Rhodia, Inc. v. U.S.

• Citation: 240 F.Supp.2d 1247
• Decision Date: 09 September 2002
• Docket Number: Court No. 00-08-00407.,No. Slip Op. 02109.,Slip Op. 02109.
• Parties: RHODIA, INC., Plaintiff, v. UNITED STATES, Defendant and Jilin Pharmaceutical Co., Ltd.; Shandong Xinhua Pharmaceutical Factory Co., Ltd., Defendant-Intervenors.
• Court: U.S. Court of International Trade

240 F.Supp.2d 1247

RHODIA, INC., Plaintiff, v. UNITED STATES, Defendant and Jilin Pharmaceutical Co., Ltd.; Shandong Xinhua Pharmaceutical Factory Co., Ltd., Defendant-Intervenors.

No. Slip Op. 02109.

Court No. 00-08-00407.

United States Court of International Trade.

September 9, 2002.

Williams Mullen Clark & Dobbins (James R. Cannon, Jr., Julia K. Bailey, William E. Pomeranz), Washington, DC, for Plaintiffs.

Robert D. McCallum, Jr., Assistant Attorney General, David M. Cohen, Director, Lucius B. Lau, Assistant Director, Ada E. Bosque, Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice; Emily Lawson, Attorney, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, for Defendant, of counsel.

White & Case (William J. Clinton, Adams C. Lee), Washington, DC, for Defendant-Intervenor Jilin Pharmaceutical Co., Ltd.

Garvey, Schubert & Barer (William E. Perry, John C. Kalitka), Washington, DC, for Defendant-Intervenor Shandong Xinhua Pharmaceutical Factory, Ltd.

OPINION

POGUE, District Judge.

On November 30, 2001, this Court in Rhodia v. United States, 25 CIT ___, 185 F.Supp.2d 1343 (2001) ("Rhodia 7"),¹ remanded the Department of Commerce's final determination in Sales at Less than Fair Value: Bulk Aspirin from the People's Republic of China, 65 Fed.Reg. 33,805 (May 25, 2000), as amended, 65 Fed. Reg. 39,598 (June 27, 2000), and the accompanying Issues and Decision Memorandum, P.R. Doc. No. 155 (May 17, 2000). The remand order directed Commerce to review the record evidence pertaining to the calculation of factory overhead, selling, general and administrative expenses (SG & A) and profit.² This Court now reviews Commerce's Redetermination Pursuant to Court Remand: Rhodia v. United States (Mar. 29, 2002) ("Remand Determination"). Jurisdiction lies under 28 U.S.C. § 1581(c) (2000).³

Background

This case involves the imposition of antidumping duties on imports of bulk acetylsalicylic acid, commonly referred to as aspirin, from the People's Republic of China ("PRC").⁴ In the Final Determination, Commerce found the PRC to be a nonmarket economy ("NME") country and therefore selected India as the surrogate market economy country in accordance with 19 U.S.C. § 1677b(c)(4). In calculating the antidumping duty, Commerce derived a normal value for PRC producers of bulk aspirin from three Indian surrogate companies; Alta Laboratories, Ltd. ("Alta"), Andhra Sugars, Ltd. ("Andhra") and Gujarat Organics, Ltd. ("Gujarat"), which produced salicylic acid, salicylic acid derivatives, or aspirin. Commerce assumed that these surrogates were not as integrated as the PRC producers and therefore claimed that the PRC producers would have a higher overhead-to-raw material ratio than the surrogate producers. To compensate, Commerce applied the overhead ratio calculated from the Indian surrogate producers' data twice. Commerce also calculated overhead, SG & A, and profit ratios using a weighted average.

This Court remanded Commerce's determination because Commerce did not identify record evidence supporting its assumption that the surrogates were less integrated than the PRC producers or explain its reasons for departing from the normal practice of using a simple average to calculate the overhead, SG & A, and profit ratio.

Discussion

I. Integration Level of Indian Producers ⁵

In the Final Determination, Commerce assumed that the Indian surrogate producers were more representative of input producers⁶ than of fully integrated producers such as those found in the PRC. Less integrated producers, according to Commerce, have lower overhead rates. As a result, Commerce applied an overhead ratio at more than one stage of the production process. Commerce did not explain, however, why a fully integrated producer has a higher overhead ratio nor cite any evidence demonstrating that the surrogate producers were in this instance less integrated than the PRC producers.

On remand, Commerce adopted the opposite position and applied the overhead ratio once, at the final stage of production. Commerce followed this Court's understanding that "[w]hile salicylic acid is an input in aspirin production, aspirin is also a derivative of salicylic acid." Rhodia I, 25 CIT at ___, 185 F.Supp.2d at 1349. Commerce therefore reasoned that because the three Indian surrogates produce at least one major aspirin input, such as salicylic acid, as well as some salicylic acid derivatives, the surrogates were representative of the PRC producers' experience. Since Andhra, one of the Indian surrogates, also produces aspirin, Commerce's conclusion was further supported.

