. for J. on the Agency R. (“Huahui Mem.”), ECF No. 58 (incorporating Jacobi’s arguments regarding surrogate country and surrogate value selection, adopting Jacobi’s arguments regarding VAT and making additional arguments thereto); Mot. of GDLSK Pl.-Intervenors for J. on the Agency R. under USCIT Rule 56.2 and Mem. of Law in Supp. of GDLSK Pls.’ Rule 56.2 Mot. for J. on the Agency R. (“GDLSK Mem.”), ECF No. 60 (adopting all arguments made by Jacobi and providing additional argument Page 5 regarding the VAT). [3] For the following reasons, the court remands the determination to Commerce to clarify and, if necessary, revise its findings on the issues of the economic comparability and significant production of Thailand, and the irrecoverable VAT calculation. The court defers ruling on Plaintiffs’ challenges to Commerce’s surrogate value selections pending the results of the redetermination.
B ACKGROUND
I. Preliminary Proceedings
On May 29, 2014, Commerce initiated AR7 on certain activated carbon from China for the period of review (“POR”) April 1, 2013 to March 1, 2014. Initiation of Antidumping and Countervailing Duty Administrative Reviews , 79 Fed. Reg. 30,809 (Dep’t Commerce May 29, 2014), PJA Tab 6, PR 18, ECF No. 85-1. [4] Commerce selected Jacobi and Datong Juqiang Activated Carbon Co., Ltd. (“DJAC”) as mandatory respondents for individual examination for AR7 “because they constitute the PRC exporters accounting for the largest volume of U.S. imports of subject merchandise that can reasonably be examined.” Selection of Respondents for Individual Review (June 26, 2014) at 1, CJA Tab 10, CR 5, ECF No. 86.
Page 6 On July 25, 2014, Commerce invited interested parties to comment on surrogate country selection and surrogate value data. See Request for Surrogate Country and Surrogate Value Comments and Information (July 25, 2014) (“Commerce SC Letter”), PJA Tab 43, PR 64, ECF No. 85-4. Commerce provided interested parties with a “non- exhaustive list of countries” that, based on 2012 per capita gross national income (“GNI”), Commerce’s Office of Policy (“OP”) considered economically comparable to the PRC. Id . at 1; see also id ., Attach. 1 (“OP SC List for AR7”) (listing South Africa, Colombia, Bulgaria, Thailand, Ecuador, and Indonesia as economically comparable countries). Commerce invited interested parties to propose additional countries. Id . at 1.
On November 12, 2014, Jacobi submitted surrogate country comments. See Jacobi’s Initial Comments on Surrogate County Selection (Nov. 12, 2014) (“Jacobi SC Comments”), PJA Tab 4, PR 178, ECF No. 85-1. Jacobi urged Commerce to rely on 2013 GNI data from the World Bank’s “World Development Indicators Database,” and asserted that data therein demonstrates the Philippines’ economic comparability to China. Id . at 3. On March 31, 2015, DJAC submitted surrogate value information proposing Thai Harmonized System (“HS”) code 4402.90.1000, “Of Coconut Shell,” to value carbonized material. Second Surrogate Value Submission by Datong Juqiang Activated Carbon Co., Ltd. (March 31, 2015) (“DJAC Second SV Submission”), Ex. 2A (“Thai Import Statistics”), PJA Tab 15, PR 322, ECF No. 85-3.
On May 5, 2015, Commerce published its Preliminary Results . See Certain Activated Carbon from the People’s Republic of China , 80 Fed. Reg. 25,669 (Dep’t Commerce May 5, 2015) (prelim. results of antidumping duty admin. review: 2013-2014) Page 7 (“ Prelim. Results ”), PJA Tab 23, PR 351, ECF No. 85-3, and accompanying Issues and Decision Memorandum , A-570-904 (Apr. 29, 2015) (“ Prelim. I&D Mem. ”), PJA Tab 17, PR 335, ECF No. 85-3. Commerce selected Thailand as the primary surrogate country. Id . at 17. Commerce explained that Bulgaria, Ecuador, Romania, South Africa, Thailand, and Ukraine are economically comparable to the PRC on the basis of 2013 GNI data; the Philippines are Indonesia are not. Id . at 14-15. Of the economically comparable countries, Commerce relied on Global Trade Atlas export data to find that Ecuador, Thailand, and South Africa are significant producers of comparable merchandise. Id . at 16; see also Surrogate Values for the Preliminary Results (Apr. 29, 2015) (“Prelim. SV Mem.”), Attach. 1 (“Global Trade Atlas Reporting Country Export Statistics”), PJA Tab 18, PR 336-39, ECF No. 85-3.
Interested parties had placed Indonesian, Thai, Philippine, and Ukrainian surrogate value data on the record for Commerce’s consideration. Prelim. I&D Mem . at 16. Commerce rejected the Philippine and Indonesian data because it did not find those countries to be economically comparable, and it determined it had “sufficiently reliable and useable [surrogate value] data” from a comparable country, Thailand. Id . at 16-17, 27. Relevant here, Commerce selected the 2010 audited financial statement of Carbokarn Co., Ltd. (“Carbokarn”), a Thai activated carbon company, to value factory overhead, selling, general, and administrative expenses, and profit. Id . at 26. [5] Page 8 Commerce selected Thai HS code 4402.90.9000, “Wood Charcoal (Including Shell Or Nut Charcoal), Excluding That Of Bamboo, Other,” to value carbonized material. Prelim. SV Mem. at 5, Attach. 3a (Global Trade Atlas surrogate values for AR7); see also Prelim I&D Mem. at 24 (noting Commerce’s reliance on Thai import data to value raw materials).
Finally, Commerce noted that, in nonmarket economy (“NME”) cases, its practice “is to subtract from [export price] or the [constructed export price] the amount of any un- refunded ( i.e. , irrecoverable) VAT [“Value Added Tax”]”. Prelim. I&D Mem . at 23. After considering the Chinese VAT regulation placed on the record, Commerce reduced Jacobi’s U.S. sales price “by the irrecoverable VAT rate of 17[%] of entered value.” Id . at 23. Commerce calculated an estimated weighted-average dumping margin of 0.0 USD/kg for DJAC and a 0.53 USD/kg margin for Jacobi. Prelim. Results , 80 Fed. Reg. at 25,669. As the only non-zero or non- de minimis dumping margin, Commerce assigned Jacobi’s rate to the separate rate-eligible companies. Id. ; Prelim. I&D Mem . at 11.
II. Post-Preliminary Proceedings
In light of
Dupont Teijin Films v. United States
,
III. Final Results
On October 9, 2015, Commerce published the Final Results . See Final Results . Commerce affirmed its preliminary selection of Thailand as the primary surrogate country. Final I&D Mem . at 5-8. Commerce selected Carbokarn’s 2011 financial statement to value financial ratios, which had been placed on the record during post- preliminary proceedings and which was more contemporaneous with the relevant POR than the 2010 Carbokarn statement used in the Preliminary Results . Final I&D Mem . at 13. Commerce selected Thai HS code 4402.90.1000 (“Of Coconut Shell”) as the surrogate value for carbonized material because it is more specific to Jacobi’s inputs than is Thai HS 4402.9000 (“Wood Charcoal”). Id . at 25, 26. As it did in the Preliminary Results , Commerce deducted 17 percent irrecoverable VAT from the U.S. price of Jacobi’s CEP sales. Id . at 16-20. Commerce calculated a weighted-average dumping margin of $1.05 USD/kg for Jacobi and $0.00 USD/kg for DJAC. Final Results , 80 Fed. Reg. at 61,174. Because Jacobi’s rate is not zero, de minimis , or based on facts available, it was assigned to the separate rate companies. Id .
Before this court is Plaintiffs’ challenge to Commerce’s Final Results . The arguments are fully briefed, and the court heard oral argument on December 21, 2016. See Docket Entry, ECF No. 93. For the reasons discussed below, the Final Results are remanded for further explanation and reconsideration, if necessary, of Commerce’s determination of the economic comparability of Thailand and the Philippines, Commerce’s determination that Thailand is a significant producer of activated carbon, and Commerce’s calculation of the irrecoverable VAT. The court defers resolution of Plaintiffs’ challenges to Commerce’s particular surrogate values pending the results of the redetermination.
J URISDICTION AND S TANDARD OF R EVIEW
The court has jurisdiction pursuant to § 516A(a)(2)(B)(iii) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(iii) (2012), [7] and 28 U.S.C. § 1581(c) (2012).
The court will uphold an agency determination that is supported by substantial
evidence and otherwise in accordance with law. 19 U.S.C. § 1516a(b)(1)(B)(i).
“Substantial evidence is ‘such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.’”
Huaiyin Foreign Trade Corp. (30) v. United States
,
Separately, the two-step framework provided in
Chevron, U.S.A., Inc. v. Natural
Resources Defense Council, Inc.
,
D ISCUSSION
I. Rule 56.2 Motions for Judgment on the Agency Record
A. Surrogate Country Selection
Plaintiffs contend that Commerce’s surrogate country analysis was unlawful, and its decision to reject the Philippines as the primary surrogate country in favor of Thailand was not supported by substantial evidence. Jacobi Mem. at 9-30; CATC Mem. at 2-9. Commerce and Defendant-Intervenors Calgon Carbon Corp. and Cabot Norit Americas Inc. (together, “Calgon”) argue that Commerce’s selection of Thailand was lawful and supported by substantial evidence. Def.’s Resp. to Pls.’ Rule 56.2 Mots. For J. Upon the Agency R. (“Gov. Resp.”) at 15-43, ECF No. 92; Confidential Def.- Intervenors’ Resp. in Opp’n to Consolidated Pls.’ Mots. For J. Upon the Agency R. (“Calgon Resp.”) at 10-33, ECF No. 73.
i. Legal Framework for Surrogate Country Selection a. Statutory and Regulatory Framework An antidumping duty is “the amount by which the normal value exceeds the export price (or the constructed export price) for the merchandise.” 19 U.S.C. § 1673. When, as here, “the subject merchandise is exported from a nonmarket economy country,” Commerce determines “normal value” by valuing the “factors of production” [8] used in producing the subject merchandise, and “an amount for general expenses and profit plus the cost of containers, coverings, and other expenses” in a surrogate market economy country. 19 U.S.C. § 1677b(c)(1).
