ZHAOQING TIFO NEW FIBRE CO., LTD., Plаintiff, v. UNITED STATES, Defendant, and DAK Americas LLC, Defendant-Intervenor.
Court No. 13-00044
United States Court of International Trade
April 9, 2015
Slip Op. 15-31
RIDGWAY, Judge
- As to Nationstar, Count VII of Plaintiffs’ Second Amended Complaint, ECF No. [73] is DISMISSED with prejudice.
- As to Nationstar, Plaintiff Drennan‘s FDCPA claim, in Count VIII of Plaintiffs’ Second Amended Com-plaint, ECF No. [73], is DISMISSED with prejudice.
- As to Nationstar, Count V and IX of Plaintiffs’ Second Amended Com-plaint, ECF No. [73], are DISMISSED without prejudice.
3. On or before December 1, 2014, Plaintiffs may file a Third Amended Complaint with respect to those claims dismissed without prejudice.
4. Nationstar‘s Motion to Sever, ECF No. [88] is DENIED, without prejudice to Nationstar to re-file such motion if and when Plaintiffs amend their Second Amended Complaint.
Ryan M. Majerus, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington D.C., argued for Defendant. With him on the briefs were Benjamin C. Mizer, Assistant Attorney General, Civil Division, and Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch. Of counsel on the briefs was Shana Hofstetter, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of Washington, D.C.
David C. Smith, Kelley Drye & Warren LLP, of Washington, D.C., argued for Defendant-Intervenor. With him on the briefs were Paul C. Rosenthal and Benjamin Blase Caryl.
OPINION
RIDGWAY, Judge:
In this action, Plaintiff Zhaoqing Tifo New Fibre Co., Ltd. (“Zhaoqing Tifo“)—a Chinese producer and exporter of polyester staple fiber—contests the final results of the U.S. Department of Commerce‘s fourth administrative review of the anti-dumping duty order covering polyester staple fiber from the People‘s Republic of China. See Certain Polyester Staple Fiber From the People‘s Republic of China: Final Results of Antidumping Duty Administrative Review; 2010-2011, 78 Fed. Reg. 2366 (Jan. 11, 2013) (“Final Results“); Issues and Decision Memorandum for the Final Results of the 2010-2011 Administrative Review (Jan. 4, 2013) (Pub. Doc. No. 108) (“Issues & Decision Memorandum“).1 Pending before the Court is Plaintiff‘s Motion for Judgment on the Agency Record, in which Zhaoqing Tifo contends that the antidumping margin calculated by Commerce in the Final Results “double counts” certain energy costs and is therefore too high. See generally Plaintiff‘s Rule 56.2 Memorandum Re Counts I-IV of the Complaint in Support of Judgment on the Agency Record (“Pl.‘s Brief“); Plaintiff‘s Rule 56.2 Reply Brief (“Pl.‘s Reply Brief“).
The Government opposes Zhaoqing Tifo‘s motion, arguing that the company failed to exhaust its administrative remedies, and that, in any event, Commerce‘s treatment of energy costs in the Final Results is supported by substantial evidence and otherwise in accordance with law. The Government thus maintains that Commerce‘s determination should be sustained. See generally, e.g., Defendant‘s Response to Plaintiff‘s Rule 56.2 Motion for Judgment Upon the Agency Record (“Def.‘s Response Brief“). Notably, the Government does not directly address the merits of Zhaoqing Tifo‘s claim that the treatment of energy costs in the Final Results led to double counting. Id. Like
Jurisdiction lies under
I. Background
Dumping occurs when merchandise is imported into the United States and sold at a price lower than its “normal value,” resulting in material injury (or the threat of material injury) to the U.S. industry. See
Normal value generally is calculated using either the price in the exporting market (i.e., the price in the “home market” where the goods are produced) or the cost of production of the goods, when the exporting country is a market economy country. See
In cases such as this, where Commerce concludes that concerns about the sufficiency or reliability of the available data do not permit the normal value of the merchandise to be determined in the typical manner, Commerce identifies one or more market economy countries to serve as a “surrogate” and then “determine[s] the normal value of the subject merchandise on the basis of the value of the factors of production” in the relevant surrogate country or countries,4 including “an amount for general expenses and profit plus the cost of containers, coverings, and other expenses.” See
Factors of production to be valued “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.” See
Zhaoqing Tifo itself requested this administrative review, because, the company explains, “all the rates of the mandatory respondents earned in the first through the third administrative review were de minimis and the 4.44% rate assigned to Zhaoqing Tifo as a ‘separate rate’ exporter was a hindrance to [the company‘s] sales” of polyester staple fiber. Pl.‘s Brief at 2-3. “Indeed,” Zhaoqing Tifo states, “the three largest producer/exporters of recycled [polyester staple fiber] have been excluded from the [Antidumping Duty] Order.” Id. at 3. Like those three producers, Zhaoqing Tifo recycles bottles made from polyester staple fiber (e.g., water and soda bottles) by chipping, cleaning, drying, and extruding them into polyester staple fiber. Id.
In all four prior segments of this proceeding—that is, in the original antidumping duty investigation that led to the Antidumping Duty Order here and in the first three administrative reviews of that Order, Commerce selected India as the surrogate country and relied on Indian financial statements to calculate surrogate financial ratios. Plaintiff‘s Supplemental Brief Regarding Exhaustion of Administrative Remedies at 3 (“Pl.‘s Supp. Brief“). Because financial statements in India are relatively detailed, Commerce was able to segregate (i.e., isolate) the energy costs that were reflected in the financial statements and to exclude them from the surrogate financial ratios calculated by the agency. Id. Commerce then separately valued Zhaoqing Tifo‘s energy costs—including electricity, water, and coal—in the factors of production database. Id.8 This methodology avoided any potential double counting.
In this fourth administrative review, Commerce advised the parties that it “intend[ed] to issue its surrogate country selection prior to or in” the agency‘s Preliminary Results. See Commerce‘s Memorandum to All Interested Parties at 2 (Nov. 9, 2011) (Pub.Doc. No. 27) (“Commerce‘s Memorandum on Surrogate Country Selection“). India did not appear on the “non-exhaustive list of six countries” that Commerce provided to the parties for consideration as potential surrogates. Id. at 1.9 Commerce solicited
On the deadline specified by Commerce, Zhaoqing Tifo submitted its views concerning the selection of an appropriate surrogate country, advocating for Thailand. Preliminary Results, 77 Fed.Reg. at 39,991.10 The deadline came and went, however, and the Domestic Producer filed nothing. Id. On Commerce‘s second deadline (one month thereafter), Zhaoqing Tifo submitted extensive, detailed data concerning the valuation of factors of production, assuming the selection of Thailand as the surrogate country (particularly in the absence of any suggestion of any other country by the Domestic Producer). Id. That second deadline passed and, again, the Domestic Producer filed nothing. Id.
Not until 10 days after Commerce‘s second deadline did the Domestic Producer file comments setting forth (for the first time, in comments that the Domestic Producer styled as “rebuttal“) its views that Commerce should select Indonesia as the surrogate country—a full 41 days past Commerce‘s specified deadline for the parties’ submission of such views. See Domestic Producer‘s Submission of Surrogate Value Data for Preliminary Results (Cover Letter) at 3 (Jan. 19, 2012) (Pub.Doc. No. 43); Preliminary Results, 77 Fed.Reg. at 39,991-92 (referring to Domestic Producer‘s submission); Commerce‘s Memorandum on Surrogate Country Selection at 2 (directing parties to file “comments, if any, on surrogate country selection ... no later than December 9, 2011 “). With those views, the Domestic Producer also submitted surrogate value data that assumed Commerce‘s selection of Indonesia as the surrogate country—10 days after the deadline specified by Commerce for the submission of such data for consideration for inclusion in the Preliminary Results. See Domestic Producer‘s Submission of Surrogate Value Data for Preliminary Results (Parts 1-2) at Atts. 1-2 (Jan. 19, 2012) (Pub.Doc. Nos. 44-45); Preliminary Results, 77 Fed.Reg. at 39,991-92 (referring to Domestic Producer‘s submission);
In the Preliminary Results, Commerce—for the first time in any segment of this proceeding—selected Indonesia as the surrogate country, as advocated by the Domestic Producer in the comments that it filed with Commerce. Preliminary Results, 77 Fed.Reg. at 39,992-93.12 To derive surrogate financial ratios, the Preliminary Results relied on the financial statements of P.T. Asia Pacific, an Indonesian producer of polyester staple fiber. Id., 77 Fed.Reg. at 39,992, 39,995. Commerce based that decision in part on its understanding at that time that P.T. Asia Pacific “share[d] the same level of integration as Zhaoqing Tifo.” Id., 77 Fed.Reg. at 39,992.
P.T. Asia Pacific‘s financial statements are relatively detailed, and include separate line items for that company‘s energy inputs. Pl.‘s Brief at 5; see also Petitioner‘s Rebuttal Brief at 13-14 (Pub.Doc. No. 101) (“Domestic Producer‘s Administrative Rebuttal Brief“). Commerce therefore excluded all energy costs from the surrogate financial ratios for purposes of the Preliminary Results, and valued all of Zhaoqing Tifo‘s energy inputs—coal, electricity, and water—in the factors of production database, with no concerns about double counting. Pl.‘s Brief at 5. The Preliminary Results addressed Commerce‘s determinations сoncerning surrogate values not only for coal, electricity, and water, but also for a wide range of other factors of production, including such items as inland freight and brokerage and handling. See generally Preliminary Results, 77 Fed.Reg. at 39,994-95.
