Goldlink Industries Co., Ltd. v. United States

Slip Op. 06-65

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
________________________________________:
:
GOLDLINK INDUSTRIES CO., LTD., :
TRUST CHEM CO., LTD., TIANJIN HANCHEM :
INTERNATIONAL TRADING CO., LTD., :
:
Plaintiffs, :
:
v. :
:
UNITED STATES, :
:
Defendant, : Consol. Court No.
: 05-00060
and :
:
NATION FORD CHEMICAL COMPANY and SUN :
CHEMICAL CORPORATION, :
:
Defendant-Intervenors and :
Plaintiffs, :
:
and :
:
CLARIANT CORPORATION, :
:
Defendant-Intervenor and :
Plaintiff. :
________________________________________:

[Held: Cross-motions for summary judgment are granted in part and
denied in part, remanded for further determinations]

Dated: May 4, 2006

Garvey Schubert Barer (William E. Perry, Lizbeth R. Levinson,
and Ronald M. Wisla) for Goldlink Industries Co., Ltd., Trust Chem
Co., Ltd., and Tianjin Hanchem International Trading Co., Ltd.,
Plaintiffs.

Peter D. Keisler, Assistant Attorney General; David M. Cohen,
Director; Patricia M. McCarthy, Assistant Director, Commercial
Litigation Branch, Civil Division, United States Department of
Justice (Stephen C. Tosini); of counsel: Dean A. Pinkert, Office of
the Chief Counsel for Import Administration, United States
Consol. Court No. 05-00060 Page 2

Department of Commerce, for the United States, Defendant.

Pepper Hamilton LLP (Gregory C. Dorris, Edward M. Andries and
Fidelis I. Agbapuruonwu) for Nation Ford Chemical Company and Sun
Chemical Corporation, Defendant-Intervenors and Plaintiffs.

Barnes, Richardson & Colburn (Matthew T. McGrath and Stephen
W. Brophy) for Clariant Corporation, Defendant-Intervenor and
Plaintiff.

OPINION

TSOUCALAS, Senior Judge: This consolidated action concerns

claims raised by Plaintiffs, Goldlink Industries Co., Ltd., Trust

Chem Co., Ltd., and Tianjin Hanchem International Trading Co., Ltd.

(collectively, “Goldlink”), and Defendant-Intervenors and

Plaintiffs, Nation Ford Chemical Company and Sun Chemical

Corporation (collectively, “Nation Ford”), and Clariant Corporation

(“Clariant”), who move pursuant to USCIT R. 56.2 for judgment upon

the agency record challenging the Department of Commerce,

International Trade Administration’s (“Commerce’s”) final

determination, entitled Notice of Final Determination of Sales at

Less Than Fair Value for Carbazole Violet Pigment 23 from the

People’s Republic of China (“Final Determination”), 69 Fed. Reg.

67,304 (Nov. 17, 2004).

Goldlink, Nation Ford and Clariant contend that various

aspects of the Final Determination are not supported by substantial

evidence or in accordance with law. Goldlink argues that

substantial evidence on the record does not support Commerce’s
Consol. Court No. 05-00060 Page 3

decision to apply total adverse facts available to Tianjin Hanchem

International Trading Co., Ltd. (“Hanchem”).1 Goldlink also argues

that Commerce incorrectly chose one Indian company’s financial data

as opposed to other Indian companies for surrogate financial ratios

in calculating normal value. Nation Ford and Clariant, (together,

“Defendant-Intervenors”), separately contend that Commerce erred

regarding the same seven aspects of the Final Determination: (1)

Commerce incorrectly classified benzene sulfonyl chloride under the

Indian Tariff Schedule; (2) Commerce incorrectly valued the

chemical inputs carbazole, sodium sulfide and calcium chloride; (3)

Commerce failed to account for steam as a factor of production; (4)

Commerce did not apply financial ratios to toll-manufacturing

within Goldlink’s supply chain; and (5) Commerce failed to include

values for terminal charges and brokerage fees in capturing all

necessary movement costs.

BACKGROUND

This case concerns an antidumping duty order for carbazole

violet pigment 23 (“CVP-23”) from the People’s Republic of China

1
Hanchem was established subsequent to the period of
investigation out of the United States sales department of Tianjin
Heng An Trading Co., Ltd. (“Heng An”). Heng An made the United
States sales of CVP-23 during the period of investigation.
Commerce determined to treat Hanchem and Heng An as a single entity
for this antidumping duty review, which is not contested by the
parties. See Preliminary Results, 69 Fed. Reg. at 35,288 n.4.
Consol. Court No. 05-00060 Page 4

for the period of investigation (“POI”) covering April 1, 2003,

through September 30, 2003. See Final Determination, 69 Fed. Reg.

at 67,304. Commerce initiated the investigation on December 19,

2003. See Notice of Initiation of Antidumping Duty Investigations

for Carbazole Violet Pigment 23 from India and the People’s

Republic of China, 68 Fed. Reg. 70,761 (Dec. 19, 2003). On June

24, 2004, Commerce published its preliminary determination, finding

that CVP-23 was being sold at less than fair value. See Notice of

Preliminary Determination of Sales at Less Than Fair Value and

Postponement of Final Determination for Carbazole Violet Pigment 23

From the People’s Republic of China (“Preliminary Results”), 69

Fed. Reg. 35,287, 35,288 (June 24, 2004). In its Preliminary

Results, Commerce selected India as the surrogate country, see

Preliminary Results, 69 Fed. Reg. at 35,291, which it confirmed in

its Final Determination. See Final Determination, 69 Fed. Reg. at

67,305. Commerce published its Final Determination on November 17,

2004. See Final Determination, 69 Fed. Reg. at 67,304. By

reference in its Final Determination, Commerce incorporated its

Issues and Decision Memorandum for the Final Determination of

Carbazole Violet Pigment 23 from the People’s Republic of China (“I

& D Mem.”), Admin. R. Doc. 172 (Nov. 8, 2004). See Final

Determination, 69 Fed. Reg. at 67,304.
Consol. Court No. 05-00060 Page 5

JURISDICTION

The Court has jurisdiction over this matter pursuant to 19

U.S.C. § 1516a(a) (2000) and 28 U.S.C. § 1581(c) (2000).

STANDARD OF REVIEW

In reviewing a challenge to Commerce’s final determination in

an antidumping administrative review, the Court will uphold

Commerce’s determination unless it is “unsupported by substantial

evidence on the record, or otherwise not in accordance with law .

. . .” 19 U.S.C. § 1516a(b)(1)(B)(i) (2000). Substantial evidence

is “more than a mere scintilla. It means such relevant evidence as

a reasonable mind might accept as adequate to support a

conclusion.” Universal Camera Corp. v. NLRB, 340 U.S. 474, 477

(1951) (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229

(1938)). Substantial evidence “is 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) (citations

omitted). Moreover, “the court may not substitute its judgment for

that of the [agency] when the choice is ‘between two fairly

conflicting views, even though the court would justifiably have

made a different choice had the matter been before it de novo.’”

Am. Spring Wire Corp. v. United States, 8 CIT 20, 22, 590 F. Supp.
Consol. Court No. 05-00060 Page 6

1273, 1276 (1984) (quoting Penntech Papers, Inc. v. NLRB, 706 F.2d

18, 22-23 (1st Cir. 1983) (quoting, in turn, Universal Camera, 340

U.S. at 487-88)).

DISCUSSION

The antidumping review at issue involves CVP-23 from the

People’s Republic of China (“PRC”). See Final Determination, 69

Fed. Reg at 67,304. In conducting an administrative review,

Commerce determines the antidumping duty margin by taking the

difference between the normal value (“NV”), typically the home

market price of the merchandise in the exporting country, and the

United States price (also called export price) of the merchandise.

