Slip Op. 17-24
UNITED STATES COURT OF INTERNATIONAL TRADE
SHANGHAI WELLS HANGER CO., LTD.,
Plaintiff,
v. Before: Leo M. Gordon, Judge
Consol. Court No. 15-00103
UNITED STATES,
Defendant.
OPINION and ORDER
[Commerce’s final results remanded.]
Dated: March 2, 2017
Jonathan M. Freed, Trade Pacific PLLC of Washington, DC, for Plaintiffs Shanghai
Wells Hanger Co., Ltd., Hong Kong Wells Ltd., Hong Kong Wells Ltd. (USA), and
Fabriclean Supply, Inc.
Courtney D. Enlow, Trial Attorney, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice of Washington, DC, for Defendant United States. With her on
the brief were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Jeanne E.
Davidson, Director, Reginald T. Blades, Jr., Assistant Director. Of counsel on the brief
was Henry J. Loyer, Attorney, Office of the Chief Counsel for Trade Enforcement and
Compliance of Washington, DC.
Gordon, Judge: This action involves the fifth administrative review conducted by
the U.S. Department of Commerce (“Commerce”) of the antidumping duty order covering
steel wire garment hangers from the People’s Republic of China (“PRC”). See Steel Wire
Garment Hangers from the PRC, 79 Fed. Reg. 65,616 (Dep’t Commerce Nov. 5, 2014)
(prelim. results admin. rev.) (“Preliminary Results”) and accompanying Decision Mem. for
the Prelim. Results of the 2012-2013 Antidumping Duty Admin. Rev., A–570–918,
Consol. Court No. 15-00103 Page 2
(Oct. 31, 2014), PD 1781 at bar code 3238876-01, ECF No. 21 (“Preliminary Decision
Memo”); see also Steel Wire Garment Hangers from the PRC, 80 Fed. Reg. 13,332
(Dep’t Commerce Mar. 13, 2015) (final results admin. rev.) (“Final Results”) and
accompanying Issues and Decision Mem. for Steel Wire Garment Hangers from the PRC,
A–570–918, (Mar. 6, 2015), PD 197 at bar code 32631490-01, ECF No. 21
(“Final Decision Memo”).
Before the court is the USCIT Rule 56.2 motion for judgment on the agency record
of Plaintiffs Shanghai Wells Hanger Co., Ltd., Hong Kong Wells Ltd., Hong Kong Wells
Ltd. (USA), and Fabriclean Supply, Inc. (collectively, “Plaintiffs” or “Shanghai Wells”).
See Rule 56.2 Mem. Supp. Mot. J. Agency R. of Pls. Shanghai Wells Hanger Co., Ltd.,
Hong Kong Wells Ltd., Hong Kong Wells Ltd. (USA), and Fabriclean Supply, Inc.,
ECF No. 41 (“Pls.’ Br.”); see also Def.’s Mem. Opp’n Pls.’ Rule 56.2 Mot. J. Agency R.,
ECF No. 49 (“Def.’s Opp’n”); Pls.’ Reply Def.’s Opp’n, ECF No. 54 (“Pls.’ Reply”).
The court has jurisdiction pursuant to Section 516A(a)(2)(B)(iii) of the Tariff Act of 1930,
as amended, 19 U.S.C. § 1516a(a)(2)(B)(iii) (2012),2 and 28 U.S.C. § 1581(c) (2012).
Plaintiffs challenge (1) Commerce’s selection of Thailand as the primary surrogate
country, (2) Commerce’s valuation of Shanghai Wells’ labor factor of production (“FOP”);
(3) Commerce’s calculation of surrogate financial ratios, (4) Commerce’s valuation of
1
“PD” refers to a document contained in the public administrative record.
2
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.
Consol. Court No. 15-00103 Page 3
Shanghai Wells’ corrugated paperboard input; and (5) Commerce’s valuation of Shanghai
Wells’ brokerage and handling costs. For the reasons that follow, the court remands this
matter to Commerce to reconsider its surrogate country selection. The court reserves
judgment on the remaining issues, which may become moot.
I. Standard of Review
The court sustains Commerce’s “determinations, findings, or conclusions” unless
they are “unsupported by substantial evidence on the record, or otherwise not in
accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). More specifically, when reviewing
agency determinations, findings, or conclusions for substantial evidence, the court
assesses whether the agency action is reasonable given the record as a whole.
Nippon Steel Corp. v. United States, 458 F.3d 1345, 1350-51 (Fed. Cir. 2006); see also
Universal Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951) (“The substantiality of
evidence must take into account whatever in the record fairly detracts from its weight.”).
