Slip Op. No. 23-132
UNITED STATES COURT OF INTERNATIONAL TRADE
SHANGHAI TAINAI BEARING CO.,
LTD. AND C&U AMERICAS, LLC,
Plaintiffs,
and
PRECISION COMPONENTS, INC.,
XINCHANG NEWSUN
XINTIANLONG PRECISION Before: Stephen Alexander Vaden,
BEARING MANUFACTURING CO., Judge
LTD, and HEBEI XINTAI BEARING
FORGING CO., LTD, Consol. Court No. 1:22-cv-00038
Consolidated Plaintiffs,
v.
UNITED STATES,
Defendant.
OPINION
[Granting in part and denying in part Plaintiffs’ Motion for Judgment on the
Agency Record.]
Dated: September 14, 2023
David Craven, Craven Trade Law LLC, of Chicago, IL, for Plaintiffs and
Consolidated Plaintiffs.
L. Misha Preheim, Assistant Director, and Kelly Geddes, Trial Attorney,
Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of
Washington, DC, for Defendant United States. With them on the brief were Brian
Consol. Court No. 1:22-00038 Page 2
M. Boynton, Principal Deputy Assistant Attorney General; Patricia M. McCarthy,
Director, Commercial Litigation Branch; Claudia Burke, Assistant Director,
Commercial Litigation Branch; and Jesus N. Saenz, Of Counsel, U.S. Department of
Commerce, Office of the Chief Counsel for Trade Enforcement & Compliance.
Vaden, Judge: Plaintiffs Shanghai Tainai Bearing Co., Ltd. and C&U
Americas, LLC filed suit objecting to Commerce’s resolution of the thirty-third
administrative review of the antidumping order on tapered roller bearings from
China. Joined by several Consolidated Plaintiffs, Shanghai Tainai brings multiple
claims of error against Commerce’s final determination. They find moderate
success. Commerce failed to consider the necessary factors established by the
Federal Circuit before applying a partial adverse inference to Shanghai Tainai to
punish it for the non-compliance of its suppliers in the underlying investigation.
Commerce also failed to justify its decision to deduct certain surcharges Shanghai
Tainai included as extra profit on top of the Section 301 duties when calculating the
U.S. price. Plaintiffs’ winning streak stops there, however, as the Court rejects
their remaining claims, including the claim that the Section 301 duties themselves
should have been deducted from the U.S. price. Consequently, the Motions for
Judgment on the Agency Record shall be GRANTED IN PART AND DENIED IN
PART.
BACKGROUND
Shanghai Tainai is a Chinese manufacturer of tapered roller bearings
(TRBs), a type of precision bearing that facilitates the rotational movement of an
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axle. 1 Tapered roller bearings are made out of four basic components: rollers,
cages, cups, and cones. Rollers are small steel cylinders that are held together in a
circular housing called a cage. The caged rollers are inserted between two steel
rings, allowing them to move. The inner ring is called the cone, and the outer ring
is called the cup. The antidumping order on tapered roller bearings from China (the
Order) has been in place since June 15, 1987, and covers
. . . tapered roller bearings and parts thereof, finished and
unfinished, from China; flange, take up cartridge, and
hanger units incorporating tapered roller bearings; and
tapered roller housings (except pillow blocks) incorporating
tapered rollers, with or without spindles, whether or not
for automotive use.
Decision Memorandum for the Final Results of the 2019-2020 Administrative Review
of the Antidumping Duty Order on Tapered Roller Bearings and Parts Thereof,
Finished and Unfinished, from the People’s Republic of China (Decision Memo) at 2–
3 (Jan. 4, 2022), J.A. 1,004–05, ECF No. 43. Shanghai Tainai’s Motion for
Judgment on the Agency Record challenges the final results of the thirty-third
administrative review of the Order, which covers imports of tapered roller bearings
from China during the period of June 1, 2019 through May 31, 2020 (the Period of
Review). See Initiation of Antidumping and Countervailing Duty Administrative
Reviews, 85 Fed. Reg. 47,731 (Dep’t of Com. Aug. 6, 2020).
1 Shanghai Tainai has brought its Motion together with another entity, C&U Americas
LLC. In earlier proceedings before this Court, Shanghai Tainai failed to explain the
relationship between itself and C&U Americas. See Shanghai Tainai Bearing Co., Ltd. v.
United States, 582 F. Supp. 3d 1299, 1308 (CIT 2022) (referring to the “recurring mystery”
of the relationship between Shanghai Tainai and C&U Americas and noting that Plaintiffs’
counsel declined the Court’s request to shed light on it.). The Court therefore refers
generally to Plaintiffs as Shanghai Tainai.
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I. The Disputed Administrative Review
On August 6, 2020, Commerce initiated the present administrative review of
the Order. See id. Commerce selected Shanghai Tainai as the sole mandatory
respondent because it was the largest exporter of tapered roller bearings from
China during the Period of Review. See Tapered Roller Bearings and Parts Thereof,
Finished and Unfinished, from the People’s Republic of China, 86 Fed. Reg. 36,099
(Dep’t of Com. July 8, 2021) and accompanying Preliminary Decision Memorandum
at 3, J.A. at 13,073, ECF No. 43. Commerce received questionnaire responses from
Shanghai Tainai and subsequently published its Preliminary Results on July 8,
2021. See 86 Fed. Reg. 36,099 (Dep’t of Com. July 8, 2021).
In its Preliminary Results, Commerce took issue with a number of Shanghai
Tainai’s questionnaire responses. Commerce noted that Shanghai Tainai had not
provided “bills of materials” from its suppliers that could substantiate Shanghai
Tainai’s reported “factors of production.” Preliminary Decision Memorandum at 15,
J.A. at 13,085, ECF No. 43. 19 U.S.C. § 1677b(c)(1)(B) requires that Commerce
determine the normal value of subject merchandise from non-market economies
such as China “on the basis of the value of the factors of production utilized in
producing the merchandise” and that such value “be based on the best available
information regarding the values of such factors in a market economy country . . .
considered to be appropriate by [Commerce].” Commerce therefore requires that
Chinese respondents such as Shanghai Tainai provide factors of production data
that describe the inputs used to manufacture the merchandise as well as the price
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of each input in a surrogate market-economy country. 2 See Response to Section D of
the Department’s Initial Questionnaire by Shanghai Tainai Bearing Co., Ltd
(Section D Questionnaire Response) at D-1, J.A. at 81,156, ECF No. 44. In the
current review, Shanghai Tainai reported the following inputs as factors of
production: chrome steel, cold-rolled steel, turned cups and cones, rollers, cages,
and anti-rust oil. Id. at D-15, J.A. at 81,170. Commerce chose Romania as the
surrogate country to value these inputs. 3 However, when Commerce requested that
Shanghai Tainai substantiate its reported factors of production by submitting bills
of materials from its input suppliers, Shanghai Tainai responded that its affiliated
suppliers “do not maintain production slips” and that it “‘had no way of knowing the
direct input bills of materials for the unaffiliated suppliers.’” Preliminary Decision
Memorandum at 15, J.A. at 13,085 (quoting Response to the Department’s A, C and
D Supplemental Questionnaire by Shanghai Tainai Bearing Co., Ltd. at 27, J.A. at
82,201, ECF No. 44). Commerce further noted that Shanghai Tainai did not report
all the necessary factors of production data for its products. For example, it omitted
a factor of production value for “rollers” despite a product description indicating
that rollers should be included as a cost. Id. at 15–16, J.A. at 13,085–86.
For its Preliminary Results, Commerce used Shanghai Tainai’s reported
factors of production as “facts available,” averaged this data to assign a value to
missing fields, calculated an estimated dumping margin of 36.75 percent, and
2 Shanghai Tainai also included the labor and energy costs of its affiliate suppliers in its
factors of production database. Section D Questionnaire Response at D-15, J.A. at 81,170,
ECF No. 44.
3 Shanghai Tainai does not challenge the selection of Romania. Oral Arg. Tr. 41:11–12,
ECF No. 52 (Mr. Craven: “We do not object to the use of Romania.”).
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issued additional supplemental questionnaires to both Shanghai Tainai and its
unaffiliated suppliers that sought to substantiate the factors of production data.
Id.; 86 Fed. Reg. at 36,100. The unaffiliated suppliers did not respond to
Commerce’s supplemental questionnaires sent directly to them. See Decision Memo
at 7, J.A. at 1,009, ECF No. 43. Shanghai Tainai maintained that, despite its
requests, its suppliers remained unable to provide the factors of production data.
See Response to the Department’s Second Supplemental Questionnaire by Shanghai
Tainai Bearing Co., Ltd. (Second Supplemental Questionnaire Response) at 6, J.A.
at 84,320, ECF No. 44. Shanghai Tainai attached letters it had sent to suppliers
requesting bills of materials for inputs it had purchased. Id. at Ex. SSD-2, J.A. at
84,406–16. Shanghai Tainai also attached a single response email from a supplier,
who declined to provide the information. Id. at J.A. 84,415. Shanghai Tainai
claimed that, because it was not affiliated with these suppliers, “Tainai has no
power to compel their assistance.” Id. at J.A. 84,320.
Along with its response to the Second Supplemental Questionnaire, Shanghai
Tainai submitted a case brief that challenged numerous other aspects of
Commerce’s Preliminary Results. See Administrative Case Brief of Shanghai
Tainai Bearing Co., Ltd., Sept. 10, 2021 (Shanghai Tainai Case Brief), J.A. at
84,449, ECF No. 44. Shanghai Tainai first objected to Commerce’s use of financial
statements from Timken Romania SA, a bearings manufacturer, as the basis for
calculating the surrogate values of Shanghai Tainai’s factors of production. Id. at 2,
J.A. at 84,450. It claimed that Timken Romania’s complex manufacturing
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operations and use of related-party transactions made it an inappropriate
comparator and that Commerce should have instead used the financial data of
alternative surrogate value candidates URB Rulmenti Suceava or Compa S.A.
Sibiu. Id. at 4–5, J.A. at 84,452–53. Shanghai Tainai next objected to what it
termed “double counting” in the valuation of rollers, a factor of production in its
tapered roller bearings. Id. at 7, J.A. at 84,455. It argued that, although it
purchased finished rollers, Commerce refused to value them using the purchase
price. Instead, Commerce used a surrogate value that “included the cost for the
materials as well as the cost of the processing to convert the materials into rollers
and the profit for the producer of the rollers.” Id. Shanghai Tainai also claimed
that Commerce’s dumping margin defied “commercial and economic reality,” citing
to Baoding Mantong Fine Chemistry Co., Ltd. v. United States, 113 F. Supp. 3d 1332
(CIT 2015) for the proposition that such margins must be discarded. Id. at 11, J.A.
at 84,459. Plaintiff asserted that its significant operating profit would be
impossible if it were dumping at the margin Commerce calculated in the
Preliminary Results. Id.