See 19 U.S.C. § 1677b (2000). When the merchandise is produced in

a non-market economy country (“NME”), as the PRC is here, there is

a presumption that factors of production (“FOPs”) are under the

control of the state and home market sales are usually not reliable

indicators of NV. See 19 U.S.C. § 1677(18)(A) & (C) (2000). As

such, Commerce is to calculate NV by isolating each FOP in the

production process in the NME country and assign it a value from a

surrogate market economy country using the “best available

information.” 19 U.S.C. § 1677b(c)(1). An estimated amount for

general expenses and profit are added to the total FOPs to

ultimately derive the merchandise’s price as it would be if the NME

country was a market economy. See 19 U.S.C. § 1677b(c); Nation
Consol. Court No. 05-00060 Page 7

Ford Chem. Co. v. United States, 21 CIT 1371, 1372, 985 F. Supp.

133, 134 (1997) (citations omitted), aff’d 166 F.3d 1373 (Fed. Cir.

1999).

The antidumping statute does not define the phrase “best

available information,” rather, it only provides that in valuing

FOPs, Commerce shall use surrogate values that are “(A) at a level

of economic development comparable to that of the nonmarket economy

country, and (B) significant producers of comparable merchandise.”

19 U.S.C. § 1677b(c)(4). As such, Commerce is given broad

discretion “to determine margins as accurately as possible, and to

use the best information available to it in doing so.” Lasko Metal

Prods., Inc. v. United States, 43 F.3d 1442, 1443 (Fed. Cir. 1994).

Here, Commerce chose India as the surrogate country for China, see

Preliminary Results, 69 Fed. Reg. at 35,291, which is uncontested

by the parties. Furthermore, all companies in a NME country are

presumed to be subject to governmental control and assigned a

single antidumping duty rate unless the company can demonstrate an

absence of governmental control. See e.g., Decca Hospitality

Furnishings, LLC v. United States, 29 CIT ___, ___, 391 F. Supp. 2d

1298, 1300 (2005). Here, Commerce determined that Goldlink,

Hanchem, Trust Chem Co., Ltd. and Nantong Haidi Chemical Co., Ltd.

(“Haidi”) were entitled to separate rates. See Preliminary

Results, 69 Fed. Reg. at 35,289.
Consol. Court No. 05-00060 Page 8

The Court’s role in the case at bar is not to evaluate whether

the information Commerce used was the best available, but rather

whether a reasonable mind could conclude that Commerce chose the

best available information. See 19 U.S.C. §§ 1677b & 1516a. The

statute’s silence regarding the definition of “best available

information” provides Commerce with “broad discretion to determine

the ‘best available information’ in a reasonable manner on a case-

by-case basis.” Timken Co. v. United States, 25 CIT 939, 944, 166

F. Supp. 2d 608, 616 (2001).2 Commerce’s discretion in choosing

its information is limited by the statute’s ultimate goal “to

construct the product’s normal value as it would have been if the

NME country were a market economy country.” Rhodia, Inc. v. United

States, 25 CIT 1278, 1286, 185 F. Supp. 2d 1343, 1351 (2001)

(citations omitted). While Commerce enjoys broad discretion in

determining what constitutes the best information available to

calculate NV, Commerce may not act arbitrarily in reaching its

decision. See Crawfish Processors Alliance v. United States, 28

CIT ___, ___, 343 F. Supp. 2d 1242, 1251 (2004). If Commerce’s

determination of what constitutes the best available information is

reasonable, then the Court must defer to Commerce.

2
Furthermore, in evaluating the data, the statute does not
require Commerce to follow any single approach. See Luoyang
Bearing Factory v. United States, 26 CIT 1156, 1172, 240 F. Supp.
2d 1268, 1284 (2002).
Consol. Court No. 05-00060 Page 9

I. Commerce’s Determination to Apply Total Adverse Facts
Available to Hanchem Is Not Supported by Substantial Evidence
on the Record

A. Contentions of the Parties

1. Goldlink’s Contentions

Goldlink argues that Commerce’s decision to apply total

adverse facts available to Hanchem is unsupported by substantial

record evidence and is otherwise not in accordance with law. See

Br. Supp. Pls.’ R. 56.2 Mot. J. Agency R. (“Goldlink’s Br.”) at 8-

18. Specifically, Goldlink states the plain language of the

Verification of Tianjin Hanchem International Trading Co., Ltd.

(“Verification Report”), Confidential Admin. R. Doc. 64, details

the overall harmony between Hanchem’s questionnaire responses and

documents examined at verification. See Goldlink’s Br. at 10.

Goldlink asserts that the Verification Report states that Commerce

was able to verify Hanchem’s corporate structure, ownership and

separate rates with no discrepancies. See id. The Verification

Report, however, notes that sales values could not be easily

reconciled to sales quantities regarding some of the invoices. See

id. Goldlink explains these slight discrepancies existed because

either Hanchem’s United States customer 1) purchased equipment for

Hanchem and deducted that value from monies owed or 2) was

instructed by Hanchem’s owner to deposit partial payment for monies

owed into the owner’s personal bank account. See id. at 10-12.
Consol. Court No. 05-00060 Page 10

Goldlink argues that Hanchem explained these discrepancies at

verification and with the exception of one invoice, Commerce was

able to tie invoices to ledgers or accounts. See Goldlink’s Br. at

10-12. Moreover, Goldlink argues that even if Commerce did not

accept Hanchem’s explanation regarding the discrepancies, Commerce

is still not justified in applying total adverse facts available.

See id. at 12-17. Goldlink argues that Commerce is unreasonably

applying adverse facts when a company did not maintain its business

records to Commerce’s specifications. See id. at 13-14. Goldlink

asserts that it is reasonable for Commerce to rely on records

outside of Hanchem’s financial statements during verification. See

Reply Br. Pls. Goldlink Indus. Co., Ltd. et. al. (“Goldlink’s

Reply”) at 5-6. Furthermore, Commerce has relied on records

outside of a respondent’s financial statements in other situations

without automatically applying adverse facts available. See id.

Rather, Goldlink asserts that Commerce should apply facts

otherwise available under 19 U.S.C. § 1677e(a). See Goldlink’s Br.

at 15-18. Here, Hanchem’s owner was present at verification and

was able to link monies received from United States customers to

invoices in the various accounts. See id. at 14. While Hanchem’s

records were not perfect, Goldlink argues that they were adequate

for normal commercial practices in China. See id. at 17. Goldlink

indicates that Hanchem reasonably anticipated a favorable final
Consol. Court No. 05-00060 Page 11

determination and thus had every incentive to fully cooperate in

verification. See Goldlink’s Br. at 12. Hanchem provided

requested information by applicable deadlines and did not act to

impede proceedings, mislead Commerce, or engage in

misrepresentations of any kind. See id. at 4.

2. Commerce’s Contentions

Commerce responds that Hanchem failed to reconcile its United

States sales data at verification. See Def.’s Resp. Pls.’ Mot. J.

Upon Admin. R. (“Commerce’s Resp.”) at 12. Specifically, Hanchem

could not provide a direct documentary link between United States

invoices and payments recorded on Hanchem’s books and records. See

id. at 14. Commerce reasons that the Verification Report does not

contain conclusions as to whether Hanchem “‘passed’ or ‘failed’

verification,” but rather clearly states that “indirect inferences

would have to be made if a substantial portion of the United States

sales data were to be reconciled.” Id. at 15. Inferences included

“indirect and inexact” evidence presented at verification showing

“more or less” the right amounts going into Hanchem’s accounts

around the right time. See id. at 16. Thus without direct

documentation, Commerce argues it reasonably concluded that such

inferences were not a reliable basis to use Hanchem’s reported

sales values. See id. at 15 & 17. Commerce also states that

Hanchem did not act to the best of its ability because Hanchem
Consol. Court No. 05-00060 Page 12

failed to “timely disclose that its financial statements omitted

certain Untied States sales and failed to keep accurate books and

records.” Commerce’s Resp. at 18. Thus, in accordance with the

Court of Appeals for the Federal Circuit’s holding in Nippon Steel

Corp. v. United States, 337 F.3d 1373 (Fed. Cir. 2003), Commerce

argues that it may draw adverse inferences because Hanchem

reasonably should have been more forthcoming in advance to

verification. See Commerce’s Resp. at 18-19. Accordingly,

Commerce’s conclusion that Hanchem did not fully cooperate is

supported by substantial evidence and is otherwise in accordance

with law. See id. at 20.

