Zhengzhou Harmoni Spice Co., Ltd. v. United States

Slip Op. 09-39

UNITED STATES COURT OF INTERNATIONAL TRADE
____________________________________________________
ZHENGZHOU HARMONI SPICE CO., LTD., :
JINAN YIPIN CORPORATION, LTD., JINING
TRANS-HIGH TRADING CO., LTD., JINXIANG :
SHANYANG FREEZING STORAGE CO., LTD.,
LINSHU DADING PRIVATE AGRICULTURAL :
PRODUCTS CO., LTD., SHANGHAI LJ
INTERNATIONAL TRADING CO., LTD., and :
SUNNY IMPORT AND EXPORT LTD.,
:
Plaintiffs,
:
v.
: Court No. 06-00189
UNITED STATES,
:
Defendant,
:
and
:
FRESH GARLIC PRODUCERS ASSOCIATION,
CHRISTOPHER RANCH, L.L.C., THE :
GARLIC COMPANY, VALLEY GARLIC,
and VESSEY AND COMPANY, INC., :

Defendant-Intervenors. :

[Granting in part Plaintiffs’ Motion for Judgment on the Agency Record, and remanding action to
U.S. Department of Commerce.]

Dated: May 13, 2009

Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP (Bruce M. Mitchell, Mark E.
Pardo, Paul G. Figueroa, and William F. Marshall), for Plaintiffs Zhengzhou Harmoni Spice Co.,
Ltd., Jinan Yipin Corporation, Ltd., Linshu Dading Private Agricultural Products Co., Ltd., and
Sunny Import & Export Co., Ltd.

Michael F. Hertz, Deputy Assistant Attorney General; Jeanne E. Davidson, Director, and
Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division U.S.
Department of Justice (Mark T. Pittman and David S. Silverbrand); Scott D. McBride, Office of the
Court No. 06-00189 Page 2

Chief Counsel for Import Administration, U.S. Department of Commerce, Of Counsel; for
Defendant.

Kelley Drye Collier Shannon (Michael J. Coursey and Michael R. Kershow), for Defendant-
Intervenors.

OPINION

RIDGWAY, Judge:

In this action, Plaintiffs Zhengzhou Harmoni Spice Co., Ltd., Jinan Yipin Corporation, Ltd.,

Jining Trans-High Trading Co., Ltd., Jinxiang Shanyang Freezing Storage Co., Ltd., Linshu Dading

Private Agricultural Products Co., Ltd., Shanghai LJ International Trading Co., Ltd., and Sunny

Import & Export Co., Ltd. – Chinese producers and exporters of fresh garlic – contest the final

results of the U.S. Department of Commerce’s tenth administrative review of the antidumping duty

order covering fresh garlic from the People’s Republic of China (“PRC”). See Fresh Garlic from

the People’s Republic of China: Final Results and Partial Rescission of Antidumping Duty

Administrative Review and Final Results of New Shipper Review, 71 Fed. Reg. 26,329 (May 4,

2006) (“Final Results”); Issues and Decision Memorandum for the Administrative Review and New

Shipper Reviews of the Antidumping Duty Order on Fresh Garlic from the People’s Republic of

China (April 26, 2006) (Pub. Doc. No. 462) (“Decision Memorandum”).1

Pending before the Court is the Motion for Judgment on the Agency Record filed on behalf

1
Because the administrative record in this action includes confidential information, two
versions of that record were filed with the Court. Citations to documents in the public record are
noted as “Pub. Doc. No. ____,” while citations to documents in the confidential record are noted as
“Conf. Doc. No. ____.” The public version of the administrative record consists of copies of all
documents in the record, with all confidential information redacted. The confidential version of the
record consists of complete, un-redacted copies of only those documents that include confidential
information.
Court No. 06-00189 Page 3

of four of the plaintiffs in this matter – Zhengzhou Harmoni Spice Co., Ltd., Jinan Yipin

Corporation, Ltd., Linshu Dading Private Agricultural Products Co., Ltd., and Sunny Import &

Export Co., Ltd. (collectively “the Chinese Producers”).2 In their motion, the Chinese Producers

challenge the methodology used in calculating “normal value,” as well as various other aspects of

Commerce’s antidumping determination, and request that this matter be remanded to the agency for

reconsideration. See generally Brief in Support of Plaintiffs’ Rule 56.2 Motion for Judgment on the

Agency Record (“Pls.’ Brief”); Reply Brief in Support of Plaintiffs’ Rule 56.2 Motion for Judgment

on the Agency Record (“Pls.’ Reply Brief”).3

The Government opposes the Chinese Producers’ motion. The Government maintains that

Commerce’s determination is supported by substantial evidence and is otherwise in accordance with

2
Although the Complaint in this action was filed on behalf of seven plaintiffs, the pending
Motion for Judgment on the Agency Record was filed only by the four plaintiffs specifically
identified above. The other three plaintiffs took no part in briefing or oral argument, and have
expressed no views on the issues addressed herein.

As noted above, the four movant plaintiffs are referred to herein, collectively, as “the
Chinese Producers.” Other garlic producers from the PRC who were involved in Commerce’s
administrative review, including the three non-movant plaintiffs, are generally referred to simply
as “respondents.”
3
“Normal value” is generally “the price at which the foreign like product is first sold [or
offered for sale] for consumption in the exporting country.” 19 U.S.C. § 1677b(a)(1) (2000). A
“foreign like product” is generally merchandise that is identical to or like the subject merchandise
made by the same foreign producer in the same foreign country. See 19 U.S.C. § 1677(16) (2000).

Dumping takes place when goods are imported into the U.S. and sold at a price lower than
their normal value. 19 U.S.C. §§ 1673, 1677(34) (2000). Under antidumping law, an antidumping
duty is based on the “dumping margin” – the amount by which the normal value of the imported
subject merchandise exceeds the “export price” or the “constructed export price” of the subject
merchandise. 19 U.S.C. §§ 1673, 1677(35) (2000). Export Price and Constructed Export Price refer
to Commerce’s two methods for calculating prices for merchandise imported into the United States.
See 19 U.S.C. §§ 1677a(a)-(b) (2000).
Court No. 06-00189 Page 4

law, and that it should be sustained in all respects. See generally Defendant’s Memorandum in

Opposition to Plaintiffs’ Rule 56.2 Motion for Judgment Upon the Agency Record (“Def.’s Brief”).

The Defendant-Intervenors, representing the interests of domestic producers of fresh garlic,

oppose the Chinese Producers’ motion as to two of the seven issues raised – i.e., Commerce’s use

of the agency’s intermediate input methodology and the valuation of garlic bulb – and, like the

Government, similarly urge that Commerce’s determination should be sustained. See generally

Defendant-Intervenors’ Brief in Response to Plaintiffs’ Motion for Judgment on the Administrative

Record (“Def.-Ints.’ Brief”).4

Jurisdiction lies under 28 U.S.C. § 1581(c) (2000).5 For the reasons set forth below, the

Chinese Producers’ Motion for Judgment on the Agency Record is granted in part.

I. Background

The underlying antidumping order here at issue, covering imports of fresh garlic from the

PRC, dates back to 1994. See Antidumping Duty Order: Fresh Garlic from the People’s Republic

of China, 59 Fed. Reg. 59,209 (Nov. 16, 1994) (“Antidumping Order”).6 In December 2004,

4
The Domestic Producers are the Fresh Garlic Producers Association and its individual
members, Christopher Ranch, L.L.C., The Garlic Company, Valley Garlic, and Vessey and
Company, Inc.
5
All citations to statutes herein are to the 2000 edition of the United States Code. Similarly,
all references to regulations are to the 2003 edition of the Code of Federal Regulations.
6
The merchandise subject to the Antidumping Order includes “all grades of garlic, whole or
separated into constituent cloves, whether or not peeled, fresh, chilled, frozen, provisionally
preserved, or packed in water or other neutral substance, but not prepared or preserved by the
addition of other ingredients or heat processing,” which “is used principally as a food product and
for seasoning.” Antidumping Order, 59 Fed. Reg. at 59,209.
Court No. 06-00189 Page 5

Commerce initiated its tenth administrative review of producers and exporters of fresh garlic from

the PRC, including the Chinese Producers who are the plaintiffs in this action. See Initiation of

Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in Part,

69 Fed. Reg. 77,181 (Dec. 27, 2004); see also Fresh Garlic from the People’s Republic of China:

Preliminary Results and Partial Rescission of Antidumping Duty Administrative Review and

Preliminary Results of New Shipper Reviews, 70 Fed. Reg. 69,942, 69,942-43 (Nov. 18, 2005)

(“Preliminary Results”).7

In the course of conducting the administrative review, Commerce issued multiple

questionnaires to the respondents (i.e., various Chinese garlic producers, including Plaintiffs),

requesting information concerning their organization, sales, and production costs, in order to

determine the normal value of the subject merchandise. See Def.’s Brief at 4. In addition,

Commerce issued supplemental questionnaires to address certain questions that had been raised in

previous administrative reviews concerning the respondents’ reported growing and harvesting-

related “factors of production.” See Decision Memorandum at 2-3; see also Issues and Decision

Memorandum for the Administrative Review of the Antidumping Duty Order on Fresh Garlic from

the Peoples’ Republic of China (Ninth Administrative Review), 2005 WL 2290660 (June 13, 2005)

By its terms, the order expressly excludes: “(a) Garlic that has been mechanically harvested
and that is primarily, but not exclusively, destined for non-fresh use,” as well as “(b) garlic that has
been specially prepared and cultivated prior to planting and then harvested and otherwise prepared
for use as seed.” Id.
7
The statute provides for annual administrative review of antidumping duties, at the request
of an interested party. 19 U.S.C. § 1675(a). The tenth administrative review at issue here covered
the period November 1, 2003 through October 31, 2004.
Court No. 06-00189 Page 6

(“Ninth Garlic Review Memorandum”), at comment 1 (considering, and ultimately declining, use

of intermediate input methodology).8

In their responses to Commerce’s questionnaires, the respondents provided the agency with

suggested values for their factors of production. See Respondents’ Second Surrogate Value

Submission (Pub. Doc. No. 418). The Domestic Producers supplied surrogate value information for

the respondents’ factors of production, and requested that Commerce use the agency’s intermediate

input valuation methodology – as the Domestic Producers had urged in prior reviews – due to

asserted “anomalies and inconsistencies in the . . . data submitted by all of the respondents.” Def.-

Ints.’ Brief at 3; see also Domestic Producers’ Surrogate Value Submission (Pub. Doc. No. 82);

Domestic Producers’ Second Surrogate Value Submission (Pub. Doc. No. 143) (submitting

information from previous reviews comparing respondents’ ranged factors of production data);

8
The statute defines the “factors of production” used in producing merchandise to include,
inter alia: “(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). The factors of production for raw garlic bulb include, inter alia, seed,
water, energy, and labor. See Preliminary Results, 70 Fed. Reg. at 69,949-50.

In valuing factors of production, the statute directs Commerce to:

utilize, to the extent possible, the prices or costs of factors of production in one or
more market economy countries that are –

(A) at a level of economic development comparable to that of the nonmarket
economy country, and

(B) significant producers of comparable merchandise.

19 U.S.C. § 1677b(c)(4).
Court No. 06-00189 Page 7

Ninth Garlic Review Memorandum, 2005 WL 2290660, at comment 1.9

Given the concerns expressed in prior reviews as to the reliability of respondents’ records,

Commerce conducted onsite “harvest verifications” of six respondents in May and June 2005, to

assist the agency in determining whether to value intermediate inputs rather than factors of

production. See Preliminary Results, 70 Fed. Reg. at 69,943; see also Harvest Verification Reports

(Pub. Doc. Nos. 386, 392, 393). Unlike typical verifications, where Commerce focuses on

respondents’ books and records (i.e., general ledgers, subledgers, etc.), these harvest verifications

involved onsite visits to allow agency personnel to directly observe respondents’ actual cultivation

and harvesting procedures. See Decision Memorandum at 2-3; see also Def.’s Brief at 5.

In its Preliminary Results, Commerce concluded that “the books and records maintained by

the [Chinese garlic producers] do not report or account for all of the relevant information and do not

allow the respondents to identify all of the factors of production necessary to grow and harvest

garlic.” See Preliminary Results, 70 Fed. Reg. at 69,949. Commerce therefore used its intermediate

input method of valuation for the respondents’ growing and harvesting factors of production, and

valued the intermediate input, raw garlic bulb (in lieu of the upstream factors of production used to

produce that input), in calculating respondents’ dumping margins. Commerce’s Final Results

similarly reflected the agency’s use of its intermediate input methodology to value raw garlic bulb,

after again finding respondents’ data inadequate. See generally Decision Memorandum at 11-22.

While Commerce found the harvesting factors of product data insufficient, Commerce found

respondents’ reported data on their post-harvesting factors of production (i.e., processing, packaging,

9
Commerce’s intermediate input methodology is discussed in detail in section III.A, below.
Court No. 06-00189 Page 8

shipping) to be reliable, both in the Preliminary Results and in the Final Results. The agency

therefore added the surrogate values for those factors of production to the surrogate value of the raw

garlic bulb inputs. See Decision Memorandum at 14; see also generally Final Results, 71 Fed. Reg.

26,329.

II. Standard of Review

In reviewing Commerce’s final determination in an antidumping case, the agency’s

determination must be upheld, except to the extent that it is found to be “unsupported by substantial

evidence on the record, or otherwise not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i);

see also NMB Singapore Ltd. v. United States, 557 F.3d 1316, 1319 (Fed. Cir. 2009). Substantial

evidence is “more than a mere scintilla”; rather, it is “such relevant evidence as a reasonable mind

might accept as adequate to support a conclusion.” Universal Camera Corp. v. Nat’l Labor

Relations Bd., 340 U.S. 474, 477 (1951) (quoting Consol. Edison Co. v. Nat’l Labor Relations Bd.,

305 U.S. 197, 229 (1938)); see also Mittal Steel Point Lisas Ltd. v. United States, 548 F.3d 1375,

1380 (Fed. Cir. 2008) (same). Moreover, any evaluation of the substantiality of evidence “must take

into account whatever in the record fairly detracts from its weight,” including “contradictory

evidence or evidence from which conflicting inferences could be drawn.” Suramerica de Aleaciones

Laminadas, C.A. v. United States, 44 F.3d 978, 985 (Fed. Cir. 1994) (quoting Universal Camera,

340 U.S. at 487-88); see also Mittal Steel, 548 F.3d at 1380-81 (same).

That said, the mere fact that it may be possible to draw two inconsistent conclusions from

the record does not prevent Commerce’s determination from being supported by substantial

evidence. Am. Silicon Techs. v. United States, 261 F.3d 1371, 1376 (Fed. Cir. 2001); see also
Court No. 06-00189 Page 9

Consolo v. Federal Maritime Commission, 383 U.S. 607, 620 (1966). Finally, while Commerce

must explain the bases for its decisions, “its explanations do not have to be perfect.” NMB

Singapore, 557 F.3d at 1319. However, “the path of Commerce’s decision must be reasonably

discernable,” to support judicial review. Id.

III. Analysis

The Chinese Producers challenge multiple aspects of Commerce’s Final Results in the tenth

administrative review of fresh garlic from the PRC. Specifically, the Chinese Producers contest:

(1) Commerce’s decision to utilize an intermediate input methodology in valuing fresh garlic bulb;

(2) Commerce’s valuation of fresh garlic bulb using a specific subset of domestic Indian pricing

data; (3) Commerce’s wage rate calculation; (4) Commerce’s valuation of ocean freight; (5)

Commerce’s valuation of packing cartons; (6) Commerce’s valuation of plastic jars; and (7)

Commerce’s inclusion of certain labor expenses as part of manufacturing overhead. Pls.’ Brief at

2-4.

As discussed in greater detail below, there is no merit to the Chinese Producers’ challenge

to Commerce’s use of the intermediate input methodology, or their challenge to Commerce’s

inclusion of certain labor expenses as part of factory overhead. See sections III.A & III.G, infra.

In contrast, Commerce’s determinations concerning the valuation of garlic bulb, ocean freight,

packing cartons, and plastic jars, and its calculation of the applicable wage rate, cannot be sustained

on the existing record. See sections III.B-III.F, infra. The Chinese Producers’ Motion for Judgment

on the Agency Record therefore must be granted in part, and this matter remanded to Commerce for

further action.
Court No. 06-00189 Page 10

A. Intermediate Input Methodology

The Chinese Producers first challenge the use of Commerce’s intermediate input

methodology to determine the normal value of raw garlic bulb, asserting that the methodology is

contrary to the plain language of the statute and not in accordance with past practice, and that its use

did not produce the most accurate normal value. See generally Pls.’ Brief at 8-14.

The Chinese Producers contend that, when Commerce finds respondents’ factors of

production information inadequate, Commerce is statutorily required “to base normal value in its

entirety on the price at which comparable merchandise produced in a comparable market economy

is sold in other countries.” Pls.’ Brief at 8 (citing 19 U.S.C. § 1677b(c)(2)). The Chinese Producers

further maintain that, even if application of the intermediate input methodology were appropriate

in this case, the intermediate input valued must be a “component of the subject merchandise,” not

the subject merchandise itself. See id. at 9. The Chinese Producers’ arguments, however, are

without merit.

Generally, Commerce calculates normal value in antidumping matters pursuant to 19 U.S.C.

§ 1677b(a).10 Where (as here) the subject merchandise was exported from a nonmarket economy

(“NME”) country,11 and if Commerce finds that – in light of concerns about the sufficiency or

10
See n.3, supra.
11
The statute defines an NME country as “any foreign country that [Commerce] 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.” 19 U.S.C. § 1677(18)(A).

In the instant administrative review, as in those that preceded it, Commerce treated the PRC
as an NME country and selected India as the surrogate market-economy country. See Decision
Memorandum at 22; see also, e.g., Jinan Yipin Corp. Ltd. v. United States, 31 CIT ____, ____, 526
Court No. 06-00189 Page 11

reliability of the data – the available information “does not permit the normal value of the subject

merchandise to be determined under [19 U.S.C. § 1677b(a)],” the statute instructs Commerce to use

surrogate values “based on the best available information regarding the values of such factors [of

production] in a market economy country or countries considered to be appropriate” by the agency.

See 19 U.S.C. § 1677b(c)(1).12

However, if Commerce finds the available information inadequate for purposes of

determining the normal value of the subject merchandise pursuant to the factors of production

method (described above), the statute provides that Commerce shall base normal value on the export

price of comparable merchandise produced in one or more market economy countries that are

economically comparable to the nonmarket economy country at issue. 19 U.S.C. § 1677b(c)(2).

Within this general framework, the statute “accords Commerce wide discretion in the

valuation of factors of production in the application of those guidelines”; indeed, the Court of

Appeals has “specifically held that Commerce may depart from surrogate values when there are

other methods of determining the ‘best available information’ regarding the values of the factors of

production.” Shakeproof Assembly Components v. United States, 268 F.3d 1376, 1381 (Fed. Cir.

2001) (citing Lasko Metal Prods., Inc. v. United States, 43 F.3d 1442, 1446 (Fed. Cir. 1994)). In

F. Supp. 2d 1347, 1368 (2007) (eighth administrative review of the antidumping duty order on fresh
garlic from PRC); Ninth Garlic Review Memorandum, 2005 WL 2290660, at comment 2.
12
Specifically, the statute instructs Commerce to “determine the normal value of the subject
merchandise on the basis of the value of the factors of production utilized in producing the
merchandise and to which shall be added an amount for general expenses and profit plus the cost
of containers, coverings, and other expenses.” 19 U.S.C. § 1677b(c)(1). “[T]he valuation of the
factors of production shall be based on the best available information regarding the values of such
factors in a market economy country or countries considered to be appropriate” by Commerce. Id.;
see also 19 U.S.C. § 1677b(c)(4).
Court No. 06-00189 Page 12

short, when “determining the valuation of the factors of production, the critical question is whether

the methodology used by Commerce is based on the best available information and establishes

antidumping margins as accurately as possible.” Shakeproof, 268 F.3d at 1382.

In prior administrative reviews of the Antidumping Order at issue, Commerce used the

factors of production data reported by the respondents (including both harvesting and post-

harvesting factors of production), and based its calculation of the normal value of fresh garlic upon

those data. See, e.g., Ninth Garlic Review Memorandum, 2005 WL 2290660, at comment 1. In the

immediately preceding review, however, Commerce acknowledged various flaws in the respondents’

factors of production data, and considered whether use of the agency’s intermediate input

methodology would be appropriate. See id. Although the agency ultimately declined to use its

intermediate input methodology in the ninth review due to lack of sufficient information, Commerce

there indicated that it planned to “fully examine all of these issues in the next administrative

review.” Id.

In the tenth administrative review at issue here, Commerce made good on its promise, and

– indeed – decided to use its intermediate input methodology when determining the value of raw

garlic bulb. See Decision Memorandum at 11-15; Preliminary Results, 70 Fed. Reg. at 69,947-50.

