Thai Plastic Bags Industries Co. v. United States

Slip Op. 10-122

UNITED STATES COURT OF INTERNATIONAL TRADE

THAI PLASTIC BAGS INDUSTRIES CO.,
LTD., et al.

Plaintiffs,

v. Before: Pogue, Judge

UNITED STATES, Court No. 09-00537

Defendant,

and Public Version

POLYETHYLENE RETAIL CARRIER BAG
COMMITTEE, et al.

Defendant-Intervenors.

OPINION AND ORDER
[Plaintiffs’ motion for judgment upon the agency record DENIED.]
Dated: October 26, 2010

Hughes Hubbard & Reed LLP (Kenneth J. Pierce, Robert L.
LaFrankie, and Victor S. Mroczka) for the Plaintiff.

Tony West, Assistant Attorney General; Jeanne E. Davidson,
Director; Barbara S. Williams, Attorney-in-Charge, International
Trade Field Office, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Carrie A. Dunsmore) for the
Defendant.

King & Spalding, LLP (Stephen A. Jones and Daniel L.
Schneiderman) for the Defendant-Intervenors.

Pogue, Judge: In this action, producers/exporters Thai Plastic

Bags Industries Co., Ltd., Apec Film Ltd., and Winner’s Pack Co.,

Ltd. (collectively “TPBG” or Plaintiffs) challenge the cost
Court No. 09–00537 Page 2

calculation methodology used to determine their dumping margin in

the final results of the U.S. Department of Commerce’s (“Commerce”

or “the Department”) administrative review1 of the antidumping duty

(“AD”) order on polyethylene retail carrier bags (“plastic bags”)

from Thailand.2 Specifically, in their current motion for judgment

on the agency record, Plaintiffs object to Commerce’s adjustment of

Plaintiffs’ submitted data -- regarding the fixed overhead (“FOH”),

variable overhead (“VOH”), and per-unit labor costs (“labor”) of

their goods -- in Commerce’s sales-below-cost test and calculation

of constructed value(“CV”).

The court has jurisdiction pursuant to 28 U.S.C. § 1581(c) and

19 U.S.C. § 1516a(a).

Because Plaintiffs’ main challenges here contradict their

arguments as presented before the agency in the administrative

review, and because other challenges were not presented to the

agency at all, as is more fully explained below, the court denies

Plaintiffs’ motion.

1
Original AD determinations are subject to Commerce’s
periodic review, including yearly reviews conducted upon request
from interested parties. See Tariff Act of 1930, § 751, 19 U.S.C.
§ 1675(a)(2006). Future references to the Tariff Act of 1930
will be to Title 19 of the United States Code, 2006 Edition.
2
See Polyethylene Retail Carrier Bags from Thailand, 74
Fed. Reg. 65,751 (Dep’t Commerce Dec. 11, 2009) (final results of
AD administrative review) (“Final Results”), and accompanying
Issues and Decision Memorandum, A-549-821, AR: 8/01/07 - 07/31/08
(Dec. 7, 2009), Admin. R. Pub. Doc. 100 (“Decision Mem.”).
Court No. 09–00537 Page 3

Background

This action involves the fourth administrative review of the

original 2004 AD investigation of the subject merchandise.3 That

original determination, Polyethylene Retail Carrier Bags from

Thailand, 69 Fed. Reg. 34,122 (Dep’t Commerce June 18, 2004)

(notice of final determination at less than fair value), amended

by, Polyethylene Retail Carrier Bags from Thailand, 69 Fed. Reg.

42,419 (Dep’t Commerce July 15, 2004) (notice of amended final

determination of sales at less than fair value), assessed an AD

margin for Plaintiffs of 2.26 percent.4 Polyethylene Retail

Carrier Bags From Thailand, 69 Fed. Reg. 48,204, 48,205 (Dep’t

Commerce Aug. 9, 2004) (AD order).

I. Commerce’s Review Determination

TPBG requested this fourth administrative review, on September

2, 2008, see Polyethylene Retail Carrier Bags from Thailand:

Request for Administrative Review, A-549-821, POR: 8/1/07 - 7/31/08

(Sept. 2, 2008), Admin. R. Pub. Doc. 2, and Commerce then initiated

3
As noted, the investigated or “subject” merchandise at
issue are plastic bags. These plastic bags are sometimes called
grocery bags, merchandise bags, t-shirt sacks or checkout sacks,
and are generally defined as non-sealable and with handles, along
with specified thickness, length and depth ranges. TPBG produces
all of these bags in Thailand, and the plastic bags are normally
provided free of charge by retailers to customers in order to
help them package their purchases. Final Results at 65,751.
4
The dumping margin is “the amount by which the normal
value exceeds the export price or constructed export price of the
subject merchandise.” 19 U.S.C. §1677(35)(A).
Court No. 09–00537 Page 4

the review. Initiation of Antidumping and Countervailing Duty

Administrative Reviews and Requests for Revocation in Part, 73 Fed.

Reg. 56,795, 56,796 (Dep’t Commerce Sept. 30, 2008). Commerce’s

preliminary determination followed, in August 2009. Polyethylene

Retail Carrier Bags from Thailand, 74 Fed. Reg. 39,928 (Dep’t

Commerce Aug. 10, 2009) (preliminary results of antidumping duty

administrative review) (“Preliminary Results”).

