Appvion, Inc. v. United States

Slip Op. 15-104

UNITED STATES COURT OF INTERNATIONAL TRADE

________________________________
APPVION, INC., :
:
Plaintiff, : Before: Nicholas Tsoucalas,
: Senior Judge
v. :
: Court No.: 14-00143
UNITED STATES, :
: PUBLIC VERSION
Defendant, :
And :
:
PAPIERFABRIK AUGUST KOEHLER SE, :
:
Defendant-Intervenor. :
:
_____________________ :

OPINION

[Plaintiff’s Motion for Judgment on the Agency Record is denied
and Commerce’s Final Results are affirmed.]

Dated: ______________
September 17, 2015

Gilbert B. Kaplan and Daniel L. Schneiderman, King & Spalding LLP,
of Washington, D.C., for Plaintiff.

Joshua E. Kurland, Trial Attorney, U.S. Department of Justice,
Commercial Litigation Branch, of Washington, D.C., for Defendant.
With him on the brief were Reginald T. Blades, Jr., Assistant
Director, Jeanne E. Davidson, Director, and Benjamin C. Mizer,
Principal Deputy Assistant Attorney General. Of counsel on the
brief was Nanda Srikantaiah, Office of the Chief Counsel for Trade
Enforcement & Compliance, U.S. Department of Commerce of
Washington, D.C.

F. Amanda DeBusk and Matthew R. Nicely, Hughes Hubbard & Reed LLP,
of Washington, D.C., for Defendant-Intervenor.
Court No. 14-00143 Page 2

Tsoucalas, Senior Judge: This case concerns the

Defendant United States Department of Commerce’s (“Commerce”)

Final Results of the fourth administrative review (“AR4”) of the

antidumping order on lightweight thermal paper (“LWTP”) from

Germany. Lightweight Thermal Paper From Germany: Final Results of

Antidumping Duty Administrative Review; 2011–2012,(“Final

Results”) 79 Fed. Reg. 34,719 (June 18, 2014); Issues and Decision

Memorandum for the 2011-2012 Final Results of the Administrative

Review on Lightweight Thermal Paper from Germany, (“IDM for AR4”)

A-428-840, (June 11, 2014). The period of review (“POR”) is

November 1, 2011, through October 31, 2012. Final Results, 79

Fed. Reg. at 34,719.

Plaintiff, Appvion Inc., (“Appvion”) filed the instant

suit disputing Commerce’s determination that certain sales were

within the ordinary course of trade and that the application of

Adverse Facts Available (“AFA”) was not warranted. Compl., June

19, 2014, ECF No. 7. Appvion has filed a Motion for Judgment on

the Agency Record. Pl.’s Mot. for J. on the Agency R. (“Pl.’s

Br.”), Dec. 22, 2014, ECF No. 28. Commerce and Defendant-

Intervenor, Papierfabrik August Koehler SE (“Koehler” or

“Defendant-Intervenor”) oppose Appvion’s Motion. Def.’s Mem. in

Opp’n to Pl.’s Rule 56.2 Mot. for J. Upon Agency R. (“Def.’s Br.”),

May 29, 2015, ECF No. 39; Def.-Intervenor’s Resp. in Opp’n to Pl.’s

Rule 56.2 Mot. for J. on the Agency R., May 28, 2015, ECF No. 36.
Court No. 14-00143 Page 3

For the following reasons, Appvion’s Motion for Judgment on the

Agency Record is denied, and Commerce’s Final Results are affirmed.

BACKGROUND

Appvion is a manufacturer of domestic like product and

participated in the review that gave rise to the Final Results.

Compl. at ¶4. Koehler is a foreign exporter/producer of LWTP in

Germany, whose paper was subject to a 6.50% weighted average

dumping margin pursuant to the Antidumping Duty Orders:

Lightweight Thermal Paper From Germany and the People’s Republic

of China, 73 Fed. Reg. 70,959, 70,959-60 (Nov. 24, 2008).

A brief synopsis of the third administrative review

(“AR3”) is necessary to place the instant review in context. In

AR3, Koehler engaged in a fraudulent transshipment scheme where it

sold 48-gram thermal paper that was destined for consumption in

Germany through various intermediaries in third countries, in

order to manipulate prices of paper shipped directly to its German

customers. Issues and Decision Memorandum for the Final Results

of the 2010-2011 Administrative Review on Lightweight Thermal

Paper from Germany (“IDM for AR3”) at 2, A-428-840, Apr. 10, 2013.

The manipulated prices would affect the calculation of normal value

that would be used in determining the antidumping margin. Id.

