Slip Op 17-132
UNITED STATES COURT OF INTERNATIONAL TRADE
ARISTOCRAFT OF AMERICA, LLC, SHANGHAI
WELLS HANGER CO., LTD, HONG KONG
WELLS LTD., HONG KONG) WELLS LTD.
(USA), BEST FOR LESS DRY CLEANERS
SUPPLY LLC, IDEAL CHEMICAL & SUPPLY
Before: Leo M. Gordon, Judge
COMPANY, LAUNDRY & CLEANERS
SUPPLY INC., ROCKY MOUNTAIN HANGER
MFG CO., ROSENBERG SUPPLY CO., LTD., Consol. Court No. 15-00307
and ZTN MANAGEMENT COMPANY, LLC,
Plaintiffs,
v.
UNITED STATES,
Defendant.
OPINION and ORDER
[Final results sustained in part, and remanded in part to Commerce.]
Dated: September 28, 2017
Douglas J. Heffner and Richard P. Ferrin, Drinker Biddle & Reath LLP of
Washington, DC for Plaintiff Aristocraft of America LLC.
Jonathan M. Freed, Trade Pacific PLLC of Washington, DC argued for
Consolidated Plaintiffs Shanghai Wells Hanger Co., Ltd., Hong Kong Wells Ltd., Hong
Kong Wells Ltd. (USA), Best For Less Dry Cleaners Supply LLC, Ideal Chemical & Supply
Company, Laundry & Cleaners Supply Inc., Rocky Mountain Hanger MFG Co.,
Rosenberg Supply Co., Ltd., and ZTN Management Company, LLC. With him on the
briefs were Robert G. Gosselink and Jarrod M. Goldfeder.
Courtney D. Enlow, Trial Attorney, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice of Washington, DC argued for Defendant United States. With
her on the briefs were Chad A. Readler, Acting Assistant Attorney General, Jeanne E.
Davidson, Director, and Reginald T. Blades, Jr., Assistant Director. Of counsel was Henry
J. Loyer, on the brief, and Jessica R. DiPietro, Attorneys, U.S. Department of Commerce,
Office of the Chief Counsel for Trade Enforcement and Compliance of Washington, DC.
Consol. Court No. 15-00307 Page 2
Gordon, Judge: This action involves the sixth 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, 80 Fed. Reg. 69,942 (Dep’t of Commerce
Nov. 12, 2015) (final results admin. rev.) (“Final Results”); see also Issues & Decision
Memorandum for Steel Wire Garment Hangers from the PRC, A–570–918 (Dep’t of
Commerce Mar. 6, 2015), available at
http://enforcement.trade.gov/frn/2015/1511frn/2015-28757.txt (last visited this date)
(“Decision Memorandum”).
Before the court are the USCIT Rule 56.2 motions for judgment on the agency
record of Plaintiffs Shanghai Wells Hanger Co., Ltd., Hong Kong Wells Ltd., and Hong
Kong Wells Ltd. (USA), (collectively “Shanghai Wells”); Best For Less Dry Cleaners
Supply LLC, Ideal Chemical & Supply Company, Laundry & Cleaners Supply Inc., Rocky
Mountain Hanger MFG Co., Rosenberg Supply Co., Ltd., and ZTN Management
Company, LLC (collectively, “U.S. Distributors”); and Aristocraft of America LLC
(“Aristocraft”), (together with Shanghai Wells and U.S. Distributors, “Plaintiffs”).
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), Best For Less Dry Cleaners Supply
LLC, Ideal Chemical & Supply Company, Laundry & Cleaners Supply Inc., Rocky
Mountain Hanger MFG Co., Rosenberg Supply Co., Ltd., and ZTN Management
Company, LLC, ECF No. 30 (“Shanghai Wells’ Br.”); see also Rule 56.2 Mem. Supp. Mot.
J. Agency R. of Pl. Aristocraft of America LLC, ECF No. 32 (“Aristocraft’s Br.”);
Consol. Court No. 15-00307 Page 3
Def.’s Mem. Opp’n Pls.’ Rule 56.2 Mot. J. Agency R., ECF No. 42 (“Def.’s Opp’n”);
Pl. Aristocraft’s Reply Br., ECF No. 51 (“Aristocraft’s Reply”); Shanghai Wells’ Reply Br.,
ECF No. 53 (“Shanghai Wells’ 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),1 and 28 U.S.C. § 1581(c) (2012).
Plaintiffs challenge (1) Commerce’s deductions of Chinese un-refunded value-
added tax (“VAT”) as “export tax” from the starting prices used to establish the export
price and constructed export price of Shanghai Wells’ subject merchandise;
(2) Commerce’s valuation of Shanghai Wells’ corrugated paperboard input;
(3) Commerce’s valuation of Shanghai Wells’ brokerage and handling costs; and
(4) Commerce’s calculation of surrogate financial ratios. The court remands the
Final Results to Commerce with respect to its VAT deductions and calculation of
surrogate financial ratios, and sustains the Final Results on Plaintiffs’ other challenges.
I. Standard of Review
For administrative reviews of antidumping duty orders, 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
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.
Consol. Court No. 15-00307 Page 4
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 understood as a word formula connoting reasonableness
review. 3 Charles H. Koch, Jr., Administrative Law and Practice § 9.24[1] (3d ed. 2017).
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.
2017).
Separately, the two-step framework provided in Chevron, U.S.A., Inc. v. Natural
Res. Def. Council, Inc., 467 U.S. 837, 842-45 (1984), governs judicial review of
Commerce’s interpretation of the Tariff Act. See United States v. Eurodif S.A., 555 U.S.
305, 316 (2009) (An agency's “interpretation governs in the absence of unambiguous
statutory language to the contrary or unreasonable resolution of language that is
Consol. Court No. 15-00307 Page 5
ambiguous.”); see generally Harry T. Edwards & Linda A. Elliott, Federal Standards of
Review 137-161 (2007).
II. Discussion
A. Value Added Tax
Plaintiffs contend that Commerce erred in calculating Shanghai Wells’ export price
(“EP”) and constructed export price (“CEP”). The statute directs Commerce to reduce EP
or CEP by “the amount, if included in such price, of any export tax, duty, or other charge
imposed by the exporting country on the exportation of the subject merchandise to the
United States . . . .” 19 U.S.C. § 1677a(c)(2)(B). Plaintiffs argue that the plain language
of the term “export tax” leaves no room for agency interpretation under Chevron.