Following Commerce‘s publication of the Preliminary Results,13 Zhaoqing Tifo filed an administrative case brief with the agency. See Case Brief of Zhaoqing Tifo New Fibre Co., Ltd. (Pub.Doc. No. 94) (“Zhaoqing Tifo‘s Administrative Case Brief“); Final Results, 78 Fed.Reg. at 2366. In that brief, Zhaoqing Tifo explained that the operations of P.T. Asia Pacific were much more highly integrated than those of
Attached to its administrative case brief were Zhaoqing Tifo‘s proposed calculations of surrogate financial ratios derived from the financial statements of P.T. Tifico. See Zhaoqing Tifo‘s Administrative Case Brief at 20; id. at Exh. 3. In the presentation of the proposed surrogate financial ratios, Zhaoqing Tifo left the “Energy” column blank, reflecting the fact that—unlike the financial statements of P.T. Asia Pacific—P.T. Tifico‘s financial statements do not include specific line items for energy inputs. See Zhaoqing Tifo‘s Administrative Case Brief at Exh. 3; see also Pl.‘s Supp. Brief at 11-12 (captioned “Zhaoqing Tifo Presented A Financial Calculation With No Energy Factors, Implying That If The Department Included Them As [Factors of Production] They Would Be Double Counted“); Plaintiff‘s Supplemental Response Brief Regarding Exhaustion of Administrative Remedies at 5, 8 (“Pl.‘s Supp. Response Brief“) (similar).
Besides contesting the financial statements used to derive the surrogate financial ratios, Zhaoqing Tifo‘s administrative case brief also challenged the surrogate values for coal and for water that Commerce used in calculating the Preliminary Results. In particular, on the assumption that Commerce would continue to rely on P.T. Asia Pacific‘s financial statements in the Final Results and thus would also continue to include coal in the factors of production database (as Commerce did in the Preliminary Results), Zhaoqing Tifo argued that Commerce should аbandon the Indonesian import statistics that were used to value coal in the Preliminary Results and instead should use domestic values—specifically, coal prices from the Indonesian Ministry of Energy and Mineral Resources for the grade of coal that Zhaoqing Tifo uses in its operations. Zhaoqing Tifo‘s Administrative Case Brief at 2, 7-15. Zhaoqing Tifo further advocated that the water costs for a single municipality (which were used in the Preliminary Results) should be replaced with averaged water rates including data for additional municipalities. Id. at 3, 23.14
Although the Domestic Producer did not file an administrative case brief, it did file a rebuttal brief responding to Zhaoqing Tifo‘s brief. See generally Domestic Producer‘s Administrative Rebuttal Brief; Final Results, 78 Fed.Reg. at 2366. The Domestic Producer argued that, in calculating surrogate financial ratios, Commerce‘s Final Results should continue to rely on the financial statements of P.T. Asia Pacific that were used in the Preliminary Results. See Domestic Producer‘s Administrative Rebuttal Brief at 13-14. The Domestic Producer characterized any differences between the levels of inte-
More importantly for purposes of the pending motion, in the rebuttal brief that it filed with Commerce, the Domestic Producer underscored the fact that the financial statements of P.T. Tifico are much less “complete and detailed” than those of P.T. Asia Pacific—a concern that the Domestic Producer characterized as “more critical” than any differences in the relative levels of integration of the companies’ operations. Domestic Producer‘s Administrative Rebuttal Brief at 13-14. In particular, the Domestic Producer emphasized that P.T. Tifico‘s financial statements “include[] no separate breakout of [P.T. Tifico‘s] energy costs.” Id. (emphasis in the original); see also id. at 1 (stating that P.T. Tifico “is a less suitable surrogate because its financial data are less detailed“).
Criticizing Zhaoqing Tifo for assertedly “ignor[ing] the lack of ... electricity, water or any other energy-specific data” in P.T. Tifico‘s financial statements, the Domestic Producer underscored that those financial statements “have a major element missing, namely the cost of goods sold has no breakout for electricity, water or other energy factors.” Domestic Producer‘s Administrative Rebuttal Brief at 14 (emphases added). The Domestic Producer further expressly cautioned Commerce that—if the agency were to decide to rely on P.T. Tifico‘s financial statements for purposes of the Final Results—the agency would be required to “place all potential energy costs into the [mаnufacturing/factory] overhead numerator” in the surrogate financial ratios and to “turn off all company-specific energy and water consumption factors” (i.e., to remove all “energy and water consumption factors” from Zhaoqing Tifo‘s factors of production database), “in order to capture all costs while also preventing double-counting.” Id. (emphases added); see also Issues & Decision Memorandum at 9 (restating, almost verbatim, Domestic Producer‘s points concerning the absence of any line items for “electricity, water, [and] other energy factors” in P.T. Tifico‘s financial statements and related need for Commerce to remove “all company-specific energy and water consumption factors” from factors of production database, in order to “prevent[] double-counting“).
The Domestic Producer similarly addressed the other claims in Zhaoqing Tifo‘s administrative case brief. As to the valuation of coal, for example, the Domestic Producer argued that Commerce‘s Preliminary Results properly relied on import data, disputing Zhaoqing Tifo‘s attacks on the accuracy and reliability of those data and questioning the domestic price data that Zhaoqing Tifo proffered. Domestic Producer‘s Administrative Rebuttal Brief at 1-13. The Domestic Producer also opposed Zhaoqing Tifo‘s assertions that the Final Results should use a more broad-based set of data to value water. Id. at 17.
In the Final Results, Commerce made a change from the Preliminary Results (which had relied on the financial statements of P.T. Asia Pacific) and instead derived the surrogate financial ratios using the financial statements of P.T. Tifico. Final Results, 78 Fed.Reg. at 2367; see generally Issues & Decision Memorandum at 8-11 (Comment 2). Persuaded by Zhaoqing Tifo‘s administrative case brief, Commerce concluded that “P.T. Tifico‘s less integrated and less complex production operations are more comparable to Zhaoqing Tifo‘s than those of P.T. Asia Pacific.” Id. at 10. Commerce therefore determined that, for purposes of the Final Results, the financial statements of P.T. Tifico “repre-sent[] the best available information.” Id. at 11.15
Commerce was silent as to any potential double counting of the “other energy factors” (beyond water and electricity) to which the Domestic Producer‘s rebuttal brief referred. Despite the fact that P.T. Tifico‘s financial statements do not include line items for electricity, water, or any other sources of energy (such as the natural gas that P.T. Tifico uses),16 and even though the Issues & Decision Memorandum made specific mention of the risk of double counting energy inputs, Commerce continued to include coal in Zhaoqing Tifo‘s factors of production database in the Final Results, just as it had done in the Preliminary Results. See Issues & Decision Memorandum at 3-8 (Comment 1). Further, rejecting Zhaoqing Tifo‘s arguments favoring the use of Indonesian domestic data on coal prices, Commerce continued to rely on the same import statistics that it used in the Preliminary Results. Id. at 5-8.
Zhaoqing Tifo was puzzled by the fact that—given that P.T. Tifico‘s financial statements do not include specific line items for electricity, water, or any other energy inputs (such as natural gas)—Commerce removed only electricity and water from Zhaoqing Tifo‘s factors of production database for purposes of the Final Results. In light of Commerce‘s express recognition of the need to avoid double counting, and absent any explanation for treating coal differently than electricity and water, Zhaoqing Tifo assumed that Commerce‘s inclusion of coal in the factors of production database was an inadvertent error by the agency, and filed a Ministerial Error Correction Request with Commerce to that effect. See Zhaoqing Tifo‘s Ministerial Error Correction Request (Pub.Doc. No. 112). But see Domestic Producer‘s Rebuttal to Zhaoqing Tifo‘s Jan. 22nd “Clerical Error” Allegation (Pub.Doc. No. 113).
In its response to Zhaoqing Tifo‘s allegation of ministerial error, Commerce declined Zhaoqing Tifo‘s request to have coal removed from the factors of production database. See generally Commerce‘s Ministerial Error Allegation Memorandum (Pub.Doc. No. 116) (“Commerce‘s Ministerial Error Allegation Memorandum“). Specifically, Commerce stated that the inclusion of coal in the factors of production database was “the result of a methodological decision” by the agency, not a “ministerial error.” Id. at 5-6. In its entirety, Commerce‘s two-paragraph rationale reads:
We disagree with Zhaoqing Tifo that [Commerce] made a ministerial error by including steam coal as a factor of production (“FOP“) in its normal value calculations for Zhaoqing Tifo in the Final Results.... [A] ministerial error is defined at
19 CFR § 351.224(f) as “an error in addition, subtraction, or other arithmetic function, clerical error resulting from inaccurate copying, duplication, or the like, and any [other] similar type of unintentional error which the Secretary considers ministerial.” Thus, any issue raised by interested parties as aministerial error which is, in fact, the result of a methodological decision by [Commerce] will not be considered a ministerial error as it would not meet [Commerce‘s] regulatory definition of the term.
