460 F.Supp.2d 1365 (CIT. 2006), 05-00023, Guangdong Chemicals Import & Export Corp. v. United States

Docket Nº:Court No. 05-00023.
Citation:460 F.Supp.2d 1365
Case Date:September 18, 2006
Court:Court of International Trade

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460 F.Supp.2d 1365 (CIT. 2006)




Court No. 05-00023.

Slip Op. 06-142.

United States Court of International Trade.

Sept. 18, 2006

Garvey Schubert Barer (Ronald M. Wisla and William E. Perry), Washington, DC, for Plaintiff.

Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director; Jeanne E. Davidson, Deputy Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (David S. Silverbrand), Arthur D. Sidney, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of counsel, for the defendant.

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RESTANI, Chief Judge.

Restani, Chief Judge: Plaintiff Guangdong Chemicals Import and Export Corporation ("Guangdong") challenged the results of an administrative review of an antidumping duty order on sebacic acid from the People's Republic of China ("China"). Following oral argument, the court remanded for the Department of Commerce ("Commerce") to reconsider the reliability of data used to calculate the surrogate value of sebacic acid, and also to explain its choice to deduct a by-product credit from normal value, rather than from manufacturing costs. On remand, Commerce reexamined its data, excluded aberrational values, and explained its decision to change its policy with respect to by-product credits. Following remand, Guangdong asserts that Commerce's exclusion of aberrational values does not justify its use of less product-specific data. Guangdong also argues that Commerce's practice of deducting by-product credits from normal value is arbitrary, capricious and unsupported by substantial evidence. The court finds that Commerce's choice of data set and its treatment of the by-product credit are reasonable and supported by substantial evidence.

I. Background

In 1994, Commerce issued an order imposing antidumping duties on sebacic acid from China. See Sebacic Acid from the People's Republic of China, 59 Fed.Reg. 35,909 (Dep't Commerce July 14, 1994) (notice of antidumping duty order). On December 16, 2004, Commerce completed an administrative review of that order for the period of review ("POR") from July 1, 2002, to June 30, 2003. See Sebacic Acid from the People's Republic of China, 69 Fed.Reg. 75,303 (Dep't Commerce Dec. 16, 2004) (notice of final results of antidumping administrative review) (" Final Determination "). Two of Commerce's actions taken during that review are at issue in this case.

The first issue involves Commerce's valuation of sebacic acid. Because Guangdong's supplier of sebacic acid, Hengshui Dongfeng Chemical Co., produces a co-product, capryl alcohol, Commerce must allocate the supplier's costs of manufacturing between the two products based on their relative sales values. See Section C and D Response of Guangdong Chems. Imp. & Exp. Corp. (Nov. 4, 2003), P.R. Doc. 21, at D-4 (" Section C & D Response "). Because India does not produce sebacic acid, Commerce relied on statistics describing the price of sebacic acid imported into India from other countries. Prelim. Valuation of Factors of Prod. (July 30, 2004), P.R. Doc. 47 at 1-2. Commerce chose to use import statistics maintained by the Indian government, based on a six-digit Harmonized Tariff Schedule ("HTS") category ("Indian government data"). Id., P.R. Doc. 47 at 4, Attach. 4. That category lumped together imports of sebacic acid with imports of azelaic acid. Id., P.R. Doc. 47 at Attach. 4. Guangdong advocated the use of product-specific data maintained by the publication Chemical Weekly in its Chemicals Import and Export trade database index (" Chemical Weekly data" or "ChemImpEx"). Submission of Publicly Available Data for Use as Surrogate Value (Sept. 8, 2004), P.R. Doc. 62 at 2 (" Surrogate Value Submission "). That data was taken from a selection of information from the Indian government, but included a classification specific to sebacic acid. Id., P.R. Doc. 62. Because Guangdong's data included limited data points (in fact, only two imports, both from Germany, totaling 1,400 kilograms), Guangdong submitted additional corroborating data to bolster its limited data set. Id., P.R. Doc. 62 at 2, Attach. 1. Without considering the impact of the corroborating data on the veracity of either data set, Commerce rejected

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the Chemical Weekly data and adopted the Indian government data. See Issues & Decision Memorandum for the 2002-2003 Antidumping Administrative Review of Sebacic Acid from the People's Republic of China, A-570-825, at 6-9 (Dec. 10, 2004) available at http://7/8ia.7/8ita.7/8doc. 7/8gov/7/8frn/7/8summary/7/8prc/7/8E7/84-7/83678-7/81.7/8pdf (" Issues & Decision Mem."). Because Commerce failed to consider Guangdong's corroborating data, the court remanded this issue for additional consideration. Guangdong Imp. & Exp. Co. v. United States, 30 CIT ----, ----, 414 F.Supp.2d 1300, 1313 (2006).

