Jacobi Carbons AB v. United StatesJacobi Carbons AB v. United States
[The U.S. Department of Commerce’s Second Remand Results are remanded with respect to the agency’s primary surrogate country selection and sustained with respect to the agency’s value-added tax adjustment.]
Dated: March 5, 2019
Daniel L. Porter and Tung A. Nguyen, Curtis, Mallet-Prevost, Colt & Mosle LLP, of Washington, DC, for Plaintiffs Jacobi Carbons AB and Jacobi Carbons, Inc.
Gregory S. Menegaz, J. Kevin Horgan, and Alexandra H. Salzman, DeKieffer & Horgan, PLLC, of Washington, DC, for Plaintiff-Intervenors Carbon Activated Corporation, Ningxia Mineral and Chemical Ltd., Shanxi DMD Corporation, Shanxi Industry
Mollie L. Finnan, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for Defendant. With her on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, and Claudia Burke, Assistant Director. Of counsel on the brief was Emma T. Hunter, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, DC.
R. Alan Luberda, John M. Herrmann, David A. Hartquist, Melissa M. Brewer, and Kathleen M. Cusack, Kelley Drye & Warren LLP, of Washington, DC, for Defendant-Intervenors Calgon Carbon Corporation and Cabot Norit Americas, Inc.
Barnett, Judge: This matter is before the court following the U.S. Department of Commerce’s (“Commerce” or “the agency”) second redetermination upon remand in this case. See Final Results of Redetermination Pursuant to Court Remand (“2nd Remand Results”), ECF No. 124-1.
Plaintiffs Jacobi Carbons AB and Jacobi Carbons, Inc. (together, “Jacobi”) and Plaintiff-Intervenors1 (collectively, “Plaintiffs”) challenged several aspects of Commerce’s final results in the eighth administrative review of the antidumping duty
Jacobi and CAC filed comments opposing the 2nd Remand Results with respect to Thailand as a significant producer, the surrogate values selected for carbonized material and hydrochloric acid, and the VAT adjustment. See Pls.’ Comments on Commerce’s Second Remand Determination (“Jacobi’s Opp’n Cmts.”), ECF No. 127; Consol. Pls. Carbon Activated Corporation, Ningxia Mineral and Chemical Limited, Shanxi DMD Corporation, Shanxi Industry Technology Trading Co., Ltd., Shanxi Sincere Industrial Co., Ltd., Tianjin Channel Filters Co., Ltd., and Tianjin Maijin Industries Co., Ltd. Comments in Opp’n to Second Remand (“CAC’s Opp’n Cmts.”),
For the following reasons, the court remands Commerce’s determination that Thailand is a significant producer of comparable merchandise and directs Commerce to reconsider its selection of a primary surrogate country. Because Commerce relied, in part, on its preference to use data from the primary surrogate country when making its surrogate value selections for carbonized material and hydrochloric acid, see 2nd Remand Results at 7, 15, the court also remands Commerce’s surrogate value selections. The court sustains Commerce’s VAT adjustment.
JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction pursuant to
The court will uphold an agency determination that is supported by substantial evidence and otherwise in accordance with law.
DISCUSSION
I. Significant Producer of Comparable Merchandise
A. Legal Framework
An antidumping duty is the amount by which the normal value exceeds the export price (or the constructed export price) for the merchandise.
Commerce has adopted a four-step approach to selecting a primary surrogate country. Pursuant thereto:
(1) the Office of Policy (“OP”) assembles a list of pоtential surrogate countries that are at a comparable level of economic development to the [non-market economy] country; (2) Commerce identifies countries from the list with producers of comparable merchandise; (3) Commerce determines whether any of the countries which produce comparable merchandise are significant producers of that comparable merchandise; and (4) if more than one country satisfies steps (1)–(3), Commerce will select the country with the best factors data.
Jiaxing Brother Fastener Co., Ltd. v. United States, 822 F.3d 1289, 1293 (Fed. Cir. 2016) (citation omitted); see also Import Admin., U.S. Dep‘t of Commerce, Non-Market Economy Surrogate Country Selection Process, Policy Bulletin 04.1 (2004), available at http://enforcement.trade.gov/policy/bull04–1.html (last visited Feb. 27, 2019) (“Policy Bulletin 04.1”).