As we noted in the Prelim[inary] Surrogate Value Memo, [Commerce] intended to include steam coal as an FOP in [the agency‘s] calculation of normal value, and to value this FOP using Indonesia‘s Harmonized Tariff Schedule category 2701.19. [Commerce] did not change this decision in the Final Results. Moreover, it is clear [Commerce] intended to include steam coal as an FOP in the Final Results as it is the first issue in the Issues and Decision Memo, where [the agency] articulated [its] intention to apply a surrogate value to the steam coal FOP. Thus, [Commerce] did not inadvertently fail to еxclude steam coal as an FOP in the normal value calculations for the Final Results.
Id. (footnotes omitted).
Commerce‘s Ministerial Error Allegation Memorandum thus shed very little light on the Final Results’ treatment of coal and other energy inputs such as natural gas (relative to water and electricity). In some respects, the Ministerial Error Allegation Memorandum raised more questions than it answered. The Memorandum does not explain why it is significant that Commerce‘s Preliminary Surrogate Value Memorandum indicated that the agency intended to value coal in the factors of production database. The Preliminary Surrogate Value Memorandum predates the Preliminary Results, which relied on the financial statements of P.T. Asia Pacific; and those financial statements include line items for energy inputs. Thus, for purposes of the Preliminary Results, no party objected to including all three of Zhaoqing Tifo‘s energy inputs in the factors of production database (and, to avoid double counting, excluding water, electricity, and natural gas from the surrogate financial ratios). However, Commerce relied on a different set of financial statements for the Final Results—specifically, the financial statements of P.T. Tifico, which (unlike the financial statements of P.T. Asia Pacific) do not include line items for energy sources.
Further, the Preliminary Surrogate Value Memorandum indicated not only Commerce‘s intent to value coal in the factors of production database, but also electricity and water as well (which is, in fact, what Commerce did in the Preliminary Results). The Ministerial Error Allegation Memorandum is silent as to why the change of financial statements and the need to avoid double counting required Commerce to remove (exclude) electricity and water from the factors of production database in the Final Results, but did not also require the removal (exclusion) of coal.
This action ensued.18
II. Standard of Review
In an action reviewing an antidumping determination by Commerce, the agency‘s determination must be upheld except to the extent that it is found to be “unsupported by substantial evidence on the record, or otherwise not in accordance with law.”
Moreover, any determination as to the substantiality of the evidence “must take into account whatever in the record fairly detracts from its weight,” including “contradictory evidence or evidence from which conflicting inferencеs could be drawn.” Suramerica de Aleaciones Laminadas, C.A. v. United States, 44 F.3d 978, 985 (Fed. Cir. 1994) (quoting Universal Camera Corp., 340 U.S. at 487-88); see also Mittal Steel, 548 F.3d at 1380-81 (same). That said, the mere fact that it may be possible to draw two inconsistent conclusions from the record does not prevent Commerce‘s determination from being supported by substantial evidence. American Silicon Techs. v. United States, 261 F.3d 1371, 1376 (Fed. Cir. 2001); see also Consolo v. Federal Maritime Comm‘n, 383 U.S. 607, 620 (1966).
In evaluating whether a determination by Commerce was “arbitrary and capricious,” the court considers “whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment.” Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971). “The agency must articulate a ‘rational connection between the facts found and the choice made.‘” Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285 (1974) (quoting Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962)). A determination is arbitrary and capricious if the agency “relied on factors which Congress
Lastly, while Commerce must explain the bases for its decisions, “its explanations do not have to be perfect.” NMB Singapore, 557 F.3d at 1319-20. Nevertheless, “the path of Commerce‘s decision must be reasonably discernable” to support judicial review. Id. (citing State Farm, 463 U.S. at 43); see generally
III. Analysis
The motion at hand is directed to Zhaoqing Tifo‘s claim that Commerce “double counted” certain energy costs in calculating Zhaoqing Tifo‘s antidumping margin in the Final Results of the fourth administrative review at issue here. Specifically, Zhaoqing Tifo contends that Commerce‘s use of surrogate financial ratios derived from the financial statements of P.T. Tifico (which do not break out energy costs), in tandem with Commerce‘s inclusion of coal in the factors of production database, resulted in the double counting of energy costs in the Final Results. According to Zhaoqing Tifo, it was improper for Commerce to include coal in the factors of production database because the energy consumed by P.T. Tifico in its production of polyester staple fiber is embedded in manufacturing/factory overhead in P.T. Tifico‘s financial statements, and thus is included in the surrogate financial ratios that Commerce used in the Final Results.
As a threshold matter, the Government and the Domestic Producer contend that the doctrine of exhaustion of administrative remedies bars Zhaoqing Tifo from prosecuting that claim. As discussed below, however, the exhaustion argument is unavailing, in light of the specific circumstances of this case. Moreover, the Final Results’ treatment of energy sources other than electricity and water (including Zhaoqing Tifo‘s coal and P.T. Tifico‘s natural gas) is not explained, precluding both any assessment of the substantiality of the evidence supporting Commerce‘s inclusion of coal in the factors of production database and any determination as to whether Commerce‘s action was arbitrary and capricious, as Zhaoqing Tifo contends.
A. The Doctrine of Exhaustion of Administrative Remedies
Invoking the doctrine of exhaustion of administrative remedies in an effort to bar consideration of the merits of Zhaoqing Tifo‘s “double counting” claim, the Government and the Domestic Producer point to the statute, which provides that “the Court of International Trade shall, where appropriate, require the exhaustion of administrative remedies.”
Against this backdrop, the Government asserts that Zhaoqing Tifo‘s administrative case brief “did not challenge Commerce‘s inclusion of steam coal in the factors of production [database]” and that Zhaoqing Tifo therefore failed to exhaust its administrative remedies and is prohibited from raising its double counting claim in this forum. Def.‘s Response Brief at 7; see also, e.g., id. at 2, 5-6, 7-14. The Domestic Producer makes the same argument. See, e.g., Def.-Int.‘s Response Brief at 1-2, 8-13.
As explained below, however, the doctrine of exhaustion has no application here, where—at the time of the filing of administrative case briefs and rebuttal briefs with Commerce—Zhaoqing Tifo had no objection (and no reason to object) to Commerce‘s inclusion of coal in the factors of production database. Moreover, even if thе doctrine of exhaustion did apply, the administrative rebuttal brief filed by the Domestic Producer alerted Commerce to the potential for double counting of energy inputs if the agency were to switch to the financial statements of P.T. Tifico for purposes of the Final Results. Commerce thus had sufficient opportunity to address the double counting of energy in the Final Results. In fact, the Final Results did address double counting with respect to electricity and water, albeit not as to coal or natural gas or any other source of energy.20
The Government and the Domestic Producer seek to make much of the fact that Commerce included coal in the factors of production database at the Preliminary Results stage. Thus, they contend, Zhaoqing Tifo was obligated to include in its administrative case brief an objection to that treatment of coal, and the absence of such an objection constitutes a failure to exhaust administrative remedies. According to the Government and the Domestic Producer, it was too late for Zhaoqing Tifo to object to the inclusion of coal in the factors of production database and to raise its concerns about double counting energy inputs after the Final Results issued. See, e.g., Def.‘s Response Brief at 5-6, 7, 9-13; Def.-Int.‘s Response Brief at 1-2, 9-11.21
Zhaoqing Tifo also suggests that its filing of a ministerial error allegation with Commerce following issuance of the Final Results served to exhaust its administrative remedies. See Pl.‘s Reply Brief at 7; Pl.‘s Supp. Brief at 2, 15, 16-17, 25, 27; [Plaintiff‘s] Supplemental Authority Regarding Exhaustion of Administrative Remedies at 5 (“Pl.‘s Brief on Supp. Authority“); [Plaintiff‘s] Response to Notice of Supplemental Authority Regarding Exhaustion of Administrative Remedies at 2, 4. According to the Domestic Producer, “where a party properly challenges a ministerial error following the final results of an administrative review, that party will be deemed to have exhausted its administrative remedies with regards to that error.” Def.-Int.‘s Response Brief at 8 (citing
Under these circumstances, Zhaoqing Tifo was not required to exhaust its administrative remedies, because—simply stated—at the time of the Preliminary Results, there was nothing to exhaust. See generally, e.g., Corus Staal, 502 F.3d at 1381 (observing that doctrine of exhaustion
The Government and the Domestic Producer argue that Zhaoqing Tifo‘s administrative case brief should have anticipated
Zhaoqing Tifo was not required to anticipate that Commerce (1) would adopt P.T. Tifico‘s financial statements in lieu of
Like the court in Pohang Iron & Steel as well as Saha Thai (discussed above), other courts too have highlighted the compelling policy considerations that weigh against unduly demanding application of the doctrine of exhaustion—that is, policy considerations that counsel against requiring parties to try to foresee the future and to anticipate in their comments filed with the agency the range of options and potential cоurses of action that the agency ultimately might take. Thus, for example, as the U.S. Court of Appeals for the D.C. Circuit observed:
While we certainly require some degree of foresight on the part of commenters, we do not require telepathy. We should be espe
cially reluctant to require advocates for affected industries and groups to anticipate every contingency. To hold otherwise would encourage strategic vagueness on the part of agencies and overly defensive, excessive commentary on the part of interested parties seeking to preserve all possible options for appeal. Neither response well serves the administrative process.