Koehler did not voluntarily disclose the transshipment scheme

during AR3. Id. at 12. Koehler discontinued the transshipment

scheme on [[ ]]. Pl.’s Confidential App. Koehler’s
Court No. 14-00143 Page 4

Supplemental Resp. at 25, May 15, 2013, ECF No. 30. As a result,

Commerce applied total AFA to Koehler in AR3. IDM for AR3 at 6.

Commerce’s decision was affirmed by this Court. Papierfabrik

August Koehler SE v. United States, 38 CIT ____, 7 F.Supp.3d 1304

(2014), appeal filed and docketed, Papierfabrik August Koehler SE

v. United States, Appeal No. 15-1489 (Fed. Cir. Mar. 25, 2015).

In AR4, however, Koehler acknowledged that the

transshipments began prior to the POR and ended during AR4. Pl.’s

Confidential App., Koehler Section A Response at 15-17, Feb. 25,

2012. In contrast to AR3, in AR4 Koehler fully disclosed the

transshipment sales channel, Channel 2, and its related sales data

in its reporting of home market sales during AR4. See id. at 15-

17, 24, and Ex. A-7. Koehler sold LWTP through three sales channels

to its German customers during AR4: Channel 1 (direct shipments),

Channel 2 (transshipped sales), and Channel 3 (consignment sales).

IDM for AR 4, at 3.

During AR4, Appvion contended that sales of KT 48 (a

grade of thermal paper) products through Channels 1 and 3 were

outside the ordinary course of trade. Id. Appvion claimed that

the sales were made at artificial prices that were “aberrationally

low and not determined by commercial considerations nor market-

based supply and demand, in part because of the particular manner

in which Koehler established prices for these sales.” Id. Appvion

also argued that the application of AFA was warranted. Id. at 18.
Court No. 14-00143 Page 5

In the Final Results, Commerce determined that the sales

were not outside the ordinary course of trade and concluded that

Koehler did not make sales of subject merchandise at less than

normal value. Id. at 6-7; Final Results 79 Fed. Reg. at 34,719.

Accordingly, Commerce found that Koehler’s LWTP was subject to a

zero percent weighted-average dumping margin for the POR. Final

Results 79 Fed. Reg. at 34,720. Furthermore, Commerce found no

basis to apply AFA. IDM for AR4 at 19. Appvion filed the instant

action disputing Commerce’s Final Results and a Motion for Judgment

on the Agency Record. Compl. at 1-6; Pl.’s Br. at 1-45.

JURISDICTION AND STANDARD OF REVIEW

This Court has jurisdiction pursuant to section 201 of

the Customs Courts Act of 1980, 28 U.S.C. § 1581(c) (2012), and

section 516A(a)(2)(B)(iii) of the Tariff Act of 1930, as amended,

19 U.S.C. § 1516a(a)(2)(B)(iii) (2012). 1

In reviewing a challenge to Commerce's final

determination in an antidumping administrative review, the Court

will uphold Commerce's determination unless it is “unsupported by

substantial evidence on the record, or otherwise not in accordance

with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). Substantial evidence

means “more than a mere scintilla” of “such relevant evidence as

a reasonable mind might accept as adequate to support a

1 Further citations to the Tariff Act of 1930, as amended, are to the relevant
provisions of Title 19 of the U.S. Code, 2012 edition.
Court No. 14-00143 Page 6

conclusion.” Universal Camera Corp. v. NLRB, 340 U.S. 474, 477, 71

S.Ct. 456, 459, 95 L.Ed. 456, 462 (1951)(quoting Consol. Edison

Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126,

140 (1938)). To determine if substantial evidence exists, the

court reviews the record as a whole, including whatever “fairly

detracts from its weight.” Id. at 488, 71 S.Ct. at 464, 95 L.Ed.

at 467. 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. Am. Silicon Techs. v. United States, 261 F.3d 1371,

1376 (Fed. Cir. 2001); see also Consolo v. Fed. Mar. Comm'n, 383

U.S. 607, 620, 86 S.Ct. 1018, 1026, 16 L.Ed.2d 131, 141 (1966).

