Bristol Metals L.P. v. United States

Slip Op. 10-44

UNITED STATES COURT OF INTERNATIONAL TRADE

BRISTOL METALS L.P., FELKER
BROTHERS CORP., MARCEGAGLIA
USA INC., and OUTOKUMPU
STAINLESS PIPE, INC.,
Before: Leo M. Gordon, Judge
Plaintiffs,
Court No. 09-00127
v.

UNITED STATES,

Defendant.

OPINION

[Final remand results sustained.]

Dated: April 20, 2010

Schagrin Associates (Roger B. Schagrin), Michael J. Brown) for Plaintiffs Bristol
Metals, LP, Felker Brothers Corp., Marcegaglia USA Inc., and Outokumpu Stainless
Pipe Co. Inc.

Tony West, Assistant Attorney General, Jeanne E. Davidson, Director,
Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Action,
U.S. Department of Justice (Joshua E. Kurland, Trial Attorney); and Office of the Chief
Counsel for Import Administration, U.S. Department of Commerce (David W.
Richardson, of counsel) for Defendant United States.

Gordon, Judge: This action involves the final less than fair value determination

of the U.S. Department of Commerce (“Commerce”) in the antidumping investigation

covering circular welded austenitic stainless pressure pipe from the People’s Republic

of China. See Circular Welded Austenitic Stainless Pressure Pipe from the People’s

Republic of China, 74 Fed. Reg. 4913 (Dep’t of Commerce Jan. 28, 2009) (final

determ.) (“Final Determination”), and accompanying Issues and Decision Memorandum
Court No. 09-00127 Page 2

for Circular Welded Austenitic Stainless Pressure Pipe from the People’s Republic of

China, A-570-930 (Jan. 21, 2009), available at

http://ia.ita.doc.gov/frn/summary/PRC/E9-1827-1.pdf (“Decision Memorandum”) (last

visited Apr. 20, 2010). Before the court are the Final Results of Redetermination

(Jan. 5, 2010) (“Remand Results”) filed by Commerce pursuant to Bristol Metals L.P. v.

United States, Court No. 09-00127 (Oct. 23, 2009) (remand order). The court has

jurisdiction pursuant to Section 516A(a)(2)(B)(i) of the Tariff Act of 1930, as amended,

19 U.S.C. § 1516a(a)(2)(B)(i) (2006),1 and 28 U.S.C. § 1581(c) (2006).

I. Background

Respondents Zhejiang Jiuli Hi-Tech Metals Co., Ltd. (“Jiuli”) and Winner

Machinery Enterprise Co., Ltd (“Winner”) submitted separate rate applications during

the antidumping investigation. Circular Welded Austenitic Stainless Pressure Pipe from

the People’s Republic of China, 73 Fed. Reg. 51,788 (Dep’t of Commerce Sept. 5,

2008) (prelim. determ.). Although Jiuli and Winner each qualified for separate rates

(apart from the China-wide rate), id. at 51,792, Commerce chose to individually

investigate only Winner, who accounted for the largest volume of subject merchandise.

Commerce preliminarily calculated a company-specific dumping margin for Winner

(22.03 percent), which it then assigned to Jiuli. Id.

At verification Winner withdrew from the investigation and refused to further

cooperate. 74 Fed. Reg. at 4913. In the Final Determination Commerce applied

adverse facts available to Winner pursuant to 19 U.S.C. § 1677e, treating Winner as

1
Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions
of Title 19 of the U.S. Code, 2006 edition.
Court No. 09-00127 Page 3

part of the China-wide entity, which Commerce assigned an adverse facts available rate

of 55.21 percent, the highest computer control number (“CONNUM”) specific calculated

dumping margin from Winner’s unverified data. Id. at 4914-15. Commerce assigned

Jiuli, an otherwise willing and cooperative respondent not selected for individual

investigation, a separate sample pool rate that Commerce calculated from the margins

contained in the antidumping petition (10.53 percent). Id. at 4914.