See Aristocraft’s Br. 2-8. Defendant responds that Commerce properly interpreted this
statutory language to allow for deductions from Shanghai Wells’ EP and CEP for Chinese
un-refunded value-added tax (“irrecoverable VAT”) incurred on the subject wire hangers
exported to the United States. Def.’s Opp’n 39-46. Plaintiffs alternatively argue that
Commerce’s application of its methodology was unreasonable given the administrative
record (unsupported by substantial evidence). See Aristocraft’s Br. 8-13.
As noted above, the court reviews Commerce’s interpretation of the antidumping
statute “within the framework established by Chevron, U.S.A., Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837 (1984).” Maverick Tube Corp. v. United States, 861
F.3d 1269, 1272 (Fed. Cir. 2017) (quoting Agro Dutch Indus. v. United States, 508 F.3d
1024, 1029-30 (Fed. Cir. 2007)). Pursuant to this framework, the court must first
determine if the statute, 19 U.S.C. § 1677a(c)(2)(B), unambiguously addresses whether
Consol. Court No. 15-00307 Page 6
partially un-refunded VAT may be deducted from a respondent’s EP or CEP as a “tax,
duty, or other charge” that is imposed on the exportation of the subject merchandise.
Congress has not expressed an unambiguous intent on how Commerce should resolve
this issue.
Several recent cases in the U.S. Court of International Trade have addressed the
issue of this particular Chinese VAT within the Chevron framework: Juancheng Kangtai
Chem. Co. v. United States, 41 CIT ___, ___, 2017 WL 218910, at *11-13 (Jan. 19, 2017)
(“Juancheng”); China Mfrs. Alliance, LLC v. United States, 41 CIT ___, ___, 205 F.
Supp. 3d 1325, 1344-51 (2017) (“China Mfrs. Alliance”); and Jacobi Carbons AB v. United
States, 41 CIT ___, ___, 222 F. Supp. 3d 1159, 1186-94 (2017) (“Jacobi Carbons”). This
Court is persuaded by the Chevron analysis of Jacobi Carbons and Juancheng. The court
also finds persuasive Jacobi Carbons’ questioning of the reasonableness of Commerce’s
methodology applied to the facts in that case, and believes those same misgivings are
applicable here.
To explain in more detail, Juancheng reviewed Commerce’s deduction, pursuant
to § 1677a(c)(2)(B), for Chinese “irrecoverable VAT” as a “charge imposed by” China
“on the exportation of the subject merchandise to the United States.” Juancheng, 41 CIT
at ___, 2017 WL 218910, at *11. Juancheng observed that the statute does not define
the phrase “export tax, duty, or other charge imposed” and concluded that because
Congress had not spoken to the precise question at issue, Chevron step one was
inapplicable. Id. Under the second prong of Chevron the court analyzed whether the
statutory language “‘export tax, duty, or other charges’ [could permissibly include] ‘a cost
Consol. Court No. 15-00307 Page 7
that arises as the result of export sales.’” Id. (citing Final Results of Redetermination
Pursuant to Court Remand, Consol. Court No. 14–00056, ECF No. 81–1 (Apr. 15, 2016)
regarding Chlorinated Isocyanurates from the PRC, 79 Fed. Reg. 4875 (Dep’t of
Commerce Jan. 30, 2014), and accompanying issues and decision memorandum (Jan.
22, 2014), available at http://enforcement.trade.gov/frn/summary/prc/2014-01898-1.pdf
(“Juancheng Remand Results”)).
Specifically, the court in Juancheng noted that the statute included the broad
catchall term “other charges” that could reasonably include an irrecoverable VAT, and
further explained that Commerce’s interpretation was in accord with precedent from the
U.S. Court of Appeals for the Federal Circuit interpreting the term “charges.” Juancheng,
41 CIT at ___, 2017 WL 218910, at *11 (citing Shell Oil Co. v. United States, 751 F.3d
1282, 1291-92 (Fed. Cir. 2014)). The court also observed that when Commerce found
irrecoverable VAT to “arise as the result of export sales, Commerce also reasonably
interpreted the requirement that the cost be ‘imposed . . . on the exportation of the subject
merchandise to the United States,’ [such that the cost] ‘arises solely from, and is specific
to, exports.’” Id. (citing Juancheng Remand Results as well as § 1677a(c)(2)(B) (internal
citations omitted)). Having determined that Commerce reasonably interpreted
§ 1677a(c)(2)(B) to deduct an amount for irrecoverable VAT as a “charge imposed by the
exporting country on the exportation of the subject merchandise to the United States,”
the court in Juancheng ultimately concluded that Commerce had not, on that
administrative record, unreasonably overstated the amount of irrecoverable VAT given its
calculation of a fixed eight percent rate for the subject merchandise. Juancheng therefore
Consol. Court No. 15-00307 Page 8
sustained Commerce’s remand determination for the deduction of irrecoverable VAT.
Id., 41 CIT at ___, 2017 WL 218910, at *13-14.
In China Manufacturers Alliance the court reviewed Commerce’s deduction
pursuant to § 1677a(c)(2)(B) for respondent Guizhou Tyre Co., Ltd. (“GTC”) “for what it
considered to be Chinese un-refunded value-added tax (‘VAT’) incurred on the subject
tires that GTC exported to the United States.” China Mfrs. Alliance, 41 CIT at ___, 205 F.
Supp. 3d at 1344. Commerce characterized the irrecoverable VAT as “‘a net VAT burden
that arises solely from, and is specific to, exports’ and ‘is VAT paid on inputs and raw
materials (used in the production of exports) that is nonrefundable and, therefore, a cost.’”
Id. (quoting Issues and Decision Memorandum for Final Results of Antidumping Duty
Administrative Review: Certain New Pneumatic Off-the-Road Tires from the People’s
Republic of China, A–570–912 (Dep’t of Commerce Apr. 8, 2015), at 28).
China Manufacturers Alliance held that Commerce’s determination was unlawful
under Chevron step one because Commerce failed to find that a specific “amount” of an
“export tax, duty, or other charge” was “imposed” by China. China Mfrs. Alliance, 41 CIT
at ___, 205 F. Supp. 3d at 1346. The court explained:
Instead of finding as a fact that the PRC imposed a tax, duty, or charge—of
whatever character—in an amount equivalent to 8% of the FOB value of
GTC’s subject merchandise, Commerce applied a presumption that goods
exported from China are subject to “irrecoverable VAT” in the amount of 8%
of the FOB value of the exported good.
Id. The court further explained that “Commerce substituted a presumption—whether
rebuttable or irrebuttable—for an actual finding” and in so doing violated § 1677a(c)(2)(B).