3. Nation Ford and Clariant’s Contentions

Defendant-Intervenors both contend that Commerce’s application

of total adverse facts available to Hanchem is supported by

substantial evidence and otherwise is in accordance with law. See

Resp. Br. Nation Ford Chem. Co. & Sun Chem. Corp. Opp’n Pls.’ Rule

56.2 Mot. J. Agency R. (“Nation Ford’s Resp.”) at 5; [Clariant’s]

Resp. Br. Opp’n Pl. Goldlink’s Mot. J. Agency R. (“Clariant’s

Resp.”) at 5. Clariant argues that Goldlink’s contention, that

Commerce was able to verify Hanchem’s sales without issue, is

contradicted by the Verification Report. See Clariant’s Resp. at

6-7. Rather, the Verification Report never states that Commerce

accepted Hanchem’s explanations. See id. at 7. It also notes that
Consol. Court No. 05-00060 Page 13

while Hanchem explained the discrepancies, Hanchem neither created

nor maintained any paperwork outlining the commingled account

payment transactions. See Nation Ford’s Resp. at 10; Clariant’s

Resp. at 7. Thus, Hanchem’s failure to keep or maintain adequate

records supports Commerce’s decision to apply total adverse facts.

See id.; Clariant’s Resp. at 7. Hanchem asked Commerce to accept

indirect inferences based on values and approximations of payment

dates as verification for its explanation of the discrepancies.

See id. at 10 & 13; Clariant’s Resp. at 8-9. Nation Ford also

argues that Hanchem offers facts to the Court that are outside the

official record. See Nation Ford’s Resp. at 5. Nation Ford states

that Hanchem’s questionnaire responses failed to provide any detail

of its accounting practices. See id. at 6-8. Thus, Commerce

followed with a supplemental questionnaire, which Hanchem also

failed to answer fully. See id. Commerce provided Hanchem with a

verification outline in advance explaining what it expected to be

able to verify including the documentation it expected to see, and

Hanchem failed to inform Commerce in advance that it would not be

able to provide the requested documents. See id. at 9. By not

informing Commerce before verification of its accounting practices,

Hanchem failed to cooperate to the best of its ability, thus

application of total adverse facts is reasonable. See id. at 13-

14; Clariant’s Resp. at 9-10.
Consol. Court No. 05-00060 Page 14

B. Analysis

Section 1677e(a) of Title 19 of the United States Code

mandates that Commerce use “facts otherwise available” in an

antidumping proceeding if “(1) necessary information is not

available on the record, or (2) an interested party or any other

person-- (A) withholds information that has been requested . . . or

(D) provides such information but the information cannot be

verified . . . in reaching the applicable determination under this

subtitle.” 19 U.S.C. § 1677e(a) (2000). The “focus of subsection

(a) is a respondent’s failure to provide information.” Nippon

Steel, 337 F.3d at 1381 (emphasis retained). The legislative goal

behind Commerce’s right to use facts available is to “induce

respondents to provide Commerce with requested information in a

timely, complete, and accurate manner . . . .” Nat’l Steel Corp.

v. United States, 18 CIT 1126, 1129, 870 F. Supp. 1130, 1134

(1994). Consequently, Commerce enjoys broad, although not

unlimited, discretion with regard to the propriety of its use of

facts available. See generally, Olympic Adhesives, Inc. v. United

States, 899 F.2d 1565, 1572 (Fed. Cir. 1990) (acknowledging

Commerce’s broad discretion to use facts available, but pointing

out that Commerce’s resort to facts available is an abuse of

discretion where the information Commerce requests does not and

could not exist).
Consol. Court No. 05-00060 Page 15

Furthermore, if Commerce determines that “an interested party

has failed to cooperate by not acting to the best of its ability to

comply with a request for information,” Section 1677e(b) grants

Commerce the discretion to use adverse inferences when relying on

information from an array of “facts otherwise available” sources.

See 19 U.S.C. § 1677e(b) (emphasis added) (“may” as opposed to

“shall” in Section 1677e(a)); 19 C.F.R. § 351.308(c) (2003). When

Commerce concludes that a party has not cooperated to the best of

its ability and applies adverse inferences, it must make two

showings. See Nippon Steel, 337 F.3d at 1382-83. First, Commerce

“must make an objective showing that a reasonable and responsible

importer would have known that the requested information was

required to be kept and maintained . . ..” Id. And second,

Commerce must then “make a subjective showing that the respondent

. . . not only has failed to promptly produce the requested

information, but further that the failure to fully respond is the

result of the respondent’s lack of cooperation . . ..” Id.

Moreover, while Commerce has broad discretion, it may not be overly

punitive in its selection of facts otherwise available. See F.LLI

De Cecco di Filippo Fara S. Martino S.p.A. v. United States, 216

F.3d 1027, 1032-33 (Fed. Cir. 2000).

Commerce initially determined that Hanchem was eligible for a

separate rate other than the PRC-wide rate, which was determined by
Consol. Court No. 05-00060 Page 16

using facts otherwise available. See Preliminary Determination, 69

Fed. Reg. at 35,289. In its Final Results, however, Commerce

determined that while Hanchem was not a part of the PRC entity, it

chose to apply “as adverse facts available to Hanchem the same rate

as that applied to the PRC entity due to Hanchem’s verification

failure.” Final Results, 69 Fed. Reg. at 67,305. Commerce further

explained that it was

unable to verify the accuracy of what Hanchem submitted
to [Commerce] in its questionnaire responses.
Specifically, we were unable to verify the reported
value of Hanchem’s sales to the United States during the
POI. Furthermore, for a significant percentage of
Hanchem’s reported U.S. sales, we were unable to verify
the reported U.S. prices.

I & D Mem. at 33. Commerce states that Hanchem could not provide

documentary evidence to verify its explanations of the

discrepancies and was asking Commerce to make indirect inferences

regarding amounts received for United States sales. See Analysis

Memorandum for Final Determination for Tianjin Hanchem

International Trading Co., Ltd. (“Analysis Mem.”), Confidential

Admin. R. Doc. 74 at 2 (Nov. 8, 2004). Commerce also states that

Hanchem failed to inform Commerce that it did not have financial

statements that covered sales of the subject merchandise until the

first day of verification. See id. at 3. Commerce concluded that

Hanchem had not cooperated to the best of its ability, as required

by 19 U.S.C. § 1677e(b), because Hanchem “knew or should have know

[sic] the information requirements for reconciliation and failed
Consol. Court No. 05-00060 Page 17

until the start of verification to notify [Commerce] that it would

be unable [to] provide such information. Moreover, Hanchem failed

to keep or maintain adequate records.” Id. Therefore, Commerce

applied total adverse facts available and assessed the PRC-wide

antidumping duty rate to Hanchem of 217.94 percent. See Final

Determination, 69 Fed. Reg. at 67,306.

The Court finds that Commerce’s application of total adverse

facts available to Hanchem is unsupported by record evidence. At

verification, Commerce stated it could not reconcile revenue earned

from United States sales to Hanchem’s financial statements without

making “a number of indirect inferences.” Analysis Mem. at 2. The

Court agrees with Commerce that it is reasonable that a responsible

importer keep adequate records so that sales and amounts received

can be correlated in a manner that does not involve a heavy

reliance on inferences based on approximate amounts near

approximate dates. Here, however, Commerce does not cite to any

record evidence to reasonably warrant an application of total

adverse facts available other than the discrepancies in verifying

some but not all of Hanchem’s United States sales. See

Verification Report at 7. While Commerce’s inability to reconcile

Hanchem’s United States sales affects Hanchem’s export price value,

it seems unreasonable to the Court that such would warrant an
Consol. Court No. 05-00060 Page 18

application of total adverse facts.3 Commerce also states that

during verification it “found no evidence that any U.S. sales were

missing” from Hanchem’s questionnaire responses and that it was

able to directly tie certain invoices to the sales ledger.

