Zhejiang Native Produce & Animal By-Products Import & Export Corp. v. United States

United States Court of Appeals for the Federal Circuit

05-1058

ZHEJIANG NATIVE PRODUCE & ANIMAL BY-PRODUCTS IMPORT & EXPORT
CORP., KUNSHAN FOREIGN TRADE CO., CHINA (TUSHU) SUPER FOOD IMPORT
& EXPORT CORP., HIGH HOPE INTERNATIONAL GROUP JIANGSU FOODSTUFFS
IMPORT & EXPORT CORP., NATIONAL HONEY PACKERS & DEALERS
ASSOCIATION (NHPDA), ALFRED L. WOLFF, INC., C.M. GOETTSCHE & CO.,
CHINA PRODUCTS NORTH AMERICA, INC., D.F. INTERNATIONAL (USA) INC.,
EVERGREEN COYLE GROUP, INC., EVERGREEN PRODUCE, INC., PURE SWEET
HONEY FARM, INC., and SUNLAND INTERNATIONAL, INC.,

Plaintiffs-Appellants,

v.

UNITED STATES,

Defendant-Appellee,

and

SIOUX HONEY ASSOCIATION and
AMERICAN HONEY PRODUCERS ASSOCIATION,

Defendants.

Ned H. Marshak, Grunfield, Desiderio, Lebowitz, Silverman & Klestadt LLP, of
New York, New York, argued for plaintiff-appellant. With him on the brief were Bruce M.
Mitchell; and Mark E. Pardo, of Washington, DC. Of counsel were Jeffrey S. Grimson,
of Washington, DC and Adam M. Dambrov, of New York, New York.

Reginald T. Blades, Jr., Senior Trial Counsel, Commercial Litigation Branch, Civil
Division, United States Department of Justice, of Washington, DC, argued for
defendant-appellee. With him on the brief were Peter D. Keisler, Assistant Attorney
General and David M. Cohen, Director. Of counsel on the brief was William J. Kovatch,
Jr., Attorney, Office of Chief Counsel for Import Administration, United States
Department of Commerce, of Washington, DC. Of counsel were Robert LaFrankie,
Berniece Browne and John D. McInerny, Attorneys.

Appealed from: United States Court of International Trade

Judge Richard K. Eaton
United States Court of Appeals for the Federal Circuit

05-1058

ZHEJIANG NATIVE PRODUCE & ANIMAL BY-PRODUCTS IMPORT & EXPORT CORP.,
KUNSHAN FOREIGN TRADE CO.,
CHINA (TUSHU) SUPER FOOD IMPORT & EXPORT CORP.,
HIGH HOPE INTERNATIONAL GROUP
JIANGSU FOODSTUFFS IMPORT & EXPORT CORP.,
NATIONAL HONEY PACKERS & DEALERS ASSOCIATION (NHPDA),
ALFRED L. WOLFF, INC., C.M. GOETTSCHE & CO.,
CHINA PRODUCTS NORTH AMERICA, INC., D.F. INTERNATIONAL (USA) INC.,
EVERGREEN COYLE GROUP, INC., EVERGREEN PRODUCE, INC.,
PURE SWEET HONEY FARM, INC., and SUNLAND INTERNATIONAL, INC.,

Plaintiffs-Appellants,
v.

UNITED STATES,

Defendant-Appellee,
and

SIOUX HONEY ASSOCIATION and
AMERICAN HONEY PRODUCERS ASSOCIATION,

Defendants.

__________________________

DECIDED: December 20, 2005
__________________________

Before NEWMAN, Circuit Judge, ARCHER, Senior Circuit Judge, and RADER, Circuit
Judge.

NEWMAN, Circuit Judge.

Zhejiang Native Produce & Animal By-Products Import & Export Corporation and

other importers and exporters (collectively "Zhejiang") appeal the decision of the United
States Court of International Trade, holding that "critical circumstances," 19 U.S.C.

§1673(a)(3), apply to certain importations of honey from the People's Republic of China.1

We reverse the decision and remand for further proceedings.

ANALYSIS

In 1995 the governments of the People's Republic of China and the United States

entered into an agreement suspending an antidumping investigation of honey imported

from China, initiated as reported at Initiation of Antidumping Duty Investigation: Honey from

the People's Republic of China, 59 Fed. Reg. 54434 (Oct. 31, 1994). The Suspension

Agreement was signed for the United States by the Assistant Secretary of Commerce for

Import Administration and by the Minister-Councillor of the Embassy of the People's

Republic of China. The Agreement stated its purpose as follows:

For the purpose of encouraging free and fair trade in honey, establishing
more normal market relations, and preventing the suppression or
undercutting of price levels of the domestic product, the United States
Department of Commerce ("the Department") and the Government of the
People's Republic of China ("PRC") enter into this suspension agreement
("the Agreement").

