WEISHAN HONGDA AQUATIC FOOD CO., LTD., Plаintiff, CHINA KINGDOM (BEIJING) IMPORT & EXPORT CO., LTD., SHANGHAI OCEAN FLAVOR INTERNATIONAL TRADING CO., LTD., DEYAN AQUATIC PRODUCTS AND FOOD CO., LTD., Plaintiffs-Appellants v. UNITED STATES, CRAWFISH PROCESSORS ALLIANCE, Defendants-Appellees
2018-1375
United States Court of Appeals for the Federal Circuit
March 5, 2019
Appeal from the United States Court of International Trade in No. 1:16-cv-00073-MAB, Judge Mark A. Barnett.
YINGCHAO XIAO, Lee & Xiao, San Marino, CA, argued for plaintiffs-appellants. Also represented by DOUGLAS CAMPAU.
MOLLIE LENORE FINNAN, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee United States. Also represented by JOSEPH H. HUNT, JEANNE E. DAVIDSON, PATRICIA M. MCCARTHY; BRENDAN SASLOW, SAAD YOUNUS CHALCHAL, Office of Chief Counsel for Trade Enforcement & Compliance, United States Department of Commerce, Washington, DC.
WILL E. LEONARD, Adduci, Mastriani & Schaumberg, LLP, Washington, DC, for defendant-appellee Crawfish Processors Alliance. Also represented by JOHN STEINBERGER.
Before DYK, WALLACH, and CHEN, Circuit Judges.
This appeal concerns the U.S. Department of Commerce‘s (“Commerce“) final results of an administrative review and a new shipper review of the antidumping duty ordеr on freshwater crawfish tail meat (“subject merchandise“) from the People‘s Republic of China (“China“). See Freshwater Crawfish Tail Meat from the People‘s Republic of China, 81 Fed. Reg. 21,840, 21,840 (Dep‘t of Commerce Apr. 13, 2016) (final admin. review and new shipper review) (“Final Results“); see also Freshwater Crawfish Tail Meat from the People‘s Republic of China, 81 Fed. Reg. 23,457, 23,457 (Dep‘t of Commerce Apr. 21, 2016) (notice of correction to final admin. review and new shipper review) (“Amended Final Results“).1 Appellants China Kingdom (Beijing) Import & Export Co., Ltd. (“China Kingdom“), Ocean Flavor,
Ltd. (“Deyan“) (collectively, “Chinese Respondents“) argue the U.S. Court of International Trade (“CIT“) erred in sustaining Commerce‘s calculations of weighted average dumping margins for each respondent. Weishan Hongda Aquatic Food Co. v. United States, 273 F. Supp. 3d 1279, 1293 (Ct. Int‘l Trade 2017) (sustaining the margins calculated in the ”Final Results, as corrected by the Am[ended] Final Results and as amended by the [Final Results of Remand Redetermination (‘Remand Results‘)]“); see J.A. 733–43 (Remand Results);2 see also J.A. 1–2 (Judgment).
The Chinеse Respondents appeal. We have jurisdiction pursuant to
BACKGROUND
I. Legal Framework
By statute, antidumping duties may be imposed on foreign merchandise sold, or likely to be sold, “in the United States at less than its fair value.”
investigation.
When conducting these reviews, Commerce typically must “determine the individual weighted average dumping margin for each known exporter and producer of the subject merchandise.”
The statute explains how “normal value shall be determined” “[i]n order to achieve a fair cоmparison with the export price or constructed export price.”