DISCUSSION

1. Ordinary Course of Trade

Antidumping duties are equal to the “amount by which

the normal value exceeds the export price (or the constructed

export price) for the merchandise.” 19 U.S.C. § 1673. The

antidumping statute defines normal value as the price of the

subject merchandise “at a time reasonably corresponding to the

time of the sale used to determine the export price or constructed

export price,” 19 U.S.C. § 1677b(a)(1)(A), where the price is “the

price at which the foreign like product is first sold . . . for

consumption in the exporting country, in the usual commercial

quantities and in the ordinary course of trade . . . .” 19 U.S.C.
Court No. 14-00143 Page 7

§ 1677b(a)(1)(B)(i). In order for Commerce to include particular

sales in its calculation of normal value, the sales must have been

made in the ordinary course of trade. U.S. Steel Corp. v. United

States, 37 CIT ____, 953 F.Supp.2d 1332, 1341 (2013). In turn,

the “ordinary course of trade” means:

the conditions and practices which, for a
reasonable time prior to the exportation of
the subject merchandise, have been normal in
the trade under consideration with respect to
merchandise of the same class or kind. The
administering authority shall consider the
following sales and transactions, among
others, to be outside the ordinary course of
trade:

(A) Sales disregarded under section
1677b(b)(1) of this title [sales below
the cost of production].

(B) Transactions disregarded under section
1677b(f)(2) of this title [sales between
affiliated persons where the amount
representing the element of value does not
fairly reflect the amount usually reflected in
sales of merchandise under consideration in
the market under consideration].

19 U.S.C. § 1677(15). Other than for the aforementioned

subsections (A) and (B), the Tariff Act provides “little assistance

in determining what is outside the scope of that definition.” NSK

Ltd. v. United States, 25 CIT 583, 599, 170 F.Supp.2d 1280, 1296

(2001). The Court has held that “the statutory provision defining

what is considered outside the ordinary course of trade is

unclear.” Id. Accordingly, the Court has found that Commerce has

discretion to determine what sales are outside the ordinary course
Court No. 14-00143 Page 8

of trade. U.S. Steel, 37 CIT at ____, 953 F.Supp.2d at 1341.

Commerce may consider sales or transactions to be outside the

ordinary course of trade “if . . . based on an evaluation of all

of the circumstances particular to the sales in question, that

such sales or transactions have characteristics that are

extraordinary for the market in question.” 19 C.F.R. §

351.102(b)(35) (2015). Examples of sales that Commerce might

consider as being outside the ordinary course of trade are sales

or transactions involving off-quality merchandise or merchandise

produced according to unusual product specifications, merchandise

sold at aberrational prices or with abnormally high profits,

merchandise sold pursuant to unusual terms of sale, or merchandise

sold to an affiliated party at a non-arm’s length price. Id. In

determining whether home market sales are in the ordinary course

of trade, Commerce must “evaluate not just ‘one factor taken in

isolation but rather . . . all the circumstances particular to the

sales in question.’” Cemex, S.A. v. United States, 133 F. 3d 897,

900 (Fed. Cir. 1998) (quoting Murata Mfg. Co. v. United States, 17

CIT 259, 264, 820 F.Supp. 603, 607 (1993)). “In applying its

totality of the circumstances test, Commerce does not give

particular weight to any single factor. Instead, Commerce

determines which factor may be more or less significant based on

the case at hand.” U.S. Steel, 953 F. Supp.2d at 1342 (citing

Murata, 17 CIT at 263, 820 F.Supp. at 606). “An analysis of these
Court No. 14-00143 Page 9

factors should be guided by the purpose of the ordinary course of

trade provision which is ‘to prevent dumping margins from being

based on sales which are not representative’ of the home market.”

Id. (quoting Monsanto Co. v. United States, 12 CIT 937, 940, 698

F.Supp. 275, 278 (1988)).

Very low prices or profits may be indicative of sales

outside the ordinary course of trade; however, the mere fact of

such low prices or profits does not necessarily mean that such

sales are outside the ordinary course of trade, as Commerce must

evaluate all the circumstances particular to the sales in question.

See Cemex, S.A. v. United States, 19 CIT 587, 592, (not reported

in Federal Supplement) (1995), aff’d, Cemex, S.A. v. United States,

133 F.3d at 900; see also, NTN Bearing Corp. of America, 25 CIT

664, 681, 155 F.Supp.2d 715, 732 (2001), rev’d on other grounds

sub nom. Fag Italia S.p.A. v. United States, 402 F.3d 1356 (2005).

Commerce’s decision is “entitled to deference from this

Court.” Mantex, Inc. v. United States, 17 CIT 1385, 1403, 841 F.

Supp. 1290, 1306 (1993). “The Plaintiff has the burden of proving

whether sales used in Commerce’s calculations are outside the

ordinary course of trade or not . . . .” Nachi-Fujikoshi Corp. v.

United States, 16 CIT 606, 608, 798 F. Supp. 716, 718 (1992).

