Slip Op. 09-96
UNITED STATES COURT OF INTERNATIONAL TRADE
CATFISH FARMERS OF AMERICA,
Plaintiffs, Before: Leo M. Gordon, Judge
v. Consol. Court No. 08-00111
UNITED STATES,
Defendant.
OPINION and ORDER
[Commerce’s administrative review results remanded.]
Dated: September 14, 2009
Akin, Gump, Strauss, Hauer & Feld, LLP (Valerie A. Slater, Christopher D.
Priddy, Jaehong D. Park, Jarrod M. Goldfeder, Natalya D. Dobrowolsky) for Plaintiffs
Catfish Farmers of America, America’s Catch, Consolidated Catfish Companies, LLC,
d/b/a Country Select Fish, Delta Pride Catfish Inc., Harvest Select Catfish Inc.,
Heartland Catfish Company, Pride of the Pond, Simmons Farm Raised Catfish, Inc.,
and Southern Pride Catfish Company, LLC.
Tony West, Assistant Attorney General, Jeanne E. Davidson, Director,
Franklin E. White, Jr., Assistant Director, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice (Richard P. Schroeder); and Office of Chief Counsel for
Import Administration, U.S. Department of Commerce (David W. Richardson),
of counsel, for Defendant United States.
Grunfeld Desiderio Lebowitz Silverman & Klestadt, LLP (Mark E. Pardo,
Andrew T. Schutz) for Defendant-Intervenors QVD Food Co., Ltd. and QVD USA, LLC.
Arent Fox LLP (John M. Gurley, Matthew L. Kanna, Diana Dimitriuc-Quaia)
for Defendant-Intervenors East Seafoods Joint Venture Co., Ltd. and Piazza’s Seaford
World LLC.
Gordon, Judge: This consolidated action involves an administrative review
conducted by the U.S. Department of Commerce (“Commerce”) of the antidumping duty
order covering certain frozen fish fillets from the Socialist Republic of Vietnam.
Consol. Court No. 08-00111 Page 2
See Certain Frozen Fish Fillets from the Socialist Republic of Vietnam, 73 Fed. Reg.
15,479 (Dep’t of Commerce Mar. 24, 2007) (final results of administrative review), as
amended, 73 Fed. Reg. 47,885 (Dep’t of Commerce Aug. 15, 2008) (“Final Results”);
see also Issues and Decision Memorandum for Certain Frozen Fish Fillets from the
Socialist Republic of Vietnam, A-552-801 (Mar. 17, 2008), available at
http://ia.ita.doc.gov/frn/summary/vietnam/E8-5889-1.pdf (last visited Sept. 14, 2009)
(“Decision Memorandum”). Before the court are motions for judgment on the agency
record filed by QVD Food Co. (“QVD”), and Catfish Farmers of America, and individual
U.S. catfish processors, America’s Catch, Consolidated Catfish Companies, LLC, d/b/a
Country Select Fish, Delta Pride Catfish Inc., Harvest Select Catfish Inc., Heartland
Catfish Company, Pride of the Pond, Simmons Farm Raised Catfish, Inc., and Southern
Pride Catfish Company, LLC (collectively “Catfish Farmers”). 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) (2006),1 and 28 U.S.C. § 1581(c) (2006). For the reasons set forth
below, the court remands this action to Commerce to reconsider (1) QVD’s international
freight expense, (2) the valuation of QVD’s labels, and (3) the calculation of the
surrogate value for fish oil. The court sustains Commerce’s determinations regarding all
other issues in this action.
Standard of Review
For administrative reviews of antidumping duty orders, the court sustains
1
Further citations to the Tariff Act of 1930 are to the relevant provisions of Title 19 of
the U.S. Code, 2006 edition.
Consol. Court No. 08-00111 Page 3
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 substantial evidence challenges
to Commerce's actions, the court assesses whether the agency action is “unreasonable”
given the record as a whole. Nippon Steel Corp. v. United States, 458 F.3d 1345,
1350-51 (Fed.Cir.2006); see Dorbest Ltd. v. United States, 30 CIT 1671, 1675-76,
462 F. Supp. 2d 1262, 1269-70 (2006) (providing comprehensive explanation of
standard of review in non-market economy context). Often described as "such relevant
evidence as a reasonable mind might accept as adequate to support [the agency's]
conclusion," Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938),
“substantial evidence” is best understood as a word formula connoting reasonableness
review. 3 Charles H. Koch, Jr., Administrative Law and Practice § 10.3[1] (2d ed. 2008).
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.” Edward D. Re., Bernard J. Babb, and Susan M. Koplin,
8 West’s Fed. Forms, National Courts § 13342 (2d ed. 2009).
The administrative record for an antidumping duty administrative review may
support two or more reasonable, though inconsistent, determinations on a given issue.
Therefore, arguments (like some made in this case) that “substantial record evidence”
supports an alternative determination to the one the agency reached are not responsive
to the standard of review. The question the court must consider is whether the choice
Consol. Court No. 08-00111 Page 4
the agency made is reasonable, not whether some alternative may also have
constituted a reasonable choice.
Discussion
1. QVD’s International Freight Expense
In the Final Results Commerce calculated the net price for QVD’s U.S. sales by
subtracting a gross-weight, international freight expense. See Decision Memorandum
at 23. Although Commerce stated that its practice was to subtract international freight
based on the manner in which it was incurred, after reviewing Catfish Farmers’
arguments, Commerce agrees that it must reconsider its calculation of international
freight expense and requests a remand to do so, which the court will grant. SKF USA
Inc. v. United States, 254 F.3d 1022, 1029-30 (Fed. Cir. 2001) (“SKF”).