Portland Cement Ass‘n v. EPA, 665 F.3d 177, 186 (D.C. Cir. 2011); cf. Portland General Electric Co. v. Bonneville Power Administration, 501 F.3d 1009, 1024 n. 13 (9th Cir. 2007) (underscoring wisdom of excusing failure to exhaust where issue that a plaintiff seeks to litigate was raised by another party at the administrative level; “If we required each [party] to raise every issue or be barred from seeking judicial review of the agency‘s action, we would be sanctioning the unnecessary multiplication of comments and proceedings before the administrative agency. That would serve neither the agency nor the parties.“); American Forest & Paper Ass‘n v. EPA, 137 F.3d 291, 295 (5th Cir. 1998) (in context of challenge to agency rulemaking, rejecting agency argument that, because plaintiff “did not participate in the agency proceedings below,” it was “preclude[d] from raising its objection in [the] court“; “The rule urged by EPA [i.e., that the court should preclude a plaintiff from litigating an issue that it did not raise at the administrative level] would require everyone who wishes to protect himself from arbitrary agency action ... to become ... a psychic able to predict the possible changes that could be made” by the agency in the course of the administrative proceeding).
In sum, the doctrine of exhaustion of administrative remedies has no application here.
2. Assuming Arguendo That the Doctrine of Exhaustion Applied
Even if the doctrine of exhaustion of administrative remedies were applicable, two separate but related exceptions to that doctrine also would apply. Thus, even if the doctrine of exhaustion were applicable, Zhaoqing Tifo nevertheless still would be entitled to its day in court on its claim that Commerce‘s inclusion of coal in the factors of production database, coupled with the agency‘s use of P.T. Tifico‘s financial statements (which do not separately break out energy costs), resulted in the double counting of energy inputs in the Final Results.
One well-recognized exception to the doctrine of exhaustion permits a party to litigate an issue that the party did not exhaust at the administrative level where that issue was raised before the agency by a different party. See, e.g., Indiana Utility Regulatory Comm‘n v. FERC, 668 F.3d 735, 739 (D.C. Cir. 2012) (acknowledging exception to doctrine of exhaustion “when an agency has considered the argument at the urging of another party“); Kessler v. Surface Transportation Board, 635 F.3d 1, 8 (D.C. Cir. 2011) (recognizing exception to exhaustion doctrine allowing a plaintiff to “raise [in litigation] any issue raised by any party to the administrative proceeding“); Portland General Electric Co. v. Bonneville Power Administration, 501 F.3d 1009, 1023-25 (9th Cir. 2007) (explaining that failure to exhaust is excused where issue that plaintiff seeks to raise in litigation “was raised by someone other than the [plaintiff]” at the administrative level); American Forest & Paper Ass‘n v. EPA, 137 F.3d 291, 295-96 (5th Cir. 1998) (explaining that, even though plaintiff “did not participate in the agency proceedings below” (and thus, by definition, did not raise before the agency the issues that plaintiff sought to litigate in court), “the concerns underlying the exhaustion doctrine [were] not implicated” where the issues that plaintiff sought to raise in litigation were raised by opposing parties at the administrative level; pointing out that “it is ironic that [plaintiff] now seeks to preserve its claim on the basis of its opponents’ complaints“).28
The Government concedes that a party‘s failure to exhaust is excused if the issue to be litigated was raised before the agency by a different party. See Def.‘s Supp. Brief at 15. However, the Domestic Producer disputes the point and seeks to distinguish several of the cases cited to support that proposition. See generally, e.g., Def.-Int.‘s Supp. Response Brief at 8 n. 25, 9-10 (discussing, and seeking to distinguish, cases cited for proposition that a party is entitled to litigate an issue notwithstanding the party‘s failure to exhaust at the administrative level where the issue was raised before the agency by a different party). As explained above, although it is true that the facts of each case are different and that none of the cases relied on precisely parallels this case, the Domestic Producer cannot possibly distinguish every case cited. Nor it is possible to ignore the broader themes that run through the cited decisions and the important considerations of policy, pragmatism, and fundamental fairness that motivate them. See generally nn. 23 & 27, supra.
It is therefore of relatively little moment whether or not, at the administrative level, Zhaoqing Tifo raised concerns about the potential double counting of energy inputs, because—without regard to whatever Zhaoqing Tifo said or didn‘t say—the Domestic Producer clearly sounded the alarm. Among other things, the administrative rebuttal brief that the Domestic Producer filed with Commerce specifically and explicitly warned Commerce in no uncertain terms that, if the agency were to rely on P.T. Tifico‘s financial statements in the Final Results, the agency could avoid double counting only by “plac[ing] all potential energy costs into the [manufacturing/factory] overhead numerator” in the surrogate financial ratios and “turn[ing] off all [Zhaoqing Tifo]-specific energy and water consumption factors” by removing them from the factors of production database. Domestic Producer‘s Administrative Rebuttal Brief at 14 (emphases added).29 In short, even if the doctrine of exhaustion were applica-
In addition, there is a second, related exception that would similarly serve to excuse any failure to exhaust by Zhaoqing Tifo (again, assuming arguendo that the doctrine of exhaustion otherwise applied). Specifically, the exhaustion requirement does not bar a plaintiff from raising an issue in litigation if the agency in fact had an opportunity to consider the issue at the administrative level, whether or not the agency actually availed itself of that opportunity. See, e.g., Indiana Utility Regulatory Comm‘n v. FERC, 668 F.3d 735, 739 (acknowledging exception to doctrine of exhaustion “when an agency has
As discussed immediately above, the double counting issue was raised at a minimum by the Domestic Producer—and the fact that Commerce thus had an opportunity to consider the issue in the Final Results would alone suffice to preserve Zhaoqing Tifo‘s right to pursue its double counting claim in this forum. But, in addition, the record further makes it clear that Commerce in fact considered the potential for double counting, at least as to some energy inputs.
Specifically, Commerce‘s Issues and Decision Memorandum recognizes that “P.T. Tifico‘s financial statement does not break out energy [costs].” Issues & Decision Memorandum at 14. Therefore, “in order to prevent double counting” (by having electricity and water both captured in the surrogate financial ratios and also included in the factors of production database), Commerce “placed all electricity and water costs into the [manufacturing/factory] overhead numerator” in the financial ratios, and removed from the factors of production database the “electricity and water [costs]” that the agency had included in the database in the Preliminary Results. Id. at 11; see also Final Results,
As such, even assuming arguendo that the doctrine of exhaustion did apply, any failure to exhaust by Zhaoqing Tifo would be excused, because Commerce was not deprived of the opportunity to address the double counting of energy inputs in the Final Results. In fact, Commerce‘s Final Results did address double counting—albeit only as to electricity and water, and not coal or natural gas or any other source of energy.33
B. The Doctrine of Judicial Estoppel
Apart from its invocation of the doctrine of exhaustion of administrative remedies, the Domestic Producer also contends that Zhaoqing Tifo‘s double counting claim is independently barred by the doctrine of judicial estoppel. See generally Def.-Int.‘s Supp. Brief at 1, 2, 23-25; Defendant-Intervenor‘s Supplemental Response Brief at 12, 15 (“Def.-Int.‘s Supp. Response Brief“); Def.-Int.‘s Brief on Supp. Authority at 8-9. Like the exhaustion argumеnts analyzed above, this argument too is lacking in merit.
The gravamen of judicial estoppel is that, “[a]bsent any good explanation, a
[W]here a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him.
Davis v. Wakelee, 156 U.S. 680, 689 (1895) (quoted in New Hampshire v. Maine, 532 U.S. at 749). Thus, judicial estoppel “generally prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase.” Pegram v. Herdrich, 530 U.S. 211, 227 n. 8 (2000).
The Domestic Producer argues, in essence, that Zhaoqing Tifo is judicially estopped from claiming in this forum that coal should not be included in the factors of production database, because—according to the Domestic Producer—Zhaoqing Tifo claimed at the administrative level that coal should be included in the database. See generally Def.-Int.‘s Supp. Brief at 1, 2, 23-25; Def.-Int.‘s Supp. Response Brief at 12, 15; Def.-Int.‘s Brief on Supp. Authority at 8-9. That argument fails for several reasons.
As an initial matter, raising an argument for the first time in supplemental briefing is much too late. Even if the Domestic Producer‘s judicial estoppel argument had been made in a timely fashion, however, it would have fared no better.
As the Supreme Court observed in New Hampshire v. Maine, judicial estoppel applies only where “a party‘s later position [is] ‘clearly inconsistent’ with its earlier position.” New Hampshire v. Maine, 532 U.S. at 750 (citations omitted); see also Hill-Rom Services, Inc. v. Stryker Corp., 755 F.3d 1367, 1380-82 (Fed. Cir. 2014) (same). This is not such a case.
