Slip Op. 11- 147
UNITED STATES COURT OF INTERNATIONAL TRADE
CLEARON CORPORATION AND
OCCIDENTAL CHEMICAL
CORPORATION,
Plaintiffs, Before: Judith M. Barzilay, Senior Judge
v. Court No. 10-00377
UNITED STATES,
Defendant,
ARCH CHEMICALS, INC.,
Defendant-Intervenor.
[Plaintiffs’ motion for judgment on the agency record denied.]
Dated: November 30, 2011
Gibson, Dunn & Crutcher LLP, (Daniel J. Plaine, J. Christopher Wood, and Andrea F. Farr),
for Plaintiffs Clearon Corporation and Occidental Chemical Corporation.
Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, Patricia M. McCarthy,
Assistant Director, David D’Alessandris, Trial Attorney, Commercial Litigation Branch, Civil
Division, U.S. Department of Justice; and Office of the Chief Counsel for Import
Administration, U.S. Department of Commerce (David Richardson), of counsel, for Defendant
United States.
Blank Rome LLP, (Larry A. Hampel), for Defendant-Intervenor Arch Chemicals, Inc.
OPINION
BARZILAY, Senior Judge: Plaintiffs Clearon Corp. and Occidental Chemical Corp.
(domestic producers), move for judgment upon the agency record pursuant to USCIT Rule 56.2,
Court No. 10-00377 Page 2
challenging a decision of the United States Department of Commerce (“Commerce”) during an
administrative review of the antidumping duty order covering chlorinated isocyanurates from the
People’s Republic of China for the 2008-09 period of review. See Chlorinated Isocyanurates
from the People's Republic of China, 75 Fed. Reg. 70,212 (Dep’t of Commerce Nov. 17, 2010)
(final results admin. review), as amended by Chlorinated Isocyanurates from the People’s
Republic of China, 75 Fed. Reg. 76,699 (Dep’t of Commerce Dec. 9, 2010) (correction to final
results) (“Final Results”); see also Issues and Decision Memorandum for the 2008 – 2009
Administrative Review of Chlorinated Isocyanurates from the People’s Republic of China, A-
570-898 (Nov. 10, 2010), available at http://ia.ita.doc.gov/frn/summary/PRC/2010-29020-1.pdf
(“Decision Memorandum”). Specifically, Plaintiffs challenge Commerce’s exclusion from the
best available information certain surrogate company financial statements that Commerce
determined were tainted by subsidies. The court has jurisdiction pursuant to 19 U.S.C. §
1516a(a)(2)(B)(iii) and 28 U.S.C. § 1581(c). For the reasons set forth below, the court sustains
the Final Results.
I. STANDARD OF REVIEW
For administrative reviews of antidumping duty orders, 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. § 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, 1352 (Fed. Cir. 2006). 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 (Fed. Cir.
Court No. 10-00377 Page 3
2005) (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); see also Catfish Farmers of Am. v. United States, 33 CIT __, __, 641
F. Supp. 2d 1362, 1366 (2009) (“The administrative record for an antidumping duty
administrative review may support two or more reasonable, though inconsistent, determinations
on a given issue.”).
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) (“Chevron”), governs judicial review of
Commerce’s interpretation of the antidumping statute. Dupont Teijin Films USA, LP v. United
States, 407 F.3d 1211, 1215 (Fed. Cir. 2005); 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); 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.”).
II. DISCUSSION
Commerce calculates antidumping duty margins by comparing the “normal value” of the
subject merchandise with its actual or constructed export price. 19 U.S.C. § 1677b(a). In the non-
market economy context Commerce approximates normal value by using the “best available
information” from surrogate countries and companies. 19 U.S.C. § 1677b(c)(1). Included is
“general expenses and profit,” id., which Commerce calculates using financial ratios derived
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from financial statements of one or more surrogate companies. Among the criteria Commerce
uses to select the best available financial statements (reliability, availability, quality, specificity,
contemporaneity), Commerce generally avoids information tainted by subsidies. Catfish Farmers
of Am., 641 F. Supp. 2d at 1378, 1380.