Notice of Agreement, Honey from the People's Republic of China: Suspension of

Investigation, 60 Fed. Reg. 42522 (Aug. 16, 1995). The Agreement required that honey

from China would be imported at a price of at least 92% of the weighted average price of all

imported honey from all other countries for the most recent six months of data, and set

quantity limits. The Notice stated that the Agreement complied with "the criteria for

1 Zhejiang Native Produce & Animal By-Products Import & Export Corp. v.
United States, No. 02-00057, 25 ITRD (BNA) 2394 (Ct. Int'l Tr. Nov. 21, 2003); 26 ITRD
(BNA) 2320 (Ct. Int'l Tr. Aug. 26, 2004).

05-1058 2
suspension of an investigation pursuant to Section 734(l) of the Tariff Act of 1930, as

amended." Id. Such criteria include the complete elimination of sales at less than fair

value:

19 U.S.C. §1673c(b). Agreements to eliminate completely sales at less than
fair value or to cease exports of merchandise
The administering authority may suspend an investigation if the
exporters of the subject merchandise who account for substantially all of the
imports of that merchandise agree --
....
(2) to revise their prices to eliminate completely any amount
by which the normal value of the merchandise which is the
subject of the agreement exceeds the export price (or the
constructed export price) of that merchandise.

The Suspension Agreement by its terms expired on August 16, 2000. On

September 29, 2000 the American Honey Producers Association and the Sioux Honey

Association filed with the Department of Commerce a petition asserting dumping of honey

from China. The petition cited a price quotation obtained on August 17, 2000 for Chinese

honey, a price apparently not significantly different from import prices before expiration of

the Agreement. The petition proposed that India be used as a free-market surrogate for

China in accordance with 19 U.S.C. §1677b(c), and provided data that were asserted to

show that the price quotation for Chinese honey was at less than fair value. The

Department of Commerce initiated an antidumping investigation. See Initiation of

Antidumping Duty Investigations: Honey from Argentina and the People's Republic of

China, 65 Fed. Reg. 65831 (Nov. 30, 2000).

The Department of Commerce then conducted a cost and pricing investigation for

India as a free-market surrogate for China, using data from publications and from Indian

honey producers, for the period January 1, 2000 through June 30, 2000. Referring to the

05-1058 3
price quotations for Chinese honey imported under the Suspension Agreement and

following its expiration, Commerce concluded that these prices were at less than fair value

when compared with the data for India. Notice of Preliminary Determination of Sales at

Less Than Fair Value: Honey from the People's Republic of China, 66 Fed. Reg. 24101

(May 11, 2001); Amended Preliminary Determination, 66 Fed. Reg. 40191 (Aug. 2, 2001);

Final Determination, 66 Fed. Reg. 50608, 50609 (Oct. 4, 2001); Amended Final

Determination, 66 Fed. Reg. 63670 (Dec. 10, 2001). Dumping margins ranging from

25.88% to 183.80% were found.

The petitioners also asserted that "critical circumstances" existed. Critical

circumstances are defined in 19 U.S.C. §1673d(a)(3) as when:

(A)(ii) the person by whom, or for whose account, the merchandise was
imported knew or should have known that the exporter was selling the
subject merchandise at less than its fair value and that there would be
material injury by reason of such sales, and
(B) there have been massive imports of the subject merchandise over a
relatively short period.

If the criteria for critical circumstances are met, then antidumping duties are made effective

90 days earlier than the effective date of antidumping duties in the absence of critical

circumstances. The foundation of this enlarged imposition of antidumping duties is, as the

statute states, that the importer "knew or should have known" that the price was below fair

value and would materially injure domestic industry, and that there were "massive imports"

at dumping prices. See generally Joseph E. Patterson, 1 Antidumping and Countervailing

Duty Laws §3:11.

The statute does not state how "knew or should have known" is determined.

Commerce has adopted the general practice of imputing such knowledge whenever the

05-1058 4
dumping margin is greater than 25%, without requiring evidence of actual knowledge.

Applying this imputation, Commerce held that critical circumstances existed for the four

respondents whose imports were of the largest volume, and retrospectively levied

antidumping duties for an additional 90 days, that is, for imports on and after February 10,

2001. For the other respondents, antidumping duties were levied for imports on and after

May 11, 2001, the date of the initial Preliminary Determination.

The Court of International Trade, after a remand to Commerce to check certain of

the data from India, affirmed the critical circumstances ruling. The respondents had argued

that they should not be found to be dumping because their prices were in compliance with

those set under the Suspension Agreement. They pointed out that the Suspension

Agreement was in effect during the Period of Investigation of surrogate data for India.