2. Valuation of QVD’s Labels
In the Final Results Commerce used the average of the 2004 UN COMTRAD
data covering imports of labels into Bangladesh from all over the world to value QVD’s
label factor of production. See Surrogate Value Mem. at 8; Decision Memorandum
at 25. QVD argues that although the UN COMTRAD data is an appropriate basis upon
which to derive a surrogate value for labels, there are three data points in the dataset
for Japan, Hong Kong, and the Netherlands that should be excluded because they
represent aberrationally high prices with low volumes. QVD Br. in Support of Pl.’s Mot.
for J. Agency R. 15-19 (“QVD’s Br.”). Commerce agrees that the issue needs to be
further explored and requests a remand to reconsider the application of its aberrational
Consol. Court No. 08-00111 Page 5
outlier policy to the label surrogate value data, a request the court will grant.
SKF, 254 F.3d at 1029-30.
3. Valuation of Fish Oil
In the Final Results Commerce relied upon World Trade Atlas Indian Import
statistics for HTS subheading 1504.20 (Fish Oil, Not Fish Liver) to value the fish oil
produced as a by-product of fish processing. Decision Memorandum at 42.
Catfish Farmers argue that Commerce had previously declined to use this data in the
investigation and did not explain why it was appropriate to use the data in this
administrative review. Catfish Farmers Mem. in Support of Pl.’s Mot. for J. Agency R.
39-40 (“Catfish Farmers Br.”). Commerce acknowledges that it did not address this
argument in the Final Results and requests a remand to reconsider the surrogate value
for fish oil and address Catfish Farmers’ argument, a request the court will grant.
SKF, 254 F.3d at 1029-30.
4. Bona Fide Sales of East Sea Seafoods’ Subject Merchandise
To derive the United States price for respondent East Sea Seafoods Joint
Venture Co. (“ESS”), Commerce used the price between ESS’s affiliated company
Piazza’s Seafood World LLC (“PSW”) and unaffiliated United States customers.
See Decision Memorandum at 39 & n.33, Pub. Doc. 256.2 After explaining in detail
each of the arguments raised by Catfish Farmers that ESS’s sales were not bona fide
commercial transactions, Commerce concluded:
2
Documents in the administrative record are identified as either “Pub. Doc.” (for a public
document) or “Confid. Doc.” (for a confidential document), followed by the document
number.
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We have analyzed all of the information on the record with respect to the
question of whether ESS’s sales during the POR constitute bona fide
sales. Although we have some concerns about certain aspects of the facts
on the record, a review of the totality of the circumstances leads us to
conclude that sales of ESS’s product are bona fide transactions. In
determining whether a sale is a bona fide commercial transaction, the
Department examines the totality of the circumstances of the sale in
question. If the weight of the evidence indicates that a sale is not typical of
a company’s normal business practices, the sale is not consistent with
good business practices, or “the transaction has been so artificially
structured as to be commercially unreasonable,” the Department finds that
it is not a bona fide commercial transaction and must be excluded from
review. See Certain Cut-to-Length Carbon Steel Plate from Romania:
Notice of Rescission of Antidumping Duty Administrative Review, 63 FR
47232, 47234 (September 4, 1998).
In particular, in determining whether a U.S. sale, in the context of a review,
is a bona fide transaction, the Department considers numerous factors,
with no single factor being dispositive, in order to assess the totality of the
circumstances surrounding the sale in question. The Department
considers such factors as (1) the timing of the sale, (2) the sales price and
quantity, (3) the expenses arising from the sales transaction, (4) whether
the sale was sold to the customer at a loss, and (5) whether the sales
transaction between the exporter and customer was executed at arm’s
length. See American Silicon Technologies v. United States, 110 F. Supp.
2d 992, 996 (CIT 2000) (citation omitted); see also Tianjin Tiancheng
Pharmaceutical Co. Ltd. v. United States, 366 F. Supp. 2d 1246, 1250
(CIT 2005). An examination of whether a sale is a bona fide transaction
may include a variety of these and other factors, depending upon the
unique circumstances of each case.
In examining all of the information on the record in this case, we have
determined that the concerns raised by the Petitioners do not cause us to
reject the commercial reasonableness of ESS’s U.S. sale. In the instant
case, we have examined the pricing concerns of the Petitioners and find
that information on the record, including price lists and average POR
prices, indicate that ESS’s sale was not priced aberrationally high. We
have also analyzed the quantity of the sale, and have determined that it
was of a commercial quantity because it was consistent in size with other
sales of seafood products that PSW made during the POR. We disagree
with the Petitioners that the fact that ESS does not produce a catalog,
website or did not actively seek out U.S. customers during the POR,
necessitates a conclusion that any U.S. sale it enters into is not legitimate.
Also, the tolling arrangement does not, on its face, lead us to conclude
Consol. Court No. 08-00111 Page 7
that the operation was not a legitimate commercial enterprise because
tolling arrangement [sic] are often part of a legitimate business enterprise.
We also cannot conclude that the timing of the sale results in a finding that
the sales are not bona fide because companies can make a sale at any
time during the POR. When viewing the totality of the circumstances,
concerning all the facts and arguments placed on the record by parties,
we conclude that we cannot determine ESS’s sales to be non-bona fide.
Therefore, we will continue to calculate a margin for ESS in these final
results.
Decision Memorandum at 39.
Catfish Farmers argue that Commerce’s “determination regarding [ESS] was not
supported by substantial evidence because it failed to provide a reasoned and adequate
explanation for its conclusion that ESS’s U.S. sales were bona fide.” Catfish Farmers
Br. 16. Catfish Farmers argue that Commerce “failed to address the detailed record
evidence, argument, and precedent relevant to the bona fides of [ESS] itself, and was
unsupported by substantial evidence.” Catfish Farmers Br. 13.