In the Preliminary Results Memorandum, incorporated by

reference in the Preliminary Results, Commerce matched U.S. models

to foreign-market models in order to make the appropriate price of

sales comparisons.5 6
In order to appropriately compare

5
Unique models of subject merchandise and analogous
foreign like products are assigned control numbers (“CONNUM”).
See (Mem. in Supp. of Pls.’ Mot. for Summ. J. on the Agency R.
(“Pls.’ Br.”) 5 n.2; Def.’s Opp. to Pls.’ Mot. for J. Upon the
Agency R. (“Gov’t Response Br.”) 3.) Foreign-market and exported
CONNUMs are referred to as “CONNUMHs” and “CONNUMUs,”
respectively. See Request for Information, Polyethylene Retail
Carrier Bags from Thailand, A-549-821, 8/1/2007 - 7/31/2008 (Nov.
25, 2008), Admin R. Pub. Doc. 14 at B-5, C-5.
Commerce matched CONNUMUs to CONNUMHs “according to the
following methodology, in descending order of preference”:

1) We found the identical home-market model according
to the abbreviated product code (CONNUMH). We made
comparisons to weighted-average home-market prices
that were based on all sales which passed the cost
test of the identical products. . . .

2) If no identical match was found, we matched the
similar merchandise on the basis of the
comparison-model market which was closest in terms
of the physical characteristics to the model sold
in the United States. These characteristics are,
in order from most important to least important
for purposes of our selection, 1) quality, 2) bag
Court No. 09–00537 Page 5

the matched sales, Commerce adjusted the FOH, VOH, and labor

amounts, as they had been allocated in TPBG’s submission,7 to

type, 3) length, 4) width, 5) gusset, 6)
thickness, 7) percentage of high-density
polyethylene resin, 8) percentage of low-density
polyethylene resin, 9) percentage of low linear-
density polyethylene resin, 10) percentage of
color concentrate, 11) percentage of ink coverage,
12) number of ink colors, and 13) number of sides
printed. We made comparisons to weighted-average
home-market prices that were based on all sales
which passed the cost test of the most similar
product. . . .

3) For those U.S. models for which no identical or
similar match was found, the CV of the U.S. model
was used as the basis for normal value.

Polyethylene Retail Carrier Bags from Thailand - Thai Plastic
Bags Industries Group (TPBG), Preliminary Results Analysis
Memorandum, A-549-821, AR 8/1/07 - 7/31/08 (Aug. 10, 2009),
Admin. R. Conf. Doc. 29 (“Preliminary Mem.”) at 2.
6
In some cases, Commerce found “U.S. models for which no
identical or similar [home market] match” existed on the record,
Preliminary Mem. at 2, and “found that there were some models for
which [Commerce] had to disregard sales below cost.” Id. at 6.
Thus, Commerce “calculated normal value based on CV when [it] did
not find an identical or similar model in the home market or when
the identical or similar model was disregarded as below cost.”
Id. Commerce moreover “calculated [CV] . . . [by] includ[ing]
the cost of materials and fabrication, adjusted [to eliminate
cost differences attributable to factors other than physical
characteristics] . . . .” Preliminary Results, 74 Fed. Reg. at
39,932.
There were [[
]] and, therefore, [[
]]. (Def.-Intervenors’ Opp’n
to Pls.’ Mot. for J. Upon the Agency R. (“Def.-Interventors’
Mem.”) 5 n.4.)
7
In its administrative review, Commerce served
questionnaires on the Plaintiffs who, as “respondents,” were
required to respond with requested information.
Court No. 09–00537 Page 6

assure that the allocated costs were appropriate. As Commerce

explained:

TPBG’s reported COP and CV data indicate
considerable cost disparities among products with similar
physical characteristics.8 . . . TPBG explained that,
because the Rayong facility is more efficient than the
Sampran facility, the per-kg costs at the Rayong facility
are lower than the costs at the Sampran facility. . . .
TPBG explained that it produces more home-market products
at the Sampran facility and more export products at the
Rayong facility. . . . TPBG explained that priority is
given to U.S. production runs over home-market production
runs. Specifically, TPBG explained that U.S. production
runs are run on a continuous basis whereas home-market
production runs are often interrupted for priority export
runs. TPBG explained that the stop and go for domestic
production results in greater production inefficiencies.

[I]t is unreasonable to attribute the starts and
stoppages, and associated inefficiencies, mainly to the
home-market products. By TPBG’s own admission, the cause
of the stoppages is management’s own internal decision
concerning the export and home-market production runs and
not due to production activities or requirements of the
domestic product. Accordingly, we determine that the
cost differences created by TPBG’s methodology are not
attributable to the physical differences between the
home-market and U.S. products.

[19 C.F.R. § 351.411] states, “{t}he Secretary will
not consider differences in [COP] when compared
merchandise has identical physical characteristics.” In

8
For example, for CONNUM [[ ]] (U.S.
product), TPBG reported an output of [[ ]], direct material
costs of [[ ], direct labor costs of [[ ]],
variable overhead of [[ ]], and fixed overhead of
[[ ]. For CONNUM [[ ] (home-
market product) TPBG reported an output of [[ ]], direct
material costs of [[ ]], direct labor costs of
[[ ]], variable overhead of [[ ]], and
fixed overhead of [[ ]].
Court No. 09–00537 Page 7

[Stainless Steel Bar from the United Kingdom9] and
accompanying Issues and Decision Memorandum at Comment 1,
we reaffirmed our policy that we would determine whether
cost differences may affect the accuracy of the margin
calculation, when such cost differences are attributable
to factors beyond physical characteristics (such as
situations where the merchandise is produced at separate
facilities or the cost differences are high even though
the physical differences appear small). In such
instances, we have adjusted costs to address the
distortion. See, e.g., [Hot-Rolled Flat-Rolled Carbon-
Quality Steel Products From Japan10] at Comment 22; Small
Diameter Circular Seamless Carbon and Alloy Steel,
Standard, Line and Pressure Pipe From Brazil11] at
Comment 2. [W]e [] adjusted the per-unit labor, VOH, and
FOH costs of each product, by averaging most of these
costs across all product lines, to eliminate the
distortion caused by TPBG’s allocation methodology.