[t]he extent to which a country is a significant producer should not be judged against the [subject non-market economy] country’s production level or the comparative production of the five or six сountries [that are considered potential surrogate countries]. Instead, a judgement [sic] should be made consistent with the characteristics of world production of, and trade in, comparable merchandise (subject to the availability of data on these characteristics). Since these characteristics are specific to the merchandise in question, the standard for “significant producer” will vary from case to case. For example, if . . . there are ten large producers and a variety of small producers, “significant producer” could be interpreted to mean one of the top ten. If, in the example above, there is also a middle-size group of producers, then “significant producer” could be interpreted as one of the top ten or middle group. In another case, there may not be adequate data available from major producing countries. In such a case, “significant producer” could mean a country that is a net exporter, even though the selected surrogate country may not be one of the world‘s top producers.
Policy Bulletin 04.1 at 3.
Because the term is otherwise undefined and ambiguous, the court must assess whether Commerce’s interpretation of significant producer is based on a permissible construction of the statute. Apex Frozen Foods, 862 F.3d at 1329 (quoting Chevron, 467 U.S. at 843). To effectuate judicial review, Commerce must provide a reasoned analysis or explanation for [its] decision so the court may determine whether a particular decision is arbitrary, capricious, or an abuse of discretion. Thai I-Mei Frozen Foods Co., Ltd. v. United States, 616 F.3d 1300, 1304 (Fed. Cir. 2010) (citation omitted).
The 2nd Remand Results reflect Commerce’s third effort to justify its determination that Thailand is a significant producer of comparable merchandise. Therein, Commerce explained that it would compar[e] data for comparable merchandise to establish whether any country that is at the same level of economic development as [the PRC] was: a) a significant net exporter; or b) a major exporter to the United States. 2nd Remand Results at 5-6 & n.25 (citing Yantai Oriental Juice Co. v. United States, 27 CIT 477, 481 (2003)) (emphasis added). To that end, Commerce noted that the record contained Global Trade Atlas (“GTA”) import and export data for the potential surrogate countries as well as Malaysia and the Philippines, and 2014 UNCOMTRADE data for 65 activated carbon exporting countries. Id. at 6. The GTA data indicated that Malaysia and the Philippines were net exporters, but Thailand was not. Id. Commerce did not, however, examine whether Thailand (or any of the potential surrogate countries) was “a major exporter to the United States,” its stated alternative metric for evaluating significant production. See id. Rather, Commerce discussed Thailand’s total global exports. See id. at 6-7.
Commerce prefaced its discussion of export quantity by explaining that although [t]he [c]ourt has suggested that significant production means production ‘having or likely to have influence or effect’ on world trade[,] . . . Commerce instead interprets ‘significant’ to mean a noticeably or measurably large amount. Id. at 6 & n.31 (quoting Jacobi (AR8) I, 313 F. Supp. 3d at 1358 & n.26). According to the 2014 UNCOMTRADE and GTA data sets, Thailand exported more than nine million kilograms
C. Parties’ Contentions
CAC contends that Commerce’s interpretation of significant as “noticeably or measurably large” is “unreasonably subjective.” CAC’s Opp’n Cmts. at 4. CAC also contends that the 2014 UNCOMTRADE data show that the top nine countries on the list may be considered “significant exporters” and, thereafter, the remaining countries, including Thailand, each account for less than two percent of total global exports. Id. at 6-7. CAC further contends that Thailand’s status as a net importer undermines Commerce’s reliance on total exports. Id. at 4-5.9
D. Commerce’s Determination is Remanded for Reconsideration
Upon consideration of the agency’s second remand redetermination and the briefing to the court, Commerce’s finding that Thailand is a significant producer must be remanded. Commerce has effectively divorced the term “significant” from the term “production” and applied its interpretation of “significant” without the context and explanation necessary to ensure that its determination is not arbitrary. Although Commerce is within its discretion to define “significant” as “noticeably or measurably large,” see Juancheng Kangtai Chem. Co., Ltd. v. United States, Slip Op. 17-3, 2017 WL 218910, at *4 (CIT Jan. 19, 2017) (holding that Commerce’s corresponding interpretation of the term “significant” merited Chevron deference), Commerce has not supplied the court with a well-reasoned explanation supporting its consideration of total exports as a substitute for production. Overall, the agency has failed to interpret or apply the statutory criterion in its entirety and has not supported its determination that Thailand is a significant producer with substantial evidence.
