Air Products and Chemicals, Inc. v. U.S., Slip Op. 98-60.

• Decision Date: 06 May 1998
• Docket Number: No. Slip Op. 98-60.,Court No. 96-06-01573.,Slip Op. 98-60.
• Citation: 14 F.Supp.2d 737
• Parties: AIR PRODUCTS AND CHEMICALS, INC., Plaintiffs, v. UNITED STATES, Defendant, Sinopec Sichuan Vinylon Works, Defendant-Intervenor, Guangxi Gitic Import & Export Corp. and Guangxi Vinylon Plant, Defendant-Intervenors.
• Court: U.S. Court of International Trade

14 F.Supp.2d 737

AIR PRODUCTS AND CHEMICALS, INC., Plaintiffs, v. UNITED STATES, Defendant, Sinopec Sichuan Vinylon Works, Defendant-Intervenor, Guangxi Gitic Import & Export Corp. and Guangxi Vinylon Plant, Defendant-Intervenors.

No. Slip Op. 98-60.

Court No. 96-06-01573.

United States Court of International Trade.

May 6, 1998.

COPYRIGHT MATERIAL OMITTED

Ellis & Aeschliman, Columbus, OH (David R. Busam), Wickens & Lebow, Washington, DC (Edward M. Lebow) for Plaintiff.

Frank W. Hunger, Assistant Attorney General of the United States; David M. Cohen, Director; Cynthia B. Schultz, Commercial Litigation Branch, Civil Division, United States Department of Justice; Of Counsel, Robert J. Heilferty, Office of the Chief Counsel for Import Administration, Department of Commerce, Washington, DC, for Defendant.

Williams, Mullen, Christian & Dobbins (William E. Perry), Washington, DC, for Defendant-Intervenor, Sinopec Sichuan Vinylon Works.

Aitken Irvin Lewin Berlin Vrooman & Cohn, LLP (Bruce Aitken), Washington, DC, for Defendant-Intervenors, Guangxi Gitic Import & Export Corp. and Guangxi Vinylon Plant.

OPINION

POGUE, Judge.

Plaintiff, Air Products and Chemicals Inc. ("Air Products"), challenges aspects of the U.S. Department of Commerce ("Commerce" or the "Department") final determination in Polyvinyl Alcohol From the People's Republic of China, 61 Fed.Reg. 14,057 (Dep't Commerce 1996)(final det.)("Final Determination").

This Court has jurisdiction pursuant to 28 U.S.C. § 1581(c)(1994) and 19 U.S.C. § 1516a(2)(B)(iii)(1994).

Plaintiff's motion for judgment on the agency record¹ raises four issues: (1) whether Commerce's assignment of a company-specific antidumping margin was in accordance with law, and if in accordance with law, whether Commerce's finding of an absence of de jure and de facto governmental control was supported by substantial evidence; (2) whether Commerce's calculation of factory overhead, general expenses and profit rates was in accordance with law, and if in accordance with law, whether Commerce's determination that VAM Organic and Polychem are equally representative of the PVA industry in India was supported by substantial evidence; (3) whether Commerce's application of the factory overhead percentage rate to total costs in the final stage of production was supported by substantial evidence; and (4) whether Commerce's calculation of indirect labor costs was in accordance with law and was supported by substantial evidence.

Background

On March 9, 1995, Air Products filed an antidumping petition with Commerce and the United States International Trade Commission ("ITC") alleging that polyvinyl alcohol² ("PVA") from Japan, the People's Republic of China ("PRC"), Taiwan, and the Republic of Korea was being sold at prices below fair market value injuring the domestic industry. Commerce initiated an antidumping investigation covering entries of PVA from October 1, 1994, through March 31, 1995. See Polyvinyl Alcohol From Japan, the Republic of Korea, the People's Republic of China, and Taiwan, 60 Fed.Reg. 17,053 (Dep't Commerce 1995)(init. antidumping duty investigation).

In the course of its investigation, Commerce issued an antidumping questionnaire to the PRC's Ministry of Foreign Trade and Economic Cooperation ("MOFTEC") and the two known PRC producers of PVA, Guangxi Gitic Import and Export Corporation ("Guangxi") and Sinopec Sichuan Vinylon Works ("Sichuan"). P.R. Doc. No. 47, App. Def.'s Mem. Opp'n Pl.'s Mot. J. Agency R. 1 ("Govt.App."). In June, 1995, Commerce received responses from the respondents. See Polyvinyl Alcohol From the People's Republic of China, 60 Fed.Reg. 52,647 (Dep't Commerce 1995)(prel.det.)("Preliminary Determination"). During August and September 1995, Commerce requested clarifications of the submitted questionnaire responses.

On October 10, 1995, Commerce preliminarily determined that PVA from the PRC was being sold at less than fair value. Id. In October and November 1995, Commerce conducted on-site verification of the PRC producers. Final Determination, 61 Fed.Reg. at 14,058.