Preliminary Mem. at 3-4 (citations omitted). Accord Preliminary

Results, 74 Fed. Reg. at 39,932. The adjusted costs were then used

in Commerce’s computation of the cost of production [“COP”] and CV

of those matched foreign models.

Relevant to the litigation here, TPBG then contested

Commerce’s preliminary determination, arguing that Commerce should

use TPBG’s reported costs, without Commerce’s adjustments, because

“[t]he TPBG cost methodology correctly allocates additional costs

9
Stainless Steel Bar from the United Kingdom, 72 Fed. Reg.
43,598 (Dep’t Commerce Aug. 6, 2007) (final results of AD
administrative review).
10
Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From
Japan 64 Fed. Reg. 24,329 (Dep’t Commerce May 6, 1999) (notice of
final determination of sales at less than fair value).
11
Small Diameter Circular Seamless Carbon and Alloy Steel,
Standard, Line and Pressure Pipe From Brazil, 60 Fed. Reg. 31,960
(Dep’t Commerce June 19, 1995).
Court No. 09–00537 Page 8

to those products which require additional time to process, with

products which require less time to process having fewer costs

allocated to those products.” Thai Plastic Bags Group (“TPBG”) Case

Brief, A-549-821, ARP 8/1/2007 - 7/31/2008 (Sept. 9, 2009), Admin.

R. Conf. Doc. 1489, (“Pls.’ Case Br.”) at 1. TPBG stated that it

“based its reported costs on actual cost and production records

maintained in the ordinary course of business.” Id. at 2.12

Importantly, TPBG also argued that if Commerce determined that it

was necessary to adjust TPBG’s cost allocation, the adjustment

should be, contrary to the petitioners’ position, applied to all

costs used in the calculation.13 Thai Plastic Bags Group (“TPBG”)

Rebuttal Brief, A-549-821, ARP 8/1/2007 - 7/31/2008 (Sept. 14,

2009), Admin. R. Conf. Doc. 1494,(“Pls.’ Rebuttal Br.”) at 1. See

also id. (“Either [Commerce] should use the revised costs for all

purposes in its calculations, or it should not revise the costs at

all.”) (emphasis in original).14

12
TPBG points out that it “has been using the same cost
accounting system and the same methodology in the U.S.
antidumping proceedings involving [plastic bags] from Thailand
since 2004.” Id. at 1.
13
TPBG specifically argued that the cost adjustment should
not be limited to Commerce’s DIFMER adjustment. See infra pp.
16-17.
14
TPBG argued:

[Stainless Steel Bar, 72 Fed. Reg. 43598] states that
[Commerce] has concerns when a respondent has provided
cost data which might affect the accuracy of the
results, such as ‘when such cost differences are
Court No. 09–00537 Page 9

After considering TPBG’s argument, Commerce concluded, in its

Decision Memorandum, that “[b]ecause TPBG’s reported conversion

attributable to factors beyond physical characteristics
(such as situations where the merchandise is produced
at separate facilities or the cost differences are high
even though the physical differences appear small). . .
. Stainless Steel Bar expresses [Commerce’s] concerns
in such situations that relate to all aspects of
[Commerce’s] calculations, not just the [DIFMER]
calculation. . . . In fact, [Commerce’s] primary
concern in Stainless Steel Bar related to how that
respondent’s use of job-order costs for each CONNUM
could distort the sales below cost test[.] . . . Thus,
[Commerce] was primarily concerned with the potential
effects on the sales below cost test. [Commerce] went
on to stress that distortions in cost arising from
timing and other non-physical characteristic factors
could affect the sales below cost test[.] . . . In
other words, [Commerce] was concerned that the cost
distortions could be used to manipulate the margin
through the sales below cost test. [Commerce] went on
to state that such distortions could also affect the
[DIFMER] adjustments, but it is apparent that the sales
below cost test [and by extension the calculation of
CV] remains the primary concern[.] . . . Adjusting the
reported costs only for purposes of the [DIFMER]
adjustment merely replaces one set of purported
distortions with another set of distortions. In other
words, if [Commerce] is to achieve its goal of
calculating an accurate dumping margin, then any
adjustment to the costs must be applied consistently
throughout the calculation . . . . [I]f [Commerce]
insists on revising [labor, VOH, and FOH], then
[Commerce’s] objective of ensuring an accurate dumping
calculation with respect to all parts of that
calculation mandates that [Commerce] should apply those
revisions throughout the entire calculation.
[Commerce] thus should follow the Stainless Steel Bar
reasoning and continue to apply the cost revisions for
all purposes, for the [DIFMER] adjustments, the sales
below cost test[,] and the calculation of [CV].

Id. at 2-4, 6 (citations and footnote omitted). The reader will
note that this position is directly contrary to TPBG’s current
position before the court. See infra.
Court No. 09–00537 Page 10

costs resulted in product-specific cost differences which were

unrelated to differences in physical characteristics, [Commerce]

could not use TPBG’s reported costs . . . .” Decision Mem. at 3.