Commerce adopted this criterion from the legislative history to the 1988 amendments to
the antidumping statute, which noted that Commerce should avoid prices that “it has reason to
believe or suspect may be subsidized,” and further explained that Commerce need not “conduct a
formal investigation to ensure that such prices are not subsidized, but rather . . . [should] base its
decision on information generally available to it at that time.” Omnibus Trade and
Competitiveness Act of 1988, H.R. Rep. No. 100-576, at 590 (1988) (Conf. Rep.), reprinted
in 1988 U.S.C.C.A.N. 1547, 1623-24 (“H.R. Report”). Other than this short statement in the
legislative history, Congress provided no further guidance as to what would constitute a
reasonable basis to believe or suspect that a price may be subsidized, leaving further
development to Commerce in its discretion.
Commerce, in turn, has chosen to address the issue, case-by-case, through administrative
practice, and has identified some general guideposts: (1) If a financial statement contains a
reference to a specific subsidy program found to be countervailable in a formal CVD
determination, Commerce will exclude that financial statement from consideration. (2) If a
financial statement contains only a mere mention that a subsidy was received, and for which
there is no additional information as to the specific nature of the subsidy, Commerce will not
exclude the financial statement from consideration. See Issues and Decision Memorandum for
the Final Results of the 3rd New Shipper Reviews: Certain Frozen Fish Fillets from the Socialist
Republic of Vietnam, A-552-801, at 4-5 (Dep’t of Commerce June 15, 2009), available at
Court No. 10-00377 Page 5
http://ia.ita.doc.gov/frn/summary/VIETNAM/E9-14607-1.pdf (“Decision Memorandum for
Frozen Fish from Vietman”).
In the Preliminary Results, Commerce used the financial statements of two Indian
companies, Aditya Birla Chemicals Limited (“Aditya”) and Kanoria Chemicals & Industries
Limited (“Kanoria”), to calculate the financial ratios for the respondent. See Chlorinated
Isocyanurates From the People’s Republic of China, 75 Fed. Reg. 27,302, 27,307 (Dep’t of
Commerce May 14, 2010) (prelim. results); see also Decision Memorandum at 15. The
respondent challenged Commerce’s decision to include Aditya’s financial statements, arguing
that the reference to “Capital Subsidy” in the annual report reflected the receipt of a subsidy that
Commerce found countervailable in a prior administrative proceeding. Respondent’s Admin.
Case Br. 11 (citing Polyethylene Terephthalate Film Sheet, and Strip from India, 71 Fed. Reg.
7,534 (Dep’t Commerce, Feb. 13, 2006) (“PET Films”)). In their rebuttal brief, Plaintiffs argued
that the particular reference to “Capital Subsidy” did not reflect a countervailable subsidy, but
instead referred to a financial contribution made by the majority owners of the company, not the
government. Pl. Admin. Rebuttal Br. 6, 9. Plaintiffs did not make any other arguments; they did
not mention or cite PET Films, or present any arguments about Commerce’s policy of handling
information tainted by subsidies. This is all Plaintiffs said in their rebuttal brief on this issue:
[Respondent’s] second argument, that “Aditya received Capital Subsidies,” is
even less meritorious and is contradicted by the plain language of the ABCIL
financial statement. [Respondent’s] brief (at p. 11) cites several instances in
which the term “Capital Subsidy” appears in the ABCIL financial statement but
conspicuously omits any reference to the specific note in the financial statement
that explains the meaning of the term. In fact, page 39 of the ABCIL annual report
states that “During the year, the Company has reclassified its treatment in respect
of Capital Subsidy related to Promoter’s Contribution and accordingly treated the
same as Capital Reserve.” [Aditya] Annual Report at 39 (emphasis added). In
other words, the “Capital Subsidy” on which [Respondent] bases its argument has
nothing to do with the Government of India. It is a contribution of funds from the
Court No. 10-00377 Page 6
Promoters of ABCIL, who are shown in the annual report as the majority owners
of the company.