Commerce values the factors of production using “the best available information
regarding the values of such factors” in an “appropriate” market economy country or
countries. 19 U.S.C. § 1677b(c)(1)(B). In deciding what is an “appropriate” market
economy country, Commerce must utilize, “to the extent possible, the prices or costs of
factors of production” in a market economy country that is at “a level of economic
development comparable to that of the [NME] country,” and is a “significant producer[]
of comparable merchandise.” 19 U.S.C. § 1677b(c)(4). “The process of choosing a
market economy country to value the factors of production is known as surrogate
country selection.”
Jiaxing Bro. Fastener Co., Ltd. v. United States
,
b.
Commerce Policy Bulletin 04.1
Commerce has adopted a four-step approach to implement the above-described
statutory and regulatory framework.
See
Import Admin., U.S. Dep’t of Commerce, Non-
Market Economy Surrogate Country Selection Process, Policy Bulletin 04.1 (2004),
http://enforcement.trade.gov/policy/bull04-1.html (last visited March 31, 2017)
[hereinafter “Policy Bulletin 04.1”]. First, OP compiles a list of potential surrogate
countries that are economically comparable to the NME based on per capita GNI as
reported by the World Bank. Policy Bulletin 04.1 at 2. Potential surrogate countries
“are not ranked” and are “considered equivalent in terms of economic comparability.”
Id.
Second, among the potential surrogates, Commerce identifies countries that
produce comparable merchandise.
Id.
Third, Commerce determines whether any of
the potential surrogates identified in step two are significant producers of comparable
merchandise.
Id.
at 3. Whether production is “significant” is generally determined in
relation to “world production of, and trade in, comparable merchandise.”
Id.
Finally, if
two or more countries fulfill the first three criteria, Commerce selects as the primary
surrogate the country with the best surrogate value data.
Id.
at 4;
see also Jiaxing Bro.
Fastener Co., Ltd.
,
ii. Commerce’s Sequential Approach to Surrogate Country Selection
a.
Parties’ Contentions
Jacobi contends that Commerce erred when it excluded the Philippines as a
potential surrogate country solely on the basis of economic comparability and declined
to consider its significant production of comparable merchandise and its data quality.
See
Jacobi Mem. at 9-13;
see also
CATC Mem. at 5 (asserting that “[Commerce]
cannot lawfully make one criterion a threshold requirement . . . .”). CATC argues that
the statutory mandate to use the “best available information” elevates Commerce’s data
criterion such that it “is, at a minimum, equally as critical” as the economic comparability
and significant comparable production criteria. CATC Mem. at 3. Jacobi and CATC
point to several decisions from this court as support for the proposition that “economic
comparability alone cannot be used to determine a reasonable primary surrogate
country.” Jacobi Mem. at 11-12 (citing
Vinh Hoan Corp. v. United States
,
Commerce contends that Plaintiffs failed to raise arguments related to its surrogate country methodology in the underlying administrative proceeding, and, thus, failed to exhaust their administrative remedies. Gov. Resp. at 20-23. Commerce further contends that it properly applied Policy Bulletin 04.1 in selecting Thailand as the primary surrogate country. Gov. Resp. at 18-20, 23-28.
b. Administrative Exhaustion
1.
Legal Standard
“[T]he Court of International Trade shall, where appropriate, require the
exhaustion of administrative remedies.” 28 U.S.C. § 2637(d). Exhaustion of
administrative remedies is a doctrine that holds “that no one is entitled to judicial relief
for a supposed or threatened injury until the prescribed administrative remedy has been
exhausted.”
Consol. Bearings Co. v. United States
,
2.
Plaintiffs Adequately Exhausted Their Remedies
A careful review of the case briefs filed in the underlying administrative
proceeding show that Plaintiffs sufficiently raised Commerce’s sequential approach to
surrogate country selection.
See Trust Chem Co. Ltd. v. United States
,
As demonstrated by [Commerce’s] Preliminary Results, [Commerce] has treated the economic comparability criteria of its surrogate country analysis as a threshold . [Commerce] did not consider the relative quality of data in countries outside of the [per capita] GNI band nor did [Commerce] consider the relative significant production of countries outside of the GNI band. After determining the Philippines and Indonesia were not at the same level of economic comparability, [Commerce] stopped its analysis of these countries. This approach cannot be reconciled with the relevant statutory mandate.
CATC Case Br. (June 22, 2015) at 6, PJA Tab 33, PR 375, ECF No. 85-4 (emphasis added). Likewise, DJAC asserted that Commerce must “weigh the economic comparability, significant production and data quality considerations conjunctively, rather than disjunctively.” Case Br. of Datong Juqiang Activated Carbon Co., Ltd. (June 22, 2015) at 4-5, PJA Tab 32, PR 374, ECF No. 85-4. For its part, Jacobi asserted that Commerce should select the Philippines because it “best meets all of the criteria outlined in [Commerce’s] policy bulletin,” and that Commerce has previously “conducted a broader analysis of what constitutes the best available surrogate country,” and has “relied upon the totality of facts rather than the proximity of the GNI for the potential surrogate country.” Jacobi’s Case Br. for POR 7 (June 22, 2015) (“Jacobi Case Br.”) at 5, 7, PJA Tab 34, PR 381, ECF No. 85-4 (second emphasis added). Accordingly, Commerce’s exhaustion argument lacks merit.
c. Commerce’s Sequential Surrogate Country Selection Methodology is Lawful
Plaintiffs argue that Commerce erred when it excluded the Philippines as a
potential surrogate country on the basis of lack of economic comparability; instead,
Plaintiffs contend, Commerce should have considered the degree to which the
Philippines fulfilled all three statutory criteria before making its determination. The
Federal Circuit, however, has rejected this same argument by parties in
Jiaxing Brother
Fastener Co., Ltd.
Therein, the Federal Circuit addressed whether Commerce’s
decision to exclude India from consideration as a potential surrogate country on the
basis of its lack of economic comparability conflicted with the express terms of 19
U.S.C. § 1677b.
Jiaxing Bro. Fastener Co., Ltd.
,
Further, this court has affirmed Commerce’s discretion to exclude countries from
consideration on the basis of economic comparability.
See Fresh Garlic Producers
Ass’n v. United States
(“
Fresh Garlic I
”),
In asserting that Commerce should have weighed the Philippines’ fulfillment of all three statutory criteria, Jacobi and CATC would misapply several opinions from this court addressing Commerce’s selection of a surrogate country from among two countries on OP’s list. For example, Jacobi relies on the following passage from Ad Hoc Shrimp :
Because none of Commerce’s three surrogate country eligibility criteria is preeminent, it follows that relative strengths and weaknesses among potential surrogates must be weighed by evaluating the extent to which the potential surrogates satisfy each of the three criteria.
Jacobi Mem. at 12 (citing
Ad Hoc Shrimp
,
CATC’s reliance on a similar passage from
Amanda Foods
is also misplaced.
See
CATC Mem. at 4 (quoting
Amanda Foods
,
Allied Pac. , another case relied on by Jacobi, addresses the conjunctive nature
of the statutory selection criteria. In particular,
Allied Pac.
considers whether
Commerce’s use of “regression analysis [pursuant to 19 C.F.R. § 351.408(c)(3)
[13]
]
based on a basket of countries not economically comparable to China” to determine the
surrogate labor rate complies with Congress’s instruction to value, “to the extent
possible,” factors of production in market economy countries that are economically
comparable and significant producers of comparable merchandise.
Allied Pac.
, 32 CIT
at 1352, 1357,
While Jacobi correctly notes that Policy Bulletin 04.1 acknowledges that it may be “more appropriate . . . to address economic comparability only after the significant producer of comparable merchandise requirement is met,” Jacobi Mem. at 11 (quoting Policy Bulletin 04.1 at 4), that situation typically arises when the subject merchandise is “unusual or unique” because few countries produce it, or because “major inputs are not widely traded internationally, Policy Bulletin 04.1 at 4. Jacobi does not contend, nor is there record evidence suggesting, that activated carbon is unusual or unique, or is produced from inputs that are not widely traded.
[13] The regulation directed “[t]he Secretary [to] use regression-based wage rates reflective of the observed relationship between wages and national income in market economy countries. The Secretary will calculate the wage rate to be applied in nonmarket economy proceedings each year. The calculation will be based on current data, and will be made available to the public.” 19 C.F.R. § 351.408(c)(3). simultaneously.”). After extensive analysis, the court held that 19 C.F.R.
§ 351.408(c)(3) conflicted with 19 U.S.C. § 1677b(c) and, thus, was invalid.
Allied Pac.
,
Jacobi also attempts to rely on an opinion from this court analyzing whether Commerce must, in the event an “off-list” country is proposed, determine whether that country’s data quality outweighs its lack of economic comparability. See Jacobi Mem. at 12-13 (citing Clearon Corp. v. United States (“ Clearon II ”), 39 CIT___, ___, 2015 WL 4978995, at *4 (2015)). In Clearon II , the court stated that
[o]n the one hand, it is unreasonable for Commerce to acknowledge that the level of economic comparability and the quality of a country’s data are two separate considerations, and then refuse to undertake a comparative analysis, of the type Commerce here implies it must undertake, in order to determine whether data quality outweighs the fact that a country is not on the surrogate country list.
First, the above-quoted passages essentially restate Commerce’s policy to select
a country on OP’s list unless none are usable because “(a) they either are not
significant producers of comparable merchandise, (b) do not provide sufficiently reliable
sources of publicly available SV data, or (c) are not suitable for use based on other
reasons.”
Final I&D Mem
. at 6;
see also Clearon Corp. v. United States
(“
Clearon III
”),
Second, Jacobi’s reliance on Clearon II appears to interject a “substantial evidence” issue into its argument that Commerce’s surrogate country analysis was “not in accordance with law” by urging the court to consider the sufficiency of Thai data for valuing factors of production as part of its consideration whether Commerce’s sequential approach to surrogate country selection is lawful. See Jacobi Mem. at 9 (capitalization omitted). However, whether Commerce’s method of selecting the primary surrogate country is lawful is an issue distinct from whether the results Commerce obtained are supported by substantial evidence. The court will not conflate the two.
