Zhejiang Dunan Hetian Metal Co. v. United States

• Decision Date: 25 August 2011
• Docket Number: No. 2010–1367.,2010–1367.
• Parties: ZHEJIANG DUNAN HETIAN METAL CO., LTD., Plaintiff–Appellant,v.UNITED STATES, Defendant–Appellee,andParker–Hannifin Corporation, Defendant–Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

652 F.3d 1333

33 ITRD 1097

ZHEJIANG DUNAN HETIAN METAL CO., LTD., Plaintiff–Appellant,

v.UNITED STATES, Defendant–Appellee,andParker–Hannifin Corporation, Defendant–Appellee.

No. 2010–1367.

United States Court of Appeals, Federal Circuit.

June 22, 2011.Rehearing Denied Aug. 25, 2011.

Mark E. Pardo, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of Washington, DC, argued for plaintiff-appellant. With him on the brief was Andrew T. Schutz.L. Misha Preheim, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee United States. With him on the brief were Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy Assistant Director. Of counsel on the brief was Joanna Theiss, Attorney, Office of the Chief Counsel for Import Administration, United States Department of Commerce, of Washington, DC.Donald R. Dinan, Roetzel & Andress, LPA, of Washington, DC, argued for defendant-appellee Parker–Hannifin Corporation. With him on the brief was Craig A. Koenigs.Before RADER, Chief Judge, MOORE and O'MALLEY, Circuit Judges.O'MALLEY, Circuit Judge.

Zhejiang DunAn Hetian Metal Co. (“DunAn”) appeals the decision of the United States Court of International Trade denying DunAn's Motion for Judgment Upon the Agency Record. This court has jurisdiction pursuant to 28 U.S.C. § 1295(a)(5). On appeal, DunAn raises three issues: whether (1) the United States Department of Commerce (“Commerce”) erred in calculating the surrogate value for brass bar by including shipments from Japan, France, and the United Arab Emirates (“UAE”); (2) Commerce applied an improper adverse inference to DunAn's December 2007 sales quantity data; and (3) Commerce's valuation of labor pursuant to 19 C.F.R. § 351.408(c)(3) is contrary to 19 U.S.C. § 1677b(c)(4). DunAn's notice of appeal was timely. For the reasons explained below, we vacate and remand.

Background

On March 19, 2008, Parker–Hannifin Corp. (“Parker–Hannifin” or “Appellee”) filed an antidumping petition (the “Petition”) on behalf of the domestic industry concerning imports of frontseating service valves (“FSVs”) ¹ from the People's Republic of China (“China”), alleging that Chinese firms were exporting FSVs to the United States at prices that were less than fair value.² In April of 2008, Commerce initiated its antidumping duty investigation. Frontseating Service Valves from the People's Republic of China: Preliminary Determination of Sales at Less Than Fair Value, Preliminary Negative Determination of Critical Circumstances, and Postponement of Final Determination, 73 Fed.Reg. 62,952 (Dep't of Commerce Oct. 22, 2008) (“ Preliminary Determination ”). Commerce established July 1, 2007 through December 31, 2007 as the period of investigation. Id. On June 30, 2008, Commerce selected DunAn as a mandatory respondent for the investigation. Id. at 62,954. Commerce published its preliminary determination in October 2008. Id. In March of 2009, Commerce published its final determination. Frontseating Service Valves from the People's Republic of China: Final Determination of Sales at Less Than Fair Value and Final Negative Determination of Critical Circumstances, 74 Fed.Reg. 10,886 (Dep't of Commerce March 13, 2009) (“ Final Determination ”). The factual background relating to the specific issues presented on appeal is discussed below.

A. Selection of a Surrogate Value for Brass Bar

For the purposes of antidumping duty investigations, Commerce considers China to be a non-market economy. Preliminary Determination, 73 Fed.Reg. at 62,953. As a result, Commerce employed its non-market economy methodology to calculate the normal value of the FSVs DunAn exported. As described by Commerce,

Section 773(c)(1) ³ of the Act directs [Commerce] to base normal value ⁴ (“NV”) on the [non-market economy] producer's factors of production (“FOPs”), valued in a surrogate market economy (“ME”) country or countries considered to be appropriate by [Commerce]. In accordance with section 773(c)(4) ⁵ of the Act, in valuing the FOPs, [Commerce] shall use, to the extent possible, the prices or costs of the FOPs in one or more ME countries that are: (1) at a level of economic development comparable to that of the

[non-

market economy] country; and (2) significant producers of comparable merchandise.

