Slip Op. 13-9
UNITED STATES COURT OF INTERNATIONAL TRADE
Before: Nicholas Tsoucalas, Senior Judge
___________________________________
US MAGNESIUM LLC, :
:
Plaintiff, :
:
v. : Court No.: 12-00006
:
UNITED STATES, :
: PUBLIC VERSION
Defendant, :
:
and :
:
TIANJIN MAGNESIUM :
INTERNATIONAL CO., LTD., :
:
Defendant-Intervenor. :
:
OPINION and ORDER
Held: Plaintiff’s motion is granted in part so that Commerce may
reconsider its decision not to extend the deadline for USM’s
untimely submission as well as the surrogate values for labor,
financial ratios, and truck freight rates. Plaintiff’s motion is
denied with regard to TMI’s U.S. expenses. The court defers
judgment on the issue of retort classification so that Commerce may
reconsider its determination following its analysis of the untimely
submission on remand.
Dated: January 22, 2013
King & Spalding LLP, (Stephen A. Jones and Jeffery B. Denning)
for US Magnesium LLC, Plaintiff.
Stuart F. Delery, Acting Assistant Attorney General; Jeanne E.
Davidson, Director, Claudia Burke, Assistant Director, Commercial
Litigation Branch, Civil Division, United States Department of
Justice (Renee Gerber and Ryan M. Majerus); Office of the Chief
Counsel for Import Administration, United States Department of
Commerce, Melissa M. Brewer, Of Counsel, for the United States,
Defendant.
Riggle & Craven, (David A. Riggle, Saichang Xu, and David J.
Court No. 12-00006 Page 2
Craven) for Tianjin Magnesium International Co., Ltd., Defendant-
Intervenor.
TSOUCALAS, Senior Judge: Plaintiff US Magnesium LLC (“USM”)
moves for judgment on the agency record challenging the
determination by the Department of Commerce, International Trade
Administration (“Commerce”) in Pure Magnesium From the People’s
Republic of China: Final Results of the 2009–2010 Antidumping Duty
Administrative Review of the Antidumping Duty Order, 76 Fed. Reg.
76,945 (Dec. 9, 2011) I.A. Access Public Rec. 31 (“Final
Results”).1 Commerce and defendant-intervenor Tianjin Magnesium
International Co., Ltd. (“TMI”) oppose USM’s motion.
Background
The administrative review at issue concerns pure magnesium
TMI imported from the People’s Republic of China (“PRC”) during the
period of review (“POR”) beginning May 1, 2009 and ending April 30,
2010. See id. at 76,945. TMI imports pure magnesium supplied by
a sole producer, [[
]]. P.R. 13 at 11. [[ ]] produces pure magnesium
via the “Pidgeon” process. Under the “Pidgeon” process, the
producer first treats magnesium-bearing dolomite in a kiln to
produce calcined dolomite. The producer then mixes the calcined
1
Hereinafter all documents in the public record will be
designated “P.R.” and all documents in the confidential record
designated “C.R.” without further specification except where
relevant. Additionally, the abbreviation “I.A.” will refer to
portions of the confidential and public records filed in Commerce’s
electronic filing system, I.A. Access.
Court No. 12-00006 Page 3
dolomite with ferrosilicon and fluorite power and presses the
mixture into balls or briquettes. In order to purify the magnesium
— chemically and physically separate it from the other inputs — the
producer places the pressed mixture into retorts, which are “steel
tubes placed under a vacuum in a furnace.” Def.’s Opp. Pl.’s Mot.
J. Agency R. at 5 (“Def.’s Br.”). The high heat from the furnace
vaporizes the magnesium, which travels through the retort and then
“condense[s] into a highly purified form.” Id. at 5; See Pure
Magnesium from the PRC: Issues and Decision Memorandum for the
Final Results of the 2009–2010 Administrative Review at 7 n.39,
Inv. No. A-570-832 (Dec. 5, 2011) (“I&D Memo”). TMI reported that
[[ ]] rented retorts during the POR. See P.R. 45 at 7.
TMI also reported that Mr. James Gammons performed certain
“ministerial activities” in the U.S. on behalf of TMI. P.R. 61 at
3. The “activities” focused on [[
]].” Id. TMI claimed that “Mr. Gammons was not a sales agent
for TMI” and that he did not take possession of subject merchandise
in the U.S. prior to sales to U.S. customers. Id.
During the review, Commerce used its nonmarket economy2
2
“The term ‘nonmarket economy country’ means any foreign
country that the administering authority determines does not
operate on market principles of cost or pricing structures, so that
sales of merchandise in such country do not reflect the fair value
of the merchandise.” Section 771(18) of the Tariff Act of 1930, as
amended, 19 U.S.C. § 1677(18) (2006). All further citations to the
Tariff Act of 1930 are to the relevant provisions of Title 19 of
the U.S. Code, 2006 edition.