II. Procedural History
In 1997, Commerce, after conducting an investigation, issued an antidumping duty order that covers freshwater crawfish tail meat from China. See Freshwater Crawfish Tail Meat from the People‘s Republic of China, 62 Fed. Reg. 48,218, 48,219 (Dep‘t of Commerce Sept. 15, 1997) (antidumping duty order). Following timely requests, Commerce initiated an administrative review in October 2014, covering a period of review from September 1, 2013, to August 31, 2014. See Initiation of Antidumping and Countervailing Duty Administrative Reviews, 79 Fed. Reg. 64,565, 64,565, 64,567 (Dep‘t of Commerce Oct. 30, 2014) (initiation admin. review). Commerce limited its review to the two largest exporters of the subject merchandise by volume, thereby selecting China Kingdom and Deyan as mandatory respondents, while Ocean Flavor participated in the administrative review by seeking voluntary respondent status. J.A. 416; see J.A. 317–18 (deciding, by Commerce, to limit the review); see also
In October 2015, Commerce published the preliminary results of its administrative review and new shipper review. See Freshwater Crawfish Tail Meat from the People‘s Republic of China, 80 Fed. Reg. 60,624, 60,624 (Dep‘t of Commerce Oct. 7, 2015) (prelim. admin. review and new shipper review) (“Preliminary Results“); see also J.A. 415–30 (providing Commerce‘s decision memorandum accompanying the Preliminary Results). For the Preliminary Results, Commerce explained in its accompanying decision memorandum that, before selecting surrogate values, it “determined that South Africa, Colombia, Bulgariа, Thailand, Ecuador, and Indonesia are countries that are at the same level of economic development to that of [China]” and further found that “Indonesia and Thailand are significant producers of comparable merchandise [to freshwater crawfish tail meat], processed seafood.” J.A. 418–19 (footnotes omitted). Because of Commerce‘s regulatory preference “to value [factors of production] in a single country,” Commerce selected “Thailand as the primary surrogate country,” given “the availability of factor values in Thailand relative to Indonesia,” “including, importantly, financial statements.” J.A. 419 (footnote omitted); see
Although the period of review covered September 1, 2013, to August 31, 2014, Commerce explained that it “[found] it appropriate to consider using the financial statеment of . . . two [Thai] seafood processors . . . for calendar year 2012.” J.A. 449. Commerce detailed that “the condition known as [Early Mortality Syndrome (‘EMS‘)] . . . decimated shrimp populations in Thailand covering calendar years 2013 and 2014, [thereby] sharply restricting the profitability of seafood processors in that country,” but that calendar year 2012 was unaffected by EMS. J.A. 449 (emphasis added). Commerce noted that the Thai Financial Statements “do not identify energy expenses” and therefore Commerce was “unable to segregate and . . . exclude energy costs from the calculation of the surrogate financial ratio for overhead,” per its normal practice in calculating these ratios. J.A. 449. Nevertheless, Commerce relied on the Thai Financial Statements, сalculating surrogate financial ratios of 7.73% for manufacturing overhead, 2.45% for SG&A expenses, and 6.77% for profit. J.A. 449. Consequently, Commerce calculated a 0.00% weighted average dumping margin for each of the Chinese Respondents. Preliminary Results, 80 Fed. Reg. at 60,625.
Commerce issued the Final Results in April 2016. 81 Fed. Reg. at 21,840; see J.A.
Based on the Oceana Report, Commerce calculated the following surrogate financial ratios: 6.69% for manufacturing overhead, 37.05% for SG&A expenses, and 20.05% for profit. J.A. 699. Although the surrogate financial ratio for manufacturing overhead slightly decreased from the Preliminary Results, the other two surrogate financial ratios markedly increased. See J.A. 449 (calculating, for the Preliminary Results, surrogate financial ratios of 7.73% for manufacturing overhead, 2.45% for SG&A expenses, and 6.77% for profit). As a result of, inter alia, the change to the surrogate financial ratios made in the Final Results, Commerce recalculated the weighted average dumping margins from 0.00% to: 22.16% for China Kingdom, 12.04% for Deyan, and 17.23% for Ocean Flavоr. 81 Fed. Reg. at 21,841.
The Chinese Respondents and Hongda sued Appellee United States (“the Government“) in the CIT, challenging the antidumping duty rates assigned to them. See Weishan Hongda, 273 F. Supp. 3d at 1280; see also J.A. 45–46 (excerpts from the Complaint). The United States “requested remand to address” the issue of “the factual basis for Commerce‘s determination that South Africa is a significant producer of comparable merchandise.” Weishan Hongda, 273 F. Supp. 3d at 1284. In the Remand Results, Commerce calculated the same margins as it did in the Final Results, “continu[ing] to find it appropriate to rely on” the Oceana Report because it determined that South Africa is at “the same level of economic development as China” and “is a significant producer of comparable merchandise.” J.A. 733–34 (footnote omitted). Commerce explained that “[Global Trade Atlas] export data and the ‘export revenue’ figure reported in [the] Oceana [Report], sufficiently demonstrate that South Africa is a significant producer of comparable merchandise.” J.A. 741. Following the Remand Results, the Chinese Respondents and Hongda represented to the CIT that “they no longer challenge Commerce‘s finding that South Africa is a significant producer of comparable merchandise.” Weishan Hongda, 273 F. Supp. 3d at 1285 (footnote omitted). Instead, the Chinese Respondents argued Commerce erred by relying on the Oceana Report “to value financial ratios.” Id.