Commerce noted that the production of a chemical derivative necessarily requires some further processing. Remand Determ, at 5 (citing to The Cassell Dictionary of Chemistry 59 (1998), which defines derivatives as "a chemical compound derived from some other compound by a straightforward reaction, which usually retains the structure and some of the chemical properties of the original compound"). Even though Commerce was unable to ascertain whether the further processing used by the Indian surrogates to produce the derivatives was "major or minor," Commerce found that "there is no evidence on the record which shows that the further processing is not commensurate with the additional stage of processing Jilin and Shandong employ to produce aspirin." Remand Determ. at 5. Based on the record, Commerce could not "rule out that the production of derivatives by [the surrogates] may mean that they are as integrated as Jilin and Shandong." Id.

Furthermore, Commerce determined that the quantity of aspirin a company produces "is not probative of whether the company should be viewed as an integrated producer." Id. at 6. Rather, Commerce found that as Andhra produces a small percentage of aspirin as well as other chemicals, "because [it] produces both acetic anhydride and aspirin, we cannot conclude that the company's overhead amount better represents the experience of an upstream input producer." Id.

Based on this analysis of the evidence, Commerce refrained from adjusting the Indian surrogate producers' data in its calculation of the normal value on remand. This decision is consistent with Commerce's normal practice because Commerce does not generally adjust the surrogate values used in the calculation of factory overhead. See Notice of Final Determination of Sales at Less Than Fair Value: Polyvinyl Alcohol from the People's Republic of China, 61 Fed.Reg. 14,057, 14,060 (Mar. 29, 1996); Synthetic Indigo from the People's Republic of China, 65 Fed.Reg. 25,706, 25,706-07 (May 3, 2000); Certain Helical Spring Lock Washers from the People's Republic of China, 64 Fed.Reg. 13,401, 13,404 (Mar. 18, 1999); Certain Helical Spring Lock Washers from the People's Republic of China, 65 Fed.Reg. 31,143, 31,143 (May 16, 2000); Notice of Final Determination of Sales at Less Than Fair Value: Collated Roofing Nails from the People's Republic of China, 62 Fed.Reg. 51,410, 51,413, 51,417 (Oct. 1, 1997). Rather, once Commerce establishes that the surrogate produces identical or comparable merchandise, closely approximating the nonmarket economy producer's experience, Commerce merely uses the surrogate producer's data. 19 U.S.C. § 1677b(c)(4) (2000); 19 C.F.R. § 351.408(c)(4) (2001). Furthermore, Commerce is neither required to "duplicate the exact production experience of the Chinese manufacturers," Nation Ford Chem. Co. v. United States, 166 F.3d 1373, 1377 (Fed.Cir.1999), nor undergo "an item-by-item analysis in calculating factory overhead." Magnesium Corp. of Am. v. United States, 166 F.3d 1364, 1372 (Fed.Cir.1999). Moreover, Commerce need not use "perfectly conforming information," only comparable information. Antidumping Duties; Countervailing Duties: Notice of Proposed Rulemaking and Request for Public Comments, 61 Fed.Reg. 7,308, 7,344 (Feb. 27, 1996). Therefore, on remand, Commerce acted consistently with its normal practice by refraining from adjusting the Indian surrogate producers' data.

In Polyvinyl Alcohol from the PRC, Commerce was faced with a situation similar to the one before the court here. 61 Fed.Reg. 14,057, 14,060 (Mar. 29, 1996). The petitioners in that investigation argued that the application of factory overhead at the final stage of production, rather than to the upstream stages, would understate normal value. Id. Just as it determined here, in Polyvinvyl Alcohol from the PRC, Commerce found that "there [was] no evidence on the record to indicate that the Indian producers are any less vertically integrated than the PRC PVA producers." Id. Commerce also held that there was "no basis to assume that applying [a] factory overhead percentage once, at the final stage of production of the PRC producers, undervalues factory overhead." Id.

Unless there is substantial evidence in the record which supports a finding that the surrogate producers are less integrated that the PRC producers, and as a result have a lower overhead ratio, Commerce cannot depart from its standard practice. Rhodia claims that by upholding this practice, the Court will be permitting Commerce to make inferences adverse to the domestic producer. Here, however, Commerce is not making an adverse inference, but is simply following its standard practice of using data from a surrogate producer of identical or comparable merchandise.

II. Weighted Average v. Simple Average

In the Final Determination, Commerce calculated surrogate overhead, SG & A, and profit ratios using a weighted average of the three Indian producers; Alta, Andhra, and Gujarat. This Court found that "[i]n almost every antidumping investigation where Commerce uses only a few surrogate companies, Commerce applies a simple average to derive overhead, SG & A, and profit," and remanded to Commerce to either conform with its usual practice or "explain the reasons for its departure." Rhodia I, 25 CIT at ___, 185 F.Supp.2d...