The second issue involves a change in Commerce's treatment of by-product credits. Because Hengshui produces fatty acid and glycerine as by-products of sebacic acid, Commerce gave Guangdong a credit reflecting the value of the by-products. See Final Redetermination Pursuant to Court Remand (May 3, 2006), Remand P.R. Doc. 4 at 7 (" Final Redetermination "). In its preliminary determination, Commerce applied this credit to the cost of manufacturing sebacic acid. See id. In its final determination, Commerce applied the credit against normal value, after calculating overhead costs, "special general and administrative" ("SG & A") expenses, and profits. See id. Commerce failed to provide an opportunity for interested parties to comment on this change in methodology before issuing its final determination. Id. Commerce therefore requested a remand in order to explain its application of the by-product credit. Id.

Commerce issued its Final Redetermination on May 3, 2006. As described more fully below, the Final Redetermination continued to use the Indian government data to value sebacic acid, but adjusted the Indian government data to eliminate aberrational values. Id., Remand P.R. Doc. 4 at 3, 5. Commerce also explained the rationale behind its application of Guangdong's by-product credit. Id., Remand P.R. Doc. 4 at 7. Guangdong argues that Commerce's choice of data set remains unreasonable, and that Commerce's application of the by-product credit is unreasonable in light of generally accepted accounting procedures. See Pl.'s Comments on Def.'s Final Determination Pursuant to Court Remand at 1-2 ("Pl.'s Comments"). The court addresses each issue in turn.

II. Commerce's Use of the Indian Government Data to Calculate the Normal Value of Sebacic Acid

Because India does not produce sebacic acid, Commerce relied on import statistics to estimate the value of sebacic acid. As mentioned, Commerce used statistics from the Indian Department of Commerce's Import/Export Data Bank, based on a six-digit basket category in the Indian HTS, 1 which includes both sebacic acid and azelaic acid. Issues & Decision Mem. at 3. During the review, Guangdong offered more product-specific data compiled in an import and export database maintained on the website of the Indian publication Chemical Weekly. Guangdong Chems. Imp. & Exp. Co. Case Br. (Sept. 20, 2004), P.R. Doc. 65, at 4-6. Guangdong proposed using the Chemical Weekly data, which was based on a portion of the Indian government's information, but was further subdivided and included a specific subheading for sebacic acid. 2 Surrogate Value Submission, P.R. Doc. 62 at 2. Based on this data, Guangdong argued that the value of sebacic acid in India during the POR was $3,551.73. 3 Id., P.R. Doc. 62 at 2.

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Guangdong corroborated its proposed value with data from U.S. import statistics for sebacic acid, benchmark price data from the publication Chemical Market Reporter, and prices for oxalic acid, a chemical asserted to be similar to sebacic acid. Id., P.R. Doc. 62 at 2-3.

In response to Guangdong's proposed data, Commerce conducted additional research to determine whether prices of azelaic and sebacic acid were similar. See Comparison of U.S. Int'l Trade Comm'n Dataweb Values for Sebacic Acid & Azelaic Acid Imps. to the United States (Dec. 10, 2004), P.R. Doc. 79 at 1 (" Price Comparison Mem."). It concluded that the two products were similarly priced, varying only by $.30 per kilogram over a twenty-three-month period during which the price for sebacic acid ranged between $2 and $3 per kilogram. Id., P.R. Doc. 79 at 1. Commerce therefore used the broader Indian government data to arrive at a surrogate value of $15,826.30 for sebacic acid. See Issues & Decision Mem. at 9 (electing to use Indian government data); see also Prelim. Valuation of Factors of Prod., P.R. Doc. 47 at 4 (using Indian government data to arrive at $15,826.30 per-metric-ton value for sebacic acid). In rejecting the Chemical Weekly data, Commerce reasoned that it could not determine how the Chemical Weekly data were derived from the Indian government information, and that the Chemical Weekly data lacked "a sufficiently broad range of import values." See Issues & Decision Mem. at 7.

Guangdong filed suit in this Court to challenge the results of the administrative review. See Guangdong, 30 CIT at ----, 414 F.Supp.2d at 1300. Guangdong argued, inter alia, that Commerce had not supported its decision to use the Indian government data instead of the Chemical Weekly data. Id. at ----, 414 F.Supp.2d at 1303. Because Commerce did not explain why it rejected the Chemical Weekly data without consideration of the corroborating data submitted by Guangdong, nor explained why the Indian government data were not aberrational, the court remanded for Commerce to address these infirmities in its reasoning...

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