The CIT ultimately “sustain[ed] Commerce‘s Final Results, as corrected by the Am[ended] Final Results and as amended by the Remand Results.” Id. at 1293 (third
DISCUSSION
The Chinese Respondents argue Commerce “improperly rejected the two Thai financial statements . . . in favor of [the Oceana Report] in the calculation of surrogate financial ratios.” Appellants’ Br. 9. Appellee Crawfish Processors Alliance (“CPA“), a domestic interested party during Commerce‘s proceedings, contends the Chinese Respondents’ surrogate financial ratio arguments “are barred by [their] failure to exhaust administrative remedies” and therefore the CIT lacked jurisdiction over this claim. CPA‘s Br. 19 (capitalization modified); see id. at 19–22. After articulating the appropriate legal standards, we address CPA‘s threshold argument and then the Chinese Respondents’ argument.6
I. Standard of Review
We apply the same standard of review as the CIT, see Downhole Pipe, 776 F.3d at 1373, which upholds Commerce‘s determinatiоns that are supported “by substantial evidence on the record” and otherwise “in accordance with law,”
II. CIT‘s Jurisdiction
A. Legal Standards
“Article III generally requires a federal court to satisfy itself of its jurisdiction over the subject matter before it considers the merits of a case.” Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999). A court “may not assume jurisdiction for the purpose of deciding the merits of the case.” Sinochem Int‘l Co. v. Malaysia Int‘l Shipping Corp., 549 U.S. 422, 431 (2007). “The requirement that jurisdiction be established as a threshold matter springs from the nature and limits of the judicial power of the United States and is inflexible and without exception.” Steel Co. v. Citizens for a Better Env‘t, 523 U.S. 83, 94–95 (1998) (internal quotation marks, brackets, and citation omitted). Where jurisdiction is lacking, “the proper course would be to dismiss on that ground.” Sinochem, 549 U.S. at 436.
“We review a decision of the [CIT] on whether to require exhaustion in a particular case for abuse of discretion.” Boomerang Tube LLC v. United States, 856 F.3d 908, 912 (Fed. Cir. 2017). The CIT “shall, where appropriate, require the exhaustion of administrative remedies.”
B. The CIT Had Jurisdiction to Reach the Merits of the Chinese Respondents’ Claims
In assessing CPA‘s argument whether the Chinese Respondents exhausted their administrative remedies where they did not raise the issue of surrogate financial ratios in their case briefs in the administrative review, but where Hongda raised the issue in the “separate, but aligned” new shipper review, the CIT said “[i]n light of the decision on the merits of this case, the court need not resolve CPA‘s argument.” Weishan Hongda, 273 F. Supp. 3d at 1289, 1290 (emphasis added). Instead, the CIT acknowledged the Government‘s reprеsentation “that it was not asserting the doctrine of administrative exhaustion against the [Chinese Respondents] because Commerce had examined surrogate values jointly for both reviews, relying on the same evidence and arriving at the same determination.” Id. at 1289. Therefore, the CIT “turn[ed] to the merits of [Chinese Respondents’ and Hongda‘s] exhausted arguments.” Id. at 1290 (footnote omitted).
CPA now argues the CIT lacked jurisdiction over the Chinese Respondents’
“[E]xhaustion of administrative remedies is required where Congress imposes an exhaustion requirement by statute.” Coit Indep. Joint Venture v. Fed. Sav. & Loan Ins. Corp., 489 U.S. 561, 579 (1989) (citations omitted). “But where Congress has not clearly required exhaustion, sound judicial discretion governs.” McCarthy v. Madigan, 503 U.S. 140, 144 (1992) (citation omitted). “[T]he initial question whether exhaustion is required should be answered by reference to congressional intent; аnd a court should not defer the exercise of jurisdiction under a federal statute unless it is consistent with that intent.” Patsy v. Bd. of Regents, 457 U.S. 496, 501–02 (1982) (footnote omitted).
We clarify that the requirement to exhaust administrative remedies under
753 F.3d at 1374; Belgium, 551 F.3d at 1349; Consol. Bearings, 348 F.3d at 1003.
In analyzing
III. Surrogate Financial Ratios
A. Legal Standard
When valuing factors of production in the nonmarket economy context, the statute directs that Commerce‘s decision “shall be based on the best available information regarding the values of such factors in a market economy country or countries.”