Plaintiffs could not challenge the assignment of Jiuli’s sample pool rate during the

administrative proceeding because the events with Winner unfolded after the

preliminary determination and Commerce first assigned Jiuli a separate sample pool

rate in the Final Determination. It was not until their brief before the court that Plaintiff

had the first opportunity to challenge Commerce’s (1) decision to assign Jiuli a sample

pool rate (as opposed to the China-wide rate), Pls.’ Mot. J. Agency R. 3-8, and

(2) Commerce’s surrogate valuation of stainless steel to calculate the sample pool rate.

Id. at 8-10. Defendant, in turn, requested a voluntary remand to address Plaintiffs’

arguments in the first instance, which the court granted. Bristol Metals L.P. v. United

States, Court No. 09-00127 (Oct. 23, 2009) (remand order). In their comments on the

Remand Results, Plaintiffs continue to challenge Commerce’s surrogate valuation of

stainless steel, and the assignment of a sample pool rate to Jiuli.

II. Standard of Review

When reviewing Commerce’s antidumping determinations, the court sustains

Commerce’s determinations, findings, or conclusions unless they are “unsupported by

substantial evidence on the record, or otherwise not in accordance with law.” 19 U.S.C.
Court No. 09-00127 Page 4

§ 1516a(b)(1)(B)(i). More specifically, when reviewing agency determinations, findings,

or conclusions for substantial evidence, the court assesses whether the agency action

is reasonable given the record as a whole. Nippon Steel Corp. v. United States,

458 F.3d 1345, 1350-51 (Fed. Cir. 2006). See also Dorbest Ltd. v. United States,

30 CIT 1671, 1675-76, 462 F. Supp. 2d 1262, 1268 (2006) (providing a comprehensive

explanation of the standard of review in the nonmarket economy context). Substantial

evidence has been described as “such relevant evidence as a reasonable mind might

accept as adequate to support a conclusion.” Dupont Teijin Films USA v. United States,

407 F.3d 1211, 1215 (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)).

Substantial evidence has also been described as “something less than the weight of the

evidence, and the possibility of drawing two inconsistent conclusions from the evidence

does not prevent an administrative agency’s finding from being supported by substantial

evidence.” Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620 (1966). Fundamentally,

though, “substantial evidence” is best understood as a word formula connoting

reasonableness review. 3 Charles H. Koch, Jr., Administrative Law and Practice

§ 10.3[1] (2d. ed. 2009). Therefore, when addressing a substantial evidence issue

raised by a party, the court analyzes whether the challenged agency action “was

reasonable given the circumstances presented by the whole record.” Edward D. Re,

Bernard J. Babb, and Susan M. Koplin, 8 West’s Fed. Forms, National Courts § 13342

(2d ed. 2009).

Separately, the two-step framework provided in Chevron, U.S.A., Inc. v. Natural

Res. Def. Council, Inc., 467 U.S. 837, 842-45 (1984), governs judicial review of
Court No. 09-00127 Page 5

Commerce's interpretation of the antidumping statute. Dupont, 407 F.3d at 1215; Agro

Dutch Indus. Ltd. v. United States, 508 F.3d 1024, 1030 (Fed. Cir. 2007). “[S]tatutory

interpretations articulated by Commerce during its antidumping proceedings are entitled

to judicial deference under Chevron.” Pesquera Mares Australes Ltda. v. United States,

266 F.3d 1372, 1382 (Fed. Cir. 2001); see also Wheatland Tube Co. v. United States,

495 F.3d 1355, 1359 (Fed. Cir. 2007) (“[W]e determine whether Commerce's statutory

interpretation is entitled to deference pursuant to Chevron.”).

III. Discussion

A. Commerce’s Surrogate Valuation of Stainless Steel Inputs

Valuation of factors of production in a nonmarket economy (“NME”) case is

governed by 19 U.S.C. § 1677b(c), which directs Commerce to use the “best available

information” in determining surrogate values. 19 U.S.C. § 1677b(c)(1)(B). The

antidumping statute also directs Commerce to use values from an appropriate surrogate

country to the extent possible. 19 U.S.C. § 1677b(c)(4). Commerce’s regulations

provide that surrogate values should normally be “publicly available” and (other than

labor costs) from a single surrogate country. 19 C.F.R. § 351.408(c) (2007). In addition

to the statutory and regulatory preference for using surrogate country data, Commerce

prefers data that is publicly available, reflects a broad market average, is

contemporaneous with the period of review, is specific to the input in question, and is

exclusive of taxes on exports. See, e.g., Certain New Pneumatic Off-the-Road Tires

from the People's Republic of China, 73 Fed. Reg. 40,485 (Dep’t of Commerce July 15,