Substantial evidence has been described as “such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion.” DuPont Teijin Films USA v.
United States, 407 F.3d 1211, 1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v.
NLRB, 305 U.S. 197, 229 (1938)). Substantial evidence has also been described as
“something less than the weight of the evidence, and the possibility of drawing two
inconsistent conclusions from the evidence does not prevent an administrative agency’s
finding from being supported by substantial evidence.” Consolo v. Fed. Mar. Comm’n,
383 U.S. 607, 620 (1966). Fundamentally, though, “substantial evidence” is best
Consol. Court No. 15-00103 Page 4
understood as a word formula connoting reasonableness review. 3 Charles H. Koch, Jr.,
Administrative Law and Practice § 9.24[1] (3d ed. 2016). Therefore, when addressing a
substantial evidence issue raised by a party, the court analyzes whether the challenged
agency action “was reasonable given the circumstances presented by the whole record.”
8A West’s Fed. Forms, National Courts § 3.6 (5th ed. 2016).
II. Discussion
In an antidumping duty administrative review, Commerce determines whether
subject merchandise is being, or is likely to be, sold at less than fair value in the United
States by comparing the export price and the normal value of the merchandise. 19 U.S.C.
§§ 1675(a)(2)(A), 1677b(a). In the non-market economy (“NME”) context, Commerce
calculates normal value using data from surrogate countries to value respondents’ FOPs.
19 U.S.C. § 1677b(c)(1)(B). Commerce must use the “best available information” in
selecting surrogate data from “one or more” surrogate market economy countries.
19 U.S.C. § 1677b(c)(1)(B), (4). The surrogate data must “to the extent possible” be from
a market economy country or countries that are (1) “at a level of economic development
comparable to that of the [NME] country” and (2) “significant producers of comparable
merchandise.” 19 U.S.C. § 1677b(c)(4). Commerce has a stated regulatory preference to
“normally . . . value all factors in a single surrogate country.” 19 C.F.R. § 351.408(c)(2)
(2013). Commerce utilizes a four-step process to select a surrogate country:
(1) the Office of Policy . . . assembles a list of potential surrogate countries
that are at a comparable level of economic development to the NME
country; (2) Commerce identifies countries from the list with producers of
comparable merchandise; (3) Commerce determines whether any of the
Consol. Court No. 15-00103 Page 5
countries which produce comparable merchandise are significant producers
of that comparable merchandise; and (4) if more than one country satisfies
steps (1)–(3), Commerce will select the country with the best factors data.
Vinh Hoan Corp. v. United States, 39 CIT ___, ___, 49 F. Supp. 3d 1285, 1292 (2015)
(internal quotation marks omitted) (quoting Import Admin., U.S. Dep't of Commerce,
Non-Market Economy Surrogate Country Selection Process, Policy Bulletin 04.1 (2004)
(“Policy Bulletin”), available at http://enforcement.trade.gov/policy/bull04–1.html
(last visited this date)). See also 19 C.F.R. § 351.408(c)(2); Policy Bulletin at 4 (“[D]ata
quality is a critical consideration affecting surrogate country selection.”). When choosing
the “best available” surrogate data on the record, Commerce, to the extent practicable,
seeks data that are publicly available, product-specific, reflective of a broad market
average, and contemporaneous with the period of review. Qingdao Sea–Line Trading Co.
v. United States, 766 F.3d 1378, 1386 (Fed. Cir. 2014).
Here, Commerce issued a non-exhaustive list of potential surrogate countries.
See Letter Regarding Deadlines for Surrogate Country and Surrogate Value Comments,
Attach. 1, PD 14 at bar code 3175386-01 (Jan. 23, 2014). Commerce identified six
potential surrogate countries that were at a level of economic development comparable
to the PRC and were significant producers of comparable merchandise. Id. Commerce’s
surrogate country determination therefore turned on the issue of data quality, i.e., which
country had the best available data. The choice soon narrowed from among six to
between two, Thailand and the Philippines. Commerce appeared to address the relative
quality of Thai and Philippine import data, labor data, and financial statements to
Consol. Court No. 15-00103 Page 6
determine which country provided the “best available” information. See Final Decision
Memo at 12 (Comment 2, “Selection of Surrogate Country”). For import and labor data,
Commerce determined that Thailand had the better quality data. Id. at 10-11.