As set forth above, in reaching its decision, Commerce sent multiple supplemental questionnaires

to the respondent producers of Chinese garlic, and conducted onsite harvest verifications of six of

those producers, all in an attempt to verify their harvesting factors of production. See Preliminary

Results, 70 Fed. Reg. at 69,943; Harvest Verification Reports.

Despite the agency’s efforts, Commerce found that “respondents are unable to accurately
Court No. 06-00189 Page 13

report and substantiate the complete costs of growing garlic.” See Intermediate Input Methodology

Memorandum (Pub. Doc. No. 388), at 3. Specifically, Commerce stated:

Evidence on the record of these reviews regarding the recording and accounting
standards of the garlic industry in the PRC supports a finding that we cannot
accurately quantify the consumption rates of all relevant [factors of production] used
to grow, harvest and process the subject merchandise. Further, the respondents’
ability to measure and report accurate [factors of production] to the Department is
greatly diminished by the fact that they lease the land on which the garlic is grown,
and therefore cannot obtain information on other crops that are grown on this land
in the off-season, which ultimately affect the [factors of production] for raw garlic.
Finally, respondents do not keep the types of books and records that would allow the
Department to establish the appropriateness or accuracy of the reported [factors of
production].

Id. at 10-11.13 After determining the surrogate value for the intermediate input at issue – raw garlic

bulb – Commerce added the post-harvesting factors of production, which it had deemed reliable, to

the intermediate value and ultimately arrived at the overall normal value of the subject merchandise.

See Decision Memorandum at 14.

Commerce here used its intermediate input methodology within the statute’s traditional best-

available-factor-of-production-information valuation methodology, and not pursuant to the

alternative methodology exception established by statute. See Decision Memorandum at 14. As

13
The evidence of record demonstrates that the respondents: (1) did not adequately “track
actual labor hours incurred for growing, tending and harvesting activities and, thus, do not maintain
appropriate records”; (2) were not able to adequately report yield loss resulting “from shrinkage that
occurs during the production of garlic due to the loss of water weight and the discarding of roots,
stems, and skins during processing”; (3) differed significantly in how they reported seed usage,
“resulting in vastly divergent reported seed use among respondents”; (4) failed to account for
additional variables, such as the effect of the off-season crops grown on the leased land; and (5) kept
such inaccurate books and records, that Commerce could not conduct a meaningful standard
verification. See generally Def.’s Brief at 15-16 (internal quotation marks and citations omitted).
These problems are much the same as the concerns raised in the ninth administrative review. See
Ninth Garlic Review Memorandum, 2005 WL 2290660, at comment 1.
Court No. 06-00189 Page 14

Commerce explained in its Intermediate Input Methodology Memorandum, Commerce merely

“modif[ied]” its standard upstream factor of production methodology in applying its intermediate

input methodology. See Intermediate Input Methodology Memorandum at 1. The only difference

is that, in cases where the intermediate input methodology is employed, Commerce believes that,

due to inaccurate or flawed data, or some other anomaly, the best way to value the factors of

production used to produce an intermediate product (here, raw garlic bulb) is through the direct

valuation of that intermediate input. See Decision Memorandum at 14.14 Commerce explained that:

We [Commerce] also disagree with the contentions raised by . . . respondents that we
relied on [§ 1677b(c)(2)’s alternative methodology exception] to calculate normal
value. Rather, using the intermediate input methodology . . . is consistent with [§
1677b(c)(1)(B)] because we valued the respondents’ reported [factors of production].
The intermediate input methodology merely allows [Commerce] to value the
intermediate product (in this case the raw garlic bulb) in lieu of valuing the upstream
inputs used to produce that intermediate product. Valuing the intermediate input in
this way constitutes the “best available information,” in accordance with [§
1677b(c)(1)(B)].

Decision Memorandum at 14 (discussing application of 19 U.S.C. § 1677b(c)). None of the Chinese

14
Commerce has previously recognized two separate sets of circumstances where it “will
modify its standard [factor of production] methodology” and use its intermediate input methodology.
See Intermediate Input Methodology Memorandum at 1. The first scenario is where the factors of
production used to produce an intermediate input account for an insignificant share of the total
output, and Commerce determines that the increased accuracy to the overall calculation that would
result from valuing each of these intermediate input factors of production is insignificant (i.e., the
insignificant share exception). Decision Memorandum at 12; Intermediate Input Methodology
Memorandum at 1. The second instance is where “it is clear that attempting to value the factors used
in a production process yielding an intermediate product would lead to an inaccurate result because
[Commerce] may not be able to account for a significant element of cost adequately in the overall
factors buildup” (i.e., the significant element exception). Intermediate Input Methodology
Memorandum at 1. See also Decision Memorandum at 12; see generally Anshan Iron & Steel Co.
v. United States, 28 CIT 1728, 358 F. Supp. 2d 1236 (2004) (“Anshan II”).
Court No. 06-00189 Page 15

Producers’ arguments undermine the soundness of Commerce’s reasoning to any significant degree.

The Chinese Producers contend that the statute requires that, if Commerce finds the available

factors of production data inadequate, the agency must abandon application of the traditional factor

of production method, and instead apply an alternative valuation methodology, basing “normal value

in its entirety on the price at which comparable merchandise produced in a comparable market

economy is sold in other countries.” Pls.’ Brief at 8 (citing 19 U.S.C. § 1677b(c)(2)). But the

Chinese Producers are mistaken.

Because the statutory exception that the Chinese Producers invoke “is unclear as to the

circumstances in which ‘the available information is adequate for purposes of determining the

normal value,’ the question is whether Commerce’s interpretation is based on a permissible

construction of the statute.” Def.’s Brief at 22 (citing Chevron U.S.A., Inc. v. Natural Res. Def.

Council, Inc., 467 U.S. 837, 843 (1984)).15 Here, Commerce properly read the statute to require use

of an “alternative valuation method” only when “all respondents’ information is ‘inadequate’ or

unuseable to determine normal value under [§] 1677b(c)(1).” Id. at 21. As the Domestic Producers

explain, the statute “only directs Commerce to determine the ‘quantities of raw materials employed;’

[sic] it contains no detailed prescription for how physical [factors of production] are to be identified

or a requirement that material [factors of production] be identified with the same level of detail in

every case.” Def.-Ints.’ Brief at 9 (quoting 19 U.S.C. § 1677b(c)(3)(B)).

Congress accorded Commerce broad discretion to develop one or more methodologies for

valuing factors of production in NME cases, subject only to the fundamental requirement that the

15
The internal quotation is from the text of 19 U.S.C. § 1677b(c)(2).
Court No. 06-00189 Page 16

agency’s determinations be “based on the best available information” in every case. See 19 U.S.C.

§ 1677b(c)(1); see also Def.-Ints.’ Brief at 9-10. Commerce’s intermediate input valuation

methodology was developed pursuant to the agency’s broad statutory authority, and in accordance

with its statutory mandate to base its determinations “on the best available information” concerning

the values of the factors of production at issue. See 19 U.S.C. § 1677b(c)(1); see also Def.-Ints.’

Brief at 9-11.

The Chinese Producers further claim that “the statute leaves no discretion for the agency to

disregard [certain factors of production] and still attempt to calculate normal value pursuant to 19

U.S.C. § 1677b(c)(1).” See Pls.’ Reply Brief at 3. But Commerce is not forced to abandon §

1677b(c)(1) factors of production valuation merely because a portion of respondents’ factors of

production data is inadequate.

On its face, the § 1677b(c)(2) exception limits Commerce’s ability to determine normal value

using that alternative valuation method – i.e., to determine normal value based on the price at which

comparable merchandise is “produced in one or more market economy countries that are at a level

of economic development comparable to that of the nonmarket economy country,” and “sold in other

countries, including the United States” – to situations where the agency “finds that the available

information is inadequate for purposes of determining the normal value of subject merchandise

under [§ 1677b(c)(1)].” 19 U.S.C. § 1677b(c)(2). Using a short-cut to determine factors of

production value in certain, limited situations where the factors of production data submitted are

inadequate certainly falls within the broad discretion accorded Commerce under the statute.

Commerce here did not conclude that all of respondents’ factors of production data was
Court No. 06-00189 Page 17

inadequate for determining the normal value of subject merchandise; only a portion was found to

be inadequate. As a result, in the present review, there was no need for the agency to resort to the

alternative methodology exception in § 1677b(c)(2). See Def.’s Brief at 21-23; Def.-Ints.’ Brief at

10. Contrary to the Chinese Producers’ “all-or-nothing” approach, because the only inaccurate

factors of production data concerned the factors of production used to produce raw garlic bulb,

Commerce reasonably decided to value that intermediate input (raw garlic bulb) pursuant to the

intermediate input methodology (and within the traditional valuation methodology prescribed by §

1677b(c)(1)), while also using the post-harvesting factors of production data that the agency deemed

accurate. See Def.’s Brief at 22-23. Thus, as the Government and the Domestic Producers maintain,

both Commerce’s interpretation of the statute and the agency’s decision to use its intermediate input

methodology in this case are reasonable. See id. at 14; Def.-Ints.’ Brief at 10.

Turning to Commerce’s application of its intermediate input methodology, the Chinese

Producers correctly note that, in past cases, Commerce has used that methodology to value a

component of the subject merchandise. Here, according to the Chinese Producers, raw garlic bulb

– the intermediate input at issue – is “the actual product subject to the dumping order.” Pls.’ Brief

at 9.16 The Chinese Producers’ argument is unavailing.

16
Commerce has previously applied the intermediate input methodology to intermediate
foodstuff products such as whole fish (in the production of frozen fish fillets) and raw mushrooms
(in the production of preserved mushrooms). See Issues and Decision Memorandum for the
Antidumping Duty Investigation of Certain Frozen Fish Fillets from the Socialist Republic of
Vietnam, 2003 WL 24153843 (June 23, 2003), at comment 3; Issues and Decision Memorandum
for the Antidumping Duty Administrative and New Shipper Reviews on Certain Preserved
Mushrooms from the People's Republic of China, 2001 WL 640661 (June 11, 2001), at comment
2.
Court No. 06-00189 Page 18

The Government explains that, “because the raw garlic bulb is harvested from the ground,

and is ‘not immediately shipped to the United States,’ [and] requires ‘at least a minimum amount

of processing and packing,’ the raw garlic bulb cannot be the subject merchandise.” See Def.’s Brief

at 19 (quoting Decision Memorandum at 13). The Government notes that “Commerce’s experience

in several administrative and new shipper reviews of fresh garlic confirmed this conclusion, showing

. . . ‘that the garlic harvested from the ground is, at minimum, cleaned to remove the outer skins in

order to give the garlic bulb its characteristic white, fresh appearance,’” and “‘the whole bulb garlic

is then typically packed in mesh bags and cartons for shipment.’” See id. at 19 (quoting Decision

Memorandum at 13). Contrary to the Chinese Producers’ assertions, the fact that raw garlic bulb

is an advanced intermediate input does not set this case apart from prior cases where Commerce has

used its intermediate input methodology.

The Domestic Producers’ analysis differs slightly from that of the Government, but reaches

the same end. The Domestic Producers concede that raw garlic bulb may be covered by the

Antidumping Order. See Def.-Ints.’ Brief at 12.17 However, the Domestic Producers go on to note

that “the propriety of applying the intermediate input methodology has nothing to do with whether

the intermediate inputs in question are within the scope of the antidumping order or not; it depends

on whether this methodology achieves a more accurate and legally-defensible result in the particular

case.” Id. at 12.

17
The Domestic Producers state that “[t]he subject merchandise in this case is processed fresh
and peeled garlic; raw garlic bulb is only an intermediate input used in the production of that subject
merchandise – albeit an input so advanced that raw garlic bulb, if exported by China to the United
States, would be covered by the antidumping duty order.” Def.-Ints.’ Brief at 12.
Court No. 06-00189 Page 19

In any event, the Chinese Producers’ emphasis on the scope of the Antidumping Order is

misplaced, because (as both the Government and the Domestic Producers note) the subject

merchandise in the present case is not the raw bulb, but – rather – fresh garlic, which, as described

above, obviously requires at least some degree of processing in order to be ready for shipment. See

Decision Memorandum at 13.

Finally, the Chinese Producers assert that Commerce failed to adequately explain the need

to depart from the agency’s practice in prior reviews, and its basis for concluding that use of the

agency’s intermediate input methodology would result in a more accurate margin. See Pls.’ Brief

at 12. As the Chinese Producers acknowledge, “Commerce is permitted to deviate from . . . past

practice, at least where it explains the reason for its departure.” Allegheny Ludlum Corp. v. United

States, 346 F.3d 1368, 1373 (Fed. Cir. 2003) (citing Atchison, Topeka & Santa Fe Ry. Co. v.

Wichita Bd. of Trade, 412 U.S. 800, 808 (1973)). The Chinese Producers seek to make much of the

fact that “respondents to this review maintained their books and records in accordance with the

methodology employed in previous reviews of this order.” Pls.’ Brief at 12. But that is of little

moment here.

As the Government and the Domestic Producers underscore, in the administrative review

immediately preceding the review at issue here, Commerce unequivocally expressed its concerns

about the accuracy and reliability of the factors of production data submitted by the respondents and

stated the agency’s intentions to examine and address those concerns in future reviews. See Ninth

Garlic Review Memorandum, 2005 WL 2290660, at comment 1; see also Def.’s Brief at 17-18;

Def.-Ints.’ Brief at 14-15. The Domestic Producers explain:
Court No. 06-00189 Page 20

Although Commerce was not persuaded to depart from use of the traditional
upstream [factors of production] valuation method in the eighth and ninth reviews
themselves, it put all parties on notice in the final results of the ninth review that it
intended to scrutinize the respondents’ reported upstream [factors of production]
very carefully in this tenth review with a view toward moving to use of the
intermediate input valuation method if its review of the upstream data warranted it.

Def.-Ints.’ Brief at 14.

Commerce adequately explained its intermediate input methodology and the agency’s

reasons for using it in this case (i.e., to obtain the most accurate results) in the Preliminary Results,

in the Intermediate Input Methodology Memorandum, and in the Decision Memorandum. See

generally Preliminary Results, 70 Fed. Reg. at 69,949-50; Intermediate Input Methodology

Memorandum; Decision Memorandum at 11-15. Moreover, the agency’s reasoning in this case is

reinforced by the agency’s handling of similar issues in other cases in the past. The law does not

require more. See generally NMB Singapore, 557 F.3d at 1319 (although agency must explain the

bases for its decisions, “its explanations do not have to be perfect,” so long as “the path of

Commerce’s decision . . . [is] reasonably discernable”).

In sum, Commerce acted within its discretion in deciding to use the agency’s intermediate

valuation methodology. Commerce thoroughly explained its reasons for deviating from its practice

in prior administrative reviews of the Antidumping Order at issue; and the agency adequately

supported its use of the intermediate input methodology within factors of production valuation. The

Chinese Producers’ challenges to Commerce’s use of the intermediate input methodology in this

instance must therefore be rejected.
Court No. 06-00189 Page 21

B. Garlic Bulb Valuation

The Chinese Producers fare better on their challenge to Commerce’s surrogate valuation of

the raw garlic bulb input in its calculation of normal value for fresh garlic. According to the Chinese

Producers, Commerce erred in selecting the Indian Agricultural Marketing Information Network

(“Agmarknet”) data for the “China” variety of garlic as the basis for the surrogate value of

respondents’ garlic bulb input. The Chinese Producers further assert that Commerce improperly

rejected more representative data that the respondents submitted. See generally Pls.’ Brief at 16-17,

20-21.

As section III.A above explains, in a nonmarket economy case such as this, Commerce must

base its surrogate values on “the best available information” from an appropriate market economy

country or countries. See 19 U.S.C. § 1677b(c)(1). Because the statute does not define “best

available information,” Commerce has broad discretion to determine the best available information

“in a reasonable manner on a case-by-case basis.” See Rhodia, Inc. v. United States, 25 CIT 1278,

1286, 185 F. Supp. 2d 1343, 1351 (2001) (quotation marks and citation omitted). That discretion,

however, is “curtailed by the purpose of the statute, i.e., to construct the product's normal value as

it would have been if the NME country were a market economy country.” Rhodia, 25 CIT at 1286,

185 F. Supp. 2d at 1351 (citing Nation Ford Chem. Co. v. United States, 166 F.3d 1373, 1375 (Fed.

Cir. 1999)).18

In the present case, following its decision to apply the intermediate input methodology to

18
See also Goldlink Indus. Co., Ltd. v. United States, 30 CIT 616, 619, 431 F. Supp. 2d
1323, 1327 (2006); Baoding Yude Chem. Indus. Co., Ltd. v. United States, 25 CIT 1118, 1119, 170
F. Supp. 2d 1335, 1337 (2001).
Court No. 06-00189 Page 22

determine normal value, Commerce was required to choose a surrogate value for the intermediate

input in question, raw garlic bulb.19 Initially, Commerce found that Indian import statistics derived

from the World Trade Atlas constituted the best publicly available data for this purpose, and

dismissed the use of Agmarknet data. See Preliminary Results, 70 Fed. Reg. at 69,949-50.20 In the

Preliminary Results, Commerce explained its dissatisfaction with the Agmarknet data, noting that

the agency could not “ascertain the quality or nature of the garlic products (i.e., bulbs, loose cloves,

etc.).” Preliminary Results, 70 Fed. Reg. at 69,950. According to Commerce, this shortcoming was

important, because respondents’ garlic is a large, high yield, high-quality type of garlic that is

distinct from the overwhelming majority of garlic grown in India. See Decision Memorandum at

40-41. Thus, while the respondents submitted data from the broader Agmarknet database during the

course of the review, Commerce initially rejected the use of Agmarknet data based on the agency’s

belief that the data reflected only small-bulb Indian garlic. In addition, Commerce was concerned

19
In the eighth and ninth administrative reviews, Commerce employed the standard upstream
factors of production methodology, rather than the intermediate input methodology, and identified
a surrogate value for garlic seed using price data derived from the Indian National Horticultural
Research and Development Foundation (“NHRDF”); Commerce then calculated surrogate values
for the other inputs. See Ninth Garlic Review Memorandum, 2005 WL 2290660, at comment 2; see
also Fresh Garlic from the People’s Republic of China: Final Results of Antidumping Duty
Administrative Review and New Shipper Reviews (Eighth Administrative Review), 69 Fed. Reg.
33,626, 33,628 (June 16, 2004) (“Eighth Garlic Review Memorandum”).

In the instant review, Commerce’s objective was to find the best available surrogate value
for the intermediate product (as opposed to previous reviews, where it sought to identify the most
appropriate surrogate value for garlic seed and other upstream factors of production).
20
The World Trade Atlas has been described as “a database of commodities using all levels
of the Harmonized Tariff Schedule,” which “enables users to determine the value of a specific
product and identify countries to or from which the product is being exported or imported.”
Longkou Haimeng Mach. Co. v. United States, 32 CIT ____, ____ n.17, 581 F. Supp. 2d 1344, 1361
n.17 (2008).
Court No. 06-00189 Page 23

that it could not determine whether the Agmarknet figures were tax-exclusive. See id. at 40; see also

Def.’s Brief at 25.

In the Final Results, Commerce reversed course and concluded that the Agmarknet data

reflecting values for the Indian domestic garlic identified as “China” variety was the best overall

source of Indian price information. See Decision Memorandum at 40-41. Explaining its decision

to rely on the Agmarknet data, Commerce stated:

[T]he [Agmarknet] database represents daily garlic bulb prices from wholesale
markets in 21 out of 28 Indian states plus the National Capital Territory of Delhi.
Therefore, we find that Agmarknet data are broadly representative of garlic bulb
prices throughout India as noted by several respondents. Second, the database
represents market transactions covering the period November 1, 2003 through
October 31, 2004, and therefore, we find the data to be contemporaneous with the
review.

Id. at 42 (emphasis added). Commerce also noted that the Agmarknet database was publicly

available; but the agency had to concede that it still had no firm indication as to whether the

Agmarknet figures were inclusive of taxes. See id. Finally, and most importantly, Commerce noted

that Agmarknet lists prices for six separate varieties of garlic, one of which is the “China” category.

Conspicuously absent from the Agmarknet data, however, is any description of those categories.

See id. at 40, 42.

Obviously conscious that its task was “to value large-sized garlic bulb because this is the

primary characteristic that distinguishes the type of garlic exported by the PRC respondents from

the majority of garlic sold in India,” Commerce found the “China” variety of garlic to be most

similar to the respondents’ garlic – even though no description of “China” variety garlic was

provided, and seemingly based on nothing more than perhaps the name of the variety, and the fact
Court No. 06-00189 Page 24

that it had a higher weighted-average price. See Decision Memorandum at 42-44.

To be sure, Commerce enjoys broad discretion in determining what constitutes the best

information available. Nevertheless, Commerce may not act arbitrarily. “In determining the

valuation of the factors of production, the critical question is whether the methodology used by

Commerce is based on the best available information and establishes antidumping margins as

accurately as possible.” Shakeproof, 268 F.3d at 1382. The statutory objective of calculating

dumping margins as accurately as possible can be achieved only when Commerce's choice as to

what constitutes the best available information evidences a rational and reasonable relationship to

the factor of production that it represents. And, as the Chinese Producers assert, Commerce’s

speculation here – that higher-price-equals-bigger-bulb – cannot suffice to establish the requisite

rational and reasonable relationship between respondents’ garlic bulb input and the Agmarknet

“China” variety of garlic. See Pls.’ Brief at 23. In short, absent evidence on the nature and

characteristics of Agmarknet’s “China” variety of garlic bulb, Commerce’s decision to use the

“China” variety prices was impermissibly speculative. See id. at 17.