Court No. 12-00006 Page 4
(“NME”) methodology to construct the normal value3 (“NV”), Pure
Magnesium from the PRC: Preliminary Results of the 2009-2010
Antidumping Duty Administrative Review, 76 Fed. Reg. 33,194, 33,195
(June 8, 2011) (“Preliminary Results”), using surrogate data to
value the factors of production (“FOP”). See 19 U.S.C. §
1677b(c)(1). Commerce selected India as the surrogate country and
used Indian data to value TMI’s FOP. Preliminary Results, 76 Fed.
Reg. at 33,195. Commerce classified retorts as an indirect
material rather than as a direct material, treating them as factory
overhead in the FOP calculation. P.R. 64 at 9. Additionally,
Commerce determined that “the subject merchandise was sold directly
to the unaffiliated customers in the [U.S.] prior to importation.”
Preliminary Results, 76 Fed. Reg. at 33,196. Therefore, Commerce
concluded that all of TMI’s U.S. sales were export price4 (“EP”)
sales and did not calculate a separate constructed export price
(“CEP”)5 for TMI’s U.S. sales. Id. Commerce did not adjust EP to
3
“Normal value” is “the price at which the foreign like
product is first sold (or, in the absence of a sale, offered for
sale) for consumption in the exporting country.” 19 U.S.C. §
1677b(a)(1)(B)(i).
4
“Export price” refers to “the price at which the subject
merchandise is first sold (or agreed to be sold) before the date of
importation by the producer or exporter of the subject merchandise
outside of the United States to an unaffiliated purchaser in the
United States or to an unaffiliated purchaser for exportation to
the United States.” 19 U.S.C. § 1677a(a).
5
“Constructed export price” refers to “the price at which the
subject merchandise is first sold (or agreed to be sold) in the
United States before or after the date of importation by or for the
Court No. 12-00006 Page 5
reflect the expenses TMI incurred in association with services Mr.
James Gammons provided for TMI in the U.S. See I&D Memo at 3. On
June 30, 2010 Commerce issued the preliminary results of the
review, assigning TMI a weighted average dumping margin of O.OO%.
Preliminary Results, 76 Fed. Reg. at 33,200.
On September 1, 2011, nearly eleven months after the October
19, 2010 deadline for the submission of new factual information,
USM submitted a Chinese magnesium industry bulletin which allegedly
indicated that [[ ]] produced retorts during the POR rather
than rented them, as TMI reported. See I.A.P.R. 11 at 2. Commerce
rejected USM’s submission, concluding that “some of the documents
submitted by [USM] were clearly available prior to the deadline for
submission of factual information.” Id.
On December 9, 2011 Commerce issued the Final Results. See
Final Results, 76 Fed. Reg. at 76,945. Although Commerce made
certain changes to the margin calculation, it again assigned TMI a
weighted average dumping margin of 0.00%. Id. at 76,947.
JURISDICTION and STANDARD OF REVIEW
This Court has jurisdiction over this matter pursuant to 19
U.S.C. § 1516a(a)(2)(B)(iii) and 28 U.S.C. § 1581(c).
This Court will uphold Commerce’s determination unless it is
“unsupported by substantial evidence on the record, or otherwise
account of the producer or exporter of such merchandise or by a
seller affiliated with the producer or exporter” to an unaffiliated
purchaser. 19 U.S.C. § 1677a(b).
Court No. 12-00006 Page 6
not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i).
“Substantial evidence is ‘such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion.’” Huaiyin
Foreign Trade Corp. (30) v. United States, 322 F.3d 1369, 1374
(Fed. Cir. 2003) (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197,
229 (1938)).
DISCUSSION
USM argues that the Final Results are unsupported by
substantial evidence and are otherwise not in accord with the law
with respect to: Commerce’s classification of retorts as an
indirect material; the surrogate values used to calculate financial
ratios, labor rates, and truck freight rates; and Commerce’s
refusal to adjust the U.S. price to reflect movement expenses
associated with services Mr. James Gammons provided for TMI. See
Pl.’s Br. Supp. Mot. J. Agency R. at 2–5 (“Pl.’s Br.”).
Additionally, USM argues that Commerce abused its discretion by
rejecting USM’s untimely submission. Id. at 1–2. Commerce asks for
voluntary remand in order to reconsider the surrogate values for
labor and financial ratios, but opposes USM’s motion in all other
respects. See Def.’s Br. at 1–2.