Although Commerce’s double negative conclusion that it “cannot determine
ESS’s sales to be non-bona fide” lacks a certain clarity, the court nevertheless does not
agree that a remand is necessary for a further explanation about the bona fides of
ESS’s U.S. sales. During the administrative review, Commerce first explained, and then
applied, its totality of the circumstances bona fide sales test. As Commerce explained,
Commerce considers numerous factors (with no single factor being dispositive),
to assess the totality of the circumstances surrounding the sale in question. Commerce
considers such factors as (1) the timing of the sale, (2) the sales price and quantity,
(3) the expenses arising from the sales transaction, (4) whether the sale was sold to the
customer at a loss, and (5) whether the sales transaction between the exporter and
Consol. Court No. 08-00111 Page 8
customer was executed at arm’s length. See Am. Silicon Tech. v. United States,
24 CIT 612, 616, 110 F. Supp. 2d 992, 996 (2000) (citation omitted); see also
Tianjin Tiancheng Pharm. Co.. v. United States, 29 CIT 256, 260, 366 F. Supp. 2d
1246, 1250 (2005). An examination of whether a sale is a bona fide transaction may
include a variety of these and other factors, depending upon the circumstances of each
case. If the weight of the evidence indicates that a sale is not typical of a company’s
normal business practices, the sale is not consistent with good business practices, or
the transaction has been so artificially structured as to be commercially unreasonable,
Commerce excludes the non-bona fide transaction from review.
In response to Catfish Farmers’ arguments that ESS’s U.S. sales were not bona
fide, Commerce analyzed ESS’s U.S. sale and found that the sale was not priced
aberrationally high and was made in commercial quantities. Commerce also concluded
that ESS’s lack of a website, catalog, or U.S. sales solicitations during the period of
review did not, in and of themselves, mean that the U.S. sale was unreliable.
Commerce likewise found that ESS’s tolling arrangement did not, on its face, suggest
an illegitimate commercial enterprise because tolling arrangements are often part of
legitimate business enterprises. These are all reasonable findings and conclusions
supported by the administrative record. When measured against Commerce’s totality of
the circumstances bona fide sales analysis, Commerce’s conclusion regarding the bona
fides of ESS’s U.S. sale is reasonable.
Turning to Catfish Farmers’ arguments about the bona fides of ESS itself,
Catfish Farmers argue that Commerce did not directly address that contention in its
Consol. Court No. 08-00111 Page 9
totality of circumstances bona fide sales determination, and that Commerce therefore
“entirely failed to consider an important aspect of the problem,” Motor Vehicle Mfrs.
Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). Catfish Farmers chose
to subsume the bona fides of ESS within the bona fide sales argument, rendering the
bona fides of ESS one of many factors for Commerce to consider. See Catfish Admin.
Case Br. 42-59, Confid. Doc. 89. What Commerce did in resolving the bona fide
U.S. sales issue was to focus on ESS’s affiliated company sale and subsequent sales to
unaffiliated U.S. customers. Commerce followed its usual practice of evaluating the
totality of the circumstances with regard to those sales. Commerce was persuaded that
the sales were legitimate, and by implication, that ESS was too. See Daewoo Elecs. v.
Int’l Union, 6 F.3d 1511, 1520 (Fed. Cir. 1993) ("’The specific determination we make is
whether the evidence and reasonable inferences from the record support’ Commerce's
findings.") (quoting Matsushita Elec. Indus. Co. v. United States, 750 F.2d 927, 933
(Fed. Cir. 1984)). The court does not believe Commerce erred by failing to separately
and distinctly address the legitimacy of ESS as a respondent when Catfish Farmers did
not raise that as a separate, standalone issue. It was argued within the context of
Commerce’s totality of the circumstances sales test. The court therefore does not share
Catfish Farmers’ belief that a remand is either necessary or appropriate in this instance.
Commerce’s bona fide sales determination was reasonable and therefore is sustained.
5. Collapsing Thuan Hung with QVD and QVD Dong Thap
In the Final Results Commerce collapsed Thuan Hung with QVD and QVD Dong
Thap, as it had in the preceding review. Decision Memorandum at 19. QVD claims that
Consol. Court No. 08-00111 Page 10
other than a family relationship there is no evidence of financial ties or transactions that
would support a determination to collapse Thuan Hung with QVD and QVD Dong Thap.
QVD Br. 4. Commerce placed the memorandum from the second administrative review
addressing the affiliation and collapsing of the QVD companies on the record of this
administrative review. See Second Review Collapsing Memorandum, Confid. Doc. 37
(“Collapsing Memorandum”). In its supplemental questionnaire Commerce asked QVD
to indicate whether the facts had changed since the preceding review period. Decision
Memorandum at 18. In response QVD represented that “there were no changes in the
corporate structures of any of the QVD companies or affiliates” and there “were no
changes from the 2nd administrative review to the capital structure, scope of operations,
affiliations, production capacity, ownership, or management.” Id. at 19 (internal
quotations omitted). Accordingly, relying upon the rationale of the second
administrative review, and “absent any information that would change that
determination,” Commerce again collapsed Thuan Hung with QVD and QVD Dong
Thap. Id. at 19.
If parties are affiliated or collapsed, Commerce generally disregards transactions
between those parties and looks further downstream for transactions. For example,
for export or constructed export price, Commerce looks downstream to find the first sale
to an unaffiliated purchaser. 19 U.S.C. § 1677a(a), (b). In the administrative review
Commerce found that Thuan Hung was part of the QVD family group, a determination
that QVD does not challenge. QVD Br. 10. Rather, QVD asserts that Commerce’s
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collapsing analysis was improper because there was not a significant potential for
manipulation by the collapsed entities. QVD Br. 14.
Commerce collapses affiliated parties and treats them as a single entity if
(1) “those producers have production facilities for similar or identical products that would
not require substantial retooling of either facility in order to restructure manufacturing
priorities” and (2) “the Secretary concludes that there is a significant potential for the
manipulation of price or production.” 19 C.F.R. § 351.401(f)(2) (2006).3 The regulations
further provide a non-exhaustive list of three factors that Commerce may consider in
determining whether there is a significant potential for manipulation:
(1) the level of common ownership; (2) the extent to which managerial employees or
board members of one firm sit on the board of directors of an affiliated firm; and
(3) whether operations are intertwined. Id.
QVD does not dispute that Thuan Hung has production facilities that can produce
and did produce, during the period of review, products similar or identical to the subject
merchandise. However, QVD disputes Commerce’s determination that there is a
significant potential for manipulation of prices and production. QVD Br. 8.