As detailed above, contrary to the assertions of the Government and the Domestic Producer, Zhaoqing Tifo did not affirmatively argue at the administrative level that coal should be included in the factors of production database. Instead, on the assumption that Commerce would continue to rely on P.T. Asia Pacific‘s financial statements in the Final Results and thus would also continue to include coal in the factors of production database (as Commerce did in the Preliminary Results), Zhaoqing Tifo argued that Commerce should use a certain set of data (i.e., coal prices from the Indonesian Ministry of Energy and Mineral Resources) in lieu of the Indonesian import statistics thаt Commerce used to value coal in the Preliminary Results. See, e.g., n. 21, supra (rejecting assertions of Government and Domestic Producer that Zhaoqing Tifo affirmatively advocated for inclusion of coal
In addition, there is yet a third reason why the Domestic Producer‘s judicial estoppel claim must fail. The Supreme Court has emphasized that judicial estoppel applies only where the party sought to be estopped “has succeeded in persuading a court to accept that party‘s earlier position.” New Hampshire v. Maine, 532 U.S. at 750; see also Hill-Rom Services, 755 F.3d at 1380 (same).35 As the Supreme Court has pointed out, “[a]bsent success in a prior proceeding, a party‘s later inconsistent position introduces no ‘risk of inconsistent ... determinations,’ and thus poses little threat to judicial integrity.” New Hampshire v. Maine, 532 U.S. at 750-51 (citations omitted).
Here, however, Zhaoqing Tifo did not prevail at the administrative level. Zhaoqing Tifo‘s arguments notwithstanding, the Final Results rejected the coal prices from the Indonesian Ministry of Energy and Mineral Resources that Zhaoqing Tifo proffered and instead continued to value coal using the same Indonesian import statistics that Commerce had used in the Preliminary Results. See Issues & Decision Memorandum at 5, 8 (Comment 1) (stating that Final Results continue to value coal using Indonesian import statistics relied on in Preliminary Results). Because Zhaoqing Tifo did not “succeed in persuading [Commerce] to accept [Zhaoqing Tifo‘s] ... position” (an agency determination that Zhaoqing Tifo contests in Count V), judicial estoppel cannot apply—not even as to Count V of the Complaint, which (again) is not the subject of the pending motion. Judicial estoppel thus is no bar to consideration of the merits of Zhaoqing Tifo‘s double counting claim.
C. The Merits of Zhaoqing Tifo‘s “Double Counting” Claim
Although the administrative rebuttal brief that the Domestic Producer filed with Commerce put the agency on notice that P.T. Tifico‘s financial statements include “no breakout for electricity, water or other energy factors” and argued that—in order to avoid double counting—the use of those financial statements in the Final Results would require the agency to exclude all energy inputs from the factors of production database, there is no dispute that Commerce removed only water and electricity, leaving coal in the database. See Domestic Producer‘s Administrative Rebuttal Brief at 14; see also id. at 13-14 (emphasizing that P.T. Tifico‘s financial statements “include[] no separate breakout of the company‘s energy
In its Issues and Decision Memorandum, Commerce acknowledged that “P.T. Tifico‘s financial statement does not break out energy [inputs].” Issues & Decision Memorandum at 13-14; see also id. at 11 (stating that “P.T. Tifico‘s financial statement does not include a separate breakout of its costs for electricity and water“). Recognizing that fact, the Issues and Decision Memorandum expressly addressed the potential for double counting and the need to avoid double counting by excluding energy sources from the factors of production database—but only as to water and electricity, and not as to coal or natural gas or any other energy inputs.
The Issues and Decision Memorandum thus explained that, “in order to prevent double counting,” the Final Results “placed all electricity and water costs into the [manufacturing/factory] overhead numerator” (i.e., accounted for all electricity and water costs by including them in the surrogate financial ratios) and removed from the factors of production database the “electricity and water consumption factors” that Commerce had included in the database for purposes of the Preliminary Results. Issues & Decision Memorandum at 11; see also Final Results,
Conspicuously absent from the Final Results, however, is any explanation for Commerce‘s treatment of coal or natural gas or any “other energy factors” beyond water and electricity to which the Domestic Producer‘s administrative rebuttal brief referred. See Domestic Producer‘s Administrative Rebuttal Brief at 14 (stating that P.T. Tifico‘s financial statements include “no breakout for electricity, water or other energy factors“) (emphasis added). Zhaoqing Tifo maintains that there are no grounds for treating coal differently than water and electricity, and that Commerce‘s inclusion of coal in the factors of produc
Commerce‘s Issues and Decision Memorandum does not explain, for example, why the agency singled out electricity and water, and did not address the “other energy factors” referenced in the Domestic Producer‘s administrative rebuttal brief. Commerce does not explain the agency‘s rationale for excluding electricity and water from the factors of production database, but not coal. Commerce offers no justification for the difference in treatment. Similarly, Commerce does not explain why including coal in the factors of production database does not result in the double counting of energy inputs. It is the absence of “a separate breakout of ... costs for electricity and water” in P.T. Tifico‘s financial statements that led Commerce to exclude those inputs from the factors of production database for purposes of the Final Results. But nowhere does Commerce identify the “separate breakout” of other energy inputs (such as natural gas) in P.T. Tifico‘s financial statements that might serve as a basis for an agency determinatiоn that such inputs are not captured in the surrogate financial ratios and that coal may be included in the factors of production database without fear of double counting. Nowhere does Commerce explain why its concerns about the double counting of electricity and water do not also extend to coal (and any other energy sources, such as natural gas).
In their briefs filed with the court, the Government and the Domestic Producer argue at some length that Commerce properly included coal in the factors of production database and that Commerce reasonably treated coal differently than electricity and water. See generally Def.‘s Response Brief at 6, 15-21; Def.-Int.‘s Response Brief at 2, 13-25.37 They argue, for example, that Commerce “distinguishes between energy inputs that are general expenses (i.e., not direct costs) accounted for in [manufacturing/]factory overhead, and energy inputs that are direct inputs in the production process and that are not accounted for in [manufacturing/]factory overhead.” Def.‘s Response Brief at 18; see also Def.-Int.‘s Response Brief at 21 (similar). They state that “Commerce looks at how [an] energy input is used and then determines on a case-by-case basis whether (1) to exclude that input because it is accounted for by [manufacturing/]factory overhead, or (2) to include it as a factor of production.” Def.‘s Response
The Government and the Domestic Producer assert that Commerce‘s preference is to value energy inputs in the factors of production database, particularly when the energy sources are “direct inputs in the production process.” Def.‘s Response Brief at 18; see also Def.-Int.‘s Response Brief at 18, 21, 24 (similar). They further assert that “Commerce‘s practice is to exclude energy inputs from the factors of production [database] when they are used in the general running of the business—i.e., in offices, bathrooms, and other facilities—as opposed to being used in the direct production of the subject merchandise.” Def.‘s Response Brief at 17; see also Def.-Int.‘s Response Brief at 18, 24 (similar). They state that, here, Commerce “determined that PT Tifico‘s surrogate financial statements likely included water and electricity in its general expenses, and specifically in its [manufacturing/]factory overhead.” Def.‘s Response Brief at 17; see also Def.-Int.‘s Response Brief at 20, 23 (similar). And they claim that, in contrаst, “coal is used as a direct input and, consequently, would not be accounted for within [manufacturing/]factory overhead expenses.” Def.‘s Response Brief at 20; see also Def.-Int.‘s Response Brief at 18-19, 23 (similar).38 Further, while the Government is basically silent on the matter, the Domestic Producer argues that there is no record evidence that energy was double counted in Commerce‘s calculations. Def.-Int.‘s Response Brief at 2, 17-18, 22. But see Pl.‘s Reply Brief at 9, 13-21 (disputing claims of Government and Domestic Producer that Commerce properly included coal in the factors of
production database and that Commerce reasonably treated coal differently than electricity and water); [Plaintiff‘s] Supplemental Authority Regarding Exhaustion of Administrative Remedies at 3-4 (“Pl.‘s Brief on Supp. Authority“) (same); [Plaintiff‘s] Response to Notice of Supplemental Authority Regarding Exhaustion of Administrative Remedies at 11-12 (same).
Without regard to the accuracy or reasonableness of the representations made by the Government and the Domestic Producer, the bottom line is that none of this information appears in Commerce‘s Issues and Decision Memorandum. The sundry reasons and explanations and justifications offered by the Government and the Domestic Producer in their briefs thus constitute impermissible post hoc rationale. Litigation counsel‘s attempts at “backfill” are no substitute for an agency‘s own reasoned decisionmaking on the administrative record. Burlington Truck Lines, 371 U.S. at 168-69; Abbott Laboratories v. United States, 573 F.3d 1327, 1332-33 & n. 1 (Fed. Cir. 2009). It is black letter law that an agency‘s action may be upheld, if at all, only on the grounds articulated by the agency itself. State Farm, 463 U.S. at 50. As such, the arguments made and the information supplied by the Government and the Domestic Producer cannot be credited. See generally Pl‘s Reply Brief at 9-10, 21.
The long and the short of it is that the Issues and Decision Memorandum (and, more generally, the Final Results) give no indication whether Commerce ever considered the potential for double counting of energy inputs other than electricity and
Zhaoqing Tifo asks that this matter be remanded to Commerce “with specific limiting instructions” directing the agency “to remove the coal energy factor from the [factors of production] database and recalculate Zhaoqing Tifo‘s antidumping duty margin.” Pl.‘s Brief at 23; Pl.‘s Reply Brief at 10, 22. However, particularly in light of the procedural posture of the case, such relief is not warranted.