Relatedly, and finally, it bears repeating that the issue Plaintiffs raise here is whether Commerce permissibly excluded the Philippines on the basis of lack of economic comparability, or whether Commerce should have considered the Philippines’ fulfilment of the other statutory criteria-- irrespective of the quality of Thai data --before excluding it. Clearon II is, thus, unsupportive of Plaintiffs’ argument.
In sum, Commerce has discretion to develop a reasonable methodology to
implement its surrogate country selection criteria.
Jiaxing Bro. Fastener Co., Ltd
., 822
F.3d at 1298. This court has consistently rejected challenges to Commerce’s exclusion
of particular countries as potential surrogate countries based on their lack of economic
comparability.
See Clearon I
,
iii. Whether Substantial Evidence Supports Commerce’s Selection of Thailand as the Primary Surrogate Country a. Parties’ Contentions
Jacobi contends that “Commerce’s determination that Thailand was a better surrogate country than the Philippines” rests on unsupported factual findings regarding the Philippines’ economic comparability, Thailand’s status as a significant producer, and the quality of Thai data. Jacobi Mem. at 13. CATC asserts that Commerce should have selected the Philippines as the primary surrogate country because it “is the most significant producer of comparable merchandise” and has “critically superior” data than does Thailand. CATC Mem. at 2, 6, 7. Jacobi and CATC also contend that Commerce wrongly interpreted the term “significant producer.” Jacobi Mem. at 13; CATC Mem. at 5-6.
Commerce argues that (1) its determination that the Philippines is not economically comparable to China is supported by substantial evidence, (2) its determination that Thailand is a significant producer is adequately supported and rests on a sound interpretation of the term, and (3) it reasonably relied on Thai data. Gov. Resp. at 28-43. Calgon asserts that record evidence establishes that Thailand meets each of the statutory criteria and, thus, Commerce need not have considered the Philippines. Calgon Resp. at 16, 29. The court addresses Parties’ arguments as to each of the statutory criteria, in turn.
b.
Economic Comparability
Jacobi contends that Commerce’s determination that the Philippines’ per capita
GNI falls outside the range of countries economically comparable to China “is factually
incorrect.” Jacobi Mem. at 14. According to Jacobi, “the 2013 GNI data demonstrate
that the Philippines is as economically comparable to China as in previous years when
Commerce found the Philippines to be economically comparable”; that, in fact, the
Philippines’ 2013 per capita GNI “was even closer to China’s than . . . in previous
years.” Jacobi Mem. at 14,15. In light of Commerce’s previous selection of the
Philippines as the primary surrogate country, Jacobi argues that Commerce’s
determination that it lacked economic comparability for this POR was “arbitrary and
capricious.” Jacobi Mem. at 15 (citing
Juancheng Kangtai Chem. Co. v. United States
,
Commerce contends that it “is not required . . . to use the same surrogate country that it used in previous reviews,” and it “selects the primary surrogate country for each segment of a proceeding based on the record of that particular segment.” Gov. Resp. at 29. Commerce further contends that it “dropped the Philippines from its surrogate country list” because 2013 GNI data demonstrated that it had become “less economically comparable to China over time,” such that “the Philippines’ and China’s per capita GNI rankings had moved further apart.” Gov. Resp. at 31.
While Jacobi acknowledges that Commerce must make its surrogate country determination on the basis of data submitted for this POR; it argues that “Commerce never explained why a permissible difference [from China’s GNI] suddenly became impermissible.” Pls.’ Reply Br. (“Jacobi Reply”) at 10, ECF No. 81.
1.
Legal Framework
Section 1677b(c)(4)(A) does not define the phrase “economic comparability” or
require a particular methodology to determine which countries are economically
comparable.
See
19 U.S.C. § 1677b(4);
Jiaxing Bro. Fastener Co., Ltd.
, 961 F. Supp.
2d at 1328. Thus, “Commerce may perform its duties in the way it believes most
suitable.’”
Jiaxing Bro. Fastener Co., Ltd.
,
2.
Commerce’s Economic Comparability
Determination Lacks Reasoned Analysis
Commerce is correct that “nothing in the statute [] requires [it] to consider any
particular country as a surrogate country.”
Jiaxing Bro. Fastener Co., Ltd.
, 822 F.3d at
1298. “[E]ach administrative review is a separate exercise of Commerce’s authority that
allows for different conclusions based on different facts in the record.”
Id.
at 1299
(quoting
Qingdao Sea-Line Trading Co. Ltd.
,
To that end, the court will uphold Commerce’s determination when the path to
that determination is reasonably discernable from the determination itself.
See NMB
Singapore Ltd. v. United States,
The path explaining the basis for OP’s list of potential surrogate countries is not
discernible to the court. In July 2014, Commerce sent interested parties a “non-
exhaustive list of countries” that, based on 2012 per capita GNI, were deemed
economically comparable to the PRC. Commerce SC Letter at 1; OP SC List for AR7 at
2. Thereafter, Commerce preliminarily selected Thailand as the primary surrogate
country.
Prelim. I&D Mem
. at 17. Commerce explained that it selected Thailand on the
basis of 2013 per capita GNI data that Jacobi had placed on the record; Commerce
further explained that “none of the surrogate country lists . . . based on 2013 GNI data
list . . . the Philippines as being [economically comparable] to the PRC.”
Id
. at 13-15
(citing Prelim. SV Mem.). In the
Final Results
, Commerce again selected Thailand as
(capitalization omitted); CATC Mem. at 2 (“[Commerce] should select the Philippines . . .
.”). Although the court must consider “evidence that fairly detracts from the
substantiality of the evidence,”
Nippon Steel Corp.
,
the primary surrogate country. Final I&D Mem . at 5. Commerce responded to arguments favoring the Philippines by reiterating that “[a]s stated in the Preliminary Results, the Philippines[’] GNI falls outside the range of GNI data represented by the countries on the surrogate country lists and is therefore not at the same level of economic development as the PRC.” Id . Commerce further reiterated that “none of the surrogate country lists issued by the Department based on 2013 GNI data that are on the record of this review list the Philippines as being at the same level of economic development as the PRC.” Id . at 6.
Commerce’s conclusory assertions fail to enable the “court [to] consider whether
[its compilation of the list] was based on a consideration of the relevant factors” because
the
Final Results
did not explain what factors OP considered when it compiled the list.
Bowman Transp., Inc. v. Arkansas-Best Freight System, Inc.
,
In its briefing to the court, Commerce explains that OP compiles the list by
“compar[ing] the change in China’s per capita GNI to the changes in the per capita GNIs
of the existing set of surrogate countries,” and “then determin[ing] whether it is
necessary to re-center the GNI range in light of the year-to-year GNI changes, looking
for GNI ranges that are “evenly distributed around [] [China’s] GNI.” Gov. Resp. at 30
(citing,
inter alia
, Remand Results,
Clearon Corp. v. United States
, Court No. 13-00073,
at 9 (Ct. Int’l Trade Dec. 11, 2014), ECF No. 69 (final alteration original). “After
centering the GNI range, Commerce searches for countries within that range that are
suitable candidates for inclusion on the list.”
Id.
at 30.
[17]
Commerce further explains
that, in AR7, “the 2013 per capita GNI difference between the Philippines and China is
greater than all the countries on the surrogate country list.”
Id.
at 31.
[18]
The inadequacy of Commerce’s explanation for its determination of the GNI
range is demonstrated by its citation not to the
Issues and Decision Memorandum
or
record evidence, but to its explanation in another case, post-remand.
See Id
. at 30;
Clearon I
,
Commerce to provide a reasoned explanation as to why the range of GNI data reflected
on OP’s list demonstrates economic comparability to the PRC, including why the
Philippines’ GNI does not.
See Timken U.S. Corp.
,
c. Significant Production Jacobi contends that “Global Trade Atlas data for this POR demonstrate that the Philippines is, by far, the largest producer of activated carbon,” and is “about eight times greater than the production volume of Thailand.” Jacobi Mem. at 18-19 (emphasis omitted). Jacobi further argues that “Thailand does not meet the statutory definition of ‘significant producer,’” and Commerce has impermissibly found that “any country with non-zero production” is a significant producer. Id. at 19, 21 (citing Fresh Garlic I , 121 F. Supp. 3d at 1338-40 (rejecting the proposition that “significant producer” means “any country with non-zero production”)) (emphasis omitted); see also CATC Mem. at 6 (“[Commerce] found that countries with any amount of exports of activated carbon are presumed to be equally significant producers. ‘Any’ is a very broad interpretation of the term ‘significant.’”).
According to Jacobi, Commerce has previously relied on “significant net exports (exports minus imports)” and “significant exports to the United States when there was no information showing worldwide production of subject merchandise or production figures in potential surrogate countries.” Jacobi Mem. at 19 (citation omitted). Jacobi points to the statute’s legislative history, which states that “[t]he term ‘significant producer’ includes any country that is a significant net exporter and, if appropriate, Commerce may use a significant net exporting country in valuing factors.” Id . at 19 (quoting Conference Report to the 1988 Omnibus Trade & Competitiveness Act , H. R. Conf. Rep. No. 100-576 at 590). Jacobi asserts that Thailand is not a significant producer because it had insignificant net exports in terms of quantity, negative net exports in terms of value, and insignificant exports to the United States. Id . at 20; see also Jacobi Reply at 12 (had Commerce relied on net exports, “Thailand would have failed the ‘significant producer’ requirement”).
Commerce responds that it need not select “the
most
significant producer.” Gov.
Resp. at 32. Commerce asserts that although “‘significant producer’
includes
any
country that is a significant net exporter,” the term is not limited to net exporting
countries.
Id.
at 32. Moreover, because the legislative history does not define “net
exporter” in terms of quantity, value, or both, Commerce argues, pursuant to
Chevron
the court must “defer to Commerce’s reasonable interpretation of the statutory
provision.”