Commerce’s reliance on the Domestic Producers’ Market Research Report (submitted in the

course of the administrative review) does little, if anything, to buttress the agency’s decision. As

the Market Research Report explains it, Chinese garlic exported to the United States has an average

bulb diameter of greater than 40 millimeters, while garlic typically grown and sold in the Indian

market has an average bulb diameter of only 20 to 40 millimeters. Decision Memorandum at 42-43;

see also generally Market Research Report (Pub. Doc. No. 41). The Market Research Report stated

that this typical Indian garlic is cultivated in “short-day” zones, rather than “long-day” zones (which
Court No. 06-00189 Page 25

have longer periods of sunlight, and which are where larger, high-yield garlic is cultivated).

Decision Memorandum at 41 (citing Market Research Report at 11).21

The Market Research Report specifically identified Agrifound Parvati (a large Indian garlic

variety) as one of the three varieties of garlic with characteristics similar to the Chinese garlic grown

by respondents. Decision Memorandum at 41; id. n.110 (citing Ninth Garlic Review Memorandum,

2005 WL 2290660, at comment 2; Market Research Report at 18). According to Commerce,

“Agrifound Parvati is a clonal garlic believed to be of Chinese genetic origin that was developed by

NHRDF and is the closest variety (in terms of genetic origin, specifications, etc.) to Chinese garlic.”

Id. at 41 (citing Market Research Report at 18). Commerce further indicated that “use of such clonal

varieties, developed mainly by NHRDF, are increasing in certain areas in India due to the efforts of

NHRDF and other institutions, and that this development is in sharp contrast to the rest of the county

where local varieties dominate.” Id. (citing Market Research Report at 13-17, 18).

The Chinese Producers contend that – from Commerce’s recitation of certain information

from the Domestic Producers’ Market Research Report (outlined above) – the agency then “made

a substantial leap . . . and concluded without any evidentiary support that the minute group of sales

designated as ‘China’ variety in the Agmarknet data must represent sales of this larger garlic being

cultivated in the ‘long-day’ regions.” See Pls.’ Brief at 17; see also Decision Memorandum at 41.

The Chinese Producers’ assessment is not far off the mark. The language of Commerce’s

21
The “long-day” zones are defined as agro-climatic zones above 30 degrees north latitude
which are characterized by longer periods of sunlight vis-a-vis the “short-day” zones, which are
below 30 degrees north latitude and enjoy less sunlight. Decision Memorandum at 41; Market
Research Report at 10-11.
Court No. 06-00189 Page 26

summation of the Market Research Report, and the agency’s phrasing of its ultimate conclusion on

this point, are telling.22 The stated rationale for the agency’s selection of Agmarknet’s “China”

variety data as the surrogate value for raw garlic bulb in this case was largely speculative and

conclusory, and lacks adequate support in the evidentiary record.

Even the Domestic Producers are “not prepared to defend Commerce’s choice of the price

for garlic designated as ‘China’ in the Agmarknet data as the surrogate value for raw garlic bulb.”

Def.-Ints.’ Brief at 17.23 All that the Domestic Producers are prepared to defend is “the principle

underlying Commerce’s choice – that is, the notion that the surrogate value for raw garlic bulb

should, as much as possible, be representative of the large-bulb garlic exported by respondents to

the United States.” Id. Such a “notion,” however, lends Commerce no support in its decision to

select the “China” variety of Agmarknet garlic, in particular, as a basis for surrogate value here.

22
Summarizing what it gleaned from the Domestic Producers’ Market Research Report,
Commerce concluded in its Decision Memorandum that “while smaller local varieties remain the
predominant type of garlic grown in India, large-bulb garlic – similar to that grown by the PRC
respondents – is being grown in various parts of India and is beginning to make inroads vis-a-vis
the locally cultivated, small-bulb Indian varieties.” See Decision Memorandum at 41 (citing Market
Research Report at 13-17).

From the referenced information, drawn from the Market Research Report, Commerce
reached its ultimate conclusion:

Based on the evidence of the increasing availability of the large-sized garlic bulb in
India and absent contrary information, [the agency] find[s] it reasonable to conclude
that the variety indicated as “China” is representative of the distinctively larger garlic
produced by the PRC respondents.

Decision Memorandum at 42.
23
The Domestic Producers initially filed their own action seeking review of Commerce’s
decision in this respect; however, that action was voluntarily dismissed.
Court No. 06-00189 Page 27

The Government struggles to mount a defense of Commerce’s decision, gamely arguing that

the price differential between “China” variety garlic and other Indian garlic “would be expected if

the ‘China’ variety garlic reflected the larger Agrifound Parvati bulb.” See Def.’s Brief at 28

(emphases added). However, the conjecture and contingency reflected in “woulds” and “ifs” belie

the sound evidentiary basis required to support the agency’s conclusion “that the Agmarknet ‘China’

variety garlic was the most appropriate surrogate for respondents’ garlic.” See id. at 28.

The Government emphasizes that “the information regarding garlic bulb derived from the

other reported garlic varieties in the Agmarknet database . . . did not reveal any physical

characteristics demonstrating that they were similar to respondents’ large bulbed garlic.” Def.’s

Brief at 28. But the very same can be said of the information on the “China” variety. See Decision

Memorandum at 42 (“there are no descriptions provided by Agmarknet which define these variety

categories”). The Agmarknet database provides no physical description of any of the listed varieties

of garlic bulb, including the “China” variety.

Distilled to its essence, the Government’s argument in support of Commerce’s selection of

the “China” variety data as the best available information is basically the same as the basis set forth

by the agency itself in its Decision Memorandum – that is, that a higher price may be indicative of

a larger bulb, and that such a larger bulb may be the Agrifound Parvati bulb, which, in turn, may be

similar to the respondents’ garlic bulb. See Def.’s Brief at 26-28; Decision Memorandum at 41-43.

The tenuous nature of that logic is self-evident.

The Chinese Producers point to other problems with Commerce’s selection of the Agmarknet

“China” variety data as well. See generally Pls.’ Brief at 17, 21. For example, the Chinese
Court No. 06-00189 Page 28

Producers note that “China” variety garlic is apparently grown only in three Indian states (Punjab,

Gujarat, and Haryana). But only one of those states (Punjab) is within the long-day growing region

where Agrifound Parvati – the Indian variety which reportedly may be the most similar to the

respondents’ Chinese garlic – is found. See id. at 20-21. In other words, in an effort to base

surrogate value on the “China” variety of garlic bulb, Commerce selected a dataset made up

primarily of non-long-day-zone regions, and rejected the Chinese Producers’ effort to select a

dataset more representative of long-day zones (which the Domestic Producers contend, and

Commerce accepted, is most likely where garlic comparable to respondents’ garlic is grown). See

id. Such inherently illogical reasoning undermines Commerce’s selection and use of the “China”

variety as the basis for surrogate value here.

And there are other seeming contradictions in Commerce’s position that are problematic.

For example, the Chinese Producers emphasize that Commerce assertedly predicated its decision

to use Agmarknet data on the fact that the Agmarknet data were broad-based and country-wide. Yet

Commerce ultimately based the surrogate value on data from a subset of Indian garlic (the “China”

variety) grown only in three Indian states, which essentially contradicted the agency’s rationale for

using the Agmarknet data in the first place. See Pls.’ Brief at 20-21; see also Decision

Memorandum at 42 (emphasizing that “Agmarknet data are broadly representative of garlic bulb

prices throughout India”).

Underscoring the apparent irony of Commerce’s decision, the Chinese Producers note that

Commerce rejected their proposal to use sales prices contained in the Agmarknet database for states

where the Market Research Report indicates that high-yield, high-quality garlic predominates (i.e.,
Court No. 06-00189 Page 29

the states of Himachal Pradesh, Uttaranchal, and Jammu and Kashmir), based on the agency’s

reasoning that:

it is [Commerce’s] practice to use country-wide data instead of regional data when
the former is available. Moreover, we attempt to find the most representative, least
distortive . . . market-based value. The more broad-based the value, the greater the
likelihood that the value [is] representative.

Pls.’ Brief at 20-21 (quoting Decision Memorandum at 45). Thus, not only is Commerce’s selection

of “China” variety garlic as the “best available information” unsupported by the evidence, but it also

seems inherently inconsistent with Commerce’s stated rationale for rejecting the respondents’

proposed data (i.e., that the data were not country-wide).

Finally, the Chinese Producers maintain that, because the Agmarknet data that Commerce

used constituted price information representative of the final product (fresh garlic sold at market),

the data intrinsically already reflected post-harvest factors of production. See Pls.’ Brief at 11-12.

Thus, the Chinese Producers contend, Commerce impermissibly inflated the surrogate value of fresh

garlic by adding additional post-harvest factors of production (e.g., sales, packing, and transportation

costs) to a figure that already reflected such costs. See id. at 11-12; see also Pls.’ Reply Brief at 5.

While there is a certain logic to the Chinese Producers’ argument, they have not demonstrated that

use of the intermediate input methodology in fact results in double counting. On remand, however,

Commerce should consider this possible inconsistency and the potential for double counting that

may result when using data from the Agmarknet database, which presumably contains information

regarding Indian market transactions and is representative of the final garlic product rather than an

intermediate garlic product (i.e., garlic bulb). See Pls.’ Brief at 12-14.

As the Chinese Producers emphasized at oral argument, Commerce’s use of Agmarknet data
Court No. 06-00189 Page 30

for the intermediate input appears to conflict with its prior claim that raw garlic – the intermediate

input – is not the subject merchandise because it requires further processing to become market-ready

fresh garlic (the final product). See Recording of Oral Argument at 1:50:00. As Commerce noted,

the post-harvest factors of production in India may differ from those of respondents. But, on

remand, Commerce should be mindful that, when valuing an intermediate product in an NME

country case, it must find a surrogate representative of that intermediate product. See Decision

Memorandum at 52-53; see also Def.’s Brief at 29-30.24 Here, it is unclear whether Agmarknet’s

Indian garlic is adequately representative of the respondents’ “intermediate” garlic bulb.

Commerce has broad discretion in this arena; but its decisions nonetheless cannot be

arbitrary, and must have a solid foundation in the evidentiary record. The Government here

contends that Commerce selected the “China” variety of garlic bulb as listed in the Agmarknet

database because that garlic comes from three different states in different regions (unlike the

regional data proposed by the Chinese Producers, which – the Government claims – may be subject

to regional price distortions). See Def.’s Brief at 31. The Chinese Producers’ proposed data set may

or may not be the “best available information”; but, contrary to the Government’s assertions,

Commerce has not established that the long-day-region data proffered by the Chinese Producers

suffers from any distortions. See id.

24
Commerce found that none of the respondents’ packaging expenses are included in the
Agmarknet data. See Decision Memorandum at 52. Commerce also stated that “none of the type
of packaging or processing inputs used by . . . respondents for their exports of peeled garlic . . . are
included in the garlic bulb prices quoted by Agmarknet.” Id. But that finding is relevant only to
peeled garlic, and does not necessarily equate Indian market-ready garlic with the respondents’
intermediate input (raw garlic bulb).
Court No. 06-00189 Page 31

In light of the numerous flaws and discrepancies in Commerce’s reasoning (as summarized

above), Commerce has failed to adequately support its selection of Agmarknet’s “China” variety

garlic bulb as the basis for its surrogate valuation of respondent’s garlic bulb input. This issue

therefore must be remanded to the agency, so that it may reconsider its valuation of respondents’

garlic bulb input, taking into consideration the evidence and the arguments that the Chinese

Producers have advanced here.

C. Wage Rate Calculation

Taking issue with Commerce’s wage rate calculation, the Chinese Producers contend that

the PRC wage rate used in this review – calculated pursuant to the agency’s “long-standing

regression-based methodology” – does not reflect the wage rates in market economy countries

comparable to the PRC; that Commerce failed to explain why the results produced by the regression

methodology are more accurate than the alternatives proposed by the Chinese Producers; and that

Commerce’s calculation contravenes established precedent. See generally Pls.’ Brief at 24-31; Pls.’

Reply Brief at 8-9; see also Def.’s Brief at 55 (referring to Commerce’s “long-standing regression-

based methodology”); Expected Non-Market Economy Wages: Request for Comment on

Calculation Methodology, 70 Fed. Reg. 37,761 (June 30, 2005) (same). Because Commerce has

failed to adequately explain, justify, and support its methodology (including its application in this

case), this issue must be remanded to Commerce for further consideration.

When constructing the normal value of a product from an NME country, Commerce must

determine the “hours of labor required” as a factor of production. See 19 U.S.C. § 1677b(c)(3).

Like other factors of production, Commerce is directed to value labor “utiliz[ing], to the extent
Court No. 06-00189 Page 32

possible, the prices or costs of factors of production in one or more market economy countries that

are[:] (A) at a level of economic development comparable to that of the nonmarket economy

country, and (B) significant producers of comparable merchandise.” 19 U.S.C. § 1677b(c)(4). In

doing so, Commerce essentially creates a “hypothetical” market value to approximate the production

experience in the NME country. See Nation Ford, 166 F.3d at 1377-78. The valuation of an NME-

country producer’s cost of labor, however, is treated differently from the valuation of other factors

of production. See Dorbest v. United States, 30 CIT 1671, 1703, 462 F. Supp. 2d 1262, 1291

(2006), appeal docketed, No. 2009-1257, -1266 (Fed. Cir. Mar. 20, 2009) (“Dorbest I”) (citing 19

C.F.R. § 351.408(c)(3) (2003)); see also Decision Memorandum at 50.

Commerce is permitted to depart from typical surrogate valuation and to value factors of

production according to source data outside of the data from the chosen surrogate country – provided

that the “methodology used by Commerce is based on the best available information and establishes

antidumping margins as accurately as possible.” Shakeproof, 268 F.3d at 1381-82 (“we have

specifically held that Commerce may depart from surrogate values when there are other methods

of determining the ‘best available information’ regarding the values of the factors of production”).25

Commerce has determined that “in calculating wage rates, an analysis different in some aspects from

valuing other [factors of production is] warranted in light of [the agency’s] concerns about wide

25
See also Nation Ford, 166 F.3d at 1378 n.5 (the antidumping duty statute “does not
preclude consideration of pricing or costs beyond the surrogate country if necessary”); Lasko Metal,
43 F.3d at 1446 (“Where [Commerce] can determine that a NME producer’s input prices are market
determined, accuracy, fairness, and predictability are enhanced by using those prices. Therefore,
using surrogate values when market-based values are available would, in fact, be contrary to the
intent of the law.”) (internal quotation marks and citation omitted); see also Dorbest I, 30 CIT at
1706, 462 F. Supp. 2d at 1293.
Court No. 06-00189 Page 33

variances in wage rates between comparable economies.” See Decision Memorandum at 50.

Accordingly, in valuing the cost of labor in NME cases, Commerce employs “regression-based wage

rates reflective of the observed relationship between wages and national income” in a variety of

market economy countries. 19 C.F.R. § 351.408(c)(3)26; see also Dorbest I, 30 CIT at 1703, 462 F.

Supp. 2d at 1291.27 In other words, unlike its valuation of other factors of production in an NME

case, Commerce bases its surrogate wage rate on data from a broad “basket” of countries, and does

not limit itself to market economy countries at a level of economic development comparable to the

NME country in question. See Dorbest I, 30 CIT at 1706, 462 F. Supp. 2d at 1293.

In the case at bar, Commerce employed a labor rate of $0.97 per hour – Commerce’s

26
Commerce’s regulation specifies that the agency is to “calculate the wage rate to be applied
in nonmarket economy proceedings each year.” 19 C.F.R. § 351.408(c)(3). The calculation is to
be “based on current data” and “made available to the public.” Id.
27
Dorbest I concisely describes Commerce’s regression methodology:

Using this regression analysis, Commerce determines the relationship between
countries’ per capita Gross National Product (“GNI”) and their wage rates;
Commerce approximates the wage rate of the PRC by using the PRC’s GNI as the
variable in the equation that was the result of the regression.

* * * *
For wage rate data used to calculate the regression, because of the practices of the
respective data sources, there is normally a two-year interval between the current
year and the most recent reporting year of the data required for Commerce’s
methodology. Therefore, Commerce uses the “most recent reporting year” provided
by each country and inflates those values, i.e., multiplies the values by the rate of
inflation. Commerce calculates the wage rate regression once a year and uses that
regression to calculate the wage rate for all investigations and administrative reviews
in [NME countries] conducted during that year.

Dorbest I, 30 CIT at 1703-04, 462 F. Supp. 2d at 1291 (internal quotation marks and citations
omitted); see also Zhejiang Native Produce & Animal By-Products Import & Export Group Corp.
v. United States, 32 CIT ____, 2008 WL 2410210 *13 (2008).
Court No. 06-00189 Page 34

calculated wage rate for 2003 for the PRC, derived through the agency’s regression-based analysis

of a wage rate data set from some 50-plus market economy countries, including “the most

industrialized and advanced countries in the world,” using data from the Yearbook of Labour

Statistics published by the International Labour Organization (“ILO”). See Decision Memorandum

at 48-51; see also Preliminary Results, 70 Fed. Reg. at 69,950.

The Chinese Producers contested the Preliminary Results, raising three main objections.

First, the Chinese Producers argued that the statute requires Commerce to calculate a wage rate

based on wage rate data from the principal surrogate country, India – a market economy country “at

a level of economic development comparable to that of the nonmarket economy country” which is

a “significant producer[] of comparable merchandise.” See Decision Memorandum at 47; Pls.’ Brief

at 24-25; 19 U.S.C. § 1677b(c)(4). The Chinese Producers further challenged the inclusion in

Commerce’s regression analysis of non-comparable countries (such as Switzerland, the United

Kingdom, Norway, and Germany), in conflict with the asserted statutory directive to use surrogate

values derived from economically comparable countries. See Decision Memorandum at 47-48; Pls.’

Brief at 24-25;19 U.S.C. § 1677b(c)(4)(A). Finally, the Chinese Producers argued that Commerce’s

labor rate calculation “inexplicably ignored” the available 2003 data for 14 countries, and should

include all available data. See Decision Memorandum at 48; Pls.’ Brief at 25.

In its Final Results, Commerce rejected the Chinese Producers’ arguments, and reaffirmed

that, for the administrative review at issue here, “the appropriate surrogate value for the wage rate

for the PRC respondents continues to be the wage rate of $0.97/hour.” See Decision Memorandum

at 49-51.
Court No. 06-00189 Page 35

The Chinese Producers argue that the Final Results on the surrogate value for the wage rate

in this case comprise “arguments, conclusions and findings that are directly contradicted by record

evidence,” such that Commerce’s determination is not supported by substantial evidence. See Pls.’

Brief at 26-27. The Chinese Producers target, in particular, Commerce’s conclusion that its

regression model “reflects ‘market economy wage rates at a comparable level of economic

development.’” Id. at 26 (quoting Decision Memorandum at 50). The Chinese Producers contend

that Commerce’s conclusion “is directly contradicted by record evidence . . . [which] show[s] that

the regression model does not reflect, and in fact drastically overstates, the market wage rates in

countries at a comparable level of economic development.” Id. The Chinese Producers emphasize

that Commerce’s calculated wage rate of $0.97/hour is “400% higher than India’s actual wage rate

of $0.23/hr. and much higher than the wage rates of other countries found to be economically

comparable to China.” Id. The Chinese Producers further note that Commerce’s calculated wage

rate for China “is much higher than the actual rates of Pakistan ($0.38), Sri Lanka ($0.34), and the

Philippines ($0.80), countries found by Commerce to be economically comparable to China.” Id.

The Government does not specifically dispute any of the facts as stated by the Chinese

Producers. Nor does the Government respond directly to the Chinese Producers’ charge that

Commerce’s conclusion that the agency’s regression model reflects “market economy wage rates

at a comparable level of economic development” is not supported by substantial evidence (except

that the Government baldly asserts at one point in its brief that “Commerce’s wage rate calculation

is supported by substantial evidence”). See Def.’s Brief at 54 (emphasis added); see generally id.

at 54-58.
Court No. 06-00189 Page 36

Instead, the Government argues that Commerce properly decided “not to rely on the sole

wage rate from the selected surrogate country because, while per capita [Gross National Product]

rates and wages are positively correlated, there is great variation in the wage rates of the market

economy countries that it treats as economically comparable.” See Def.’s Brief at 55 (quoting

Decision Memorandum at 49) (internal quotation marks omitted). The Government explains that

“[u]nlike other surrogate values for valuing merchandise, such as water, ocean freight, etc., which

do not vary significantly from country to country, labor is unique because ‘immigration, welfare and

general wage support programs’ can greatly influence wage rates in each country and ‘two

economically comparable economies’ can have very different wage rates as a result.” Id. (quoting

Decision Memorandum at 49). Accordingly, the Government states, “since 2000, the regression

methodology has been ‘based on data from a wide range of [56] market economy countries’ to

enhance ‘the accuracy, predictability and stability of the wage rate.’” Id. (quoting Decision

Memorandum at 49). The Government similarly argues that Commerce properly declined to expand

the “basket” of labor data used in its analysis to include additional countries. See id. at 56-58.