Shanghai Tainai further alleged that Commerce improperly deducted Section
301 duties from the U.S. price of its tapered roller bearings, resulting in a higher
dumping margin. Id. at 8, J.A. at 84,456. It argued that, although 19 U.S.C. §
1677a(c)(2)(A) requires the deduction of “United States import duties,” the statute
should be interpreted to refer to ordinary customs duties and not those duties
imposed under Section 301, which are temporary “special” duties and therefore
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properly included in the U.S. price. Id. at 9, J.A. at 84,457. Shanghai Tainai also
claimed that Commerce improperly capped the U.S. price by deducting customer
payments denominated as “additional revenue for 301” from the price, even where
Shanghai Tainai charged amounts that exceeded the amount of Section 301 duties.
Id. at 10, J.A. at 84,458. This tended to increase Shanghai Tainai’s dumping
margin by reducing the U.S. price. Finally, Shanghai Tainai faulted Commerce for
declining to grant a “by-product offset” for scrap metal that it sold, which further
increased its dumping margin. Id. at 10–11, J.A. at 84,458–59.
On January 10, 2022, Commerce published its Final Results and
accompanying Decision Memo. See Tapered Roller Bearings and Parts Thereof,
Finished and Unfinished, From the People’s Republic of China: Final Results and
Partial Recission of Review; 2019-2020 (Final Results), 87 Fed. Reg. 1,120 (Dep’t
Com. Jan. 10, 2022); Decision Memo, J.A. at 1,003, ECF No. 43. It decided to apply
partial facts available with an adverse inference to fill the gaps in Shanghai
Tainai’s missing factors of production data. See Decision Memo at 7, J.A. at 1,009,
ECF No. 43. When an interested party fails to act to the best of its ability to comply
with a request for information from Commerce, Commerce may use an inference
adverse to that party in selecting the information that will fill the gap in the record.
See 19 U.S.C. § 1677e(b). Here, Commerce did not find that Shanghai Tainai had
failed to cooperate to the best of its ability. Instead, it based its decision to apply an
adverse inference on the lack of cooperation from Shanghai Tainai’s suppliers. See
Decision Memo at 8, J.A. at 1,010, ECF No. 43 (“[W]e find that Tainai has
Consol. Court No. 1:22-00038 Page 9
cooperated with Commerce’s requests for information, but its missing [factors of
production] information from unaffiliated suppliers necessitates the use of partial
AFA[.]” 4). To do this, Commerce relied on Mueller Comercial De Mexico, S. de R.L.
De C.V. v. United States, 753 F.3d 1227 (Fed. Cir. 2014). See id. at 12–13, J.A. at
1,014–15. In Mueller, the Federal Circuit affirmed Commerce’s practice of using
facts available with an adverse inference to calculate a respondent’s dumping
margin in situations where the respondent cooperated but the respondent’s supplier
did not. See Mueller, 753 F.3d at 1233. The Court described this practice as resting
on policy considerations; namely, that doing so may cause the respondent to induce
a supplier’s compliance by refusing to do business with the supplier unless it
cooperates with Commerce’s requests for information. This may deter the supplier’s
non-cooperation. See id.
Commerce found that Shanghai Tainai “could potentially induce compliance
on the part of its unaffiliated suppliers.” Decision Memo at 13, J.A. at 1,015, ECF
No. 43. It wrote:
Based on Tainai’s large volume of entries during the POR 5 and the
quantity of TRBs that it purchased from suppliers, it is reasonable to
conclude that Tainai is an important customer to its Chinese TRB
suppliers, which means that Tainai is in a position to exercise its
leverage over its TRB suppliers to induce them to cooperate. Thus, we
find that it is reasonable to conclude that Tainai has some business
mechanism to induce its suppliers to cooperate. Furthermore, Tainai
may choose not to do business with these suppliers in the future due to
their lack of cooperation and instead select suppliers . . . that [are]
willing to commit to participation in an [antidumping] review. By
applying AFA with respect to the missing data, Commerce is relying on
4 Adverse facts available, i.e., the acronym-happy trade bar’s way of saying Commerce drew
an adverse inference when choosing among the facts available for selection.
5 Period of review
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the statutory means that it has available to induce the cooperation of
these parties so that Commerce has the information necessary to
calculate accurate dumping margins.
Id. at 13–14, J.A. at 1,015–16. Commerce therefore applied partial facts available
with an adverse inference for the missing factors of production data. It summarized
the methodology it used to do so:
Here, the missing data are the inputs for [turned cups and cones,
rollers, or cages] that are then assembled by Tainai into finished TRBs.
Accordingly, as partial AFA, we are applying the highest [factors of
production] usage rate reported by Tainai’s affiliated suppliers for
turned cups and cones, tapered rollers, and cages within each product
type sourced solely from the unaffiliated suppliers for each associated
CONNUM. 6
Id. at 13, J.A. at 1,015. Commerce emphasized that (1) it “calibrated the remedy so
that only purchases from uncooperative producers impact Tainai’s weighted-
average dumping margin,” and (2) its methodology “uses Tainai’s submitted [factors
of production] data in determining the normal value of each CONNUM[.]” Id. It
concluded that this manner of applying adverse facts available was “consistent with
the overriding purpose of the Act of fairness and accuracy” as well as “the purpose
of applying AFA, which is to deter non-cooperation without being punitive.” Id.
This methodology yielded a dumping margin of 538.79 percent. Final Results, 87
Fed. Reg. at 1,121. By way of comparison, the China-wide entity rate that
6 “CONNUM” is an acronym for “control number” and denotes a distinct tapered roller
bearing product. To ensure that Commerce is comparing like products in the home and
U.S. markets, it asks respondents to sort merchandise according to key differentiating
categories — in this review, by product description, outer diameter, inner diameter, and
weight. For example, cup-50-25-0.30 would be a distinct product, or CONNUM, with a
“cup” design, an outer diameter of 50, an inner diameter of 25, and a weight of 0.30
kilograms. See Request For Information at Section C, J.A. at 1,448–49, ECF No. 43.
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Commerce assigned to companies that did not request a separate rate was 92.84
percent. Id.
Commerce’s Final Results also rejected the other arguments Shanghai Tainai
made in its case brief. Commerce first found that it was appropriate to use Timken
Romania’s financial statements to value Shanghai Tainai’s factors of production
because neither alternative entity met regulatory criteria: Rulmenti operated at a
loss, and Compa S.A. Sibiu did not produce comparable merchandise. Decision
Memo at 18, J.A. at 1,020, ECF No. 43. In contrast, Timken Romania’s financial
statements were usable because (1) Timken Romania produced tapered roller
bearings and (2) its financial statements were accompanied by an auditor’s report
that identified no irregularities. Id. at 19, J.A. at 1,021.
Commerce next denied that it double counted the value of Shanghai Tainai’s
purchases of finished rollers by using a surrogate value rather than the purchase
price. Id. at 20, J.A. at 1,022. Commerce explained that Shanghai Tainai
purchased these rollers from non-market economy suppliers, and 19 U.S.C. §
1677b(c)(1) combined with 19 C.F.R. § 351.408 require Commerce to apply surrogate
values to all such factors of production. Id. at 21, J.A. at 1,023. Commerce also
rejected Shanghai Tainai’s argument that its dumping margin defied commercial
and economic reality. Id. at 28, J.A. at 1,030. Commerce explained that “[t]he fact
that the [factor of production] consumption rates we are using as partial AFA are
the highest such rates does not per se make them unrealistic or unreasonable. The
[factor of production] consumption rates are Tainai’s own rates and, therefore,
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commercial, and nothing on the record indicates they are aberrational.” Id.
Commerce denied the precedential authority of Baoding Mantong and pointed out
that, in Nan Ya Plastics Corp. Ltd. v. United States, 810 F.3d 1333 (Fed. Cir. 2016),
the Federal Circuit held that Commerce’s determination is accurate “‘if it is correct
as a mathematical and factual matter,’” and reflects commercial reality if “‘it is
consistent with the method provided in the statute.’” Id. at 29, J.A. at 1,031
(quoting Nan Ya Plastics, 810 F.3d at 1344). Therefore, Commerce “‘need not
examine the economic or commercial reality of the parties, specifically, or of the
industry more generally, in some broader sense.’” Id.
Commerce next disagreed that Section 301 duties were improperly deducted
from U.S. price and cited to prior decisions that treated these duties as “U.S. import
duties,” which are required by statute to be deducted. Id. at 22, J.A. at 1,024.
Commerce also continued to find that amounts Shanghai Tainai charged customers
to offset the Section 301 duties must be capped at the actual amount of the Section
301 duties and that additional amounts could not be included in the U.S. price of
the merchandise. Id. at 22–23, J.A. at 1,024–25. Commerce concluded by finding
that it correctly denied Shanghai Tainai’s claim for a by-product offset because
Plaintiff had failed to provide production records that could substantiate the
amount of scrap generated from the production of subject merchandise during the
period of review. Id. at 26, J.A. at 1,028.
After receiving the Final Results, which contained a far larger dumping
margin than Commerce had found in the Preliminary Results, Shanghai Tainai
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submitted a ministerial error allegation. See Ministerial Error Allegations of
Shanghai Tainai Bearing Co., Ltd. (Ministerial Error Allegations), J.A. at 84,881,
ECF No. 44. Shanghai Tainai’s allegation focused on Commerce’s methodology for
choosing partial facts available and alleged that it did not properly implement its
decision to “rel[y] on Tainai’s highest reported usage rate for each of the [factors of
production] on a product-specific rate for each control number[.]” Id. at 3, J.A. at
84,883. Rather than select the factor of production on a product-specific basis,
Commerce allegedly selected the factor of production on a more general component-
level basis, leading to distortions. For example, Shanghai Tainai alleged that
Commerce took factors of production usage rates from much heavier, more
expensive bearings and applied them to lighter, cheaper bearings that shared
nothing in common besides being “the same general type of component” but which
“are simply not the same product.” Id. at 4–5, J.A. at 84,884–85. Shanghai Tainai
further alleged that the absence of factors of production data for the production of
finished inputs — such as turned cups and cones, rollers, and cages — was
“ultimately irrelevant” because Shanghai Tainai purchased these inputs in a
finished state and knew their usage rates. Id. at 6–7, J.A. at 84,886–87.