Id.
at 33 (citing
Fresh Garlic I
,
Calgon argues that of the countries OP considered economically comparable to the PRC, Thailand is the largest exporter of activated carbon. Calgon Resp. at 16-17 (citing Prelim. I&D Mem. at 16 and Pet’rs’ Comments on Surrogate Country Selection (Nov. 12, 2014) (“Pet’rs’ SC Comments”) at 3, PJA Tab 5, PR 179, ECF No. 85-1). Calgon further argues there is record evidence of significant production of activated carbon by Gigantic and Carbokarn. Calgon Resp. at 17-18.
1. Legal Framework Neither the statute nor Commerce’s regulations define “significant producer.” See 19 U.S.C. § 1677b; 19 C.F.R. § 351.408; Policy Bulletin 04.1 at 3.
Because the term “is not statutorily defined, and is inherently ambiguous,” the court
must assess “whether Commerce’s definition of significant producer is based on a
permissible construction of the statute.”
Fresh Garlic I
,
In Fresh Garlic I , the court opined that
an interpretation of ‘significant producer’ countries as those whose domestic production could influence or affect world trade would be a permissible construction of the statute. This follows from the plain meaning of the word ‘significant’ as something ‘having or likely to have influence or effect.’ This definition, however, necessarily requires comparing potential surrogate countries’ production to world production of the subject merchandise.
2. Commerce’s Determination that Thailand is a Significant Producer Lacks Substantial Evidence In the Issues and Decision Memorandum , Commerce identified Thailand as a significant producer on the basis of its total export quantities. Final I&D Mem . at 7 (citing Global Trade Atlas Reporting Country Export Statistics). Commerce explained that it “prefer[s] to consider quantity, rather than value, in determining whether a country is a significant producer” because “the fact that a country is not a net exporter of a particular product, in value terms, does not necessarily mean that the country is not a significant producer of that good, given that the country could import more higher-valued products than it exports.” Id . at 7 (emphasis added).
Commerce’s reasoning falls short for several reasons. First, Commerce does not
explain whether Thailand actually imports more higher-valued goods than it exports.
Second, Commerce relied on Thailand’s total exports--not net exports--to find that it is a
“significant producer.” Thus, Commerce’s rationale for disfavoring net value as a
measure of significant production does little to support (or explain) its preference for
considering total export quantities. Finally, Commerce’s reasoning fails to persuade
that reliance on total exports, devoid of evidence of influence on world trade, is a
permissible method of interpreting the term “significant producer,” and, thus, identifying
significant producer countries.
See Chevron
,
In 2013, Thailand exported 7,871,321 kilograms of activated carbon.
See
Global
Trade Atlas Reporting Country Export Statistics;
Final I&D Mem
. at 7 n.24. However,
the court’s calculations show that Thailand’s proportion of 2013 global exports (which
collectively equaled 554,263,223 kilograms) was just 1.4% including the PRC, and 2.6%
excluding the PRC.
See
Global Trade Atlas Reporting Country Export Statistics.
Commerce has not explained the significance of Thailand’s contribution to global
exports sufficiently well so as to enable the court to conclude that its determination that
Thailand is a “significant producer” is supported by substantial evidence.
See generally
Final I&D Mem
. at 7-8;
[19]
cf. Fresh Garlic Producers Ass’n v. United States
(“
Fresh
Garlic II
”),
Nor is Commerce’s post hoc argument that Thailand ranks ninth out of the 27
activated carbon exporting countries included in its data set sufficient.
See
Gov. Resp.
at 33-34 (citing Global Trade Atlas Reporting Country Export Statistics);
Burlington
Truck Lines, Inc.,
d. Data Quality/Surrogate Value Selections
Plaintiffs present several challenges to Commerce’s selection of a Thai financial statement to value financial ratios and Thai HS code 4402.90.1000 to value carbonized material. [21] See Jacobi Mem. at 24-30, 34-44; CATC Mem. at 7, 9-18. [22]
To value the NME respondent’s factors of production, Commerce must select the
“best available information” from one or more market economy countries that are
economically comparable to the NME country and are significant producers of
comparable merchandise. 19 U.S.C. § 1677b(c)(1)(B), (c)(4). Because the court is
remanding the issues of economic comparability and significant production to the
agency, on remand, Commerce may decide to select a different country as the primary
surrogate country and, thus, may need to reconsider its surrogate value selections.
This is particularly true given Commerce’s regulatory preference for using data from a
single surrogate country.
See
19 CFR § 351.408(c)(2). Accordingly, to avoid rendering
an essentially advisory opinion, the court defers consideration of Plaintiffs’ surrogate
value challenges pending the results of the redetermination.
[23]
[21] “Carbonized material is a charred, intermediate input used in the production of activated carbon.” Calgon Resp. at 34 n.18.
[22] Plaintiffs challenge Commerce’s determination that data considerations generally favor selecting Thailand as the primary surrogate country by focusing on the financial statements used to value financial ratios, and Commerce’s separate decision to use Thai HS 4402.90.1000 to value carbonized material. See, e.g. , Jacobi Mem. at 24-44. However, because Commerce’s assessment of all factor of production data is influenced by its determinations regarding economic comparability and significant production, it is appropriate to defer reaching all of Plaintiffs’ SV arguments. See 19 U.S.C. § 1677b(c)(1)(B), (c)(4).
[23] In relation to its argument that the average unit value for Thai HS 4402.90.1000 is aberrant, Jacobi moved to supplement the administrative record with evidence of the
B. Adjustment for Chinese Value Added Tax
Plaintiffs contend that Commerce lacks authority to deduct irrecoverable VAT from Jacobi’s U.S. sales price, and Commerce’s method of calculating the VAT adjustment is not supported by substantial evidence. Jacobi Mem. at 44; CATC Mem. at 18; Huahui Mem. at 2; GDLSK Mem. at 7. Commerce contends its deduction of irrecoverable VAT from Jacobi’s CEP was lawful and supported by substantial evidence. Gov. Resp. at 54; see also Calgon Resp. at 44.
i. Overview of Commerce’s VAT Adjustment Pursuant to 19 CFR § 351.401 and a 2012 change in methodology for calculating export price or CEP, Commerce generally will deduct price adjustments “that are reasonably attributable to the subject merchandise.” 19 CFR § 351.401(c); Methodological Change for Implementation of Section 772(c)(2)(B) of the Tariff Act of 1930, as Amended, In Certain Non-Market Economy Antidumping Proceedings , 77 Fed. Reg. 36,481 (Dep’t Commerce June 19, 2012) (“ Methodological Change ”); Final I&D Mem . at 17. Finding that “[t]he PRC’s VAT regime is product-specific [and, thus, ‘attributable to the subject merchandise’], with VAT schedules that vary by industry and even across products within the same industry,” Commerce applied a 17% “irrecoverable VAT” adjustment to Jacobi’s CEP for activated carbon. Final I&D Mem . at 16-17 & n.67 (citing Jacobi’s Suppl. Sect. C Resp. (Oct. 21, 2014) (“Jacobi Suppl. Sect. C Resp.”), Ex. SC-54 (“Chinese VAT Regulations”), CJA Tab 2, CR 124, CR 133, ECF No. 86.). [24]
nature of the Thai imports. The court will deny that motion. See infra Discussion Section II.
[24] The relevant Chinese regulation provides that “[e]ntities and individuals engaged in the . . . import of goods within the territory of the [PRC] are taxpayers of value
Commerce’s adjustment for irrecoverable VAT consists of two steps: “(1) determining the irrecoverable VAT on subject merchandise, and (2) reducing U.S. price by the amount determined in step one.” Final I&D Mem . at 17. Commerce defines “irrecoverable VAT” as “(1) the FOB [‘free on board’] value of the exported good, applied to the difference between (2) the standard VAT levy rate and (3) the VAT rebate rate applicable to exported goods.” Id . “The first variable, export value, is unique to each respondent while the rates in (2) and (3), as well as the formula for determining irrecoverable VAT, are each explicitly set forth in Chinese law and regulations.” Id . Here, the PRC levies a 17% VAT on inputs and raw materials used in the production of activated carbon, for which there is no VAT rebate. Id . at 17 & n.68 (citing Chinese VAT Regulations). Thus, Commerce concluded, “the irrecoverable rate is equal to the full VAT percentage.” Id . at 17.
ii.
Parties’ Contentions
Jacobi argues the Chinese VAT is not a statutory “export tax or other charge”
and, thus, Commerce lacked authority to reduce Jacobi’s U.S. sales price by the
amount of VAT Jacobi paid and was not refunded. Jacobi Mem. at 45-47. Assuming
Commerce had such authority, Jacobi contends that Commerce erroneously applied the
VAT adjustment to a “fictitious entered value.”
Id.
at 45, 47-55. CATC adopts Jacobi’s
argument, and further contends that a recent case in this court affirming Commerce’s
adjustment methodology,
Fushun Jinly Petrochemical Carbon Co. v. United States
(“
Fushun Jinly
”),
CATC Mem. at 18-19; see also Huahui Mem. at 2-3 ( Fushun Jinly does not resolve the matter and “was predicated on the particular facts of that case”); GDLSK Mem. at 8 ( Fushun Jinly was wrongly decided and did not examine the relevant Chinese regulation). CATC also contends that Commerce erroneously applied the VAT adjustment to Jacobi’s U.S. price, and not the lesser cost of the raw materials upon which Jacobi paid the VAT. CATC Mem. at 21-22.