I. USM’s Untimely Submission
During the review, TMI reported that [[ ]] rented the
retorts it used in the production of pure magnesium during the POR
and that rental equipment was not treated as a direct expense for
Court No. 12-00006 Page 7
accounting purposes in the PRC. See P.R. 45 at 7. Commerce
classified retorts as an indirect material in the preliminary
results of the review. P.R. 64 at 9. USM challenged that
determination before Commerce, P.R. 79 at 5–23, and on September 1,
2011, submitted a newly-discovered Chinese magnesium industry
bulletin which allegedly indicated that [[ ]] produced
retorts during the POR. See I.A.P.R. 11 at 2. USM also submitted
two pieces of corroborating evidence, a 2006 magnesium industry
directory and a website USM alleges belongs to [[ ]]. Id.
Although USM made the submission almost eleven months after the
deadline for submission of new factual information, it insisted
that Commerce place the submission on the record because it
allegedly demonstrated that TMI deliberately misled Commerce by
reporting that [[ ]] rented retorts. Id. Commerce rejected
USM’s submission because the website and the 2006 directory were
“clearly available prior to the deadline for submission of factual
information.” Id. Commerce continued to classify retorts as an
indirect material in the Final Results. See I&D Memo at 6–9. USM
argues that Commerce abused its discretion because it failed to
address prima facie evidence of fraud contained in the untimely
submission.6 See Pl.’s Br. at 14–16.
6
USM also argues that Commerce abused its discretion because
the bulletin would have prevented a 20% understatement in the NV by
ensuring that Commerce properly classified retorts as a direct
material. Pl.’s Br. at 10–14. USM’s argument is unpersuasive as
the bulletin would not have negated Commerce’s retort
Court No. 12-00006 Page 8
Commerce has the discretion to establish and enforce deadlines
for the submission of factual information. See Grobest, 36 CIT at
__, 815 F. Supp. 2d at 1365 (citing NTN Bearing Corp. v. United
States, 74 F.3d 1204, 1206–07 (Fed. Cir. 1995)). Commerce may
extend such deadlines where it finds that there is “good cause” to
do so. 19 C.F.R. § 351.302(b) (2012). However, “Commerce’s
discretion in this regard is not absolute.” Grobest, 36 CIT at __,
815 F. Supp. 2d at 1365 (citing NTN Bearing, 74 F.3d at 1207). In
determining whether Commerce’s rejection of an untimely submission
amounts to an abuse of discretion, this Court considers “whether
the interests of accuracy and fairness outweigh the burden placed
on [Commerce] and the interest in finality.” Id.
Here, the court finds that Commerce abused its discretion
because it failed to address prima facie evidence of fraud USM
raised while the record was still open. Courts have clearly
indicated that prima facie evidence of fraud is to be treated
differently than other untimely submitted factual information,
allowing and even ordering consideration of such evidence after the
closure of administrative proceedings. See Home Prods. Int’l, Inc.
v. United States, 633 F.3d 1369, 1381 (Fed. Cir. 2011) (ordering
classification in and of itself, but would only be a factor in the
classification determination. Cf. Grobest & I-Mei Indus. (Vietnam)
Co. v. United States, 36 CIT __, __, 815 F. Supp. 2d 1342, 1366–67
(2012) (reversing Commerce’s decision to reject respondent’s
untimely submission of separate rate eligibility certification in
part because it directly contradicted Commerce’s decision to apply
Vietnam-wide rates to respondent).
Court No. 12-00006 Page 9
remand where prima facie evidence of fraud was discovered after the
close of the administrative review); Tokyo Kikai Seisakusho, Ltd.
v. United States, 529 F.3d 1352, 1361 (Fed. Cir. 2008) (recognizing
that Commerce’s power to reconsider a determination is “even more
fundamental when . . . it is exercised to protect the integrity of
its own proceedings from fraud”); Tianjin Magnesium Int’l Co. v.
United States, 36 CIT __, __, 836 F. Supp. 2d 1377, 1381 (2012)
(Tsoucalas, Senior J.) (upholding Commerce’s decision to consider
prima facie evidence of fraud discovered during remand).7
Here, USM discovered evidence that [[ ]] produced
retorts after TMI reported that [[ ]] rented retorts. See
I.A.P.R. 11 at 2. However, in dismissing USM submission, Commerce
limited its analysis to one factor: some of the documents were
available before the deadline. Id. Because of this single-minded
focus, Commerce overlooked the possibility that TMI deliberately
failed to report information to which it also clearly had access.
Prima facie evidence of fraud concerning proper classification of
FOP undermines the accuracy and fairness of a review. Grobest, 36
7
In a recent case evidencing the courts’ treatment of
untimely discovered evidence of fraud, this Court granted
Commerce’s motion to expand the scope of an already ordered remand
to consider new evidence that a party provided false information
during the review. Ad Hoc Shrimp Trade Action Comm. v. United
States, 37 CIT __, __, Slip Op. 13-4, at 9 (Jan. 9, 2013). The
Court held that Commerce provided compelling justification for
considering the untimely discovered evidence: there was
“information sufficient to persuade [Commerce] that its
determinations in the administrative review at issue may have been
based on information that was false or incomplete.” Id. at 8.