However, mere arguments and explanations do not constitute “evidence” – much less

“substantial evidence.” As the Chinese Producers point out, Dorbest I took note of the same types

of seeming distortions (vis-a-vis Commerce’s labor rate calculation for 2002), and remanded the

matter to Commerce. See Pls.’ Brief at 27 (citing Dorbest I, 30 CIT at 1710-13, 462 F. Supp. 2d at

1296-98). Dorbest I similarly questioned the bases for Commerce’s assertion that its regression

methodology in that case enhanced “the accuracy, predictability and stability” of the wage rate used

there – the same justification that Commerce invokes here. See Dorbest I, 30 CIT at 1710-12, 462
Court No. 06-00189 Page 37

F. Supp. 2d at 1297-98; Decision Memorandum at 49 (stating that Commerce “finds that its

regression methodology, based on data from a wide range of market economy countries, enhances

the accuracy, predictability and stability of the wage rate”). Just as Commerce’s determination in

Dorbest I was found to be unsupported by substantial evidence, so too Commerce’s determination

here is lacking. The matter therefore must be remanded to the agency for further consideration.

The Chinese Producers also criticize the Final Results on the grounds that Commerce “failed

to give valid reasons for the selection of its methodology and [its] rejection of the alternatives” that

the Chinese Producers proposed – specifically, “calculating the labor rate based on 1) the wage rate

in India; or 2) all available data from market economy countries.” See Pls.’ Brief at 28-29.

The Government first asserts generally that “Commerce has no affirmative obligation to

prove that its regulation [providing for the use of regression-based wage rates] is superior” to

alternatives, citing Lasko Metal for the proposition that “policies adopted by Commerce are

reasonable when they enhance accuracy, fairness, and predictability.” See Def.’s Brief at 56 (citing

Lasko Metal, 43 F.3d at 1446). As noted above, however, it is Commerce’s unsupported assertion

that the agency’s methodology enhanced “the accuracy, predictability and stability of the wage rate”

that lies at the very heart of this dispute. See Decision Memorandum at 49; see generally Dorbest

I, 30 CIT at 1710-12, 462 F. Supp. 2d at 1297-98. Moreover, the Government’s argument does not

speak to the Chinese Producers’ challenge to the size and composition of the “basket” of countries

selected for Commerce’s regression analysis. The Government’s argument thus fails to meet the

thrust of the Chinese Producers’ point.

As to the Chinese Producers’ first proposed alternative – that Commerce value wage rates
Court No. 06-00189 Page 38

using only India wage data – the Government argues simply that the wage rate methodology set

forth in its regulations “expressly rejects the India-only methodology posited by [the Chinese

Producers], and is consistent with 19 U.S.C. § 1677b(c) and Commerce’s overriding obligation to

construct the most accurate normal value.” See Def.’s Brief at 55-56. But, as the Chinese Producers

note, Commerce’s stated underlying rationale is that “using data from a single market-economy

country comparable to China (i.e., India, Indonesia, Pakistan, Sri Lanka, and the Philippines) ‘would

not provide [Commerce] with a sufficiently large data set to conduct a reliable regression analysis.’”

Pls.’ Brief at 28 (quoting Decision Memorandum at 50). The Chinese Producers further note that

Dorbest I faulted Commerce for its failure to explain its selection of the regression methodology

over other possible alternatives, stating: “While Commerce’s model may be the best information

available on the record, . . . Commerce has failed to give a viable explanation for its choice in light

of [the] possible distortion of its predicted wage rates for countries such as the PRC.” See id.

(quoting Dorbest I, 30 CIT at 1711, 462 F. Supp. 2d at 1297). Similarly, Commerce in this case has

failed to adequately explain its decision “to use a regression based methodology that [at least

arguably] results in distorted and unrepresentative wage rates versus a single wage rate from India,

the country [Commerce] has found most comparable to China.” See id.

The Government also seeks to brush aside the Chinese Producers’ second proposed

alternative (that Commerce expand its “basket” of labor data to include data from 19 additional

countries), asserting that there is no “record evidence demonstrating that such a change would result

in a more accurate wage rate.” Def.’s Brief at 56; see also id. at 56-58. As the Chinese Producers

observe, however, the Government is attempting to gloss over key findings and determinations in
Court No. 06-00189 Page 39

the Final Results, such as Commerce’s finding that its analysis in this case was based “on a basket

of countries . . . that is sufficiently robust to conduct a meaningful regression analysis.” See Pls.’

Brief at 28-29 (quoting Decision Memorandum at 51) (emphasis added). That assertion (and others

of its ilk) are mere conclusory statements, unsupported on the existing record, and cannot withstand

judicial scrutiny. See Dorbest I, 30 CIT at 1711, 462 F. Supp. 2d at 1297; see generally Pls.’ Brief

at 28-29.

In addition, the Government argues that, in light of time constraints, it was not “feasibl[e]”

for Commerce to expand the basket of countries used for its analysis in this review, and, moreover,

that such a change could have been effected only through notice-and-comment rulemaking. See

Def.’s Brief at 56-58. Dorbest I made short work of these same two arguments, however. See

Dorbest I, 30 CIT at 1709-10, 462 F. Supp. 2d at 1295-96; see also Wuhan Bee Healthy Co. v.

United States, 31 CIT ____, ____, 2007 WL 2071537 at * 15-16 (2007) (“Wuhan I”) (rejecting same

two arguments by Commerce); Zhejiang Native Produce & Animal By-Products Import & Export

Group Corp. v. United States, 32 CIT ____, ____, 2008 WL 2410210 at * 15 (2008) (same).28 They

are no more compelling here.

The Chinese Producers’ third and final argument is that Commerce’s calculation of the labor

rate in this review “runs contrary to” Dorbest I, which, according to the Chinese Producers, is “direct

legal precedent” mandating rejection of “[Commerce’s] calculation of the labor rate and its

justification for the arbitrary exclusion of certain countries” from its analysis in this case. See Pls.’

28
Cf. Wuhan Bee Healthy Co. v. United States, 32 CIT ____, _____ , 2008 WL 2217466
at * 2 (2008) (“Wuhan II”) (noting that, on remand, Commerce “expanded the basket of countries”
used in its analysis, and adequately explained wage rate calculation).
Court No. 06-00189 Page 40

Brief at 29, 31.

Dorbest I is not binding here, of course. See Algoma Steel Corp. v. United States, 865 F.2d

240, 243 (Fed. Cir. 1989) (explaining that one judge on the Court of International Trade is not bound

by decisions of another judge on the court). As the analysis above suggests, Dorbest I is

nevertheless highly instructive, as are other recent opinions on this same issue. See, e.g., Dorbest

v. United States, 32 CIT ____, ____, 547 F. Supp. 2d 1321, 1324-30 (2008), appeal docketed, No.

2009-1257, -1266 (Fed. Cir. Mar. 20, 2009) (“Dorbest II”)29; Wuhan I, 31 CIT at ____, 2007 WL

2071537 at * 13-16; Wuhan Bee Healthy Co. v. United States, 32 CIT ____, ____, 2008 WL

2217466 at * 1-3 (2008) (“Wuhan II”); Zhejiang, 32 CIT at ____, 2008 WL 2410210 at * 13-15;

Allied Pacific Food (Dalian) Co. v. United States, 32 CIT ____, ____, 587 F. Supp. 2d 1330, 1351-

61 (2008) (“Allied Pacific II”).30 On remand, Commerce will have ample opportunity to consider

29
Commerce’s use of the regression methodology was ultimately sustained in Dorbest II –
but only after Commerce detailed its rationale and marshaled substantial evidence to support its
decision in the remand results filed following Dorbest I. See generally Dorbest II, 32 CIT at ____,
547 F. Supp. 2d at 1325-30. In those remand results, Commerce reflected the results of notice and
comment rulemaking concerning data selection and methodology for determining labor wage rates
in NME countries, considered various methodologies, explained away seeming distortions such as
those raised by the Chinese Producers here, and otherwise adequately supported its decision to use
the regression model and the particular dataset there at issue. See Dorbest II, 32 CIT at ____, 547
F. Supp. 2d at 1325-30.
30
A recent decision of this court, Allied Pacific II, for the first time squarely held
Commerce’s regression methodology regulation to be inconsistent with the governing statute. See
generally Allied Pacific II, 32 CIT at ____, 587 F. Supp. 2d at 1351-61. Specifically, Allied Pacific
II presented the question “whether Commerce, in determining the surrogate labor rate according to
its regulation [19 C.F.R. § 351.408(c)(3)] and its methodology, has satisfied both the first and the
second criterion stated in [19 U.S.C.] § 1677b(c)(4), i.e., both the ‘economic comparability’ criterion
and the ‘significant producer’ criterion.” See id., 32 CIT at ____, 587 F. Supp. 2d at 1355 (citing
19 U.S.C. § 1677b(c)(4)) (emphases added). The court concluded that “both the methodology
Commerce used to develop the . . . surrogate labor rate and the regulation under which that
methodology was applied” cannot be reconciled with the statute, because, inter alia, “the regulation
Court No. 06-00189 Page 41

the implications of those cases for this case, and any other relevant developments (as appropriate),31

taking into consideration the Chinese Producers’ arguments, as well as the discussion here.

Accordingly, in the absence of sufficient evidence and adequate explanation and justification

to support Commerce’s use of its regression methodology to calculate the applicable wage rate here,

and in light of the agency’s failure to properly consider the Chinese Producers’ objections and other

alternative approaches, this matter must remanded to Commerce for further consideration.

does not permit a surrogate labor rate to be determinate for an individual proceeding and thereby
precludes consideration of any investigation-specific information.” See id., 32 CIT at ____, 587 F.
Supp. 2d at 1353, 1356.

In the course of its analysis, the court in Allied Pacific II reviewed a number of cases often
cited to support Commerce’s regression methodology in particular and/or its broad discretion in
valuing factors of production in general. See Allied Pacific II, 32 CIT at ____, 587 F. Supp. 2d at
1359–61 (discussing, inter alia, Nation Ford, 166 F.3d 1373; Shakeproof, 268 F.3d 1376; Lasko
Metal, 43 F.3d 1442). The court determined, however, that none of those decisions stands for the
proposition that Commerce is permitted to “adopt a methodology, by regulation or otherwise, under
which Commerce cannot consider labor costs in one or more surrogate countries that potentially are
better [sources of] information than the country-wide labor cost information that the regulation, and
methodology implementing it, requires Commerce to use.” Id., 32 CIT at ____, 587 F. Supp. 2d at
1360; see generally id., 32 CIT at ____, 587 F. Supp. 2d at 1359-61.

In the aftermath of Allied Pacific II, the continued vitality of Commerce’s regulation and the
regression methodology are uncertain. However, the Chinese Producers here have not raised the
precise issue presented in Allied Pacific II; no party sought leave to file supplement briefs on the
matter; and, as discussed above, Commerce has failed to adequately explain or support its use of the
regression methodology in this case. There is therefore no need to consider the validity of
Commerce’s regulation (or its regression methodology) at this time, though Commerce obviously
should be mindful of Allied Pacific II in considering this issue on remand.
31
See, e.g., Antidumping Methodologies: Market Economy Inputs, Expected Non-Market
Economy Wages, Duty Drawback; and Request for Comments, 71 Fed. Reg. 61,716 (Oct. 19, 2006).
Court No. 06-00189 Page 42

D. Ocean Freight Valuation

The Chinese Producers also contest the surrogate value that Commerce calculated for ocean

freight costs, which the agency based on price quotes for refrigerated containers as published by

Maersk Sealand. See generally Pls.’ Brief at 31-38; Pls.’ Reply Brief at 9-11. The Chinese

Producers first argue that the Maersk rates used by Commerce reflect distortions and are not

representative of the expenses that the Chinese Producers and other respondents actually incurred.

See Pls.’ Brief at 32-33; Pls.’ Reply Brief at 9-10. In addition, the Chinese Producers fault

Commerce for rejecting the three alternative data sources that the respondents placed on the record.

See Pls.’ Brief at 33-38; Pls.’ Reply Brief at 9-11.32 For the reasons detailed below, this issue too

must be remanded to Commerce for redetermination.

In the Preliminary Results, Commerce calculated surrogate ocean freight costs using general

cargo quotes that the agency had obtained from Maersk. See Preliminary Results, 70 Fed. Reg. at

69,950. The Chinese Producers and other respondents disputed Commerce’s use of those Maersk

quotes, and placed additional ocean freight cost data on the record. See Decision Memorandum at

59-60; see also Respondents’ Second Surrogate Value Submission (Pub. Doc. No. 418), Exhs. V-IX.

The respondents’ additional data included rates for Maersk refrigerated containers, which the

Chinese Producers state they placed on the record for the sole purpose of showing that the Maersk

price quotes were aberrational “because they contained additional charges not incurred by the

32
The three alternative data sources, discussed in detail below, are: (1) an average of the
actual ranged values incurred by the respondents; (2) data from the Descartes Carrier Rate Retrieval
database; and (3) public price quotes from another carrier, Evergreen Marine, which did not include
certain additional charges reflected in the Maersk rates. See Decision Memorandum at 59;
Respondents’ Second Surrogate Value Submission, Exhs. V-VIII.
Court No. 06-00189 Page 43

respondents.” See Pls.’ Brief at 31. In its final margin calculations, however, Commerce calculated

the ocean freight surrogate value using the Maersk quotes for refrigerated containers. See Decision

Memorandum at 62; see also Respondents’ Second Surrogate Value Submission, Exhs. VIII and IX.

In deciding to rely on the Maersk rates for refrigerated containers that the Chinese Producers had

placed on the record, Commerce rejected the other three sources of data that the respondents

favored. See generally Decision Memorandum at 60-62; Def.’s Brief at 32-38.

Commerce first rejected the use of public versions of the market economy ocean freight rates

actually paid by the respondents, on the grounds that the rates were not accurate because they had

been adjusted within ten percent of actual cost in order to protect proprietary information. See

Decision Memorandum at 60. Commerce stated that the agency’s policy is to use ranged data only

in the absence of more accurate information, and expressed concern that it would be impossible for

the agency to make adjustments to improve the accuracy of the data without disclosing proprietary

information. See id. at 60; see also Def.’s Brief at 38 (citing Allegheny Ludlum Corp. v. United

States, 27 CIT 1461, 1467-68 (2003)).

Commerce similarly rejected data from the Descartes database, a web-based service that

numerous ocean freight carriers use to publish their rates in order to comply with Federal Maritime

Commission regulations. See Decision Memorandum at 61; Pls.’ Brief at 34. Commerce based its

refusal to use the Descartes data on the fact that Descartes is a fee-based service, and expressed

reservations about the agency’s ability to corroborate the accuracy of the rate information reflected

in the database. See Decision Memorandum at 61.
Court No. 06-00189 Page 44

Commerce rejected the respondents’ third source of data – ocean freight price quotes from

Evergreen Marine – on the grounds that those quotes reflected rates for “generic cargo” and were

therefore insufficiently specific. See Decision Memorandum at 61.

The Chinese Producers maintain that the Maersk price quotes for refrigerated containers

that Commerce used in the Final Results are not representative of the respondents’ actual

commercial activity during the period of review, because those Maersk rates reflect both (1) a

Qingdao-to-Hong Kong-to-U.S. shipping route that – according to the Chinese Producers – no

respondent to this review used, and (2) an additional inland “PRC arbitrary charge” that results in

an additional $1,200 per container, which – according to the Chinese Producers – no respondent

incurred. See Pls.’ Brief at 32-33; Pls.’ Reply Brief at 9-10; see also Decision Memorandum at 59.33

According to the Chinese Producers, the Maersk price quotes thus are “aberrational surrogate

values,” which Commerce should be required to discard. See Pls.’ Brief at 32-33. As Commerce

noted, however, the Chinese Producers provided no evidence to support their bare assertions that

they did not use the shipping route at issue and that they did not incur the “PRC arbitrary charge.”

See Decision Memorandum at 61.

On the other hand, the Chinese Producers (together with other respondents) did place on the

record ample alternative data that Commerce failed to adequately consider in selecting the Maersk

quotes as the basis for the surrogate value of the respondents’ ocean freight costs. Not only did

Commerce fail to sufficiently analyze those alternative sources of data, but – in addition – it failed

33
The “PRC arbitrary charge” is a charge placed on cargo that is transported through Hong
Kong. See Decision Memorandum at 59.
Court No. 06-00189 Page 45

to adequately explain why the Maersk data that it used was appropriately representative for the

purpose (i.e., to approximate the respondents’ ocean freight costs). See Decision Memorandum at

61-62; Pls.’ Reply Brief at 9 (citing Shangdong Huarong Gen. Corp. v. United States, 25 CIT 834,

838-39, 159 F. Supp. 2d 714, 719-20 (2001)).34

The Chinese Producers make a strong case that the most accurate source for surrogate ocean

freight values is the publicly-available, ranged data on the market economy ocean freight rates that

were actually paid by the respondents to this review. See Pls.’ Brief at 35-36. Even recognizing

Commerce’s policy to use ranged figures only in the absence of more accurate data on the record,

Commerce has failed to establish, through citations to record evidence, that the Maersk price quotes

are in fact more accurate than the ranged data reflecting the ocean freight rates that the respondents

actually paid to ship their actual subject merchandise during the period of review at issue here. See

id.35

34
Describing the relevant review paradigm, Shangdong Huarong aptly stated that:

Despite the broad latitude afforded Commerce and its substantial discretion in
choosing the information it relies upon, the agency must act in a manner consistent
with the underlying objective of 19 U.S.C. § 1677b(c) – to obtain the most accurate
dumping margins possible. This objective is achieved only when Commerce's choice
of what constitutes the best available information evidences a rational and reasonable
relationship to the factor of production it represents.

Shangdong Huarong, 25 CIT at 838, 159 F. Supp. 2d at 719 (citation omitted).
35
In its entirety, the stated rationale for Commerce’s conclusion that the Maersk quotes for
refrigerated containers are the best publicly-available source for surrogate valuation consists of a
mere two brief paragraphs:

[Commerce] continues to believe that Maersk Sealand is the best publicly-available
source from which to value ocean freight in the instant reviews. Maersk Sealand is
a public source that has often been used by the Department in NME cases to value
Court No. 06-00189 Page 46

Moreover, as the Chinese Producers point out, Commerce in the past has frequently used

publicly-available, ranged data to value relatively minor inputs, such as ocean freight. See Pls.’

Brief at 36 (citing Notice of Final Determination of Sales at Less Than Fair Value: Barium

Carbonate from the People's Republic of China, 68 Fed. Reg. 46,577 (Aug. 6, 2003); Certain

Preserved Mushrooms from the People's Republic of China: Final Results and Partial Rescission of

the New Shipper Review and Final Results and Partial Rescission of the Third Antidumping Duty

Administrative Review, 68 Fed. Reg. 41,304 (July 11, 2003); Notice of Final Determination of Sales

at Less Than Fair Value: Melamine Institutional Dinnerware Products from the People's Republic

of China, 62 Fed. Reg. 1708 (Jan. 13, 1997)).

Furthermore, the public versions of the market economy ocean freight rates actually paid by

the respondents in this review are the very type of information that Commerce used as the basis for

ocean freight. The price quotes, with all of the inclusive charges, are actual rates
charged by a market economy supplier to ship cargo from Quingdao to the United
States. . . .

However, [Commerce] does find that the general cargo rates from Maersk Sealand
are less specific to the subject merchandise than the Maersk Sealand rates for
refrigerated goods that the GDLSK respondents placed on the record in their
surrogate value submission following the Preliminary Results. Where possible, it is
the Department’s practice to choose surrogate values that are as specific to the input
being valued as possible. Here, we find that the publicly available Maersk Sealand
rates for refrigerated cargo is more applicable to the rates that the PRC respondents
would be charged when shipping garlic to the United States because garlic is
generally shipped in refrigerated containers. Accordingly, for these final results, the
Department will use the publicly available refrigerated cargo rate quotes from
Maersk Sealand that . . . respondents have placed on the record to calculate a
surrogate value for ocean freight for those respondents that purchased their ocean
freight from an NME supplier.

Decision Memorandum at 61-62 (footnotes omitted).
Court No. 06-00189 Page 47

the surrogate value for ocean freight charges in the eighth administrative review of the Antidumping

Order on fresh garlic from the PRC. See Issues and Decision Memorandum for the Administrative

Review and New Shipper Reviews of the Antidumping Duty Order on Fresh Garlic from the

People's Republic of China (Eighth Administrative Review), 2004 WL 3524395 (June 16, 2004)

(“Eighth Garlic Review Memorandum”), at comment 5; see also Pls.’ Brief at 35-36. Commerce

there rejected the use of Maersk Sealand data in favor of the actual market economy rates paid by

one of the respondents, finding those actual market economy rates to be the “most accurate rate

available”:

Because this is a rate actually incurred and paid for in a market-economy currency
by a respondent in a review of this antidumping duty order on fresh garlic from the
PRC, we have determined that it is the most accurate rate available and selected it
as the surrogate value for shipments to the west coast. We adjusted this rate to arrive
at a surrogate value for shipments to the east coast.