Commerce argues that it reasonably interpreted an ambiguous statutory provision when it applied its irrecoverable VAT methodology adopted after notice and comment in 2012, and its calculation is supported by substantial evidence. Gov. Resp. at 54-55, 56-68. Commerce further argues that Jacobi failed to exhaust administrative remedies regarding its arguments about Commerce’s method of calculating the VAT adjustment. Id. at 55, 64-65; see also Calgon Resp. at 49-50. Calgon argues that judicial precedent and Commerce’s past practice supports the deduction of irrecoverable VAT. Calgon Resp. at 46-49 & n.28. Calgon further argues that Commerce properly calculated Jacobi’s VAT adjustment. Id . at 51-57.
iii. Legal Framework Pursuant to 19 U.S.C. § 1677a(c), Commerce may deduct from export price or CEP “the amount, if included in such price, of any export tax, duty, or other charge imposed by the exporting country on the exportation of the subject merchandise to the United States, other than an export tax, duty, or other charge described in section 1677(6)(C) of this title.” [25] 19 U.S.C. § 1677a(c)(2)(B). Such price adjustments must be “reasonably attributable to the subject merchandise.” 19 C.F.R. § 351.401(c). Before addressing Parties’ contentions about Commerce’s authority pursuant to § 1677a(c)(2)(B), a brief overview of the relevant legal landscape is merited.
In
Magnesium Corp. of Am. v. United States
, the Federal Circuit affirmed
Commerce’s then-current practice in cases involving non-market economy countries of
not deducting export taxes paid to the Russian Federation.
Consistent with
Magnesium Corp
., Commerce had declined to apply
§ 1677a(c)(2)(B) “in NME antidumping proceedings because pervasive government
intervention in NMEs precluded proper valuation of taxes paid by NME respondents to
NME governments.”
Methodological Change
,
When, as Commerce contends here, the VAT is “a fixed percentage of the price,” Commerce “will adjust the export price or constructed export price downward by the same percentage.” Id . “[B]ecause these are taxes affirmatively imposed by the Chinese and Vietnamese governments,” Commerce “presume[s] that they are also collected.” Id . According to Commerce, “[t]he unrefunded VAT or affirmatively imposed export tax only arises through the fact that there were export sales.” Id . Therefore, “because the liability arises as a result of export sales, this is where payment originates.” Id . Deducting irrecoverable VAT “is consistent with the Department’s longstanding policy,” and “with the intent of the statute, that dumping comparisons be tax-neutral.” Id .
As noted above, the court recently addressed a challenge to Commerce’s
authority to deduct irrecoverable VAT. In
Fushun Jinly
, plaintiffs argued that
Magnesium Corp.
’s “plain meaning” determination still controls such that Commerce
may not deduct export taxes, duties, or other charges imposed by an NME government.
The court noted that “neither the governing statute nor its legislative history
defines ‘export tax, duty or other charge imposed’ for the purpose of adjusting U.S.
price,” which is aside from the significance of the statutory terms “‘if included in the
price’” that
Magnesium Corp.
considered unambiguous.
Id.
at *11. Finding the terms
“export tax, duty or other charge imposed” ambiguous, the court concluded that
Commerce’s interpretation of the terms in the
Methodological Change
, “achieved
through notice and comment, compels
Chevron
deference.”
Id.
(citing
United States v.
Eurodif S.A
.,
iv.
Commerce Properly May Adjust for Irrecoverable VAT
Jacobi contends that Commerce’s interpretation of its authority pursuant to 19
U.S.C. § 1677a(c)(2)(B) is not entitled to
Chevron
deference because “[t]he statute
reflects the clear intent of Congress and leaves no room for Commerce’s discretion.”
Jacobi Mem. at 45 (citing
Chevron
,
In order to determine whether Commerce’s statutory construction is permissible,
the court considers whether the construction is reasonable, consistent with statutory
goals, and reflects agency practice.
Apex Exps. v. United States
,
Section 1677a(c)(2)(B) authorizes the deduction of (1) “the amount,
if included in
such price
,” (2) “of any
export tax, duty, or other charge
imposed by the exporting
country” (3) “
on the exportation of
the subject merchandise to the United States.” 19
U.S.C. § 1677a(c)(2)(B) (emphasis added).
Magnesium Corp
. interpreted the first
italicized phrase, finding the phrase to be unambiguous, and accepting Commerce’s
analysis of the facts (that it was not then able to determine if the taxes were included in
the export price from the NME country); however,
Magnesium Corp
. did not preclude a
finding that the latter two italicized phrases are ambiguous.
See Magnesium Corp.
, 166
F.3d at 1370 (“Because the plain language of the statute does not require all export
taxes to be deducted from the USP, but requires deduction of only those that are
included in the price of the merchandise, the statute clearly contemplates a situation
where the export tax is not included in the price of the merchandise.”).
Fushun Jinly
thus correctly held that
Magnesium Corp
. did not control the issue of Commerce’s
authority to deduct irrecoverable VAT.
See Fushun Jinly
,
a. Whether the Chinese VAT is an “export tax, duty or other charge”
As this case demonstrates, the scope of the phrase “[e]xport tax, duty, or other
charge” is ambiguous. Commerce does not expressly define the Chinese VAT as one
or the other; rather, it describes the VAT generally as an “export tax, duty, or other
charge imposed.”
Final I&D Mem
. at 17 (it is “reasonable to interpret
these terms
as
encompassing irrecoverable VAT because” it “is a cost that arises as a result of export
sales”) (emphasis added) (citations omitted). The relevant Chinese regulation imposes
a tax on imported goods; it does not explicitly tax exports.
See
Chinese VAT
Regulations, Art. 1. However, the catchall phrase “other charge” captures any financial
obligation provided it is “imposed by the exporting country on the exportation of the
subject merchandise,” regardless of whether the imposing country explicitly labels the
charge as one pertaining to exports. Commerce’s interpretation of Chinese VAT as, if
not an “export tax,” an “other charge,” is a permissible construction of those statutory
terms.
See Dominion Res., Inc.
,
b. Whether the Chinese VAT is Imposed on the Exportation of the Subject Merchandise
Interpreting the Chinese VAT as an “other charge” does not fully resolve the issue; it must also reasonably be construed as one that is “imposed by the exporting country on the exportation of the subject merchandise.” 19 U.S.C. § 1677a(c)(2)(B).
With respect to Chinese domestic sales, a “company can credit the VAT they pay on input purchases [“input VAT”] . . . against the VAT they collect from customers [“output VAT”]” before remitting VAT to the government. Final I&D Mem . at 16. And, “[i]n a typical VAT system,” companies receive on export a full rebate of the input VAT paid in relation to “purchases of inputs used in the production of exports.” Id . However, in the PRC, “the input VAT . . . is not refunded” on the exportation of the goods. Id . Thus, the input VAT remains recoverable until such time as the product is exported; only then does it become irrecoverable. According to Commerce, “[t]his amounts to a tax, duty or other charge imposed on exports that is not imposed on domestic sales.” Id. at 16-17 (“Irrecoverable VAT, as defined in PRC law, is a net VAT burden that arises solely from, and is specific to, exports”).
Because the VAT is stated in Chinese law, it is “‘imposed by the exporting
country.”
Id.
at 17;
see also
Chinese VAT Regulations. However, the key inquiry is
whether a VAT paid on inputs and not refunded on export is “imposed” on the
exportation of the subject merchandise. In the
Methodological Change
, Commerce
concluded generally that “because the liability arises as a result of export sales, this is
where payment originates.”
To understand the parameters of what it means for something to be “imposed,”
and, thus, to determine whether Commerce’s statutory construction is permissible, the
court considers the term’s plain meaning.
See Taniguchi v. Kan Pacific Saipan, Ltd.
,
The ordinary meaning of the term “imposed” demonstrates the reasonableness of
Commerce’s interpretation. Because the Chinese VAT is refunded in the context of
domestic sales but not exports, it constitutes a “penalty” that is “applied,” and with which
Jacobi is forever “burdened,” at the time of exportation. Further, accounting for
irrecoverable VAT is consistent with Commerce’s policy and the statute to calculate
accurate tax-neutral dumping margins.
See Federal-Mogul Corp. v. United States
, 63
F.3d 1572, 1581-82 (Fed. Cir. 1995) (affirming Commerce’s practice of calculating tax
neutral dumping margins by accounting for VAT when determining U.S. sales price);
Methodological Change
,
v. Commerce’s VAT Calculation in This Case a. Overview of Commerce’s Methodology Commerce calculates irrecoverable VAT by determining the amount of VAT applicable to exports (defined as “the standard VAT levy rate” minus any VAT rebate on exports) and applying that value to “the FOB value of the exported good.” Final I&D Mem. at 17. Here, China levies a 17% VAT on inputs and does not refund any VAT on exports of activated carbon. Id. ; see also Jacobi Suppl. Sect. C Resp. at 29-30. Thus, Commerce determined that “the irrecoverable VAT rate is . . . 17[%].” Final I&D Mem . at 17. Additionally, although “[e]ntered values reported by respondents are a reasonable reflection of the FOB value of the exported goods,” here, Commerce concluded that Jacobi’s entered values were “not representative of commercial export values when compared to an ex-factory net U.S. price and/or an estimated customs value” [26] because “a significant percentage of Jacobi’s entered values [were] less than the estimated customs values.” Id. at 18-19 (citing Margin Analysis for the Final Results (Jacobi) (Oct. 2, 2015) (“Jacobi Final Margin Analysis Mem.”), CJA Tab 3, CR 357-58, ECF No. 86). Because Jacobi’s entered values resulted in “an inappropriately low VAT adjustment,” Commerce relied on an estimated customs value as a substitute for the FOB China port value to calculate the irrecoverable VAT adjustment. Id. at 18-19.
b. Parties’ Contentions Jacobi contends that Commerce should have applied the 17% VAT adjustment to its actual entered values and not “some sort of concocted estimated customs value.” Jacobi Mem. at 48-50 (underline omitted). According to Jacobi, to assess the reliability of its entered values Commerce should have compared its entered values to its net U.S. sales price, as it had done for the purpose of assessing duties in the second administrative review (“AR2”). See Id. at 49-50; Jacobi Mem., Attach. A (“Jacobi VAT Comparison”) (chart comparing Jacobi’s entered values and U.S. sales price); Calgon Resp. at 51 (noting “the basis for Jacobi’s claim is a comparison of the VAT adjustment Commerce applied in the underlying proceeding . . . with Commerce’s duty assessment analysis in [AR2],” which concerned Commerce’s decision to calculate duties on the basis of a per-unit assessment rate rather than on an ad valorem basis). In support, Jacobi points to a spreadsheet contained in Commerce’s margin analysis for Jacobi’s final results comparing Jacobi’s “entered value[s] to a new version of “NETPRI” (the Commerce acronym for the calculated net U.S. selling price) which Commerce has labelled “ NETPRI1 .” Jacobi Mem. at 50 (citing Jacobi Final Margin Analysis Mem., Attach IV (“Commerce VAT Comparison”). Jacobi further explains that during AR2 Commerce concluded its entered values were unreliable because 58% “of total sales had a reported entered value that was less than half of Jacobi’s reported net unit price.” Id . at 51 (citation omitted). In contrast, here, Jacobi contends, its entered value was less than half the net sales price in only 3.6% of the transactions. Id. at 52; Jacobi VAT Comparison at 1. Jacobi also contends that Commerce erred when it relied on Carbokarn’s profit to calculate the estimated customs value. Id. at 53-55.