Court No. 12-00006 Page 10
CIT at __, 815 F. Supp. 2d at 1365. Commerce should have exercised
its authority to protect the review from fraud by addressing that
evidence in its analysis. Tokyo Kikai, 529 F.3d at 1361.
Additionally, the burden on Commerce and its interest in
finality are relatively minimal in the instant case. First, USM
submitted the information over two months before Commerce placed
information and new comments concerning the surrogate value for
truck freight onto the record and three months before Commerce
issued the Final Results.8 See NTN Bearing, 74 F.3d at 1208
(noting that because preliminary results are subject to change,
“the tension between finality and correctness simply [does] not
exist” during that stage). Second, USM presented the evidence
while the proceedings were still open and Commerce did not address
the apparent fraud in its determination. See I.A.P.R. 11 at 2. As
noted above, Courts approved and even ordered the reopening of
proceedings to consider prima facie evidence of fraud discovered
after the close of proceedings. See Home Prods., 633 F.3d at 1381;
Tokyo Kikai, 529 F.3d at 1361; Tianjin Magnesium, 36 CIT at __, 836
F. Supp. 2d at 1381. Therefore, taking into account the relatively
8
Commerce insists that its decision to solicit and place the
information concerning surrogate data for truck freight onto the
record is distinguishable from the instant issue because Commerce
used that information during the preliminary results stage but
“inadvertently failed to place it on the record.” Def.’s Br. at
13. However, this argument is unconvincing because it overlooks
Commerce’s decision to place new comments from both parties on the
record as well. See Pl.’s Br. at 10 & n.11, 13; I.A.P.R. 23.
Court No. 12-00006 Page 11
low burden of accepting the late submission in this case,
Commerce’s failure to address prima facie evidence of fraud that
USM presented during the proceeding was an abuse of discretion.
TMI argues that Commerce’s determination should nevertheless
be upheld because the information contained in the bulletin was
immaterial to Commerce’s retort classification. See Def.-
Intervenor Resp. Br. at 4. Specifically, TMI argues that Commerce
did not consider whether [[ ]] rented or produced retorts
when classifying them as indirect materials. Id. However, TMI’s
argument must fail for a three reasons. First, Commerce made its
decision without considering the information in USM’s submission
because it was not on the record. Second, classifying retorts as
a direct material results in a higher NV and, accordingly, alters
the dumping margin. See Pl.’s Br. at 12. Finally, should USM’s
submission ultimately indicate fraudulent conduct by TMI, Commerce
may decide to apply adverse facts available to the issue of retort
classification. See 19 U.S.C. § 1677e(b). The information
contained in the bulletin is material to the classification of
retorts and, as such, Commerce should have considered whether the
bulletin contained prima facie evidence of fraud.
Accordingly, the court remands this issue so that Commerce may
consider whether the bulletin presents prima facie evidence of
fraud. On remand, Commerce is not required to place the bulletin
and the associated materials onto the record, but it must provide
Court No. 12-00006 Page 12
an adequate explanation addressing the evidence of fraud should it
elect not to do so. To guide its decision, Commerce should
consider the factors outlined in Home Products, including “the
interests in finality, the extent of the inaccuracies in the . . .
administrative review, whether fraud existed in the . . .
administrative review, the strength of the evidence of fraud, the
level of materiality, and other appropriate factors.” Home Prods.,
633 F.3d at 1381.
II. Classification of Retorts
Commerce classified retorts as indirect materials because they
“are not physically incorporated into the final magnesium product
and are replaced too infrequently to be considered a direct
material.” See I&D Memo at 8. Commerce also determined that
[[ ]] classifies retorts as an indirect material in its
accounting records. Id. at 7. As such, Commerce accounted for
retort costs as factory overhead in the FOP calculation. Id. at 8.
USM claims that Commerce erroneously reclassified retorts as
an indirect material, treating them as factory overhead in the FOP
calculation and understating the NV. See Pl.’s Br. at 17. USM
insists that retorts should be classified instead as a direct
material, id., and offers four arguments in support of its claim:
(1) Commerce wrongfully reclassified retorts as an indirect
material, ignoring the accounting practices of [[ ]] without
showing that those practices were distortive; (2) Commerce limited
Court No. 12-00006 Page 13
its analysis to physical incorporation and consumption frequency
while ignoring evidence that detracted from its conclusion in
violation of this Court’s holding in Bridgestone Americas, Inc. v.
