Liberty Frozen Foods Pvt., Ltd. v. United States

Slip Op. 11-96

UNITED STATES COURT OF INTERNATIONAL TRADE

LIBERTY FROZEN FOODS PVT., LTD.,
et al.,

Plaintiffs, Before: Pogue, Chief Judge

– v – Consol.1 Court No. 10-00231

UNITED STATES,

Defendant,

– and –

AD HOC SHRIMP TRADE ACTION
COMMITTEE, et al.,

OPINION

[Remanding to the Department of Commerce for reconsideration of
Plaintiffs’ dumping margin calculation in administrative review
of antidumping duty order.]

Dated: August 3, 2011

Kutak Rock LLP (Lizbeth R. Levinson and Ronald M. Wisla) for
the Plaintiffs.

Tony West, Assistant Attorney General; Jeanne E. Davidson,
Director; Particia M. McCarthy, Assistant Director, Commercial
Litigation Branch, Civil Division, United States Department of
Justice (Joshua E. Kurland) for the Defendant.

Picard, Kentz & Rowe, LLP (Nathaniel J. M. Rickard, Andrew
W. Kentz, Jordan C. Kahn and Kevin M. O’Connor) for Defendant-
Intervernor Ad Hoc Shrimp Trade Action Committee.

1
This action was consolidated with Court No. 10-00237,
which has been dismissed. Order, Ad Hoc Shrimp Trade Action
Committee v. United States, No. 10-00237 (CIT Mar. 1, 2011)
(USCIT Rule 41(a)(1)(A)(ii) dismissal).
Consol. Court No. 10-00231 Page 2

Stewart and Stewart (Geert M. De Prest and Elizabeth J.
Drake) and Leake & Andersson, LLP (Edward T. Hayes) for
Defendant-Intervenor American Shrimp Processors Association.

Pogue, Chief Judge: In this action, Plaintiffs seek review

of the United States Department of Commerce’s (“Commerce” or the

“Department”) Final Results in the fourth administrative review

of the antidumping duty order covering certain frozen warmwater

shrimp from India.2 Specifically, Plaintiffs challenge

Commerce’s inclusion of, and method of calculation for, their bad

debt expenses in the cost of sales at issue in this review. The

court has jurisdiction pursuant to 28 U.S.C. § 1581(c) (2006).3

As explained in detail below, the court concludes that,

although Commerce correctly included the contested bad debt

expenses in its determination, Commerce’s calculation of

Plaintiffs’ specific expenses was arbitrary, and thus contrary to

2
See Certain Frozen Warmwater Shrimp from India, 75 Fed.
Reg. 41,813 (Dep’t Commerce July 19, 2010) (final results of
antidumping duty administrative review, partial rescission of
review, and notice of revocation of order in part) (“Final
Results”), and accompanying Issues & Decision Memorandum, A-533-
840, ARP 08-09 (July 13, 2010), Admin. R. Pub. Doc. 310 (“I & D
Mem.”) (adopted in Final Results, 75 Fed. Reg. at 41,815).
Plaintiffs were respondents in the review.
3
Jurisdiction under 28 U.S.C. § 1581(c) attaches where, as
here, an action is brought under Section 516A(a)(2) of the Tariff
Act of 1930, as amended, 19 U.S.C. § 1516a(a)(2) (2006)
(providing a cause of action for, inter alia, challenges to final
determinations by Commerce in administrative reviews of
antidumping duty orders). All further citations to the Tariff
Act of 1930, as amended, are to Title 19 of the U.S. Code, 2006
edition.
Consol. Court No. 10-00231 Page 3

law. This issue is therefore remanded to the agency for

reconsideration.