Id., 41 CIT at ___, 205 F. Supp. 3d at 1351. The court opined that “[g]eneralized
Consol. Court No. 15-00307 Page 9
conclusions about China’s VAT scheme do not suffice. Commerce may not reduce the
starting price by a fixed percentage—no matter how derived—that is not the actual
amount of a tax, duty, or other charge that the exporting country is found in fact to have
imposed.” Id.
The court, in effect, read § 1677a(c)(2)(B) as forbidding approximations derived
from percentages, and requiring Commerce to make a distinct finding of a specific
“amount” in each case in which Commerce assesses irrecoverable VAT as a deductible
export tax. This differed from Juancheng, as well as an earlier decision, Fushun Jinly
Petrochemical Carbon Co. v. United States, 40 CIT ___, 2016 WL 1170876 (Mar. 23,
2016), which did not interpret the statute to require such an express obligation.
Fushun Jinly and Juancheng instead held that § 1677a(c)(2)(B) broadly affords
Commerce discretion to calculate deductions for an “export tax, duty, or other charge,”
and sustained Commerce’s deductions for irrecoverable VAT.
In Jacobi Carbons the court reviewed Commerce’s adjustments for irrevocable
VAT pursuant to § 1677a(c)(2)(B) for respondents Jacobi Carbons AB and Jacobi
Carbons, Inc. (together, “Jacobi”). See Jacobi Carbons, 41 CIT at ___, 222 F. Supp. 3d
at 1186-88. The court in Jacobi Carbons meticulously explained Commerce’s formula for
calculating irrecoverable VAT and addressed Jacobi’s arguments that irrecoverable VAT
could not be interpreted as an “export tax or other charge” under the statute. Id.
Jacobi Carbons followed Fushun Jinly’s legal analysis (offering a somewhat more
expansive explanation of § 1677a(c)(2)(B) than Juancheng), and concluded that
Commerce reasonably interpreted the vague language of § 1677a(c)(2)(B) to deduct
Consol. Court No. 15-00307 Page 10
irrecoverable VAT from respondents’ CEP as a charge “imposed by the exporting country
on the exportation of merchandise.” Id.
To provide some additional context and background, the court notes that
Commerce announced it would begin making § 1677a(c)(2)(B) deductions from EP or
CEP for goods exported from non-market economy countries in its Methodological
Change for Implementation of Section 772(c)(2)(B)2 of the Tariff Act of 1930, as amended,
In Certain Non–Market Economy Antidumping Proceedings, 77 Fed. Reg. 36,481,
36,482-83 (Dep’t of Commerce June 19, 2012) (“Methodological Change”). The Decision
Memorandum states that “[w]here the irrecoverable VAT is a fixed percentage of U.S.
price, the Department explained [in the Methodological Change] that the final step in
arriving at a tax-neutral dumping comparison is to reduce the U.S. price downward by this
same percentage.” Decision Memorandum at 12. Jacobi Carbons explained how this
methodology reasonably interpreted vague language in § 1677a(c)(2)(B), including the
requirement that such taxes or other charges be “imposed” by the exporting country.
See Jacobi Carbons, 41 CIT at ___, 222 F. Supp. 3d at 1187-88 (determining that
Commerce’s interpretation as implemented through the Methodological Change was
reasonable given the plain meaning of the term “imposed” used in the statute).
Aristocraft challenges Commerce’s interpretation of the statutory language by
arguing that Commerce’s definition of “irrecoverable VAT” is simply a tautology to meet
the statutory requirements for a price deduction and not a real cost imposed under
2
19 U.S.C. § 1677a(c)(2)(B).
Consol. Court No. 15-00307 Page 11
Chinese law. See Aristocraft’s Br. 6-8. Aristocraft argues that Commerce invented the
term “irrecoverable VAT” that is found nowhere in Chinese law. Aristocraft does, however,
acknowledge that Shanghai Wells “pays [VAT] for its domestic purchases of inputs used
to produce the hangers” on export sales, and this VAT would ordinarily be refunded if the
same subject merchandise was sold in a domestic sale. Id. at 8. Aristocraft recognizes
that this is a cost, but characterizes it as an “internal tax” that cannot reasonably be
described as being “imposed” on exportation. Id.
The court disagrees. It is reasonable to describe an input VAT not fully recouped
on export sales as a cost imposed on the exportation of the subject merchandise.
See Jacobi Carbons, 41 CIT at ___, 222 F. Supp. 3d at 1186-88. Commerce identified
this cost-in-fact resulting from the operation of Chinese law under the term “irrecoverable
VAT.” See Decision Memorandum at 12-13. Commerce defines irrecoverable VAT as
“a cost that arises as the result of export sales.” Id. at 13. “Because the Chinese VAT is
refunded in the context of domestic sales but not exports, it constitutes a ‘penalty’ that is
‘applied,’ and with which [respondent] is forever ‘burdened,’ at the time of exportation.”
See Jacobi Carbons, 41 CIT at ___, 222 F. Supp. 3d at 1188. Commerce reasonably
concluded that the phrase “export tax, duty, or other charge imposed by the exporting
country on the exportation,” 19 U.S.C. § 1677a(c)(2)(B), could be read to include such a
cost.
There remains the issue of whether Commerce’s calculation of the amount of
irrecoverable VAT to deduct is reasonable given the administrative record (supported by
substantial evidence). See Aristocraft’s Br. 8-12. The court concludes that here, as in
Consol. Court No. 15-00307 Page 12
Jacobi Carbons, 41 CIT at ___, 222 F. Supp. 3d at 1188-94, Commerce has failed to
demonstrate that its calculation of an eight percent irrecoverable VAT deduction from the
Shanghai Wells’ EP and CEP was reasonable (supported by substantial evidence).
Commerce prefaces its analysis by explaining that under Chinese law
irrecoverable VAT is comprised of “some portion of the input VAT that a company pays
on purchases of inputs used in the production of exports [that] is not refunded.” Decision
Memorandum at 12; see also id. at 13 (irrecoverable VAT “is VAT paid on inputs and raw
materials (used in the production of exports)”). Commerce also concludes that under
Chinese law “the standard VAT levy is 17 percent and the rebate rate for subject
merchandise is nine percent.” Id. at 14. Commerce though fails to explain how in light of
its definition of “irrecoverable VAT” a reasonable mind could find that Shanghai Wells
incurred an irrecoverable VAT charge in the amount of eight percent of the value of the
subject exports.