Id. (citation omitted). Commerce reviewed the issue and concluded that “Capital Subsidy” did
implicate an impermissible subsidy program that Commerce had found countervailable in PET
Films. See Decision Memorandum at 17. Accordingly, Commerce did not use Aditya’s financial
statements in its ratio calculation, and instead relied on Kanoria’s financial information. Id.
Plaintiffs seek a remand instructing Commerce to include Aditya’s financial information
in the agency’s financial ratio calculation. Pl. Br. 15-16. Plaintiffs raise a substantial evidence
challenge to Commerce’s action, repeating their argument at the administrative level that the
subsidies mentioned Aditya’s financial statements were not from the Government of India. Pl.
Br. 7-8. Plaintiffs then introduce a new argument, not made before the agency, that the “Capital
Subsidy” program identified in PET Films lacked sufficient specificity to justify exclusion under
Commerce’s policy for handling information tainted by subsidies. Pl. Br. 9-15.
A. Commerce’s Interpretation of Aditya’s Financial Statements
On the first issue, Plaintiffs argue that Commerce misread the plain language of Aditya’s
annual report, which they contend explains that the “Capital Subsidy” entry represents a financial
contribution by the majority owners of Aditya and not the Government of India. Pl. Br. 7-8.
According to Plaintiffs, Commerce misread page 38 of the Aditya’s annual report (which
references three types of “Capital Subsidy/Government Grant”) and similarly misread page 39 of
the report (which, in Note 2, states that Aditya “has reclassified its treatment in respect of Capital
Subsidy related to Promoter’s Contribution and accordingly treated the same as Capital
Reserve”). JA 241, 242. Plaintiffs argue that the language in Note 2 demonstrates that the
“Capital Subsidy” entry is not a government subsidy but a financial contribution by the
promoters, who, in this case, are the majority owners of the company. Pl. Br. 7-8.
Court No. 10-00377 Page 7
In the Final Results, Commerce explained that
page 38 of Aditya’s financial statements characterizes “Capital Subsidy” in
multiple ways: (1) Capital subsidy/Government grants are accounted for where it
is reasonably certain that the ultimate collection will be made; (2) Capital
subsidy/Government grants related to specific non depreciable assets are credited
to capital reserve account; (3) Capital subsidy/Government grants related to
specific depreciable assets are credited to capital reserve account and are
recognized as income in profit and loss statement on a systematic and rational
basis over the useful life of the assets; (4) Capital subsidy/Government grants in
the nature of Promoter’s Contribution are credited to capital reserve account. In
other words, Aditya’s financial statements clearly indicate that Aditya
receives multiple types of aid through “Capital subsidy/Government grants”
and that the aid Aditya receives is not limited to “Promoter’s Contribution.”
Thus, because “Capital Subsidy” is a program the Department has found provides
countervailable benefits, the Department has reason to believe or suspect that
Aditya received countervailable benefits.
Decision Memorandum at 18 (emphasis added).
Commerce reasonably concluded that the three forms of Capital Subsidies identified in
the annual report (depreciable assets, non-depreciable assets, and Promoter’s Contribution)
constituted evidence that Aditya received multiple forms of government aid. Id. Commerce also
considered the language in Note 2, which addresses only Promoter’s Contribution, and
reasonably concluded that the subsidies were not limited to Promoter’s Contribution but also
included subsidies related to depreciable and non-depreciable assets. Id. at 18. Commerce did not
agree with Plaintiffs’ view that the language in Note 2 proves Aditya receives no government
subsidies. Id. Commerce therefore did not share Plaintiffs’ inferences and assumptions about the
financial statements. See Catfish Farmers of Am., 641 F. Supp. 2d at 1380 (“Commerce refused
to indulge [petitioner’s] hoped for inferences and assumptions. . . .”).