2008) and accompanying Issues and Decision Memorandum, at cmt. 10.
Court No. 09-00127 Page 6

Here, as is sometimes the case, no data set from the record perfectly satisfies

Commerce’s preferences. After reviewing the information available in the record,

Commerce determined that the “best available information” for the surrogate value of

the stainless steel input used in the subject merchandise was World Trade Atlas Indian

Import data for HTS 7219 and 7220 (“WTA data”), which are the two HTS categories

that include grades 304 and 316 stainless steel that Plaintiffs cited in the petition. See

Remand Results at 7; Circular Welded Austenitic Stainless Pressure Pipe from the

People's Republic of China, 73 Fed. Reg. 10,221, 10,224 (Dep’t of Commerce Feb. 26,

2008) (init. notice) (“Initiation Notice”). Commerce’s selection of the WTA data was

reasonable because Commerce determined, and the record supports, that the data

substantially satisfies the criteria Commerce applies in identifying an appropriate

surrogate value. Commerce also determined (and the record supports) that its only

weakness (coverage of a broader range of steel than the two grades used by Plaintiffs)

did not negate its superiority to the alternative data sets advocated by Plaintiffs.

Specifically, as explained in the Remand Results, Commerce determined that the

WTA data was from a reliable, publicly available source that Commerce regularly uses

for surrogate values. Remand Results at 7. Commerce next determined that the WTA

data matched its criteria because the data consists of average, tax exclusive values. Id.

Commerce also determined that the data reflected the prices paid in actual transactions

(as opposed to offers that may vary significantly from final prices). Id. In addition,

Commerce determined the WTA data was contemporaneous with the period of

investigation. Id. Finally, Commerce acknowledged that the WTA data was not a
Court No. 09-00127 Page 7

perfect complement to the particular grades of stainless steel cited in the petition, but

explained that the WTA data did represent “an import category that covers imports of

the type of steel for which Plaintiff has provided alternative surrogate values.”2 Id.; see

also id. at 10 (stating “the WTA import data . . . reflects actual prices paid for imports

under an HTS category applicable to the stainless steel grades offered for sale on the

[Steel Authority of India Ltd.] price list. . . . Therefore, while the WTA import data . . .

may not distinguish between grades of stainless steel, we continue to find that it is more

appropriate as the source of a surrogate value given the faults of the data proposed by

Plaintiffs.”).

Equally important, the WTA data comes from India, the primary surrogate country

advocated by Plaintiffs, and chosen by Commerce for use in valuing factors of

production. Remand Results at 7. Hence, in using the WTA data, rather than data sets

that were not from a surrogate country or of unknown origin, Commerce adhered to the

statutory mandate to use surrogate country data to the extent possible, as well as its

regulatory preference for valuing inputs from a single surrogate country. See 19 U.S.C.

§ 1677b(c)(4); 19 C.F.R. § 351.408(c)(2). As Commerce noted: “given that the

remainder of the surrogates used by [Commerce] to value the factors of production

were from India, we find it even more appropriate to not use a surrogate value from the

2
The record also indicates that there is a viable market in India for the stainless steel
used in Plaintiffs’ product, as evidenced by Plaintiffs’ advocacy of India as a surrogate
country because it is a “significant producer” of the product. See Initiation Notice, 73
Fed. Reg. at 10,223 (citing Petition, at 6-7); Petitioners Comments on Surrogate
Selection, Pub. Rec. Doc. 66, at 2-3.
Court No. 09-00127 Page 8

United States to value stainless steel.” Remand Results at 10 (citing 19 C.F.R.

§ 351.408(c)(2)).