However, the court held that Commerce was not required to consider the price and volume

terms or even the existence of the Suspension Agreement, stating that "the Suspension

Agreement was not an agreement to eliminate dumping, but rather an agreement to restrict

the volume of imports." Zhejiang, 25 ITRD (BNA) at 2409 n.34. The court held that it was

not relevant whether the import price met the 92% reference price as applied during the

period of the Suspension Agreement, and concluded that compliance with the reference

price did not mean that dumping was avoided. Thus the court held that knowledge was

properly imputed that the price of the honey from China was at less than fair value, despite

the fact that the honey was not sold below the reference price of 92% of the average price

of all imported honey.

Zhejiang challenges the imposition of "critical circumstances" based on this

imputation of knowledge of sales at less than fair value. Zhejiang states that the purpose

05-1058 5
and effect of the Suspension Agreement was to set "completely" a non-dumping price for

Chinese honey, see 19 U.S.C. §1673c(b), and that the importers should not be charged

with imputed knowledge that the China prices would be found to be below fair value when

compared with later-determined costs and prices in India. Zhejiang argues that because

the honey from China met the 92% price condition set in the Suspension Agreement, even

after expiration of the Suspension Agreement, the importers should not, in fairness, be

charged a retrospective penalty based on an unknown surrogate value of honey in India.

Zhejiang points out that the Suspension Agreement was designed to eliminate

dumping, and disputes the government's position and the court's holding that the purpose

of such agreements is not to prevent sales at less than fair value. The government cites a

subsection of the statute that refers to suspension agreements with a nonmarket economy:

19 U.S.C. §1673c(l)(1). The administering authority may suspend an
investigation under this part upon acceptance of an agreement with a
nonmarket economy country to restrict the volume of imports into the United
States of the merchandise under investigation only if the administering
authority determines that --
(A) such agreement satisfies the requirements of subsection (d) of this
section, and
(B) will prevent the suppression or undercutting of price levels of domestic
products by imports of the merchandise under investigation.

This subsection, recognizing that value levels may not be comparable for a nonmarket

economy, requires that a suspension agreement that restricts the volume of imports will not

be entered unless the restriction will prevent suppression or undercutting of domestic

prices. However, the statute does not mean or imply that dumping prices are intended to

be acceptable, for §1673c(b) mandates that such agreements will "eliminate completely

sales at less than fair value."

05-1058 6
 The government does not argue that the Suspension Agreement failed to comply

with the statute. Rather, the government argues that Zhejiang was properly imputed with

knowledge that prices that conformed with the Agreement were dumping prices. That

position is negated by the statute itself, for the prices in compliance with the Suspension

Agreement were required to be at a level that would eliminate sales at less than fair value.

See United States v. Morton, 467 U.S. 822, 828 (1984) (parts of statutes are not construed

in isolation; a statute is read as a whole). The Court of International Trade erred in holding

that the Suspension Agreement was not designed to eliminate dumping.

Imputed knowledge of both unfair pricing and material injury should not be

automatic. Such a determination is made "on a case by case basis," as the International

Trade Administration of the Department of Commerce explained with respect to imputing

knowledge of values in a market economy:

. . . in our analysis of the "knowledge of sales at less than fair value" issue in
state-controlled economy investigations, we must develop tests for
determining whether the importers had, or should have had, knowledge of
sales at less than fair value which are not dependent upon specific actual or
implied knowledge of which country would be chosen as a surrogate for
determining fair value.
We must make the required determination on a case by case basis
using all the available information and drawing upon market conditions of the
industry subject to the investigation.

Final Determination of Sales at Less Than Fair Value: Potassium Permanganate From the

People's Republic of China, 48 Fed. Reg. 57347, 57349 (Dec. 29, 1983), upheld by ICC

Industries, Inc. v. United States, 812 F.2d 694 (Fed. Cir. 1987). This court sustained the

imputation of knowledge that potassium permanganate prices were below fair value on the

facts of that case, where there were only two originating sources of potassium

permanganate in world commerce, and the product originating from China was priced

05-1058 7
significantly lower than the product from Spain. Also, in ICC Industries there was not a

non-dumping settlement at a specified reference price. These are all factors to be

considered when deciding, on a case by case basis, whether there are critical

circumstances warranting the enlarged retroactive imposition of dumping liability.

Zhejiang argues that the "knew or should have known" requirement for critical

circumstances was not met, and that substantial evidence does not support the contrary

finding based on imputation. We agree. As Zhejiang states, "it strains credibility to suggest

that Commerce could establish minimum prices for honey designed to 'prevent the

suppression or undercutting of price levels of the United States honey products' and then

determine that U.S. importers purchasing honey in accordance with these pricing guidelines

should have known these sales would be found to be at less than fair value." Reply Br. at

15-16. When all factors are considered, there is not substantial evidence to support the

finding of critical circumstances.

The contrary ruling of the Court of International Trade is reversed. The case is

remanded for appropriate further proceedings.

REVERSED AND REMANDED

05-1058 8