CATC contends that Commerce erred when it applied the 17% VAT rate to the “higher . . . cost of the finished subject merchandise rather than the lower . . . cost of raw materials.” CATC Mem. at 21-22.
Commerce asserts that it relied on the same methodology it used in AR2 to assess the reliability of Jacobi’s entered values for the purpose of determining “the most reliable base values upon which to calculate the VAT adjustment.” Gov. Resp. at 62; see also id. at 63 (“In both reviews, Commerce analyzed the difference between Jacobi’s entered values reported to Customs [a]nd Border Protection [(‘CBP’)] and the estimated customs values, and found that substantial differences existed between the two values.”). Different from AR2, however, in AR7, Commerce had to apply a VAT adjustment to that base value. Id. at 62. “Therefore, to avoid confusion in its calculations, Commerce referred to [what it had called] the ‘net unit price’ in [AR2] as the ‘estimated customs value’ in this review.” Id. at 63; see also id. at 64 (noting the field labelled “USNETPRI1” has the label “Estimated Customs Value” above it “to indicate that the field labelled U.S. Net Price is being calculated as an estimated customs value without the inclusion of VAT”) (citing Commerce VAT Comparison). Commerce then derived the “final ‘net unit price’” by applying the VAT rate to the estimated customs value. Id . at 64. In so doing, “Commerce treated the ‘estimated customs value’ the same as it treated the ‘net unit price’ in [AR2].” Id .
Commerce further asserts its reliance on Carbokarn’s profit is consistent with
agency policy, which requires CEP profit in NME cases to be based on surrogate
information instead of “financial report data of [an NME] respondent.”
Id.
at 67 (citing
Import Admin., U.S. Dep’t of Commerce, Calculation of Profit for Constructed Export
Price Transactions, Policy Bulletin 97.1 (1997), http://enforcement.trade.
gov/policy/bull97-1.htm (last visited March 31, 2017) (“Policy Bulletin 97.1”));
see also
Calgon Resp. at 55 (“market distortions” render Commerce’s use of profit data from an
NME company inappropriate, and “Jacobi’s argument goes to the heart of the surrogate
value methodology, which is directed by the statute and has been judicially upheld”)
(citing 19 U.S.C. § 1677b(c)(1) and
CP Kelco US, Inc. v. United States
.,
Defendant also contends that Jacobi failed to exhaust administrative remedies with regard to its comparison of entered values to net price and its arguments about Commerce’s profit calculation. Gov. Resp. at 64; see also Calgon Resp. at 50 (asserting “Jacobi had ample opportunity to raise this argument before Commerce” because “the VAT adjustment was a live issue”). Defendant further contends that Jacobi’s “calculations [in Jacobi VAT Comparison] are not on the record of this review,” and, thus, should not be considered by this court. Gov. Resp. at 64-65; see also Calgon Resp. at 49-50.
Jacobi asserts it lacked the opportunity to respond to Commerce’s use of
“fictitious entered values” in the
Final Results
because Commerce had relied on
Jacobi’s actual entered values in the
Preliminary Results
; thus, “[t]he exhaustion
doctrine does not apply.” Jacobi Reply at 27 n.2 (citing
Prelim I&D Mem
. at 23;
Corus
Staal BV
,
c. Comparison of “Entered Value” to “Estimated Customs Value”
1. Administrative Exhaustion
“This court has discretion to determine when it will require the exhaustion of
administrative remedies.”
Blue Field (Sichuan) Food Indus. Co., Ltd. v. United States
(“
Blue Field
”),
In the Preliminary Results , Commerce derived the final net U.S. Price by “reduc[ing] each of [Jacobi’s] sale’s U.S. price by the irrecoverable VAT rate of 17 [%] of entered value.” Prelim. I&D Mem . at 23 (citing Prelim. Results Analysis Mem. for Jacobi Carbons AB (Apr. 29, 2015), CJA Tab 4, CR 351, ECF No. 86). Thereafter, the Domestic Industry argued that Jacobi’s entered values were unreliable as the basis for calculating VAT; thus, Commerce “should use a recalculated entry based on estimated customs value [] when the reported [entered value] is understated.” Pet’rs’ Rev. Case Br. (June 30, 2015) (“Pet’rs’ Rev. Case Br.”) at 13-15, CJA Tab 5, CR 353, ECF No. 86. In rebuttal, Jacobi argued that its entered values were reliable and disputed the Petitioners’ comparison of entered values and net U.S. price. Jacobi’s Rebuttal Br. for POR 7 (July 2, 2015) (“Jacobi Rebuttal Br.”) at 9-16, CJA Tab 6, CR 354, ECF No. 86. Jacobi also disputed Commerce’s use of Carbokarn’s financial statement for deriving the profit portion of the estimated customs value. Jacobi Rebuttal Br. at 15. Commerce agreed with the Petitioners, and, “for the final results, . . . revised Jacobi’s irrecoverable VAT adjustment” when the entered value was less than the estimated customs value. See Jacobi Final Margin Analysis Mem. at 3; Commerce VAT Comparison.
Based on the foregoing, Jacobi had no reason to contest Commerce’s comparison methodology or use of estimated customs value in its case brief because Commerce did not rely on an estimated customs value until issuing the Final Results . See Jacobi Final Margin Analysis Mem. at 3. The Domestic Industry first raised the issue in its case brief, to which Jacobi responded in rebuttal. Pet’rs’ Rev. Case Br. at 13-15; Jacobi Rebuttal Br. at 9-16; see also 19 C.F.R. § 351.309(d)(2) (“The rebuttal brief may respond only to arguments raised in case briefs and should identify the arguments to which it is responding.”). Jacobi relied on data from the “same U.S. sales database that Commerce used for its [antidumping] margin calculation” to compile the chart appended to its motion, which pertains to an issue about which Commerce had notice. See Jacobi Mem. at 52; Jacobi VAT Comparison. On these facts, Jacobi’s arguments are not barred by the exhaustion doctrine. See Trust Chem Co. Ltd. , 791 F. Supp. 2d at 1268 & n.27 (finding the exhaustion doctrine satisfied when the information was before the agency and Commerce was on notice).
2. Commerce’s Determinations Regarding Jacobi’s Entered Values Were Supported by Substantial Evidence.
Jacobi challenges three aspects of Commerce’s VAT calculation: (1) Commerce’s comparison of Jacobi’s entered values to an estimated customs value, (2) Commerce’s subsequent decision that Jacobi’s entered values were unreliable, and (3) Commerce’s reliance on Carbokarn’s profit amount to derive the estimated customs value. The court addresses each, in turn.
First, as to Commerce’s methodology, what Jacobi characterizes as a “concocted estimated customs value” is the same estimated customs value Commerce used to determine reliability in AR2. See Final I&D Mem. at 18 (noting that Commerce “performed a similar comparison in this review” as it had in the 2AR, “comparing Jacobi’s entered values to the estimated customs values”); Gov. Resp. at 63-64 (explaining that, “to avoid confusion in its calculations, Commerce referred to [what it had called] the ‘net unit price’ in [AR2] as the ‘estimated customs value’ in this review”). Commerce labeled the relevant field “USNETPRI1,” and, above it, “Estimated Customs Value,” to indicate that it is using net price as the estimated customs value for comparison purposes and to distinguish it from Jacobi’s final net price, which included a VAT adjustment. Commerce VAT Comparison; Gov. Resp. at 63-64. Commerce’s methodology was reasonable.
Second, substantial evidence supported Commerce’s conclusion that Jacobi’s entered values were unreliable. Preliminarily, Commerce prefaced its explanation about its determination by noting that, during AR2, it had “found substantial differences between Jacobi’s estimated customs value for its entries of certain activated carbon and the entered values reported to CBP.” Final I&D Mem . at 18. Commerce thus determined that Jacobi’s entered values “were being systematically understated,” which, if relied upon, “would result in the under-collection of antidumping duties by CBP.” Id . at 18. Commerce therefore “performed a similar comparison in this review,” and, likewise, found that “a significant percentage of Jacobi’s entered values [were] less than the estimated customs values.” Id. at 18-19 (citing Jacobi Final Margin Analysis Mem.); see also Commerce VAT Comparison. Its identical comparison methodology notwithstanding, Commerce did not purport to be conducting identical analyses in AR2 and AR7; rather, Commerce discussed AR2 for the purpose of explaining its past practice of comparing Jacobi’s entered values to an estimated customs value to assess the reliability of those entered values. See Id. at 18; see also Calgon Resp. at 52 (noting Commerce’s explanation “that issues concerning Jacobi’s reported entered values dated back to [AR2]”).
Here, record evidence shows that, in 98% of transactions, the entered value was lower than the estimated customs value. Commerce VAT Comparison; see also Gov. Resp. at 66. Even had Commerce relied on Jacobi’s actual net price as Jacobi contends it should have, according to the court’s calculations, the entered value was lower than the net price for 75% of transactions. See Jacobi VAT Comparison. That Commerce determined unreliability in AR2 on the basis of transactions where the entered value was less than half the net price does not mean that Commerce was required to use the same standard here. Record evidence shows that Jacobi’s entered values were consistently understated; thus, Commerce’s conclusion is reasonable and supported by substantial evidence.