Verification Report at 6. Furthermore, Commerce did not indicate

that Hanchem was uncooperative during verification. See id. at 5-

7. If the inability to reconcile values here is of such

consequence as to warrant application of total adverse facts

available, then Commerce must reasonably support its determination

with substantial evidence on the record. The Court, therefore,

remands this issue back to Commerce to re-examine its determination

to apply total adverse facts rather than partial adverse facts for

the unverifiable sales.

3
The Court recognizes that while each antidumping duty
determination is decided case-by-case, there are situations where
the application of total adverse facts is more than reasonable.
See e.g., Crawfish Processors Alliance, 28 CIT at ___, 343 F. Supp.
2d at 1270-71 (where a respondent did not participate in
verification and its affiliated company failed to contact or
arrange verification); Notice of Preliminary Results of Antidumping
Duty Administrative Review; Final Rescission, in Part; and Intent
to Rescind, in Part of Freshwater Crawfish Tail Meat from the
People’s Republic of China, 68 Fed. Reg. 58,064, 58,067 (Oct. 8,
2003), Verification Report of Weishan Fukang Foodstuffs Co., Ltd.,
(where a respondent actively countermined verification after
Commerce arrived and had begun verification).
Consol. Court No. 05-00060 Page 19

II. Commerce Failed to Adequately Explain Its Determination That
Subsidies Did Not Distort Pidilite’s Financial Ratios

A. Contentions of the Parties

1. Goldlink’s Contentions

Goldlink challenges Commerce’s decision to use data from

Pidilite Industries, Ltd. (“Pidilite”), an Indian producer of CVP-

23, as surrogate financial ratios rather than data from the Reserve

Bank of India (“RBI”) or other Indian companies. See Goldlink’s

Br. at 18-34. Specifically, Goldlink states that Commerce

determined in a simultaneous countervailing duty (“CVD”)

investigation of CVP-23 from India that Pidilite received four

different subsidies from the Government of India and assessed a CVD

margin of 17.93 percent ad valorem. See id. at 18-20. Goldlink

contends that the subsidies distort Pidilite’s financial

statements, thus making them unreliable for the purposes of

calculating surrogate financial ratios. See id. at 19. Commerce

itself, Goldlink asserts, is going against its preferred practice

of using “where possible,” data that is not distorted or otherwise

unreliable. See id. at 22. Goldlink also asserts that the

subsidies Pidilite received are of a magnitude similar to other

situations where Commerce has rejected surrogate financial ratios

from subsidized companies. See id. at 22-24. Goldlink argues that

the subsidies Pidilite received either reduced the cost of

materials or increased profit through increasing revenues or
Consol. Court No. 05-00060 Page 20

decreasing taxes. See Goldlink’s Br. at 28-29. Goldlink maintains

that Commerce did not adequately explain why Pidilite’s subsidies

did not distort their financial statements, thus Commerce’s

determination to use Pidilite’s data is not supported by

substantial evidence. See id. at 24-28. Rather, Commerce merely

“restate[s] the regulatory standard, reviewed the positions of the

parties and stated its conclusion bereft of any fact-finding or

independent analysis.” Id. at 25. Goldlink also asserts that the

burden lies with Commerce to select the best surrogate information

available, not with itself to show that the subsidies distorted

Pidilite’s financial statements. See Goldlink’s Reply at 10-11.

Moreover, instead of using Pidilite’s data, Goldlink argues

that Commerce should rely upon data from the RBI or include other

Indian company data. See Goldlink’s Br. at 29-32. Goldlink states

that Commerce has used RBI data for surrogate financial ratios when

company specific data is either unavailable or not reliable. See

id. at 29. Since Pidilite’s data is distorted, Goldlink reasons

that the RBI data is the best available information. See id. at

30. Goldlink also argues, in the alternative, that if Commerce

uses data from Indian companies, then its decision to reject data

from Navpad Pigment Pvt. Ltd. (“Navpad”) and Nirvip Dyes & Chemical

Pvt. Ltd. (“Nirvip”) is not supported by substantial evidence. See

id. at 30-32. Both Navpad and Nirvip are producers of CVP-23. See
Consol. Court No. 05-00060 Page 21

id. at 31. Commerce’s explanation for rejecting their data is

because their financial statements were not accompanied by an

auditor’s certification. See id. Goldlink states that both

companies’ financial statements were audited and certified by

independent chartered Indian accountants, as was Pidilite’s

financial statements. See id. at 31-32. Goldlink argues that

Commerce favorably distinguishes Pidilite’s data because it was

published on the Internet. See id. Goldlink asserts that Commerce

should average Navpad and Nirvip’s data for surrogate financial

ratios and exclude Pidilite’s data because it is distorted. See

id. at 32-34.

2. Commerce’s Contentions

Commerce responds that its decision to rely upon Pidilite’s

financial statements to calculate surrogate financial ratios and

reject the RBI and other Indian companies’ data is supported by

substantial evidence and in accordance with law. See Commerce’s

Resp. at 26. Commerce states it examined whether Pidilite’s

financial statements had been systematically skewed by subsidies

and determined that the record evidence did not support such a

conclusion. See id. at 21. Thus, Commerce followed its normal

preference to use data based on the production of identical

merchandise, which Pidilite satisfies here. See id. Furthermore,

Commerce argues it properly rejected data from Navpad and Nirvip
Consol. Court No. 05-00060 Page 22

because such financial statements were not accompanied by an

auditor’s certification. See id. at 21.

Specifically, Commerce argues that Goldlink failed to

demonstrate that the subsidies Pidilite received distorted its

financial statements “as a whole by a significant amount . . ..”

Commerce’s Resp. at 21 (emphasis retained). Therefore, it was

reasonable for Commerce to rely upon such data. See id. Moreover,

Commerce argues that Pidilite’s financial statements also support

Commerce’s determination. See id. Pidilite’s data indicated that

the overwhelming bulk of countervailable subsidies received were in

the general category of “other income.” See id. at 21-22. Any

export incentives received could only have had a minuscule effect

on profit ratios. See id. at 22. Commerce also asserts that the

state sales tax deferrals Pidilite received were negligible when

compared to the export incentives and not taken into account when

determining profits. See id. at 22-23. Commerce states that

Goldlink’s contention that Commerce is not following its preferred

practice – disusing data from surrogate countries that grant

broadly available non-industry specific export subsidies – is

obfuscating the reasoning behind Commerce’s policy. See id. at 23.

Broadly available non-industry specific export subsidies can

directly reduce the price of a single exported FOP. See id.

Whereas, subsidization of exports of a single product that affect
Consol. Court No. 05-00060 Page 23

a company’s entire bottom line must be averaged over the company’s

gross revenues. See Commerce’s Resp. at 23-24. Therefore, since

Pidilite’s financial ratios were not distorted to any significant

degree by the subsidies it received, rather than affecting a single

FOP, Commerce maintains that it reasonably relied upon such data.

See id. Commerce further states that Goldlink failed to clearly

demonstrate how the subsidies Pidilite received systematically

distorted its financial ratios. See id. at 24-25.

Commerce rejected data from Navpad and Nirvip because their

financial statements lacked an auditor’s certification. See id. at

21. While Goldlink argues that these financial statements had

stamps and signatures purporting review by auditors, Commerce

states that they actually lacked “certification by the auditor,

i.e., a statement explicitly stating precisely what the auditor did

and what the auditor found.” Id. at 25 (emphasis retained).

Commerce states that its decision to reject Navpad and Nirvip’s

data is reasonable because it requires properly certified financial

statements for purposes of calculating financial ratios. See id.

at 26.

3. Clariant and Nation Ford’s Contentions

Defendant-Intervenors also respond that Commerce’s decision to

use Pidilite data for surrogate financial ratios is supported by

substantial evidence. See Nation Ford’s Resp. at 17; Clariant’s
Consol. Court No. 05-00060 Page 24

Resp. at 11. Nation Ford argues that the Pidilite data satisfies

Commerce’s regulations for valuing manufacturing overhead, general

expenses and profit. See Nation Ford’s Resp. at 17-18. Commerce

has consistently held that the mere receipt of government subsidies

does not necessarily mean that a company’s financial ratios are

unusable. See id. at 19; Clariant’s Resp. at 11. Defendant-

Intervenors state that Goldlink has greatly exaggerated the alleged

distortion that the subsidies may have caused in Pidilite’s

financial statements. See id. at 20; Clariant’s Resp. at 12.