Plaintiffs’ argument ultimately fails because it requires the court to choose between what
appear to be two reasonable interpretations of Aditya’s financial statements. For example, one
might reasonably infer, as suggested by Plaintiffs, that the references to the subsidies were mere
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statements of Aditya’s accounting policy and did not reflect actual government infusions during
the period of review. Pl. Br. 7-8, Pl. Reply Br. 8. Alternatively, one might also reasonably infer,
as Commerce did, that the references to the “Capital Subsidy” program (which Commerce
previously identified as countervailable in PET Films), indicated that Aditya received multiple
forms of government aid during the review period in the form of depreciable and non-
depreciable assets, and perhaps even Promoter’s Contribution. See Decision Memorandum at 18.
A well-established principle of substantial evidence review is that “[t]he possibility of
drawing two inconsistent conclusions from the evidence does not prevent an administrative
agency's finding from being supported by substantial evidence.” Consolo, 383 U.S. at 620; see
also Catfish Farmers of Am., 641 F. Supp. 2d. at 1366 (“The administrative record for an
antidumping duty administrative review may support two or more reasonable, though
inconsistent, determinations on a given issue.”). Although Plaintiffs put forth what might be
considered a reasonable interpretation of the Aditya financial statements, Commerce’s choice
was also reasonable and therefore must be sustained.
B. Commerce’s Policy of Excluding Information Tainted by Subsidies
Plaintiffs next argue for the first time that Commerce’s decision to reject Aditya’s
financial statements violated its policy of requiring reference to a “specific subsidy program”
before excluding it as a source of surrogate value information. Pl. Br. 9-15. In particular,
Plaintiffs dispute Commerce’s reliance on PET Films (a CVD determination from 2006) to
establish a “specific subsidy program.” Pl. Br. 13-15; Pl. Reply Br. 1-7; see Issues and Decision
Memorandum for the 2003 Countervailing Duty Administrative Review of Polyethylene
Terephthalate Film, Sheet, and Strip from India: Final Results, C-533-825, at 6 (Feb. 13, 2006),
available at http://ia.ita.doc.gov/frn/summary/INDIA/E6-1989-1.pdf; see also Notice of
Court No. 10-00377 Page 9
Preliminary Results and Rescission in Part of Countervailing Duty Administrative Review:
Polyethylene Terephthalate Film, Sheet, and Strip From India, 69 Fed. Reg. 18,542, 18,547
(Dep’t of Commerce Apr. 8, 2004) (prelim. results of admin. review) unchanged in Final Results
of Countervailing Duty Administrative Review: Polyethylene Terephthalate Film, Sheet, and
Strip from India, 69 Fed. Reg. 51,063 (Dep’t of Commerce Aug. 17, 2004) (final results of
admin. review). Plaintiffs maintain that PET Films did not establish “Capital Subsidy” as a
specific subsidy program because Commerce applied facts available to make its determination.
Pl. Br. 13-14. Plaintiffs argue that Commerce was unable to define “Capital Subsidy” with
sufficient specificity in PET Films for it to serve as a valid reference to a specific subsidy
program in this case. Pl. Br. 9-14; Pl. Reply Br. 5-7.
Plaintiffs unfortunately did not present these arguments to Commerce when they had the
opportunity. As noted above, respondent in its case brief placed the issue of PET Films and the
“Capital Subsidy” program squarely in play. The time for Plaintiffs to raise the above arguments
was in their rebuttal brief to the agency. See 19 C.F.R. § 351.309(d) (2010). When reviewing
Commerce’s antidumping determinations, the Court of International Trade requires litigants to
exhaust administrative remedies “where appropriate.” 28 U.S.C. § 2637(d) (2006); see also 19
C.F.R. § 351.309(c)(2) (2010) (“The case brief must present all arguments that continue in the
submitter’s view to be relevant to the final determination.”). “This form of non-jurisdictional
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.” Carpenter Tech. Corp. v. United States, 30 CIT 1373, 1374-75, 452 F. Supp.