On February 14, 1996, after submission of briefs by petitioner and respondents, Commerce held a public hearing. Id. On March 29, 1996, Commerce published its final determination. Id. at 14,057. Following the ITC's affirmative determination that an industry in the United States was threatened with material injury by reason of the subject imports, an antidumping duty order was entered against PVA from the PRC. Polyvinyl Alcohol From the People's Republic of China, 61 Fed.Reg. 24,286 (Dep't Commerce 1996)(antidumping duty ord.). Commerce found a 0 percent margin for Sichuan and a 116.75 percent margin for Guangxi. Id. at 24,287.

Standard of Review

In reviewing a final antidumping determination the Court of International Trade must decide whether Commerce's determination is in accordance with law and whether Commerce's conclusions are supported by substantial evidence on the record. See Section 516a(b)(1)(B)(i) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(b)(1)(B)(1994).

Discussion

Commerce calculates an antidumping margin by comparing an imported product's price in the United States to the normal value ("NV") of comparable merchandise. Normal value typically equals the domestic price of the product in the exporting country. When the exporting country is a nonmarket economy ("NME")³, the domestic product sales may not be reliable indicators of market value. In such cases, Commerce must estimate the normal value by 1) isolating each factor of the production process in the NME country, 2) choosing a surrogate market economy country at a comparable level of economic development that produces comparable merchandise, 3) assigning a value to each factor of production equal to its cost in the surrogate country, and 4) adding to those values an estimated amount for profit and general expenses. 19 U.S.C. § 1677b(c)(1994).⁴

The purpose of the procedure established under section 1677b(c) is to construct the product's price as it would have been if the NME country were a market economy, using the best information available regarding surrogate values. Tianjin Machinery Import & Export Corp. v. United States, 16 CIT 931, 940, 806 F.Supp. 1008, 1018 (1992); Timken Co. v. United States, 16 CIT 142, 144, 788 F.Supp. 1216, 1218 (1992).⁵ Commerce used the above procedure in the determination at issue, using India as the surrogate market economy.⁶

1. Company-Specific Rate v. Country-Wide Rate

In its May 23, 1995, antidumping questionnaire to the two PRC PVA producers, Commerce advised the parties of its policy with respect to "separate" company-specific rates as follows:

The Department presumes that a single antidumping margin is appropriate for all exporters in a nonmarket economy country. The Department may, however, consider requests for separate rates from individual exporters. Individual exporters requesting a separate rate must respond to the following questions in order for the Department to consider fully the issue of separate rates.

P.R. Doc. No. 47 at A-2, Govt.App. 1. The Department requested economic, industry and company-specific information. In its June 30, 1995 response, Sichuan provided Commerce with information regarding its eligibility for a separate rate. See C.R. Doc. No. 16, Govt.App. 2.

Plaintiff argues Commerce's determination that Sichuan is entitled to a separate, company-specific margin was not in accordance with law. Pl.'s Mem. Supp. Mot. J. Agency R. at 2 ("Air Product's Brief"). Plaintiff maintains Commerce improperly applied its NME methodology in determining Sichuan's independence by not requiring Sichuan to affirmatively demonstrate its independence. Therefore, Plaintiff argues, Commerce should have rejected Sichuan's submitted information and applied facts available to determine the appropriate dumping margin. Id.; see 19 U.S.C. § 1677e (1994).

For purposes of Commerce's determinations involving products from an NME country, producers and exporters in the NME country are presumed to export under the control of the central government until they affirmatively demonstrate on a de jure and de facto basis that there is an absence of government control. Sparklers From the People's Republic of China, 56 Fed.Reg. 20,588, 20,589 (Dep't Commerce 1991)(final det.). This approach has been consistently upheld by this court. Tianjin, 16 CIT at 935, 806 F.Supp. at 1013-14 (1992); Sigma Corp. v. United States, 17 CIT 1288, 1302 841 F.Supp. 1255, 1266 (1993); Writing Instrument Mfrs. Ass'n v. United States, 21 CIT ___, ___, 984 F.Supp. 629, 642-43 (1997), appeals docketed, No. 98-1178 (Fed. Cir. Jan. 9, 1998), 98-1202 (Fed.Cir. Jan. 21, 1998).

Evidence supporting de jure absence of government control includes: (1) absence of restrictive stipulations on individual exporters' business and export licenses; (2) legislative enactments decentralizing control of companies; or (3) formal measures by the government decentralizing control of the companies. Tianjin, 16 CIT at 935, 806 F.Supp. at 1014; Sigma Corp., 17 CIT at 1302 n. 3, 841 F.Supp. at 1266 n. 3. Evidence supporting de facto absence of governmental control includes: (1) whether each exporter sets its own export prices independently of the government and other exporters; and (2) whether each exporter can keep the proceeds from its sales. Id.

During its on-site verification of the Sichuan manufacturing facility, Commerce officials evaluated the evidence supporting Sichuan's separate rate claim. See C.R. Doc. No. 60 at 1, App. Pl.'s Mem. Supp. Mot. J. Agency R. 1 ("Pl.App."). In the final determination, Commerce explained its analysis of both a de jure and de facto absence of governmental control. Final Determination, 61 Fed.Reg. at 14,058-60. In addition, Commerce specifically found that Sichuan acted independently from the China Petrochemical Corporation ("Sinopec"). Id.

Plaintiff's specific challenge to Commerce's...