Commerce stated:

We disagree [with petitioners/Defendant-intervenors] . .
. that we should use TPBG’s reported costs for the
purposes of the sales-below-cost test and the calculation
of constructed value. Normally, the product costs a
respondent reports should reflect cost differences
attributable to the different physical characteristics we
define to ensure that the product-specific costs we use
for the below-cost test reflect the corresponding
product’s physical characteristics accurately without
hiding extraneous factors that may affect differences in
costs. In addition, [19 U.S.C. § 1677b(a)(6)(C)(ii)]
requires that we account for and adjust for any
differences attributable to physical differences between
subject merchandise and foreign like product if similar
products are compared. For this purpose, [19 C.F.R. §
351.411(b)] directs us to consider differences in
variable costs associated with the physical differences
in the merchandise, i.e., the difference-in-merchandise
adjustment. Normally, we use a respondent’s
product-specific costs (that reflect cost differences
attributable to our defined physical characteristics as
described above) for the below-cost test. See [19 U.S.C.
§ 1677b(b)(1)] . Similarly, the product-specific costs
should incorporate differences in variable costs
associated with the physical differences in the
merchandise in accordance with [19 C.F.R. § 351.411(b)]
and be used for the difference-in-merchandise adjustment.
In contrast, where a respondent’s reporting methodology
results in cost differences extraneous to our identified
physical characteristics, we may not rely on a
respondent’s reported methodology. . . .

In the less-than-fair-value investigation of PRCBs
from Malaysia, we calculated different costs of
production to use for the below-cost test and the
difference-in-merchandise adjustment. See Malaysia PRCB
LTFV and accompanying I&D Memo at Comment 5. We do not
consider our decision in that investigation to be
consistent with our normal practice of calculating a
single cost of production for both the sales-below-cost
Court No. 09–00537 Page 11

test and the difference-in-merchandise adjustment, even
in cases in which we revised material costs to neutralize
the cost differences resulting from extraneous factors
other than differences in the physical characteristics.
See, e.g., [Stainless Steel Bar from the United Kingdom,
72 Fed. Reg. 43,598 (Dep’t Commerce Aug. 6, 2007) (final
results of AD administrative review) (“UK SSB”), and
accompanying I&D Memo at Comment 1].

Decision Mem. at 3-4 (footnote omitted).

Finally, Commerce reasoned that “although TPBG might have used

its actual [period of review (“POR”)] and production records that

it maintains in its normal course of business as a basis for

allocating its conversion costs, TPBG has acknowledged that its

allocation methodology, which was developed for dumping purposes,

is a departure from its normal cost-accounting system.” Id. at 4-5.

Thus, Commerce concluded, “[Commerce’s] adjustment does not

represent a departure from TPBG’s normal books and records.” Id. at

5.

As a consequence of its determinations, Commerce assessed an

AD margin of 21.99 percent for TPBG for the fourth administrative

review. Final Results, 74 Fed. Reg. at 65,752.

II. Legal Framework

In calculating the normal value of subject merchandise

originating from a market economy country, such as Thailand,

Commerce must follow the rules laid out in 19 U.S.C. § 1677b(a)-
Court No. 09–00537 Page 12

(b), (d)-(f).15 Pursuant to this statutory instruction, Commerce

must first attempt to determine a “price” to use as a normal value,

more specifically, “the price at which the foreign like product is

first sold . . . for consumption in the exporting country, in the

usual commercial quantities and in the ordinary course of trade,

and, to the extent practicable, at the same level of trade as the

export price or constructed export price.” Id. § 1677b(a)(1)(B).

As indicated above, in order to ascertain this “price,” Commerce

tries to match the subject merchandise to “foreign like

product[s].”16

A. Sales Below Cost

In its calculation of the price of the foreign like product,

Commerce will discard certain of a respondent’s reported sales.

Relevant to this matter, if Commerce determines that sales of the

foreign like product “were made at less than cost of production,”17

15
See also id. § 1677b(a) (“In determining under this
subtitle whether subject merchandise is being, or is likely to
be, sold at less than fair value, a fair comparison shall be made
between the export price or constructed export price and normal
value.”).
16
Foreign like products are defined in 19 U.S.C. § 1677(16).
Of note, subsections (B) and (C) of 19 U.S.C. § 1677(16), which
are referenced in section 1677b(a)(6)(C)(ii), refer to foreign
like products that are not identical to subject merchandise.
17
COP, for purposes of section 1677b, equals the sum of:

(A) the cost of materials and of fabrication or
other processing of any kind employed in producing the
foreign like product, during a period which would
ordinarily permit the production of that foreign like
Court No. 09–00537 Page 13

it will disregard these sales. Id. § 1677b(b)(1).18 As noted above,

in certain circumstances, Commerce will not use the price of the

foreign like product and will, instead, calculate a CV to input as

the normal value. For example, after Commerce disregards

respondent’s sales as less than the COP, if no foreign like product

sales remain, “normal value shall be based on the [CV] of the

merchandise.” Id. § 1677b(b)(1).19

product in the ordinary course of business;

(B) an amount for selling, general, and
administrative expenses based on actual data pertaining
to production and sales of the foreign like product by
the exporter in question; and

(C) the cost of all containers and coverings of
whatever nature, and all other expenses incidental to
placing the foreign like product in condition packed
ready for shipment. . . .

Id. § 1677b(b)(3) (emphasis added).
18
These sales are only disregarded if they “have been made
within an extended period of time in substantial quantities” and
“were not at prices which permit recovery of all costs within a
reasonable period of time[.]” Id. § 1677b(b)(1)(A)-(B). Such
requirements are not at issue here.
19
CV amounts to the sum of:

(1) the cost of materials and fabrication or other
processing of any kind employed in producing the
merchandise[] . . . [“COM”];

(2)(A) the actual amounts . . . for selling,
general, and administrative expenses. . . ; and

(3) the cost of all containers and coverings . . .
and all other expenses incidental to . . . shipment to
the United States. . . .
Court No. 09–00537 Page 14

According to statute and regulations, Commerce uses the same

method to calculate “costs” for both COP and CV. Commerce also

uses the respondent’s records, provided that these records meet
20
certain requirements.