For the financial statements, however, Commerce did not compare the available
Philippine and Thai statements. Commerce simply concluded that the Thai financial
statements were “usable” and relied on a regulatory preference to value all factors of
production in a single country. Id. at 15 (“[B]ecause we have useable financial statements
from Thailand, the primary surrogate country in this review, and because it is the
Department’s preference to stay within the primary surrogate country, we are not
considering the Philippine financial statements.”).
The problem here is straightforward. Plaintiffs argue that Commerce never
compared the Philippine and Thai financial statements to determine which was best, and
that by sidestepping this comparison (one Commerce made for import and labor data),
Commerce failed to apply its surrogate country selection criteria reasonably. See Pls.’
Br. 13-14. The court agrees. Implicit in Commerce’s “finding” that the Thai financial
statements are merely “usable” is a tacit concession that the Philippine financial
statements are actually superior, a fact borne out by the record. Plaintiffs explain that the
four Philippine surrogate companies “produced comparable merchandise by drawing wire
rod to wire and making various wire products,” id. at 13-14, which closely resembles
Shanghai Wells’ production process. Id. at 21. Plaintiffs contrast the Thai financial
statements, noting that the two of the three Thai companies – Sahasilp and Monkgol
Consol. Court No. 15-00103 Page 7
Fasteners – did not produce comparable merchandise and did not draw wire from wire
rod in the production process. Id. 21-22. According to its public financial statements,
Sahasilp manufactured and sold “all kinds of nuts, rivets, screws, pressed components of
shoe[] decoration and related accessories,” and its web site described the following
product categories: “Furniture Part, Automotive Part, Machines, Springs, Standard
Stainless Steel Chemical Elements, and Cold Forming Carbon Steel,” which, Plaintiffs
note, are not comparable to garment hangers. Id. 21 (quoting M&B Metal Prods. Co.’s
Surrogate Value Submission, Ex. 1, P.D. 170 at barcode 3232295-01 (Oct. 1, 2014) &
Ex. 3, P.D. 172 at barcode 3232295-03 (Oct. 1, 2014)). Plaintiffs also note that the record
shows that Mongkol Fastener produced fasteners for “various applications such as
construction part, machinery part, automobile part, electrical appliance part, [and] medical
implant part,” using over fifteen types of machinery, none of which included wire drawing
machinery. Id. 22 (“Nothing in this record indicated that Mongkol Fastener engage[d] in
drawing wire from steel wire rod, but the record contains abundant evidence regarding its
forging and die-casting operations for manufactured products dissimilar to steel wire
garment hangers.”). Defendant and Defendant-Intervenor do not offer a compelling or
persuasive response to Plaintiffs’ analysis of the record.
Given the importance of wire drawing for the production of the subject
merchandise, and the relative weakness of the Thai companies on this characteristic
when compared to those of the Philippines, the court cannot understand how a
reasonable mind would conclude that the Thai financial statements are superior to the
Consol. Court No. 15-00103 Page 8
Philippine financial statements. Rather than acknowledge the apparent superiority of the
Philippine financial statements, and incorporate that fact into its surrogate country
selection analysis, Commerce instead settled for “usable” Thai statements because it
preferred to “stay within the primary surrogate country.” Id. at 15. That though puts the
proverbial cart before the horse. Commerce may not select Thailand as the surrogate
country by ignoring a step in its process. It must first reasonably evaluate the available
data sets, which includes an acknowledgment that on this record a reasonable mind
would not select the Thai financial statements as better than the Philippine statements.
Be aware, however, that this does not mean that the Philippines must, and
Thailand cannot, be the surrogate country. It simply means that Commerce’s process of
selecting Thailand was unreasonable. The court expresses no opinion on whether either
country may constitute a reasonable choice on this administrative record. It may be that
the import and labor data carry more weight in the margin calculation for wire hangers.
It may be that the financial statements are the relatively more important factor. It may
even be that this is a case where sourcing surrogate data from more than one country
(despite the attendant headaches and difficulty that entails) yields the most accurate
dumping margin. Commerce and the parties will have to sort that out on remand.
III. Conclusion
For the foregoing reasons, it is hereby
ORDERED that the Final Results are remanded to Commerce to reconsider its
selection of Thailand as the primary surrogate country; it is further
Consol. Court No. 15-00103 Page 9
ORDERED that Commerce shall file its remand results on or before May 2, 2017;
and it is further
ORDERED that, if applicable, the parties shall file a proposed scheduling order
with page limits for comments on the remand results no later than seven days after
Commerce files its remand results with the court.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: March 2, 2017
New York, NY