Appvion argues that direct sales of matching 48 gram

products were outside the ordinary course of trade and should not

have been included in the calculation of normal value, because the
Court No. 14-00143 Page 10

sales had extraordinary characteristics. Pl.’s Br. at 9. Appvion

argues that the sales were exceptional and should be excluded,

because they were the only sales vetted through [[

]] to eliminate dumping. Id. at 10.

Appvion further contends that the sales were outside the ordinary

course of trade, because they were made at artificially low prices

or profit levels, while higher market-priced sales were concealed

through transshipments (Channel 2). Id. at 9-10. Appvion calls

this Koehler’s “two-tier pricing mechanism.” Id. at 19. Appvion

came to this conclusion by aggregating sales between Channels 1

(direct shipments) and 3 (consignment sales) and comparing them

against Channel 2 (transshipped sales). Def.’s Br. at 10.

Commerce contends that when the sales are disaggregated,

it did not find “aberrationally low” profits earned on Channel 1

and 3 sales, rather, it found that variations in price and

profitability were due to market factors as opposed to the

transshipment scheme. Id. at 11. Appvion does not point to any

authority questioning the reasonableness of Commerce’s decision to

disaggregate the channels. Pl.’s Br. at 1-44. Accordingly, the

court finds that Commerce’s decision to disaggregate the channels

was reasonable given that Koehler identified them as separate sales

channels. Pl.’s Confidential App. Koehler’s Resp. to Section A

Questionnaire at 15, Feb. 25, 2012.
Court No. 14-00143 Page 11

Appvion argues that sales of the 55-gram product

(another grade of LWTP) “form a commercial benchmark” against which

to evaluate Koehler’s pricing for the matching product. Pl.’s Br.

at 14. Appvion assumes that sales of the “48-gram product would

carry a substantial price premium (on a per weight basis) over

sales of a 55-gram product, because one kilogram of the 48-gram

product has 15% more square meters of paper than one kilogram of

the 55-gram product.” Id. Nevertheless, Commerce properly

considered various factors that may explain the difference in

price: there is “significant demand” for KT 55 products in

Koehler’s home market, as the KT 55 product is thicker and

stronger; transport costs are [[

]]; and [[ ]] for the KT 55 product

allow for [[ ]]. Def.’s Br. at

23-24. Thus, Commerce cited evidence in the record showing that

pricing patterns may be influenced by a variety of factors. See

id. Accordingly, Commerce’s decision not to use KT 55 as a

commercial benchmark was reasonable and supported by substantial

evidence.

Appvion further alleges that a dramatic price increase

among Channels 1 and 3 direct sales after the transshipment scheme

ended in June 2012 confirms that the sales at issue were made

outside the ordinary course of trade. Pl.’s Br. at 14-15. The

court disagrees. When the sales were disaggregated, Commerce did
Court No. 14-00143 Page 12

not find a dramatic price increase after the transshipment scheme

ended. Pl.’s Confidential App. Price and Profitability Analysis

at Fig. 2, June 11, 2014.

Further, after the transshipment scheme was discontinued

in [[ ]] Channel 1 prices [[ ]] only in [[

]], which is [[ ]] after the scheme was

discontinued. Id. at 3. This suggests that the price increase

was not connected to the transshipment scheme. See id. There is

a consistency in prices between Channels 2 and 3, as the Channel

3 customer replaced the [[ ]] Channel 2 customer after

the transshipment scheme ended in [[ ]]. See id. at Fig.

2. The prices were similar both during and after the transshipment

scheme ended in [[ ]]. See id. Correspondingly, Channel 1

sales were made to [[ ]] and showed more variation

in price. See id. at 5. This suggests that the price differences

between sales could be attributed to [[ ]].

See id.

Appvion counters that Channel 3 (consignment) sales are

irrelevant to its ordinary course of trade argument, because

[[ ]] of matching 48-gram products

during the transshipment period. Pl.’s Br. at 25. Appvion’s

argument, however, is inconsistent, because it claims that Channel

3 sales are irrelevant, yet it argues for an aggregated price

analysis of Channels 1 and 3. Id. at 21, 25. Channel 3 sales are
Court No. 14-00143 Page 13

relevant, because they relate to Appvion’s claim of a dramatic

increase in price when the transshipment scheme was discontinued.

Commerce’s disaggregated profitability analysis reveals

that “Channel 1 profits, while ranging from [[

]] than the Channel 2 profits, were not so

different as to be ‘aberrational.’” Pl.’s Confidential App. Price

and Profitability Analysis at 8.