With regard to the first control factor, common ownership, Commerce found, in
the second review, that the QVD family members “comprise the only shareholders and
the largest share holders as a family in each company” and that, as a result, the QVD
family companies have the ability or incentive to coordinate their actions in order to
direct the companies to act in concert with each other. Collapsing Memorandum
3
Further citations to the C.F.R. are to the 2006 edition.
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at 15-16. This finding was incorporated into the Final Results in this review, along with
the other second administrative review findings on this issue. Decision Memorandum
at 19.
QVD argues that common family ownership is not sufficient to collapse
companies without further indicia of control. QVD Br. 10 (citing Certain Welded Carbon
Steel Pipes and Tubes from Thailand, 63 Fed. Reg. 55,578 (Dep’t of Commerce
Oct. 16, 1998) (final results of antidumping duty administrative review) (“Tubes from
Thailand”)). QVD is correct that common family ownership alone provides an
insufficient basis to collapse entities, but QVD’s analysis of Tubes from Thailand is
incomplete. Rather, Tubes from Thailand supports Commerce’s determination that,
from a family group perspective, the ownership of Thuan Hung is a positive indicator of
the significant potential for manipulation. In Tubes from Thailand Commerce decided
not to collapse one company into the others, finding that the family in question was only
a minority owner. Tubes from Thailand, 63 Fed. Reg. at 55,583. In the instant case the
existence of the family group, and the significant controlling ownership by the family
members, reasonably supports Commerce’s collapsing decision.
With regard to the second control factor, the extent to which managerial
employees or board members of one firm sit on the board of directors of an affiliated
firm, Commerce found that, because senior leadership positions of each of the QVD
companies were filled with members of the QVD family, and the QVD family members
are the largest stakeholders in the company, the evidence “clearly shows that the family
has the ability and financial incentive to coordinate their actions to direct . . .
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[the companies] . . . to act in concert with each other.” Collapsing Memorandum at 16;
see Statement of Administrative Action of the Uruguay Round Agreements Act (“SAA”),
H.R. Doc. 103-316 (Vol. I) at 838 (”A company may be in a position to exercise restraint
or direction, for example, through corporate or family groupings.”).
QVD argues that this control factor requires overlapping boards of directors.
QVD Br. 11. QVD is incorrect. There is no applicable precedent that requires
overlapping boards of directors to support a collapsing determination. The regulation’s
list of factors is non-exhaustive and merely suggests three factors for Commerce to
examine in establishing potential control. See 19 C.F.R. § 351.401(f)(2). Commerce
made a family group determination that QVD does not contest. Here, Commerce
reasonably applied the control analysis to the family group level because the companies
are owned and controlled by family members. Accordingly, although Thuan Hung does
not share board members with the other QVD companies, the presence of members of
the QVD family group in senior leadership positions in all of the QVD companies
supports a finding that there is a significant potential for manipulation.
With regard to the third control factor, intertwined operations, Commerce relied
upon several facts. In the second review, Commerce found that Thuan Hung had a
past arrangement with QVD and QVD Dong Thap to process frozen fish fillets for export
to the United States. Decision Memorandum at 19; Collapsing Memorandum at 15-16.
Commerce acknowledged that the arrangement had ended in 2003, but, in the second
review, Commerce continued to find that the past arrangement evidenced the potential
for intertwined operations in the future. Collapsing Memorandum at 16. Commerce,
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however, did not rely upon this fact alone in making its determination. In addition,
Commerce found that Thuan Hung processed Vietnamese catfish like the subject
merchandise and that Thuan Hung had an import-export registration so that it could
export to the United States if it wanted to. Id. As a result, Commerce found a potential
for intertwined transactions that, when combined with the family group determination,
and the level of ownership and direct control by family members of the QVD companies,
supported a determination that Thuan Hung should be collapsed with QVD and
QVD Dong Thap. Id. at 16. After confirming that there were no major changes to the
underlying data from the prior review, Commerce concluded that it was appropriate in
this review to continue to treat QVD Dong Thap and Thuan Hung as a single entity.
Decision Memorandum at 19.
QVD cites to three administrative determinations in which Commerce found that
there was insufficient evidence of intertwined operations to support a collapsing
determination. QVD Br. 12-13. Two of the determinations do not involve family group
findings and, therefore, are inapplicable. The administrative precedent that does
address a family group scenario, Tubes from Thailand, supports Commerce’s collapsing
decision in this action, because the evidence that Commerce found missing in Tubes
from Thailand is present here. In Tubes from Thailand Commerce based its decision
not to collapse upon the totality of the circumstances, including determinations that the
family member on the board of the company in question was only one of nine, and that
the family in that case owned a minority share of the company in question. In contrast,
here, Commerce found that the QVD family members are the only shareholders,
Consol. Court No. 08-00111 Page 15
the largest shareholders, and hold senior leadership positions in the companies.
Collapsing Memorandum at 15-16.
In addition Commerce found that Thuan Hung processed fish fillets for the
QVD companies in the past; that it processed fish identical to the subject merchandise
during the period of review; that it has an import-export registration; and that, although it
shipped no subject merchandise during the period of review, it could have done so.
Further, QVD focuses a great deal upon its contention that the companies did not share
customers and customer lists, make production decisions in conjunction with each
other, coordinate pricing, borrow or lend to each other, or engage in similar joint
activities. QVD Br. 5-6. The regulation, however, covers not just actual manipulation,
but also whether there is a significant potential for manipulation of price and production
in the future. 19 C.F.R. § 351.401(f)(1).
As with any collapsing determination, Commerce’s determination here was
dependent upon the totality of the facts and circumstances. Commerce reasonably
determined that there existed a significant potential for manipulation of price and
production by the collapsed entities. Commerce’s collapsing decision is therefore
sustained.
6. Affiliation of QVD USA and Beaver Street Fisheries
In the Final Results Commerce rejected Catfish Farmers’ argument that
QVD USA and Beaver Street Fisheries (“BSF”) were affiliated because they shared an
employee. Catfish Farmers contend that Commerce failed to evaluate whether BSF
and QVD USA were affiliated because they both employ Person X, or whether BSF
Consol. Court No. 08-00111 Page 16
directly or indirectly controlled QVD USA through Person X. Catfish Farmers Br. 21-24.
