Sinopec Sichuan Vinylon Works v. U.S.
| Decision Date | 04 April 2005 |
| Docket Number | Slip Op. 05-45.,Court No. 03-00791. |
| Citation | 366 F.Supp.2d 1339 |
| Parties | SINOPEC SICHUAN VINYLON WORKS, Plaintiffs, v. UNITED STATES, Defendant and Celanese Chemicals, Ltd. and E.I. DuPont De Nemours & Co., Defendant — Intervenors. |
| Court | U.S. Court of International Trade |
Gamey Schubert Barer, William E. Perry, Lizabeth R. Levinson, (Ronald M. Wisla), J. Patrick Briscoe, Washington, DC, for Plaintiff.
Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director; (Jeanne E. Davidson), Deputy Director; (Stephen C. Tosini), Trial Attorney, Department of Justice, Civil Division, Commercial Litigation Branch and Ada E. Bosque, Attorney-Advisor, Office of Chief Counsel for Import Administration, U.S. Department of Commerce, for Defendant, of counsel.
Wilmer Cutler Pickering Hale & Dorr LLP, (Ronald I. Meltzer), Tammy J. Horn, Atman M. Trivedi, Washington, DC, for Defendant-Intervenors.
Plaintiff Sinopec Sichuan Vinylon Works ("SVW"), a Chinese producer and exporter of polyvinyl alcohol ("PVA") from the People's Republic of China ("China"), challenges the final determination of sales at less than fair value and the resulting antidumping duty order issued by the United States Department of Commerce, International Trade Administration ("Commerce" or "the Department" or "the Government") in Polyvinyl Alcohol from the People's Republic of China, 68 Fed.Reg. 47538 (2003), as amended 68 Fed.Reg. 52183 (2003) (). Plaintiff contests Commerce's decisions (1) not to apply the "self-produced" rule to inputs produced by a joint venture; (2) to apply a value-based methodology to allocate costs between acetylene and acetylene tail gas instead of a heat of combustion-based methodology; (3) to use the ceiling price of published Indian natural gas prices as the surrogate value for natural gas rather than an average of published floor and ceiling prices; and finally, (4) Commerce's decision regarding when and how to apply a by-product credit in its calculation of Plaintiff's normal value. Commerce has requested remand of its use of the ceiling price for natural gas. For the reasons explained below, Plaintiff's USCIT R. 56.2 Motion for Judgment Upon an Agency Record is granted, in part, and the case is remanded to Commerce to reconsider its analysis with regard to issues (1), (3), and (4). Commerce's decision regarding issue (2) is affirmed.
For non-market economy ("NME") countries, section 773(c) of the Tariff Act of 1930 requires that Commerce calculate normal value using market economy prices to value the factors of production used in the NME country to produce the subject merchandise. 19 U.S.C. § 1677b(c) (2003); Antidumping Duty Manual, Ch. 8 at 85. In its normal value calculation, Commerce valued costs of production by utilizing the financial statements of an Indian surrogate, VAM Organic Chemical Ltd. (subsequently, Jubilant Organosys Ltd.) ("Jubilant" or "the surrogate") to value factory overhead, general expenses and profit. Def.'s Memo in Opp. to Pl.' Mot. for J. Upon the Agency Record ("Def.'s Memo") at 3. Jubilant is a producer of polyvinyl acetate (PVAc), a product comparable to the PVA produced by SVW. The two manufacturers' production processes differ, however, in that SVW polymerizes vinyl acetate monomer ("VAM") into PVAc, and then converts it into PVA, while Jubilant processes ethanol into ethylene to derive VAM, which it then processes into PVAc. Pl.'s Brief in Support of Mot. for J. on Agency Record ("Pl.'s Brief") at 3. Jubilant does not follow through to the final stage for the production of PVA, where significant amounts of acetic acid are recovered. Id. SVW, on the other hand, does perform this final stage and, therefore, recovers acetic acid in the production of PVA.
On March 20, 2003, Commerce published its preliminary determination, where it reported a de minimis dumping margin. Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Polyvinyl Alcohol from the People's Republic of China, 68 Fed.Reg. 13674 (March 20, 2003). Commerce's investigations revealed that SVW purchases acetic acid, one of the main inputs, from a joint venture partner within the PRC. Issues and Decision Memo ("I & D Memo") at 3. For its preliminary determination, Commerce did not value the costs of producing acetic acid by the joint venture, but instead used a surrogate value from an Indian producer. Id. Commerce reasoned that the joint venture was neither a branch nor a division of SVW, and therefore, it was statutorily required to treat acetic acid as purchased from another NME supplier. I & D Memo at 3. SVW argued that Commerce should have treated acetic acid as a self-produced input because the joint venture supplier produces acetic acid within SVW's manufacturing site and supplies it directly to SVW through a connected pipe system. Id. at 5. Moreover, SVW argued that it owned a substantial minority interest in the joint venture, and that it decided to form this relationship because it would be more cost effective to produce the input than to purchase it. Id. To treat the joint venture as an arms-length supplier, SVW contended, would result in an inflated cost of production, since SVW obtains substantial economic benefits from its vertical integration with the joint venture. Id. at 5. Commerce rejected SVW's argument, and continued to treat acetic acid as a purchased input in its valuation rather than using SVW's costs of production. I & D Memo at 7.