Eighth Garlic Review Memorandum, 2004 WL 3524395, at comment 5; see also Pls.’ Brief at 35-36.

Under these circumstances, Commerce’s bases for rejecting the publicly-available, ranged data on

the market economy ocean freight rates actually paid by the respondents to this review are not

sufficient.

Commerce’s dismissal of the Descartes data is similarly lacking adequate support in the

record, and was not sufficiently explained by the agency. It is true that Commerce declined to use

the Descartes database in previous administrative reviews specifically because it is a fee-based

service to which the agency did not subscribe. See Def.’s Brief at 36. But, as the Chinese Producers

note, the mere fact that a service is fee-based does not preclude the use of data from that service in

determining surrogate values. In fact, as the Chinese Producers emphasize, Commerce has routinely
Court No. 06-00189 Page 48

used data from fee-based services – including Descartes, as well as the World Trade Atlas and other

services – in calculating surrogate values in the past. See Pls.’ Brief at 34; see also Def.’s Brief at

36.36 Even in the instant administrative review, Commerce used World Trade Atlas data in valuing

the respondents’ cardboard carton and plastic jar inputs. See Preliminary Results, 70 Fed. Reg. at

69,950; Decision Memorandum at 64, 68.

The Government argues that “simply because Commerce has subscribed to paid databases

in the past, it is not required to obtain paid memberships to each and every paid database.” Def.’s

Brief at 36. The Government also emphasizes Commerce’s stated preference for publicly-available

data. See Def.’s Brief at 36-37. As the Chinese Producers observe, however, because the Descartes

database is used by ocean freight carriers to publish rates in conformance with Federal Maritime

Commission regulations, the underlying Descartes data are (at least indirectly) publicly-available.

36
For instances in which Commerce has used data from fee-based services (such as Descartes
or the World Trade Atlas), see, e.g., Certain Non-Frozen Apple Juice Concentrate From the People’s
Republic of China: Preliminary Results of 2001-2002 Administrative Review and New Shipper
Review and Partial Rescission of Administrative Review, 68 Fed. Reg. 40,244, 40,248 (July 7, 2003)
(using Descartes database to value respondents’ international freight expenses); Certain Non-Frozen
Apple Juice Concentrate From the People’s Republic of China: Preliminary Results of New Shipper
Review, 68 Fed. Reg. 44,741, 44,743 (July 30, 2003) (same); Tapered Roller Bearings and Parts
Thereof, Finished and Unfinished, from the People’s Republic of China: Final Results of 2003-2004
Administrative Review and Partial Rescission of Review, 71 Fed. Reg. 2517, 2522 (Jan. 17, 2006)
(valuing packing material inputs using a weighted-average unit value derived from the World Trade
Atlas online); Notice of Preliminary Determination of Sales at Less Than Fair Value and
Postponement of Final Determination: Chlorinated Isocyanurates from the People’s Republic of
China, 69 Fed. Reg. 75,294, 75,300 (Dec. 16, 2004) (valuing raw material inputs using import data
from the World Trade Atlas online); Certain Preserved Mushrooms from the People’s Republic of
China: Final Results of Sixth Antidumping Duty New Shipper Review and Final Results and Partial
Rescission of the Fourth Antidumping Duty Administrative Review, 69 Fed. Reg. 54,635, 54,641
(Sept. 9, 2004) (valuing prices of certain chemicals using the World Trade Atlas online); Amended
Notice of Final Results of the Antidumping Duty Administrative Review: Petroleum Wax Candles
from the People’s Republic of China, 69 Fed. Reg. 20,858, 20,859 (Apr. 19, 2004) (using Indian
import data from the World Trade Atlas online to derive the value of banding straps).
Court No. 06-00189 Page 49

And, as such, the underlying information is generally susceptible to verification. See Pls.’ Brief at

34-35.

In valuing factors of production, Commerce must balance its need for accurate rate

information against its preference for publicly-available information, ever cognizant of its primary,

over-arching objective – to calculate dumping margins as accurately as possible. See Shakeproof,

268 F.3d at 1382; Allied Pacific Food (Dalian) Co. Ltd. v. United States, 30 CIT 736, 760-61, 435

F. Supp. 2d 1295, 1316-17 (2006) (“Allied Pacific I”) (“19 U.S.C. § 1677b(c) . . . does not require

Commerce to use publicly available information to value the factors of production”; agency “must

balance the interests of transparency and verification that are served by public availability with other

considerations, including the desirability of data that are as specific as possible”). Commerce’s

summary rejection of the Descartes data here cannot be sustained.

Finally, the Evergreen Marine data, which the respondents placed on the record and which

Commerce rejected as insufficiently specific, resembled the Maersk data that Commerce actually

used, except that the Evergreen data did not reflect the Qingdao-to-Hong Kong-to-U.S. shipping

route (a routing which the Chinese Producers maintain that respondents never used). See Pls.’ Brief

at 36-37; see also Decision Memorandum at 61. In its brief, the Government now asserts that

Commerce erred in the Final Results when the agency indicated that the difference between the

Maersk rates used in the Preliminary Results and those used in the Final Results was between rates

for non-refrigerated and refrigerated shipments, when – according to the Government – the real

difference was between general cargo rates and rates for “containers of garlic.” See Def.’s Brief at

35 (quotation marks and citations omitted).
Court No. 06-00189 Page 50

At a minimum, the Government’s challenge to Commerce’s position as stated in the agency’s

Final Results has the effect of muddying the waters on the relative merits of the Maersk data versus

the Evergreen data. Moreover, it is not clear that the Maersk data submitted by the respondents

following the Preliminary Results were in fact garlic-specific (or even vegetable-specific), as the

Government now contends they were. See Def.’s Brief at 32-33, 35; Respondents’ Second Surrogate

Value Submission, Exhs. VIII and IX.37 Further, it is undisputed that the Evergreen quotes reflect

charges for refrigerated containers, and that garlic is shipped in refrigerated containers. See

Decision Memorandum at 61-62 (noting that “garlic is generally shipped in refrigerated

containers”). But neither Commerce nor the Government has pointed to any evidentiary support for

the notion that special refrigerated containers (with special garlic-specific or vegetable-specific

shipping rates) even exist, much less that such containers and such rates were used by the

respondents here. Commerce’s dismissal of the Evergreen rates on the grounds that they “are not

as specific to the subject merchandise as [the Maersk data]” thus has not been sufficiently explained

or supported in the evidentiary record. See Decision Memorandum at 61.

For all these reasons, Commerce’s determination on this matter cannot be sustained against

the Chinese Producers’ attacks. On remand, Commerce is directed to reconsider its determination

37
At one point in its brief, the Government appears to assert that the Maersk rates used in the
Final Results were for “containers of garlic,” while elsewhere (but on the same page) the
Government indicates only that the Maersk rates were “specific to the shipment of refrigerated
vegetables.” See Def.’s Brief at 35. This seeming discrepancy only further muddies the waters on
this point.

It appears that the quoted rates within the particular class of refrigerated container cover
shipment of anything from fats and oils to quiche, wonton skins, and fruit on a stick, i.e., items that
need to be refrigerated when shipped. See Respondents’ Second Surrogate Value Submission (Pub.
Doc. No. 418), Exhs. VIII and IX.
Court No. 06-00189 Page 51

as to the surrogate value for the respondents’ ocean freight expenses, in light of the Chinese

Producers’ arguments and the record evidence, consistent with this opinion.

E. Carton Valuation

The Chinese Producers next dispute Commerce’s valuation of certain packing inputs –

specifically, the surrogate values for cardboard cartons (reviewed here) and for plastic jars (analyzed

in section III.F, below).

The Chinese Producers contend that Commerce erred in using Indian import data as the basis

for the surrogate value for the cardboard cartons used to pack and ship the respondents’ garlic. The

Chinese Producers maintain that Commerce instead should have selected a surrogate value derived

from the price quotes for domestic Indian boxes that the Chinese Producers submitted for the

agency’s consideration. See generally Pls.’ Brief at 38-47; Pls.’ Reply Brief at 11-13. Indeed,

according to the Chinese Producers, the value based on the Indian import statistics “is more than

three times higher than the average of the price quotes for domestic packing boxes because the

Indian import statistics [1] include specialty boxes [and] [2] [boxes] that were transported by air.”

See Decision Memorandum at 62.

As discussed below, the domestic Indian box prices submitted by the Chinese Producers

were not without problems. Even so, Commerce failed to adequately explain and justify its

conclusion that the Indian import statistics were the best available information. Nor did Commerce

properly support its decision to use those data by reference to substantial evidence in the record.

In prior administrative reviews, Commerce valued the cartons used to pack and ship the

respondents’ garlic using a figure derived from Indian import statistics for Harmonized Tariff
Court No. 06-00189 Page 52

Schedule (“HTS”) subheading 4819.1001, which covered boxes made of corrugated paper and

paperboard. See Def.’s Brief at 38-39; Ninth Garlic Review Memorandum, 2005 WL 2290660, at

comment 7; Eighth Garlic Review Memorandum, 2004 WL 3524395, at comment 3; see also Jinan

Yipin Corp., Ltd. v. United States, 31 CIT ____, ____, 526 F. Supp. 2d 1347, 1376-79 (2007)

(analyzing challenge to Commerce’s valuation of packing cartons in eighth administrative review).

In the period of review at issue here, however, that HTS subheading was no longer valid.

The domestic producers placed on the record of this review certain Indian import statistics

for HTS subheading 4819.1010 (which now encompasses the boxes of corregated paper and

paperboard formerly covered by HTS 4819.1001). See Def.’s Brief at 39; Domestic Producers’

Surrogate Valuation Submission (Pub. Doc. No. 82), at 9, Exh. 17. The Chinese Producers, in turn,

submitted price quotes for “packing cartons identical to the type used by [the Chinese Producers],”

which were obtained from four Indian vendors of cardboard boxes, in four different cities across the

country. Pls.’ Brief at 38; Decision Memorandum at 62; see also Respondents’ Surrogate Value

Submission (Pub. Doc. No. 81), Exh. 17.

In the Preliminary Results, Commerce rejected the price quotes that the Chinese Producers

had obtained from Indian box vendors, and instead relied on the Indian import data provided by the

domestic producers. See Preliminary Results, 70 Fed. Reg. at 69,950; Preliminary Factors Valuation

Memorandum (Pub. Doc. No. 400), at 11-12. Thereafter, respondent Dong Yun submitted

additional information to Commerce, from Eximkey.com,38 which indicated that the Indian import

data for HTS subheading 4819.1010 covered a very wide variety of products, including so-called

38
Eximkey.com is a source of trade intelligence data.
Court No. 06-00189 Page 53

“specialty boxes” and gift boxes, as well as other types of non-packing cartons and boxes. See Dong

Yun’s Surrogate Value Data Submission (Pub. Doc. No. 249), Exh. 2; Pls.’ Brief at 44-45; Pls.’

Reply Brief at 12-13. In the Final Results, Commerce nonetheless continued to rely upon the Indian

import data provided by the domestic producers, rather than using the domestic Indian box prices

that the Chinese Producers had obtained. See Decision Memorandum at 63-65.

As outlined in section III.A above, Commerce is entitled to great latitude and substantial

discretion in selecting the information that it relies upon in reaching its determinations. Yet

Commerce “must act in a manner consistent with the underlying objective of 19 U.S.C. § 1677b(c)

– to obtain the most accurate dumping margins possible,” an “objective . . . achieved only when

Commerce’s choice of what constitutes the best available information evidences a rational and

reasonable relationship to the factor of production it represents.” Shangdong Huarong Gen. Corp.

v. United States, 25 CIT 834, 838, 159 F. Supp. 2d 714, 719 (2001); see also Guangdong Chem.

Imp. & Exp. Corp. v. United States, 30 CIT 85, 96, 414 F. Supp. 2d 1300, 1310-11 (2006)

(Commerce is accorded wide discretion in selection of data sources for use in administrative review;

role of court is to determine whether Commerce’s choice of data was reasonable) (citing Nation

Ford, 166 F.3d at 1377).

Based on the existing record, it is far from clear that the Indian import statistics used by

Commerce were the best available information in this case.

Commerce rejected the use of the domestic Indian box prices, stating that the price quotes

did not “meet the criteria of public availability that the Department has historically relied upon when

choosing appropriate surrogate values.” Decision Memorandum at 64. As the Chinese Producers
Court No. 06-00189 Page 54

note, neither the statute nor the regulations define “public availability.” See Pls.’ Brief at 41.

Commerce has typically cited concerns about “public availability” in declining to use private market

studies commissioned by interested parties. In Writing Instrument Manufacturers, for example, the

court sustained Commerce’s rejection of a private study in favor of prices taken from a trade journal,

for purposes of valuing basswood logs. Writing Instrument Mfrs. v. United States, 21 CIT 1185,

1202, 984 F. Supp. 629, 644 (1997), aff’d, 178 F.3d 1311 (Fed. Cir. 1998). The court noted that the

journal prices were preferable to the private study, because the journal prices provided accurate,

market-based information and represented “a reliable source insulated from conflicts of interest.”

Id., 21 CIT at 1202, 984 F. Supp. at 644.

The Chinese Producers maintain that neither of the concerns identified in Writing Instrument

Manufacturers is present in this case. According to the Chinese Producers, the domestic Indian box

prices “are market based prices,” and “there is no question about a conflict of interest.” See Pls.’

Brief at 41. The Chinese Producers state that (unlike a private study, for example) the price quotes

were not commissioned, but – rather – were “published [by the Indian vendors of packing boxes]

in the ordinary course of business as a response to a request for prices,” by a “disinterested third

party.” See id. at 41.39

In the Final Results, however, Commerce noted that “[n]o detail on the parties that requested

39
The Chinese Producers also argue, in essence, that – even if the price quotes were not
otherwise “publicly available” information – the domestic Indian box prices became publicly
available information when the Chinese Producers submitted them for inclusion in the administrative
record here. See Pls.’ Brief at 41. As they say in the South, however, “that dog won’t hunt.” By
such logic, virtually anything (including, for example, the privately-commissioned study at issue in
Writing Instrument Manufacturers) could be transformed into publicly available information by the
alchemy of placing the information on the record of an administrative proceeding.
Court No. 06-00189 Page 55

the prices, or whether or not an affiliation existed between the requester and the Indian companies,

was ever placed on the record.” Decision Memorandum at 64; see also Def.’s Brief at 40. Further

detailing its reservations, the agency explained:

[Commerce] must be cautious in using selective price quotes. A respondent could,
for example, receive ten quotes, and provide [Commerce] with only the two or three
it prefers. A respondent could also potentially influence the quote it receives from
a company. There are many unknowns that accompany a price quote, so
[Commerce] does not favor the use of such information if other publicly available
data are on the record.

Decision Memorandum at 64.40

To be sure, as the Chinese Producers underscore, Commerce has pointed to no actual

affirmative evidence of a distortion or evidence of an affiliation tainting the domestic Indian box

price prices at issue here. Pls.’ Brief at 40-42, 47; Pls.’ Reply Brief at 13.41 Absent any such

evidence, the Chinese Producers assert, Commerce is – in effect – improperly presuming distortion

40
The Government argues in its brief: “It is undisputed that Commerce has no information
regarding the Indian companies, the requester of the price quotations, the relationship, if any,
between [the] Indian companies and the requester of the price quotations, the means of contact
between the Indian companies and the requester, or even the market conditions with regard to carton
supplies and demand during the two day window in which the quotations were obtained.” Def.’s
Brief at 42 (citing Kaiyuan Group Corp. v. United States, 28 CIT 698, 720, 343 F. Supp. 2d 1289,
1310 (2004), aff’d, 188 Fed. Appx. 996 (Fed. Cir. 2006) (stating that, where information is within
respondent’s control, it is responsibility of respondent to provide to Commerce information that is
needed for agency’s calculations)).
41
In a similar situation, the Hebei Metals court pointed out that a plaintiff foreign
producer/exporter had indicated in its comments on a remand determination that “[t]he record
plainly shows that [the plaintiff foreign producer/exporter] does not import its coal,” although it
“[did] not cite the record to support this view.” Hebei Metals & Minerals Imp. & Exp. Corp. v.
United States, 29 CIT 288, 296 n.4, 366 F. Supp. 2d 1264, 1271 n.4 (2005) (quotation marks and
citation omitted). “On the other hand,” the court noted with approval, “[the plaintiff foreign
producer/exporter] correctly observes that ‘there is absolutely no record evidence suggesting that
Indian fence post producers use imported coal in their operations.’” Id.
Court No. 06-00189 Page 56

and affiliation. See Pls.’ Brief at 42; but see Def.’s Brief at 42 (citing Kaiyuan Group Corp. v.

United States, 28 CIT 698, 720, 343 F. Supp. 2d 1289, 1310 (2004), aff’d, 188 Fed. Appx. 996 (Fed.

Cir. 2006) (stating that it is respondent’s responsibility to provide information within its control

which is necessary for agency’s calculations)).42 And, the Chinese Producers argue, predicating an

agency determination “on nothing but unfounded speculation” is impermissible. Pls.’ Brief at 41-42.

Finally, as the Chinese Producers emphasize, Commerce’s preference for publicly available

information is simply that – a preference. See generally Pls.’ Brief at 42-43. And, as the Chinese

Producers note, all other things being equal, a mere preference can never “trump” Commerce’s

paramount obligation under the statute – to use the best available information to calculate dumping

margins as accurately as possible. See Pls.’ Brief at 42-43 (citing, inter alia, Rhone Poulenc, Inc.

v. United States, 899 F.2d 1185, 1191 (Fed. Cir. 1990); Horner v. Jeffrey, 823 F.2d 1521, 1531 (Fed.

Cir. 1987); Hebei Metals & Minerals Imp. & Exp. Corp. v. United States, 29 CIT 288, 299, 366 F.

42
The Government points to Kaiyuan as an illustration of Commerce’s “longstanding policy
concerns related to price quotations and its preference for publicly available information that is the
least subject to manipulation.” See Def.’s Brief at 42 (citing Kaiyuan, 28 CIT at 724-25, 343 F.
Supp. 2d at 1314 (sustaining agency decision to value input using Indian import statistics, rather
than price quotes); also citing Final Determination of Sales at Less Than Fair Value: Certain Cut-to-
Length Carbon Steel Plate From the People’s Republic of China, 62 Fed. Reg. 61,964, 61,981 (Nov.
20, 1997)). See also Commerce Policy Bulletin 04.1, Non Market Economy Surrogate Country
(March 1, 2004) (stating that Commerce practice is “to use investigation or review period-wide
average prices, prices specific to the input in question, prices that are net of taxes and import duties,
prices that are contemporaneous with the period of investigation or review, and publicly available
data”) (quoted in Decision Memorandum at 63); Issues and Decision Memorandum for Final Results
of the Antidumping Duty Administrative Review on Synthetic Indigo from the People’s Republic
of China, 2003 WL 24153859 (Sept. 12, 2003), at Comment 4 (discussed in Decision Memorandum
at 65).
Court No. 06-00189 Page 57

Supp. 2d 1264, 1273-74 (2005)).43 Accordingly, the Chinese Producers point out, Commerce has

used non-publicly available information in the past in situations where it constituted the best

information available to the agency. See Pls.’ Brief at 43 & n.11 (citing examples).

Against this backdrop, Commerce’s rejection of the domestic Indian box prices in favor of

the use of Indian import statistics must be considered, in the context of the agency’s overarching

obligation to use the best available information to calculate dumping margins as accurately as

possible. See Hebei Metals, 29 CIT at 295-96, 366 F. Supp. 2d at 1270-71 (explaining that “‘best

available information’ standard set forth in [the statute] does not permit Commerce to choose

between two unreasonable choices, i.e., two surrogate coal values that have an unexplained relation

to the coal used by [the respondent] . . . Commerce [is] required to obtain adequate evidence for the

43
The Chinese Producers note that Commerce expressly recognized the overriding
precedence of the goal of accuracy in this context when the agency amended its regulations in 1997,
revising the stated preference from “published information” to a preference for “publicly available
information,” to allow the agency greater flexibility to use the most accurate surrogate information
available. See Pls.’ Brief at 43. Commerce there explained:

[P]aragraph (c)(1) drops the preference for published information, limiting the
preference to publicly available information. The publicly available standard is
aimed at promoting transparency, while the deletion of the published information
standard enables the Department to achieve greater accuracy when information on
the specific factor can be derived outside of published sources. . . . [This change] is
intended to reflect the Department’s preference for input specific data over the
aggregated data that frequently appears in published statistics.

Notice of Proposed Rulemaking and Request for Public Comments, 61 Fed. Reg. 7308, 7344 (Feb.
27, 1996).