On February 10, 2022, Commerce published its response to Shanghai
Tainai’s ministerial error allegations. See 2019–2020 Antidumping Administrative
Review of Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,
from the People’s Republic of China: Allegation of Ministerial Errors in the Final
Results (Ministerial Error Response), J.A. at 13,467, ECF No. 43. Commerce
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rejected both of Shanghai Tainai’s allegations, describing them as falling outside of
19 CFR § 351.224(f)’s definition of a ministerial error as “an error in addition,
subtraction, or other arithmetic function, clerical error resulting from inaccurate
copying, duplication, or the like, and any other similar type of unintentional error.”
Id. at 3–5, J.A. at 13,469–71. Commerce wrote, “While we were less than exact in
our phrasing, the language in our memoranda and programing indicates our
intention to apply the AFA on a product description basis as that product was
reported in the CONNUM.” Id. It described its manner of selecting facts otherwise
available with an adverse inference and applying surrogate values to finished
inputs as reflecting intentional methodological choices rather than an unintentional
error. Id.
II. The Present Dispute
On February 24, 2022, Shanghai Tainai filed its Complaint alleging that
Commerce’s Final Results were unsupported by substantial evidence and arbitrary
and capricious. See Complaint, ECF No. 7. In its Motion for Judgment on the
Agency Record, (Pls.’ Br.), Shanghai Tainai claimed the same defects that it had
alleged during the administrative process: (1) Commerce improperly applied facts
available with an adverse inference to a cooperative entity; (2) the facts that
Commerce selected were unreasonable and distortive; (3) the dumping margin that
Commerce calculated defied commercial and economic reality; (4) Commerce erred
in selecting the financial statements of Timken Romania as the source for the
surrogate values of Shanghai Tainai’s factors of production; (5) Commerce
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improperly valued finished inputs purchased by Shanghai Tainai using surrogate
values; (6) Commerce improperly deducted Section 301 duties from the U.S. price of
the subject merchandise; (7) Commerce improperly capped amounts that Shanghai
Tainai charged its customers and denominated as “additional revenue for 301”; and
(8) Commerce should have granted Shanghai Tainai a by-product offset. Pls.’ Br. at
13, 23, 24, 31, 35, 42, 44, 46, 52, ECF No. 32.
Shanghai Tainai’s Motion was accompanied by a separate Motion from
Chinese entities that were not selected for individual review but received the same
rate as Shanghai Tainai. See Consolidated Plaintiffs’ Motion for Judgment on the
Agency Record, ECF No. 34; see also 19 U.S.C. § 1673d(c)(5)(A) (providing that the
all-others rate shall be an average of the dumping margin assigned to entities
selected for individual review). These Consolidated Plaintiffs (Precision
Components, Inc., Xinchang Newsun Xintianlong Precision Bearing Manufacturing
Co., Ltd. and Hebei Xintai Bearing Forging Co., Ltd.) moved for judgment on the
agency record with an accompanying brief whose sole claim was that any new rate
resulting from a remand of Commerce’s Final Results should also be applied to the
Consolidated Plaintiffs. See Consolidated Plaintiffs’ Motion for Judgment on the
Agency Record at 10, ECF No. 34.
The Government then filed its Response to Plaintiffs’ Motion for Judgment on
the Agency Record (Def.’s Br.), ECF No. 37, rejecting Shanghai Tainai’s arguments.
See Def.’s Br., ECF No. 37. The Government described its decision to apply facts
available with an adverse inference as reasonable. Id. at 9. 19 U.S.C. § 1677e(b)(1)
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provides for the application of facts available with an adverse inference whenever
an “interested party” has failed to cooperate to the best of its ability with a request
for information. The Government pointed to Commerce’s determination that
Shanghai Tainai’s unaffiliated suppliers were interested parties in their own right
because they were “producers of subject merchandise.” Id. at 10 (citing the scope of
the Order as including “TRBs and parts thereof, finished and unfinished.”).
Because Commerce had issued questionnaires seeking factors of production data
from both Shanghai Tainai and its unaffiliated suppliers, the suppliers’ failure to
respond meant that “the statute permitted Commerce to ‘use an inference that is
adverse to the interests of that party in selecting from among the facts otherwise
available,’ or, fill the gap in the data with information that may result in a higher
dumping margin in order to induce future cooperation with Commerce’s requests.”
Id. at 11 (quoting 19 U.S.C. § 1677e(b)(1)(A)). The Government also argued that
Shanghai Tainai’s efforts to collect this data from its suppliers were lacking, noting
that Shanghai Tainai only sought the information after the Preliminary Results
and could only demonstrate a single round of correspondence with its suppliers. Id.
at 15. The Government noted that Shanghai Tainai had previously participated in
a 2012–13 new shipper review under the Order; therefore, it and its suppliers knew,
or should have known, that “[t]his is fundamental data that any producer or
importer should be prepared to provide.” Id. at 13 (emphasis in original).
The Government also rejected Shanghai Tainai’s other claims. It described
Commerce’s choice of facts available to fill the gaps in the record as reasonable
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because Commerce used “reported costs for similar inputs from Tainai’s affiliated
producers,” did so only for “components that were 100% provided by unaffiliated
parties,” and determined that choosing facts with an adverse inference was
“necessary to induce future cooperation from Tainai’s unaffiliated suppliers.” Id. at
18. The Government denied that Commerce’s determination needed to reflect
“commercial reality” as an independent standard, citing Federal Circuit precedent.
Id. at 23. The Government next argued that the claims originating in Shanghai
Tainai’s ministerial error allegations — namely, that Commerce used factors of
production data from highly dissimilar products and that missing factors of
production data for finished inputs it purchased were irrelevant — were not
ministerial errors and were adequately addressed by Commerce’s Ministerial Error
Response. Id. at 25–27. The Government then claimed that Commerce reasonably
determined that Timken Romania’s financial statements were the best available
information for calculating surrogate value, pointing to Commerce’s statutory
discretion to make such a determination and to various defects in alternative
financial statements that rendered them unusable. Id. at 30–31. Regarding the
deductibility of Section 301 duties, the Government cited Commerce’s consistent
practice of deducting them from U.S. price as “U.S. import duties” and argued that
Commerce reasonably capped amounts that Shanghai Tainai charged customers
and denominated as “additional revenue for 301” by limiting such amounts to the
actual amount of the Section 301 duties. Id. at 34, 36. Finally, the Government
described Commerce’s denial of Shanghai Tainai’s request for a by-product offset as
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a reasonable response to Shanghai Tainai’s failure to provide evidence of the
amount of scrap it produced during the period of review. Id. at 38–39.
On March 23, 2023, the Court held oral argument. See Oral Arg. Tr., ECF
No. 52. There, the Court ordered supplemental briefing on Shanghai Tainai’s two
claims related to Section 301 duties. First, the Court asked the parties to consider
the deductibility of Section 301 duties from U.S. price in light of the Federal
Circuit’s decision in Borusan Mannesmann Boru Sanayi ve Ticaret A.S. v. United
States, 63 F.4th 25 (Fed. Cir. 2023), which upheld this Court’s decision that Section
232 duties are deductible as “U.S. import duties.” Second, the Court ordered
supplemental briefing on the question of Commerce’s capping of amounts charged to
customers invoiced as “additional revenue for 301” after Plaintiff clarified the
nature of these charges at oral argument. See Oral Arg. Tr. 40:13–18, ECF No. 52;
see also Defendant’s Response to the Court’s March 23, 2023 Order (Def.’s Supp.
Br.), ECF No. 53; Plaintiffs’ Response to the Court’s March 23, 2023 Order (Pls.’
Supp. Br.), ECF No. 54. With the record now complete, the Court decides the
parties’ claims.
JURISDICTION AND STANDARD OF REVIEW
The Court has jurisdiction over Plaintiffs’ challenge to the Final Results
under 19 U.S.C. § 1516a(a)(2)(B)(i) and 28 U.S.C. § 1581(c), which grant the Court
authority to review actions contesting final determinations in antidumping reviews.
The Court must sustain Commerce’s “determinations, findings, or conclusions”
unless they are “unsupported by substantial evidence on the record, or otherwise
Consol. Court No. 1:22-00038 Page 19
not in accordance with the law.” 19 U.S.C. § 1516a(b)(1)(B)(i). If they are
unsupported by substantial evidence or not in accordance with the law, the Court
must “hold unlawful any determination, finding, or conclusion found.” Id. “[T]he
question is not whether the Court would have reached the same decision on the
same record[;] rather, it is whether the administrative record as a whole permits
Commerce’s conclusion.” See New American Keg v. United States, No. 20-00008,
2021 WL 1206153, at *6 (CIT Mar. 23, 2021). Furthermore, “the possibility of
drawing two inconsistent conclusions from the evidence does not prevent an
administrative agency’s finding from being supported by substantial evidence.”
Matsushita Elec. Indus. Co. v. United States, 750 F.2d 927, 933 (Fed. Cir. 1984).
Reviewing agency determinations, findings, or conclusions for substantial
evidence, the Court assesses whether the agency action is reasonable given the
record as a whole. Nippon Steel Corp. v. United States, 458 F.3d 1345, 1350–51
(Fed. Cir. 2006); see also Universal Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951)
(“The substantiality of evidence must take into account whatever in the record
fairly detracts from its weight.”). The Federal Circuit has described “substantial
evidence” as “such relevant evidence as a reasonable mind might accept as adequate
to support a conclusion.” DuPont Teijin Films USA v. United States, 407 F.3d 1211,
1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229
(1938)).
Consol. Court No. 1:22-00038 Page 20
DISCUSSION
I. Summary
Commerce may apply facts otherwise available with an adverse inference
against a cooperating respondent on the theory that doing so will incentivize the
respondent’s non-cooperative suppliers to provide information sought during an
antidumping review. However, when it does so, Commerce must satisfy specific
requirements that the Federal Circuit has identified — namely, Commerce must
make a case-specific determination that the respondent can influence its suppliers’
decision to cooperate, and Commerce must take into account the predominant
interest in accuracy and explain any deterrence-based rationale that is used against
the cooperating party. The Court finds that Commerce failed to meet this standard
and remands Commerce’s Final Results for additional explanation consistent with
those requirements. In doing so, the Court does not accept Shanghai Tainai’s claim
that Commerce calculated a dumping margin that had no basis in commercial
reality. The Court also rejects Plaintiffs’ argument that Commerce improperly
selected the financial statements of Timken Romania when calculating surrogate
values. That entity’s information was the best available to Commerce.