Furthermore, Nation Ford argues that Goldlink has unsuccessfully

questioned Pidilite’s financial ratios on three separate occasions,

each rejection well reasoned by Commerce. See Nation Ford’s Resp.

at 18-20. Goldlink, both here and at Commerce, has failed to

demonstrate that the subsidies systematically distort Pidilite’s

financial ratios. See id. at 20-21; Clariant’s Resp. at 12-13.

Accordingly, Commerce’s decision to reject the non-company specific

data from the RBI is also supported by substantial evidence. See

id. at 23; Clariant’s Resp. at 13-14.

Defendant-Intervenors further respond that Commerce’s decision

to reject financial statements from Navpad and Nirvip because they

were incomplete is also supported by substantial evidence. See

Nation Ford’s Resp. at 23; Clariant’s Resp. at 14. Nation Ford

emphasizes that the Pidilite data is reliable because it included
Consol. Court No. 05-00060 Page 25

a complete auditors report with a summary of the audit and an

opinion approving the completeness and accuracy of the data in

accordance with Indian generally accepted accounting principles.

See Nation Ford’s Resp. at 24-25. Furthermore, Nation Ford

indicates that the record does not contradict Goldlink’s assertion

that Navpad’s and Nirvip’s financial statements were “stamped and

signed.” See id. at 24. Rather, these financial statements lacked

an “auditor’s certification,” and the record does not indicate that

an accountant’s stamp and signature alone is in accordance with

Indian generally accepted accounting principles. See id.;

Clariant’s Resp. at 14. Commerce followed its long stated

preference for selecting financial statements that have been

audited, which is reasonable and should be affirmed. See id. at

25-27; Clariant’s Resp. at 14.

B. Analysis

In calculating NV, Commerce must include a company’s “general

expenses and profit,” i.e., those not traceable to a specific

product, which is referred to as a company’s “financial ratios” and

include factory overhead, selling, general and administrative

(“SG&A”) expenses and profit. See 19 U.S.C. § 1677b(c)(1); Peer

Bearing Co. v. United States, 25 CIT 1199, 1214, 182 F. Supp. 2d

1285, 1303-04 (2001). The antidumping duty statute authorizes, but

does not mandate that Commerce use surrogate countries to estimate
Consol. Court No. 05-00060 Page 26

the value of the FOPs. See 19 U.S.C. § 1677b(c)(1). When using

surrogate values, however, Commerce shall use the “best available

information.” Id. In legislative history, Congress provided

Commerce with guidance by stating that, “[i]n valuing such factors

[of production], Commerce shall avoid using any prices which it has

reason to believe or suspect may be dumped or subsidized prices.”

H.R. Conf. Rep. No. 100-576 at 590 (1988), reprinted in 1988

U.S.C.C.A.N. 1547, 1623 (“House Report”). The House Report further

states that, “the conferees do not intend for Commerce to conduct

a formal investigation to ensure that such prices are not dumped or

subsidized, but rather intend that Commerce base its decision on

information generally available to it at that time.” H.R. Conf.

Rep. No. 100-576 at 590-91, reprinted in 1988 U.S.C.C.A.N. at 1623-

24.

In its Preliminary Determination, Commerce acknowledged that

it had preliminarily determined in a companion CVD case for India

that Indian CVP-23 producers and exporters were receiving

countervailable subsidies. See Preliminary Determination, 69 Fed.

Reg. at 35,292. Commerce also stated that the receipt of

government subsidies does not necessarily mean that a company’s

financial ratios are unusable. See id. Thus, Commerce determined

that Pidilite’s audited financial statements were usable as

surrogate financial ratios. See id. In its I & D Mem., Commerce
Consol. Court No. 05-00060 Page 27

stated that its preference is to use, “where possible, the

financial data of surrogate producers of identical merchandise,

provided that” the data is “not distorted or otherwise unreliable.”

I & D Mem. at 7. Here, Commerce determined that there was

insufficient reason to reject Pidilite’s financial statements on

the basis of an affirmative CVD determination. See id. Commerce

again reiterated that the mere existence of a subsidy is not, in

itself, sufficient evidence of such a distortion. See id. (citing

Final Results of Antidumping Duty Administrative Review of

Persulfates from the People’s Republic of China, 68 Fed. Reg. 6,712

(Feb. 10, 2003). Furthermore, Commerce determined that the RBI

data was not the best available information because financial data

from a producer of identical merchandise exists and rejected the

Navpad and Nirvip data because their financial statements were not

accompanied by an auditor’s certification. See id.

The Court finds that Commerce has not fully explained its

determination that subsidies did not render Pidilite’s financial

ratios unusable. Commerce must use data that is not distorted or

otherwise unreliable to determine NV. See 19 U.S.C. § 1677b(c);

Lasko Metal, 43 F.3d at 1443 (duty to determine margins as

accurately as possible). Since the presumption is that NME data is

distorted, Commerce must find a reasonable surrogate value.

Logically then, Commerce cannot use a surrogate value if it is also
Consol. Court No. 05-00060 Page 28

distorted, otherwise defeating the purpose of using a surrogate

value rather than the actual export value. While, it is reasonable

that the mere presence of subsidies does not necessarily mean the

financial ratios are distorted, Commerce must explain its

determination that Pidilite’s financial ratios are not distorted by

the subsidies it received here. Commerce merely states that the

parties had not demonstrated that the subsidies “systematically

distort Pidilite’s financial ratios.” I & D Mem. at 7. Other than

the affirmative CVD determination, Commerce asserts that Pidilite’s

financial statements are the best available information on the

record. See id. While Pidilite’s financial ratios may be the best

information available, the Court finds that Commerce’s conclusory

statement is not clearly supported in the record. Thus, the Court

is unable to determine whether Commerce’s decision is reasonable.

The Court acknowledges that its review is limited to sustaining

Commerce if one could reasonably conclude that Commerce chose the

best available information, even if the Court would have preferred

other data, but that is not yet the case here. Commerce must first

explain its choice. Therefore, the Court remands this issue to

Commerce to further explain its determination in detail,

specifically how the subsidies Pidilite received did not distort

its financial ratios rendering them unusable.
Consol. Court No. 05-00060 Page 29

The Court sustains Commerce’s decision to reject data from the

RBI because the companies represented therein reflect non-CVP-23

producers, which is reasonable when data from a CVP-23 producer is

available. See 19 U.S.C. § 1677b(c)(4). The Court also finds that

Commerce’s rejection of data from Navpad and Nirvip because of the

absence of a auditor’s certification is reasonable given that

better available information exists in the record. The Court,

however, notes that if on remand, Commerce determines that

Pidilite’s financial statements are distorted due to the subsidies

received, then Commerce should look at all the information on the

record anew to determine what is the best available information.

If none of the information on the record is satisfactory, then

Commerce should reopen the record to obtain more information

regarding either the existing sources or new ones.

III. Surrogate values

Defendant-Intervenors separately and identically contest

Commerce’s selection of surrogate values for five FOPs. See Mem.

Law Pls.’ Nation Ford Chem. Co. & Sun Chem. Corp. Supp. Rule 56.2

Mot. J. Agency R. (“Nation Ford’s Mem.”) at 10-17; Mem. Supp.