Moreover, Commerce's investigation revealed that during the PVA production process, acetylene and acetylene tail gas are also recovered. Def.'s Brief at 4. For its preliminary determination, Commerce allocated the costs for these two products using a heat combustion methodology, as SVW did in its own records. I & D Memo at 17. Petitioners argued that tail gas should be treated as a co-product, rather than a by-product, and that SVW allocated more costs to tail gas than it did to acetylene, despite the latter's significantly higher market value. Def.'s Brief at 4. For its final determination, Commerce reasoned that "allocation of costs solely on potential heats of combustion when the potential heat is not a factor in the process at hand is not reasonable given the vastly different market values of the joint products at issue," I & D Memo at 17, and ultimately used a "value based methodology." Id.; I & D Memo at 15-18.
In its investigation Commerce also used surrogate values for natural gas, a raw material input in the production of PVA, using values obtained from the Gas Authority of India, Ltd. ("GAIL"). I & D Memo at 22. Plaintiff challenged Commerce's use of GAIL's reported ceiling prices, arguing that Commerce should use an average of the reported ceiling and floor prices for natural gas, as opposed to the highest reported price, which the Department used. Id. In its final determination, Commerce rejected SVW's argument and continued to use the natural gas prices from the surrogate as it did in the preliminary determination, asserting that the lower prices were "only offered on preferential terms to customers in a particular geographic region." I & D Memo at 23.
Finally, during its calculations for the preliminary determination, Commerce utilized surrogate financial ratios for factory overhead, SG & A, and profit to calculate SVW's cost of production. I & D Memo at 25. Commerce also determined that the denominator of the financial ratios did not account for the significant quantity of the acetic acid by-product that SVW recovered during the final PVA production stage, and not experienced by the surrogate. Id. at 28. Therefore, to account for this discrepancy, Commerce applied the surrogate's financial ratios to SVW's costs prior to making an offset for the recovered by-product, with the goal of equating the base on which the ratios were calculated with that to which they were applied. I & D Memo at 25.
SVW suggested that Commerce should apply overhead, SG & A, and profit after granting the by-product credit. Petitioners, on the other hand, urged Commerce to adjust Jubilant's financial statements to account for SVW's higher level of integration, which resulted in differences in costs between the two manufacturers. Pl.'s Brief at 4. Commerce found that the differences in material costs were due to differences in the production process, and not to capital intensity or integration. I & D Memo at 28. Therefore, it refused to adjust the surrogate values, and instead continued to apply Jubilant's ratios prior to offsetting for SVW's recovery of acetic acid. Pl.'s Brief at 5.
Commerce issued its final determination on August 11, 2003, in which it reported an affirmative dumping margin of 7.40 percent. Polyvinyl Alcohol from the People's Republic of China, 68 Fed.Reg. 47538 (2003). On September 2, 2003, Commerce published the antidumping duty order with a reduced dumping margin of 6.91 percent, after correcting various clerical errors. Polyvinyl Alcohol from the People's Republic of China, 68 Fed.Reg. 52183 (2003). It concluded that PVA from the PRC was being sold at less than fair market value within the meaning of section 733(b) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1673b(b) (1988). Plaintiff SVW filed a complaint contesting Commerce's findings.
This court has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(c) (2005). In reviewing Commerce's antidumping duty determinations, the court will sustain any determination, finding, or conclusion by Commerce unless it is unsupported by substantial evidence on the record or is otherwise not in accordance with law. See 19 U.S.C. § 1516a(b)(1) (2005); Fujitsu General Ltd. v. United States, 88 F.3d 1034, 1038 (Fed.Cir.1996). Substantial evidence...
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Guangdong Chemicals Import & Export Corp. v. U.S., Slip Op. 06-142. Court No. 05-00023.
...costs." Pl.'s Comments 11. Commerce claims that this methodology was approved as reasonable in Sinopec Sichuan Vinylon Works v. United States, 29 CIT ___, ___, 366 F.Supp.2d 1339, 1351 (2005). Sinopec involved a respondent, Sinopec Sichuan Vinylon Works ("SVW") that produced polyvinyl alcoh......