Instead, this matter is remanded to Commerce to permit the agency to reconsider its determination on the inclusion of coal in the factors of production database and to expressly consider any associated potential for double counting of energy inputs, explaining its reasoning fully and with reference to the record evidence. In the interests of due process and fundamental fairness, Commerce is encouraged to reopen the administrative record on remand, to ensure that the Remand Results are based on an appropriate record and to allow the parties an adequate opportunity to place on the record, for the consideration of the agency, information to illuminate or clarify key points such as the energy sources that P.T. Tifico uses in its production of polyester staple fiber, whether P.T. Tifico uses those energy sources for any other purpose, and how the sources are treated in P.T. Tifico‘s financial statements and in the surrogate financial ratios that Commerce derived from the financial statements for use in the Final Results (including whether there is any potential for double counting).
IV. Conclusion
For the reasons set forth above, Plaintiff‘s Motion for Judgment on the Agency Record must be granted and this matter remanded to the U.S. Department of Commerce for further action not inconsistent with this opinion.
A separate order will enter accordingly.
Notes
With the benefit of 20/20 hindsight, it now may seem abundantly clear to the Government and the Domestic Producer that Zhaoqing Tifo could have anticipated that, in the Final Results, Commerce would decide to rely on the financial statement of P.T. Tifico, and that Commerce also would exclude water and electricity—but not coal—from the factors of production database. However, the judgment of the Government and the Domestic Producer on this point is distorted (at least to some extent) by the well-documented cognitive phenomenon known as “hindsight bias.”
“Hindsight bias” refers to the “tendency for people to overestimate the predictability of past events.” C. Guthrie, J. Rachlinski, & A. Wistrich, Inside the Judicial Mind, 86 Cornell Law Rev. 777, 799 (2001); see generally id. at 778, 780 & n. 13, 784, 799-805, 816-18 & nn. 198-201, 820 & nn. 209, 212, 821 & n. 213, 824-25, 827, 828 & nn. 233-36, 829 (explaining, inter alia, that, although “[f]ew judgments in ordinary life require people to assess the predictability of past outcomes,” “such judgments are pervasive in the law“; citing numerous examples of operation of hindsight bias in the law; and discussing emрirical evidence on effect of hindsight bias in the law and in the legal system); see also, e.g., C. Guthrie, J. Rachlinski, & A. Wistrich, Judging by Heuristic: Cognitive Illusions in Judicial Decision Making, 86 Judicature 44, 47-48 (July/August 2002) (abstracted from Inside the Judicial Mind). Many other authorities similarly address hindsight bias, in a legal context and otherwise.
See also Dongbu Steel, 34 CIT at __, 677 F.Supp.2d at 1360-62 (emphasizing that “the law does not require a party to be prescient, and to be able to precisely predict the timing and the exact contours” of final agency action, and explaining that “[a]lthough [plaintiffs] might have been well-advised to raise their concerns in their case briefs filed with the agency (concerns which, by definition, would have been somewhat hypothetical), they were under no legal obligation to do so“); Qingdao Taifa, 33 CIT at 1092-93, 637 F.Supp.2d at 1236-37 (concluding that doctrine of exhaustion did not apply, because a party “[was] not required to predict that Commerce would accept other parties’ arguments and change its decision” in Final Results); Pohang Iron & Steel, 23 CIT at 792-93 (reasoning that, as a matter of sound policy, parties should not be required to raise anticipatory arguments in their administrative case briefs; “It would be foolish to encourage parties to make arguments because they might somehow become important under a possible future scenario. In the interest of administrative efficiency, parties should be encouraged to address only the issues that are currently relevant“); Saha Thai, 17 CIT at 729-30, 828 F.Supp. at 59-60 (soundly rejecting Government argument that exhaustion doctrine should be applied to require parties to anticipate issues and to “motivate all interested parties to an administrative review to brief and litigate every possible issue,” pointing out that such an approach would lead to “wasteful litigation“); cf. CEMEX, 133 F.3d at 904-05 (affirming trial court‘s decision to remand issue to Commerce for correction of error even though error had not been previously raised before agency; explaining that “the remand was not improper merely because [a party] did not exhaust its administrative remedies,” where error at issue “was undiscoverable until after Commerce published its final results“).
To some extent, like the plaintiff in American Forest & Paper Ass‘n, Zhaoqing Tifo too now finds itself in the unusual and rather “ironic” position of “seek[ing] to preserve its [double counting] claim on the basis of its opponent[‘s] complaints“—i.e., on the basis of the Domestic Producer‘s cautions to Commerce about the potential for double counting and the resulting need to remove “all [Zhaoqing Tifo]-specific energy and water ... factors” from the factors of production database if the agency decided to rely on P.T. Tifico‘s financial statements for purposes of determining the surrogate financial ratios for the Final Results. See American Forest & Paper Ass‘n v. EPA, 137 F.3d at 295-96; Domestic Producer‘s Administrative Rebuttal Brief at 13-14.
See also, e.g., Cellnet Communication, Inc. v. FCC, 965 F.2d 1106, 1109 (D.C. Cir. 1992) (holding plaintiffs’ failure to exhaust to be excused where issue sought to be litigated was raised by other parties at the administrative level); Natural Resources Defense Council, Inc. v. EPA, 824 F.2d 1146, 1150-52 (D.C. Cir. 1987) (“NRDC v. EPA“) (en banc) (quoting Buckeye, and, in action challenging EPA‘s withdrawal of proposed amendments to regulations, holding that plaintiff was excused from exhaustion—notwithstanding plaintiff‘s “total abstention from participation in the rulemaking proceedings“—where the issue raised by plaintiff in litigation was “explicitly raised ... before the EPA in [another party‘s] comments on the proposed amendments“); Washington Ass‘n for Television & Children v. FCC, 712 F.2d 677, 680-84 & n. 10 (D.C. Cir. 1983) (citing Buckeye and recognizing exception to exhaustion requirement where issue that plaintiff seeks to litigate was raised before the agency by a different party); Office of Communication of the United Church of Christ v. FCC, 465 F.2d 519, 523-24 (D.C. Cir. 1972) (permitting plaintiff to litigate issue that it did not raise at administrative level, explaining that purpose of requiring exhaustion is to allow agency an opportunity to consider issues before being subject to litigation and that “[t]here is no requirement that this opportunity [for the agency to consider issues] be afforded in any particular manner, or by any particular party“); Buckeye Cablevision, Inc. v. United States, 438 F.2d 948, 951-52 (6th Cir. 1971) (holding plaintiff entitled to litigate issues that it did not raise at administrative level where “the identical issues ... were raised by other parties” before the agency); Shantou Red Garden, 36 CIT at __, 815 F.Supp.2d at 1332 (holding that, although plaintiff failed to exhaust its administrative remedies, “[e]xcusing the failure ... is appropriate here because Commerce considered [plaintiff‘s] objection ... when it addressed the argument advanced by [a different party]“); Trust Chem Co. v. United States, 35 CIT __, __ n. 27, 791 F.Supp.2d 1257, 1268 n. 27 (2011) (excusing failure to exhaust where “Commerce was [previously] put on notice of the issue” that plaintiff sought to raise in litigation and “the specific information upon which [p]laintiff relie[d], ... submitted by the [opposing party], [was] necessarily before the agency“); Pakfood Public Co. v. United States, 34 CIT __, __, 724 F.Supp.2d 1327, 1351 (2010) (acknowledging that exhaustion is excused where agency had opportunity to consider issue at administrative level “as a result of other parties’ arguments“), aff‘d, 453 Fed.Appx. 986 (Fed. Cir. 2011) (non-precedential); Valley Fresh Seafood, 31 CIT at 1990-91, 1994-95, 1998 (citing, inter alia, NRDC v. EPA, and excusing failure to exhaust where issue plaintiff sought to litigate was raised by another party at the administrative level, noting that “[plaintiff‘s] participation [at the administrative level] was not necessary to Commerce‘s deliberation on that issue” because “the petitioners raised [the] issue in their case brief“); Jinan Yipin Corp. v. United States, 31 CIT 1901, 1938-40, 526 F.Supp.2d 1347, 1379-81 (2007) (citing, inter alia, NRDC v. EPA, and exсusing failure to exhaust where issue that one plaintiff re
Throughout supplemental briefing, the Domestic Producer repeatedly insists that its administrative rebuttal brief did not raise the issue of the potential for double counting of coal. See, e.g., Def.-Int.‘s Supp. Brief at 2 (arguing that “no party raised the issue of double-counting coal in its administrative case or rebuttal briefs“); id. at 8 (asserting that “[t]he issue of double-counting the coal value was never raised before Commerce until after the Final Results were issued“); id. at 9 (stating that “[n]o party to the case ever argued that coal would be double-counted“); id. at 21-22 (asserting that Domestic Producer “raised in its administrative rebuttal brief before Commerce the issue of double-counting water and electricity if Commerce chose to use the new surrogate financial statement,” and that “no party raised the issue of double-counting the coal factor in their briefs before Commerce“); id. at 23 (arguing that “[t]he double-counting issue as to coal as a factor of production was never addressed before Commerce” until after the Final Results); Def.-Int.‘s Supp. Response Brief at 2 (asserting that “no party raised the double-counting of coal issue ‘in administrative case or rebuttal briefs‘“); id. at 4 (stating that no party raised “the double-counting of coal issue” in its administrative brief filed with Commerce); id. at 8 (arguing that “[n]owhere in its rebuttal brief did [the Domestic Producer] raise the double-counting of coal issue“); id. (asserting that “[i]n its rebuttal brief arguments regarding energy factors, [the Domestic Producer] repeatedly refers to ‘water and electricity,’ not coal“); id. at 9 (stating thаt “double-counting of coal was never briefed before [Commerce]“); id. at 10 (asserting that “no party briefed the issue of double-counting coal“); id. at 11 (arguing that “[t]he double-counting of coal issue was not raised until ... after the Final Results“); Def.-Int.‘s Brief on Supp. Authority at 11 (asserting that no party raised “the double-counting coal issue” until after Final Results).