Commerce’s Policy Bulletin 04.1 does not discuss the use of total exports to identify significant producers. It indicates that, in the absence of production data, a “‘significant producer’ could mean a country that is a net exporter.” Policy Bulletin 04.1 at 3 (emphasis added); cf. H.R. Rep. No. 100–576, at 590 (1988) (Conf. Rep.), reprinted
Commerce also failed to adequately explain its determination that Thailand’s total export quantity was significant. While Commerce appears to suggest that countries ranked among the top 15 exporters represent the “top global exporters,” see 2nd Remand Results at 7, 39, the lack of further explanation or any clear delineation
Commerce’s seemingly arbitrary delineation contrasts with Policy Bulletin 04.1’s recognition of the contextual nature of the significant producer determination and corresponding examples that evaluate significance in terms of the particular characteristics of overall global trade in the subject merchandise. See Policy Bulletin 04.1 at 3 (noting, “[f]or example, [that] if there are just three producers of comparable merchandise in the world, then arguably any commercially meaningful production is significant”).
Commerce’s assertion that Thailand’s export quantity is “noticeably large” in comparison to countries exporting less than one million kilograms is also unavailing. See 2nd Remand Results at 39. While perhaps true, the import of this observation for
Lastly, Commerce’s reliance on Thailand’s status as “the largest exporter of activated carbon among the countries identified as being at the same level of economic development as China” lacks merit. See 2nd Remand Results at 7. As the Government points out, Commerce’s practice is not to evaluate “[t]he extent to which a country is a significant producer . . . against . . . the comparative production of the five or six countries on [Commerce’s] surrogate country list.” Def.’s Reply Cmts. at 6 (quoting Policy Bulletin 04.1 at 3). Commerce’s policy recognizes that a country’s level of economic development is irrelevant to whether that country’s production (or exports) of a given product may be considered “significant.” Nevertheless, while Commerce is not irrevocably committed to this statement of policy, its diametrically opposite approach in this case, absent any explanation, cannot be sustained. Accordingly, Thailand’s ranking among this group of countries is not substantial evidence that Thailand is a significant producer of comparable merchandise.
II. Value-Added Tax
A. The Application of Section 1677a(c)(2)(B) to Nonmarket Economies
When calculating export price and constructed export price, Commerce may deduct “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
Prior to 2012, Commerce did not apply
governed by a presumption of widespread intervention and influence in the economic activities of enterprises[ and a]n export tax charged for one purpose may be offset by government transfers provided for another purpose. . . . To make a deduction for export taxes imposed by a NME government would unreasonably isolate one part of the web of transactions between government and producer.
Id. (citation omitted). Commerce’s declination to apply
As the countries that Commerce considered to be nonmarket economies evolved, so did Commerce’s practices. In 2002, Commerce revoked Russia’s status as a NME country. See Silicon Metal From the Russian Federation, 68 Fed. Reg. 6,885, 6,887 (Dep’t Commerce Feb. 11, 2003) (notice of final determination of sales at less than fair value) (citation omitted). In 2007, Commerce determined that China (and Vietnam), while still regarded as NME countries, had nevertheless become sufficiently dissimilar from the centrally-planned economies of the Soviet-era such that Commerce could determine whether those governments bestowed countervailable subsidies on certain companies or industries. See Methodological Change, 77 Fed. Reg. at 36,482; Issues and Decision Mem. for the Final Determination in the Countervailing Duty Investigation of Coated Free Sheet Paper from the People’s Republic of China, C-570-907 (Oct. 17, 2007) at Cmt. 1, available at https://enforcement.trade.govfrn/summary/prc/E7-21046-1.pdf (last visited Feb. 27, 2019).14 In accordance with its determination that countervailable subsidies from China and Vietnam could be measured, Commerce
In 2012, Commerce concluded that it could now identify and measure certain taxes paid by Chinese producers to the Chinese government and announced that, henceforth, it would consider whether the PRC “has imposed an export tax, duty, or other charge upon export of the subject merchandise during the period of investigation or the period of review,” including, for example, “an export tax or VAT that is not fully refunded upon exportation.” Id. at 36,482 (internal quotation marks omitted). Thus, when the PRC does so, and “the respondent was not exempted, [Commerce] will reduce the respondent‘s export price and constructed export price accordingly, by the amount of the tax, duty or charge paid, but not rebated.” Id. at 36,483. When “the export tax, VAT, duty, or other сharge” is “a fixed percentage of the price,” Commerce announced that it would “adjust the export price or constructed export price downward by the same percentage.” Id. “[B]ecause these are taxes affirmatively imposed by the Chinese . . . government[],” Commerce “presume[s] that they are also collected.” Id.