Finally, Commerce properly relied on Carbokarn’s financial statement for the
profit portion of the estimated customs value. Antidumping duties are derived from the
difference between the normal value and the CEP for the subject merchandise. 19
U.S.C. § 1673. In the NME context, Commerce determines normal value using financial
information from a surrogate market economy country-based company. 19 U.S.C.
§ 1677b(c)(1);
see also Jiangsu Jiasheng Photovoltaic Technology Co., Ltd. v. United
States
,
Here, Commerce deducted profit (designated “CEPROFIT”) in its calculation of Jacobi’s net price. Jacobi Final Margin Analysis Mem. at 3. Record evidence shows that “CEPROFIT” is derived from Carbokarn’s 2011 financial statement. Surrogate Values for the Final Results (Oct. 2, 2015) (“Final SV Mem.”), Attach. II, PJA Tab 40, PR 408, ECF No. 85-4 (non-Global Trade Atlas surrogate value sources). During oral argument, Jacobi asserted it had provided financial information derived from its domestic affiliate, thereby rendering resort to Carbokarn’s financial statement unnecessary. Oral Arg. at 1:53:40-54:15. However, the financial statement Jacobi placed on the record appears to include financial information regarding the “Jacobi Carbons Group” of companies, not just the domestic importer, Jacobi Carbons, Inc. See Jacobi’s Sect. C Resp. (Aug. 18, 2014), Ex. C-21 (“Jacobi Sales Reconciliation”), CJA Tab 9, CR 48, ECF No. 86; see also Jacobi Mem. at 1 (distinguishing Jacobi Carbons AB as the foreign exporter from Jacobi Carbons, Inc. as the U.S. importer); Id . at 53 (citing Jacobi Sales Reconciliation in support of its argument that Commerce should have relied on Jacobi’s profit from the relevant POR). Jacobi offers no other reason why Commerce should have departed from its policy and practice, which has statutory and judicial support.
Accordingly, Commerce’s determination that Jacobi’s entered values were unreliable, and, thus, unsuitable as a basis for the VAT adjustment, and its methodology for arriving at that conclusion, were reasonable and supported by substantial evidence, as was Commerce’s use of a surrogate financial ratio to calculate CEP profit.
d. Commerce’s VAT Calculation Was Not Supported By Substantial Evidence
CATC contends that Commerce erroneously applied the 17% VAT adjustment to the cost of the finished subject merchandise rather than the cost of Jacobi’s raw materials. CATC Mem. at 21-22. CATC asserts that the “calculation essentially assumes that the raw materials imported by Jacobi [and upon which it paid the VAT] cost the same as the retail price of subject merchandise exported by Jacobi,” which it describes as an “untenable theory.” CATC Mem. at 22. Commerce did not respond to CATC’s argument in its brief before the court. See Gov. Resp. at 65-68. During oral argument, Defendant was unable to explain the reasoning behind Commerce’s methodology on the basis of the record before the court. See Oral Arg. at 1:56:40- 2:02:59.
The statute provides for reducing the starting price used to calculate CEP by “the
amount, if included in such price, of any export tax, duty, or other charge imposed by
the exporting country on the exportation of the subject merchandise to the United
States.” 19 U.S.C. § 1677a(c)(2)(B). Correspondingly, the
Methodological Change
states that when an NME government, such as the PRC, imposes “an export tax, duty
or other charge on subject merchandise . . ., from which the respondent was not
exempted, [Commerce] will reduce the respondent’s . . . [CEP] accordingly
, by the
amount of the tax, duty or charge paid, but not rebated
.”
In the Issues and Decision Memorandum Commerce recognizes that an NME government may “impose[] an export tax, duty, or other charge on subject merchandise or on inputs used to produce the subject merchandise,” and insists Commerce “will reduce the respondent’s EPs or CEPs accordingly by the amount . . . paid , but not rebated.” Final I&D Mem. at 16 (emphasis added) (citation omitted). Commerce also recognizes that, “[i]rrecoverable VAT, as defined in PRC law, is a . . . VAT paid on inputs and raw materials (used in the production of exports).” Id. at 16-17 (citations omitted); see also id. at 20 (the “irrecoverable VAT adjustment does not entail deducting VAT paid on the sale of activated carbon, but rather the portion of VAT paid on inputs to produce activated carbon that is not rebated by the PRC government”). Though recognizing that the Chinese VAT applies to (and, thus, is calculated as a percentage of the cost of) inputs and not the finished subject merchandise, here, Commerce applied the VAT rate to the value of the finished goods. See Jacobi Final Margin Analysis Mem. at 3 (applying the 17% irrecoverable VAT adjustment to Jacobi’s entered values or its estimated customs values as a proxy for entered values); Prelim. I&D Mem . at 18 (“[F]or the purposes of these preliminary results of review, for Jacobi’s CEP sales, we reduced each sale’s U.S. price by the irrecoverable VAT rate of 17% of entered value. . . .”).
As discussed above, the irrecoverable VAT deducted from Jacobi’s CEP must be
“the amount” of VAT included in the price. 19 U.S.C. § 1677a(c)(B)(2);
see also
Methodological Change
,
II. Motion to Supplement the Administrative Record
Jacobi moves to supplement the administrative record with evidence it contends demonstrates that the average unit value for Thai HS 4402.90.1000 is aberrant. See Confidential Jacobi Mem. to Suppl. the Admin. R. (“Jacobi’s Mot.”), ECF No. 49. Defendant and Defendant-Intervenor oppose Jacobi’s motion. See Def.’s Resp. to Pl.’s Mot. to Suppl. the Admin. R., ECF No. 66; Def.-Intervenors’ Opp’n to Pl.’s Mot. to Suppl. the Admin. R., ECF No. 65.
“Except in very limited circumstances, this court’s review of Commerce’s
determination is limited to the record before it,”
Assoc. of Am. School Paper Suppliers v.
United States
(“
AASPS
”),
Jacobi does not rely on the exceptions recognized by the Federal Circuit; rather, Jacobi seeks supplementation on the basis of new information that was not “publicly available during the underlying administrative proceeding.” Jacobi Mem. at 2, 3-12. In sum, Jacobi contends that supplementation is merited because of “a mid-proceeding change in surrogate country [(Thailand)],” “limited time . . . to address data for that new country,” “a last minute change” to Thai HS 4402.90.1000 as the surrogate value for carbonized material, “no time . . . to address” the surrogate value, and aberrant data in the surrogate value that distorted the dumping margin. Id. at 11.
Jacobi, however, had the opportunity to obtain the information it now seeks to submit. As early as July 25, 2014, Jacobi had notice that Thailand was a potential primary surrogate country. See generally Commerce SC Letter. On March 31, 2015, DJAC timely proposed Thai HS 4402.90.1000 as the surrogate value for carbonized material. See Thai Import Statistics.
On May 5, 2015, Commerce preliminarily selected Thailand as the primary surrogate country and Thai HS 4402.90.9000 as the surrogate value for carbonized material. Prelim. I&D Mem . at 17, 24. Commerce’s preliminary selections gave interested parties additional notice that Commerce may rely on Thai import data for the Final Results, and, thus, the impetus to address that data. Jacobi had until June 2, 2015 to submit additional data. See Jacobi’s Post-Prelim. Submission of Factual Information Concerning Appropriate Surrogate Values (June 2, 2015), PJA 30, PR 370- 71, ECF No. 85-4. However, Jacobi declined to submit surrogate value information regarding carbonized material. See id. at 2.
Accordingly, Jacobi had about 10 months from the time it first had notice that
Thailand was a potential surrogate country, and more than two months from when
DJAC first proposed Thai HS 4402.90.1000 as the surrogate value for carbonized
material, to obtain and submit the information it now seeks to submit. According to
Jacobi’s own motion, this should have been ample time.
See
Jacobi Mem. at 9 (noting
that Jacobi spent two months--November and December 2015--researching imports into
Thailand under Thai HS 4402.90.1000). Jacobi has not shown that it
could not
have
obtained the information in question in time to submit it to the agency, but rather, that it
did not
obtain the information until it had the financial incentive to do so.
See id.
at 2,
11, 14-15 (describing the financial consequences on Jacobi of an increased dumping
margin due to Commerce’s reliance on Thai HS 4402.90.1000 to value carbonized
material). Because the information is not new and formerly unavailable, permitting
supplementation now would be “tantamount to [permitting]
de novo
review through the
back door.”
AASPS
,
Nor is the court persuaded by Jacobi’s appeal to the court’s inherent authority to
provide an equitable remedy.
See
Jacobi Mem. at 12-15. Pursuant to 28 U.S.C.
§ 1585, this court “shall possess all the powers in law and equity of, or as conferred by
statute upon, a district court of the United States.” However, “in the federal courts
equity has always acted only when legal remedies were inadequate” or unavailable.
Canadian Lumber Trade All. v. United States
,
Nevertheless, on remand, Commerce may decide whether to reopen and
supplement the record.
See Essar Steel
,
C ONCLUSION
In accordance with the foregoing, it is hereby
ORDERED that Commerce’s Final Results are remanded to Commerce to further address the issue of economic comparability, as set forth in Discussion Section I.A.iii.b above; it is further
ORDERED that Commerce’s Final Results are remanded to Commerce to further address the issue of significant production, as set forth in Discussion Section I.A.iii.c above; it is further
ORDERED that Commerce’s Final Results are remanded to Commerce to further address the issue of its calculation of the irrecoverable VAT adjustment, as set forth in Discussion Section I.B.v.d above; it is further
ORDERED that Commerce’s Final Results are remanded to Commerce for reconsideration of the separate rate assigned to non-mandatory respondents in *65 Court No. 15-00286
accordance with any redetermination of the antidumping margin assigned to Jacobi; and it is further
ORDERED that the court defers ruling on Plaintiffs’ challenges to Commerce’s determinations regarding Thai data quality and surrogate value selection; it is further
ORDERED that Commerce shall file its remand results on or before July 6, 2017; it is further
ORDERED that the deadlines provided in USCIT Rule 56.2(h) shall govern thereafter; it is further
ORDERED that any comments or responsive comments must not exceed 6000 words; it is further
ORDERED that Jacobi’s motion to supplement the administrative record (ECF No. 49) is DENIED .