Id. at 62,954 (internal footnotes added). In accordance with this methodology, Commerce selected India as the surrogate market economy. Id. (“[Commerce] found that India is at a level of economic development comparable to that of [China], is a significant producer of comparable merchandise (i.e., FSVs) and has publicly available and reliable data.”).

With respect to the factors of production DunAn utilized to manufacture FSVs, DunAn indicated that brass bar was one of its primary raw materials. To value this factor of production, DunAn provided a first surrogate value submission that included Indian import statistics under Harmonized Tariff Schedule (“HTS”) heading 7407.21.10 covering “brass bars” from the Monthly Statistics of the Foreign Trade of India, as published by the Government of India's Directorate General of Commercial Intelligence and Statistics of the Ministry of Commerce and Industry, as set forth in the World Trade Atlas (“WTA Indian import data”). In addition to this information, DunAn also submitted InfoDrive India data ⁶ pertaining to this HTS heading.

To value brass bar for the Preliminary Determination, Commerce used an average Indian import value, which represented the average value of all the materials imported into India under HTS category 7407.21.10 as reported in the WTA Indian import data. Joint Appendix (“JA”) 247 (“[W]e find that WTA Indian import data represent the best available information for purposes of valuing brass bar and have relied upon these data in calculating margins for this preliminary determination.”). In its preliminary determination, Commerce concluded that DunAn's weighted-average dumping margin was 26.72%. Preliminary Determination, 73 Fed.Reg. at 62,961.

In response to Commerce's preliminary determination, DunAn submitted a brief objecting to various aspects of the determination. Specifically, DunAn argued that, on the basis of the InfoDrive data, Commerce should exclude import data from Japan, France, and the UAE because the materials imported from these countries were not brass bar. According to DunAn, Commerce's inclusion of these materials in its calculation of the brass bar surrogate value rendered it less accurate, and, thus, resulted in an unduly high weighted-average dumping margin.

Despite DunAn's arguments, Commerce issued a final determination that calculated the surrogate value for brass bar without excluding the imports from Japan, France, and the UAE. Antidumping Duty Investigation of Frontseating Service Valves from the People's Republic of China: Issues and Decision Memorandum for the Final Determination, 2009 WL 736059 (Mar. 6, 2009), at comment 4 (“[Commerce] has concluded that for the final determination, we will continue to include the value of imports from Japan, France, and the UAE in calculating the surrogate value for brass bar....”) (“ Issues and Decisions Memorandum ”). Explaining its reasoning, Commerce stated:

[W]ith respect to the imports in question ... we find that the Infodrive data contain insufficient product information in the description of the line items to enable [Commerce] to make a definitive determination that these line items are misclassified. Specifically, the product description in the Infodrive data are such that, given the dependency upon the chemical make-up of the underlying products, they could be properly classified within the Indian HTS category where they are, or in the category addressed by DunAn. Thus, [Commerce] cannot determine, due to lack of product detail, i.e., chemical properties, the precise chemical make-up of these line items. Accordingly, without clear evidence to the contrary, [Commerce] will not speculate that these materials have been misclassified. Therefore, pursuant to section 773(c)(1) of the Act, [Commerce] has determined to include imports from Japan, France, and the UAE in calculating the surrogate value for brass bar in the final determination because the record evidence does not demonstrate that the imports from these countries were misclassified.

Id. Commerce found, moreover, “that the WTA [Indian import data] represent [ed] the best surrogate value in this case because they are publicly available, product-specific, contemporaneous, tax exclusive, and representative of brass bar prices.” JA 403.B. Application of Partial Adverse Facts Available to DunAn's December 2007 Sales

During the period of investigation, DunAn reported that it had a single U.S. customer. According to DunAn, it maintained inventory in this customer's warehouse through a vendor managed inventory program. Zhejiang DunAn Hetian Metal Co. v. United States, 707 F.Supp.2d 1355, 1372 (Ct. Int'l Trade 2010). Pursuant to this program, DunAn would ship FSVs from China to the customer's warehouse. The customer only actually purchased the FSVs when it withdrew them from the warehouse. Id. At the end of each month, the customer would send DunAn a consumption report that indicated how many of each type of FSV it had withdrawn. Id. Utilizing this information, DunAn would confirm both the quantities and prices indicated in the report. Id. Confirming prices was simple; the sales price for each FSV was established in a prior agreement between DunAn and its customer. Issues and Decisions Memorandum, 2009 WL 736059 at comment 12b. That price, moreover, did not vary on the basis of quantity sold, nor did it vary over the course of the period of investigation. Confirmation of the quantity of FSVs the customer removed from the warehouse was a more complicated exercise. A DunAn employee at the customer's warehouse...