B. Commerce‘s Selection of the Oceana Report to Calculate Surrogate Financial Ratios Is Supported by Substantial Evidence and Otherwise in Accordance with Law
Commerce determined the Thai Financial Statements were not the best available information because “information on the record indicates that these Thai companies benefitted from countervailable export subsidies.” J.A. 691 (footnote omittеd). According to Commerce, the Thai Financial Statements demonstrate that Surapon and Kiang Huat “received export subsidies under the Investment Promotion Act.” J.A. 691. Instead, Commerce relied on the Oceana Report, explaining that it is “a viable alternative” because it is “contemporaneous with the [period of review]” and “contains the necessary information for [Commerce] to calculate appropriate financial ratios.” J.A. 692 (footnote omitted) (citing J.A. 698–99). Commerce explained that, compared to the Thai Financial Statements that did not separately identify energy costs, the Oceana Report “enable[d Commerce] to follow [its] normal methodology, i.e., the energy costs are included in the [materials, lаbor, and energy costs] denominator and not the overhead numerator to the calculation.” J.A. 699 (italics omitted). The Chinese Respondents argue Commerce should have used the Thai Financial Statements to calculate surrogate financial ratios, and that it erred by summarily rejecting the Thai Financial Statements “on subsidy grounds without weighing them against the inferior data quality of [the] Oceana [Report].” Appellants’ Br. 16 (capitalization modified). We disagree with the Chinese Respondents.
The TPEA states that, “[i]n valuing the factors of production,” Commerce “may disregard price or cost values without further investigation if [Commerce] has determined that broadly available export subsidies existed or particular instances of subsidization occurred.” Pub. L. No. 114-27, § 505(b), 129 Stat. at 386 (amеnding
subsidies pursuant to
In addition, Commerce appropriately relied on the Oceana Report as preferable to the Thai Financial Statements. Unlike the Thai Financial Statements, the Oceana Report enabled Commerce to use its “normal methodology” to calculate the manufacturing overhead ratio by including energy costs in the denominator of the calculation. See J.A. 699 (explaining this in Commerce‘s surrogate value memorandum for the Final Results); see also J.A. 704 (identifying by Commerce in a spreadsheet that the Oceana Report reflects energy costs as zero because it considered energy costs to be included under raw materials costs). Had Commerce not employed its normal methodology, it would not have been able to calculate surrogatе values for the Chinese “[R]espondents’ energy inputs” due to concerns of “double-counting energy costs” in the surrogate financial ratios. J.A. 429, 429 n.66. “[T]he decision to select a particular methodology rests solely within Commerce‘s sound discretion.” SolarWorld, 910 F.3d at 1226 (internal
Moreover, although Commerce recognized that “we do not have an established hierarchy that automatically gives certain characteristics (i.e., contemporaneity or specificity) more weight than others,” J.A. 691 (italics omitted), Commerce stated that the Oceana Report contained information that “is contemporaneous with the [period of review]” for the present administrative review, J.A. 692. Given that the statute acknowledges the import of contemporaneity when calculating antidumping margins,
The Chinese Respondents’ counterarguments are unavailing. First, they argue that § 505(b) of the TPEA “merely gives Commerce discretion, rather than a mandate,” to disregard prices distorted by export subsidies. Appellants’ Br. 19. They maintain that “Commerce is required to establish that the alternative financial is more reliable and representative.” Id. at 18 (emphasis and citation omitted). While they are correct that Commerce‘s analysis when selecting the “best available information” on the record inherently involves a comparison of the competing data sources to identify what available information is “best” to value factors of production,
where [it has] other more reliable and representative data on the record.” J.A. 690 (emphasis added). Commerce then found that the Thai Financial Statеments suffered from distortions due to export subsidies, and it explained that the Oceana Report was “a viable alternative,” while addressing the challenges made to the Oceana Report. J.A. 692. Because Commerce
Second, the Chinese Respondents argue the Oceana Report is unreliable for calculating surrogate financial ratios because it “yields a distorted overhead ratio” due to “lack of a breakout for raw material costs and the inclusion of an anomalous line item ‘overhead expenditure.‘” Appellants’ Br. 16. Regarding an alleged distorted overhead ratio, the Chinese Respondents fail to explain how the Oceana Report‘s failure to break out raw materials causes a distortion to the overhead ratio. See generally id. Instead, Commerce was able to use its normal methodology to “calculate appropriate financial ratios,” despite the Oceana Report‘s failure to “provide disaggregated expenses for raw materials or labor cost,” J.A. 692, because Commerce‘s manufacturing overhead ratio groups “materials, labor, and energy costs” in the denominator, J.A. 699. Regarding an alleged anomalous overhead expenditure, the CIT found that no party exhausted this particular argument before Commerce. See Weishan Hongda, 273 F. Supp. 3d at 1288 (stating Hongda “did not present to Commerce in the first instance its argument[] about possible misallocation of overhead expenditure“). Because the Chinese Respondents did not challenge this failure to exhaust rationale in its opening brief, this argument is waived. See SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1320 (Fed. Cir. 2006). Accordingly, we conclude Commerce did not err by relying on the Oceana Report to calculate surrogate financial ratios.
CONCLUSION
We have considered the Chinese Respondents’ remaining arguments and find them unpersuasive. For the foregoing reasons, the Judgment of the U.S. Court of International Trade is
AFFIRMED