B. Commerce’s Application of the Statute to Chinese VAT
Pursuant to the Methodological Change, for the Final Results, Commerce reduced Jacobi’s constructed export price by an amount it described as “irrecoverable VAT.” I&D Mem. at 7. According to Commerce, irrecoverable VAT constituted an “export tax, duty, or other charge” pursuant to
In Jacobi (AR8) I, the court remanded the VAT adjustment for reconsideration in accordance with its resolution of this issue in the seventh administrative review.16 313 F. Supp. 3d at 1373. In that proceeding, the court found that
In its first redetermination in the seventh administrative review, Commerce continued to characterize its adjustment as accounting for irrecoverable VAT (i.e., unrefunded input VAT). See Jacobi Carbons AB v. United States (“Jacobi (AR7) II“), 42 CIT ___, 313 F. Supp. 3d 1308, 1341 (2018). As the basis for its adjustment, however, Commerce pointed to the 17 percent output VAT rate applicable to Jacobi‘s foreign and domestic sales and found that it was, thus, included in Jacobi‘s U.S. price. See id. The court again remanded the adjustment, this time because Commerce‘s revised explanation introduced an inconsistency between the calculation methodology (based on output VAT) and the theory underlying the adjustment (unrefunded input VAT). Id. at 1341-44. Pointing to the record on remand, the court further instructed:
[t]o the extent that Commerce continues to justify the adjustment as accounting for irrecoverable VAT defined as unrefunded input VAT, Commerce must address record evidence demonstrating that Jacobi, in fact, recovers the input VAT it incurs by the offset it takes before remitting the output VAT it collects. . . .
On the other hand, if Commerce asserts that the adjustment is based on an export tax due to Jacobi‘s collection of output VAT, Commerce must (a) address the record evidence regarding Jacobi‘s offset for input VAT paid on inputs taken against the output VAT collected, and (b) explain why the VAT adjustment is properly made on the basis of an estimated customs value instead of the FOB value on which the PRC assesses it.
Id. at 1342-43 (internal citations omitted).
In addition to reconsidering its VAT adjustment in accordance with Jacobi (AR7) I and Jacobi (AR7) II, in a subsequent order, the court instructed Commerce to include in its redetermination consideration of Aristocraft of Am., LLC v. United States, 42 CIT ___, 331 F. Supp. 3d 1372, 1379 (2018), in which that court posed several questions for Commerce to address on remand regarding the evidentiary basis for the adjustment. See Order (Aug. 22, 2018), ECF No. 120. Commerce‘s explanation for the VAT adjustment as discussed in Aristocraft differed significantly from the explanation offered in this proceeding.
In its second remand redetermination in this action, Commerce changed the basis for its VAT adjustment from irrecoverable VAT (i.e. unrefunded input VAT) to the 17 percent output VAT imposed on foreign and domestic activated carbon sales. 2nd Remand Results at 30-31. Commerce supported its revised explanation by way of reference to a more recent iteration оf Chinese VAT law, the relevance of which it had not previously considered. Id. at 27-28 & n.133 (citing Notice of the Ministry of Finance and the State Administration of Taxation on VAT and Consumption Tax Policies for Exported Goods and Labor Services (“2012 VAT Notice“)); see also Jacobi‘s Second Suppl. Sec. C Questionnaire Resp. (Nov. 25, 2015), Ex. C-6, PR 266, PRJA Tab 3 (the
Pursuant to that law, companies that produce exported goods that are ineligible for an export VAT rebate do not incur a reduction in the input VAT amount credited against the output VAT. See 2nd Remand Results at 29-30. Export sales of such goods are treated as domestic sales and are, thus, subject to the collection of output VAT. See id. at 29-30 & n.136 (citation omitted); 2012 VAT Notice, Art. 7.2(1)). In contrast, companies that produce exported goods that are eligible for a VAT rebate incur “a reduction in or offset to the input VAT that can be credited against output VAT” when the company calculates its net VAT payable amount. 2nd Remand Results at 27; see also 2012 VAT Notice, Art. 5.1(1). Export sales of such products are not subject to output VAT; instead, these companies incur a reduction in the input VAT amount they may credit against the output VAT collected solely on domestic sales. See 2nd Remand Results at 29. That reduction in the input VAT credit represents “irrecoverable VAT.” See id. at 28-29.