A simplified example illustrates the problem. Starting with Commerce's two
conclusions about Chinese VAT, a subject wire hanger exported from China to the United
States with an FOB export value of $1 (to take a round number) would contain “inputs and
raw materials” that were subject to VAT at the rate of 17% applicable to those inputs and
raw materials, and the exportation of the hanger would have qualified Shanghai Wells for
a VAT rebate of $0.09. For Shanghai Wells to have incurred a “tax, duty, or other charge,”
of un-refunded VAT, of $0.08 (in accordance with Commerce's conclusion that the
irrecoverable VAT was eight percent of export value), the actual VAT imposed on the
“inputs and raw materials” used in the production of the hanger would have to have been
Consol. Court No. 15-00307 Page 13
$0.17, i.e., the $0.09 in refunded VAT plus the $0.08 in un-refunded VAT. But for the VAT
on the inputs and raw materials to have been $0.17, those VAT-subject inputs and raw
materials would have had to have been valued at $1, which was the entire FOB value of
the exported hanger. The FOB export values could have included no other costs
(for example, no cost of labor, no factory overhead, no selling, general, administrative, or
any other expenses), and no profit. See generally Aristocraft’s Br. 10-11 (citing a similar
simplified example provided in its administrative case brief that Commerce did not directly
address).
Commerce's conclusion that Shanghai Wells incurred a net VAT charge of eight
percent on the value of its subject exported hangers implies that the 17% standard VAT
levy was applied to the entire FOB export value of the hanger, and not to the VAT-subject
inputs and raw materials used in production. Cf. Def.’s Opp’n 44-45 (arguing, for what
appears to be the first time, that the 17 percent VAT rate used in Commerce’s calculation
was applied to the “total export sales value”). This breakdown of the formula contradicts
Commerce’s conclusion that the VAT was “paid on inputs and raw materials (used in the
production of exports).” Decision Memorandum at 13.
As in Jacobi Carbons, the Decision Memorandum in this case offers no explanation
to resolve the apparent contradiction, and the court cannot understand how a reasonable
mind could follow Commerce’s stated methodology and arrive at the net VAT charge of
eight percent. See Jacobi Carbons, 41 CIT at ___, 222 F. Supp. 3d at 1193-94 (noting that
Commerce could not explain its reasoning for the same contradiction, and remanding for
Consol. Court No. 15-00307 Page 14
further explanation). The court therefore remands this issue to Commerce for further
explanation and, if appropriate, reconsideration.
B. Corrugated Paper
Plaintiffs challenge Commerce’s surrogate valuation of Shanghai Wells’
corrugated paper input, arguing that Commerce’s use of average unit values (“AUV”) from
Global Trade Atlas (“GTA”) Thai import statistics for HTS code 4808.10 (“Corrugated
Paper and Paperboard, Whether or Not Perforated”) for the period of review resulted in
the selection of an aberrationally high surrogate value that significantly distorted the final
antidumping duty margin calculated for Plaintiffs. See Shanghai Wells’ Br. 18-19. For the
reasons explained below, the court sustains Commerce’s use of this surrogate dataset.
The statute “directs Commerce to value the factors of production ‘based on
the best available information regarding the values of such factors in a market economy
country.’ 19 U.S.C. § 1677b(c)(1)(B) (emphasis added).” Downhole Pipe & Equipment,
L.P. v. United States, 776 F.3d 1369, 1375 (Fed. Cir. 2015). “The term ‘best available’ is
one of comparison, i.e., the statute requires Commerce to select, from the information
before it, the best data for calculating an accurate dumping margin. . . . This ‘best’ choice
is ascertained by examining and comparing the advantages and disadvantages of using
certain data as opposed to other data.” Dorbest Ltd. v. United States, 30 CIT 1671, 1675,
462 F. Supp. 2d 1262, 1268 (2006). The “burden of creating an adequate record lies with
[interested parties] and not with Commerce.” QVD Food Co. v. United States, 658 F.3d
1318, 1324 (Fed. Cir. 2011); see also Nan Ya Plastics Corp. v. United States, 810 F.3d
1333, 1337-38 (Fed. Cir. 2016) (same); Jacobi Carbons AB v. United States, 619 F. App’x
Consol. Court No. 15-00307 Page 15
992, 996 (Fed. Cir. 2015) (same).
During the administrative proceeding Plaintiffs argued that the Thai AUV were
aberrational. Commerce, in turn, explained that it analyzes whether surrogate data are
aberrational by comparing “the GTA import data at issue [with] GTA data from the other
potential surrogate countries at a comparable level of economic development to that of
the NME for a given case.” Decision Memorandum at 16. Commerce also noted that
neither Plaintiffs nor any other party “placed GTA import data for comparable countries
on the record of this review.” Id. As a consequence, Commerce did not evaluate whether
the Thai dataset might be aberrational in some other sense. Importantly, Plaintiffs do not
challenge Commerce’s practice of measuring possible aberrations in a dataset only
against other surrogate data from economically comparable countries. Plaintiffs instead
lodge a facial attack on the quality of the Thai dataset Commerce used, arguing to the
court that Commerce should have independently sought out better data. See Shanghai
Wells’ Br. 20-21. This is a risky litigation position because, as noted, although Commerce
may help develop the administrative record, the burden to develop it ultimately rests with
interested parties like Plaintiffs. See QVD Food Co., 658 F.3d at 1324 (“Although
Commerce has authority to place documents in the administrative record that it deems
relevant, the burden of creating an adequate record lies with [interested parties] and not
with Commerce.” (internal quotations omitted)). Also, when an interested party had the
opportunity during the administrative proceeding to develop the record and submit data,
the court may not subsequently order Commerce to open the record to allow that
interested party a second chance to submit data. See Essar Steel Ltd. v. United States,
Consol. Court No. 15-00307 Page 16
678 F.3d 1268, 1278 (Fed. Cir. 2012) (explaining that it is plaintiffs’ burden to timely
submit relevant information to the record and holding that the courts may not order
Commerce to reopen the record to admit evidence that plaintiffs failed to submit during
the administrative proceeding). When Plaintiffs argue that Commerce should have done
more, they unwittingly concede that they did too little. It is too easy to sit back and criticize
the quality of a particular surrogate dataset in isolation; it is more difficult to have to defend
the merits of one’s own proffered surrogate dataset as the only dataset that a reasonable
mind would choose as the best available on the record.