Commerce also explained its basis for rejecting the alternative data sets

advocated by Plaintiffs. First, Plaintiffs argue that Commerce should have calculated

the surrogate values using either Plaintiffs’ own costs for grades 304 and 316 or those

reported by the American Metal Market. Pls.’ Cmts. at 2. Commerce explained,

however, that these data sets are poor surrogates for metal prices in China because the

United States is not an acceptable surrogate country for China. See Remand Results

at 10. Although Commerce has occasionally used United States data as a last resort

when the record lacks surrogate country data, in this case the WTA data came from

India, the surrogate country that Plaintiffs advocated and Commerce selected.

Commerce’s decision to use the Indian WTA data rather than the United States data is

consistent with the statutory and regulatory provisions requiring Commerce to use

surrogate country data to the extent possible. See 19 U.S.C. § 1677b(c)(4); 19 C.F.R.

§ 351.408(c). See also Remand Results at 10. In addition, Plaintiffs’ suggestion that

Commerce use Plaintiffs’ own cost data fails to satisfy Commerce’s preference to use

publicly available information.

The next data set Plaintiffs advocate, grades 304 and 316 steel prices from

Management Engineering & Production Services (“MEPS”), suffers from similar

deficiencies. As Commerce explained, the MEPS data provide no information regarding

the countries from which it was derived. Remand Results at 7, 10. The data potentially

includes prices from non-surrogate countries; it also potentially includes prices from
Court No. 09-00127 Page 9

nonmarket economy countries and those that maintain broadly available export

subsidies that are inappropriate for use in valuing factors of production. Id. Commerce

concluded that use of such data would thus not provide reliable information on which to

calculate a surrogate value for stainless steel from China and would conflict with

Commerce’s statutory preference for data from a single, appropriate surrogate country.

The final alternative data set that Plaintiffs advocate is a price list from the Steel

Authority of India Ltd. (“SAIL”). Pls.’ Cmts. at 2. Commerce explained that it prefers

actual prices over price lists because price lists may not reflect the prices paid in actual

transactions. Remand Results at 7, 10. Price lists, which constitute a producer’s

opening offer, may be just the starting point in a negotiation that could result in a

significantly different final sale price. They also represent the experience of a single

producer, rather than a broad market average. See Laminated Woven Sacks from the

People's Republic of China, 73 Fed. Reg. 35,646 (Dep’t of Commerce June 24, 2008)

and accompanying Issues and Decision Memorandum, cmts. 2 & 3. Unlike the SAIL

price list, the WTA data report actual prices paid for stainless steel imports throughout

India (including grades 304 and 316). Remand Results at 10. Hence, Commerce

reasonably determined that the WTA data better met its criteria.

The issue here closely resembles one decided by the court in Polyethylene Retail

Carrier Bag Comm. v. United States, 29 CIT 1418, 1436-45 (2005). In Polyethylene

Retail a party challenged Commerce’s use of Indian HTS data to calculate the surrogate

value of an input in an antidumping investigation because the data was not as specific

as alternatives that party proposed. As in this case, Commerce determined that the
Court No. 09-00127 Page 10

less-specific HTS data was still the “best available information” because of more serious

flaws with the proposed alternatives. The court recognized that the “broad [Indian HTS]

basket provisions include a large number of products Plaintiffs did not use to produce

the subject merchandise,” id. at 1437, but nonetheless upheld Commerce’s

determination that the Indian HTS data was still the best data available, stating that it

would not “substitute its own evidentiary evaluation for Commerce's.” Id. at 1445.

Here, Commerce provided a reasoned basis for determining that the WTA data it

used both met its criteria for selecting surrogate values and constituted better data than

the alternatives proposed by Plaintiffs. As in Polyethylene Retail, the court is reluctant

to “substitute its own evidentiary evaluation for Commerce's,” id., and to substitute its

own judgment for the agency’s in considering and weighing the relative importance of

the various criteria applied. The important point is that Commerce carefully considered

each of its announced criteria against the alternative data sources on the record, and

proffered a reasoned explanation for its ultimate choice. With that said, Commerce’s

surrogate value selection for stainless steel inputs is reasonable, and therefore

supported by substantial evidence.