The Chinese Producers sum up: “Thus, the preference for publicly available information was
adopted to promote the Department’s obligation to ‘achieve greater accuracy’ in its selection of
surrogate values. The preference was never intended to act as a prohibition against using more
accurate surrogate data.” Pls.’ Brief at 43 (quoting 61 Fed. Reg. at 7344; citing Horner, 823 F.2d
at 1531).
Court No. 06-00189 Page 58

value it selected” ) (emphasis added).

The Chinese Producers maintain that “[n]ot only do the domestic [Indian box] prices . . .

satisfy [Commerce’s] established criteria for surrogate value selection,” but, moreover, “the Indian

Import Statistics are woefully distorted.” See Pls.’ Brief at 44. Indeed, the Chinese Producers assert

that the Indian import statistics are so fatally flawed that Commerce did not even have “two

reasonable surrogate values from which to choose” – that is, that the domestic Indian box prices

were the only reasonable source for surrogate value, and thus, by definition, the best information

available to the agency in this case. See id. at 45.

As a threshold matter, the Chinese Producers correctly observe that – all other things being

equal – there is a preference for Commerce’s use of domestic data, rather than import statistics such

as those that the agency relied on in this case. See generally Pls.’ Brief at 38-40; Hebei Metals, 29

CIT at 299-300, 366 F. Supp. 2d at 1273-74 (“A domestic price is preferred for the calculation of

surrogate values by prior practice, policy, and logic. All else being equal, tax- and duty-free

domestic data is clearly preferable over import data . . . ”); Rhodia, 25 CIT at 1287, 185 F. Supp. 2d

at 1352 (“Commerce has a stated preference for the use of the domestic price over the import price,

all else being equal”).44

44
See also, e.g., Ferrovanadium and Nitrided Vanadium from the Russian Federation: Notice
of Final Results of Antidumping Duty Administrative Review, 62 Fed. Reg. 65,656, 65,661 (Dec.
15, 1997) (Commerce has “articulated a preference for a surrogate country’s domestic prices over
import values”); Sulfanilic Acid From the People’s Republic of China; Final Results of Antidumping
Duty Administrative Review, 63 Fed. Reg. 63,834, 63,838 (Nov. 17, 1998) (“domestic prices are
preferred . . . if both domestic and import prices are available on a tax- and duty-exclusive basis, all
else being equal”); but see Shanghai Foreign Trade Enters. Co. v. United States, 28 CIT 480, 493,
318 F. Supp. 2d 1339, 1350 (2004) (“Commerce has a preference for using import statistics to value
material inputs because they are publicly available published information and do not include
domestic taxes or subsidies.”).
Court No. 06-00189 Page 59

Quite apart from the well-established general preference for domestic data (in lieu of import

statistics),45 the Chinese Producers also identify two basic problems specific to the Indian import

45
Hebei Metals succinctly summarizes some of the policy underpinnings of the preference
for the use of domestic data, rather than import statistics:

In addition to being a Commerce policy in accordance with precedent, the
conditional preference for domestic data is a logical starting point for achieving the
objective set by Congress. In a hypothetical world of [an] NME country as a market
economy country from which taxes, duties, and other governmental interference have
been excluded, it is reasonable to assume that a domestic price reflects the value of
a factor of production more accurately than an import price. This assumption may
be undermined by record evidence showing how an import price more accurately
reflects the actual costs incurred by a producer of the relevant product, but this must
be explained reasonably by Commerce.

Hebei Metals, 29 CIT at 300, 366 F. Supp. 2d at 1274-75; see also Yantai Oriental Juice Co. v.
United States, 26 CIT 605, 617 (2002) (concluding that Commerce erred in using import data –
rather than domestic prices – in determining surrogate value for coal; faulting agency for failure to
explain “how the use of seemingly more expensive imported coal data is the best available
information establishing the actual costs incurred by Indian . . . producers [of the subject
merchandise]”; holding that, where a fungible commodity is available domestically, it is
unreasonable for agency to presume that domestic importers would use more expensive imports,
absent supporting evidence and explanation).

Consonant with both the policy underpinnings of the preference for domestic data in
determining surrogate values and the fundamental realities of the commercial world, the Chinese
Producers here take strong exception to “[Commerce’s] implication that [the respondents] would
import more expensive specialty boxes,” noting that such action would not be “representative of
business realities in India.” See Pls.’ Brief at 40. Emphasizing that “the purpose of the statute is to
construct the . . . normal value [of a product] as it would have been if the NME country were a
market economy country,” the Chinese Producers pointedly observe that “Indian garlic companies
have no reason to buy more expensive imported boxes,” since basic packing cartons such as those
used to pack and ship garlic “can be supplied domestically.” Id.

The Chinese Producers underscore their point:

The same is true in China; the [Chinese Producers] source their packing boxes
domestically. Logically, if the Chinese companies were in India, they would not buy
the more expensive imported boxes and ship them by air to their factories.
Court No. 06-00189 Page 60

statistics provided by the domestic producers and used by Commerce in this case.

First, the Chinese Producers point out that it is undisputed that HTS subheading 4819.1010

(the subheading for which Commerce has Indian import statistics) covers gift, specialty, and other

non-packing boxes, in addition to the sort of plain cardboard packing cartons that the respondents

here used to ship their garlic. See Pls.’ Brief at 38, 44-47; Pls.’ Reply Brief at 11-13; see also

Decision Memorandum at 64 (admitting that “there are many different types of boxes covered by

the Indian HTS category”). The Chinese Producers argue that the Indian import statistics are thus

“less specific” than the domestic Indian box prices vis-a-vis the product being valued by the

surrogate (i.e., the boxes that the respondents actually used to ship their garlic). See Pls.’ Brief at

45-46; Pls.’ Reply Brief at 13.

And, second, the Chinese Producers note that it is similarly undisputed that the Indian import

statistics provided by the domestic producers include certain air freight charges, which – according

to the Chinese Producers – serve to further distort the average unit price reflected in those statistics.

See Pls.’ Brief at 40, 44-46; see also Def.’s Brief at 44 (conceding that “Commerce does not deny

that the import statistics may contain some prices from some companies that imported cartons into

India by air”); Decision Memorandum at 65 (same). The ultimate effect, the Chinese Producers

note, is that “[Commerce] is imputing [to] the Chinese respondents . . . the costs of specialty boxes

and air freight charges they would not incur were they in India.” Pls.’ Brief at 40.

Id. The Chinese Producers conclude that, in effect, Commerce “is imputing the Chinese respondents
with the costs of specialty boxes and air freight charges they would not incur were they in India.”
Id. According to the Chinese Producers, “[Commerce’s] decision to value cartons using more
expensive imports which were shipped by air” is thus not only “contrary to established practice”
and “Court[] precedent,” it is also contrary to “obvious business realities.” Id.
Court No. 06-00189 Page 61

Pointing to the Eximkey.com data, the Chinese Producers assert that “the great majority of

the entries under HTS 4819.1010 cover boxes used for something other than packing, and other

packing products, which bear no resemblance to the packing boxes used by [the respondents in this

case].” See Pls.’ Brief at 44. According to the Chinese Producers, the Eximkey.com data

“unquestionably show that imports classified under HTS 4819.10.10 . . . contain a myriad of

specialty products that inevitably inflate the average unit values of [the merchandise reflected in the

Indian import statistics,] thereby distorting the surrogate values for cartons” used in Commerce’s

calculations here. See Pls.’ Reply Brief at 12.

The Government seeks to discredit the Eximkey.com data, raising basically the same points

that Commerce raised in the Final Results. See Def.’s Brief at 43-44 (citing Decision Memorandum

at 64-65).46 As the Chinese Producers observe, however, there is sound authority for the proposition

that information (such as the Eximkey.com data here) which is used solely for purposes of (for lack

of better terms) “corroboration” or “impeachment” need not necessarily meet the same standards as

information relied on by Commerce to support its determinations. See Pls.’ Reply Brief at 12-13

(citing Dorbest I, 30 CIT at 1698, 462 F. Supp. 2d at 1286 (explaining that, e.g., “[r]egardless of

whether or not Commerce finds it appropriate to use Infodrive India data to value mirrors, the

46
Specifically, the Eximkey.com data were reported in several different units of measure,
which Commerce apparently could not compare directly to the Indian import statistics (which were
reported on a per-kilogram basis). In addition, although Dong Yun had indicated that Eximkey.com
data were available for only two months of the period of review (November 2003 and December
2003), Commerce was able to obtain Eximkey.com data for all months for the period January 2004
through October 2004. On the other hand, by the time Commerce sought to review the
Eximkey.com data, only the data for 2004 and 2005 were still available on the website. Commerce
was therefore unable to confirm the two months of Eximkey.com data (November and December
2003) that Dong Yun had provided. Finally, Commerce noted that Dong Yun keyed some data
incorrectly. See Decision Memorandum at 64-65; see also Def.’s Brief at 43.
Court No. 06-00189 Page 62

Infodrive India data can prove to be illuminating as to the nature of the product actually being

valued within a specific . . . [tariff] subheading”)).47

Even more to the point, as noted above, Commerce does not deny that the Indian import

statistics for HTS subheading 4819.1010 included gift boxes, specialty boxes, and other non-packing

cartons. See, e.g., Decision Memorandum at 64 (conceding that “there are many different types of

boxes covered by the Indian HTS category”). Nor could Commerce do so.

Instead, the Government’s principal argument rests on Commerce’s assertion (stated in its

Final Results) that the gift and specialty boxes of concern to the Chinese Producers actually “are

sourced from the PRC according to the import data,” and have been excluded from the calculations

because Commerce did not include imports from China, an NME country, in its surrogate value

calculations. See Decision Memorandum at 64-65; Def.’s Brief at 43-44. As the Chinese Producers

are quick to point out, however, Commerce “has supplied no details . . . demonstrating that the

removal of PRC imports from the Indian import statistics eliminates the distortions caused by the

inclusion of other specialty boxes within HTS [subheading] 4819.1010.” See Pls.’ Brief at 45-46

(emphasis added); see generally Dorbest I, 30 CIT at 1740 n.46, 462 F. Supp. 2d at 1320 n.46

(explaining that “if Commerce is going to use [Indian import statistics such as those here], it must

(and did) accept the burden to ask the follow-up questions and conduct the analysis that such a

choice will necessitate”).48

47
See also Guangdong Chem., 30 CIT at 97, 414 F. Supp. 2d at 1312 (stating that “[a]lthough
an agency is not required to comment on every submission it receives, a pertinent submission, such
as Guangdong’s corroborating evidence, should not be ignored”).
48
The Chinese Producers point out that, for example – even if gift and specialty boxes from
China are excluded from Commerce’s analysis – merchandise as diverse as “Federal Express
Court No. 06-00189 Page 63

Further, the Chinese Producers take issue with Commerce’s assertion that gift and specialty

boxes are largely sourced from mainland China. The Eximkey.com data seem to indicate to the

contrary – that is, that the majority of gift and specialty boxes are in fact imported into India from

Taiwan. See Pls.’ Brief at 46.49 The Chinese Producers thus conclude that “the record evidence

packaging (from the U.S.), coffee advertising boxes (UAE [United Arab Emirates]), and cardboard
display materials (from Japan) continue to be included within the import statistics relied upon by
[Commerce].” See Pls.’ Brief at 46.
49
Noting that the Chinese Producers did not raise the point in the administrative review
proceedings before Commerce, the Government contends that the doctrine of exhaustion of
administrative remedies bars the Chinese Producers from now arguing that the majority of gift boxes
are imported not from China, but – rather – from Taiwan. See Def.’s Brief at 44 n.5. The
Government’s exhaustion argument fails for two reasons.

First, only in the Final Results did Commerce assert that gift and specialty boxes had
effectively been purged from the Indian import statistics by virtue of the agency’s exclusion of data
on imports from China – which is the very point that the Chinese Producers seek to rebut by
focusing on the Eximkey.com data which seem to indicate that, to the contrary, the majority of such
boxes in fact are actually sourced from Taiwan. See Decision Memorandum at 65 (stating that
“[W]e remove imports from the PRC from our calculation of a carton value from the Indian import
statistics because the PRC is an NME country. Most of the gift and ‘specialty boxes’ referenced by
the [Chinese Producers] are sourced from the PRC according to the import data. Therefore most of
the gift boxes and ‘specialty boxes’ . . . are already excluded from our calculations.”). In other
words, the Chinese Producers had no reason to raise its claim concerning Taiwan until after
Commerce made its argument in the Final Results, when Commerce, in effect, “opened the door”
on the issue of the origin of gift and specialty boxes. Under such circumstances, the Chinese
Producers were not required to exhaust their remedies before the agency, because there was nothing
to exhaust.

Second, and in any event, the issue of whether to require the exhaustion of administrative
remedies in a case such as this is a matter committed to the sound discretion of the trial court. See
AgroDutch Indus. Ltd. v. United States, 508 F.3d 1024, 1029 (Fed. Cir. 2007) (citing Corus Staal
BV v. United States, 502 F.3d 1370, 1381 (Fed. Cir. 2007)).

The Government also disputes the Chinese Producers’ point on the merits, asserting that the
Eximkey.com data are “unreliable” and that “[the Chinese Producers’] claims that the Eximkey.com
data proved anything regarding the cartons in HTS § 4819.1010 [are thus] incorrect.” See Def.’s
Brief at 44 & n.5. As discussed above, however, the Government is much too quick to dismiss the
Court No. 06-00189 Page 64

indicates that the Indian import statistics continue to include gift boxes and other specialty packing

materials that are not used by respondents for shipping garlic.” Id. at 45-46.50

Compounding the situation is the undisputed fact that – besides including gift and specialty

boxes and other products that “bear no resemblance to the packing boxes used by [the respondents]”

– the Indian import statistics provided by the domestic producers also include products that were

shipped by air. See Pls.’ Brief at 40, 44, 47; Decision Memorandum at 65 (conceding that “the

Indian HTS category reflects” merchandise shipped by air, as well as other means); Def.’s Brief at

44 (admitting that “Commerce does not deny that the import statistics may contain prices from some

companies that imported cartons into India by air”). The effect of these air freight charges, the

Chinese Producers assert, is to further distort the Indian import statistics as a surrogate for the value

of the cartons actually used by the respondents in this case. See Pls.’ Brief at 40, 45-47.

It is telling that Commerce and the Government have avoided directly confronting the

Chinese Producers’ claims that air freight charges distort the Indian import statistics. The sum total

of Commerce’s analysis of this point in the Final Results constitutes a mere three sentences: “Some

value of the Eximkey.com data for use in impeaching or corroborating data relied on by Commerce.
See, e.g., Dorbest I, 30 CIT at 1698, 462 F. Supp. 2d at 1286 (explaining that, e.g., “[r]egardless of
whether or not Commerce finds it appropriate to use Infodrive India data to value mirrors, the
Infodrive India can prove to be illuminating as to the nature of the product actually being valued
within a specific . . . [tariff] subheading”).
50
Just as examples to illustrate their point that “the great majority of entries under HTS
4819.1010 cover boxes used for something other than packing, and other packaging products, which
bear no resemblance to the packing boxes used by the [respondents],” the Chinese Producers listed,
inter alia, “Color envelopes,” “10 kg boxes,” “Inner shoe boxes,” “Black potpourri box and lid,”
“DVD gift box/glue bay/polyform & logo,” “Fedex bulk pack,” “Vienna Luangchis Operation advise
coffee box,” “Cole Haan packing box with sleeves,” and “Corrugated cardboard chest.” See Pls.’
Brief at 44; see also n.48, supra (identifying diverse sampling of other products included within
Indian import statistics for HTS subheading 4819.1010).
Court No. 06-00189 Page 65

companies may import cartons into the PRC by air, while others may not . . . . This point alone,

however, does undermine the [agency’s] rationale . . . . Furthermore, the respondents have not

submitted any documents on the record of this review demonstrating that their own domestic carton

suppliers did not import the products into the PRC by air.” See Decision Memorandum at 65; see

also Def.’s Brief at 44. Rather than grappling with the merits of the Chinese Producers’ concerns

about the distortive effects of air freight charges on surrogate value, Commerce summarily dismissed

them:

Mere allegations of facts, absent any record evidence for support of such claims,
cannot be a basis for undermining the use of publicly available, contemporaneous
valuation data from Indian HTS categories in this case.

Decision Memorandum at 65.

Conspicuously absent from the record, however, is any evidence to support Commerce’s

suggestion that the Chinese Producers (or, for that matter, any other respondent) used packing

cartons that were imported – much less imported by air.51 Under the circumstances presented here,

Commerce’s bare speculation cannot be sustained. For reasons set forth above (see n.45, supra),

“the preference for domestic data is most appropriate where [ – as here – ] the circumstances indicate

that a producer in a hypothetical market would be unlikely to use an imported factor in its production

process.” Hebei Metals, 29 CIT at 300, 366 F. Supp. 2d at 1274.

In the present case, the Chinese Producers reason that “Indian garlic companies have no

reason to buy more expensive imported boxes if these can be supplied domestically,” noting that

51
In the Final Results, Commerce acknowledged that the respondents domestically source
the cartons that they use to pack and ship their garlic. See, e.g., Decision Memorandum at 65
(acknowledging the respondents’ “own domestic carton suppliers”); Pls.’ Brief at 40 (noting that the
Chinese Producers “source their packing boxes domestically”).
Court No. 06-00189 Page 66

“[t]he same is true in China; [the Chinese Producers] source their packing boxes domestically.” Pls.’

Brief at 40. Here, much as in Yantai, the record is simply devoid of any indication as to why the

respondents would have used imported packing cartons (much less cartons imported by air), when

such basic packaging materials were available domestically. See Yantai Oriental Juice Co. v. United

States, 26 CIT 605, 617 (2002) (citing Nation Ford, 166 F.3d at 1376); see also Pls.’ Brief at 40.

Commerce here has failed to reasonably approximate the carton cost incurred by a surrogate Indian

garlic producer, and thus, has not created an accurate hypothetical market.

Commerce’s carton valuation analysis in this case suffers from the same basic kinds of

infirmities as its carton valuation analysis in the eighth administrative review. See generally Jinan

Yipin, 31 CIT at ____, 526 F. Supp. 2d at 1376-79. The court there faulted Commerce for, inter

alia, failing to adequately address “trade intelligence data” provided by the respondents which

“indicate[d] that the tariff subheading [used in the import statistics on which Commerce there relied]

is quite broad in scope.” Id., 31 CIT at ____, 526 F. Supp. 2d at 1378. The court criticized

Commerce’s dismissive treatment of the trade intelligence data, and found that the data provided

support for “the court’s conclusion that Commerce’s valuation decision is unsatisfactory on [the

existing] record because it is based on import data that are not reasonably representative of [the

respondents’] packing cartons.” Id., 31 CIT at ____, 526 F. Supp. 2d at 1378. The court similarly

criticized Commerce for its rejection of Indian box prices proffered by the respondents, which the

agency found were (among other things) “not representative of a range of prices during the period

of review,” and which the Government argued were “not derived from a public source.” Id., 31 CIT

at ____, 526 F. Supp. 2d at 1379. As the court there emphasized, however, “[t]he price quotes . .
Court No. 06-00189 Page 67

. are vastly superior to the Indian import data in an important respect: they are specific to the factor

being valued.” Id., 31 CIT at ____, 526 F. Supp. 2d at 1379. The court therefore remanded the

matter to Commerce:

Because the data used by Commerce to calculate the surrogate value were not
reasonably representative of [the respondents’] cartons and yielded a calculated
result that was more than three times higher than the price quotes, the court cannot
conclude that Commerce used the “best available information” or that it supported
its choice with record evidence or adequate reasoning.

Id., 31 CIT at ____, 526 F. Supp. 2d at 1379 (quoting 19 U.S.C. § 1677b(c)(1)). The same result

must obtain in this case.

In short, as in Jinan Yipin, it appears that Commerce here overstated any potential concerns

as to the reliability of the domestic Indian box prices that the agency rejected, at the same time that

the agency significantly understated the patent flaws and defects in the Indian import statistics on

which the agency relied. As the Chinese Producers put it, Commerce “failed to explain how [the

seemingly] non-representative import data is the ‘best available information’ when domestic data

on the record represent[] the exact type of product used by the respondents and actual domestic

market prices for that input.” See Pls.’ Reply Brief at 13 (emphasis added). Nor did Commerce

support its selection of the Indian import statistics by reference to substantial evidence in the record.

Commerce’s determination on this matter therefore cannot be sustained. This issue too must be

remanded for further consideration.

F. Plastic Jar Valuation

The Chinese Producers similarly take issue with the surrogate value that Commerce assigned

for the plastic jars used to pack the respondents’ peeled garlic. See generally Pls.’ Brief at 47-49;
Court No. 06-00189 Page 68

Pls.’ Reply Brief at 11-13. As with packing cartons, the Chinese Producers argue that Commerce

erred in using the Indian import data provided by the domestic producers as the basis for the

surrogate value for plastic jars. According to the Chinese Producers, the Indian import statistics “are

. . . flawed in two different ways; [1] the products imported under [the selected HTS subheading]

are not sufficiently similar to the merchandise actually used by the . . . respondents, and [2] the

values [of imported merchandise included within the selected HTS subheading] are distorted by the

inclusion of [air] freight charges.” The Chinese Producers maintain that Commerce therefore should

have selected a surrogate value derived from the domestic Indian jar prices that they submitted for

the agency’s consideration. See generally Pls.’ Brief at 47-49; Pls.’ Reply Brief at 11, 13.