The Court agrees with Shanghai Tainai that Commerce did not sufficiently
explain its decision to cap price increases that Shanghai Tainai masked by invoicing
its customers for Section 301 duty payments. The Court takes issue with
Commerce’s attribution of these amounts to the sale of services, rather than
merchandise, and additionally rejects its unacceptably narrow interpretation of the
Consol. Court No. 1:22-00038 Page 21
regulation defining price adjustments. However, Commerce was correct to deduct
the actual Section 301 duty payments from U.S. price, as doing otherwise would
ignore the clear textual command in the presidential order enacting the duties that
they must be in addition to existing duties. Finally, Commerce’s rejection of
Shanghai Tainai’s request for a by-product offset was proper because Plaintiff
conceded that it failed to record the quantity of by-product it produced during the
period of review.
II. Application of Partial Facts Available with an Adverse
Inference
When foreign merchandise is sold in the United States at less than its fair
value — thereby injuring a domestic industry — the law allows Commerce to
impose antidumping duties on the merchandise. Antidumping duties equal the
amount by which the foreign market value, known as the “normal value,” of the
merchandise exceeds the U.S. price of the merchandise. 19 U.S.C. § 1677b(a).
When Commerce is missing data necessary to calculate the normal value of
merchandise subject to an antidumping investigation, the antidumping statute
provides a two-part process to fill the gap. See 19 U.S.C. § 1677e(a). The statute
enables Commerce to use “facts otherwise available” in place of the missing
information 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 by [Commerce],
Consol. Court No. 1:22-00038 Page 22
(B) Fails to provide such information by the deadlines for submission of
the information or in the form and manner requested, . . .
(C) Significantly impedes a proceeding under this subtitle, or
(D) Provides such information but the information cannot be verified[.]
Separately, 19 U.S.C. § 1677e(b) permits those facts otherwise available to be
chosen with an adverse inference if “an interested party has failed to cooperate by
not acting to the best of its ability to comply with a request for information from
[Commerce].” Although § 1677e(a) and § 1677e(b) are often collapsed into “adverse
facts available” or “AFA,” the two statutory processes require distinct analyses
rather than the single analysis implied by the term “AFA.” Commerce first must
determine that it is missing necessary information; and, if it wishes to fill the
resulting gap with facts that reflect an adverse inference against an interested
party, Commerce must secondarily determine that the party has failed to cooperate
by not acting to the best of its ability. See Zhejiang DunAn Hetian Metal Co. v.
United States, 652 F.3d 1333, 1346 (Fed. Cir. 2011).
Here, Commerce chose an unorthodox path to justify its application of facts
otherwise available with an adverse inference to Shanghai Tainai. After first
determining in its Preliminary Results that Shanghai Tainai had failed to provide
bills of materials for its factors of production, Commerce notified Shanghai Tainai of
the deficiency and used Shanghai Tainai’s reported factors of production
information as facts otherwise available — without an adverse inference — to fill
the gap in the record. See Decision Memo at 10, J.A. at 1,012, ECF No. 43.
Consol. Court No. 1:22-00038 Page 23
Commerce then sent a supplemental questionnaire to both Shanghai Tainai and its
unaffiliated suppliers, seeking the missing information. Shanghai Tainai reported
to Commerce its fruitless attempts to elicit the information from its suppliers;
meanwhile, the suppliers ignored Commerce’s questionnaire. See id. at 6–7, J.A. at
1,008–09; see also Second Supplemental Questionnaire Response at Ex. SSD-2, J.A.
at 84,406–16, ECF No. 44. Commerce therefore concluded in its Final Results that,
although “Tainai has been cooperative throughout this review . . . its suppliers have
not.” Decision Memo at 7, J.A. at 1,009, ECF No. 43. Commerce’s ultimate decision
to apply facts otherwise available with an adverse inference against Shanghai
Tainai’s missing factors of production data was therefore not grounded in Plaintiff’s
failure to “act to the best of its ability to comply with a request for information,” as §
1677e(b) would seem to require. Rather, it was based on the suppliers’ failure to
cooperate. Commerce found that “Tainai’s unaffiliated TRB component suppliers
are interested parties within the meaning of [19 U.S.C. § 1677(9)] because they are
producers of subject merchandise (i.e., all TRBs and parts thereof, finished and
unfinished, from China are subject merchandise) and they failed to cooperate by not
providing their [factors of production] data, either through Tainai or directly to
Commerce.” Id. at 12, J.A. at 1,014. Commerce therefore determined that,
“consistent with [§ 1677e(b)], which states that Commerce may apply AFA when an
interested party has failed to cooperate by not acting to the best of its ability in
responding to Commerce’s requests for information, we find the use of partial AFA
with respect to the uncooperative producers to be appropriate.” Id.
Consol. Court No. 1:22-00038 Page 24
The legal standard that Commerce must meet in order to apply facts
available with an adverse inference against a respondent on the basis of its
suppliers’ non-compliance is explained in Mueller Comercial De Mexico, S. de R.L.
De C.V. v. United States, 753 F.3d 1227 (Fed. Cir. 2014). In the administrative
proceeding underlying that case, respondent Mueller’s supplier, Ternium, failed to
report production cost data on a product-specific basis because it claimed such data
was not “readily available.” Id. at 1230. The Federal Circuit found that “[i]n this
case, Mueller is a cooperating party, while Ternium is not.” Id. at 1232. Commerce
nonetheless calculated Mueller’s dumping margin using an adverse inference
because it “found that Mueller could and should have induced Ternium’s
cooperation by refusing to do business with Ternium, and Ternium would not be
sufficiently deterred if Mueller were unaffected by Ternium’s non-cooperation[.]”
Id. at 1233. The Federal Circuit concluded that “Commerce may rely on such
policies as part of a margin determination for a cooperating party like Mueller, as
long as the application of those policies is reasonable on the particular facts and the
predominant interest in accuracy is properly taken into account as well.” Id.
(emphasis added).
The Federal Circuit explained that this doctrine requires more than a mere
deterrence rationale. It cited F.lli De Cecco Di Filippo Fara S. Martino S.p.A. v.
United States, 216 F.3d 1027, 1032 (Fed. Cir. 2000) for the proposition that, for non-
cooperating parties, § 1677e(b) must be applied to arrive at “a reasonably accurate
estimate of the respondent’s actual rate, albeit with some built-in increase intended
Consol. Court No. 1:22-00038 Page 25
as a deterrent to noncompliance.” Mueller, 753 F.3d at 1234. This was “[a]ll the
more so for a cooperating party, for which the equities would suggest greater
emphasis on accuracy in the overall mix.” Id. Indeed, “Commerce cannot confine
itself to a deterrence rationale and also must carry out a case-specific analysis of the
applicability of deterrence and similar policies.” Id. In cases of supplier non-
cooperation, Commerce must carefully consider whether the cooperating respondent
has a mechanism to force the non-cooperating supplier’s cooperation. “[I]f the
cooperating entity has no control over the non-cooperating suppliers, a resulting
adverse inference is potentially unfair to the cooperating party.” Id. at 1235.
Therefore, “Commerce must take into account that Mueller itself was a cooperating
party and that Commerce’s inducement/evasion approach to Mueller’s rate
calculation could discourage Mueller’s own cooperation.” Id. at 1236.
In sum, if Commerce has either (1) failed to consider evidence that
reasonably detracts from the conclusion that Shanghai Tainai had sufficient control
over its suppliers to force their cooperation by declining to do business with them;
or (2) failed to properly take into account the predominant interest in accuracy —
for instance, by failing to carry out a case-specific analysis of its deterrence
rationale or failing to take into account whether a cooperating party will be
discouraged from future cooperation — then Commerce lacks substantial evidence
to apply facts available with an adverse inference against a cooperating party on
the basis of supplier non-cooperation. Here, Commerce failed to meet either
standard.
Consol. Court No. 1:22-00038 Page 26
“The concept of ‘control,’ as discussed in Mueller, does not require actual
control. Instead, it requires Commerce to consider record evidence concerning the
practical ability of a respondent to induce the supplier’s cooperation.” Venus Wire
Industries Pvt. Ltd. v. United States, 471 F. Supp. 3d 1289, 1309 (CIT 2020).
Commerce did not conduct such an analysis here. Its discussion of Shanghai
Tainai’s ability to induce its suppliers’ cooperation consisted of the following
paragraph:
While Tainai argues that it could not persuade its suppliers to
cooperate with Commerce’s requests for information, the record
evidence supports our finding that Tainai could potentially induce
compliance on the part of its unaffiliated suppliers. Commerce chose
Tainai as a mandatory respondent in this review because it accounted
for the largest volume of entries of subject merchandise during the
POR. Based on Tainai’s large volume of entries during the POR and
the quantity of TRBs that it purchased from suppliers, it is reasonable
to conclude that Tainai is an important customer to its Chinese TRB
suppliers, which means that Tainai is in a position to exercise its
leverage over its TRB suppliers to induce them to cooperate. Thus, we
find that it is reasonable to conclude that Tainai has some business
mechanism to induce its suppliers to cooperate. Furthermore, Taiani
may choose not to do business with these suppliers in the future due to
their lack of cooperation and instead select suppliers . . . willing to
commit to participation in an AD review. By applying AFA with
respect to the missing data, Commerce is relying on the statutory
means that it has available to induce the cooperation of these parties
so that Commerce has the information necessary to calculate accurate
dumping margins.
Decision Memo at 13–14, J.A. at 1,015–16, ECF No. 43 (emphasis added). Although
it is true that Shanghai Tainai purchased a large quantity of tapered roller bearing
parts from its suppliers as a collective group, Commerce’s analysis ignored the other
side of the equation — whether such quantity was significant as to each supplier.
Shanghai Tainai cited record evidence that “Tainai had multiple suppliers, all of
Consol. Court No. 1:22-00038 Page 27
which only supplied a small portion of Tainai’s needs . . . . Simply put, Tainai was
not a significant enough customer of any of these entities to assert any market
power over these entities.” Pls.’ Br. at 21, ECF No. 32 (citing to Shanghai Tainai’s
Response to Section D of the Department’s Initial Questionnaire at Ex. D-7, J.A. at
81,310–12, ECF No. 44, providing a diversified supplier chart and recording the
percentage of total input quantity purchased from each supplier). Whether
Shanghai Tainai’s claim was true as a factual matter was not established because
Commerce failed to consider the question. See Oral Arg. Tr. 15:13–16, ECF No. 52
(The Court: “[Commerce] seems to speak in terms of generalities of what may be
true in a large number of cases and not to the specific supplier scenario that
[Shanghai Tainai] put data in the record to support.”). Such one-sided analysis is
barred by the requirements that Commerce’s determinations be supported by
substantial evidence and that the evidence be “case specific.” See Universal Camera
Corp., 340 U.S. at 488 (“The substantiality of evidence must take into account
whatever in the record fairly detracts from its weight.”); Mueller, 753 F.3d at 1234
(“Commerce cannot confine itself to a deterrence rationale and also must carry out a
case-specific analysis of the applicability of deterrence and similar policies.”).