In accordance with the foregoing description of Chinese VAT law, Commerce explained that activated carbon is one of the products that is ineligible for an export rebate. Consequently, Commerce found that producers of activated carbon do not incur a reduction in the amount of input VAT creditable against output VAT. Id. at 30; see also 2012 VAT Notice, Art. 7.1(1). Instead, export sales of activated carbon are treated in the same manner as domestic sales and are subject to the collection of output VAT.
Commerce further noted that certain questions raised by the Aristocraft court concerning the calculation of irrecoverable VAT were now irrelevant to Commerce‘s adjustment in this case. Id. at 31-32. Additionally, in response to the court‘s instruction that any assessment based on output VAT should include consideration of record evidence regarding Jacobi‘s ability to offset the output VAT with input VAT, see Jacobi (AR7) II, 313 F. Supp. 3d at 1343, the agency explained that “Commerce‘s adjustment is not intended to account for the total amount of net VAT creditable,” 2nd Remand Results at 34. Rather, pursuant to the Methodological Change, “when the ‘export tax, VAT, duty, or other charge [is] a fixed percentage,’ Commerce ‘will adjust the export price or constructed export price downward by the same percentage.‘” Id. at 35 (citing Methodological Change, 77 Fed. Reg. at 36,483).
output VAT = FOB * exchange rate / (1 + legal VAT rate) * legal VAT rate.
Id. at 36 & n.164 (citing Jacobi‘s Sec. C Questionnaire Resp. (Aug. 14, 2015) (“Jacobi‘s § CQR“), Ex. SC-18, CR 56, CRJA Tab 6; 2012 VAT Notice). Commerce reconsidered its prior reliance on estimated customs values to calculate the adjustment and instead used Jacobi‘s entered values because those “are the FOB China port values used in the Chinese tax authorities’ output VAT calculations.” Id. at 36 & n.165 (citation omitted). Commerce thus adjusted Jacobi‘s U.S. price downwards by the output VAT amount calculated using the above formula and Jacobi‘s entered values. Id. at 36.
Commerce further explained that because Jacobi‘s sales of subject merchandise are subject to output VAT, Jacobi‘s U.S. price “necessarily include[s]” output VAT. Id. at 35. In response to Jacobi‘s argument that Commerce had not shown its sales price to include output VAT because the invoice on the record of the remand proceeding does not reflect the collection of output VAT, Commerce pointed to Jacobi‘s questionnaire response explaining that its sales to foreign and domestic buyers are subject to 17 percent output VAT and Jacobi‘s calculation of its net VAT payable that includes amounts representing the collection of output VAT for each POR month. Id. at 49 & nn.207-08 (citations omitted).
C. Commerce‘s Authority to Deduct Output VAT from U.S. Price
Jacobi contends that “Commerce‘s revised reasoning still fails to satisfy the statutory requirement for an adjustment” pursuant to section
In Qingdao and China Manufacturers, the court, upon reviewing the statute in its current form and as enacted prior to the adoption of the Uruguay Round Agreements Act (“URAA“),17 concluded, pursuant to Chevron prong one, that section
Previously, when considering Commerce‘s irrecoverable VAT theory for the adjustment, this court held that “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.” Jacobi (AR 7) I, 222 F. Supp. 3d at 1186-87 (emphasis added). In other words, the court considered “other charge” inherently ambiguous and Commerce reasonably interpreted the phrase to encompass irrecoverable VAT.