Id. § 1677b(e) (emphasis added).
20

Costs shall normally be calculated based on the records
of the exporter or producer of the merchandise, if such
records are kept in accordance with the generally
accepted accounting principles [“GAAP”] of the
exporting country (or the producing country, where
appropriate) and reasonably reflect the costs
associated with the production and sale of the
merchandise. [Commerce] shall consider all available
evidence on the proper allocation of costs, including
that which is made available by the exporter or
producer on a timely basis, if such allocations have
been historically used by the exporter or producer [].
. . .

Id. § 1677b(f)(1)(A). Accord AD Manual 70. See also Statement of
Administrative Action, H.R. Rep. No. 103-316, at 834-35 (1994)
(“SAA”), reprinted in 1994 U.S.C.C.A.N. 4171-72,(“The exporter or
producer will be expected to demonstrate that it has historically
utilized [its reported] allocations . . . . In determining
whether to accept the cost allocation methods proposed by a
specific producer, . . . Commerce will [] consider whether the
producer historically used its submitted cost allocation methods
to compute the cost of the subject merchandise prior to the
investigation or review and in the normal course of its business
operation.”).
The SAA “represents an authoritative expression by the
Administration concerning its views regarding the interpretation
and application of the Uruguay Round agreements, both for
purposes of U.S. international obligations and domestic law. . .
. [S]ince this Statement will be approved by the Congress at the
time it implements the Uruguay Round agreements, the
interpretations of those agreements included in this Statement
carry particular authority. . . . [T]he Statement describes the
administrative action proposed to implement the particular
agreement, explaining how the proposed action changes existing
Court No. 09–00537 Page 15

Commerce must attempt to calculate COP and CV as accurately as

possible and, to this end, Commerce is authorized to make

adjustments to cost allocations. Commerce’s regulations instruct

that “[i]n determining the appropriate method for allocating costs

among products, [Commerce] may take into account production

quantities, relative sales values, and other quantitative and

qualitative factors associated with the manufacture and sale of the

subject merchandise and foreign like product.” 19 C.F.R. §

351.407(c). Accord AD Manual 71 (“We review various qualitative and

quantitative factors to determine whether a representative measure

of the materials, labor, overhead and other costs have been

allocated to the foreign like product. We should specifically

review the allocation methods (e.g., production quantities and

relative sales values) to determine whether an appropriate portion

of common costs have been allocated to the product.”) (emphasis

added). See also SAA at 834-35, reprinted in 1994 U.S.C.C.A.N. at

4172. Specifically, if Commerce “determines that costs [as

submitted by a respondent . . . have been shifted away from

production of the subject merchandise, or the foreign like

product,” then “[Commerce] will adjust costs appropriately, to

ensure they are not artificially reduced.” SAA at 835, reprinted in

1994 U.S.C.C.A.N. at 4172.

administrative practice and stating why the changes are required
or appropriate to implement the agreement.” SAA at 656, reprinted
in 1994 U.S.C.C.A.N. at 4040.
Court No. 09–00537 Page 16

B. DIFMER Adjustment to Price

Once Commerce computes price or CV, Commerce must then make

certain “adjustments” pursuant to statute. 19 U.S.C. §

1677b(a)(6),(8). Relevant here, the “price” “shall be”:

increased or decreased by the amount of any difference
(or lack thereof) between the export price or constructed
export price and the price . . . that is established to
the satisfaction of the administering authority to be
wholly or partly due to— . . . .

(ii) the fact that [nonidentical]
merchandise . . . is used in determining
normal value[] . . . .

19 U.S.C. § 1677b(a)(6)(C). Commerce’s regulations implementing
21 22
Section 1677b(a)(6)(C), provide for this “DIFMER” adjustment.

21
DIFMER adjustment refers to Commerce’s “difference in
physical characteristics” or “difference-in-merchandise”
adjustment or “allowance”:
(a) Introduction. In comparing United States
sales with foreign market sales, [Commerce] may
determine that the merchandise sold in the United
States does not have the same physical characteristics
as the merchandise sold in the foreign market, and that
the difference has an effect on prices. In calculating
normal value, [Commerce] will make a reasonable
allowance for such differences. (See section
773(a)(6)(C)(ii) of the Act.)

(b) Reasonable allowance. In deciding what is
a reasonable allowance for differences in physical
characteristics, [Commerce] will consider only
differences in variable costs associated with the
physical differences. . . . [Commerce] will not
consider differences in cost of production when
compared merchandise has identical physical
characteristics.

19 C.F.R. § 351.411(b); see also AD Manual at 5 (“The statutory
preference is to compare the subject merchandise sold in the
United States to identical articles some in the [foreign] market.
Court No. 09–00537 Page 17

Adjustments are not made for DIFMERs “based on . . . the fact that

the domestic and exported products are produced in different

facilities with differing production efficiencies.” AD manual 50;

SAA at 828, reprinted in 1994 U.S.C.C.A.N. at 4167.23

III. TPBG’s Challenge

In their brief before the court, Plaintiffs argue that:

(1) Substantial Evidence Does Not Support Commerce’s Factual
Finding that Physically Similar Products Have Significant
Cost Differences

(2) Substantial Evidence Does Not Support Commerce’s
Determination that Plaintiffs’ Costs Are Unreasonable or
Otherwise Distorted