The problem here is that Plaintiffs did too little, and their arguments to the court
facially attacking the Thai surrogate dataset in an absolute, as opposed to relative, sense,
misunderstand the “best available” statutory requirement. The court does not evaluate
whether the information Commerce used was the best available in some absolute sense,
“‘but rather whether a reasonable mind could conclude that Commerce chose the best
available information.’” Zhejiang DunAn Hetian Metal Co. v. United States, 652 F.3d 1333,
1341 (Fed. Cir. 2011) (quoting Goldlink Indus. Co. v. United States, 30 CIT 616, 619, 431
F. Supp. 2d 1323, 1327 (2006) (emphasis added)).
Plaintiffs below argued that Commerce should have used fourth administrative
review Thai data with a multiplier to account for inflation. See U.S. Distributors’ Case Brief
at 17-19, 28-29, PD 166 at bar code 3300332-01 (Aug. 24, 2015) (suggesting Commerce
inflate the surrogate value for corrugated paper from the fourth review for the sixth
review); Shanghai Wells’ Br. 17-27 (challenging Commerce’s selected Thai AUV for
corrugated paper without suggesting any reasonable alternatives, arguing that
Consol. Court No. 15-00307 Page 17
Commerce should have provided comparable GTA import data on the record or used
benchmark data from the U.S. to “corroborate” the aberrational nature of the selected
data). Now before the court Plaintiffs have abandoned their proffered dataset, choosing
not to argue at all about the relative merits of their proffered alternative against the dataset
Commerce used. What they do instead is attempt a simple facial attack on the Thai data
Commerce used, coupled with a request that the court order Commerce to obtain better
data. That argument is ultimately not responsive to the “best available” statutory standard,
and accordingly the court sustains Commerce’s use of the Thai surrogate dataset to value
the corrugated paper input.
C. Brokerage & Handling
Plaintiffs challenge Commerce’s surrogate value determination of Shanghai Wells’
brokerage and handling (“B&H”) costs, asserting that Commerce inappropriately relied
upon the World Bank’s “Doing Business 2015: Thailand” publication (“Doing Business”)
instead of using allegedly more specific and accurate brokerage rate information from two
global shipping companies that Shanghai Wells placed on the record. See Shanghai
Wells’ Br. at 17. Separately, Plaintiffs contend that Commerce overstated the numerator
and understated the denominator in its calculation of the B&H surrogate value. Id.
The court has repeatedly affirmed Commerce's use of World Bank data as a
reliable and accurate source to value B&H, and does so again here. See, e.g., Yingqing
v. United States, 40 CIT ___, ___, 195 F. Supp. 3d 1299, 1311-12 (2016) (detailing prior
affirmations of Commerce’s use of the World Bank Doing Business report, and again
affirming its use as a more “suitable surrogate data source for steel wire garment hangers”
Consol. Court No. 15-00307 Page 18
than the alternative posed by plaintiffs); Foshan Shunde Yongjian Housewares &
Hardwares Co. v. United States, 40 CIT ___, 172 F. Supp. 3d 1353 (2016) (affirming
Commerce's use of World Bank Doing Business report to value B & H); Since Hardware
(Guangzhou) Co. v. United States, 37 CIT ___, ___, 911 F. Supp. 2d 1362, 1377 (2013)
(affirming Commerce's reliance on World Bank Doing Business report and noting that the
report is a “reliable and accurate source”).
Plaintiffs argue that instead of relying on the broad and unspecific information in
the Doing Business report, Commerce should have used the average of actual export
brokerage rates from two Thai shipping container lines that were placed on the record.
See Decision Memorandum at 18; Shanghai Wells’ Br. 31-33. Commerce rejected these
alternative sources, finding that they provided only price quotes instead of actual
expenses. Decision Memorandum at 19-20. Moreover, Commerce noted its express
preference for using “broad market averages” over such individualized price quotes,
reasonably explaining that reliance on limited data from only two Thai shipping companies
would be inferior to using the “broad market averages” provided by the wealth of data
relating to various Thai businesses’ B&H information available in the Doing Business
report. Id. at 20. Commerce’s explanation and determination are reasonable given its
stated preference to use “broad market averages” for B&H surrogate value calculations.
Decision Memorandum at 20. The court therefore sustains Commerce’s selection of the
Doing Business data as the “best available information” on the record to value Shanghai
Wells’ B&H costs. 19 U.S.C. § 1677b(c).
Consol. Court No. 15-00307 Page 19
Commerce calculated surrogate B&H costs from the Doing Business report as
follows:
Documents preparation US $175
+Customs clearance and technical control US $50
+Ports and terminal handling US $160
-Letter of credit fee (excluded) (US $60)
TOTAL US $325
See Shanghai Wells’ Br. 28. During the administrative proceeding, Shanghai Wells placed
on the record information to confirm that the specific amount ($60) of the costs of
obtaining a letter of credit in Thailand assumed in the 2015 Doing Business report.
See Decision Memorandum at 21 & n.155 (citing Ningbo Dasheng’s Surrogate Value
Submission, Ex. SV-9, PD3 115 at barcode 3274160-02 (May 4, 2015)). Commerce
accordingly deducted out this fee upon Shanghai Wells’ provision of proof that it did not
incur such expenses. Id. Plaintiffs argue that Commerce should have made further
adjustments to the total surrogate B&H calculation to include deductions for other
expenses not incurred by Shanghai Wells that remain in the “Documents preparation”
category of the Doing Business report. See Shanghai Wells’ Br. 28-31. Plaintiffs note that
Shanghai Wells provided record evidence that it did not incur the full amount of fees
included in the “Documents preparation,” and thus should have had this amount reduced
for expenses relating to the creation of commercial invoices, bills of lading, or certificates
of origin. Id. Commerce does not dispute this information, but maintains that it properly
assessed B&H expenses in the full amount (minus the letter of credit fee previously
3
“PD ___” refers to a document contained in the public administrative record.
Consol. Court No. 15-00307 Page 20
addressed) because the Doing Business report did not clearly identify or break-down
which costs were associated with which documents in the “Documents preparation”
category. See Def.’s Resp. 35. Commerce maintains that it may reasonably rely on the
Doing Business reported B&H values without “going behind the data” unless Shanghai
Wells can establish a precise breakdown of which costs they did not incur and what
segment of the $115 document preparation cost is attributable to those specific costs. Id.
at 35-36. The court agrees.
As explained in Foshan Shunde Yongjian Housewares & Hardwares Co., “[t]he
document preparation component of the Doing Business data point is an aggregate figure
that includes costs for the preparation of numerous documents.” 40 CIT at ___, 172 F.
Supp. 3d at 1360. Where Plaintiffs fail to identify an “exact breakdown of the data included
in the World Bank report, and how the business practices of this broad pool of companies
relate to the business practices of [Plaintiffs], [Commerce] can no more deduct a letter of
credit expense, or remove elements of document and preparation charges, than it can
add extra expenses which [Plaintiffs] incurred but which are not reflected by the World
Bank data.” Id. (citation omitted). Given that Plaintiffs in this action did not make such
specific identifications (other than the $60 value for the letter of credit fee), the court will
sustain as reasonable Commerce’s refusal to make further adjustments to the B&H
“documents preparation” line item from the Doing Business report.