BACKGROUND

Commerce calculates dumping margins by comparing export

prices to the subject merchandise’s normal value in the

producer’s home or comparison market.4 Among the calculations

used to arrive at the appropriate normal value is the

Department’s calculation of a mandatory5 respondent’s selling

4
Goods are considered “dumped” when they are sold at less
than fair value (“LTFV”), 19 U.S.C. § 1677(34) – that is, when
“the normal value exceeds the export price or constructed export
price of the subject merchandise.” 19 U.S.C. § 1677(35)(A).
“Normal value” is “the price at which the foreign like product is
first sold (or, in the absence of a sale, offered for sale) 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
. . ., at a time reasonably corresponding to the time of the sale
used to determine the export price or constructed export price.”
19 U.S.C. § 1677b(a)(1)(A) & (B)(i). “Export price” is “the
price at which the subject merchandise is first sold (or agreed
to be sold) before the date of importation by the producer or
exporter of the subject merchandise outside of the United States
to an unaffiliated purchaser in the United States or to an
unaffiliated purchaser for exportation to the United States, as
adjusted under [19 U.S.C. § 1677a(c)].” Id. at § 1677a(a).
Constructed export price is not applicable here.
5
See 19 U.S.C. § 1677f-1(c)(2)(B) (“If it is not
practicable to make individual weighted average dumping margin
determinations [] because of the large number of exporters or
producers involved in the investigation or review, [Commerce] may
determine the weighted average dumping margins for a reasonable
number of exporters or producers by limiting its examination to
. . . exporters and producers accounting for the largest volume
of the subject merchandise from the exporting country that can be
reasonably examined.”). When the Department limits its
examination pursuant to 19 U.S.C. § 1677f-1(c)(2), the
Consol. Court No. 10-00231 Page 4

expenses during the period of review (“POR”).6

Within the POR at issue here7 – in March, 2008 – one of the

companies comprising the Liberty Group, Liberty Frozen Foods,

Pvt., Ltd.(“LFF”), wrote off the value of a sale for which full

payment had not been received (the “write-off”).8 The Liberty

Group did not, however, report the value of this bad debt write-

off as part of its POR costs. See Supplemental Section D Resp. Of

respondents selected for individual review are referred to as
“mandatory respondents.” E.g., Certain Frozen Warmwater Shrimp
from India, 75 Fed. Reg. 12,175, 12,176 (Dep’t Commerce Mar. 15,
2010) (preliminary results of antidumping administrative review,
partial rescission of review, notice of intent to rescind review
in part, and notice of intent to revoke order in part) (“Prelim.
Results”).
The Department selected the Plaintiffs, collapsed into a
single entity (the “Liberty Group”), for individual review as a
mandatory respondent. Final Results, 75 Fed. Reg. at 41,813 &
n.2.
6
See 19 U.S.C. § 1677b(a)(6)(C)(iii) (Commerce may make
adjustments to normal value to account for differences in the
circumstances of sales in the U.S. and foreign markets);
19 C.F.R. § 351.410(b) (selling expenses relevant to
determination of differences in circumstances of sales) & (c)
(defining “direct selling expenses” as “expenses, such as
commissions, credit expenses, guarantees, and warranties, that
result from, and bear a direct relationship to, the particular
sale in question”). See also 19 C.F.R. § 412(f)(2) (defining
“indirect selling expenses” as “selling expenses, other than
direct selling expenses or assumed selling expenses (see
§ 351.410), that the seller would incur regardless of whether
particular sales were made, but that reasonably may be
attributed, in whole or in part, to such sales”).
7
The POR was February 1, 2008 through January 31, 2009.
Final Results, 75 Fed. Reg. at 41,814.
8
See Mem. of Points & Auths. in Supp. of Pls.’ 56.2 Mot.
for J. on Agency R. (“Pls.’ Br.”) 3-4.
Consol. Court No. 10-00231 Page 5

[LFF], A-533-840, ARP 08-09 (Oct. 7, 2009), Admin. R. Con. Doc.

28 [Pub. Doc. 219] (“LFF’s Supp. Sec. D Resp.”) Ex. 3.2.6

(identifying the write-off as an exclusion from its reported

costs). In explaining this omission, the Liberty Group stated

that the write-off was “related to [an] earlier year.” Id.

The Department then requested from the Liberty Group a

detailed explanation regarding this write-off.9 Responding to

this request, the Liberty Group submitted an unsupported

statement that the write-off relates to a quality claim from “[a]