(3) Commerce Wrongly Concluded that Plaintiffs’ Cost

When this is not possible, [Commerce] will compare merchandise
which is physically similar to the articles sold in the United
States and adjust for any physical differences in the merchandise
([DIFMER]) being compared that affect the price of the
merchandise . . . .”).
22
Commerce calculates the DIFMER adjustment by calculating
“the variable manufacturing cost incurred in producing the
differences in physical characteristics.” AD Manual 49. The
calculation “is based on actual physical differences in the
products, and is calculated on the basis of direct manufacturing
costs.” Id. at 49-50 “Direct” manufacturing costs utilized by
Commerce in the DIFMER analysis “include[s] the cost of
materials, labor and variable factory overhead,” id. at 50, but
does not include fixed costs, see 19 C.F.R. § 351.410(b).
If the DIFMER adjustment for the foreign like product
exceeds 20 percent of the total COP of the subject merchandise,
Commerce will not use that foreign like product. AD Manual at 7.
When Commerce “determine[s] that the [DIFMER] adjustment is too
great, [Commerce] select[s] a different product as most similar
or, if there is no similar match, use[s] [CV] for the [normal
value.” Id.
23
Moreover, because CV is based on COM of the subject
merchandise, no DIFMER adjustment is made to CV. Id. at 58.
Court No. 09–00537 Page 18

Differences Are Not Attributable to the Physical
Differences of the Merchandise

(4) The Difference-In-Merchandise Adjustment Standard Should
Not Be Used for the Purposes of the Sales-Below-Cost and
Constructed Value Calculations

(5) Commerce’s Reliance on Previous Administrative
Determinations -- to Support its Rejection of Plaintiffs’
Reported Costs Not Attributable to Physical Differences
of the Merchandise -- is Misplaced

Standard of Review

Applying the familiar standard for reviewing Commerce’s

decision, the court “shall hold unlawful any determination,

finding, or conclusion 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 United States v. Eurodif

S.A., __ U.S. __, 129 S. Ct. 878, 886 (2009).

Analysis

Essentially, Plaintiffs challenge two aspects of Commerce’s

final determination. First, TPBG contends that Commerce improperly

applied the “physical differences” test, associated with the DIFMER

adjustment, to the sales-below-cost test and the constructed value

calculation.24 Second, TPBG asserts that, assuming Commerce’s use

24
This is the gravamen of Plaintiff’s fourth and fifth
arguments to the court, that:

(4) The Difference-In-Merchandise Adjustment Standard
Should Not Be Used for the Purposes of the Sales-Below-
Cost and Constructed Value Calculations [and that]

(5) Commerce’s Reliance on Previous Administrative
Court No. 09–00537 Page 19

of this test was proper, Commerce did not support its determination

to adjust TPBG’s submitted numbers with substantial evidence.25

The court will address each of Plaintiffs’ challenges in turn.

A. Legality of Commerce’s Adjustment Pursuant to its “Physical
Characteristics” Test

Plaintiffs’ argument on this issue is barred by judicial

estoppel. “[W]here a party assumes a certain position in a legal

proceeding, and succeeds in maintaining that position, he may not

thereafter, simply because his interests have changed, assume a

contrary position, especially if it be to the prejudice of the

party who has acquiesced in the position formerly taken by him.”

New Hampshire v. Maine, 532 U.S. 742, 749 (2001) (quoting Davis v.

Wakelee, 156 U.S. 680, 689 (1895)). See also Trs. in Bankr. of N.

Am. Rubber Thread Co. v. United States, 593 F.3d 1346, 1353-54

(Fed. Cir. 2010); Scarano v. Cent. R. Co., 203 F.2d 510, 513 (3d

Cir. 1953).26

Determinations -- to Support its Rejection of
Plaintiffs’ Reported Costs Not Attributable to Physical
Differences of the Merchandise -- is Misplaced

25
This is the gravamen of Plaintiff’s second argument to the
court, that:

(2) Substantial Evidence Does Not Support Commerce’s
Determination that Plaintiffs’ Costs Are Unreasonable
or Otherwise Distorted

26
Judicial estoppel is “is an equitable doctrine invoked by
a court at its discretion[.]” New Hampshire, 532 U.S. at 750
Court No. 09–00537 Page 20

The Federal Circuit has made it clear that“[j]udicial estoppel

applies just as much when one of the tribunals is an administrative

agency as it does when both tribunals are courts.” Trs. in Bankr.

of N. Am. Rubber Thread Co., 593 F.3d at 1353-54 (citing Lampi

Corp. v. Am. Power Prods., Inc., 228 F.3d 1365, 1377 (Fed. Cir.

2000) (“The [judicial estoppel] doctrine also applies to

administrative proceedings in which a party obtains a favorable

order by making an argument that it seeks to repudiate in a

subsequent judicial proceeding.”))(“Turning to the remaining issue,

we find that NART is precluded by the doctrine of judicial estoppel

from arguing in the CIT in favor of a revocation date of October 1,

1995, given its earlier successful argument to Commerce that a

revocation date of October 1, 1995, was inappropriate.”). Thus,

judicial estoppel applies here, where the court is reviewing an

agency decision rather than a decision of a lower court.