True enough, the Domestic Producer‘s administrative rebuttal brief did not refer specifically to coal. See generally Domestic Producer‘s Administrative Rebuttal Brief at 13-14. But that is not the whole story, and it is a far cry from the Domestic Producer‘s implication that its brief addressed the potential double counting of only electricity and water and nothing else. See, e.g., Def.-Int.‘s Supp. Brief at 21-22 (asserting that Domestic Producer “raised in its administrative rebuttal brief ... the issue of double-counting water and electricity“); Def.-Int.‘s Supp. Response Brief at 8 (arguing that Domestic Producer‘s administrative rebuttal brief “repeatedly refers to ‘water and electricity,’ not coal“). To the contrary, as discussed above, the Domestic Producer‘s administrative rebuttal brief speaks to the potential for double counting not only electricity and water, but also, more generally, “other energy factors” as well. See Domestic Producer‘s Administrative Rebuttal Brief at 13-14 (referring broadly to P.T. Tifico‘s “energy costs“); id. at 14 (referring generally to P.T. Tifico‘s “electricity, water [and] other energy factors“); id. (arguing that, if Commerce uses P.T. Tifico‘s financial statements in Final Results, agency must account for “all potential energy costs“—not some energy costs, and certainly not only electricity and water—in surrogate financial ratios); id. (arguing that, if Commerce uses P.T. Tifico‘s financial statements in Final Results, agency must “turn off all company-specific energy and water consumption factors“—not merely electricity and “water consumption factors,” but all energy and water consumption factors in the factors of production database); id. (referring to “the lack of electricity, water or any other energy-specific data” in P.T. Tifico‘s financial statements).
The Domestic Producer‘s administrative rebuttal brief thus referred specifically to water and electricity—but, contrary to the Domestic Producer‘s representations in this forum, it did not stop there. The brief expressly discussed “other energy factors” as well. See Domestic Producer‘s Administrative Rebuttal Brief at 13-14. It is telling that the Domestic Producer has ignored the brief‘s broader references to energy sources in general. Further, the Domestic Producer has offered no explanation as to what was meant by phrases such as “other energy factors” and no explanation as to why those references do not include energy inputs such as coal and natural gas. Whatever the Domestic Producer meant to say in its administrative rebuttal brief, it cannot truthfully claim that it intended to limit its argument concerning the potential for double counting to water and electricity alone. It requires no imagination to read the Domestic Producer‘s reference to “other energy factors” (and other similar phrases) to cover energy inputs such as coal and natural gas; and nothing on the record indicates that the Domestic Producer intended otherwise.
Even more troubling are the Domestic Producer‘s outright misrepresentations of fact. At one point, for example, the Domestic Producer states—in a brief filed in this forum—that its administrative rebuttal brief “argued that if Commerce used the P.T. Tifico financial statement ..., then Commerce would need to ‘turn off electricity and water consumption factors to prevent double-counting.‘” See Def.-Int.‘s Supp. Brief at 3-4. However, that is not an accurate statement of what the Domestic Producer actually said in the referenced brief. Contrary to the Domestic Producer‘s claim, the statement in its administrative rebuttal brief was not limited to “electricity and water consumption factors” (as the Domestic Producer now contends). (Emphasis added.) Instead, the statement in the Domestic Producer‘s brief referred much more broadly to “energy and water consumption factors.” (Emphasis added.) See Domestic Producer‘s Administrative Rebuttal Brief at 14 (stating that Commerce would need to “turn off all company-specific energy and water consumption factors ... [to] prevent[] double-counting“) (emphasis added). Again, this exceeds the limits of zealous advocacy. See n. 21, supra.
See also, e.g., American Forest & Paper Ass‘n v. EPA, 137 F.3d at 295-96 (recognizing that failure to exhaust is excused where agency had opportunity to consider the issue that plaintiff seeks to litigate, and ruling that, “because the public comments ... were sufficiently specific to prompt EPA to adopt the provision contested [in the case at bar], the agency cannot reasonably claim that it has been denied the opportunity to consider the issue“); NRDC v. EPA, 824 F.2d at 1150-52 (quoting Office of Communication of the United Church of Christ v. FCC, and, in action challenging EPA‘s withdrawal of proposed amendments to regulations, holding that plaintiff was excused from exhaustiоn—notwithstanding plaintiff‘s “total abstention from participation in the rulemaking proceedings“—where issue raised by plaintiff in litigation in fact “was raised before the agency,” such that the agency “had notice of [the] issue and could, or should have, taken it into account in reaching a final decision on the proposed amendments“; ultimately finding it “clear that the EPA actually did consider” issue that plaintiff sought to raise in litigation); Cellnet Communication, 965 F.2d at 1109 (holding plaintiffs’ failure to exhaust to be excused where issue sought to be litigated was raised by other parties before the agency; “[c]onsideration of [an] issue by the agency at the behest of another party is enough to preserve it“); Washington Ass‘n for Television & Children, 712 F.2d at 680-84 & n. 10 (recognizing exception to exhaustion requirement where the agency “in fact considered the issue“); Office of Communication of the United Church of Christ, 465 F.2d at 523-24 (permitting plaintiff to litigate issue not exhausted at administrative level, where issue in fact was “raised by the majority and challenged by the dissenters” in agency‘s final determination); Buckeye, 438 F.2d at 951-52 (holding plaintiff entitled to litigate issues that it did not raise at administrative level where agency nevertheless “had an opportunity to consider the identical issues“); Shantou Red Garden, 36 CIT at __, 815 F.Supp.2d at 1332 (holding that, although plaintiff failed to exhaust its administrative remedies, “[e]xcusing the failure ... is appropriate here because Commerce considered [plaintiff‘s] objection ... when it addressed the argument advanced by [a different party]“); Trust Chem, 35 CIT at __ n. 27, 791 F.Supp.2d at 1268 n. 27 (excusing failure to exhaust, emphasizing that “[t]he determinative question is whether Commerce was put on notice of the issue,” and concluding that, in case at bar, “Commerce was aware that [p]laintiff was contesting” the issue that plaintiff subsequently raised in litigation and that “the specific information upon which [p]laintiff relie[d] ... [was] before the agency“); Pakfood, 34 CIT at __, __, 724 F.Supp.2d at 1351, 1352-53 (acknowledging that exhaustion is excused where “the agency in fact thoroughly considered the issue in question,” but ruling that, under specific circumstances of the case, Commerce did not have “full and adequate opportunity to consider the [issue] in the first instance“); Valley Fresh Seafood, 31 CIT at 1990-91, 1994-95, 1998 (citing general principle that “[t]he court may excuse a party‘s failure to raise an argument before the administrative agency if ... the agency in fact considered the issue,” and excusing failure to exhaust where “the issue on which [plaintiff] now seeks judicial review was presented to, and considered by, Commerce during the administrative review“; emphasizing, inter alia, that “Commerce had [a] full opportunity to consider the issue [raised by plaintiff in litigation] during the administrative review“); Jinan Yipin, 31 CIT at 1938-40, 526 F.Supp.2d at 1379-81 (recognizing that “[t]he court may excuse a party‘s failure to raise an argument before the administrative agency if ... the agency in fact considered the issue,” and excusing failure to exhaust where “[plaintiff‘s] failure to raise [its] claims [at the administrative level] did not prevent Commerce from actually considering ... [the] issues at the agency level“; noting that “[a]lthough [plaintiff] did not raise arguments [as to two issues] below, Commerce actually considered [those] issues at the agency level through the arguments of [other parties]“); Holmes Products Corp., 16 CIT 1101, 1103-04 (stating that “[a] party may be excused from failure to raise an argument before the administrative agency as long as the agency in fact considered the issue. Thus, exhaustion may be excused ... if it is clear that the agency had an opportunity to consider [the issue that a plaintiff seeks to raise]“) (citations omitted); Timken, 16 CIT at 437-38, 795 F.Supp. at 445 (excusing plaintiff‘s failure to exhaust, emphasizing that “[w]hile it may be true that [plaintiff] did not raise this issue below, it is certain ... that the [agency] addressed it in its Final Results“); SKF, 15 CIT at 159 n. 6, 762 F.Supp. at 350 n. 6 (excusing plaintiff‘s failure to exhaust where agency itself addressed issue in recalculations in agency‘s Final Determinations); Al Tech Specialty Steel, 11 CIT at 377 n. 5, 661 F.Supp. at 1210 n. 5 (recognizing exception to doctrine of exhaustion for “issues not properly raised but in fact considered by the administrative body“).