[Clariant] Pl.-Intervenor’s Mot. J. Agency R. (“Clariant’s Mem.”)

at 2-3. Specifically, Defendant-Intervenors argue that: 1)Commerce

chose the incorrect tariff classification from the Indian tariff

schedule for valuing benzene sulfonyl chloride; 2) Commerce
Consol. Court No. 05-00060 Page 30

incorrectly values carbazole by using a basket category import

price rather than a more specific import price; 3) Commerce

incorrectly valued sodium sulfide based on an import price rather

than the concentration specific prices available in Chemical

Weekly, an Indian publication; 4) Commerce used the incorrect

concentration price for calcium chloride rather than adjusting for

the different concentration levels reported by the Chinese

producers; and 5) Commerce failed to account for steam as a factor

of production. See Nation Ford’s Mem. at 10-17; Clariant’s Mem. at

2-3. Commerce has requested a voluntary remand on the issues of

benzene sulfonyl chloride, calcium chloride and steam. See

Commerce’s Resp. at 34-36. Specifically, Commerce concedes that it

incorrectly valued benzene sulfonyl chloride using import data from

the Indian harmonized tariff schedule for a different chemical.

See id. at 34. Regarding calcium chloride, Commerce relied on

calcium chloride values from Chemical Weekly based on a 70 percent

concentration, while Goldlink’s data reported using calcium

chloride at a 100 percent basis, which was not contradicted at

verification. See id. Therefore, Commerce requests a voluntary

remand to adjust for concentration levels where the Chemical Weekly

data relied upon was expressed at a 70 percent concentration. See

id. at 35. Commerce also states that although it found that steam

was a FOP for CVP-23, there was no information on the record to

value steam. See id. Commerce further declined to value steam
Consol. Court No. 05-00060 Page 31

using the United States price quotes provided by the Defendant-

Intervenors because of its longstanding practice to reject United

States prices. See Commerce’s Resp. at 35. Therefore, Commerce

declined to select a value for steam. See id. Commerce now

requests a remand to reopen the record and gather new evidence to

determine a statutorily permissible surrogate value for steam. See

id. at 36. The Court grants Commerce’s request for voluntary

remand, which the Court will then review, but also notes that

Commerce should thoroughly explain its reasoning. Accordingly, the

Court will address in turn the remaining two surrogate values still

at issue.

A. Commerce Properly Selected Indian Import Prices as the
Surrogate Value for Sodium Sulfide

1. Parties’ Contentions

Defendant-Intervenors argue that Commerce incorrectly valued

sodium sulfide using Indian import prices rather than the

concentration specific prices available in Chemical Weekly.

Defendant-Intervenors argue that CVP-23 can be made with different

concentrations of sodium sulfide and the Chinese producers reported

specific concentrations purchased. See Nation Ford’s Mem. at 12-

14; Clariant’s Mem. at 11. Thus, Defendant-Intervenors assert that

the value of sodium sulfide should be based on concentration

specific prices. See id.; Clariant’s Mem. at 11-12. Furthermore,

Commerce failed to explain its decision to use import prices
Consol. Court No. 05-00060 Page 32

deviating from its preference to use domestic data, like the

Chemical Weekly information submitted by Defendant-Intervenors.

See Reply Br. Clariant Corp. (“Clariant’s Reply”) at 6.

Commerce responds that it valued sodium sulfide using non-

aberrational Indian import prices because such prices satisfied its

criteria for selecting surrogate values and thus is supported by

substantial evidence. See Customs’ Resp. at 28. Customs states

that its three criteria for selecting surrogate value information

are: 1) that the information be publicly available, 2) be

representative of a range of prices within the POI, and 3) be

product-specific and tax-exclusive. See id. at 28-29. While

Defendant-Intervenors urge Commerce to use concentration specific

prices listed in Chemical Weekly and while Commerce states that it

may make an adjustment for reported concentration levels, Commerce

does not select sources for surrogate values based on concentration

levels. See id. at 29. Commerce further states that “although

sodium sulfide was reported as a factor of production on a 100-

percent concentration basis, it would not be appropriate to make an

adjustment where the surrogate value source does not indicate

concentration levels.” Id. The Indian import prices that Commerce

chose to value sodium sulfide satisfy its three criteria, and

accordingly, Commerce argues, its decision is supported by

substantial evidence. See Customs’ Resp. at 30.
Consol. Court No. 05-00060 Page 33

Goldlink also responds that Commerce properly determined the

value for sodium sulfide using the best information available. See

Def.-Intervenors Goldlink et al.’s Opp’n Pl. Nation Ford Chem.

Co.’s &Pl.-Intervenor Clariant Corp.’s Rule 56.2 Mot. J. Agency R.

(“Goldlink’s Resp.”) at 7. Goldlink states that Commerce has broad

latitude in choosing surrogate value information, which is entitled

to deference. See id. Here, Goldlink notes that Commerce did not

find the sodium sulfide data as “aberrational or otherwise

unusable” when it determined import statistics for other FOPs were

aberrational. Id. at 7-8. Goldlink argues that Defendant-

Intervenors’ contention that the Chemical Weekly data is better

than the Indian import prices is a decision that Commerce has

determined in the negative. See id. at 8. Without citing record

evidence that undermines the reliability of the Indian import

statistics, Commerce’s decision is entitled to deference. See id.

2. Analysis

The Court rejects Defendant-Intervenors’ complaint that

Commerce erred in using Indian import prices rather than Chemical

Weekly prices. In valuing FOPs in the NME country context,

Commerce enjoys considerable discretion. See Lasko, 43 F.3d at

1446. Commerce chose Indian import prices as surrogate values for

all but four of the material inputs, including sodium sulfide. See

Preliminary Determination, 69 Fed. Reg. at 35,291. Commerce
Consol. Court No. 05-00060 Page 34

explained its three criteria for selecting surrogate value

information, which do not include adjustment for concentration

levels. See I & D Mem. at 12. Furthermore, Commerce stated it

considered “quality, specificity, and contemporaneity of the data.”

Preliminary Determination, 69 Fed. Reg. at 35,291. Specifically

regarding surrogate values adjusted for chemical concentration

levels, Commerce stated that it “would not adjust surrogate values

to reflect purity levels when the surrogate value sources do not

indicate levels of purity which can be used for comparison

purposes.” I & D Mem. at 16. While Defendant-Intervenors prefer

the Chemical Weekly data, Commerce recognizes that Chemical Weekly

prices are based on 100-percent purity unless indicated otherwise.

See id. Commerce argues that no grounds exist to adjust prices

because respondents reported factors on a 100-percent concentration

basis, which Commerce verified. See I & D Mem. at 16; Nation

Ford’s Mem. at 12. The Court finds that Commerce’s decision to use

Indian import values for sodium sulfide is reasonable.

B. Commerce Properly Selected Indian Import Prices as the
Surrogate Value for Carbazole

1. Parties’ Contentions

Defendant-Intervenors initially argued that Commerce

incorrectly valued carbazole using an import basket category rather

than the more specific import prices. See Nation Ford’s Mem. at

14; Clariant’s Mem. at 9. Nation Ford then withdrew its challenge
Consol. Court No. 05-00060 Page 35

to Commerce’s surrogate value selection for carbazole. See Reply

Br. Pls. Nation Ford Chem. Co. & Sun Chem. Corp. Supp. Rule 56.2

Mot. J. Agency R. (“Nation Ford’s Reply”) at 2.4 Clariant

continues to argue that basket categories are broad classifications

including several different chemicals, which are not

interchangeable in the production process. See Clariant’s Mem. at

9. Thus, the basket category price has no direct relation to the

import price of a specific input. See id. Clariant contends that

Chemimpex, the Chemical Weekly database, is a satisfactory

alternative source of surrogate values that Commerce unreasonably

rejected. See id. at 10. The Chemimpex data, Clariant argues,

meets Commerce’s traditional criteria for surrogate values and

moreover, is product specific whereas the basket category data is

not. See id.

Commerce responds that it valued carbazole using Indian import

prices rather than Chemimpex because the Indian import prices

satisfied its surrogate value criteria. See Customs’ Resp. at 30.

Commerce concedes that the Indian import prices are from tariff

classifications that slightly differ from the corresponding FOP.

See id. at 31. Commerce argues, however, that relying on a basket

category is not a sufficient basis to claim that Commerce failed to

4
Clariant does not explicitly withdraw its challenge in
its reply brief and did not attend oral arguments held before the
Court on February 9, 2006. See Clariant’s Reply at 1-10.
Consol. Court No. 05-00060 Page 36

adhere to its own practice. See id.