(citation and quotation marks omitted). This doctrine can be
applied to questions of law. Transclean Corp. v. Jiffy Lube
Int’l, Inc., 474 F.3d 1298 (Fed. Cir. 2007). Although neither
party has raised this issue before the court, “the doctrine can
be raised by courts sua sponte because judicial estoppel concerns
the integrity of the judicial system independent of the interests
of the parties.” In re Airadigm Communc’ns, Inc., 616 F.3d 642,
661, Nos. 08-3585, 08-3587, 08-3588, 08-3590, 2010 WL 3024876, at
*17 n.14 (7th Cir. Aug. 4, 2010) (citing Grigson v. Creative
Artists Agency L.L.C., 210 F.3d 524, 530 (5th Cir. 2000)
(“[B]ecause that doctrine protects the judicial system, [the
court] can apply it sua sponte in certain instances.”)(citations
omitted)). Sua sponte application of judicial estoppel is
“especially” warranted in “egregious case[s] wherein a party has
successfully asserted a directly contrary position.” Beall v.
United States, 467 F.3d 864, 870 (5th Cir. 2006).
Court No. 09–00537 Page 21

Three non-exclusive factors frame the application of judicial

estoppel. New Hampshire, 532 U.S. at 750-51. First, “a party’s

later position must be clearly inconsistent with its earlier

position.” Id. at 750 (citations and quotation marks omitted).

Second, the court considers whether a party has “succeeded in

persuading a court to accept that party’s earlier position, so that

judicial acceptance of an inconsistent position in a later

proceeding would create the perception that either the first or the

second court was misled[.]” Id. (citations and quotation marks

omitted). Third, the court considers “whether the party seeking to

assert an inconsistent position would derive an unfair advantage or

impose an unfair detriment on the opposing party if not estopped.”

Id. at 750-51 (citations omitted). See also Scarano v. Cent. R.

Co., 203 F.2d 510, 513 (3d Cir. 1953) (“A plaintiff who has

obtained relief from an adversary by asserting and offering proof

to support one position may not be heard later in the same court to

contradict himself in an effort to establish against the same

adversary a second claim inconsistent with his earlier contention.

Such use of inconsistent positions would most flagrantly exemplify

that playing ‘fast and loose with the courts’ which has been

emphasized as an evil the courts should not tolerate.”).

Application of the Supreme Court’s three factors weighs in

favor of applying judicial estoppel in this case. First, TPBG’s

position before this court is “directly” and “clearly” contrary to
Court No. 09–00537 Page 22

its position before Commerce during the administrative review.

Below, Plaintiffs argued that the same concerns -- the need for

cost differences to be based upon physical differences -- underlie

the DIFMER, the sales below cost, and the CV calculations. Pls.’s

Rebuttal Br. at 1-4, 6. This argument was made directly in

response to the petitioners’ request that Commerce use TPBG’s

reported costs for COP and CV, while using adjusted costs for

DIFMER. Decision Mem. at 3. Currently, before the court,

Plaintiffs argue that Commerce improperly “applied the wrong legal

standard in making [its] decision [that TPBG’s costs were

‘distorted’ for purposes of the sales below cost test and CV]

(i.e., Commerce applied the DIFMER ‘physical differences’ test).”

(Mem. in Supp. Of Pls.’ Mot. for J. on the Agency R. (“Pls.’ Mem.”)

at 2.) But before the agency, Plaintiffs claimed that if the

agency revised costs for DIFMER purposes, it must do so for all

purposes, including COP and CV. Basically, before the court, TPBG

argues that Commerce cannot take physical differences into account

when determining whether to accept reported costs for the purposes

of COP and CV, and may only address those physical differences in

the DIFMER adjustment; at the same time, TPBG argued before

Commerce that when calculating COP, CV, and DIFMER, Commerce should

use the same costs adjusted to reflect cost differences
Court No. 09–00537 Page 23

attributable to physical differences in the merchandise.27 Thus,

in the administrative proceeding, Plaintiffs argued for the same

across the board adjustments to costs for each purpose; here

Plaintiffs argue against such adjustments. These two positions are

not reconcilable.

Second, Plaintiffs succeeded in its argument before Commerce.

See Decision Mem. at 3-4 (“We disagree with petitioners’ argument,

however, that we should use TPBG’s reported costs for the purposes

of the sales-below-cost test and the calculation of constructed

value. . . . Therefore, for the final results, to limit the

distortive effect of cost differences that are unrelated to

differences in physical characteristics, we have continued to . .

. use the adjusted cost for the sales-below-cost test, the [DIFMER]

adjustment, and constructed-value calculations.”). Id. at 3-4.

Third, TPBG would “derive an unfair advantage or impose an

unfair detriment” on the government if allowed to switch their

position on this issue here. For these reasons, Plaintiffs claim

on this issue is barred.28

27
In its memorandum before the court, TPBG states that
“Commerce properly used one set of costs for [DIFMER, CV, and COP
for sales below cost], but it improperly ‘adjusted’ them before
doing so.” (Pls.’ Mem. at 2.) This argument does not make sense.
TPBG is not challenging Commerce’s adjustment of costs for
purposes of calculating the DIFMER adjustment
28
The court also notes that TPBG would be unlikely to
prevail on the merits of this issue. In its determination,
Commerce decided to revise TPBG’s cost allocations (regarding
direct labor, variable overhead and fixed overhead costs) to
Court No. 09–00537 Page 24
B. Evidence Supporting Commerce’s Rejection of Plaintiffs’ Reported
Costs Pursuant to 19 U.S.C. § 1677b(f)(1)(A)