Contrary to Catfish Farmers’ assertions, Commerce was aware of their arguments,
restated those arguments, and rejected those arguments. Commerce examined the
relationship between QVD USA, BSF, and Person X, and determined that the record
evidence did not reveal the type of control necessary to warrant a finding that QVD USA
and BSF were affiliated. Decision Memorandum at 15-16. The antidumping statute
provides that, among other scenarios, an affiliation relationship exists when two or more
persons directly or indirectly control, are controlled by, or are under common control
with, any person. 19 U.S.C. § 1677(33)(F). The statute defines the “control of another
person” as being “legally or operationally in a position to exercise restraint or direction
over the other person.” 19 U.S.C. § 1677(33).
In the Final Results Commerce concluded that “[w]hile Person X acts as
QVD USA’s agent in the United States and is also employed by BSF, there is no
evidence on the record to indicate that QVD USA or BSF are in a legal or operational
position to exercise restraint or direction over each other, or that they are under
common control of Person X. Decision Memorandum at 15-16. Commerce determined
that QVD does not control BSF through Person X, and BSF does not control QVD USA
through Person X. Commerce found that although Person X has some influence over
the prices of QVD USA, the owner of QVD (not Person X), has the ultimate authority to
set QVD USA’s prices. QVD USA Verification Report at 5-6, Confid. Doc. 86.
With respect to BSF, Commerce found that Person X had no control over the
purchasing decisions of BSF. Id. Commerce found that BSF employed Person X as
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one of many advisors about fish market conditions, production facilities, or exporter
information. Id. Given Person X’s role for the respective companies, Commerce found
the record evidence insufficient to support a finding that BSF controlled, or was in a
position to control, QVD USA through Person X. These are reasonable findings
supported by the administrative record.
Catfish Farmers argue that BSF allegedly “controls” Person X through their
employer-employee relationship, and because Person X allegedly was operationally
able to exercise restraint and direction over QVD USA, BSF could indirectly exercise
control over QVD USA through Person X. Commerce, though, did not agree, finding as
a factual matter that Person X simply was not a vehicle through which either company
could exercise control over one another. See Hontex Enter., Inc. v. United States,
27 CIT 272, 299, 248 F. Supp. 2d 1323, 1345-46 (2003) (“At no point does the evidence
demonstrate that [the shared employee] was in control of both Companies or that his
activities served to allow one company or any third party to exercise control over the
Companies. The evidence merely demonstrates that the Companies shared an
employee and nothing more.”). Here, Commerce conducted a full control analysis of
the relationships between QVD USA, BSF, and their shared employee, Person X, and
found that the requisite statutory control was absent, a finding that is reasonable given
the role that Person X played in each company.
7. Surrogate Value Selections for Whole Live Fish and Financial Ratios
Catfish Farmers challenge (1) the surrogate value Commerce used to value the
primary input, whole live fish, for the subject merchandise, frozen fish fillets, and
Consol. Court No. 08-00111 Page 18
(2) the surrogate financial statements Commerce used to value the financial ratios for
selling, general, and administrative expenses, overhead, and profit. Catfish Farmers
Br. 24-35.
In an antidumping proceeding Commerce is required to determine whether
subject merchandise is being, or is likely to be, sold at less than fair value in the United
States by comparing the export price (the price of the goods sold in the United States)
and the normal value of merchandise. 19 U.S.C. § 1675(a)(2)(A). The normal value of
merchandise is usually determined by reference to sales of merchandise in the home
market, in a third country, or through a constructed value of the merchandise.
See 19 U.S.C. § 1677b(a)(1), (4).
Under Commerce’s non-market economy methodology for determining normal
value, Commerce determines a surrogate value for each input used in producing
subject merchandise. 19 U.S.C. § 1677b(c)(1). “[T]he factors of production utilized in
producing merchandise include, but are not limited to – (A) hours of labor required,
(B) quantities of raw materials employed, (C) amounts of energy and other utilities
consumed, and (D) representative capital cost, including depreciation.” 19 U.S.C.
§ 1677b(c)(3).
When constructing the value for subject merchandise in a non-market economy,
Commerce need not “duplicate the exact production experience of the” non-market
economy manufacturers, or undergo an item-by-item accounting when accounting for
factory overhead. Nation Ford Chem. Co. v. United States, 166 F.3d 1373, 1377
(Fed. Cir. 1999). Rather, Commerce must use the best available information to “acquire
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an accurate reading of the actual costs of a company operating in a state-controlled-
economy.” Technoimportexport and Peer Bearing Co. v. United States, 15 CIT 250,
254, 766 F. Supp. 1169, 1174 (1991).
A. Fish Prices from 2006-07 Financial Statement
for Gachihata Acquaculture Farms, Ltd.
For the Final Results Commerce had a choice of several proposed sources for
surrogate value information for the whole live fish used to make the subject
merchandise, frozen fish fillets. Commerce obtained a surrogate value for whole live
fish from the 2006-07 audited financial statement for Bangladeshi fish grower Gachihata
Acquaculture Farms, Ltd. (“Gachihata”). Decision Memorandum at 13-14.
Catfish Farmers argue that this financial statement is unreliable and that Commerce
should have continued to use the sales data from the 2000-01 Gachihata statement,
indexed for inflation. Catfish Farmers Br. 6-13. Although styled as an argument that
Commerce failed to consider their arguments and offer a rational connection between
the facts found and the choice made, Plaintiffs’ argument reads more like a garden
variety request to reweigh the evidence, something the substantial evidence standard of
review does not allow.
In selecting among competing surrogate value sources, Commerce evaluates
potential data for reliability, availability, quality, specificity, and contemporaneity.
See Preliminary Determination of Sales at Less Than Fair Value and Postponement of
the Final Determination: Magnesium Metal from the People's Republic of China,
69 Fed. Reg. 59,187, 59,195 (Dep’t of Commerce Oct. 4, 2004) (“Magnesium Metal
from China”).