Like the domestic Indian box prices that the Chinese Producers provided, the domestic

Indian price quotes that the Chinese Producers submitted for plastic jars were not without their

flaws. However, notwithstanding the problems with those price quotes, Commerce failed to

adequately explain and support its determination that the Indian import statistics were the best

information available.

In prior administrative reviews, Commerce had valued plastic jars using a figure derived

from Indian import statistics for HTS subheading 3923.3000, which covered “Carboys, Bottles,

Flasks, and Similar Articles of Plastics, Nesoi.” See Pls.’ Brief at 47 & n.12; Def.’s Brief at 46;

Ninth Garlic Review Memorandum, 2005 WL 2290660, at comment 8. However, in the period of

review at issue here, that HTS subheading was no longer valid. See Pls.’ Brief at 47 n.12.

The domestic producers placed on the record of this review Indian import statistics for HTS

subheading 3923.3090, covering “Carboys, Bottles, Flasks, and Similar Articles of Plastics.” Def.’s
Court No. 06-00189 Page 69

Brief at 46-47. The Chinese Producers, in turn, submitted four price quotes obtained from three

different Indian vendors of plastic jars. See Decision Memorandum at 66-67; Pls.’ Brief at 48; see

also Respondents’ Surrogate Value Submission (Pub. Doc. No. 81), Exh. 21.

In the Preliminary Results, Commerce rejected the domestic Indian jar prices, and instead

relied on the Indian import data provided by the domestic producers. See Decision Memorandum

at 68; Preliminary Results, 70 Fed. Reg. at 69,950; Preliminary Factors Valuation Memorandum

(Pub. Doc. No. 400), at 14-16. Thereafter, the Chinese Producers submitted additional information

to Commerce, from Infodrive India,52 which indicated that the Indian import data for HTS

subheading 3923.3090 covered a very broad range of products, including “specialty jars” and other

“plastic products completely different from the plastic jars used by the [Chinese Producers] to pack

. . . peeled garlic,” such as “slippers,” “hairdressing accessories,” “fibre glass,” and “disposable

plasticware.” See Decision Memorandum at 66; Pls.’ Brief at 48-49; Pls.’ Reply Brief at 11-13.

In the Final Results, Commerce nevertheless continued to rely upon the Indian import data

provided by the domestic producers, rather than using the domestic Indian jar prices submitted by

the Chinese Producers. See Decision Memorandum at 66-69. Commerce’s grounds for rejecting

the domestic Indian jar prices largely paralleled its grounds for rejecting the domestic Indian box

prices (discussed in the immediately preceding section). See id.; section III.E, supra (discussing

surrogate value for cartons).

52
In the Final Results, Commerce described Infodrive India as “a service that provides,
among other things, descriptions of the items included in Indian import HTS categories.” See
Decision Memorandum at 68; see also Zhejiang, 32 CIT at ____ n.7, 2008 WL 2410210 at * 6 n.7
(describing Infodrive India as a source that “compile[s] and disseminate[s] official import
statistics”).
Court No. 06-00189 Page 70

As with the domestic Indian box prices, Commerce stated that the domestic Indian jar prices

did not “meet the criteria for public availability . . . that the Department relies upon when choosing

appropriate surrogate values in order to decrease the possibility of price manipulation of documents

prepared specifically for use in antidumping proceedings.” Decision Memorandum at 66; see also

Def.’s Brief at 47. Commerce noted pointedly that “no detail on the identity of the party that

requested the prices, or information as to whether or not an affiliation existed between the requester

and the Indian companies, was ever placed on the record.” Decision Memorandum at 67; see also

Def.’s Brief at 47.

On the other hand, the Chinese Producers correctly observe that it is equally true that

Commerce did not cite even a scintilla of evidence of manipulation or distortion or affiliation to cast

doubt on the reliability of the domestic Indian jar prices. See Pls.’ Reply Brief at 13. As with

Commerce’s rejection of the domestic Indian box prices, the Chinese Producers contend that – in

the absence of any such evidence – Commerce is, in effect, improperly presuming that the domestic

Indian jar prices were corrupted. And, as the Chinese Producers have noted, Commerce is generally

precluded from predicating agency determinations “on nothing but unfounded speculation.” See

section III.E, supra (and authorities and sources cited there).

Further, as the Chinese Producers have underscored, Commerce’s preference for publicly

available information is simply a preference, which can never “trump” the agency’s overarching

obligation under the statute – to use the best available information to calculate dumping margins as

accurately as possible. See Pls.’ Brief at 42-43 (and authorities cited there); see generally section

III.E, supra. The Chinese Producers charge that Commerce in this case is guilty of a “myopic focus
Court No. 06-00189 Page 71

on the ‘public availability’ of . . . Indian import statistics while disregarding the more basic inquiry,

namely, can the use of this surrogate source [i.e., the Indian import statistics] lead to the calculation

of an accurate dumping margin?” Pls.’ Reply Brief at 11. According to the Chinese Producers,

“[w]here, as here, those import statistics are proven to be distorted by products such as . . . specialty

jars which are not the products used by any respondent in this review, the answer is unequivocally

no.” Id.53

The Chinese Producers thus maintain not only that the domestic Indian jar prices reflect

53
In addition to its asserted reservations as to the reliability of the domestic Indian jar prices
(discussed above), Commerce also identified several other concerns vis-a-vis those price quotes.

First, Commerce noted that “two of the four price quotes actually fall outside of the [period
of review].” Decision Memorandum at 67; see also Def.’s Brief at 47. Commerce further stated that
“even the [two] contemporaneous price quotes” did not “cover a substantial time period throughout
the [period of review],” and could thus “be subject to temporary market fluctuations.” Decision
Memorandum at 67; see also Def’s Brief at 47. In addition, Commerce pointed out that “[t]wo of
the four price quotes do not indicate whether lids are included in the submitted price,” and that “[t]he
remaining two price quotes, which clearly include the price of the lid, do not separate between the
price of the lid and the price of the jar.” Decision Memorandum at 68; see also Def.’s Brief at 47.
In light of this fact, Commerce noted that it “would not have a separate price to use for either jars
or lids for those respondents for which only one of these factors is valued with a surrogate value in
[the agency’s] calculations,” which would “further impede[] [the agency’s] use of these submitted
values.” Decision Memorandum at 68; see also Def.’s Brief at 47.

No doubt these points diminish, at least, to some degree, the utility of the domestic Indian
jar prices. But the fact that domestic data provided by a respondent are not perfect does not
necessarily warrant the rejection (in whole or in part) of those data. Nor do flaws in such data
automatically justify resort to import statistics which suffer from other flaws. See also, e.g., Hebei
Metals, 29 CIT at 301, 366 F. Supp. 2d at 1275 (explaining that, “[w]hile the contemporaneity of
data is one factor to be considered by Commerce . . . , three months of contemporaneity is not a
compelling factor where the alternative data is only a year-and-a-half distant from the [period of
investigation]”; moreover, contemporaneity is “insufficient to explain why an import price is the
best available information for establishing the actual costs incurred by a producer”); Dorbest I, 30
CIT at 1695 n.14, 462 F. Supp. 2d at 1284 n.14 (“contemporaneity, in and of itself[,] should not be
viewed as the sole reason to discard data; rather the quality of the data needs to be viewed in its
totality”).
Court No. 06-00189 Page 72

“domestic, product specific surrogate data,” including “actual domestic market prices,” for “plastic

jars with similar characteristics and dimensions to the plastic jars” that the Chinese Producers

actually use to pack their peeled garlic, but – moreover – that the Indian import statistics relied on

by Commerce are so distorted both by “a myriad of specialty products” that “are not remotely

representative of the plastic jars used by the [Chinese Producers]” and by air freight charges that the

surrogate value derived from the import statistics can only be described as “aberrational.” See Pls.’

Brief at 47-49; Pls.’ Reply Brief at 12-13.

As an initial matter, the Chinese Producers point out that, as detailed in section III.E above,

there is a preference – all other things being equal – for Commerce’s use of domestic data, rather

than import statistics such as those relied on by the agency in this case. See Pls.’ Brief at 49; Pls.’

Reply Brief at 13; see generally section III.E, supra (and authorities cited there).54

Besides pointing to the well-established, general preference for the use of domestic data

(rather than import statistics), the Chinese Producers also attack the use of import statistics here on

fundamentally the same two case-specific grounds that they invoked in challenging the use of import

statistics for the surrogate value for cartons.

First, the Chinese Producers note, it is “irrefutable” that HTS subheading 3293.3090 (the

subheading for which Commerce has Indian import statistics) is a “broad, basket” tariff provision

which captures an extraordinarily wide range of plastic products, above and beyond the very basic

54
Section III.E above outlines some of the compelling policy considerations and commercial
realities that undergird the strong preference favoring Commerce’s use of domestic data over import
statistics, all other things being equal. See generally, e.g., Hebei Metals, 29 CIT at 299, 366 F.
Supp. 2d at 1273 et seq. (“A domestic price is preferred for the calculation of surrogate values by
prior practice, policy, and logic.”).
Court No. 06-00189 Page 73

plastic jars that the respondents used to pack garlic. See Pls.’ Brief at 48; see also id. at 47, 49; Pls.’

Reply Brief at 11-13. The Chinese Producers argue that the merchandise reflected in the Indian

import statistics is thus not representative of, or sufficiently specific to, the product being valued by

the surrogate (i.e., the plastic jars that the respondents actually used). See Pls.’ Reply Brief at 13.

And, second, the Chinese Producers note that it is also undisputed that the Indian import

statistics include certain air freight charges, which – according to the Chinese Producers – further

distort the average unit price reflected in the Indian import statistics. See Pls.’ Brief at 47-49; see

also Def.’s Brief at 48 (acknowledging that “HTS § 3923.3090 includes some prices that are

inclusive of airfreight,” and that “the Indian import statistics . . . include the freight experience of

those importers that used or did not use air freight”); Decision Memorandum at 68-69 (same). The

Chinese Producers therefore conclude that “it is particularly appropriate to use domestic surrogate

data . . . in this case, given that the import data is distorted by air freight charges, and other products,

such as ‘slippers,’ ‘hairdressing accessories,’ ‘fibre glass,’ and ‘disposeable plasticware.’” Pls.’

Brief at 49.

In addition to the language of the tariff provision itself, the Chinese Producers also point to

the Infodrive India data to establish on the record that HTS subheading 3923.3090 “is distorted by

plastic products that do not resemble at all the plastic jars used by the [Chinese Producers].” See

Pls.’ Brief at 48. To highlight their point, the Chinese Producers note that, inter alia, the Infodrive

India data indicate that “the highest quantity of imports . . . driv[ing] the price of [merchandise

classified under HTS subheading 3923.3090] is imported from Italy by L’Oreal India Pvt. and is

described as ‘hair products.’” Id. According to the Chinese Producers, the effect of the “myriad
Court No. 06-00189 Page 74

specialty products” classified under HTS subheading 3923.3090 is to “inevitably inflate the average

unit values [of the merchandise reflected in the Indian import statistics] thereby distorting the

surrogate value[] for . . . jars.” See Pls.’ Reply Brief at 12.

Much as they sought to discredit the Eximkey.com data in their analysis of cartons, so too

Commerce and the Government have sought to dismiss the Infodrive India data here. See generally

Decision Memorandum at 68; Def.’s Brief at 48. First, Commerce noted that, while the Indian

import statistics report data on a kilogram basis, the Infodrive India data were not “consistently

reported on a weight basis.” Decision Memorandum at 68. According to Commerce, “[w]ithout the

conversion factor to convert the reported [Infodrive India] unit types to a kilogram basis,” the

agency could not confirm “[the] respondents’ contention that [the merchandise classified under HTS

subheading 3923.3090] is dominated by hair products.” Id.55 In addition, Commerce expressed

concern that it “[could not] determine the method by which respondents selected only twelve

[entries]” out of the “650 records available for the HTS category” for the “ten months of the [period

of review]” for which data were available through Infodrive India. Id.

55
It is unclear why Commerce seized solely on the respondents’ statements concerning the
dominance of “hair products” in the statistics for HTS subheading 3923.3090, to the exclusion of
any broader implications of the Infodrive India data, and ignored any light that those data might
otherwise shed on the scope of the tariff subheading.

Moreover, while – absent the referenced “conversion factor” – it may (or may not) have been
impossible for Commerce to verify that “hair products” dominate the HTS subheading, the Infodrive
India data in any event were not “meaningless.” Compare Decision Memorandum at 68. Whether
or not Commerce could verify the respondents’ specific quantitative statements, the Infodrive India
data nevertheless stand as unrefuted, concrete evidence of non-representative merchandise captured
by the Indian import statistics on which Commerce seeks to rely. See generally Dorbest I, 30 CIT
at 1695-98, 462 F. Supp. 2d at 1284-86 (rejecting various similar arguments made by Commerce
in attempt to justify refusal to use Infodrive India data).
Court No. 06-00189 Page 75

As discussed in section III.E above, however, information that is used for purposes such as

corroboration or impeachment – such as the Infodrive India data here – need not necessarily meet

the same standards as information that Commerce relies on to support its determinations. See Pls.’

Reply Brief at 12-13 (citing Dorbest I, 30 CIT at 1698, 462 F. Supp. 2d at 1286 (explaining that,

e.g., “[r]egardless of whether or not Commerce finds it appropriate to use Infodrive India data to

value mirrors, the Infodrive India data can prove to be illuminating as to the nature of the product

actually being valued within a specific . . . [tariff] subheading”)).

And, more fundamentally – whatever may be the shortcomings of the Infodrive India data

– the fact remains that neither Commerce nor the Government have even attempted to deny that the

Indian import statistics for HTS subheading 3923.3090 included a very broad spectrum of other

products, in addition to basic plastic jars. Nor could they reasonably deny it. Instead, distilled to

its essence, their argument on this point amounts to little more than a claim that Commerce cannot

accurately ascertain from the existing record the full extent of the distortion attributable to the broad

scope of the tariff subheading. See Decision Memorandum at 68 (stating that “[w]ithout the

conversion factor to convert the reported unit types to a kilogram basis, respondents’ contention that

the HTS category is dominated by hair products is meaningless because the quantities noted for hair

products are in pieces”); see also Def.’s Brief at 48.56

56
As detailed in section III.E above, the parties similarly dispute the surrogate value for
cartons, where a major issue is the Chinese Producers’ concern that the relevant tariff subheading
used in the Indian import statistics captured, inter alia, gift boxes and specialty boxes that are not
representative of the basic packing cartons that the respondents used to pack and ship garlic. See
generally section III.E, supra.

There, Commerce evidently made some effort to cure (or at least minimize) the problem of
non-representative merchandise captured in the import statistics on which the agency seeks to rely.
Court No. 06-00189 Page 76

Similarly, Commerce and the Government concede – as they must – that the Indian import

statistics reflect entries of merchandise that included air freight charges. See Def.’s Brief at 48

(acknowledging that “HTS § 3923.3090 includes some prices that are inclusive of airfreight,” and

that “the Indian import statistics . . . include the freight experience of those importers that used or

did not use air travel”); Decision Memorandum at 68-69 (same). Much like the Indian import

statistics used for the surrogate value of cartons, the Chinese Producers assert that the effect of such

air freight charges is to further distort the Indian import statistics as a surrogate for the value of the

jars actually used by the respondents in this case. See Pls.’ Brief at 47-49.

Just as Commerce and the Government do not directly confront the Chinese Producers’

assertions that the air freight charges have the effect of distorting the Indian import statistics used

to value cartons, so too Commerce and the Government do not directly address the Chinese

Producers’ claim here. Like its analysis of cartons, Commerce’s analysis of this point vis-a-vis jars

is a terse three sentences in the Final Results: “Some companies import jars and lids into the PRC

by air, others do not, and the Indian HTS category reflects all of these experiences. This point alone,

however, does not supersede the fact that [the Indian import statistics are] the most contemporaneous

and accurate surrogate on the record. Furthermore, the respondents have not submitted any

documents on the record of this review demonstrating that their own domestic plastic jar and lid

suppliers did not import the products into the PRC by air.” Decision Memorandum at 68-69; see

also Def.’s Brief at 48-49. Again, as with packing cartons, rather than squarely responding to the

See Decision Memorandum at 64-65 (where Commerce asserts that gift and specialty boxes are
sourced primarily from China, and that agency excluded Chinese imports from the import statistics
that it used). In stark contrast, Commerce has made no such effort here.
Court No. 06-00189 Page 77

merits of the Chinese Producers’ concerns about the distortive effects of air freight charges on the

surrogate value of plastic jars, Commerce simply dismissed those concerns (using the exact same

words it used to dismiss the Chinese Producers’ concerns about cartons):

Mere allegations of facts, absent any record evidence for support of such claims,
cannot be a basis for undermining the use of publicly available, contemporaneous
valuation data from HTS categories in this case.

Decision Memorandum at 69.

Here too, however – as with cartons – the record seems to be devoid of any actual evidence

to support Commerce’s suggestion that the Chinese Producers (or any respondent) used plastic jars

that were imported, much less imported by air.57 And, as with cartons, Commerce’s bare speculation

cannot be sustained.

The Chinese Producers emphasize that Indian garlic producers have no reason to buy more

expensive imported jars, noting that “if the [respondents] were in [India] they would purchase the

plastic jars domestically” (just as the respondents domestically sourced the actual jars that they used

for their garlic produced in China). Pls.’ Brief at 49. As in Yantai, the record in this case is simply

silent as to any reason why the respondents would have used imported plastic jars (much less jars

imported by air), when such a basic product was available domestically. See Yantai, 26 CIT at 617

(citation omitted). As explained in greater detail in section III.E above, “the preference for domestic

data is most appropriate where [– as here –] the circumstances indicate that a producer in a

hypothetical market would be unlikely to use an imported factor in its production process.” Hebei

57
In the Final Results, Commerce acknowledged that the respondents domestically sourced
the plastic jars that they used to pack their peeled garlic. See, e.g., Decision Memorandum at 69
(referring to the respondents’ “own domestic plastic jar and lid suppliers”).
Court No. 06-00189 Page 78

Metals, 29 CIT at 300, 366 F. Supp. 2d at 1274.

In sum, just as it appears that Commerce overstated its concerns as to the reliability of the

domestic box prices at the same time that it significantly understated the obvious infirmities in the

Indian import statistics on which it relied in determining a surrogate value for packing cartons, so

too it appears that Commerce has done the same thing vis-a-vis the agency’s valuation of plastic jars.

In the words of the Chinese Producers, Commerce “failed to explain how [the seemingly] non-

representative import data is the ‘best available information’ when domestic data on the record

represent[] the exact type of product used by the respondents and actual domestic market prices for

that input.” See Pls.’ Reply Brief at 13. Nor did Commerce support its selection of the Indian

import statistics by reference to substantial evidence in the record.

Like Commerce’s determination on the surrogate value for cartons, Commerce’s

determination on this matter cannot be sustained. And, like Commerce’s determination on the

surrogate value for cartons, this issue also must be remanded for further consideration.

G. Certain Labor-Related Expenses

The Chinese Producers’ final challenge is to Commerce’s treatment of certain labor-related

expenses. Specifically, the Chinese Producers contend that Commerce improperly included

“provident fund” and “gratuity” expenses as part of manufacturing overhead in the agency’s

calculation of normal value. See generally Pls.’ Brief at 49-56; Pls.’ Reply Brief at 13-15.

The Chinese Producers’ challenge turns on whether provident fund and gratuity expenses

were already reflected in Commerce’s calculations (through the surrogate labor rate), such that those

expenses should not have been separately accounted for elsewhere (specifically, in manufacturing
Court No. 06-00189 Page 79

overhead). As discussed below, there is nothing in the record to indicate that provident fund

expenses in fact were already reflected in Commerce’s calculations. Moreover, the record makes

it clear that any potential double counting associated with Commerce’s treatment of gratuities had

no effect whatsoever on the overall calculation of overhead expenses. The Chinese Producers’

challenge to Commerce’s treatment of provident fund and gratuity expenses therefore must fail.