United States, 34 CIT __, 710 F. Supp. 2d 1359 (2010); (3) Commerce
failed to articulate a standard for its useful consumption
frequency determination; and (4) Industry practice is to treat
retorts as a direct material. See Pl.’s Br. at 17–28. Commerce
argues that its determination was consistent with both
[[ ]]’s accounting records and the holding in Bridgestone.
See Def.’s Br. at 17–25.
The court cannot now determine whether Commerce’s
classification was based on substantial evidence because Commerce
may choose to place USM’s untimely submission on the record during
the remand proceeding. The results of that determination will
potentially impact Commerce’s classification of retorts.
Accordingly, the court will defer further consideration of this
issue in order to allow Commerce to revisit its classification of
retorts in light of its decision concerning USM’s untimely
submission. See Amanda Foods (Vietnam) Ltd. v. United States, 33
CIT __, __, 647 F. Supp. 2d 1368, 1379 (2009) (deferring judgment
on Commerce’s surrogate value selection because it would likely be
impacted by remand result of the surrogate country determination).
III. Surrogate Values
“Commerce ordinarily determines the [NV] of subject
Court No. 12-00006 Page 14
merchandise of an exporter or producer from a [NME] country ‘on the
basis of the value of the [FOP] utilized in producing the
merchandise.’” Shantou Red Garden Foodstuff Co. v. United States,
36 CIT __, __, 815 F. Supp. 2d 1311, 1316 (2012) (quoting 19 U.S.C.
§ 1677b(c)(1)). This procedure seeks “to assess the ‘price or
costs’ of [FOP]” of subject merchandise in a comparable market
economy “in an attempt to construct a hypothetical market value of
that product.” Nation Ford Chem. Co. v. United States, 166 F.3d
1373, 1375 (Fed. Cir. 1999). Because “the process of constructing
foreign market value for a producer in a [NME] is difficult and
necessarily imprecise,” id. at 1377 (quoting Sigma Corp. v. United
States, 117 F.3d 1401, 1407 (Fed. Cir. 1997)), Commerce must use
the “best available information” to select surrogate values for
each of the FOP. 19 U.S.C. § 1677b(c)(1).
When selecting the best available surrogate value, Commerce
“normally will use publicly available information to value [FOP],”
19 C.F.R. § 351.408(c)(1), and it prefers to use data “reflect[ing]
a broad market average . . . contemporaneous with the period of
review, specific to the input in question, and exclusive of taxes
on exports.” Fuwei Films (Shandong) Co. v. United States, 36 CIT
__, __, 837 F. Supp. 2d 1347, 1350–51 (2012). Commerce has “broad
discretion to determine the ‘best available information.’”
Goldlink Indus. Co. v. United States, 30 CIT 616, 619, 431 F. Supp.
2d 1323, 1327 (2006) (quoting Timken Co. v. United States, 25 CIT
Court No. 12-00006 Page 15
939, 944, 166 F. Supp. 2d 608, 616 (2001)). When reviewing
Commerce’s surrogate value selection, “[t]he Court’s role is not to
make that determination anew, but rather to decide ‘whether a
reasonable mind could conclude that Commerce chose the best
available information.’” China First Pencil Co. v. United States,
34 CIT __, __, 721 F. Supp. 2d 1369, 1375 (2010) (quoting QVD Food
Co. v. United States, 34 CIT __, __, 721 F. Supp. 2d 1311, 1315
(2010), aff’d, 658 F.3d 1318 (Fed. Cir. 2011)).
A. Surrogate Value for Truck Freight
Commerce selected Infobanc as the surrogate for truck freight
rates in India because “Infobanc data are contemporaneous, country-
wide, and identify the relevant time period, distances, and
weights.” I&D Memo at 16. Additionally, Commerce noted that it
has “traditionally relied on truck freight data published by
Infobanc to determine the [surrogate value] for inland freight.”
Id. Although Commerce acknowledged flaws and omissions in the
Infobanc rates, it still considered them to be the best available
information because of flaws in the two alternative surrogates
suggested by USM, World Bank’s rates from its survey “Trading
Across Borders in India” and the rates from Gati, Ltd. (“Gati”), a
truck freight company operating in India. See id. at 16–18.
Specifically, Commerce rejected World Bank’s rates because they
included the prices of various means of inland transportation, id.
at 16–17, and Gati’s rates because it prefers to use rates that
Court No. 12-00006 Page 16
“reflect[] numerous transactions between many buyers and sellers”
over the rates from a single company. Id. at 18. USM argues that
Infobanc rates are unreliable and Commerce’s selection was
unsupported by substantial evidence in the record. See Pl.’s Br.
at 31–37.9
“Commerce is not permitted to select a surrogate value by
default.” Taian Ziyang Food Co. v. United States, 35 CIT __, __,
783 F. Supp. 2d 1292, 1328 (2011). When choosing between imperfect
data sets, “Commerce’s analysis must do more than simply identify
flaws in the data sets it rejects.” Guangdong Chems. Imp. & Exp.