B. Whether Jiuli Is Entitled to a Separate Rate

An exporter may “affirmatively demonstrate its entitlement to a separate,

company-specific margin by showing an absence of central government control, both in

law and in fact, with respect to exports.” Sigma Corp. v. United States, 117 F.3d 1401,

1405 (Fed. Cir. 1997) (citation omitted); Pls.’ Cmts. at 7 (quoting Sigma). Jiuli made

such a showing in this case. Id. at 10. Nonetheless, Plaintiffs argue that Jiuli may only
Court No. 09-00127 Page 11

qualify for a separate margin if it submitted “company-specific price and cost data to

[Commerce] . . . in addition to showing an absence of government control.” Id. at 7; see

also id. at 8-9. Plaintiffs’ arguments are unpersuasive.

Commerce has a well-established administrative practice of calculating a

separate rate for those responsive companies that are part of the “sample pool” for an

investigation and for which Commerce lacks the resources to investigate individually.

Policy Bulletin 05.1: Separate-Rates Practice and Application of Combination Rates in

Antidumping Investigations Involving Non-Market Economy Countries, at 2, 3-4, 6

(Apr. 5, 2005), available at http://ia.ita.doc.gov/policy/bull05-1.pdf (explaining separate

rate practice and stating Commerce will calculate a separate rate for the “pool of

non-investigated firms” in an NME proceeding). See also Certain Kitchen Appliance

Shelving and Racks From the People's Republic of China, 74 Fed. Reg. 9591, 9596-97

(Dep’t of Commerce Mar. 5, 2009) (applying separate rate to pool of cooperating, non-

investigated respondents); Sodium Hexametaphosphate From the People’s Republic of

China, 73 Fed. Reg. 6479, 6480-81 (Dep’t of Commerce Feb. 4, 2008) (same).

The court, in turn, has upheld Commerce’s practice of calculating this kind of

rate. Coalition for the Pres. of Am. Brake Drum and Rotor Aftermkt. Mfrs. v. United

States, 23 CIT 88, 111, 44 F. Supp. 2d 229, 251 (1999) (explaining that Commerce’s

approach has the “weight of fairness and common sense”). Although Brake Drum did

not use the precise term “sample pool rate,” it involved the exact same kind of rate

Commerce applied here. See Brake Drums and Brake Rotors from the People's

Republic of China, 62 Fed. Reg. 9160, 9162 (Dep’t of Commerce Feb. 28, 1997)
Court No. 09-00127 Page 12

(stating Commerce applied a separate rate to exporters that “cooperated with our

investigations but which were not selected as respondents”).

The court cannot identify any support in the statute or case law to substantiate

Plaintiffs’ argument that companies like Jiuli may not qualify for a separate rate unless

they meet an additional requirement of submitting company-specific price and cost data,

even if Commerce makes no such request. Such a requirement would eviscerate

Commerce’s separate rate policy. See Policy Bulletin 05.1, at 4 (separate rate

application “will replace the requirement that [non-selected firms] respond to Section A

of the Department’s questionnaire”).

In the Remand Results Commerce explained the difference between “all others”

rates and “sample pool” rates: once established in an investigation, an “all others” rate

does not change in subsequent administrative proceedings, whereas a “sample pool”

rate may change from one review to another (or not be calculated at all). Remand

Results at 2, 3, 12. In NME proceedings, Commerce typically need not calculate an “all

others” rate because Commerce presumes that all producers and exporters either

qualify for a rate separate from the NME entity or are assumed to be part of the entity.

Remand Results at 2-3, 13 (citing Brake Drum, 23 CIT at 107, 44 F. Supp. 2d at 248.

Nevertheless, when calculating an NME “sample pool” rate, Commerce is guided by the

“all others rate” provision, 19 U.S.C. § 1673d(c)(5). Amanda Foods (Vietnam) Ltd. v.

