U.S. Inc. v. United States

• Decision Date: 17 August 2010
• Docket Number: Slip Op. 10-93.,Court No. 08-00321.
• Citation: 724 F.Supp.2d 1308
• Parties: PSC VSMPO-AVISMA CORPORATION and VSMPA Tirus, U.S., Inc., Plaintiff, v. UNITED STATES, Defendant, and U.S. Magnesium LLC, Defendant-Intervenor.
• Court: U.S. Court of International Trade

724 F.Supp.2d 1308

PSC VSMPO-AVISMA CORPORATION and VSMPA Tirus, U.S., Inc., Plaintiff,

v.UNITED STATES, Defendant,andU.S. Magnesium LLC, Defendant-Intervenor.

Slip Op. 10-93.

Court No. 08-00321.

United States Court of International Trade.

Aug. 17, 2010.

Arent Fox LLP (John M. Gurley, Mark P. Lunn and Diana Dimitriuc Quaia), Washington, DC, for Plaintiffs PSC VSMPO-AVISMA Corporation and VSMPO-Tirus, U.S. Inc.

Tony West, Assistant Attorney General; Jeanne E. Davidson, Director; Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice (David S. Silverbrand, Trial Attorney) for Defendant United States; Daniel J. Calhoun, Office of the Chief Counsel for Import Administration, United States Department of Commerce, Of Counsel, for Defendant.

King & Spalding, LLP (Stephen A. Jones and Jeffery B. Denning), Washington, DC, for Defendant-Intervenor U.S. Magnesium LLC.

OPINION

BARZILAY, Judge.

This case concerns a challenge to the U.S. Department of Commerce's (“the Department” or “Commerce”) determination in an antidumping administrative review covering pure and alloyed magnesium metal from the Russian Federation. Plaintiffs PSC VSMPO Avisma Corporation (“Avisma”) and VSMPA Tirus, U.S., Inc., (collectively, “Plaintiffs”) and Defendant-Intervenor U.S. Magnesium, LLC (“USM”), challenge Commerce's method for calculating the value of chlorine gas when determining the normal value for the subject merchandise in Results of Redetermination Pursuant to Remand, A-421-819 (Dep't Commerce Mar. 30, 2010) (“ Redetermination Results ”). ¹ Because the court finds that the Department's method for calculating the value for chlorine gas is not supported in the record and does not comport with the statute, the court remands the proceedings to Commerce for further consideration.

I. Background & Procedural History.

A. The Industrial Processes at Issue

A thorough understanding of this case demands familiarity with the industrial processes at issue. ² Avisma is the world's largest producer of titanium. Pls. Br.App. Tab 3 Ex. 5 at 2; Pls. Br.App. Tab 5 at 11. Its production facility operates in two principal stages. In the carnallite refinement stage, enriched carnallite ³ undergoes dehydration and electrolysis to produce raw magnesium and chlorine gas. Pls. Br.App. Tab 8 Ex. 1.A at 1. Avisma processes [[much]] of the resulting raw magnesium to create the subject merchandise and uses the [[rest]] later in the titanium production chain, as described below. Pls. Reply Br.App. Tab 18 at 3. Avisma uses the chlorine gas in three ways:[[Much]] goes toward the ilmenite catalyzation process, while [[some]] recycles into the carnallite refinement process, and [[some]] goes on to produce calcium chloride, a de-icer. Pls. Reply Br.App. Tab 18 at 3. Therefore, only a portion of the chlorine gas goes into the production of the subject merchandise as described more completely below.

In the next stage of production, which does not result in subject merchandise, chlorine gas reacts as a catalyst with ilmenite ore ⁴ to separate titanium from titanium oxide, resulting in titanium tetrachloride. Pls. Br.App. Tab 8 Ex. 1.A at 1. Avisma then uses raw magnesium and technical-quality magnesium ⁵ to separate the chlorine from the titanium tetrachloride, producing titanium sponge and magnesium chloride. Pls. Br.App. Tab 8 Ex. 1.A at 1. Avisma refines the titanium sponge to create salable products, including titanium ingots, billets, and slabs. Pls. Br.App. Tab 3 Ex. 5 (“ 2006 Avisma Annual

Report

”) at 2. It subjects the magnesium chloride to electrolysis, splitting it into chlorine gas which feeds back into the ilmenite catalyzation process and technical-quality magnesium. Pls. Br.App. Tab 8 Ex. 1.A at 1. Avisma recycles the technical-quality magnesium into the titanium tetrachloride separation process. Pls. Br.App. Tab 8 Ex. 1.A at 1.[[ ]]

B. Procedural History

In 2007, Avisma and USM requested a review of an antidumping order covering imports of pure and alloyed magnesium from the Russian Federation for the period from April 1, 2006 to March 31, 2007. See Notice of Antidumping Duty Order: Magnesium Metal from the Russian Federation, 70 Fed.Reg. 19,930, 19,930 (Dep't Commerce Apr. 15, 2005). On May 30, 2007, Commerce commenced the review, Initiation of Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in Part, 72 Fed.Reg. 29,968, 29,968 (Dep't Commerce May 30, 2007), and nearly a year later published its preliminary results. Magnesium Metal from the Russian Federation: Preliminary Results of Antidumping Duty Administrative Review, 73 Fed.Reg. 24,541 (Dep't Commerce May 5, 2008). At this point Avisma and USM submitted briefs proposing, inter alia, changes to the Department's methodology for determining the value of chlorine gas. Commerce rejected a portion of Avisma's brief because it contained new factual information: an affidavit from accounting expert Professor George Foster (“Foster Affidavit”). See Pls. Br.App. Tabs 8-11.