2d 1344, 1346 (2006) (citing Woodford v. Ngo, 548 U.S. 81, 89 (2006)); see also Corus Staal BV
Court No. 10-00377 Page 10
v. United States, 502 F.3d 1370, 1379 (Fed. Cir. 2007) (noting that the Court of International
Trade “generally takes a ‘strict view’ of the requirement that parties exhaust their administrative
remedies before the Department of Commerce in trade cases.”); Fuwei Films (Shangdong) Co. v.
United States, 35 CIT __, __, 791 F. Supp. 2d 1381, 1384 (2011) (“An important corollary
requirement to exhaustion of administrative remedies is Commerce’s own regulatory
requirement that parties raise all issues within their administrative case briefs. . . . This
requirement works in tandem with the exhaustion requirement and promotes the same twin
purposes of protecting administrative agency authority and promoting judicial efficiency.”).
By failing to raise at the administrative level their arguments about PET Films and
Commerce’s policy concerning surrogate information tainted by subsidies, Plaintiffs deprived
Commerce of the opportunity to address those issues and make a “determination, finding, or
conclusion.” 19 U.S.C. § 1516a(b)(1). This is especially important here where Plaintiffs’ new
arguments implicate Commerce’s gap-filling, policy-making discretion. For the court to review
properly Commerce’s exercise of that discretion, Commerce must “cogently explain why it has
exercised its discretion in a given manner.” Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto.
Ins. Co., 463 U.S. 29, 48 (1983). Commerce, though, had no reason to provide detailed
explanations to arguments that were never made. The statute requires Commerce to address
“relevant arguments, made by interested parties.” 19 U.S.C. § 1677f(i)(3)(A). As the excerpt
quoted above from Plaintiffs’ rebuttal brief makes clear, Plaintiffs focused their arguments solely
on proposed interpretations of Aditya’s financial statements. Commerce fully addressed
Plaintiffs’ arguments about how to interpret the Aditya financial statements. There was simply
no reason for Commerce to do more, especially when operating under the challenges imposed by
tight statutory deadlines. Plaintiffs failed to raise any issues about PET Films or Commerce’s
Court No. 10-00377 Page 11
policy of requiring reference to a “specific subsidy program.” See Decision Memorandum for
Frozen Fish from Vietnam at 4-5. As a result, Commerce did not have the opportunity to “apply
its expertise,” potentially “rectify administrative mistakes,” or “compile a record adequate for
judicial review.” Carpenter, 452 F. Supp. 2d at 1374-75. Requiring exhaustion of administrative
remedies on these new arguments is therefore appropriate. The court will not consider Plaintiffs’
new arguments regarding Commerce’s exclusion of the Aditya financial statements. The court
will instead sustain Commerce’s decision.
III. CONCLUSION
One final note should be made. The issue here arose because Commerce had limited data
points for the financial ratio calculations. There were initially only two potential surrogate
companies, Aditya and Kanoria, with the exclusion of Aditya leaving Commerce with one. It is
unfortunate for Plaintiffs that the elimination of Aditya left only Kanoria’s information.
However, the burden of creating an adequate record ultimately falls upon Plaintiffs. See QVD
Food Co. v. United States, 658 F.3d 1318, 1324 (Fed. Cir. 2011) (“[T]he burden of creating an
adequate record lies with [interested parties] and not with Commerce.”) (internal quotation
marks and citation omitted).
To conclude, Commerce’s decision to exclude Aditya’s financial statements from its
financial ratio calculation is reasonable on this administrative record. Plaintiffs’ motion for
judgment on the agency record is denied. Judgment will be entered accordingly.
Dated: November 30, 2011 /s/ Judith M. Barzilay
New York, NY Judith M. Barzilay, Senior Judge