Beyond challenging the source of the surrogate value figures Commerce used to
calculate B&H, Plaintiffs also maintain that Commerce improperly applied a methodology
that assumed that B&H charges would vary depending on the weight of the shipments of
Consol. Court No. 15-00307 Page 21
the subject merchandise. See Shanghai Wells’ Br. 33-35. In calculating Shanghai Wells’
B&H surrogate value, Commerce divided the B&H of $325 costs per shipment by an
assumed denominator of 10,000 kg for a 20-foot container to obtain a per kilogram value
for surrogate B&H costs. See Decision Memorandum at 17-21 (discussing comments on
Commerce’s B&H calculation). Plaintiffs assert that Commerce failed to reasonably
explain its assumed denominator, specifically, why B&H expenses would change
depending on shipment weight. See Shanghai Wells’ Br. 33-35. Plaintiffs contend that
Commerce’s adjustments to Shanghai Wells’ calculated B&H costs based upon assumed
shipment weights inappropriately overstated the calculated surrogate value for B&H,
using an assumed shipment weight of 10,000 kg per container rather than Shanghai
Wells’ actual average weight of shipments on the record. Id.
Plaintiffs’ argument has some superficial appeal given that the Doing Business
report does contain language suggesting that B&H costs are not directly tied to container
weight. Plaintiffs, nevertheless, undercut their argument by failing to propose a
reasonable alternative calculation that does not depend on container weight.
They propose only that Commerce use more specific weight figures in the existing B&H
calculation methodology. See id. The court surmises that this may be because the record
evidence indicates that Shanghai Wells did in fact ship single 20-foot containers, which
both the Doing Business publication and Commerce’s methodology presume. See, e.g.,
U.S. Distributors’ Case Brief at 34, PD 166 at bar code 3300332-01 (Aug. 24, 2015).
This fact (that Plaintiffs ship in 20 foot containers) distinguishes the cases Plaintiffs rely
upon because those cases involved challenges to Commerce’s underlying assumptions
Consol. Court No. 15-00307 Page 22
about how the respondents shipped their goods. See, e.g., DuPont Teijin Films China
Ltd. v. United States, 38 CIT ___, ___, 7 F. Supp. 3d 1338, 1351-52 (2014) (remanding
B&H issue to Commerce where plaintiff’s method of shipping multiple containers per
shipment rendered illogical Commerce’s assumption that B&H costs increased
proportionally to shipment weight or size); CS Wind Vietnam Co. v. United States, 38 CIT
___, ___, 971 F. Supp. 2d 1271, 1294 (2014) (remanding same issue where record
indicated that plaintiff shipped its goods in segments in a “pyramid fashion” on the ship,
without containers).
Commerce reasonably explained that it selected the denominator of 10,000 kg per
container to preserve the internal consistency of a surrogate B&H calculation using Doing
Business figures that were calculated using 10,000 kg as the assumed container weight.
See Decision Memorandum at 20. Rather than argue that Commerce’s practice of
harmonizing its surrogate B&H calculation with the assumptions underlying the Doing
Business figures was unreasonable, Plaintiffs challenge the more fundamental
assumption that B&H costs and container weight have any connection. As noted,
however, Plaintiffs provide no explanation as to why such an assumption is unreasonable
nor do they propose any reasonable alternative. Nor do Plaintiffs argue that Shanghai
Wells’ shipments involve anything other than the shipment of single 20-foot containers,
weighing in excess of 10 tons, upon which B&H costs are assessed. As Commerce has
reasonably explained its methodology for assessing a surrogate value for B&H costs from
the best available record data, and Plaintiffs have failed to demonstrate that Commerce’s
Consol. Court No. 15-00307 Page 23
methodology was unreasonable as applied to its shipping practices, the court sustains
Commerce’s determinations with respect to the surrogate value for B&H.
D. Surrogate Financial Ratios
In the sixth administrative review, Commerce selected financial statements for
calculating surrogate financial ratios from three Thai companies: LS Industries Co. (“LS”),
Sahasilp Rivet Industrial Co. Ltd. (“Sahasilp”), and Thai Mongkol Fasteners Co., Ltd.
(“Mongkol”). See Decision Memorandum at 7-10. Commerce uses financial ratios in non-
market economy antidumping cases to calculate a respondent’s factory overhead, selling,
general and administrative expenses, and profit, which represent some of the
respondent’s factors of production. See Dorbest Ltd. v. United States, 30 CIT 1671, 1715
462 F. Supp. 2d 1262, 1300 (2006). Commerce must value the factors of production on
“the best available information regarding the values of such factors in a market economy
country or countries considered to be appropriate.” 19 U.S.C. § 1677b(c)(1). Commerce
calculates surrogate financial ratios under 19 C.F.R. § 351.408(c)(4), using “non-
proprietary information gathered from producers of identical or comparable merchandise
in the surrogate country.” Plaintiffs challenge Commerce’s selection on various grounds.
See Shanghai Wells’ Br. 3-17.
Plaintiffs argue: (1) Commerce erred in using Mongkol’s financial statement as it
included an alleged distortive and improperly translated line cost item; (2) Commerce
should have additionally used financial statements from Bangkok Fastening Co., Ltd.
(“Bangkok Fastening”) in place of, or at least in addition to, the other financial data; and
(3) Commerce erred in using financial data from Sahasilp and Mongkol, as these
Consol. Court No. 15-00307 Page 24
companies did not produce “identical or comparable merchandise.” See id.
Plaintiffs challenge Commerce’s use of Mongkol’s financial statement for
calculation of the surrogate financial ratio because the Mongkol financial statement
included a line-item, translated in petitioner’s submission as “Article making cost” that
Plaintiffs contend improperly inflated the company’s overhead costs and distorted
Commerce’s financial ratio calculation. See Shanghai Wells’ Br. 13-15. Plaintiffs assert
that Commerce should have accepted their alternative translation of the line-item as “hire
of work,” according to an unnamed Thai consultant and an online Thai-to-English
dictionary. Id. at 14.
