219 F.Supp.3d 1273 (CIT. 2017), 13-00102, CS Wind Vietnam Co., Ltd. v. United States
|Docket Nº:||13-00102, SLIP OP. 2017-26|
|Citation:||219 F.Supp.3d 1273|
|Opinion Judge:||Jane A. Restani, Judge|
|Party Name:||CS WIND VIETNAM CO., LTD., and CS WIND CORPORATION, Plaintiffs, v. UNITED STATES, Defendant, WIND TOWER TRADE COALITION, Defendant-Intervenor|
|Attorney:||No. 13-00102, SLIP OP. 2017-26 Bruce M. Mitchell, Andrew B. Schroth, Ned H. Marshak, and Dharmendra N. Choudhary, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt, LLP, of New York, NY, for plaintiffs. Joshua E. Kurland, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Depart...|
|Judge Panel:||Before: Jane A. Restani, Judge.|
|Case Date:||March 16, 2017|
|Court:||United States District Court, Federal Circuit|
Bruce M. Mitchell, Andrew B. Schroth, Ned H. Marshak, and Dharmendra N. Choudhary, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt, LLP, of New York, NY, for plaintiffs.
Joshua E. Kurland, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for defendant. With him on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Jr., Assistant Director. Of counsel on the brief was Emily R. Beline, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, DC.
Alan H. Price, Daniel B. Pickard, Robert E. DeFrancesco, III, and Derick G. Holt, Wiley Rein, LLP, of Washington, DC, for defendant-intervenor.
Before: Jane A. Restani, Judge.
Jane A. Restani, Judge
This matter is before the court following a remand to the U.S. Department of Commerce (" Commerce" ) ordered after the Court of Appeals for the Federal Circuit (" Federal Circuit" ) issued its mandate in CS Wind Vietnam Co. v. United States, 832 F.3d 1367 (Fed. Cir. 2016) (" CS Wind IV" ). In CS Wind IV, the Federal Circuit reversed this court's " affirmance of Commerce's use of packing weights rather than component weights in its calculation of surrogate values," and
" direct[ed] Commerce to use the manufacturer-reported weights in its calculation." Id. at 1374, 1381. In addition, the Federal Circuit vacated this court's " affirmance of Commerce's overhead determination with respect to jobwork charges, erection expenses, and civil expenses." Id. at 1381. This court remanded to Commerce the issues of weights selection and overhead determination. Order 1, Oct. 4, 2016, ECF No. 101 (" Remand Order" ). Subsequently, Commerce issued its Final Results of [Third] Redetermination Pursuant to Court Order, ECF No. 104-1. (" Third Remand Results" ). Defendant-Intervenor Wind Tower Trade Coalition (" WTTC" ) opposes the Third Remand Results on several grounds. Def.-Intvr. the Wind Tower Trade Coalition's Cmts. on Final Results of Redetermination Pursuant to Ct. Order 7-29, ECF No. 108 (" WTTC Cmts." ). For the following reasons, Commerce's Third Remand Results are sustained.
The court presumes familiarity with the underlying facts and procedural history of this case, and provides only the following relevant facts.
I. Weights Selection
In CS Wind Vietnam Co. v. United States, 971 F.Supp.2d 1271, 1287-88 (CIT 2014) (" CS Wind I" ), this court sustained Commerce's decision to base the actual weight of CS Wind Vietnam Co., Ltd. (" CS Wind" )'s wind towers for the normal value calculation on the weights found in a transoceanic packing list (" packed weights" ), rather than on the net weight of the factors of production reported by CS Wind (" manufacturer-reported weights" ). The court agreed with Commerce's rationale that the packed weights would not likely have been " so grossly overestimated as to chance the misplacement of the wind tower section on a shipping vessel and risk an imbalance of the vessel or rolling of the tower section in transit." Id. at 1288 (quoting Issues and Decision Mem. for the Final Determination at 31, barcode 3111148-01 (Dec. 17, 2012)). On appeal, the Federal Circuit decided that substantial evidence did not support Commerce's conclusion that the packed weights were more reliable than the manufacturer-reported weights. CS Wind IV, 832 F.3d at 1374. The Federal Circuit reasoned that " there is no evidence that either (a) a mere 4% difference in overall weight [between the packed weights and manufacturer-reported weights] or (b) the specific difference in weight figures for the small internal-components portion of the towers [in the manufacturer-reported weights] would make a difference in maintaining balance on the vessels used for transportation here." Id. Accordingly, the Federal Circuit reversed this court's affirmance of Commerce's use of the packed weights. Id. at 1381. In addition, the Federal Circuit " direct[ed] Commerce to use the manufacturer-reported weights in its calculation." Id. at 1374. This court then instructed Commerce to follow the Federal Circuit's direction to use the manufacturer-reported weights in its calculation. Remand Order at 1. In the Third Remand Results, Commerce selected under protest the manufacturer-reported weights. Third Remand Results at 7. Commerce's sole reason for this choice was the Federal Circuit's " direct[ion]" and this court's accordant remand instructions. Id.