Upоn Commerce‘s further consideration of the record and recognition that, with regard to activated carbon, China simply imposes an output VAT on domestic and export sales, the issue is now whether Commerce may apply the statute,
The notion that the imposition of a tax, duty or other charge that is generally applicable to both domestic and export sales does not alone preclude it from providing the basis for an adjustment pursuant to section
The court now turns to consideration of whether Commerce‘s interpretation of section
As an initial matter, it is important to bear in mind that here, normal value is not based on home-market (i.e., domestic) sales prices, but is based on the respondent‘s factors of production and corresponding surrogate values, which are determined on a tax-exclusive basis.18 In such a case, the principle that dumping margin calculations should be tax-neutral supports Commerce‘s adjustment.19
The Federal Circuit recognized more than two decades ago:
Buried in the language of statute and case law, and obscured by the fog of litigation, is a simple policy issue: whether Congress, in the Tariff Act of 1930 (the Act), precluded Commerce from determining dumping margins in a tax-neutral fashion.
Federal Mogul Corp. v. United States, 63 F.3d 1572, 1577 (Fed. Cir. 1995). The question, then, is whether Congress, when it did not substantively alter section 1677a in
First, the pre-URAA version of the statute clearly permitted Commerce to make tax-neutral dumping calculations. Whether it was through adjustments to foreign market value or purchase price/exporter‘s sales price, Federal Mogul confirms that “one thing is clear[:] . . . in administering the Act, [Commerce] over the years has pursued a policy of attempting to make the tax adjustment called for by the Act tax-neutral.” 63 F.3d at 1580 (further holding that nothing in the pre-URAA version of section 1677a precluded Commerce from achieving tax-neutrality in its administration of the provision requiring an upward adjustment to U.S. price to account for taxes included in the home market sales price and rebated or exempted in the context of exports sales).21 Commerce‘s policy accords with the principle that differences in sales prices due to differential tax treatment between the home market and export market “does not constitute unfair pricing behavior” but, rather, “is a difference created by forces outside the control of the
Second, the suggestion that Congress, by providing for adjustments to normal value or EP/CEP, is legislating adjustments to increase or decrease the margin of dumping is unsupported. But cf., e.g., Qingdao, 308 F. Supp. 3d at 1341, 1343 (discussing congressional intent to impact the dumping margin through certain adjustments). To the contrary, Congress, when it enacted the URAA, intended to ensure that Commerce could continue to make the adjustments to normal value and EP/CEP necessary in order to place both prices, to the extent possible, on the same basis, permitting a “fair, ‘apples-to-apples’ comparison.” Maverick Tube Corp. v. United States, 861 F.3d 1269, 1274 (Fed. Cir. 2017) (quoting Torrington Co. v. United States, 68 F.3d 1347, 1352 (Fed. Cir. 1995)); see also SAA at 827, 1994 U.S.C.C.A.N. at 4166 (noting that a new statutory provision regarding deductions from normal value to account for indirect taxes represents a change from the pre-URAA statute that accounted for indirect taxes through an upward adjustment to export price, which change “is intended to ensure that dumping margins will be tax-neutral“). Typically, these adjustments lead to ex-factory prices, packed in the same manner, and on the same tax basis. See SAA at 827.
Third, as discussed above, there is no indication that before 2012, Commerce (or Congress) considered section 1677a to be inapplicable in NME cases. See Methodological Change, 77 Fed. Reg. at 36,482; Pure Magnesium from Russia, 60 Fed. Reg. at 16,448 (noting that, in NME cases, “pecuniary aspects of internal transactions
Finally, returning to the “policy issue” identified in Federal Mogul, adjusting EP/CEP for VAT imposed on export sales allows Commerce to calculate a tax-neutral dumping margin when normal value is calculated exclusive of VAT. In this case, as discussed in more detail below, the constructed export price reported by Jacobi includes 17 percent output VAT imposed by the Chinese government, whereas the normal value, to which it is to be compared, is determined using surrogate values that are tax-exclusive. See 2nd Remand Results at 30 & n.139. To interpret section
D. Commerce‘s Adjustment is Supported by Substantial Evidence
Jacobi argues that Commerce‘s determination that 17 percent output VAT is included in Jacobi‘s constructed exported price lacks substantial evidence. See Jacobi‘s Opp‘n Cmts. at 13-14, 16. According to Jacobi, the existence of a “legal requirement” to collect output VAT on its U.S. sales is not evidence that it includes 17 percent output VAT in sales prices to the United States. Id. at 16. Jacobi points to its sales documentation submitted on the record and notes the lack of any reference to output VAT. See id. at 13-14 (citing Jacobi‘s Sec. A Questionnaire Resp. (July 15, 2015) (“Jacobi‘s § AQR“), Ex. A-17, CR 27, 30, CRJA Tab 5). Jacobi further contends that Commerce has ignored the court‘s instruction to address evidence that Jacobi offsets paid input VAT against the output VAT due. Id. at 14. Jacobi also contends that Aristocraft remains relevant and Commerce erred in failing to address the opinion. Id. at 15-16.