Commerce explained its practice with respect to translated documents in the
Decision Memorandum:
. . . when the Department receives a translated document, it assumes it is
correct unless there is a discrepancy or alternate translation. Here,
respondents provided another translation for what was originally translated
as “Article making cost.” U.S. Distributors and Aristocraft argued that the
proper translation is “Hire of work” and therefore the item should not be
classified as overhead. U.S. Distributors did not provide the name or the
qualifications of the person providing the translation or an affidavit from the
person providing the alternate translation. U.S. Distributors stated a “local
consultant” used a website to produce the translation of “Hire of work.” It is
not known who the local consultant is, whether that person speaks Thai, the
person’s qualifications, or the reliability of the website used. Therefore,
because we do not have enough information to consider the alternate
translation and because the other costs of sales were fully enumerated,
we determine that the “Article making cost” line item is not ambiguous, and
find it appropriate to continue to classify the entire line item of
“Article making cost” as MOH in the surrogate financial ratio calculation.
See Decision Memorandum at 10. This is reasonable. Plaintiffs have not challenged
Commerce’s practice of assuming the correctness of a translated document unless a
Consol. Court No. 15-00307 Page 25
party provides an alternate translation. And here, Plaintiffs could have better
substantiated their claimed translation superiority. For example, Plaintiffs could have
obtained the opinion of a Thai language expert, who could have prepared an affidavit,
with authoritative Thai to English translations. The court could then more readily throw its
weight behind such a translation as the only reasonable translation on the record. More
likely though, Commerce would have simply acknowledged the alternate translation as
correct. The court is somewhat confused that Plaintiffs believed there was any merit to
this issue, after all, they are requesting the court to trust an unnamed “consultant” and
random online dictionary to override the original translation. As explained, there is a better
way to establish that the proffered translation is the one and only reasonable translation
of the disputed term. Commerce’s determination is therefore sustained.
Plaintiffs also challenge Commerce’s refusal to select Bangkok Fastening’s
financial statement for use in calculating surrogate financial ratios. See Shanghai Wells’
Br. 15-17. Commerce found that Bangkok Fastening’s financial statement was
insufficiently detailed to use for reliable calculation of surrogate financial ratios. See
Decision Memorandum at 9. A comparison of Bangkok Fastening’s financial statement
with that of Sahasilp, the latter of which Commerce found sufficiently detailed for use in
the surrogate financial ratio calculations, demonstrates the reasonableness of
Commerce’s conclusion. Compare M&B’s Surrogate Value Submission at Exhibit 4 at p.2,
PD 121 at bar code 3275954-03 (May 13, 2015), with FabriClean’s Surrogate Value
Submission at Exhibit SV-12 at p. 34, PD 124 at bar code 3275968-02 (May 13, 2015).
The Sahasilp statement provides detailed breakdowns of the components of energy,
Consol. Court No. 15-00307 Page 26
labor, and material costs, whereas the Bangkok Fastening statement provides no such
comparable specificity. Id. Accordingly, the court sustains Commerce’s decision to reject
the Bangkok Fastening financial statement.
Plaintiffs’ most persuasive argument challenges Commerce’s selection of financial
data from Sahasilp and Mongkol as unreasonable. Plaintiffs argue that Commerce has,
in prior reviews, equated production of “comparable merchandise” with drawing wire from
wire rod. Id. at 3-13. Defendant disagrees with Plaintiffs’ assertion that an agency practice
of relying only on data from surrogate companies that draw wire rod as part of their
production practice exists. Alternatively, Defendant contends that even if such a practice
existed Commerce was either not bound to follow such a practice, or that departure from
such a practice occurred in the fourth administrative review and should not be reviewed
in this challenge to the sixth administrative review. See Def.’s Resp. 4-16. The court
agrees with Plaintiffs that Commerce failed to reasonably explain in this review its change
in emphasis for a criterion it previously determined to be criticalthat surrogate
companies must have drawn wire from wire rod in the production process. Accordingly,
the court remands the issue of surrogate financial ratio calculation to Commerce.
During the investigation Commerce concluded that “only those companies which
clearly identify wire rod as a raw material can be considered adequate surrogates to
calculate the surrogate financial ratios because any of these more accurately reflect the
production experience of the respondents.” See Steel Wire Garment Hangers from the
People’s Republic of China, 73 Fed. Reg. 47,587 (Dep’t of Commerce Aug. 14, 2008)
Consol. Court No. 15-00307 Page 27
(“Final Results-Investigation”), and accompanying Issues and Decision Memorandum, A-
570-918 (Aug. 7, 2008) (“Decision Mem.-Investigation”), at cmt. 3, available at
http://enforcement.trade.gov/frn/summary/PRC/E8-18851-1.pdf (last visited on this date).
That is a clear and direct statement of the importance of drawing wire rod in analyzing
potential surrogate companies. And in the following three administrative reviews,
Commerce solidified its stance that potential surrogate companies use wire rod in their
production process. See Shanghai Wells’ Br. 4-7 (citing the final results of Commerce’s
first three administrative reviews of the antidumping duty order covering steel wire
garment hangers).
The fourth administrative review was different, with more limited options for
surrogate financial statement selection, with several financial statements unusable.
See Steel Wire Garment Hangers from the People’s Republic of China, 79 Fed. Reg.
31,298 (Dep’t of Commerce June 2, 2014) (“Final Results-AR4”), and accompanying
Issues and Decision Memorandum, A-570-918 (May 27, 2014) (“Decision Mem.-AR4”),
at cmt. 2, available at http://enforcement.trade.gov/frn/summary/prc/2014-12730-1.pdf
(last visited on this date). As a result, Commerce selected the financial statements of one
company, LS, which were the only statements with enough detailed information for
Commerce to calculate financial ratios. Id. Notably, Commerce acknowledged that the
record did not indicate whether LS drew wire rod or what inputs it used in its production
process of nails. Id. Commerce explained that “where information as to inputs and
production is on the record for a producer of comparable merchandise, such information
may be useful in determining whether it is appropriate to use. However, the absence of
Consol. Court No. 15-00307 Page 28
such information does not exclude a producer of comparable merchandise from
consideration.” Id. The fourth review, therefore, appears not to have afforded an
“available” surrogate company that drew wire from wire rod in its production process.
In the fifth administrative review, Commerce appears to have selectively quoted its
rationale from the fourth administrative review to justify selecting financial statements
without regard to whether they drew wire from wire rod.4 In the sixth administrative review
here, Commerce mimicked its approach in the fifth administrative review, selecting
financial statements from LS, Sahasilp, and Mongkol despite the fact that the record
indicates that Sahasilp and Mongkol do not draw wire from wire rod in their production
processes. See Decision Memorandum at 8-9. Unlike the fourth administrative review,
however, here the record demonstrates that LS draws wire from wire rod in its production
process, and like the fourth administrative review, Commerce could have simply used that
one company to calculate its financial ratios. See U.S. Distributors’ Case Brief at 15,
PD 166 at bar code 3300332-01 (Aug. 24, 2015) (citing undisputed record evidence that
LS draws wire rod in its production process as support for argument that LS’s financial
statement was the “best information on the record to calculate surrogate financial ratios”).