Corp. v. United States, 30 CIT 1412, 1417, 460 F. Supp. 2d 1365,
1369 (2006). “[T]he law requires Commerce to make a reasoned
decision as to the source on which it chooses to rely, and to both
adequately explain its rationale and support its decision by
reference to substantial evidence in the record.” Taian Ziyang, 35
CIT at __, 783 F. Supp. 2d 1292 at 1329. Commerce erred in failing
to support its selection of Infobanc rates with substantial
evidence and in ignoring contradictory evidence on the record.
First, Commerce does not appear to have supported its
determination with reference to substantial evidence in the record.
9
USM also asks that the court order Commerce to select World
Bank rates, Gati’s rates, or both. See Pl.’s Br. at 37. However,
this Court will not review alternative surrogate value decisions de
novo in order to replace Commerce’s selection with one of its own.
See China First Pencil Co., 34 CIT at__, 721 F. Supp. 2d at
1375(quoting QVD Food Co., 34 CIT at __, 721 F. Supp. 2d at 1315).
Court No. 12-00006 Page 17
As noted above, Commerce stated that it selected Infobanc rates
because they are “contemporaneous, country-wide, and identify the
relevant time period, distances, and weights.” I&D Memo at 16.
Underlying that finding is Commerce’s conclusion that Infobanc
rates “represent actual transaction prices reflecting truck freight
between a number of Indian cities.” Def.’s Br. at 32. However,
Commerce does not cite any evidence in the record in support of
this claim. See id. at 32–33. Instead, Commerce cites earlier
reviews where it relied on Infobanc rates. See id. (citing Wooden
Bedroom Furniture from the PRC: Final Results and Final Rescission
in Part, 75 Fed. Reg. 50,992 (Aug. 18, 2010) and Certain New
Pneumatic Off-the-Road Tires from the PRC: Final Results of the
2009-2010 Antidumping Duty Administrative Review and Final
Rescission, in Part, 77 Fed. Reg. 14,495 (Mar. 12, 2012)).
However, Commerce’s reliance on Infobanc in earlier reviews simply
does not support its present conclusion that Infobanc rates reflect
real transaction prices throughout India.10 Moreover, Commerce’s
proffered evidence fails to establish a link between the rates and
10
Commerce argues, by reference to earlier reviews, that
Infobanc’s website has a “Directory of Logistics Operators, which
would indicate that Infobanc data is likely not from a single
logistics company.” See Def.’s Br. at 33 (citing Certain New
Pneumatic Off-the-Road Tires from the PRC: Issues and Decision
Memorandum for the Final Results of the 2009-2010 Administrative
Review of the Antidumping Duty Order at 18, Inv. No. A-570-912
(Mar. 5, 2012) (emphasis added). However, that Commerce previously
found that Infobanc possibly sources its information from multiple
companies is not persuasive, especially when the record lacks
evidence in support of that conclusion.
Court No. 12-00006 Page 18
any actual transaction prices. Without record evidence to support
the use of Infobanc rates, a reasonable person could not select
them as the best available surrogate. China First Pencil Co., 34
CIT at __, 721 F. Supp 2d at 1375.
Second, Commerce’s selection is flawed because the record does
not contain any explanatory information indicating the reliability,
sources, or methodology behind Infobanc rates. See Allied Pac.
Food (Dalian) Co. v. United States, 34 CIT __, __, 716 F. Supp. 2d
1339, 1350 (2010) (sustaining Commerce’s decision to reject a
proposed surrogate where record evidence indicated that the prices
“lack[ed] supporting data on total value and volume and ha[d]
deficiencies with respect to count size”); Wuhan Bee Healthy Co. v.
United States, 31 CIT 1182, 1195 (2007) (not published in the
Federal Supplement) (sustaining Commerce’s decision to reject an
Indiainfoline article because it contained “no additional
information on the author’s qualifications or the sources of his
information”). Here, USM specifically points out that “the
essential terms of the posted rates are unknown, including whether
the rates (1) relate to offers for shipments or reflect actual
transactions, (2) apply to containerized or bulk shipments, (3)
reflect long term contract or spot prices, and (4) are inclusive of
loading and unloading costs.” Pl.’s Br. at 34–35. While Commerce
itself recognized this infirmity, admitting that it was “unclear
whether Infobanc truck rate data on the record include costs
Court No. 12-00006 Page 19
associated with those activities,” I&D Memo at 18, it overlooked
this flaw because it “assume[d] the surrogate truck freight rate
used includes all costs associated with activities relating to
truck freight, absent evidence to the contrary.” Id. In fact, the
record contains little information concerning the Infobanc data, as
each set of monthly prices merely includes the single explanatory
phrase: “Rupees per tonne for nine tonnes.” See generally I.A.P.R.