buyer” of “certain sales” in financial year 2003-2004. 2d

Supplemental Section D Resp. of [LFF], A-533-840, ARP 08-09

(Feb. 4, 2010), Admin. R. Con. Doc. 49 [Pub. Doc. 270] 3.10

9
ITA 2d Supplemental Section D Questionnaire to Liberty
Group, A-533-840, ARP 08-09 (Jan. 7, 2010), Admin. R. Con. Doc.
44 [Pub. Doc. 258] ¶ 2(b) (“With regard to [the write-off][,] you
state that this expense was excluded because it relates to
‘earlier year’ (exhibit 3.2.6). Please explain in detail what
this expense represents, how it was recorded in the earlier year,
and why it should be excluded from the reported costs even though
it was recorded on the current financial statements as [a]
current period expense. Revise your response if necessary.”
(quoting LFF’s Supp. Sec. D Resp., Admin. R. Con. Doc. 28 [Pub.
Doc. 219] Ex. 3.2.6)).
10
(“The quality claim relates to financial year 2003-04.
The buyer concerned did not make part of the payment on certain
sales in that year on grounds of certain quality deficiencies.
The company did not accept the claim; consequently the amount in
dispute remained in receivables account. However after
discussions and in order to sustain business relationship it was
decided towards end of 2007-08 that the buyer’s claim should be
accepted. Therefore the amount was written off from receivables
during 2007-08.”).
Consol. Court No. 10-00231 Page 6

Based on this record, the Department determined it

appropriate to treat the write-off as part of LFF’s POR costs.

Prelim. Results, 75 Fed. Reg. at 12,184 (citing Liberty Group

Sales Calc. Mem., A-533-840, ARP 08-09 (Mar. 8, 2010), Admin. R.

Con. Doc. 59 [Pub. Doc. 288]). The Liberty Group objected,

arguing that the write-off should not be included in LFF’s POR

costs because it relates to sales made prior to the POR. I & D

Mem. Cmt. 5 at 17. In the alternative, the Liberty Group argued

that, because the POR spans over two of LFF’s financial years,11

the write-off should be pro-rated, such that only an amount

proportionate to the overlap between the financial year in which

it was recorded and the POR is included in the calculation of

LFF’s POR costs. Id. at 18.12

11
See [LFF’s] Sections B & C Resp., A-533-840, ARP 08-09
(July 7, 2009), Admin. R. Con. Doc. 10 [Pub. Doc. 174] Ex. B-9
(“The POR spans over two financial years: 2007-08 and 2008-09.
The sales for 2 months from 1st February 2008 to 31st March 2008
in first financial year and the sales for 10 months from 1st
April 2008 to 31st January 2009 in second financial year are
combined to arrive at sales for this POR.”).
12
See also [Liberty Group’s] Comments on Preliminary
Results, A-533-840, ARP 08-09 (Apr. 21, 2010), Admin. R. Con.
Doc. 67 [Pub. Doc. 298] (“Liberty Group Admin. Case Br.”).
Because the Liberty Group presented no other arguments to the
agency with regard to this write-off, see id., the court does not
consider Plaintiffs’ additional arguments, Pls.’ Br. 17-19. See
28 U.S.C. § 2637(d) (“[T]he Court of International Trade shall,
where appropriate, require the exhaustion of administrative
remedies.”); Corus Staal BV v. United States, 502 F.3d 1370, 1379
(Fed. Cir. 2007) (“[A]bsent a strong contrary reason, the court
should insist that parties exhaust their remedies before the
pertinent administrative agencies.”); Ad Hoc Shrimp Trade Action
Consol. Court No. 10-00231 Page 7

In its Final Results, the Department determined to continue

to treat the entire write-off as part of LFF’s POR costs. See

75 Fed. Reg. at 41,815; I & D Mem. Cmt. 5. The Liberty Group now

challenges Commerce’s decision.

STANDARD OF REVIEW

Under its familiar standard of review,“[t]he 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).

Substantial evidence is “such relevant evidence as a

reasonable mind might accept as adequate to support a

conclusion,” Consol. Edison Co. of N.Y. v. NLRB, 305 U.S. 197,

229 (1938); Gallant Ocean (Thail.) Co. v. United States, 602 F.3d

1319, 1323 (Fed. Cir. 2010) (same), ”taking into account the

entire record, including whatever fairly detracts from the

substantiality of the evidence.” Atl. Sugar, Ltd. v. United

States, 744 F.2d 1556, 1562 (Fed. Cir. 1984); see also Universal

Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951). Thus, the

Comm. v. United States, __ CIT __, 675 F. Supp. 2d 1287, 1300
(2009) (“The failure to include an argument in a case brief is a
failure to exhaust administrative remedies with respect to that
argument because it deprives Commerce of an opportunity to
consider the matter, make its ruling, and state the reasons for
its action.”) (internal quotation and alteration marks and
citation omitted).
Consol. Court No. 10-00231 Page 8

substantial evidence standard of review “can be translated

roughly to mean ‘is [the determination] unreasonable?’” Nippon

Steel Corp. v. United States, 458 F.3d 1345, 1351 (Fed. Cir.