When constructing normal value for NME country merchandise, Commerce bases its

determination on “the value of the factors of production utilized in producing the merchandise.” 19

U.S.C. § 1677b(c)(1). However, the surrogate values of the factors of production do not capture

certain costs and expenses, including manufacturing overhead (which is at issue here), as well as

selling, general, and administrative (“SG&A”) expenses, and profit costs. Commerce therefore

calculates separate values for those items (using “surrogate financial ratios” based on the financial

statements of one or more market economy companies that produce identical or comparable

merchandise),58 and adds those values to the surrogate values of the factors of production. See 19

C.F.R. § 351.408(c)(4); 19 U.S.C. § 1677b(c)(1)(B); see generally Dorbest I, 30 CIT at 1715-16,

462 F. Supp. 2d at 1300-01.59

As discussed in section III.C above, Commerce here based its surrogate labor rate

58
The “surrogate financial ratio” reflects a percentage of overhead, SG&A, and profit
expenses (which constitute the numerator) relative to the surrogate company’s sum of materials,
labor, and engery costs (“MLE”) (which constitutes the denominator). See Dorbest I, 30 CIT at
1715 n.36, 462 F. Supp. 2d at 1301 n.36.
59
The statute specifies that, if the available information does not permit calculation of normal
value pursuant to 19 U.S.C. § 1677b(a), Commerce “shall determine the normal value of the subject
merchandise on the basis of the value of the factors of production utilized in producing the
merchandise and to which shall be added an amount for general expenses and profit plus the cost
of . . . other expenses.” 19 U.S.C. § 1677b(c)(1)(B) (emphasis added).
Court No. 06-00189 Page 80

calculations on data from the International Labour Organization (“ILO”) Yearbook of Labour

Statistics. See also, e.g., Allied Pacific II, 32 CIT at ____, 587 F. Supp. 2d at 1339; Dorbest I, 30

CIT at 1707, 462 F. Supp. 2d at 1294. In the past (and in the Preliminary Results in this case),

Commerce presumed that many employee benefits were included within the surrogate values for

direct wage rates (through the ILO’s reported direct wage rates), and thus were included as part of

Materials, Labor, and Energy (“MLE”) in the denominator of the surrogate financial ratio. See

Decision Memorandum at 69-70; Preliminary Results, 70 Fed. Reg. at 69,950-51. But Commerce

analyzed that issue more closely in its January 2006 determination in Tables and Chairs from the

PRC, and announced a change from its past practice. See Folding Metal Tables and Chairs from the

People’s Republic of China; Final Results of Antidumping Duty Administrative Review, 71 Fed.

Reg. 2905 (Jan. 18, 2006); Issues and Decision Memorandum for the Final Results of Folding Metal

Tables and Chairs from the People’s Republic of China, 2006 WL 158633 (Jan. 18, 2006) (“Tables

and Chairs from the PRC”), at comment 1B.

In Tables and Chairs from the PRC, Commerce explained that the ILO’s Yearbook of Labour

Statistics distinguishes between “Chapter 5 Wages” (essentially, direct wages) and “Chapter 6 Labor

Costs” (essentially, employee benefits). Consistent with the ILO’s treatment of employee benefits,

Commerce indicated that it would begin looking to surrogate financial statements, and – where line

items in the financial statements identified labor costs that were not included in direct wage

payments – those labor costs would be included in overhead expenses. Commerce also indicated

generally that it would otherwise treat an employee benefit as an overhead expense if the benefit fell

under the ILO’s definition of a “Chapter 6 Labour Cost.” See generally Tables and Chairs from the
Court No. 06-00189 Page 81

PRC, 2006 WL 158633, at comment 1B.

In March 2006, Commerce sent the parties to this administrative review a letter (the

“Surrogate Financial Ratios Letter”), giving notice of the agency’s intent to treat certain labor-

related expenses as announced in Tables and Chairs from the PRC, and inviting the parties’

comments. In particular, to the extent relevant here, Commerce advised that it planned to include

“provident fund” and “gratuity” expenses in manufacturing overhead (i.e., in the numerator of the

surrogate financial ratio), based on Commerce’s conclusion that those expenses were not already

reflected in the rate used to calculate the surrogate value for labor. See generally Decision

Memorandum at 69; Surrogate Financial Ratios Letter (Pub. Doc. No. 440).

The Chinese Producers filed comments objecting to the proposed change in methodology,

arguing – in essence – that Commerce was in error in concluding that “the expected NME hourly

wage rate calculation does not include benefits.” See Respondents’ Comments on Proposed Ratio

Recalculations (Pub. Doc. No. 446); Decision Memorandum at 69-70. Specifically, the Chinese

Producers noted that “wage rates” and “earnings” are two distinct terms defined differently in the

Preamble to Chapter 5 of the ILO Yearbook of Labour Statistics, which provides the source data

used by Commerce in its surrogate labor rate calculation. See Respondents’ Comments on Proposed

Ratio Recalculations.

The Chinese Producers’ comments quoted the Preamble to Chapter 5 of the Yearbook,

emphasizing that it defines “[e]arnings” to include “bonuses and gratuities” (albeit only if they are

“paid by the employer directly to [the] employee”):

10. (i) Earnings should include: direct wages and salaries [as defined in
subparagraph (a)], remuneration for time not worked (excluding
Court No. 06-00189 Page 82

severance and termination pay) [as defined in subparagraph (b)],
[and] bonuses and gratuities and housing and family allowances paid
by the employer directly to this employee [as defined in subparagraph
(c)].

(a) Direct wages and salaries for time worked, or work done, cover:
(i) straight time pay of time-related workers; (ii) incentive pay of
time-related workers; (iii) earnings of piece workers (excluding
overtime premiums); (iv) premium pay for overtime, shift, night and
holiday work; (v) commissions paid to sales and other personnel.
Included are: premiums for seniority and special skills, geographical
zone differentials, responsibility premiums, dirt, danger and
discomfort allowances, payments under guaranteed wage systems,
cost-of-living allowances and other regular allowances.

(b) Remuneration for time not worked comprises direct payments to
employees in respect of public holidays, annual vacations and other
time off with pay granted by the employer.

(c) Bonuses and gratuities cover seasonal and end-of-year bonuses,
additional payments in respect of vacation period (supplementary to
normal pay) and profit-sharing bonuses.

(ii) Statistics of earnings should distinguish cash earnings from
payments in kind.

Respondents’ Comments on Proposed Ratio Recalculations (quoting ILO Yearbook, Preamble to

Chapter 5) (emphases by the Chinese Producers).

The Chinese Producers’ comments contrasted the definition of “earnings” in the Preamble

to Chapter 5 (quoted above) with the Preamble’s definition of “wage rates” (which expressly

excludes “bonuses and gratuities,” as well as “family allowances and other social security payments

made by employers”):

12. Wage rates should include basic wages, cost-of-living allowances and
other guaranteed and regularly paid allowances, but exclude overtime
payments, bonuses and gratuities, family allowances and other social
security payments made by employers. Ex gratia payments in kind,
Court No. 06-00189 Page 83

supplementary to normal wage rates, are also excluded.

Respondents’ Comments on Proposed Ratio Recalculations (quoting ILO Yearbook, Preamble to

Chapter 5).

The Chinese Producers’ comments emphasized that, according to the Preamble, “‘[t]he

statistics of wages presented in tables 5A and 5B are in general, average earnings per worker.’” See

Respondents’ Comments on Proposed Ratio Recalculations (quoting ILO Yearbook, Preamble to

Chapter 5) (emphasis by the ILO). Read in concert, the Chinese Producers argued, the quoted

excerpts from the Preamble to Chapter 5 of the ILO Yearbook establish that the surrogate labor rate

– calculated by Commerce using the Chapter 5B tables (which reflect “earnings”) – “specifically

includes gratuities and staff welfare benefits for both family and housing allowances.” See

Respondents’ Comments on Proposed Ratio Recalculations. The Chinese Producers asserted that

those labor expenses were “therefore . . . included in the Materials, Labor, Energy (“MLE”)

denominator for the surrogate ratios,” and argued that “adding [the expenses] to factory overhead

would result in an impermissible double counting . . . , since [the expenses] are already included in

the surrogate labor rate.” Id.

Commerce compared the ILO Yearbook statistics with the respondents’ reported factors of

production and the surrogate financial statements, and, in the Final Results, rejected the Chinese

Producers’ arguments as to provident fund and gratuity expenses, concluding that those expenses

should be treated as overhead. See Decision Memorandum at 71-73. In reaching its conclusion,

Commerce relied on Chapter 5 of the ILO Yearbook, which the agency uses to calculate its wage

rate. See Decision Memorandum at 71-72. Commerce noted that Chapter 5, “Wages,” expressly
Court No. 06-00189 Page 84

defines “earnings” (as that term is used in wage statistics) to specifically exclude benefits such as

“social security and pension scheme[]” payments and benefits:

The concept of earnings, as applied in wages statistics, relates to remuneration in
cash and in kind paid to employees, as a rule at regular intervals, for time worked or
work done together with remuneration for time not worked, such as for annual
vacation, other paid leave or holidays. Earnings exclude employers’ contributions
in respect of their employees paid to social security and pension schemes and also
the benefits received by employees under these schemes. Earnings also exclude
severance and termination pay.

Decision Memorandum at 71 (quoting ILO Yearbook, Chapter 5) (emphasis added).

Commerce contrasted the definition of “earnings” quoted above – from Chapter 5 (“Wages”)

of the Yearbook – with the definition of “labour cost” from Yearbook Chapter 6 (“Labour Costs”),

which makes it clear that “labour cost[s]” include employee benefits such as “employers’ social

security expenditures”:

For the purposes of labour cost statistics, labour cost is the cost incurred by the
employer in the employment of labour. The statistical concept of labour cost
comprises remuneration for work performed, payments in respect of time paid for but
not worked, bonuses and gratuities, the cost of food, drink and other payments in
kind, cost of workers’ housing borne by employers, employers’ social security
expenditures, cost to the employer for vocational training, welfare services and
miscellaneous items, such as transport of workers, work clothes and recruitment,
together with taxes regarded as labour cost.

Decision Memorandum at 71-72 (quoting ILO Yearbook, Chapter 6) (emphases added).

In the Final Results, Commerce found that provident fund expenses were not included in its

wage rate calculation and thus needed to be captured in the agency’s calculation of overhead

expenses, in order to accurately determine normal value. See Decision Memorandum at 72.

Commerce explained:

It is clear that the wages category (Chapter 5) is exclusive of employee benefits such
Court No. 06-00189 Page 85

as pension and social security, while the labor cost category (Chapter 6) is inclusive
of these employee expenses . . . . [Commerce] based its calculation of the regression-
based expected PRC wage rate on data from Chapter 5B of the [Yearbook of Labour
Statistics]. In the instant review, the detailed and well-defined surrogate financial
data permitted [Commerce] to easily segregate labor expenses into “Wages” (which
corresponds to Chapter 5B of the ILO database and, therefore, to [Commerce’s]
expected NME wage rate), and the other aforementioned labor costs (which are not
included in [Commerce’s] calculated NME wage rate). Accordingly, to be consistent
with the methodology employed in calculating the expected PRC wage rate, we have
determined that it is appropriate in the instant review to include these employee
benefit categories in factory overhead in order to ensure that they are captured in our
calculation of normal value.

Decision Memorandum at 72 (emphasis added).60

On the other hand, Commerce acknowledged that, as to two of the five financial statements

used in its calculations, treating gratuities as an overhead expense might result in “double counting.”

See Decision Memorandum at 72-73. But Commerce found that removing gratuities from overhead

expenses for those two financial statements (to preclude any potential for double counting) resulted

in merely “a one hundredth of a percent change in the overhead ratios” for those statements, and that

– when the overhead ratios for those two statements were averaged with the overhead ratios from

the remaining three financial statements – it made no difference whatsoever “in the overall

calculation of the overhead ratio.” Decision Memorandum at 72-73. Commerce therefore

60
On these grounds, Commerce explained its decision to include both “staff welfare”
expenses and “provident fund” expenses in manufacturing overhead. See Decision Memorandum
at 72. However, the Chinese Producers have not sought to contest Commerce’s treatment of staff
welfare expenses in this action. The Chinese Producers’ challenge here is confined to Commerce’s
treatment of provident fund and gratuity expenses. See, e.g., Pls.’ Brief at 53 (challenging
Commerce’s treatment of “provident fund and gratuities expenses”), 54 (asserting that agency
“decision to remove provident fund and gratuities cannot be upheld”), 55 (arguing that agency
“inclusion of the provident fund and gratuity expenses as part of overhead constitutes impermissible
double-counting”), 56 (challenging agency “inclusion of both provident fund and gratuities as part
of overhead”).
Court No. 06-00189 Page 86

concluded that the effect was insignificant under the statute. See Decision Memorandum at 72-73

(citing 19 U.S.C. § 1677f-1(a)(2)).61

The Chinese Producers here reprise their objection to the treatment of provident fund

expenses, first advanced in the administrative proceeding. As set forth more fully above, the

Chinese Producers’ argument – in a nutshell – is that the definition of “earnings” includes “bonuses

and gratuities and housing and family allowances,” and (implicitly) that provident fund expenses

are some form of “bonuses and gratuities and housing and family allowances.” See Pls.’ Reply Brief

at 14; see also Pls.’ Brief at 53-54.62 The Chinese Producers conclude that, because the surrogate

labor rate already includes “earnings,” the effect of including provident fund expenses in overhead

is impermissible “double counting.” See Pls.’ Brief at 53-55; Pls.’ Reply Brief at 13-14.

Significantly, however, the Chinese Producers have adduced no evidence whatsoever to

support their premise that provident fund expenses are akin to “bonuses and gratuities and housing

and family allowances” – much less to establish that provident fund expenses are “paid by the

employer directly to [the] employee” (language that the Chinese Producers’ Reply Brief

conveniently omitted in quoting the definition of “earnings”). See Pls.’ Reply Brief at 14 (emphasis

61
The statute provides that, for purposes of determining export price or normal value, and in
conducting reviews, Commerce may “decline to take into account adjustments which are
insignificant in relation to the price or value of the merchandise.” 19 U.S.C. § 1677f-1(a)(2).
62
The Chinese Producers are quite vague on the asserted relationship between provident fund
expenses and “bonuses and gratuities and housing and family allowances.” At one point in their
brief, the Chinese Producers assert that “‘provident fund’ expenses . . . are costs similar to
gratuities.” See Pls.’ Brief at 56. Elsewhere, they assert that “gratuities and staff welfare benefits”
are “labor expenses (generally itemized as gratuities and provident funds in the Indian financial
statements).” See Pls.’ Brief at 52. (It is clear, however, that “staff welfare” expenses are distinct
from “gratuities” and “provident fund” expenses. And it is equally clear that staff welfare expenses
are not at issue in this action. See n.60, supra.)
Court No. 06-00189 Page 87

omitted).63 Indeed, quite to the contrary, the Final Results explain that provident fund expenses are

analogous to “employee benefits such as pension and social security,” which are expressly excluded

from the ILO Yearbook definition of “earnings” quoted in the Final Results.64 See Decision

Memorandum at 72; see also Def.’s Brief at 51 (analogizing provident fund expenses to “retirement”

and “401K plans, etc.”); Tables and Chairs from the PRC, 2006 WL 158633, at comment 1B

(explaining that “employees’ provident and other funds,” inter alia, are “employee benefits paid by

the employer to employee retirement or welfare funds”).65

63
As noted above, the Chinese Producers rely upon the definition of “earnings” set forth in
the Preamble to Chapter 5 of the ILO Yearbook, which indicates that “Earnings should include . .
. bonuses and gratuities and housing and family allowances paid by the employer directly to [the]
employee.” See ILO Yearbook, Preamble to Chapter 5. Subparagraph (c) of that definition further
explains: “Bonuses and gratuities cover seasonal and end-of-year bonuses, additional payments in
respect of vacation period (supplementary to normal pay) and profit-sharing bonuses.” Id. Nothing
in the language of these provisions suggests that provident fund expenses are included within the
concept of “earnings.”

At one point in their brief, the Chinese Producers assert that “‘provident fund’ expenses . .
. are costs similar to gratuities.” See Pls.’ Brief at 56. But that claim finds no support in the
evidentiary record.
64
As noted above, Commerce explained in the Final Results that ILO Yearbook Chapter 5,
entitled “Wages,” expressly defines “earnings” (as that term is used in wage statistics) to specifically
exclude benefits such as “social security and pension scheme[]” payments and benefits:

The concept of earnings, as applied in wages statistics, . . . exclude[s] employers’
contributions in respect of their employees paid to social security and pension
schemes and also the benefits received by employees under these schemes.

Decision Memorandum at 71 (quoting ILO Yearbook, Chapter 5).
65
The definition of “earnings” that the Chinese Producers quote (taken from the Preamble
to Chapter 5 of the ILO Yearbook) is not to the contrary. There is absolutely nothing to suggest that
“earnings” – even as defined there – include “employee benefits such as pension and social security”
(or “retirement and 401K plans,” or “employee benefits paid by the employer to employee
retirement or welfare funds”). In other words, there is simply no language in the definition of
Court No. 06-00189 Page 88

In short, contrary to the Chinese Producers’ implications, the record here is devoid of

evidence to suggest that provident fund expenses are like “bonuses and gratuities and housing and

family allowances,” or that provident fund expenses are payments paid by the employer directly to

the employee. Nor is there record evidence to indicate that provident fund expenses are otherwise

included within “earnings.” The Chinese Producers’ claim that Commerce’s labor rate calculations

already reflect provident fund expenses is thus entirely lacking in substance.

The Chinese Producers’ allegations concerning the “double counting” of gratuity expenses

are equally lacking in merit. As detailed more fully above, Commerce’s Final Results expressly

recognized the possibility of double counting vis-a-vis certain gratuity expenses in this case. See

Decision Memorandum at 72. However, Commerce determined that – even as to the two financial

statements where there was a potential for double counting – the exclusion of gratuities from

overhead resulted at most “in a one hundredth of a percent change in the overhead ratios” for those

financial statements, and made no difference whatsoever “in the overall calculation of the overhead

ratio.” See Decision Memorandum at 72-73. The Chinese Producers do not contend otherwise, and

therefore cannot be heard to complain. See generally Pls.’ Brief at 53-54; Pls.’ Reply Brief at 13-15.

The Chinese Producers also attack the Final Results as “internally inconsistent.” See

generally Pls.’ Brief at 56. Noting that Commerce acknowledged the potential for double counting

vis-a-vis gratuities, the Chinese Producers state that Commerce “inexplicably” included provident

fund expenses as part of overhead, even though – according to the Chinese Producers – “‘provident

“earnings” quoted by the Chinese Producers that would suggest that provident fund expenses are
included in “earnings” (and, thus, already reflected in the surrogate labor rate).
Court No. 06-00189 Page 89

fund’ expenses . . . are costs similar to gratuities.” Id. The Chinese Producers insist that “[t]hese

two positions cannot be reconciled. [Commerce’s] inclusion of both provident fund and gratuities

as part of overhead results in impermissible double-counting for exactly the same reason, namely

because these two labor related expenses are already captured by the surrogate labor rate.” Id. The

folly of the Chinese Producers’ premise is exposed above: Contrary to the Chinese Producers’

claims, provident fund expenses are not “similar to gratuities.”

Finally, citing Luoyang Bearing, the Chinese Producers argue that Commerce’s treatment

of provident fund and gratuity expenses in this case “runs contrary to agency and Court precedent.”

See Pls.’ Brief at 53, 55-56 (citing Luoyang Bearing Corp. v. United States, 28 CIT 733, 753, 347

F. Supp. 2d 1326, 1346 (2004)); but see Def.’s Brief at 53. However, the Chinese Producers’

reliance on Luoyang Bearing is misplaced. Among other things, that case was decided before

Commerce’s change in methodology, first announced in Tables and Chairs from the PRC and

implemented in this case. And it is beyond cavil that Commerce is entitled to change its

methodology, provided that any such change is fully explained and adequately justified (as it was

in this case). See, e.g., NSK Ltd. v. United States, 510 F.3d 1375, 1381 (Fed. Cir. 2007).

In sum, the Chinese Producers have pointed to nothing that substantiates their claim that

provident fund expenses were already reflected in Commerce’s calculations (through the surrogate

labor rate), such that those expenses should not have been separately accounted for in manufacturing

overhead. Further, it is clear from the record that any potential double counting associated with

Commerce’s treatment of gratuities had no effect whatsoever on the overall calculation of overhead

expenses. The Chinese Producers’ challenge to Commerce’s treatment of provident fund and
Court No. 06-00189 Page 90

gratuity expenses is thus lacking in merit, and Commerce’s determination on the issue must be

sustained.

IV. Conclusion

For all the reasons set forth above, the Chinese Producers’ Motion for Judgment on the

Agency Record must be denied as to Commerce’s use of an intermediate input methodology in

valuing fresh garlic bulb. The Chinese Producers’ Motion for Judgment on the Agency Record

similarly must be denied as to the Chinese Producers’ claim that Commerce improperly included

provident fund and gratuity expenses as part of manufacturing overhead.

On the other hand, the Chinese Producers’ Motion for Judgment on the Agency Record is

granted as to the Chinese Producers’ challenge to Commerce’s use of the Agmarknet data for

“China” variety garlic to value fresh garlic bulb, as well as the Chinese Producers’ challenges to

Commerce’s wage rate calculation, Commerce’s valuation of ocean freight, Commerce’s valuation

of packing cartons, and Commerce’s valuation of plastic jars; and this matter is remanded to the

Department of Commerce for further action not inconsistent with this opinion.

A separate order will enter accordingly.

/s/ Delissa A. Ridgway
__________________________________
Delissa A. Ridgway
Judge

Dated: May 13, 2009
New York, New York