Goldlink also responds that Commerce valued carbazole using

the best information available. See Goldlink’s Resp. at 8.

Goldlink argues that Commerce has previously determined in an

unrelated antidumping duty review that Chemimpex data is not as

reliable as even a basket category of Indian import statistics.

See id. at 8-9. The Chemimpex data does not represent a

sufficiently broad range of import values and does not necessarily

conform to the categories in India’s Harmonized Tariff Schedule.

See id. at 9. Thus, Commerce’s decision to use the more reliable

and representative prices in the Indian import statistics is

supported by substantial evidence. See id.

2. Analysis

As noted above, Commerce has broad discretion in selecting

which price from a surrogate country to use in valuing a particular

FOP, while achieving the overarching goal to determine the margins

as accurately as possible. See Lasko Metal, 43 F.3d at 1443.

While Defendant-Intervenors argue that the Chemimpex data satisfies

Commerce’s surrogate value criteria, Commerce determined that

Indian import statistics are the best available surrogate value

information to “value certain material inputs that are contained

within Indian HTS basket categories . . ..” I & D Mem. at 15. It

is reasonable for Commerce to find official Indian government
Consol. Court No. 05-00060 Page 37

statistics more reliable than Chemimpex data, given that the latter

is derived from the former and the Chemimpex categories may not

follow the Indian tariff schedule. See Final Results of

Antidumping Duty Changed Circumstances Review and Reinstatement of

the Antidumping Duty Order of Sebacic Acid from the People's

Republic of China, 70 Fed. Reg. 16,218 (Mar. 30, 2005), I & D Mem.

at Comment 4. Therefore, the Court finds that Commerce could

reasonably determine that the Indian import prices are better

available information than the Chemimpex data.

IV. Commerce Failed to Include Indian Import Terminal Charges &
Brokerage Fees in Calculating Movement Costs

A. Contentions of the Parties

Defendant-Intervenors assert that Commerce failed to account

for all necessary movement costs, specifically brokerage fees and

terminal charges, when it relied on the cargo, insurance and

freight (“CIF”) price from India. See Nation Ford’s Mem. at 22;

Clariant’s Mem. at 17. Defendant-Intervenors argue that when

Commerce decided to use surrogate import prices, it was necessary

to include all relevant costs in India. See id.; Clariant’s Mem.

at 17. By failing to include the brokerage and terminal charges in

the surrogate values of imported materials, Nation Ford argues that

Commerce is using a surrogate import value that is inherently lower

than the surrogate domestic value, which accounts for the brokerage

and terminal charges. See Nation Ford’s Mem. at 23. Nation Ford
Consol. Court No. 05-00060 Page 38

also argues that whether Pidilite incurred brokerage and terminal

charges is irrelevant because it is merely one of many Indian

companies that imports merchandise. See Nation Ford’s Reply at 8.

Commerce is making an “arbitrary and artificial distinction between

two groups of costs,” brokerage and terminal versus freight, “both

of which are real movement costs.” Id. at 9. Therefore, Commerce

should add brokerage fees and terminal charges to its surrogate

values where it used Indian import prices to value material inputs.

See Nation Ford’s Mem. at 24; Clariant’s Mem. at 17.

Commerce responds that there is no record evidence indicating

that Pidilite incurred brokerage and terminal charges in acquiring

the FOPs, and therefore, there is no basis to include these

charges. See Commerce’s Resp. at 32. Commerce states that it did

not add the “additional [brokerage and terminal] costs involved in

importing a product into the surrogate country because [it] is only

concerned with valuing the cost of an input used by a surrogate

producer, whether it be purchased domestically or imported.” Id.

(citing I & D Mem. at 24). Commerce argues that it is not required

to obtain an “apples-to apples” comparison between Indian import

and domestic prices. See id. at 33. Rather, “[v]aluing factors of

production simply involves reasonable measure of the respondent’s

own cost of production,” as required by 19 U.S.C. § 1677b(c)(1).

Id. at 32. Absent evidence that the NME producer actually being
Consol. Court No. 05-00060 Page 39

investigated incurred brokerage and terminal charges, Commerce

argues that there is no basis to make such an adjustment. See id.

at 33. Goldlink generally supports Commerce’s position. See

Goldlink’s Resp. at 1.

B. Analysis

The Court finds that Commerce failed to capture all movement

costs and should have included terminal charges and brokerage fees.

Commerce has broad discretion in selecting which price from a

surrogate country to use in valuing a particular FOP, while

achieving the overarching goal to determine the margins as

accurately as possible. See Lasko Metal, 43 F.3d at 1443. Here,

Commerce has chosen primarily Indian import statistics as surrogate

values for material inputs. See Preliminary Determination, 69 Fed.

Reg. 35,291. In doing so, Commerce recognizes that while the

import statistics may be the best available information, “importing

material inputs may not be the experience of the surrogate

producer.” I & D Mem. at 24. Therefore, Commerce decided that it

would not “add additional costs involved in importing a product

into the surrogate country because [it] is only concerned with

valuing the cost of an input used by a surrogate producer, whether

[the input] be purchased domestically or imported.” Id.

In a NME context, the antidumping statute directs Commerce to

formulate the NV of the merchandise as accurately as possible based
Consol. Court No. 05-00060 Page 40

on values for the FOPs. See 19 U.S.C. §1677b(c). Each identified

FOP is assigned a surrogate value, i.e., their value in a market

economy. See id. Here, Commerce chose Indian import prices as

surrogate values for material inputs of CVP-23, instead of export

prices or other available data such as Chemical Weekly. See

Preliminary Results, 69 Fed. Reg. at 35,291. Commerce has the

discretion to do so, as the evaluator of the best available

information. In doing so, however, Commerce must account for the

full cost of the material input, to ultimately satisfy its

obligation to determine the margin “as accurately as possible.”

Lasko Metal, 43 F.3d at 1443. In regards to movement costs, this

includes terminal charges and brokerage fees incurred in the

importation of the material inputs for which Commerce used Indian

import statistics.

The Court is unpersuaded by Commerce’s argument that simply

because the record evidence does not indicate that Pidilite

incurred terminal charges and brokerage fees, such need not be

included. Rather, Commerce is calculating a surrogate value for

Chinese producers or exporters, and whether they incurred such

movement costs is the more relevant focus. Furthermore, because

the statute contemplates the ability of Commerce to draw FOP values

from different surrogate producers, sources, countries or multiple

surrogate countries, see generally Lasko Metal, 43 F.3d at 1446;
Consol. Court No. 05-00060 Page 41

Peer Bearing, 25 CIT at 1214-17, 182 F. Supp. 2d at 1304-06,

therefore allowing case-by-case determinations, then it makes no

sense to require Commerce to include certain charges that may not

always be incurred by the exporter. Furthermore, Commerce has

recognized that terminal charges and brokerage fees can be a part

of movement costs because it has adjusted both NV and export price

for such charges in other antidumping duty determinations.5

Therefore, the Court remands this issue and Commerce must either

include terminal charges and brokerage fees in movement costs or

precisely and reasonably explain its decision to not include such

costs here, given that its treatment of surrogate values differs

from its treatment of producers or exporters under review.