On September 10, 2008, Commerce issued the final results of the subject administrative review. Magnesium Metal from the Russian Federation: Final Results of Antidumping Duty Administrative Review, 73 Fed.Reg. 52,642 (Dep't Commerce Sept. 10, 2008) (“ Final Results ”). To determine the normal value of the subject merchandise, ⁶ the Department employed a method of constructing a value for chlorine gas which severed Avisma's production process at the point where raw magnesium and chlorine gas emerge from the carnallite refinement process. Pls. Br.App. Tab 14 (“ Final Results Issues and Decision Memorandum ”) at 10. Commerce then constructed the value of Avisma's chlorine gas by taking a bulk quantity market value of liquid chlorine and adjusting it for transportation costs between facilities and for the estimated cost of converting the liquid chlorine to chlorine gas. Final Results Issues and Decision Memorandum at 18-19. The Department then allocated this cost among the co-products of the carnallite refinement process. Id. at 10. Commerce justified this methodology by claiming that because the Department perceived a clear split-off point at the carnallite refinement process, it was reasonable to ignore the parts of Avisma's operation subsequent to that process and to treat raw magnesium as one of Avisma's primary products. Id. at 14; see also Redetermination Results at 6. The Department additionally claimed, without explanation, that determining the value of chlorine gas by taking into account Avisma's entire operation would result in a value for chlorine gas too high relative to the value that Avisma obtains from it. Final Results

Issues and Decision Memorandum

at 14; see also Redetermination Results at 5. Because the normal value of the subject merchandise necessarily bears an inversely proportional relationship to the value of chlorine gas, its co-product in the carnallite refinement process, an “unreasonably” high value for chlorine gas would result in an unreasonably low normal value for the subject merchandise. See Redetermination Results at 13. A lower normal value for the subject merchandise, in turn, would lead to a lower antidumping duty rate.

Plaintiffs and USM filed suit in this Court to contest the Final Results. Avisma claimed, inter alia, that Commerce employed an erroneous method to allocate joint costs between raw magnesium and chlorine gas, and that Commerce inappropriately rejected the portions of its case brief containing the Foster Affidavit. PSC VSMPO AVISMA Corp. v. United States, Slip Op. 09-120, 2009 Ct. Int'l Trade LEXIS 127, at *5, 2009 WL 3423021, at *2 (Oct. 20, 2009). USM also contested the Department's method for allocating joint costs between raw magnesium and chlorine gas. Id. In its decision, the court instructed Commerce to admit the Foster Affidavit to the record, citing concerns over the determination's accuracy given that the case presents an issue of first impression, and remanded the proceedings so that the Department could consider the affidavit's arguments. Id. at 2009 Ct. Int'l Trade LEXIS 127, at *22, 2009 WL 3423021, at *7.

On March 30, 2010, Commerce issued its remand results, which left the methodology for constructing the value for chlorine gas unchanged. Redetermination Results at 4. Avisma again contests the Department's chlorine gas valuation methodology, arguing that the methodology inappropriately truncates the production process at Avisma's facilities and thereby ignores the intertwined nature of Avisma's operations. Pls. Br. 2-7. USM supports the Redetermination Results “in large part,” but disagrees with the Department's method of constructing the value for chlorine gas. Def.-Int. Resp. 2.

II. Standard of Review

Because of the “complex” and “technical” nature of the Department's determinations, Commerce's expertise in determining these matters entitles it to great deference. Fujitsu Gen., Ltd. v. United States, 88 F.3d 1034, 1039 (Fed.Cir.1996). The court must sustain Commerce's determination so long as the determination is supported by “substantial evidence on the record” and is “otherwise in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i).

“Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Novosteel SA v. United States, 25 CIT 2, 6, 128 F.Supp.2d 720, 725 (2001) (quotation marks & citation omitted). This evidence must consist of “more than a scintilla” but need not constitute a preponderance. Id. at 6, 128 F.Supp.2d at 725 (citation omitted). To determine whether the Department supports its determination with substantial evidence, the court must take into account the entire record, including anything that detracts from the weight of the evidence that Commerce employs to make its determination. Universal Camera Corp. v. NLRB, 340 U.S. 474, 488, 71 S.Ct. 456, 95 L.Ed. 456 (1951)....