20 Att. 2. Ultimately, Commerce fails to identify evidence in the
record sufficient to demonstrate the reliability of Infobanc rates.
Further, record evidence indicates that during the POR there
was a significant divergence between Infobanc rates and diesel fuel
prices, which comprise a significant portion of truck freight
rates. See I.A.P.R. 20 Att. 2; P.R. 56 Ex. 1, Att. 8. The record
demonstrates that Infobanc rates fell 17% during the POR, I.A.P.R.
20 Att. 2; Pl.’s Br. at 33 n.53, while diesel fuel prices increased
by 17%. See P.R. 56 Ex. 1, Att. 8; Pl.’s Br. at 32 n.50. Commerce
disagreed with USM’s characterization of the price trends, arguing
that USM “misconstrue[d] the circumstances” in which the diesel
prices were measured by basing its calculations on inflated prices.
See I&D Memo at 17. Commerce’s conclusion is contradicted by the
record, which contains uninflated prices from Indian Oil Corp.
during the POR depicting the price increase in diesel fuel. See
P.R. 56 Ex. 1, Att. 8.
Commerce argues that Infobanc data is still the best available
Court No. 12-00006 Page 20
information because of flaws in the alternative data sets. See I&D
Memo at 18. However, Commerce’s rebuttal of World Bank and Gati
data does not cure its failure to adequately explain its reliance
upon Infobanc data. See Guangdong Chems., 30 CIT at 1417, 460 F.
Supp. 2d at 1369; Longkou Haimeng Machinery Co. v. United States,
32 CIT 1142, 1164–65, 581 F. Supp. 2d 1344, 1363–64 (ordering
remand where Commerce provided adequate reasoning for rejecting
potential surrogate data but failed to adequately “explain its
reliance” on the data set it selected) (Tsoucalas, Senior J.).
Commerce was still required to provide a reasonable explanation of
its selection of Infobanc rates with substantial evidence from the
record. See Taian Ziyang, 35 CIT at __, 783 F. Supp. 2d 1292 at
1329.
For the foregoing reasons, the court must remand Commerce’s
determination. On remand Commerce must either adequately explain
its rationale for selecting Infobanc data with support from
substantial evidence in the record or select a new surrogate for
truck freight rates.
B. Surrogate Value for Financial Ratios
Commerce selected the financial statements of Hindalco
Industries Ltd. (“Hindalco”) to calculate surrogate financial
ratios. I&D Memo at 11. USM argues that Hindalco’s financial
statements were not the best available information because the
majority of Hindalco’s production is dedicated to non-comparable
Court No. 12-00006 Page 21
merchandise and Hindalco received countervailable subsidies during
the POR. See Pl.’s Br. at 28–31. Commerce “requests a remand to
reconsider [USM]’s argument concerning Commerce’s selection of
Hindalco’s financial statement for calculating surrogate financial
ratios and to determine whether Hindalco’s financial statement
continues to be the best available information on the record.”
Def.’s Br. at 35. Accordingly, USM’s request to remand for
reconsideration of the surrogate financial ratios is granted.
C. Surrogate Value for Labor
USM alleges that “Commerce made two errors when calculating
the surrogate value for labor”: (1) Commerce selected the wrong
base period for the inflation adjustment, using May 1, 2007 through
April 30, 2008 instead of April 1, 2007 through March 31, 2008 and
(2) “Commerce derived the inflation adjustment using India’s
wholesale price index, when its labor policy bulletin identified
the Consumer Price Index as the preferred index.” Pl.’s Br. at 39.
Commerce requests that this Court remand the surrogate for labor so
that it might “examine these allegations.” Def.’s Br. at 34.
Accordingly, USM’s request to remand for reconsideration of the
surrogate value for labor is granted.
III. U.S. Movement Expenses
During the review, TMI reported that Mr. James Gammons engaged
in certain “ministerial activities” on behalf of TMI. P.R. 61 at
3. Commerce concluded that TMI incurred “expenses on facilitation”
Court No. 12-00006 Page 22
in association with the services Mr. Gammons provided, which
included “contact[ing] customshouse brokers, freight forwarders,
trucking companies, [and] warehouse companies.” I&D Memo at 4.
However, Commerce determined that TMI did not incur any selling
expenses in the U.S and that “the record contains no evidence that
Mr. Gammons engaged in sales of the subject merchandise on behalf
of TMI or took possession of the subject merchandise.” Id. Thus,
Commerce decided not to adjust the U.S. sales price to reflect the
expenses TMI incurred in payment of Mr. Gammons’ services. Id.