5
See Notice of Preliminary Determination of Sales at Less
Than Fair Value for Certain Automotive Replacement Glass
Windshields From the People’s Republic of China, 66 Fed. Reg.
48,233, 48,239-40 (Sept. 19, 2001) (deducting brokerage & terminal
charges from export price); Preliminary Results of New Shipper
Review and Antidumping Duty Administrative Review, and Rescission,
in Part, of the Antidumping Duty Administrative Review of Oil
Country Tubular Goods, Other Than Drill Pipe, From Korea, 67 Fed.
Reg. 57,570, 57,573 (Sept. 11, 2002) (deducting brokerage &
terminal charges from NV); Preliminary Results of Antidumping Duty
Administrative Review of Certain Polyester Staple Fiber from Korea,
67 Fed. Reg. 39,350, 39,351 (June 7, 2002) (deducting brokerage &
terminal charges from export price); but see Final Results and
Partial Rescission of Antidumping Duty Administrative Review of
Sulfanilic Acid From the People’s Republic of China, 61 Fed. Reg.
53,702, 53,705 (Oct. 15, 1996) (rejecting a similar argument
because “Indian Import Statistics . . . are reported on a CIF
basis. Thus, the reported import values include the costs of
transporting the merchandise to India, and an adjustment for ocean
freight from the port of export to India and for Indian port
terminal and brokerage charges is not necessary.”).
Consol. Court No. 05-00060 Page 42

V. Commerce Properly Applied Pidilite’s Financial Ratios to
Multicolor’s Toll Production

Jiangsu Multicolor Fine Chemical Co., Ltd. (“Multicolor”) toll

produced (also referred as subcontracting or leasing arrangement)

CVP-23 exported by Goldlink during the POI. See Nation Ford’s Mem.

at 18; Clariant’s Mem. at 15-16; Goldlink’s Resp. at 12.

Multicolor converted carbazole into nitroethylcarbazole, which was

then sent to both Haidi and Nantong Longteng Chemical Co., Ltd.

(“Longteng”) for conversion into crude CVP-23. See id.; Clariant’s

Mem. at 16; Goldlink’s Resp. at 12. The crude CVP-23 was then

returned to Multicolor for conversion into finished CVP-23. See

id.; Clariant’s Mem. at 16; Goldlink’s Resp. at 12.

A. Contentions of the Parties

Defendant-Intervenors contend that Commerce failed to properly

account for certain costs in the toll production of crude CVP-23

within Goldlink’s supply chain. See Nation Ford’s Mem. at 18;

Clariant’s Mem. at 16. Defendant-Intervenors argue that Commerce

incorrectly accounted for toll manufacturing by Haidi and Longteng

by only valuing certain basic FOPs (material inputs, utility and

labor) reported by Haidi and Longteng, treating the outsourcing as

if it did not occur and Multicolor directly experienced those

costs. See id.; Clariant’s Mem. at 16. Rather, Defendant-

Intervenors argue that Multicolor’s receipt of crude CVP-23 in its

tolling arrangement must account for factory overhead, SG&A, and
Consol. Court No. 05-00060 Page 43

profit attributable to this outsourcing because the cost of the

tolling is greater than the direct manufacturing costs. See Nation

Ford’s Mem. at 18; Clariant’s Mem. at 16. By not attributing the

full costs of the tolling arrangement, Commerce is failing to

calculate the cost or price of CVP-23 that would be determined in

a market economy country. See id. at 18-20; Clariant’s Mem. at 16.

Nation Ford argues that attribution of the tolling arrangement is

not “double-counting, because the toll transaction as a cost to

Multicolor is more than just the sum” of the costs of the basic

FOPs. Nation Ford’s Mem. at 20. Haidi and Longteng “separately

incurred factory overhead and SG&A costs and are entitled to profit

for their tolling operations” from Multicolor. Id. Therefore,

since Commerce has failed to calculate the antidumping duty margin

as accurately as possible, Defendant-Intervenors request a remand.

See id. at 21; Clariant’s Mem. at 17. On remand, Nation Ford

requests that Commerce recalculate the cost of toll production by

applying the financial ratios to the cost of materials, energy and

labor in the toll production process. See Nation Ford’s Reply at

15. Commerce should then include that figure as a separate cost in

calculating Multicolor’s cost of production of finished CVP-23.

See id.

Commerce responds that its application of financial ratios to

Multicolor is supported by substantial evidence and is in
Consol. Court No. 05-00060 Page 44

accordance with law. See Commerce’s Resp. at 36. Commerce argues

that Defendant-Intervenors are essentially seeking to count

expenses associated with Multicolor’s tolling arrangement at

certain stages of CVP-23 production more than once. See id. Since

Pidilite is a fully integrated producer incurring administrative

and overhead expenses at each stage of production, its financial

ratios are an appropriate surrogate for Multicolor because

Multicolor and its “subcontractor” together conduct the same

activity as Pidilite alone. See id. at 36-37. Commerce reasons

that if it followed Defendant-Intervenors’ instructions, it would

impermissibly over-count expenses for the stages of production

handled by the toll manufacturer, thus weighing SG&A twice as

expensive to Multicolor than to Pidilite for the same stages. See

id. Furthermore, Commerce argues that compliance with Defendant-

Intervenors’ logic is also inconsistent with its longstanding

practice in valuing SG&A in NME, which it followed here. See id.

at 37-38.

Goldlink also responds that Commerce correctly applied the

surrogate financial ratios to calculate Multicolor’s total cost of

manufacturing. See Goldlink’s Resp. at 12-14. Goldlink reasons

that the factory overhead, SG&A and profit values are properly

attributed to the tolling operation because Haidi’s and Longteng’s

production costs are included in Multicolor’s direct FOPs. See id.
Consol. Court No. 05-00060 Page 45

at 12-13. Accordingly, application of the factory overhead, SG&A

and profit values to the tolling operation as well as again to

Multicolor would result in double counting overhead. See id. at

13. Goldlink emphasizes that the surrogate data, here Pidilite’s

financial statements, reflect a fully integrated producer and is

thus a reasonable comparison to Multicolor’s entire production

chain, including the tolling operation. See id. at 13-14.

Therefore, Commerce’s application of factory overhead, SG&A and

profit values to Multicolor’s tolling operation is supported by

substantial evidence. See id. at 14.

B. Analysis

The Court finds that Commerce’s application of financial

ratios to Multicolor’s tolling operation is reasonable. Commerce

stated that it was not “persuaded” that “Multicolor’s overhead and

SG&A expenses have been understated because a portion of its

production is tolled to another company.” I & D Mem. at 25.

Commerce applied Pidilite’s financial ratios to Multicolor because

Pidilite is a “fully integrated” producer of CVP-23, thus its

“financial ratios serve as an appropriate surrogate for Multicolor

as well as Multicolor’s subcontractor.” Id. Commerce concluded,

that it was acting “consistent with [its] practice” and “continued

to rely on the financial ratios derived from Pidilite’s financial

statements, without adjustment.” Id. Commerce is given broad
Consol. Court No. 05-00060 Page 46

discretion “to determine margins as accurately as possible, and to

use the best information available to it in doing so.” Lasko

Metal, 43 F.3d at 1443. Here, Commerce determined that Multicolor

and its tolling operation is comparable to Pidilite, a fully-

integrated CVP-23 producer. See I & D Mem. at 25. The Court

cannot say that Commerce acted arbitrarily in determining that

Pidilite’s financial ratios are an appropriate surrogate for

Multicolor. See Hangzhou Spring Washer Co., Ltd. v. United States,

29 CIT ___, ___, 387 F. Supp. 2d 1236, 1249 (2005) (where the court

similarly addressed this issue). Accordingly, Commerce’s decision

to apply Pidilite’s financial ratios to Multicolor, as a whole, is

reasonable and supported by record evidence.

CONCLUSION

In light of the above, this case is remanded to Commerce with

instructions to: (1) re-examine its selection of surrogate values

for (a) benzene sulfonyl chloride, (b) calcium chloride, and (c)

steam; (2) re-examine its determination to apply total adverse

facts to Hanchem; (3) sufficiently explain its determination that

Pidilite’s financial ratios were not distorted by the subsidies

received; and (4) either include terminal charges and brokerage

fees in movement costs or precisely and reasonably explain its

decision to not include such costs here. Where necessary, for

example steam, Commerce is instructed to re-open the record and
Consol. Court No. 05-00060 Page 47

allow the parties to submit new information. Commerce will also

make adjustments where necessary insofar as re-examination of

Pidilite’s financial ratios may affect other aspects of the remand

determination. Commerce is affirmed in all other aspects.

/s/ Nicholas Tsoucalas
NICHOLAS TSOUCALAS
SENIOR JUDGE

Dated: May 4, 2006
New York, New York