2006) (quoting SSIH Equip. SA v. U.S. ITC, 718 F.2d 365, 381

(Fed. Cir. 1983)).

A determination, finding, or conclusion is not in accordance

with law if, inter alia, it is arbitrary. Pakfood Pub. Co. v.

United States, __ CIT __, 724 F. Supp. 2d 1327, 1334-35 (2010)

(citing SKF USA Inc. v. United States, 263 F.3d 1369, 1378, 1382

(Fed. Cir. 2001) and Nat’l Fisheries Inst. v. United States, __

CIT __, 637 F. Supp. 2d 1270, 1282 (2009)).

DISCUSSION

I. Whether Commerce Should Have Excluded LFF’s Write-Off From
Plaintiff’s Dumping Margin Calculation In This Review

Plaintiffs argue that, pursuant to the Department’s

practice, the cost of the write-off at issue should not have been

included within the dumping margin calculation for this POR,

because the write-off relates to sales made prior to the POR.

Pls.’ Br. 11-12. The court disagrees.

First, the prior Commerce determinations that Plaintiffs

cite in support of this argument are inapposite – in no case did

the Department exclude from its calculations the cost of an
Consol. Court No. 10-00231 Page 9

ordinary write-off recorded during the POR.13 Second, in each

case, the Department’s dumping margin calculation included all

ordinary expenses for bad debt written off during the POR.14

13
See Pls.’ Br. 11-13 (citing Stainless Steel Plate in
Coils from the Republic of Korea and Stainless Steel Sheet and
Strip in Coils from the Republic of Korea, 66 Fed. Reg. 45,279
(Dep’t Commerce Aug. 28, 2001) (notice of amendment of final
determinations of sales at less than fair value) (“Plate and
Sheet from Korea”); Circular Welded Non-Alloy Steel Pipe from the
Republic of Korea, 66 Fed. Reg. 18,747 (Dep’t Commerce Apr. 11,
2001) (final results of antidumping administrative review) (“Pipe
from Korea”); Stainless Steel Sheet and Strip in Coils from the
Republic of Korea, 64 Fed. Reg. 30,664 (Dep’t Commerce June 8,
1999) (notice of final determination of sales at less than fair
value) (“Sheet from Korea”); and Foam Extruded PVC and
Polystyrene Framing Stock From the United Kingdom, 61 Fed. Reg.
51,411, 51,417 (Dep’t Commerce Oct. 2, 1996) (notice of final
determination of sales at less than fair value) (“Stock from
U.K.”)).
14
Circular Welded Non-Alloy Steel Pipe from the Republic of
Korea, Issues & Decision Mem., A-589-809, ARP 98-99 (Apr. 5,
2001) (adopted in Pipe from Korea, 66 Fed. Reg. 18,747) (“Pipe
from Korea I & D Mem.”) Cmt. 10 (including bad debt expenses
recorded during the relevant POR within the dumping margin
calculation for that POR); Sheet from Korea, 64 Fed. Reg. at
30,674 (same); Stock from U.K., 61 Fed. Reg. at 51,417 (same);
see also Circular Welded Non-Alloy Steel Pipe from the Republic
of Korea, Issues & Decision Mem., A-589-809, ARP 07-08 (June 14,
2010) (adopted in 75 Fed. Reg. 34,980, 34,981 (Dep’t Commerce
June 21, 2010) (final results of antidumping duty administrative
review) (“Pipe from Korea II”) (relied on in Pls.’ Br. 9 & 15))
(“Pipe from Korea II I & D Mem.”) Cmt. 4 at 21 (same).
See also Plate and Sheet from Korea, 66 Fed. Reg. at 45,280
(amending certain prior determinations to exclude bad debt
expenses in response to a World Trade Organization panel’s ruling
that “the extraordinary bad debt expenses in these cases could
not reasonably have been anticipated”); compare with Liberty
Group Admin. Case Br., Admin. R. Con. Doc. 67 [Pub. Doc. 298] 3
(explaining that the write-off at issue was recorded in
accordance with LFF’s “normal accounting practices” for dealing
with non-received payment, and noting that LFF has written-off
similar bad debt “in a few cases”).
Consol. Court No. 10-00231 Page 10