Consol. Court No. 08-00111 Page 20
The sales data from Gachihata’s 2006-07 financial statement is publicly
available; contemporaneous with the period of review; derived from the primary
surrogate country, Bangladesh; concerns the specific type of whole live catfish used to
produce the subject merchandise; and is an audited financial statement, and, thus,
reliable. See QVD Surrogate Value Submission Ex. 6 (Oct. 30, 2007), Pub. Doc. 210.
Commerce selected the 2006-07 financial statement over the 2000-01 financial
statement because the 2006-07 financial statement data was contemporaneous with the
period of review and specific to the input. Decision Memorandum at 13.
Catfish Farmers argue that the 2006-07 Gachihata financial statement allegedly
is unreliable because: (1) the underlying data is unreliable; (2) Gachihata did not show
a profit for that period; (3) there was an irregularity regarding the valuation of biological
assets of the firm; (4) the auditors’ report accompanying Gachihata’s financial statement
was marked private and confidential and, therefore, not publicly available; and
(5) the financial statement was missing some pages. Catfish Farmers Br. 6-13.
None of these challenges provides a basis for remanding this issue to Commerce for
further consideration.
First, Catfish Farmers assert that the data from the 2006-07 Gachihata financial
statement is unreliable because it is based upon sales of six metric tons of fish, which
Catfish Farmers contend is a “commercially insignificant” quantity. Catfish Farmers
Br. 9. Catfish Farmers also claim that Commerce failed to address the commercial
quantities issue in its decision. However, Commerce expressly noted that Catfish
Consol. Court No. 08-00111 Page 21
Farmers had raised that argument. Decision Memorandum at 12. Commerce was
simply not persuaded.
Specifically, Catfish Farmers failed to demonstrate on the administrative record
that six metric tons is a commercially insignificant quantity. Catfish Farmers claim
through bare assertion and a hoped for inference that because Gachihata’s 2006-07
sales were significantly less than Gachihata’s 2000-01 sales, the 2006-07 quantity must
be commercially insignificant. Catfish Farmers Br. 9. It does not follow, however, that
because sales during the earlier period were significantly higher than sales during the
later period, the later sales were not made in commercial quantities. Catfish Farmers
hoped Commerce would infer that the 2006-07 sales were not made in commercial
quantities, but Commerce did not oblige. Catfish Farmers now invite the court to draw
that inference in the first instance, something the court will not do given the record
before the court.
Catfish Farmers also attempt to support its argument by asserting that, according
to the 2006-07 financial statement, Gachihata did not produce any subject merchandise
in 2005-06. Catfish Farmers Br. 19. This merely demonstrates that commercial
quantities were not produced in 2005-06. That fact, however, does not provide any
basis for a determination that the six metric tons at issue here was a commercially
insignificant quantity.
Second, Catfish Farmers argue that Commerce’s reliance upon the 2006-07
Gachihata financial statement was inconsistent with Commerce’s policy that financial
statements from surrogate companies with no profit will not be used as a source of
Consol. Court No. 08-00111 Page 22
financial ratios. Catfish Farmers Br. 10 (citing Certain Frozen Warmwater Shrimp From
the Socialist Republic of Vietnam: Final Results of the First Antidumping Duty
Administrative Review and First New Shipper Review, 72 Fed. Reg. 52,052
(Dep’t of Commerce Sept. 12, 2007) (“Shrimp from Vietnam”) & accompanying Decision
Memorandum at 6).
Catfish Farmers misunderstand Commerce’s policy. In Shrimp from Vietnam
Commerce announced a clarification of its practice with regard to obtaining surrogate
financial ratios for the selling, general, and administrative (“SG&A”) expenses, and
overhead for a factors-of-production-normal-value calculation. Decision Memorandum
at 9. In that proceeding, Commerce decided that profit was a function of total expenses
and, therefore, intrinsically tied to the other financial ratios. Id. at 10. As a result, using
other financial ratios from a financial statement with no profit renders those other
financial ratios unrepresentative of a normal surrogate producer. Id. Therefore,
Commerce decided that it would not use the financial ratios from a financial statement if
the company has no profit. Id.
The rationale for not using financial ratios from statements where a company has
no profit does not extend to the price the company received for a quantity of fish it sold,
which is determined by the market for fish. Whether or not the company made an
overall profit, the revenue and quantity of the sales of fish are market prices and
quantities reflected in the audited financial statement. These values are not a function
of interconnected accounting principles, as are financial ratios. Therefore, while
Commerce will understandably reject the use of no-profit statements for purposes of
Consol. Court No. 08-00111 Page 23
determining surrogate financial ratios, it reasonably may use data from such statement
to value individual material inputs that are recorded in the financial statement. Third,
Catfish Farmers allege that the 2006-07 Gachihata financial statement indicates that the
valuation of the biological assets of the firm, which includes the fish, had not been
recognized during the period. Catfish Farmers Br. 11. Catfish Farmers contend that
this alleged irregularity provides a basis to reject the use of the fish price data.
Catfish Farmers Br. 11.
However, there is no basis upon which to make a negative inference about the
prices at which Gachihata sold fish based upon the company’s policy regarding the
biological asset values for accounting purposes. The auditors’ report sets forth a
reasonable explanation for not valuing the biological assets of the firm during the period
of review. See QVD Surrogate Value Submission Ex. 5. There is nothing on the record
that indicates that Gachihata’s policy was implemented in bad faith, or that it had an
impact upon the actual prices and quantities of the fish sold. Commerce acted
reasonably when it accepted Gachihata’s 2006-07 financial statement.
Fourth, Catfish Farmers argue that because the auditors’ report was marked
private and confidential, it should be rejected. Catfish Farmers Br. 11-12.
Catfish Farmers assert that because the auditors’ report was not “publicly available,”
Commerce violated its preference for publicly available data. However, Commerce
made an appropriate judgment call to accept the auditors’ designation of its report as
private and confidential.