The Government’s arguments to the contrary miss the mark. Its brief
depends heavily on the idea that Shanghai Tainai failed to use its best efforts to
cooperate with Commerce’s requests for data because it waited until after the
publication of the Preliminary Results to seek what it should have known was
necessary data and then only asked its suppliers once for the information. See
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Def.’s Br. at 15, ECF No. 37; see also id. at 12 (“Substantial evidence supports
Commerce’s finding that Tainai and its unaffiliated suppliers failed to cooperate by
not acting to the best of their ability in providing a complete and accurate response
to requests for production information”); id. at 16 (“Commerce’s determination that
Tainai failed to act to the best of its ability is supported by substantial evidence[.]”).
Commerce, however, made no such determination. It concluded precisely the
opposite, writing “we find that Tainai has cooperated with Commerce’s requests for
information[.]” Decision Memo at 8, J.A. at 1,010, ECF No. 43. The Government’s
arguments otherwise are not merely post hoc rationalizations; they are directly
contradicted by Commerce’s Final Results. See Burlington Truck Lines v. United
States, 371 U.S. 156, 168 (1962) (“The courts may not accept appellate counsel’s post
hoc rationalizations for agency action[.]”). And when the Government did address
Shanghai Tainai’s arguments concerning the diversity of its supplier network, it did
so by merely restating Commerce’s finding that Shanghai Tainai accounted for the
largest volume of entries of subject merchandise during the period of review and
purchased a large quantity of tapered roller bearings from its suppliers. See Def.’s
Br. at 19, ECF No. 37. That ignored Plaintiff’s argument and data suggesting that
it was not a large enough customer of any one supplier to induce compliance with
Commerce’s information requests. See Pls.’ Br. at 21, ECF No. 32.
Commerce’s determination to apply facts available with an adverse inference
was also deficient for a second, independent reason: It failed to properly take into
account the predominant interest in accuracy. See Mueller, 753 F.3d at 1233
Consol. Court No. 1:22-00038 Page 29
(“Commerce may rely on such policies as part of a margin determination for a
cooperating party like Mueller, as long as the application of those policies is
reasonable on the particular facts and the predominant interest in accuracy is
properly taken into account as well.”) (emphasis added). It is true that, under the
antidumping statute, Commerce has discretion to choose among facts available in
order to draw an adverse inference. See 19 U.S.C. § 1677e(b)(2) (providing that an
adverse inference may rely on any information placed on the record). However,
“Commerce’s discretion in these matters . . . is not unbounded” — especially for a
cooperating party. De Cecco, 216 F.3d at 1032. The Federal Circuit has recognized
that Commerce must appropriately balance the competing goals of accuracy and
deterrence when it selects facts otherwise available with an adverse inference.
Although adverse facts are chosen in order to deter non-cooperation, “We find no
support in our caselaw or the statute’s plain text for the proposition that deterrence,
rather than fairness or accuracy, is the overriding purpose of the antidumping
statute when calculating a rate for a cooperating party.” Changzhou Wujin Fine
Chemical Factory Co., Ltd. v. United States, 701 F.3d 1367, 1378 (Fed. Cir. 2012);
see also Mueller, 753 F.3d at 1234 (Adverse inferences must be applied to arrive at
“‘a reasonably accurate estimate of the respondent’s actual rate, albeit with some
built-in increase intended as a deterrent to noncompliance,’” but for a cooperating
party “the equities would suggest greater emphasis on accuracy in the overall mix.”)
(quoting De Cecco, 216 F.3d at 1032). And, as the Government acknowledges,
Commerce must support its selection of facts otherwise available with a reasonable
Consol. Court No. 1:22-00038 Page 30
explanation. See Oral Arg. Tr. 10:12–23, ECF No. 52 (The Court: “[T]he
Government would agree that however broad the discretion Commerce may have to
pick among the facts available when drawing an adverse [inference], if there is a
limit of some sort, that limit would at least be . . . Commerce needs to have an
adequate explanation for its methodology about why it picked a particular fact . . . .
Would that be fair?” Ms. Westercamp: “That’s correct, Your Honor.”).
Despite assigning Shanghai Tainai an eye-popping dumping margin of 538.79
percent, Commerce asserts that it carefully calibrated its choice of facts available to
prioritize accuracy rather than deterrence. See, e.g., Decision Memo at 13, J.A. at
1,015, ECF No. 43 (“[T]he manner in which we have applied partial AFA in this
review is consistent with the Court’s decision in Mueller (i.e., consistent with the
overriding purpose of the Act of fairness and accuracy) and the purpose of applying
AFA, which is to deter non-cooperation without being punitive.”). The Government
catalogued what it presented as reasonable concessions that Commerce made when
calculating Shanghai Tainai’s dumping margin, arguing that “Commerce did not
apply ‘total’ AFA, but rather took Tainai’s efforts into account in reaching its
determination, limiting its application of adverse facts available to only the missing
information where Tainai’s unaffiliated suppliers provided 100 percent of the
factors of production for chrome steel, rollers, and turned cups and cones.” Def.’s
Br. at 13, ECF No. 37. Commerce “use[d] Tainai’s own data” and substituted “the
highest factor of production usage rate reported by Tainai’s affiliated suppliers” for
these inputs, which “has the effect of ‘calibrating the remedy so that only purchases
Consol. Court No. 1:22-00038 Page 31
from uncooperative producers impact Tainai’s weighted-average dumping margin.’”
Id. at 17–18 (quoting Decision Memo at 13, J.A. at 1,105, ECF No. 43).
It is hard to see how Commerce’s methodology could have effectively “[taken]
Tainai’s efforts into account” or “calibrat[ed] the remedy.” Id. The dumping margin
that Commerce calculated — 538.79 percent — wildly exceeded both the margin
calculated in the Preliminary Results (36.75 percent) and the China-wide rate
assigned to entities that did not participate in the investigation at all (92.84
percent). Despite Commerce’s finding that Shanghai Tainai was a cooperative
entity, the margin it calculated could hardly have been more punitive had Shanghai
Tainai refused to participate. Commerce did not discuss how assigning such a high
rate to a cooperating party could potentially disincentivize cooperation despite
Mueller’s requirement that “Commerce must take into account that [the respondent
is] a cooperating party and that Commerce’s inducement/evasion approach to [the
respondent’s] rate calculation could discourage [the respondent’s] own cooperation.”
Mueller, 753 F.3d at 1236. The dumping rate at issue in Mueller — 48.33 percent —
is likewise dwarfed by the margin at issue here. Commerce’s recitation of the ways
in which it could have calculated an even higher margin does not satisfy its duty to
explain the margin it did calculate.
Shanghai Tainai alleged in detail how Commerce’s methodological choices
resulted in such a high dumping margin. Commerce selected facts otherwise
available by “applying the highest [factors of production] usage rate reported by
Tainai’s affiliated suppliers for turned cups and cones, tapered rollers, and cages
Consol. Court No. 1:22-00038 Page 32
within each product type sourced solely from the unaffiliated suppliers for each
associated CONNUM.” Decision Memo at 13, J.A. at 1,015, ECF No. 43. But rather
than select the usage rates “within each product type,” Commerce selected them
within a more general “component” category. Pls.’ Br. at 26, ECF No. 32. Shanghai
Tainai produces tapered roller bearings in three different component categories —
assembly, cup, or cone — and each category can vary widely in weight and
diameter. See Revised U.S. Sales Database, J.A. at 83,545, ECF No. 44. In order to
sort Shanghai Tainai’s bearings into distinct products, or CONNUMs, Commerce
asked Shanghai Tainai to provide the product description (that is, the component
type), the outer diameter, the inner diameter, and the product weight of each
bearing. See Request for Information at Section C, J.A. at 1,448–49, ECF No. 43.
By not selecting usage rates within the same “product type,” surrogate values were
calculated for bearings using data that came from different bearings that were up to
five times heavier and nearly twice as large in diameter. See Pls.’ Br. at 28, ECF
No. 32. For example, a bearing with a total weight of less than one kilogram was
calculated to use many times its total weight in turned cups and rollers — inputs
that would not weigh more than the bearing into which they are incorporated. Cf.
Revised U.S. Sales Database, J.A. at 83,545, ECF No. 44 (reporting tapered roller
bearing CONNUMs as sold in the U.S.); Margin Calculation, Calculated Inputs,
J.A. at 84,730–40, ECF No. 44 (calculating uniform input usage rates for tapered
roller bearings of differing weights). This had the effect of greatly increasing the
surrogate value of Shanghai Tainai’s bearings. Rather than take into account the
Consol. Court No. 1:22-00038 Page 33
other dimensions that Commerce used to sort bearings into distinct products or
CONNUMs — inner diameter, outer diameter, and weight — Commerce looked only
to the component category, “arbitrarily selecting a value without any consideration
as to the enumerated factors identified by the Department as important in dividing,
categorizing and analyzing the bearings.” Pls.’ Br. at 27, ECF. No. 32.
Commerce never explained how this methodological choice reflected “the
overriding purpose of the Act of fairness and accuracy.” Decision Memo at 13, J.A.
at 1,015, ECF No. 43. Instead, it pointed to other, unrelated methodological choices;
declared that these reflected Commerce’s concern with accuracy; and failed to
engage with the implications of its key choice to apply factors of production usage
rates at the component level without taking diameter or weight into account. See
id. When Shanghai Tainai challenged Commerce’s choice in its ministerial error
allegation, 7 Commerce responded that:
While we were less than exact in our phrasing, the language in our
memoranda and programing indicates our intention to apply the AFA
on a product description 8 basis as that product was reported in the
CONNUM. Thus, while Tainai and PCI may have preferred that we
use a different methodology to apply partial AFA to certain of Tainai’s
[factors of production], we intentionally made the methodological
choice to apply the highest [factor of production] usage rate for turned
cups and cones, rollers, and cages to each CONNUM based on the
product type using the descriptions Tainai provided . . . . Accordingly
7 Because Commerce used facts otherwise available with an adverse inference for the first
time in its Final Results, Shanghai Tainai did not have an earlier opportunity to challenge
Commerce’s methodology.