Plaintiffs emphasize that, in two prior situations, the

Department included the cost of certain write-offs within the

margin calculation as direct, rather than indirect, selling

expenses.15 But Plaintiffs do not argue that their write-off

should have been included in the margin calculation as a direct

selling expense.16 Instead, Plaintiffs contend that,

notwithstanding the fact that the bad debt was a foreseeable

See also Stephen M. Bragg, GAAP 2011: Interpretation and
Application of Generally Accepted Accounting Principles 193
(2010) (“The recording of a valuation allowance for anticipated
uncollectible amounts is almost always necessary. The direct
write-off method, in which a receivable is charged off only when
it is clear that it cannot be collected, is unsatisfactory since
it overstates assets and also results in a mismatching of
revenues and expenses.”); id. at 396 (“The standard accounting
treatment for uncollectible accounts is to accrue a bad debt loss
in the year of sale by estimating the amount expected to be
uncollectible.”).
15
Pls.’s Br. 11-12 (citing Sheet from Korea, 64 Fed. Reg.
30,664; Stock from U.K., 61 Fed. Reg. 51,411).
16
See Liberty Group Admin. Case Br., Admin. R. Con. Doc. 67
[Pub. Doc. 298] 4 (“[The write-off] should not be included . . .
in any calculation in this POR.”); Pls.’ Br. 7-8 (“The bad debt
expense . . . should not have been attributed to this POR.”) & 14
(“[T]he bad debt [expense] . . . should be excluded [from the
dumping margin calculation] as a pre-POR direct expense.”).
Moreover, the Liberty Group “acknowledges that the write-off at
issue could not be treated as a direct offset to any POR sales
because it related to a sale made in [a] prior period.” I & D
Mem. Cmt. 5 at 18; see also Request for Information, A-533-840,
ARP 08-09 (May 14, 2009), Admin. R. Pub. Doc. 145, App. I
(Glossary of Terms) at I-6 (explaining that “direct expenses” are
those that are traceable “to sales of the merchandise under
review”).
Consol. Court No. 10-00231 Page 11

expense written off during the POR,17 the Department should have

entirely disregarded this expense when calculating LFF’s dumping

margin. Pls.’ Br. 7-8, 14.

Plaintiffs, however, have cited no statutory or regulatory

provision, nor any agency practice – and the court is not aware

of any – to support their contention that Commerce is required to

exclude from its calculations ordinary costs recorded during the

POR if they relate to pre-POR sales. To the contrary, the

Department’s prior practice has been that “expenses booked inside

the [POR], but incurred before the [POR], are included in selling

expenses if they are recurring expenses, as opposed to an

extraordinary charge.” Saccharin from the People’s Republic of

China, Issues & Decision Mem., A-570-878, Investigation (May 20,

2003) (adopted in 68 Fed. Reg. 27,530 (Dep’t Commerce May 20,

2003) (final determination of sales at less than fair value))

(“Saccharin from PRC I & D Mem.”) Cmt. 10 at 20.18

17
Compare with Plate and Sheet from Korea, 66 Fed. Reg. at
45,280 (excluding bad debt write-offs from dumping margin
calculation where the write-offs were not foreseeable); Stainless
Steel Sheet and Strip from the Republic of Korea, Issues &
Decision Mem., A-580-834, ARP 99-00 (Dec. 6, 2001) (adopted in
66 Fed. Reg. 64,950 (Dep’t Commerce Dec. 17, 2001) (final results
and partial rescission of antidumping duty administrative
review)) Cmt. 2 (excluding bad debt write-off from dumping margin
calculation where the write-off was recorded during the
investigation underlying the antidumping duty order, prior to the
POR in question).
18
See also I & D Mem. Cmt. 5 at 20 (“[I]t is the
Department’s practice to include . . . a write-off of [bad] debt
Consol. Court No. 10-00231 Page 12