Consol. Court No. 08-00111 Page 24
The relevant fact is that the financial statement, and thus the fish price used, was
publicly available. It is only the auditors’ report that was kept confidential. However, the
parties were able to examine and comment extensively upon the auditors’ report
because it was placed on the record. Decision Memorandum at 13. After reviewing all
of the arguments, Commerce found that nothing in the auditors’ report impugned the
2006-07 fish values. Id. This is a reasonable finding supported by the record.
Fifth, Catfish Farmers argue Commerce failed to address Catfish Farmers’
arguments that the 2006-07 Gachihata financial statement was incomplete and should
have rejected it upon that basis. Catfish Farmers Br. 12. However, Commerce
specifically addressed that concern:
As noted above, [Catfish Farmers] also argue that certain pages
(cover page, table of contents, page numbers, publication date, etc.) and
other sections typically found in the prior review reports are missing from
the 2006-2007 financial statement. Although we agree . . . that the 2006-
2007 financial statements do not contain certain pages and information
found in previous reports, we cannot speculate as to the reason for their
omission here. More importantly, we do not find these pages necessary
for our analysis, as previously those pages have not contained any
relevant information regarding Gachihata’s [fish] value.
Decision Memorandum at 14.
In Commerce’s view the omissions were not substantial and did not undermine
the integrity of the sales price data. Catfish Farmers have not demonstrated that the
omissions are significant. They merely argue that pages are missing and that the
financial statement is unreliable. Although the information may not have been perfect,
Commerce reasonably chose to rely upon it. Where Commerce is faced with the choice
of selecting from among imperfect alternatives, it has the discretion to select the best
Consol. Court No. 08-00111 Page 25
available information for a surrogate value so long as its decision is reasonable.
“The Court’s role . . . is not to evaluate whether the information Commerce used was
the best available, but rather whether a reasonable mind could conclude that
Commerce chose the best available information.” Goldlink Indus. Co. v. United States,
30 CIT 616, 619, 431 F. Supp. 2d 1323, 1327 (2006). Here, Commerce satisfied that
test.
B. Financial Ratios
In the Final Results Commerce used the financial statements for Bangladeshi
seafood processors Apex Foods Ltd. and Gemini Sea Food Ltd. (“Gemini”), but not
Bionic Seafood Exports Ltd. (“Bionic”) to derive the fish processing companies’
surrogate financial ratios for: (1) SG&A, (2) overhead, and (3) profit. Decision
Memorandum at 6-8. Catfish Farmers argue that Commerce should have used Bionic’s
financial statement because: (1) Commerce’s new policy of not using financial
statements from companies that have a zero profit is not supported by the evidence;
(2) Commerce’s rejection of financial statements with no profit contradicts past
precedent, including Commerce’s use of Bionic’s financial statements in all previous
administrative reviews; and (3) Commerce did not provide the parties adequate notice
or an opportunity for comment upon the new practice. Catfish Farmers Br. 24-32.
Catfish Farmers also argue that Commerce should not have used the Gemini financial
statement because the financial statement indicates that Gemini received a subsidy.
Catfish Farmers Br. 32-35.
Consol. Court No. 08-00111 Page 26
Before selecting among competing surrogate value sources for the respondents’
factor inputs, Commerce, in accordance with its normal practice, evaluates record data
for reliability, availability, quality, specificity, and contemporaneity. See Magnesium
Metal from China, 69 Fed. Reg. at 59,195. There is no dispute that both the Bionic and
Gemini financial statements are publically available, contemporaneous with the period
of review, specific to fish processors, and from the primary surrogate country,
Bangladesh. Thus, Commerce was required to exercise its judgment in choosing which
financial statement to use.
1. Bionic
Commerce reasonably determined not to use Bionic’s financial statement
because the company did not show a profit. Decision Memorandum at 6. As noted in
Section 7A, supra, Commerce determined that, for purposes of obtaining financial
ratios, it will not rely upon financial statements that have zero profit. Decision
Memorandum at 6 (citing Shrimp from Vietnam, 72 Fed. Reg. at 52,052 &
accompanying Decision Memorandum at 8-10 (Cmt. 2B)). Commerce relied on its
determination in Shrimp from Vietnam where it explained that the financial ratios are not
preferred data, in that they do not reflect the financial situation of a normal surrogate
company that operates at a profit and, thus, are not an appropriate benchmark for the
calculation of normal value in a non-market economy case, when other financial
statements, showing profits, are available. As a result, Commerce found that “use of
the parts of a financial statement for a zero profit company does not account for the
interconnectedness of the overhead, SG&A, with the zero profit.” Shrimp from Vietnam
Consol. Court No. 08-00111 Page 27
Decision Memorandum at 10. Here, in the Final Results, Commerce adopted the
rationale from Shrimp from Vietnam and disregarded Bionic’s financial statements in
calculating surrogate financial ratios. Decision Memorandum at 6.
Catfish Farmers argue that Commerce’s new policy is unreasonable because it
means that Commerce would use a financial statement for a company that made a
$1.00 profit but not that for a company which made a $1.00 loss. Catfish Farmers
Br. 27. Commerce, however, has not yet faced either factual scenario, so it is
speculation upon the part of Catfish Farmers as to what Commerce would do in such a
situation. If such circumstances arise, Commerce can address them based upon the
record before it at that time.
Catfish Farmers argue that the new policy is inconsistent with past precedent.
Catfish Farmers Br. 28-29. In both the Final Results here, and Shrimp from Vietnam,
Commerce explicitly acknowledged that, in the past, Commerce had taken inconsistent
positions with regard to financial statements with zero profits. Decision Memorandum
at 6; Shrimp from Vietnam, 72 Fed. Reg. 52,052 & accompanying Decision
Memorandum at 9. However, a past inconsistent practice is not a basis for overturning
a new practice designed to eliminate the inconsistency and provide certainty going
forward.