Additionally, Commerce noted that all of TMI’s U.S. sales were EP
sales11 and therefore TMI was not required to report sales expenses
incurred in the U.S. because generally such expenses “are captured
in the surrogate financial ratios under the NME FOP methodology to
calculate [NV] for EP sales.” Id. USM argues that the expenses at
issue were movement expenses and therefore Commerce was required to
deduct them from the U.S. price under 19 U.S.C. § 1677a(c)(2)(a)
regardless of whether they were associated with CEP or EP sales.
See Pl.’s Br. at 39.
When calculating EP or CEP, Commerce is directed to reduce the
price by “the amount, if any, included in such price, attributable
11
Commerce calculates EP “if the first sale to an unaffiliated
purchaser in the United States or to an unaffiliated purchaser for
export to the United States is made by the producer or exporter in
the foreign market prior to the date of importation.” Import
Administration, Antidumping Manual, ch. 7, p. 3 (Oct. 13, 2009)
(emphasis added).
Court No. 12-00006 Page 23
to any additional costs, charges, or expenses, and [U.S.] import
duties, which are incident to bringing the subject merchandise from
the original place of shipment in the exporting country to the
place of delivery in the [U.S.]” 19 U.S.C. § 1677a(c)(2)(A). When
calculating CEP, Commerce makes certain additional adjustments for
selling expenses incurred in the U.S., including commissions,
credit expenses, guarantees, and warrantees. See 19 U.S.C. §
1677a(d)(1). However, under the NME methodology, Commerce does not
adjust EP for those expenses incurred in the U.S., as they are
included in the FOP calculation of NV under selling, general and
administrative expenses. See Antidumping Manual, ch. 10 at p. 11;
I&D Memo at 4. The issue before the court is whether the expenses
TMI incurred were movement expenses, for which Commerce must adjust
U.S. sales price under 19 U.S.C. § 1677a(c)(2)(A).
Here, Commerce’s decision not to adjust EP was supported by
substantial evidence because the expenses associated with Mr.
Gammon’s services are not movement expenses. See 19 U.S.C. §
1677a(c)(2)(A). The services Mr. Gammons provided, which included
“contact[ing] customshouse brokers, freight forwarders, trucking
companies, [and] warehouse companies,” I&D Memo at 4, were too
attenuated from the actual movement of subject merchandise to be
considered movement expenses. Mr. Gammons did not move or store
the goods nor was he compensated for such services. The record
supports Commerce’s conclusion that Mr. Gammons “contacted” such
Court No. 12-00006 Page 24
service providers on behalf of TMI, but did not enter contracts or
act as an agent on TMI’s behalf. See P.R. 61 at 3. The prior
reviews USM cites are unpersuasive because they are easily
distinguishable from the instant case: they concern costs
associated with the actual movement of goods. See Issues and
Decision Memorandum for the Final Determination in the Antidumping
Investigation of Chlorinated Isocyanurates from Spain at 20, Inv.
No. A-469-814 (May 2, 2005) (freight forwarding costs are an
element of U.S. movement expenses) and Notice of Preliminary
Determination of Sales at Less Than Fair Value and Postponement of
Final Determination: Silicon Metal from the Russian Federation, 67
Fed. Reg. 59,253, 59,261–62 (Sept. 20, 2002) (U.S. inland freight
costs are an element of U.S. movement expenses). The “expenses on
facilitation,” I&D Memo at 4, associated with Mr. Gammons’ services
cannot be considered movement expenses. Therefore, Commerce’s
determination regarding Mr. Gammons’ services was reasonable.
CONCLUSION
For the foregoing reasons the court concludes that the Final
Results are sustained with regard to the U.S. movement expenses but
remanded as to USM’s untimely submission and the surrogate values
for truck freight, labor, and financial ratios. The court defers
judgment on the issue of retort classification so Commerce has an
opportunity to reconsider its chosen classification should Commerce
place USM’s untimely submission on the record during remand.
Court No. 12-00006 Page 25
ORDER
In accordance with the above, it is hereby
ORDERED that this case is to be remanded to the United States
Department of Commerce, International Trade Administration, to
reconsider its findings regarding USM’s untimely submission and the
surrogate values for truck freight, labor, and financial ratios;
and it is further
ORDERED that the Final Results are sustained with respect to
United States movement expenses; and it is further
ORDERED that remand results are due within ninety (90) days of
the date this opinion is entered. Any responses or comments are
due within thirty (30) days thereafter. Any rebuttal comments are
due within fifteen (15) days after the date responses or comments
are due.
/s/ NICHOLAS TSOUCALAS
Nicholas Tsoucalas
Senior Judge
Dated: January 22, 2013
New York, New York
US Magnesium, LLC v. United States
Court: United States Court of International Trade
Date filed: 2013-01-22
Citations: 2013 CIT 9, 895 F. Supp. 2d 1319
Copy CitationsCombined Opinion