The court finds that Commerce’s profitability analysis

was reasonable. See id. Even assuming arguendo that the sales

were made at abnormally low prices and profits, the sales are not

necessarily outside the ordinary course of trade. The mere fact

of abnormally low prices and profits is not enough to put sales

outside of the ordinary course of trade, as Commerce examines all

the circumstances particular to the sales in question. Cemex, 133

F.3d at 900 (quoting Murata, 17 CIT at 264, 820 F.Supp. at 607).

Moreover, here, none of the other factors associated with sales

outside the ordinary course of trade are present, as there were no

sales involving: off quality merchandise; merchandise produced

according to unusual specifications; merchandise sold pursuant to

unusual terms of sale; or merchandise sold to an affiliated party

at a non-arm’s length price. 19 C.F.R. § 351.102(b)(35). Thus,

Commerce’s determination was reasonable.
Court No. 14-00143 Page 14

Lastly, Appvion argues that Commerce’s interpretation of

the pricing data for KT 48 F20 (another grade of LWTP) is

unsupported and irrational. Pl.’s Br. at 31. Appvion’s argument,

however, does nothing to change the fact that under a disaggregated

analysis, Commerce did not find a dramatic price increase after

the transshipment scheme ended. Pl.’s Confidential App. Price and

Profitability Analysis at Fig. 2.

2. Adverse Facts Available

Commerce may apply AFA where “an interested party has

failed to cooperate by not acting to the best of its ability to

comply with a request for information.” 19 U.S.C. § 1677e(b).

“Compliance with the ‘best of its ability’ standard is determined

by assessing whether respondent has put forth its maximum effort

to provide Commerce with full and complete answers to all inquiries

in an investigation.” Nippon Steel Corp. v. United States, 337

F.3d 1373, 1382 (Fed. Cir. 2003). Commerce enjoys broad discretion

when considering whether to apply AFA. See PAM, S.p.A. v. United

States, 582 F.3d 1336, 1339-40 (Fed. Cir. 2009). This discretion

does not require that Commerce show that an importer cooperated to

the best of its ability every time it determines that AFA should

not be applied. AK Steel Corp. v. United States, 28 CIT 1408,

1417, 346 F.Supp.2d 1348, 1355 (2004). Cooperating to the best of

its ability means that the company must: take reasonable steps to

keep and maintain full and complete records documenting the
Court No. 14-00143 Page 15

information that a reasonable importer should anticipate being

called upon to produce; have familiarity with all the records it

maintains; and conduct prompt, careful, and comprehensive

investigations of all relevant records. Nippon, 337 F.3d at 1382.

In AR3, Commerce found that Koehler failed to cooperate

to the best of its ability and significantly impeded the review by

not fully reporting its home market sales. IDM for AR3 at 9.

Consequently, Commerce applied AFA in that review. Id. By

comparison, in AR4, Koehler fully disclosed its home market sales

information including the transshipment scheme, and Commerce

confirmed this through verification. IDM for AR4, at 15. Appvion,

however, contends that the transshipment scheme affected Koehler’s

entire accounting system with fraud such that any verification by

Commerce cannot be trusted. Pl.’s Br. 40-41.

Appvion heavily relies on the Court’s holding in Tianjin

Magnesium Int’l Co., Ltd. v. United States, 844 F. Supp. 2d 1342,

1347 (2012), in support of its contention. The Court takes issue

with Appvion’s contention. In Tianjin, this Court concluded that

the application of AFA was warranted where the respondent submitted

false documents two months after their falsity had been established

in a failed verification. Id. The instant case is distinguishable,

because, here, Koehler fully disclosed its home market sales

information including the transshipment scheme, and Commerce

confirmed this through verification. Pl.’s Confidential App.,
Court No. 14-00143 Page 16

Koehler Section A Response at 15-17, 24, and Ex. A-7. Furthermore,

Koehler put forth maximum effort to provide Commerce with full and

complete answers to the request for information. See Nippon, 337

F.3d at 1382. Moreover, there is no indication that Koehler was

unfamiliar with its records or that it failed to maintain full and

complete records or that it did not conduct a prompt, careful, and

comprehensive investigation. See id. The court finds that

Commerce’s decision not to apply AFA here was reasonable.

3. Conclusion

For the foregoing reasons, Plaintiff’s Motion for

Judgment on the Agency Record is denied and Commerce’s Final

Results are affirmed. Judgment will be entered accordingly.

/s/ Nicholas Tsoucalas
Nicholas Tsoucalas
Senior Judge
Dated: September 17, 2015
New York, New York