/s/ Mark A. Barnett Mark A. Barnett, Judge Dated: April 7, 2017 New York, New York
Notes
[1] Plaintiff-Intervenors include: Ningxia Huahui Activated Carbon Co., Ltd. (“Huahui”); Carbon Activated Tianjin Co., Ltd., Jilin Bright Future Chemicals Company, Ltd., Ningxia Mineral and Chemical Limited, Shanxi DMD Corporation, Shanxi Industry Technology Trading Co., Ltd., Shanxi Sincere Industrial Co., Ltd., Tancarb Activated Co., Ltd., and Tianjin Maijin Industries Co., Ltd. (collectively, “CATC”); and Ningxia Guanghua Cherishmet Activated Carbon Co., Ltd., Beijing Pacific Activated Carbon Products Co., Ltd, Cherishmet Inc., and Datong Municipal Yunguang Activated Carbon Co., Ltd., (collectively, “the GDLSK companies”).
[2] The administrative record is divided into a Public Administrative Record (“PR”), ECF No. 37-1, and a Confidential Administrative Record (“CR”), ECF No. 37-2. Parties submitted joint appendices containing all record documents cited in their briefs. See Public Joint App. (“PJA”), ECF Nos. 85, 85-1 to 85-4; Confidential Joint App. (“CJA”), ECF No. 86. There is an inconsistency in Parties’ citations to record documents; in particular, Parties cite to different administrative record numbers. See CJA at 2 (preamble to the CJA). Defendants relied on the record indices filed with the court; Plaintiffs relied on record indices Commerce prepared for the purpose of litigation. See Id. For ease of reference, the court cites to the administrative record (and the corresponding document numbers) filed with the court. The court references the confidential versions of the relevant record documents, if applicable, throughout this opinion, unless otherwise specified.
[3] Plaintiffs Huahui, CATC, and the GDLSK companies also seek recalculation of the separate rate assigned to non-mandatory respondents in accordance with any remand. CATC Mem. at 23; Huahui Mem. at 1; GDLSK Mem. at 5-7.
[4] The scope of the antidumping duty order includes “all forms of activated carbon that are activated by steam or [carbon dioxide], regardless of the raw material, grade, mixture, additives, further washing or post-activation chemical treatment . . ., or product form.” Final I&D Mem. at 2. “Unless specifically excluded, the scope of the order covers all physical forms of certain activated carbon . . . .” Id. Chemically activated carbons, reactivated carbons, and activated carbon cloth are excluded from the scope of the order. Id . at 2-3.
[5] Commerce rejected Carbokarn’s 2013 financial statement because it lacked sufficient detail. Prelim. I&D Mem . at 26. Commerce also rejected the 2013 financial statement of C. Gigantic Carbon Co., Ltd. (“Gigantic”) because it reflected “an exemption from corporate income tax under the [Thai] Investment Promotion Act,” which Commerce had determined was a countervailable subsidy. Id . at 27; see also Pet’rs’ Final Pre-Prelim. Submission of Surrogate Value Information (March 31, 2015), Attach. 3 (“2013 Gigantic Fin. Stmt.”), PJA Tab 14, PR 321, ECF No. 85-3 (accrued income tax listed as “-”).
[6] In
Dupont Teijin Films
, the court remanded the final results of an administrative review
to Commerce for consideration of more recent GNI data which had been placed on the
record.
[7] All citations to the Tariff Act of 1930, as amended, are to Title 19 of the U.S. Code, 2012 edition, and all references to the United States Code and the Code of Federal Regulations are to the 2012 edition, unless otherwise stated.
[8] The factors of production include, but are not limited to: “(A) hours of labor required, (B) quantities of raw materials employed, (C) amounts of energy and other utilities consumed, and (D) representative capital cost, including depreciation.” 19 U.S.C. § 1677b(c)(3).
[9] See 19 C.F.R. § 351.309(c)(2) (“The case brief must present all arguments that continue in the submitter’s view to be relevant to the Secretary’s final determination or final results, including any arguments presented before the date of publication of the preliminary determination or preliminary results.”); see also 19 C.F.R. § 351.309(d)(2) (“The rebuttal brief may respond only to arguments raised in case briefs and should identify the arguments to which it is responding.”)
[10] Parties are able to raise ministerial errors with the Department if such errors appear in the Final Results. See 19 C.F.R. 351.224(e).
[11] There is no exhaustive list of exceptions. Previously enumerated exceptions include
futility, an intervening court decision such that the new interpretation would impact the
agency’s actions, pure question of law, or when plaintiff had no reason to believe the
agency would not follow established precedent.
See Luoyang Bearing Factory v. United
States,
[12] Jacobi also seeks to rely on
Vinh Hoan Corp.
, which addresses “whether Commerce
was required to, and did in fact, compare the relative economic comparability of the
countries
on its OP List
.”
[14] CATC’s argument that the statutory mandate to use the “best available information”
elevates Commerce’s data criterion such that it “is, at a minimum, equally as critical” as
the economic comparability and significant production criteria, is a red herring.
See
CATC Mem. at 3. Use of the “best available information” is contingent upon Commerce
first selecting an “appropriate” market economy country from which to value factors of
production. 19 U.S.C. § 1677b(c)(1)(B). In other words, Congress has instructed
Commerce to first select an appropriate market economy country (or countries), and
then evaluate, from the range of data available
from those countries
, what constitutes
the “best available information.” Congress has not instructed Commerce to
first
look for
the “best available information” from some unspecified list of countries and then decide
which of that information comes from countries that are economically comparable
significant producers of comparable merchandise, nor has Congress instructed
Commerce to simultaneously weigh the statutory factors. Indeed, Commerce has
expressly rejected such an approach as “unfeasible.” Policy Bulletin 04.1 at 5 n.2
(declining to assign a “composite grade” on the basis of each country’s fulfillment of the
economic comparability and significant production of comparable merchandise criteria,
which is then combined with “an assessment or grading of factors data quality and
completeness”);
see also Fresh Garlic I
,
[15] Plaintiffs insert a comparative element framing the issue as whether substantial evidence supports Commerce’s decision to select Thailand over the Philippines. See Jacobi Mem. at 13 (insufficient evidence supported “Commerce’s conclusion that Thailand was a better surrogate country than the Philippines”) (emphasis added)
[16] Citations to the Oral Argument reflect time stamps from the audio recording.
[17] Commerce explains that when “search[ing] for countries within [the centered range] . .
. it takes into consideration that, in [
Dorbest Ltd.
], the Federal Circuit stated that, in
valuing labor, Commerce could rely on market economy countries that were between
half of China’s GNI and between one to two times China’s GNI.” Gov. Resp. at 30
(citing
Dorbest Ltd
.,
[18] In support, Commerce points to a table it created for the purpose of this action comparing the Philippines’ per capita GNI to China’s in relation to the other countries on OP’s list. See id. at 31 (citing Prelim. SV Mem., Attach. 2 (“Surrogate Country Memos”), and Jacobi Case Br. at 8). However, as stated above, in the underlying proceeding Commerce failed to explain the basis upon which OP relied when it limited the GNI range to the six countries on the list, and thereby excluded the Philippines. Although Commerce’s decision to exclude the Philippines ultimately may be reasonable,
[19] When pressed at oral argument to provide record evidence supporting the significance of Thailand’s exports in terms of world production and trade, Defendant argued there is no record evidence disputing its significance. Oral Arg. at 55:05-55:10. That is not the correct inquiry. Commerce bears the burden of ensuring its determination regarding significant production is supported by substantial evidence. See 19 U.S.C. § 1516a(b)(1)(B)(i).
[20] Commerce also concluded, without elaboration, that Thailand is a significant producer on the basis of “production of comparable merchandise as evidenced by the financial statements on the record.” Final I&D Mem . at 7-8. Commerce supports its conclusion with citations to November 12, 2014 letters submitted by the Domestic Industry and DJAC. Id . at 8 n.26 (citing “Letter from Petitioner, dated November 12, 2014, at page 3” and “Letter from [DJAC], dated November 12, 2014, at Exhibit 1”). Those letters appear to constitute surrogate country comments, not financial statements. See Gov. Resp. at 4 (noting that on November 12, 2014 interested parties submitted surrogate country comments). The record documents, however, fail to provide sufficient (if any) support for Commerce’s conclusion regarding Thai production of activated carbon. See Pet’rs’ SC Comments at 3 (discussing Indonesian export volume); Surrogate Country Comments by Datong Juqiang Activated Carbon Co., Ltd. (Nov. 12, 2014), Ex. 1, PJA Tab 7, PR 180, ECF No. 85-1 (Philippine and Thai activated carbon import and export statistics). Calgon also urges the court to sustain Commerce’s finding on the basis of Thai production of activated carbon. Calgon Resp. at 17-18. In support, Calgon relies on the 2013 financial statements of Thai producers Gigantic and Carbokarn in conjunction with the average unit values of Thai imports and exports to estimate Gigantic’s and Carbokarn’s total sales and production volume. See Id . at 17-18 (citing 2013 Gigantic Fin. Stmt., Second Surrogate Value Submission by Datong Juqiang Activated Carbon Co., Ltd. (March 31, 2015) (“DJAC Second SV Submission”), Ex. 8, PJA Tab 16, PR 323, ECF No. 85-3 (Carbokarn’s 2010 financial statement), and Filipino and Thai Export Statistics). The suppositions embedded in Calgon’s analysis notwithstanding, it is the agency’s responsibility to “explain the basis for its decisions.” See NMB Singapore Ltd. ,
[25] Section 1677(6)(C), which concerns “export taxes, duties, or other charges levied on the export of merchandise to the United States specifically intended to offset the countervailable subsidy received,” is not relevant here.
[26] Estimated customs value is “defined as ex-factory net U.S. price plus foreign movement expenses.” Final I&D Mem . at 18. To determine an ex-factory net U.S. price, Commerce begins with a respondent’s gross unit price, and then deducts “expenses associated with selling the product in the United States[,] . . . international movement expenses[,] and profit.” Id. at 18 n.73 (citation omitted).