TPBG argued below that Commerce should use TPBG’s reported

costs because (1) TPBG has been using the same cost system from

Thailand since 2004 and even the European Commission has verified

the costs, and (2) “TPBG based its reported costs on actual cost

and production records maintained in the ordinary course of

business,” i.e., TPBG’s reported cost methodology “correctly

allocates additional costs to those products which require

eliminate a “distortion” based on factors not attributable to
physical characteristics. 74 Fed. Reg. 39, 931. As noted,
Commerce reallocated TPBG’s costs for the sales-below-cost test,
the constructed-value calculations and the difference-in-
merchandise adjustment. Id. The governments’ legal determination
to apply its adjustment for all three purposes was reasonable
because the calculation of costs “reasonably reflect[ed]” the
associated costs of production and sales. See 19 U.S.C. §
1677b(f)(1)(A). As the SAA explains, Commerce must use a
methodology that reasonably captures all of the costs incurred in
manufacturing and selling the product at issue. SAA at 835.
Further, “if Commerce determines that costs, including financing
costs, have been shifted away from the production of the subject
merchandise, or the foreign like product, it will adjust costs
appropriately, to ensure they are not artificially reduced. Id.
See NTN Bearing Corp. of America v. U.S., 368 F.3d 1369, 1374
(Fed. Cir., 2004)(“Commerce noted that it ‘does not rely on a
respondent's reported costs solely for the calculation of COP and
CV,’ Final Results, 63 Fed.Reg. at 2574, and concluded that it
would be distortive to adjust those costs only for those
calculations, but not for others in which they were used. Id.
(‘[I]f we determine a component of a respondent's COP and CV is
distortive for one aspect of our analysis, it is reasonable to
make the same determination with respect to those other aspects
of our margin calculations where we relied on the identical cost
data.’). We concur with Commerce's analysis and hold that it did
not err in interpreting these provisions to permit it to employ
affiliated supplier cost data to calculate cost deviations to
limit the definition of similar merchandise, the difmer
adjustment, and inventory carrying costs.").
Court No. 09–00537 Page 25
additional time to process, with products which require less time

to process having fewer costs allocated to those products.” Pls.’

Case Br. at 1-2.

But Commerce rejected, in part,29 TPBG’s reported cost

allocations, as the record indicated that “TPBG has acknowledged

that its allocation methodology, which was developed for dumping

purposes, is a departure from its normal cost-accounting system.”

Decision Memo at 4-5. In addition, “TPBG’s reported conversion

costs resulted in product-specific cost differences which were

unrelated to differences in physical characteristics,” id. at 3,

but rather were based, by TPBG’s admission, on management’s

internal decision “concerning the export and home-market production

runs and not due to production activities or requirements of the

domestic product.” Preliminary Mem. at 4. Absent proof of physical

differences, Commerce was compensating for a price distortion

through a reallocation of costs to more accurately describe the

cost structure. These conclusions follow from a reasonable reading

of the record and are therefore supported by substantial evidence.

See Nippon Steel Corp. v. United States, 458 F. 3d 1345, 1350-51

(Fed. Cir. 2006).

C. TPBG’s Remaining Arguments

The remaining arguments in Plaintiffs’ brief before the court

29
As noted, Commerce adjusted only Plaintiffs’ FOH, VOH and
labor costs. Commerce did not adjust Plaintiffs’ input costs.
Court No. 09–00537 Page 26
include: (1) “substantial evidence does not support Commerce’s

factual finding that physically similar products have significant

cost differences,” Pls.’ Br. at 12-16, and (3) “Commerce wrongly

concluded that Plaintiffs’ cost differences are not attributable to

the physical differences of the merchandise.” id. at 20-23. The

government argues, and the court agrees, that, because Plaintiffs

did not make these arguments in their case briefs before Commerce,

the arguments are not appropriately reviewed here because of the

preference for administrative exhaustion.

The relevant statute reflects this preference. In civil

actions challenging AD determinations, “the Court of International

Trade shall, where appropriate, require the exhaustion of

administrative remedies.” 28 U.S.C. § 2637(d). “Simple fairness to

those who are engaged in the tasks of administration, and to

litigants, requires as a general rule that courts should not topple

over administrative decisions unless the administrative body not

only has erred but has erred against objection made at the time

appropriate under its practice.” United States v. L.A. Tucker Truck

Lines, 344 U.S. 33, 37 (1952).

Exhaustion is “generally appropriate in the antidumping

context because it allows the agency to apply its expertise,

rectify administrative mistakes, and compile a record adequate for

judicial review-advancing the twin purposes of protecting

administrative agency authority and promoting judicial efficiency.”
Court No. 09–00537 Page 27
Carpenter Tech. Corp. v. United States, 30 CIT 1595, 1597, 464 F.

Supp. 2d 1347, 1349 (2006).

Generally, parties are “procedurally required to raise the[ir]

issue before Commerce at the time Commerce [is] addressing the

issue.” Dorbest Ltd. v. United States, 604 F.3d 1363, 1375 (Fed.

Cir. 2010) (citing Mittal Steel Point Lisas Ltd. v. United States,

548 F.3d 1375, 1383 (Fed. Cir. 2008)). If Respondents “believed

that the . . . issue was relevant to the Final Results” following

the adverse decision by Commerce in the Preliminary Results, they

“needed to include that issue in [their] case brief, as required by

the regulation.” Dorbest Ltd. v. United States, __ CIT __, __, 547

F. Supp. 2d 1321, 1344 (2008) (quoting Carpenter Tech. Corp., 30

CIT at 1598, 464 F. Supp. 2d at 1349), rev’d in part on other

grounds, 604 F.3d 1363. As a result of not raising these issues in

their case brief, Plaintiffs “deprived the agency of the

opportunity to consider these arguments in the first instance.”

Carpenter Tech., 30 CIT at __, 464 F. Supp. 2d at 1349. Thus,

because Plaintiffs have not preserved these issues, the court will

not review them here.

V. Conclusion

For the foregoing reasons, the court ORDERS that Plaintiffs’

motion for judgment upon the agency record is denied.

Accordingly, judgment will be entered for the Defendant. See
Court No. 09–00537 Page 28
USCIT Rule 56.2(b).

/s/ Donald C. Pogue
Donald C. Pogue, Judge

Dated: October 26, 2010
New York, New York