In this case, the Department concluded “that LFF’s bad debt

expense, which LFF identifies as part of its ‘normal accounting

in [the dumping margin] calculations during the period in which
the write-off was recorded in the company’s accounting system.”
(citing Saccharin from PRC I & D Mem. Cmt. 10)); Def.’s Resp. to
Pls.’ Rule 56.2 Mot. for J. Upon Agency R. 9-10 (“[A]s Commerce
explained in the final results, the agency’s practice is to
include bad debt written-off during the period of review in its
calculation of a respondent’s dumping margin even if the bad debt
relates to a sale that occurred before the review period.”
(citing I & D Mem. Cmt. 5 at 20; Oil Country Tubular Goods, Other
Than Drill Pipe, from Korea, Issues & Decision Mem., A-580-825,
ARP 03-04 (Mar. 6, 2007) (adopted in 72 Fed. Reg. 9,924 (Dep’t
Commerce Mar. 6, 2007) (final results of antidumping
administrative review)) Cmt. 2 at 8 (“[I]t is the Department’s
normal practice to include bad debts written off during the POR
in the indirect selling expense calculation because they are
usually related to sales pertaining to all markets. Therefore,
the Department finds it is appropriate to include [a
respondent’s] bad debt expenses as part of [its] selling expenses
for the final results.” (citing Stainless Steel Bar from India,
Issues & Decision Mem., A-533-810, ARP 01-02 (Aug. 4, 2003)
(adopted in 68 Fed. Reg. 47,543 (Dep’t Commerce Aug. 11, 2003)
(final results of antidumping administrative review)) Cmt. 7 &
Stainless Steel Sheet and Strip in Coils From the Republic of
Korea, Issues & Decision Mem., A-580-834, ARP 00-01 (Feb. 2003)
(adopted in 68 Fed. Reg. 6,713 (Dep’t Commerce Feb. 10, 2003)
(final results and partial rescission of antidumping duty
administrative review)) Cmt. 7)) & Glycine from India, Issues &
Decision Mem., A-533-845, Investigation (Mar. 28, 2008) (adopted
in 73 Fed. Reg. 16,640 (Dep’t Commerce Mar. 28, 2008) (notice of
final determination of sales at less than fair value)) Cmt. 2 at
3 (“The Department normally classifies bad-debt expense as
indirect selling expenses because those expenses relate to the
sales of a company. . . . [Because] [the respondent] employed
the direct write-off method for its doubtful accounts (i.e., it
recognizes bad-debt expenses only when accounts are deemed
uncollectible)[,] . . . [the Department is] including [the bad
debt expenses] in the calculation of the rate for indirect
selling expenses.” (citing Coated Free Sheet Paper from the
Republic of Korea, 72 Fed. Reg. 60,630 (Dep’t Commerce Oct. 25,
2007) (notice of final determination of sales at less than fair
value)))).
Consol. Court No. 10-00231 Page 13

practices’ and similar to ‘discounts [given] in a few other

cases,’ are not extraordinary expenses which the Department would

disregard from its margin calculations.” I & D Mem. Cmt. 5 at 21

(quoting Liberty Group Admin. Case Br., Admin. R. Con. Doc. 67

[Pub. Doc. 298] 3). On the record of this case, this conclusion

is not unreasonable.

Accordingly, because the Department’s methodology applied to

the bad debt write-off at issue was neither contrary to statute

nor to the agency’s regulations or prior practice; and because a

reasonable reading of the record supports the Department’s

conclusions in applying its methodology to the facts of this

case, the court upholds Commerce’s decision not to exclude LFF’s

March 2008 write-off when calculating Plaintiffs’ dumping margin

for this POR.

As explained below, however, the court cannot uphold, in the

absence of further explanation, Commerce’s decision not to pro-

rate the value of the write-off, so as to include in its

calculations solely the amount proportionate to the overlap

between the POR and the fiscal year in which the write-off was

recorded. As explained below, under the circumstances of this

case, and in light of the Department’s prior practice under

similar circumstances, the decision not to pro-rate the write-off

is, in the absence of additional explanation, arbitrary and

therefore contrary to law.
Consol. Court No. 10-00231 Page 14

II. Whether LFF’s Write-Off Should Have Been Pro-rated

Plaintiffs argue that, if included within LFF’s selling

expenses for this POR, the write-off at issue should have been

pro-rated, on a monthly basis over the course of the fiscal year

in which it was recorded, such that only the months in which

LFF’s fiscal year overlapped with the POR should have been

considered in the dumping calculation for this POR. Pls.’ Br. 14-

18.