8 “Product description” is one of four fields that Commerce used to create CONNUMs, each
of which is a distinct tapered roller bearing product. The other fields were inner diameter,
outer diameter, and weight. Shanghai Tainai used the “product description” field to
capture the component type: assembly, cup, or cone. See Pls.’ Br. at 27, ECF No. 32; see
also Request For Information at Section C, J.A. at 1,448–49, ECF No. 43.
Consol. Court No. 1:22-00038 Page 34
we find this allegation does not qualify as a ministerial error pursuant
to 19 CFR 351.224(f).
Ministerial Error Response at 3, J.A. at 13,469, ECF No. 43. The Government’s
brief merely cited this rationale and concluded that “Commerce fully considered the
physical characteristics of the reported CONNUMs.” Def.’s Br. at 27, ECF No. 37.
But simply resting on Commerce’s discretion to do what it did fails to satisfy the
requirement to “carry out a case-specific analysis of the applicability of deterrence
and similar policies” when dealing with a cooperating respondent. Mueller, 753
F.3d at 1234. In such situations, Commerce must carefully explain how its
methodological choices — certainly including those that result in a 538.79 percent
dumping margin — prioritize accuracy over deterrence. See id. at 1234. Because
Commerce did not do so, it failed to ensure that “the predominant interest in
accuracy is properly taken into account,” as the Federal Circuit requires. Id. at
1233.
In making this finding, the Court does not accept Shanghai Tainai’s separate
argument that Commerce’s dumping margin “is inherently excessive and must be
discarded” because the margin “def[ies] commercial and economic reality.” Pls.’ Br.
at 31, 34, ECF No. 32. Although Baoding Mantong Fine Chemistry Co., Ltd. v.
United States, 113 F. Supp. 3d at 1338, found that the “assignment of so prohibitive
a dumping margin as 453.79% as a remedial measure is difficult to comprehend
from a commercial or economic standpoint,” the Federal Circuit later clarified that
there is no independent “commercial and economic reality” test. See Nan Ya
Plastics, 810 F.3d at 1344 (holding that “[w]hen Congress directs the agency to
Consol. Court No. 1:22-00038 Page 35
measure pricing behavior and otherwise execute its duties in a particular manner,
Commerce need not examine the economic or commercial reality of the parties
specifically, or of the industry more generally, in some broader sense,” and that
Commerce’s determination “reflects ‘commercial reality’ if it is consistent with the
method provided in the statute, thus in accordance with the law.”).
Nor does the Court decide Shanghai Tainai’s claim that, because it purchased
finished inputs, surrogate values for the materials used in these inputs were not
needed so that there were no gaps in the record to fill. See Pls.’ Br. at 23–24, ECF
No. 32 (“Simply put, since it was a roller, or a turned cup or cone or a cage, and
since the surrogate value data valued the roller, turned cup or cone or cage, the
amount of raw material consumed, the labor and energy expended and the like
which went into the roller was irrelevant. Such values were already included in the
finished components.”). The Court does not wish to tie the agency’s hands given the
breadth of the remand necessary to cure Commerce’s errors. Should Commerce
decide to base its calculations on the finished inputs rather than the materials used
to make those inputs, it remains free to do so.
The Federal Circuit permits Commerce to draw an adverse inference against
a cooperating party for the actions of its non-cooperative suppliers based on case-
specific facts and analyses. Commerce’s decision to invoke generalities to draw such
an inference against Shanghai Tainai fails to meet this burden. Commerce also
fails to discuss the incentives created by its decision to assess such a high dumping
margin on a party the agency found to be cooperative. On remand, Commerce must
Consol. Court No. 1:22-00038 Page 36
first consider the record evidence regarding the control that Shanghai Tainai could
have exerted over its diversified suppliers and recognize that a deterrence rationale
applied against a cooperating party that lacks the ability to control its suppliers
may be unfair to that party. Commerce must then explain how its methodological
choices — specifically those that tended to increase Shanghai Tainai’s dumping
margin — comported with its duty to prioritize accuracy over deterrence when
dealing with a cooperating respondent. In doing so, Commerce must be attuned to
the risk that calculating a dumping margin for a cooperating respondent that is
significantly higher than the all-others rate given to non-participating entities
“could discourage [the respondent’s] own cooperation.” Mueller, 753 F.3d at 1236.
If Commerce finds that it lacks substantial evidence to conclude that Shanghai
Tainai was in a position to induce cooperation from its suppliers or that its
methodology of selecting facts otherwise available with an adverse inference did not
sufficiently prioritize accuracy over deterrence, Commerce should take new action
to bring its Final Results into conformity with the Federal Circuit’s mandates.
III. Selection of Surrogate Values
When Commerce investigates an antidumping respondent that is based in a
non-market economy country such as China, Commerce must value the subject
merchandise using information taken from a market economy country. 19 U.S.C. §
1677b(c). Commerce does this by valuing the factors of production used to create
the subject merchandise — such as raw materials, labor, and utilities — based on
their value in a market economy country that is (1) at a comparable level of
Consol. Court No. 1:22-00038 Page 37
development to the non-market economy country and (2) a significant producer of
comparable merchandise. Id. § 1677b(c)(4). Commerce must select the “best
available information” to value the factors of production. Id. § 1677b(c)(1).
However, Commerce has “broad discretion” to select the market economy
information that it uses to calculate surrogate values for a non-market economy
respondent. Zhejiang DunAn Hetian Metal, 652 F.3d at 1341.
Here, Commerce determined that Brazil, Malaysia, Mexico, Romania, Russia,
and Turkey were economically comparable to China and were significant producers
of comparable merchandise during the period of review. See Preliminary Decision
Memo at 6–7, J.A. at 13,076–77, ECF No. 43. Because the parties only placed
complete surrogate value information for Romania on the record and because no
party argued in favor of selecting a different country, Commerce did not consider
surrogate value data from any country other than Romania. Id. at 7, J.A. at 13,077;
see also Oral Arg. Tr. 41:11–12, ECF No. 52 (Mr. Craven: “We do not object to the
use of Romania.”). The Romanian surrogate value information on the record
consisted of the financial statements of three Romanian entities: Compa S.A. Sibiu
(Compa), URB Rulmenti Suceava (Rulmenti), and Timken Romania. Commerce
determined that Timken Romania’s financial statements were the best available
information for calculating surrogate values because the company is “a producer of
comparable merchandise, [the financial statements] are contemporaneous with the
POR, demonstrate profitability, are publicly available, are free of known
countervailed subsidies, and generally satisfy Commerce’s criteria for selecting
Consol. Court No. 1:22-00038 Page 38
surrogate companies.” Decision Memo at 19–20, J.A. at 1,021–22, ECF No. 43.
Commerce determined that Compa’s financial statements were not suitable for use
in deriving surrogate values “because [Compa] is not a producer of comparable
merchandise.” Instead, it “manufactures valves, windscreen wiper components, and
components for turbochargers and injections systems, none of which are comparable
to TRBs.” Id. at 18, J.A. at 1,020. Commerce also determined that Rulmenti’s
financial statements were not usable because “[i]t is Commerce’s practice to only
consider companies that are profitable for calculation of surrogate financial rations”
and “[d]uring the POR, Rulmenti operated at a loss.” Id.
Shanghai Tainai challenges Commerce’s decision to rely on Timken
Romania’s financial statements and exclude those of Compa and Rulmenti. See Pls.’
Br. at 35, ECF No. 32. Shanghai Tainai cites Commerce’s “preference for multiple
financial statements,” alleges that Compa produces comparable merchandise to
Shanghai Tainai because Compa “engages in the precision grinding and finishing of
metal components and assembles them into finished goods,” and claims that
Rulmenti’s lack of profit is “a defect which can be readily remedied by setting the
profit to zero.” Id. at 37–38. Conversely, Shanghai Tainai argues that Timken
Romania’s financial statement “is badly distorted by a significant number of
affiliated party transactions and its active participation as a member of the Timken
Group.” Plaintiff “submits that these distortions are so significant as to require the
non-use of this financial statement.” Id. at 38. In particular, Shanghai Tainai
takes issue with the fact that the Timken Group is “a large group of inter-related
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bearing producers including U.S. producers with an incentive to exclude, or
otherwise limit, international competitors such as Tainai from the U.S. market” and
conducts operations that “are significantly more complex than the operations
undertaken by Tainai.” Id. at 39–40. Shanghai Tainai notes that the Timken
Group “was an active participant in the review on behalf of the domestic industry.”
Id. at 38. In the alternative, Shanghai Tainai argues that Commerce should have
at least averaged the three financial statements together to “help avoid the
distortion that results from the use of a single financial statement.” Id. at 42.
The Government rebuts Shanghai Tainai’s claims by first referencing
Commerce’s determination that the record contained only one usable financial
statement — that of Timken Romania — so that Commerce’s preference for using
multiple financial statements was not applicable here. Def.’s Br. at 33, ECF No. 37.
The Government next argues that the distortions alleged by Shanghai Tainai did
not render Timken’s financial statement unusable. Although Timken Romania
belongs to the Timken Group, which participated in the underlying administrative
review of the order on the side of the domestic industry, the Government cited to
Commerce’s explanation that “it has previously used surrogate financial statements
of entities that are affiliated with the petitioners and such a status does not
disqualify a given financial statement from consideration.” Id. (citing Decision
Memo at 19, J.A. at 13,405, ECF No. 43). Further, the Timken Group’s status as a
large group of inter-related bearing producers that conducts complex operations
should not be disqualifying given that Commerce found that Shanghai Tainai was
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itself part of “a multinational group of inter-related bearing producers.” Id. at 34
(citing Decision Memo at 19, J.A. at 13,405, ECF No. 43). The Government thus
concludes that record evidence supported Commerce’s determination that Timken
Romania’s financial statements constituted the best available information for
calculating surrogate values. Id.