The Government contends that Jacobi‘s reporting of its output VAT collection obligations represents substantial evidence that output VAT was included in its U.S. prices and Jacobi‘s sales documentation does not detract from the substantiality of that evidence. Def.‘s Reply Cmts. at 16-17. The Government further contends that Commerce properly discounted the relevance of Jacobi‘s ability to offset input VAT from output VAT and its calculation of a net VAT payable amount because Commerce‘s
Calgon contends that because “the cost of output VAT falls on the buyer of the good, not on the [seller],” Def.-Ints.’ Reply Cmts. at 14 (quoting 2nd Remand Results at 27), it is “necessarily included in Jacobi‘s price,” id. Calgon further contends that Commerce adequately addressed the court‘s questions regarding the relationship between input VAT and output VAT and the relevance of the Aristocraft opinion in light of activated carbon‘s treatment under Chinese VAT law. Id. at 15-16.22
The court sustains Commerce‘s VAT adjustment. The absence of a line item for output VAT on Jacobi‘s sales documents is not dispositive and the record supрorts Commerce‘s determination that Jacobi‘s export prices include output VAT. See Matsushita Elec. Indus. Co. v. United States, 750 F.2d 927, 933 (Fed. Cir. 1984) (the possibility of drawing two inconsistent conclusions from the evidence does not preclude the agency‘s finding from being supported by substantial evidence) (citing Consolo v. Fed. Mar. Comm‘n, 383 U.S. 607, 619–20 (1966)).
Here, Jacobi concedes that its U.S. sales were subject to the collection of 17 percent output VAT pursuant to the 2012 VAT Notice. See Jacobi‘s Opp‘n Cmts. at 16; 2012 VAT Notice, Art. 7.2(1). Jacobi suggests, however, that it calculates the net VAT payable amount as if it collected output VAT on U.S. sales, but that it does not actually collect output VAT on those sales. See Jacobi‘s Opp‘n Cmts. at 16. In making this
Moreover, contrary to Jacobi‘s arguments, see Jacobi‘s Opp‘n Cmts. at 14-15, Commerce did not impermissibly base its adjustment on the contemporaneous Chinese law whilе ignoring evidence of Jacobi‘s net VAT payment. The statute directs Commerce to make adjustments based on certain amounts included in U.S. price, not amounts remitted to the subject nonmarket economy government.23 See
In sum, Commerce‘s redetermination on this issue complies with the court‘s remand instructions set forth in Jacobi (AR8) I and the agency‘s deduction of output VAT from Jacobi‘s constructed export price is lawful and supported by substantial evidence.
CONCLUSION AND ORDER
In accordance with the foregoing, it is hereby
ORDERED that Commerce‘s 2nd Remand Results are remanded for Commerce to reconsider its surrogate country selection as well as the surrogate values for
ORDERED that Commerce‘s 2nd Remand Results are sustained with respect to the agency‘s VAT adjustment, as set forth in Discussion Section II above; it is further
ORDERED that, in the event Commerce amends the antidumping margin assigned to Jacobi, Commerce reconsider the separate rate assigned to non-mandatory respondents; it is further
ORDERED that Commerce shall file its second remand results on or before June 3, 2019; it is further
ORDERED that the deadlines provided in USCIT Rule 56.2(h) shall govern thereafter; and it is further
ORDERED that any opposition or supportive comments must not exceed 6,000 words.
/s/ Mark A. Barnett
Mark A. Barnett, Judge
Dated: March 5, 2019
New York, New York
Notes
[i]n a typical VAT system, companies do not incur VAT expense for exports. Instead, they receive on export a full rebate of the VAT they pay on purchases of inputs used in the production of exports (“input VAT”), and, in the case of domestic sales, the company can credit [input VAT] . . . against the VAT they collect from customers [“output VAT”].I&D Mem. at 7. In the PRC, however, “some portion of the input VAT that a company pays on purchases of inputs used in the production of exports is not refunded.” Id.