In response, the Department relies on Saccharin from PRC and

contends that, “[a]bsent a provision for bad debt expense

recorded by the company, it is the Department’s practice to

include the full amount of a write-off of such debt in [its]

calculations during the period in which the write-off was

recorded in the company’s accounting system.” I & D Mem. Cmt. 5

at 20 (citing Saccharin from PRC I & D Mem. Cmt. 1019) (footnote

omitted). The court finds this explanation to be incomplete, and

therefore concludes it to be insufficient.

The problem with the Department’s line of reasoning here is

that Saccharin from PRC – the sole example of agency practice

that Commerce relies upon with regard to this issue – appears to

have applied precisely the methodology that Plaintiffs asked the

19
The Department’s characterization of Saccharin from PRC
notwithstanding, the court could find no evidence that “a
provision for bad debt expense recorded by the company” played
any dispositive role in Saccharin from PRC.
Consol. Court No. 10-00231 Page 15

agency to apply in this case. In Saccharin from PRC, a

respondent’s fiscal year overlapped with the relevant POR by the

fiscal year’s first six months. Although the company recorded a

certain bad debt write-off at the end of its fiscal year –

outside of the POR – the Department determined that “this choice

was made solely as a matter of completing the books for the

year,” Saccharin from PRC I & D Mem. Cmt. 10 at 20 n.5, and

therefore “divide[d] these expenses by two and attribute[d] half

to the [relevant POR] (the first half of the calendar year).” Id.

Thus it appears that the Department would like to have it

both ways: If the bad debt expense is recorded at the end of a

company’s fiscal year, and that month falls within the POR, the

Department includes the full amount of the expense as falling

within the POR, regardless of overlap between fiscal year and

POR. See I & D Mem. Cmt. 5 at 21. But if the bad debt expense is

recorded at the end of a company’s fiscal year, and that month

falls outside the POR, the Department does not consider the full

amount of the expense to fall outside the POR, but rather pro-

rates it, and includes an amount proportional to the overlap

between fiscal year and POR. See Saccharin from PRC I & D Mem.

Cmt. 10 at 20 n.5.20 Without more explanation from the agency,

this is an unreasonable inconsistency in the Department’s

20
See also Pipe from Korea II I & D Mem. Cmt. 4 at 21-22
(same).
Consol. Court No. 10-00231 Page 16

methodology.

Accordingly, because an unexplained inconsistency in the

application of a methodology is unlawful agency action, see SKF,

263 F.3d at 1382; Pakfood, __ CIT at __, 724 F. Supp. 2d

at 1334,21 this case is remanded to the Department for

reconsideration of its decision to not pro-rate LFF’s March 2008

bad debt write-off so as to include solely such portion thereof

as is properly attributable to the POR. On remand, the

Department shall specifically explain why its failure to pro-rate

this write-off is not arbitrary in light of its determination

under apparently like factual circumstances in Saccharin from

PRC, 68 Fed. Reg. 27,530; Saccharin from PRC I & D Mem. Cmt. 10

at 20 n.5, and Pipe from Korea II, 75 Fed. Reg. 34,980; Pipe from

Korea II I & D Mem. Cmt. 4 at 21-22, or otherwise reconsider its

decision.

CONCLUSION

For all of the foregoing reasons, the Department’s Final

Results, 75 Fed. Reg. 41,813, are remanded to the agency, for

reconsideration and further explanation or amendment, in

accordance with this opinion. Specifically, the Department shall

reconsider, and further explain or amend, its decision to

21
See also Martin v. Franklin Capital Corp., 546 U.S. 132,
139 (2005) (“[L]imiting [agency] discretion according to legal
standards helps promote the basic principle of justice that like
cases should be decided alike.”).
Consol. Court No. 10-00231 Page 17

consider the full amount of LFF’s March 2008 bad debt write-off

when calculating Plaintiffs’ dumping margin in this review.

Commerce shall have until October 3, 2011 to complete and

file its remand redetermination. Plaintiffs shall have until

November 2, 2011 to file comments. Defendant and Defendant-

Intervenors shall have until November 17, 2011 to file any reply.

It is SO ORDERED.

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

Dated: August 3, 2011
New York, N.Y.