II. Surrogate Financial Ratios
A. Erection/Civil Income Ratio
Commerce uses surrogate financial ratios, which it converts to percentages, to calculate the " general expenses and profit" to be included in normal value. See 19 U.S.C. § 1677b(c)(1)(B)
(requiring that the normal value for products from nonmarket economies include amounts for " general expenses and profit" ); Hebei Metals & Minerals Imp. & Exp. Corp., 29 C.I.T. 288, 303 n.7, 366 F.Supp.2d 1264, 1277 n.7 (2005). The surrogate financial ratios include the selling, general, and administrative (" SG & A" ) ratio, the overhead expense ratio, and the profit ratio. Hebei Metals, 29 C.I.T. at 303 n.7, 366 F.Supp.2d at 1277 n.7. Commerce applies these ratios to the factors of production in order to calculate normal value. See 19 U.S.C. § 1677b(c)(1)(B); Hebei Metals, 29 C.I.T. at 303 n.7, 366 F.Supp.2d at 1277 n.7 . To calculate the surrogate financial ratios, Commerce relies on surrogate financial statements, here, from Ganges Internationale Private Limited (" Ganges" ). See CS Wind Vietnam Co. v. United States, Slip Op 2015-45, 2015 WL 2167462, at *2 (CIT May 11, 2015) (" CS Wind III" ). One particular expense line item in Ganges' financial statements has proven particularly difficult to deal with--" Jobwork Charges (including Erection and Civil Expenses)." 1 For reasons discussed below, Commerce has employed an " erection/civil income ratio," albeit in evolved forms, to determine what amount of the jobwork charges line item to include as overhead expenses. See CS Wind III, 2015 WL 2167462, at *1-7; CS Wind Vietnam Co. v. United States, Slip Op. 2014-128, 2014 WL 5510084, at *2, 6-7 (CIT Nov. 3, 2014) (" CS Wind II" ); Third Remand Results at 7-16.
The erection/civil income ratio sustained by this court in CS Wind III and remanded by the Federal Circuit in CS Wind IV worked as follows. See CS Wind III, 2015 WL 2167462, at *1-5. Commerce derived the ultimate (adjusted) erection/civil income ratio by combining an unadjusted erection/civil income ratio with a " raw materials/direct labor exclusion ratio." Id. at *4 & n.5. The unadjusted erection/civil income ratio, defined as " a," was:
a = EI + CI / SOJW + EI + CI + SOFG + Scrap
Where EI = Erection Income, CI = Civil Income, SOJW = Sales of Jobwork, SOFG = Sales of Finished Goods, and Scrap = Sales of Scrap. Id. at *4 n.5. The raw materials/direct labor exclusion ratio, defined as " b" and derived from values in the expense side of the financial statements, was:
b = 1 -- RM + DL / RM + DL + E + O
Where RM = Raw Materials, DL = Direct Labor, E = Energy, and O = Overhead. CS Wind III, 2015 WL 2167462 at *4 n.6; see also CS Wind IV, 832 F.3d at 1379 n.5 (explaining Commerce's methodology of excluding raw material and direct labor expenses from the erection/civil income ratio). The adjusted erection/civil income ratio was:
a (adjusted) = b * EI + b * CI / SOJW + b * EI + b * CI + b * SOFG + b * Scrap
CS Wind III, 2015 WL 2167462 at *4 n.7. Commerce's erection/civil income ratio yielded a percentage, 8.62%, which it then multiplied by the jobwork charges line item, subtracting the resulting amount from the total value of the jobwork charges line item. Id. Commerce then included the remaining portion of the jobwork charges line item in overhead expenses for use in the surrogate financial ratios. Id.
In its Third Remand Results, Commerce has once again revised the erection/civil income ratio, this time by: (1) eliminating Sales of Jobwork from the denominator of the erection/civil income ratio, Third Remand Results at 8, 11; (2) removing Direct Labor from the numerator of the raw materials/direct labor exclusion ratio, thus changing the raw materials/direct labor exclusion ratio to a " raw materials exclusion ratio," id. at 8; (3) choosing to apply the raw materials exclusion ratio only to Sales of Finished Goods and Scrap, id.; and...
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