The Government is correct. Because Shanghai Tainai did not object to the
selection of Romania as the surrogate country, Commerce had a limited universe of
financial statements to choose from in calculating surrogate values. Each financial
statement was flawed. In the ensuing “ugly dog contest,” Commerce was forced to
rank these flaws and come to a reasonable determination regarding which financial
statement was “the least bad one.” Oral Arg. Tr. 42:15, 43:8, ECF No. 52. At oral
argument, the Court registered its concern that Timken Romania’s parent “is a
competitor of [Shanghai Tainai]” and was “the instigator” of the challenged
administrative review. Id. at 42:23–24. However, Timken Romania’s financial
statements were “accompanied by an auditor’s report that identifies no
irregularities in Timken Romania’s reporting.” Decision Memo at 19, J.A. at 1,021,
ECF No. 43. The Court therefore declines to find that it was unreasonable for
Commerce to reject the financial statements of companies that did not manufacture
bearings or turn a profit — flaws that are worse than those of Timken Romania.
Shanghai Tainai tellingly noted that ranking these flaws amounts to “a weighing
question.” Oral Arg. Tr. 44:15, ECF No. 52. Yet, this Court may not reweigh the
evidence and substitute its judgment for Commerce’s. See Matsushita Elec., 750
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F.2d at 936. Rather, the Court may only review the record to ascertain “whether a
reasonable mind could conclude that Commerce chose the best available
information.” Jiaxing Bro. Fastener Co. v. United States, 822 F.3d 1289, 1300–01
(Fed. Cir. 2016). The parties bear the burden of building the record from which
Commerce makes its decision. See Qingdao Sea-Line Trading Co., Ltd. v. United
States, 766 F.3d 1378, 1386 (Fed. Cir. 2014) (“The burden of creating an adequate
record lies with the interested parties and not with Commerce.”) (citing QVD Food
Co., Ltd. v. United States, 658 F.3d 1318, 1324 (Fed. Cir. 2011)). Given the limited
options the parties placed on the record, the Court declines to second-guess
Commerce’s determination.
IV. Section 301 Duties
A. Deduction of Section 301 Duties from U.S. Price
In calculating Shanghai Tainai’s dumping margin, Commerce deducted
Section 301 duty payments from the U.S. price of the subject merchandise. Decision
Memo at 22, J.A. at 1,024, ECF No. 43. This increased Shanghai Tainai’s dumping
margin by reducing the U.S. price. Under 19 U.S.C. § 1677a(c)(2)(A), “[U.S. price]
shall be reduced by the amount, if any, included in such price, attributable to any . .
. United States import duties, which are incident to bringing the subject
merchandise from the original place of shipment in the exporting country to the
place of delivery in the United States.” This helps ensure an “apples [to] apples”
comparison between merchandise sold in the home market and the U.S. market by
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deducting costs associated with transporting merchandise to the United States.
Smith-Corona Group v. United States, 713 F.2d 1568, 1578 (Fed. Cir. 1983).
However, not all duties are deductible as “United States import duties.” For
instance, antidumping duties are considered “special duties” distinct from “United
States import duties” and are not deducted from U.S. price because doing so would
create a circularity problem in which the imposition of antidumping duties would
itself result in increased antidumping duties. See Power Steel Co., Ltd. v. United
States, No. 20-03771, 2021 WL 6098309 at *3 (CIT Dec. 23, 2021). Shanghai Tainai
argues that this same treatment should be extended to Section 301 duties, which
are imposed when the United States Trade Representative determines that the
actions of a foreign government are unreasonable or discriminatory and burden or
restrict U.S. commerce. See 19 U.S.C. § 2411(b)(1). Although Shanghai Tainai did
not cite any authority for its argument, it believes these duties are akin to
antidumping duties because they are imposed “in response to a specific conditions”
[sic] and are removed when that condition is resolved. Pls.’ Br. at 45–46, ECF No.
32. By contrast, deductible “U.S. import duties” should be interpreted to include
only “ordinary customs duties” that “are not contingent on external events, but
rather are ordinary duties at bound rates and cannot be ‘avoided’ by taking actions
to comply with demands for action.” Id. at 46. The Government rejects Shanghai
Tainai’s argument. It first cites Wheatland Tube Co. v. United States, 495 F.3d
1355, 1362 (Fed. Cir. 2007) for the proposition that “[n]ormal customs duties . . .
have no termination provision and are permanent unless modified by Congress.”
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Def.’s Br. at 35, ECF No. 37. The Government then notes that Commerce has
determined that Section 301 duties “are normal customs duties as they have been
imposed without a termination date” and that Commerce’s consistent practice is to
deduct them as U.S. import duties. Id.
On March 15, 2023, the Federal Circuit decided Borusan Mannesmann Boru
Sanayi ve Ticaret A.S. v. United States, 63 F.4th 25 (Fed. Cir. 2023). There, the
Federal Circuit held that certain duties imposed under Section 232, a separate
statute that provides for duties to remedy national security threats, were deductible
from U.S. price as “United States import duties.” See 19 U.S.C. § 1677a(c)(2)(A).
The Federal Circuit reasoned that Presidential Proclamation 9705, which enacted
the Section 232 duties at issue, “makes clear that the duty newly being imposed was
to add to, and not partly or wholly offset, the antidumping duties that would be due
without the new duty.” Borusan, 63 F.4th at 34. The Federal Circuit cited
language in Proclamation 9705 declaring that the duties are to be imposed “in
addition to any other duties” and that “[a]ll anti-dumping, countervailing, or other
duties and charges applicable to such goods shall continue to be imposed.”
Proclamation 9705 Adjusting Imports of Steel into the United States, clause 2, 83
Fed. Reg. 11,625, 11,627, 11,629 (Mar. 15, 2018). The Federal Circuit concluded
from this language that:
[W]hen applied to an article covered by antidumping duties, the
Proclamation 9705 and antidumping duties must together result in a
full imposition of both duties . . . . i.e., by subtraction of the
Proclamation 9705 duty from the U.S. price if the Proclamation 9705
duty is built into it. Otherwise, the Proclamation 9705 duty would be
offset substantially or completely by a reduction in the antidumping
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duty itself (through an increase in the U.S. price and therefore a
decrease in the dumping margin), defeating the evident ‘in addition to’
prescription of Proclamation 9705.
Borusan, 63 F.4th at 35. Declining to deduct the Section 232 duties imposed by
Proclamation 9705 would have the effect of increasing the U.S. price of Borusan’s
merchandise and thereby reduce its dumping margin and antidumping liability,
vitiating Proclamation 9705’s requirement that its duties add to, rather than
subtract from, any antidumping duties owed on subject merchandise. The Federal
Circuit therefore upheld Commerce’s decision to deduct these Section 232 duties
from U.S. price by treating them as “United States import duties.”
The parties did not reference Borusan in their briefing. This Court ordered
supplemental briefing on the applicability of Borusan and the Court of
International Trade decision it upheld, see Borusan Mannesmann Boru Sanayi ve
Ticaret A.S. v. United States, 494 F. Supp. 3d 1365 (CIT 2021), to the deductibility
of Section 301 duties. See Def.’s Supp. Br., ECF No. 53; Pls.’ Supp. Br., ECF No. 54.
The Government described Commerce’s determination that Section 301 duties are
deductible “United States import duties” as consistent with the Federal Circuit’s
reasoning in Borusan. Specifically, the Government invoked the language of the
legal instrument that proposed the Section 301 duties. See Notice of Determination
and Request for Public Comment Concerning Proposed Determination of Action
Pursuant to Section 301: China’s Acts, Policies, and Practices Related to
Technology Transfer, Intellectual Property, and Innovation (Notice of
Determination Pursuant to Section 301), 83 Fed. Reg. 14,906 (U.S. Trade Rep. Apr.
Consol. Court No. 1:22-00038 Page 45
6, 2018). Like Proclamation 9705, the Notice of Determination provided that “the
proposed action is an additional duty of 25 percent on a list of products of Chinese
origin identified in the Annex to this Notice.” Notice of Determination Pursuant to
Section 301, 83 Fed. Reg. at 14,907 (emphasis added). To illustrate, the Notice
explained that, “if a good of Chinese origin is currently subject to a zero ad valorem
rate of duty, the product would be subject to a 25 percent ad valorem rate of duty; if
a good of Chinese origin were currently subject to a 10 percent ad valorem rate of
duty, the product would be subject to a 35 percent ad valorem rate of duty, and so
on.” Id. The Government argues that this language “clearly implies that Section
301 duties are intended to be imposed in addition to other duties.” Def.’s Supp. Br.
at 8, ECF No. 53.
The Notice of Determination Pursuant to Section 301 did not, by itself, enact
the Section 301 duties. The instrument that did, the Notice of Action Pursuant to
Section 301, 83 Fed. Reg. 40,823 (U.S. Trade Rep. Aug. 16, 2018), also refers to the
Section 301 duty as an “additional duty.” Id. at 40,824. Indeed, the Notice of Action
contains even stronger language than the Notice of Determination, providing that
“[p]roducts of China that are provided for in new HTSUS heading 9903.88.02, as
established by Annex A of this notice . . . will be subject to an additional ad valorem
duty of 25 percent. The rates of duty applicable to products of China that are
provided for in new HTSUS heading 9903.88.2 apply in addition to all other
applicable duties, fees, exactions, and charges.” Id. at 40,824 (emphasis added).
This language tracks that of Proclamation 9705, which “directed that the [Section
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232 duty] was to be imposed ‘in addition to any other duties, fees, exactions, and
charges applicable to such imported steel articles.’” Borusan, 63 F.4th at 29
(quoting Proclamation 9705, 83 Fed. Reg. at 11,627). Under Borusan, Commerce’s
decision to treat Section 301 duties as deductible “United States import duties” is
correct.
Shanghai Tainai fails to engage with the order’s language and instead argues
that Section 301 duties are different in kind from Section 232 duties because the
latter “are put in place to protect the National Security and have no end point”
whereas the former “are subject to termination after 4 years absent an affirmative
determination to extend such duties.” Pls.’ Supp. Br. at 7, ECF No. 54. Shanghai
Tainai argues for applying a set of factors from Wheatland Tube Co. v. United
States, 495 F.3d 1355 (Fed. Cir. 2007), which found that yet another class of duties,
Section 201 “safeguard” duties, were non-deductible special duties akin to
antidumping duties. The Wheatland Tube factors are (1) whether the duties are
remedial duties that provide relief from the adverse effects of imports; (2) whether
the duties are imposed as a result of a finding of injury or threat to a U.S. industry;
and (3) whether the duties provide only temporary relief. Id. at 1362. Shanghai
Tainai asserts that Section 301 duties pass the Wheatland Tube test for non-
deductibility because the duties “were imposed in order to provide relief from unfair
competition in the form of the theft of intellectual property,” “were the result of an
express finding of threat to the U.S. as a result of the conduct in question,” and
“provide only temporary relief.” Pls.’ Supp. Br. at 8, ECF No. 54.