United States, 33 CIT ___, ___, 647 F. Supp. 2d 1368, 1379 (2009) (“To determine the

dumping margin for non-mandatory respondents in NME cases (that is, to determine the
Court No. 09-00127 Page 13

“separate rates” margin), Commerce normally relies on the ‘all others rate’ provision of

19 U.S.C. § 1673d(c)(5).”).

Plaintiffs contend that Commerce is prohibited from calculating a separate rate

for Jiuli because 19 U.S.C. § 1673d(c)(5) first requires Commerce to have calculated an

individually-investigated rate for another respondent that demonstrated its

independence from government control. Pls.’ Cmts. at 9, 12. Commerce, though, has

never found such a precondition within the statute. Remand Results at 4 (“[T]he statute

does not require the existence of an individually examined rate for a rate to be assigned

to the sample pool.”). Commerce explained that, consistent with 19 U.S.C.

§ 1673d(c)(5), it will normally base its sample pool rate on the margins “established for

exporters and producers individually examined, excluding de minimis margins or

margins based entirely on [adverse facts available],” and that, because in this case it

assigned the China-wide entity it investigated a dumping margin based entirely on

adverse facts available, it would use another reasonable calculation method for Jiuli.

Remand Results at 4. Commerce also explained that it determined both that the China-

wide entity’s rate was not reasonably reflective of Jiuli’s dumping rates and that it was

inappropriate to assign a cooperative respondent like Jiuli an antidumping margin based

entirely on adverse facts available due to another respondent’s failure to cooperate. Id.

at 4, 6, 15. These are reasonable conclusions.

Commerce’s chosen methodology of applying an average of the initiation

margins is also consistent with what Commerce has done in other NME investigations in

which the individually investigated rates are based entirely on adverse facts available,
Court No. 09-00127 Page 14

and with what Commerce has done in market economy proceedings in which the

individually investigated rates are zero, de minimis, or based entirely on adverse facts

available. See Sodium Hexametaphosphate, 73 Fed. Reg. 6479 (assigning average of

the initiation margins as sample pool rate); Glycine from Japan, 72 Fed. Reg. 67,271

(Dep’t of Commerce Nov. 28, 2007) (calculating all-others rate based upon average of

the petition rates); Certain Cold-Rolled Flat-Rolled Carbon-Quality Steel Products From

Argentina, Japan, and Thailand, 65 Fed. Reg. 5,520 (Dep’t of Commerce Feb. 4, 2000)

(same); Stainless Steel Plate in Coils from Canada, 64 Fed. Reg. 15,457 (Dep’t of

Commerce Mar. 31, 1999) (same).

Finally, in the Remand Results Commerce addressed Plaintiffs’ arguments that

Commerce should have used the “expected methodology” specified in the Statement of

Administrative Action. Remand Results at 5-6, 15-16. The expected methodology is a

calculation in which Commerce “weight-average[s] the zero and de minimis margins and

the margins determined pursuant to the facts available.” The Uruguay Round

Agreements Act, Statement of Administration Action (“SAA”), H.R. Doc. No. 103-826(I),

at 873 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4201. Commerce explained:

“given that, in this case, there are no zero or de minimis margins on the record of this

proceeding, calculating Jiuli’s margin according to the expected methodology is not

applicable.” Remand Results at 5. Commerce further explained that the SAA expressly

states that if Commerce determines the expected methodology “‘would not be

reasonably reflective of potential dumping margins for non-investigated exporters and
Court No. 09-00127 Page 15

producers’” it has discretion to “‘use other reasonable methods’” in calculating the rate

for these companies. Id. at 6 (quoting SAA).

Here, as discussed above, Commerce made that determination. It found that the

China-wide entity’s adverse facts available rate was not reasonably reflective of

potential dumping margins for Jiuli because the adverse facts available rate was higher

than the adjusted petition rates upon which Commerce initiated the investigation, and

that it would be unreasonable to apply the adverse facts available rate to Jiuli as a result

of Commerce’s administrative resource constraints. Remand Results at 6. Given the

available margins in the record, Commerce reasonably assigned Jiuli a rate based upon

an average of the petition rates, and corroborated the rate to the extent practicable

using the mandatory respondent’s unverified data, which was the only other data in the

record.

CONCLUSION

Commerce’s Remand Results are supported by substantial evidence, and

otherwise in accordance with law. Accordingly, the court will sustain Commerce’s

Remand Results and enter judgment for the United States.

/s/ Leo M. Gordon
Judge Leo M. Gordon

Dated: April 20, 2010
New York, New York