Catfish Farmers rely upon Fuyao Glass Indus. Group Co. v. United States,
27 CIT 1892 (2003) (“Fuyao”) and Rhodia, Inc. v. United States, 26 CIT 1107,
240 F. Supp. 2d 1247 (2002) (“Rhodia”), for the proposition that the Court of
International Trade has consistently upheld Commerce decisions to use financial
Consol. Court No. 08-00111 Page 28
statements of companies with zero profits. Catfish Farmers Br. 28-29. Catfish Farmers
though misstate the holdings in those cases. Those cases stand for the proposition that
Commerce may exclude zero profit figures from its profit calculations.
Fuyao, 27 CIT at 1212-13; Rhodia, 26 CIT at 115, 240 F. Supp. 2d. at 1255. These
cases did not address the issue of whether Commerce should use the selling, general,
and administrative expenses, and overhead expenses reflected in financial statements
of companies with zero profits. Further, Fuyao does not indicate, as Catfish Farmers
argue, that the “mere fact that a company is unprofitable does not indicate that the
overhead or SG&A expenses are somehow tainted.” Catfish Farmers Br. 29.
Catfish Farmers next argue that Commerce changed its practice without giving
notice or opportunity to comment. Catfish Farmers Br. 29. Assuming arguendo that
prior notice is somehow required for a change of this type of administrative practice,
Catfish Farmers were well aware of the change. Specifically, Commerce announced its
new policy of excluding zero profit financial statements in Shrimp from Vietnam,
72 Fed. Reg. 52,052 & accompanying Decision Memorandum at 9-10. The effective
date of the final results in that case was September 12, 2007. The effective date for the
Preliminary Results in the underlying review was September 19, 2007. More important,
in this administrative review, the parties had the opportunity to comment upon the issue
of excluding zero profit financial statements from financial ratio calculations, and took
advantage of that opportunity. See Catfish Farmers Admin. Case Br. 7-8,
Confid. Doc. 89; QVD Admin. Rebuttal Br. 5-8, Confid. Doc. 91. Indeed, Shrimp from
Vietnam was published more than three months before case briefs were due in this
Consol. Court No. 08-00111 Page 29
review on December 28, 2007. Thus, Catfish Farmers had sufficient notice of the
change in policy, and Commerce’s rejection of Bionic’s financial statement is a
reasonable determination supported by the administrative record.
2. Gemini
In the Final Results Commerce included data from the 2005-06 Gemini financial
statement in its calculation of the financial ratios for normal value because the data was
the best available information. Decision Memorandum at 7-8. Catfish Farmers assert
Commerce should not have used the data because there allegedly is a reason to
believe or suspect that the company had received a subsidy. Catfish Farmers
Br. 32-35. One of the criteria to determine what is the best available information in
valuing the factors of production is whether there is a reason to believe or suspect that
prices being used may be dumped or subsidized prices. Omnibus Trade and
Competitiveness Act of 1988, H.R. Rep. No. 100-576, at 590 (1988) (Conf. Rep.),
as reprinted in 1988 U.S.C.C.A.N. 1547, 1623. The Conference Report explains that a
formal countervailing duty investigation is not required in making the determination, and
that Commerce should base its decision upon the available record evidence. Id.
at 1623-24. Congress provided no further guidance as to what would constitute a
reasonable basis to believe or suspect that a price may be subsidized.
Here, Commerce explained that a mere mention, in a financial statement, that a
subsidy was received, does not necessarily mean that a countervailable subsidy exists.
Decision Memorandum at 7. Commerce carefully reviewed that mention and concluded
that there was insufficient record evidence to support a finding that Gemini received a
Consol. Court No. 08-00111 Page 30
countervailable subsidy. Decision Memorandum at 7-8. Although Catfish Farmers may
disagree with Commerce’s conclusion, and may have even reached a different
conclusion were they the decision maker, Commerce’s conclusion was reasonable and,
therefore, must be sustained.
Catfish Farmers argue that the financial statement indicates that Gemini had
received from the government of Bangladesh “a 10% [c]ash subsidy as per Bangladesh
Bank Circular No. FE-23 dated 12/12/03 against export bill, which was made available
to Bangladeshi processing and exporting companies.” Catfish Farmers Br. 33.
Commerce refused to indulge Catfish Farmers’ hoped for inferences and assumptions
about this particular quotation. Commerce did not believe it was reasonable to infer that
the amount identified as a “subsidy” was from the government of Bangladesh.
The financial statement merely reflects information from a Bangladesh Bank circular
about a “subsidy.” The record does not explain to which bank Gemini’s financial
statement is referring and contains no evidence that the “subsidy” is from a state bank.
Similarly, even if the “subsidy” were identified as being from the Bangladeshi
government or other public entity, there is no record evidence that identifies the terms of
the alleged program (for example, whether it is only on exports, who is eligible, or
whether it is a specific subsidy).
Catfish Farmers also assert that the subsidy is for “processing and exporting
companies.” Catfish Farmers Br. 33. However, other than the notations in Gemini’s
financial statement that the alleged “subsidy” was “against export” and “against export
bill,” there is no indication that the “subsidy” only applies to exports. QVD Surrogate
Consol. Court No. 08-00111 Page 31
Value Submission Ex. 7 at 19, 21 (May 14, 2007), Pub. Doc. 127. Commerce’s refusal
to share the inferences drawn by Catfish Farmers is reasonable on this administrative
record, which contained a mere mention of a subsidy without additional substantiating
evidence of countervailability. As a result, Commerce’s determination is sustained.
Conclusion
Commerce's request for a voluntary remand regarding (1) QVD’s international
freight expense, (2) the valuation of QVD’s labels, and (3) the calculation of the
surrogate value for fish oil is granted. All other issues raised by Catfish Farmers and
QVD in their motions for judgment on the agency record are denied. Accordingly, it is
hereby
ORDERED that this action is remanded to the U.S. Department of Commerce to
reconsider its calculation of QVD’s international freight expense, the valuation of QVD’s
labels, and the valuation of fish oil; and it is further
ORDERED that the U.S. Department of Commerce is to file its remand results on
or before November 10, 2009; and it is further
ORDERED that the parties are to file a proposed scheduling order with page
limits for the submission of comments on the remand results, if applicable, not later than
14 days after Commerce files the remand results with the court.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: September 14, 2009
New York, New York