The Government and the Domestic Producer repeatedly assert that Commerce had no opportunity to consider whether, in the Final Results, coal should be excluded from the factors of production database and whether double counting would otherwise result. However, such assertions by the Government and the Domestic Producer cannot be reconciled with other statements that they make, where they claim (in essence) that Commerce in fact did consider excluding coal from the database and/or the potential for double counting, but ultimately rejected those concerns and made a reasoned and (according to the Government and the Domestic Producer) a reasonable decision that coal should be included in the database.
Compare, e.g., Def.‘s Response Brief at 5-6 (asserting that “Commerce was deprived of the opportunity to address” Zhaoqing Tifo‘s argument that “the failure to exclude steam coal from the factors of production is unsupported by substantial evidence“); id. at 7 (asserting that, “[b]ecause Zhaoqing Tifo did not raise [its] argument [that Commerce double counted the value for steam coal because it was also included as part of factory overhead] in its case brief, Cоmmerce did not have the opportunity to address [the] argument“); id. at 10 (asserting that “[b]ecause Zhaoqing Tifo chose not to raise [its] argument [that “as-sign[ing] a surrogate value to steam coal, in-stead of excluding it from the factors of production, results in double counting“] during the administrative proceedings, it deprived Commerce of the opportunity to make a determination, finding, or conclusion with respect to this argument in the final results“); id.id. at 14 (referring to “Commerce‘s failure to address” whether steam coal should be excluded from the factors of production database); Def.‘s Supp. Brief at 12 (asserting that “[h]ad Zhaoqing Tifo properly framed the issue in its case brief, Commerce could have addressed the treatment of steam coal under P.T. Tifico‘s financial statement in the final results“); id. (asserting that “Commerce did not have the benefit of advocacy from all parties on [“the proper treatment of energy factors by Commerce under P.T. Tifico‘s financial statement“] prior to the final results“); id. at 14 (asserting that “Zhaoqing Tifo‘s submission of a timely argument in its case brief would have given Commerce the opportunity to consider and address the issue” of the alleged need to “treat steam coal as part of overhead” if the Final Results relied on P.T. Tifico‘s financial statements); Def.-Int.‘s Response Brief at 19 (asserting that “[i]f Zhaoqing Tifo had timely raised the double-counting issue before Commerce, ... Commerce would have had the benefit of the advocacy of the parties“); Def.-Int.‘s Supp. Brief at 2 (stating that “Commerce did not address double counting of coal“); Def.-Int.‘s Supp. Response Brief at 2 (asserting that Commerce “neither double-counted coal nor addressed double-counting of coal” in the Final Results); id. at 4 (asserting that Commerce “neither considered nor addressed the double-counting of coal” in the Final Results, because, according to Domestic Producer, “no party had raised it in their case briefs“); id. at 8 n. 25 (asserting that Commerce “did not address or consider [the] issue [of “the double-counting of coal“] in its Final Results“); id. at 10 (asserting that, “[b]ecause no party briefed the issue of double-counting coal, ... [Commerce] neither considered nor addressed that issue in its Final Results“); Def.-Int.‘s Brief on Supp. Authority at 13 (asserting that “Zhaoqing Tifo did not raise the double-counting coal issue in its administrative case brief[] ..., and Commerce was deprived of the opportunity to consider and respond to any such argument“); with Def.‘s Response Brief at 1 (referring to “Commerce‘s decision to assign a surrogate value to steam cоal, instead of excluding steam coal from the factors of production“) (emphasis added); id. at 5 (asserting that Commerce included steam coal as a factor of production “because there is no record evidence that steam coal is included in PT Tifico‘s surrogate financial statement as part of factory overhead“); id. at 6 (asserting that “Commerce reasonably determined that steam coal in this context is not a general expense, but rather is a direct input in the production of polyester staple fiber“); id. at 19 (asserting that, “[s]team coal energy is used to melt polyethylene terephthalate chips and polypropylene chips at the melting or spinning stage of production,” and that, therefore, in the Final Results, “Commerce determined that steam coal is not a general expense, and, thus, it should be considered among the factors of production and not as factory overhead“); id. at 21 (referring to “Commerce‘s finding that steam coal is a direct input in the production process and should be valued as a factor of production“); Def.-Int.‘s Response Brief at 20 (asserting that “Commerce excluded electricity and water costs from the [factors of production] database because it reasonably concluded ... that those factors were accounted for in P.T. Tifico‘s manufacturing overhead,” and, in contrast, “reasonably concluded that ... coal was not included in P.T. Tifico‘s manufacturing overhead“); id. at 21 (asserting that “it was Commerce‘s intention to include the coal in the [factors of production] database, consistent with the statute and [the agency‘s] longstanding practice of including energy and direct material factors in the [factors of production] database“); id. at 23 (asserting that “Commerce reasonably concluded that P.T. Tifico included electricity and water, but did not include coal, in its overhead“); id. (asserting that “it was reasonable for Commerce to conclude that any coal that P.T. Tifico may
The Government and the Domestic Producer cannot have it both ways. They cannot logically claim both that Commerce was deprived of the opportunity to consider the asserted need to exclude coal from the factors of production database and the potential for double counting, and also simultaneously argue that Commerce reached a deliberate determination on those points. It is possible to argue in the alternative. But these are matters of fact.
Moreover, it is one thing for counsel to seek to “prop up” an agency determination through subtle suggestions that an agency‘s determination could be sustained on the basis of record evidence and arguments that the agency itself did not cite. See section III.C, infra (rejecting various arguments by the Government and Domestic Producer as impermissible post hoc rationale). It is another matter entirely to affirmatively state—as the Government and the Domestic Producer do, at the citations noted above—that the agency in fact considered points and reasoned its way to a decision when the record is devoid of any indication whatsoever that the agency did so. Taking such liberties with the record goes well beyond the limits of zealous advocacy. See nn. 21 & 29, supra.
Absent telepathy, it is impossible to know what was in the minds of Commerce decisionmakers as they prepared the Final Results. In any event, even if Commerce did consider the possibility of excluding coal from the factors of production database and/or the potential for double counting (as it had the opportunity to do), the fact remains that there is no rationale articulated for any such determination and no evidence cited to support it.
Zhaoqing Tifo argues that, in any event, it is well settled that the application of the doctrine of exhaustion in an international trade case is a matter that is committed to the court‘s sound discretion. See Pl.‘s Reply Brief at 5-7; Pl.‘s Supp. Brief at 30-31; Pl.‘s Brief on Supp. Authority at 5;
Accordingly, even if the doctrine of exhaustion were to apply here, and even if it were determined that Zhaoqing Tifo had failed to exhaust and that such failure was not excused by any of the exceptions discussed above, Zhaoqing Tifo nevertheless could be permitted to litigate its double counting claim, subject to the court‘s discretion. See, e.g., Essar Steel, 753 F.3d at 1374 (acknowledging that application of doctrine of exhaustion is subject to discretion of Court of International Trade); Itochu Building Prods. v. United States, 733 F.3d 1140, 1145, 1148 (Fed. Cir. 2013) (recognizing that Court of International Trade‘s application of exhaustion doctrine is matter of “discretion,” subject to appellate review only pursuant to “the demanding abuse-of-discretion standard“); Yangzhou Bestpak Gifts & Crafts, 716 F.3d at 1381 (2013) (same); Ningbo Dafa, 580 F.3d at 1259 (noting that Court of Appeals has “held that applying exhaustion principles in trade cases is subject to the discretion of the judge of the Court of International Trade“) (citation omitted); Agro Dutch Industries Ltd. v. United States, 508 F.3d 1024, 1029 (Fed. Cir. 2007) (quoting Corus Staal for principle that “application of ‘exhaustion principles in trade cases is subject to the discretion of the judge of the Court of International Trade’ “); Corus Staal, 502 F.3d at 1381 & n. 5 (same; sustaining trial court determination that party failed to exhaust, and underscoring breadth of trial court‘s discretion by expressly noting that determination that trial court did not abuse its discretion in finding failure to exhaust “does not imply that the court would have abused its discretion if it had excused [the party] from having to exhaust its administrative remedies“); Norsk Hydro Canada, Inc. v. United States, 472 F.3d 1347, 1356 n. 17 (Fed. Cir. 2006) (citing Court of International Trade‘s “discretion” as to whether or not to “impose an ‘exhaustion’ requirement under
See also Def.-Int.‘s Brief on Supp. Authority at 12-13; Def.‘s Response Brief on Supp. Authority at 3-4; Def.-Int.‘s Response Brief on Supp. Authority at 3-5.
According to the Domestic Producer, “the relevant [Commerce] practices are: ... (b) Commerce‘s standard practice to include [factors of production], including energy inputs, in the [factors of production] database unless [Commerce] knows that doing so would result in double-counting; (c) when it is not definitive whether [a factor of production] is included in the surrogate financial ratios, Commerce utilizes the best information available, on a case-by-case basis, to determine whether to include that factor in the [factors of production] database or the financial ratio; (d) Commerce‘s practice to treat significant inputs, such as coal in this case, as direct materials in its [factors of production] methodology; and (e) Commerce has a preference for valuing respondents’ own energy inputs as [factors of production] when such inputs are part of an energy-intensive process.” Def.-Int.‘s Response Brief on Supp. Authority at 3-4.