Commerce, therefore, acted unreasonably by failing to adhere to its announced selection
criterion without explaining why that criterion suddenly has no relevance. Commerce is in
4
The court notes that the fifth administrative review is pending before the court, and also
includes a challenge to Commerce’s financial statement selection of the same companies
chosen in the sixth administrative review. See Shanghai Wells Hanger Co. v. United
States, 41 CIT ___, 211 F. Supp. 3d 1377 (2017) (remanding final results of fifth
administrative review on surrogate country selection, and reserving decision on Plaintiffs’
remaining arguments, including surrogate financial statement selection).
Consol. Court No. 15-00307 Page 29
a tight spot. That important criterion underpinned surrogate value selections in prior
proceedings.
Defendant has great difficulty grappling with Commerce’s unmistakable, consistent
emphasis of the importance of wire drawing in its surrogate data selection in prior
proceedings under this Antidumping Duty Order. See Def.’s Resp. 13-16. None of
Defendant’s arguments is persuasive. Defendant argues that Commerce was not
obligated to continue emphasizing the importance of drawing wire from wire rod. Id. at 14.
Defendant is correct in the abstract that Commerce may change its mind, and adopt a
new practice or policy, but Commerce must provide a reasonable basis for the change.
In F.C.C. v. Fox Television Stations, Inc., 1556 U.S. 502, 515–16 (2009), Justice Scalia
explained:
[T]he requirement that an agency provide reasoned explanation for its
action would ordinarily demand that it display awareness that it is changing
position. An agency may not, for example, depart from a prior policy sub
silentio . . . the agency need not always provide a more detailed justification
than what would suffice for a new policy created on a blank slate.
Sometimes it must—when, for example, its new policy rests upon factual
findings that contradict those which underlay its prior policy; or when its prior
policy has engendered serious reliance interests that must be taken into
account. . . . It would be arbitrary or capricious to ignore such matters. In
such cases it is not that further justification is demanded by the mere fact of
policy change; but that a reasoned explanation is needed for disregarding
facts and circumstances that underlay or were engendered by the prior
policy.
Id. (emphasis added).
In the fourth administrative review Commerce adhered to its selection criterion,
and noted and explained that it could not satisfy that criterion in that particular review
Consol. Court No. 15-00307 Page 30
because of the limits of the administrative record. See Decision Mem.-AR4, at cmt. 2.
Commerce did not all of a sudden abandon the criterion as incorrect or wrong. Id.
Commerce has yet to explain in the sixth administrative review why that selection criterion
established in the investigation and three subsequent administrative reviews was
incorrect or wrong. Suffice it to say that Commerce has yet to provide a reasonable basis
for its change in emphasis in the selection criterion, and its reliance on the fourth
administrative review is inapplicable to the sixth administrative review, given the noted
factual differences in the administrative records. See Final Results-AR4, and Decision
Mem.-AR4, at cmt. 2.
Defendant also argues that even if Commerce unreasonably departed from its
criterion that a surrogate company draw wire from wire rod, any such departure was
harmless error as Commerce reasonably found that Sahasilp and Mongkol produced
comparable merchandise given other record information. See Def.’s Resp. 14-16.
Defendant fashions a weak circular argument predicated on Commerce’s conclusions in
previous reviews that fasteners, which are produced by Sahasilp and Mongkol, are
comparable merchandise to wire hangers. Id. This circular argument fails for the very
reason that underpins Plaintiffs’ challenge on this issue: it was the process of creating
fasteners by drawing wire from wire rod that reasonably led Commerce to conclude that
fasteners and wire hangers are comparable merchandise. See, e.g., Final Results-
Investigation and Decision Mem.-Investigation at cmt. 3, (discussing why wire fasteners
are comparable merchandise to wire hangers primarily because both products require the
drawing of wire from wire rod in their production process); Steel Wire Garment Hangers
Consol. Court No. 15-00307 Page 31
from the People’s Republic of China, 76 Fed. Reg. 27,994 (Dep’t of Commerce May 13,
2011), and accompanying Issues and Decision Memorandum, A-570-918 (May 9, 2011),
at cmt. 2, available at http://enforcement.trade.gov/frn/summary/PRC/2011-11871-1.pdf
(last visited on this date) (explaining rejection of potential surrogate countries that
produced fasteners where record did not include evidence that these companies
consumed wire rod in their production process); Steel Wire Garment Hangers from the
People's Republic of China, 77 Fed. Reg. 12,553 (Dep’t of Commerce Mar. 1, 2012), and
accompanying Issues and Decision Memorandum, A-570-918 (Feb. 23, 2012), at cmt. 4,
available at http://enforcement.trade.gov/frn/summary/PRC/2012-4875-1.pdf (last visited
on this date) (“We find that the various fasteners produced by the surrogate companies
are comparable to steel wire garment hangers, the subject merchandise, because
fasteners, like steel wire garment hangers, are a downstream product of wire requiring
additional manufacturing processes.” (emphasis added)); Steel Wire Garment Hangers
from the People’s Republic of China, 78 Fed. Reg. 28,803 (Dep’t of Commerce May 16,
2013), and accompanying Issues and Decision Memorandum, A-570-918 (May 7, 2013),
at cmt. I.D, available at http://enforcement.trade.gov/frn/summary/prc/2013-11682-1.pdf
(last visited on this date) (supporting selection of financial statements from companies in
the Philippines, noting that the companies produced comparable merchandise of nails
and hangers because each company “produces its products by drawing its own steel wire
rods”).
The court remands this issue to Commerce to address reasonably the importance
of drawing wire from wire rod as a surrogate company selection criterion. The most direct
Consol. Court No. 15-00307 Page 32
and efficient way forward would appear to simply use the one company’s statements (LS)
that drew wire from wire rod, as Commerce did in the fourth administrative review.
III. Conclusion
For the foregoing reasons, it is hereby
ORDERED that the Final Results are sustained, with the exception of Commerce’s
value-added tax deductions and calculation of surrogate financial ratios; it is further
ORDERED that the Final Results are remanded to Commerce to reconsider its
value-added tax deductions and calculation of surrogate financial ratios; it is further
ORDERED the Commerce shall file its remand results on or before November 28,
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 it remand results with the court.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: September 28, 2017
New York, New York