Consol. Court No. 1:22-00038 Page 47
However, Borusan instructs that it is the text of the legal order levying duties
that is paramount; and it is unnecessary for a reviewing court to apply the
Wheatland Tube factors where that text has spoken clearly. See Borusan, 63 F.4th
at 36 (“We do not decide whether [the holding] could soundly rest on distinctions
between § 232 and the § 201 regime more generally, and the distinction between
‘normal’ and ‘special’ duties . . . . That approach presents challenges that we may
avoid. The Commerce decision sufficiently rests on the proclamation-specific basis
set forth above.”). If the legal instrument enacting statutory duties provides that
such duties are intended to be additional to existing duties, then it is reasonable for
Commerce to treat them as “United States import duties” and deduct them from the
U.S. price when calculating dumping margins. This principle, as elucidated in
Borusan, extends beyond Section 232 duties and applies to other statutory duties.
See id. at 33 (“If a statute merely authorizes a governmental officer or body to
impose a duty, as § 232 authorizes the President to do, it is the particular exercise
of the authority that determines — based on the character of that exercise —
whether the prescribed duty comes within [United States import duties].”). Here,
“the particular exercise of the authority” to enact the Section 301 duties at issue
intended for these duties to be additional to antidumping duties. The Court
therefore affirms Commerce’s determination.
B. Capping of Amounts Denominated as “Additional Revenue for 301”
In its brief, Shanghai Tainai claims that Commerce wrongly limited
“payments denominated as ‘additional revenue for 301’ to the amount of Section 301
Consol. Court No. 1:22-00038 Page 48
duties paid on the goods.” Pls.’ Br. at 46, ECF No. 32. The nature of this claim was
initially unclear to both the Court and the Government. See Oral Arg. Tr. 31:6–16,
ECF No. 52. At oral argument, Shanghai Tainai clarified what it believed
happened:
MR. CRAVEN: [T]he price reported in the sales database consisted of
two elements. There was the selling price on the invoice to the
customer, and there was a second line on the invoice that was
denominated as 301 duties for certain customers. We have requested
that the price include both the price paid for the good and the price
charged to the client for the increase in price for the 301 duties. For
certain clients Tainai simply raised the price on the invoice. For other
clients, to justify the price increase, they denominated them as 301
duties.
The Commerce Department determined that they would only allow us
to raise the price on the 301 duties to the extent that we had paid 301
duties and that any difference between those two was not allowed to be
added to the U.S. price. So if, for example, the 301 duties were 95
cents and on the line item called 301 duties Tainai reported a dollar,
the Commerce Department reduced the dollar to 95 cents.
Id. at 33:14–34:5. Here, Shanghai Tainai was direct — it saw an opportunity to
mask a price increase by invoicing the increase as part of the Section 301 duty
payment. It did so by billing customers for more than the actual amount of the
Section 301 duties. Id. That tended to increase the U.S. price of the subject
merchandise; but Commerce reduced these overcharges by capping them at the
actual amount of the Section 301 duties, reducing the U.S. price and thereby
increasing Shanghai Tainai’s dumping margin. 9
9 At oral argument, the Court asked Shanghai Tainai’s counsel to clarify how its challenge
to Commerce’s capping of Section 301 duty charges was distinct from its challenge to
Commerce’s deduction of Section 301 duties. Shanghai Tainai’s counsel responded that its
capping claim “has nothing to do” with deduction but rather “is a question simply of what
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Commerce justified its decision by invoking its general practice “not to
attribute revenue from related expenses to the price of subject merchandise because
that uncapped amount represents profit on the sale of services, not profit on the sale
of the merchandise.” Decision Memo at 24, J.A. at 1,026, ECF No. 43. Commerce
analogized these revenues to revenue that respondents receive from providing U.S.
freight, citing to a past determination in which Commerce found “that it would be
inappropriate to increase the gross unit price for subject merchandise because of
profits earned on the provision or sale of freight; such profits should be attributable
to the sale of the freight service, not to the subject merchandise.” Id. at 24–25, J.A.
at 1,026–27. Commerce also claimed that it was limited by 19 C.F.R. § 351.501(c),
which directs Commerce to calculate U.S. price “net of price adjustments . . . that
are reasonably attributable to the subject merchandise[.]” Price adjustments are
defined as “a change in the price charged for subject merchandise . . . such as a
discount, rebate, or other adjustment, including, under certain circumstances, a
change that is made after the time of sale, that is reflected in the purchaser’s net
outlay.” 19 C.F.R. § 351.102(b)(38). Commerce “note[d] that U.S. import duty
revenues are not included in the list provided at 19 CFR 351.102(b)(38).” Decision
Memo at 25, J.A. at 1,027, ECF No. 43. Commerce therefore concluded that it
would “continue to cap additional tariff revenue by the amount of Section 301 duties
applicable to each sale.” Id.
the client paid to Tainai for the goods . . . [the amounts] were collected long after the duty
was paid and it was collected for the goods.” Oral Arg. Tr. 36:4–15, ECF No. 52.
Consol. Court No. 1:22-00038 Page 50
The Court struggles to see the reason in Commerce’s determination that the
additional amounts Shanghai Tainai charged its customers in excess of Section 301
duties were “profit[s] on the sale of services, not profit[s] on the sale of the
merchandise.” Id. at 24, J.A. at 1,026. Costs to the customer associated with
Section 301 duties were invoiced as part of the cost of the merchandise, and
Commerce did not explain what “service” Shanghai Tainai provided its customers
by passing along the padded cost of the Section 301 duties to them. At any rate, it
is unclear why these amounts were attributable to the sale of services when
“uncapped,” but could become part of U.S. price up to the amount of the Section 301
duties, as Shanghai Tainai pointed out. See Pls.’ Supp. Br. at 9, ECF No. 54 (“The
United States does not dispute that this additional revenue should be part of the
price paid or payable, but rather only disputes that portion of the revenue which
exceeds the amount of the 301 duty reported as paid on the entry.”).
The Court further finds Commerce’s textual analysis unreasonable. 19
C.F.R. § 351.401(c) directs Commerce to calculate U.S. price “net of price
adjustments,” and “price adjustment” is defined as “a change in the price charged
for subject merchandise . . . such as a discount, rebate, or other adjustment,
including, under certain circumstances, a change that is made after the time of sale,
that is reflected in the purchaser’s net outlay.” 19 C.F.R. § 351.102(b)(38).
Commerce claims that the amounts at issue do not meet this definition of a “price
adjustment” because “U.S. import duty revenues are not included in the list
provided at 19 CFR 351.102(b)(38).” Decision Memo at 25, J.A. at 1,027, ECF No.
Consol. Court No. 1:22-00038 Page 51
43; see also Oral Arg. Tr. 38:22–23, ECF No. 52 (counsel for the Government
arguing that the charges are not price adjustments “because, again, these aren’t
rebates. These aren’t deductions. This is a 301 duty.”). However, that list is
bookended by the terms “such as” and “or other adjustment.” See 19 C.F.R. §
351.102(b)(38). These terms clarify that the regulation’s list of price adjustments is
not exhaustive, and a change in price need not be enumerated in order to qualify as
a “price adjustment” within the meaning of § 351.401(c). See Vazquez-Claudio v.
Shinseki, 713 F.3d 112, 115 (Fed. Cir. 2013) (“[T]he list . . . is preceded by ‘such as,’
and is therefore non-exhaustive.”); Alta Wind I Owner Lessor C v. United States,
897 F.3d 1365, 1373 (Fed. Cir. 2018) (list of contracts that ended with “or other
similar agreements” was “non-exhaustive”). Commerce’s interpretation of the
regulation is at odds with its plain text. On remand, Commerce must explain why
the amounts at issue constitute profits on the sale of services rather than profits on
the sale of merchandise and must consider whether there is any basis to exclude
such amounts from the “price adjustments” described by § 351.401(c) and §
351.102(b)(38).
V. By-Product Offset
Commerce’s established practice is to “grant an offset to normal value, for
sales of by-products generated during the production of subject merchandise, if the
respondent can demonstrate that the by-product is either resold or has commercial
value and re-enters the respondent’s production process.” Arch Chemicals, Inc. v.
United States, 33 CIT 954, 956 (2009). The burden is on the respondent to provide
Consol. Court No. 1:22-00038 Page 52
Commerce with sufficient information to support its claim of a by-product offset. Id.
A respondent does not meet this burden if it fails to “document the quantity of scrap
produced during the period of review” and merely “equate[s] total scrap sold during
the period of review with total scrap produced during the period of review.”
American Tubular Products, LLC v. United States, 847 F.3d 1354, 1361 (Fed. Cir.
2017). Here, Shanghai Tainai concedes that “the quantity of scrap produced is not
directly recorded” but attempts to argue that “the quantity of scrap produced is the
same as the quantity of scrap sold.” Pls.’ Br. at 52, ECF No. 32. Because that
argument is insufficient, Commerce’s decision to deny Shanghai Tainai a by-product
offset must be upheld.
CONCLUSION
Shanghai Tainai brings a litany of challenges to Commerce’s thirty-third
administrative review of the antidumping order on tapered roller bearings from
China. These challenges are of varying quality; accordingly, some have found the
mark and others have fallen short. Shanghai Tainai is correct that Commerce
failed to adequately explain both its use of facts otherwise available with an adverse
inference against a cooperating respondent and its capping of price increases that
were invoiced as Section 301 duty payments. However, this Court finds that
Shanghai Tainai’s other complaints — that Commerce’s dumping margin defied
commercial reality, relied on defective surrogate entity financial statements,
wrongly deducted Section 301 duties from U.S. price, and failed to include a by-
product offset — are without merit.
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The Court therefore GRANTS IN PART and DENIES IN PART Shanghai
Tainai's Motion for Judgment on the Agency Record and REMANDS Commerce's
Final Results for additional explanation consistent with this opinion. Commerce
shall file its Remand Redetermination with the Court within 120 days of today's
date. Defendant shall supplement the administrative record with all documents
considered by Commerce in reaching its decision in the Remand Redetermination.
Plaintiffs shall have t_h irty days from the filing of the Remand Redetermination to
submit comments to the Court; and Defendant shall have thirty days from the date
of Plaintiffs' filing of comments to submit a reply. Any revisions Commerce makes
to the dumping margin assigned to Shanghai Tainai will be extended to the
Consolidated Plaintiffs.
SO ORDERED.
Stephen Alexander Vaden, Judge
Dated: Jyfdr:, / 2n3
New York, New York