Thai Plastic Bags Indus. Co. v. United States

Decision Date18 June 2012
Citation34 ITRD 1707,853 F.Supp.2d 1267
PartiesTHAI PLASTIC BAGS INDUSTRIES CO., LTD., Polyethylene Retail Carrier Bag Committee, Hilex Poly Co., LLC, and Superbag Corporation, Plaintiffs, v. UNITED STATES, Defendant.
CourtU.S. Court of International Trade

OPINION TEXT STARTS HERE

Irene H. Chen, Cen Law Group LLC, of Rockville, MD, and Mark B. Lehnardt, Lehnardt & Lehnardt LLC, of Liberty, MO, for Plaintiff.

Joseph W. Dorn, Stephen A. Jones, and Daniel L. Schneiderman, King & Spalding, of Washington, DC, for Consolidated Plaintiffs.

Vincent D. Phillips, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for Defendant. With him on brief were Stuart F. Delery, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director. Of counsel on the brief was Scott D. McBride, Senior Attorney, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of Washington, DC.

OPINION

POGUE, Chief Judge:

In this action, Plaintiff Thai Plastic Bags Industries Co., Ltd. (TPBI), a producer of polyethylene retail carrier bags (“PRCBs”) from Thailand, the subject merchandise, and Plaintiffs Polyethylene Retail Carrier Bag Committee, Hilex Poly Co., LLC, and Superbag Corporation (collectively PRCBC), producers of a domestic like product, each challenge determinations made by the United States Department of Commerce (“Commerce” or “the Department”) in the fifth administrative review of the antidumping (“AD”) order on PRCBs.2

Specifically, Plaintiffs challenge: 1) Commerce's adjustments to TPBI's reported cost allocation methodology; 2) Commerce's use of zeroing; 3) Commerce's cost adjustment, under the transactions disregarded rule, for linear low density resin (“LLD”) obtained by TPBI; and 4) Commerce's determination that TPBI's 2009 inventory valuation losses were attributable to finished goods inventory and were therefore excluded from the calculation of TPBI's general and administrative expenses for producing its goods.

The court has jurisdiction pursuant to 28 U.S.C. § 1581(c).

For the reasons discussed below, issues two and three are remanded to Commerce for reconsideration and further explanation; Commerce's determinations on issues one and four are affirmed.

STANDARD OF REVIEW

Under its familiar standard of review, the court will sustain Commerce's determinations if they are “supported by substantial evidence on the record,” and “otherwise ... in accordance with law.” See Section 516A(b)(1)(B)(i) of the Tariff Act of 1930, 19 U.S.C. § 1516a(b)(1)(B)(i) (2006).3 Substantial evidence is “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion,” Consol. Edison Co. of N.Y. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126 (1938), “taking into account the entire record, including whatever fairly detracts from the substantiality of the evidence.” Atl. Sugar, Ltd. v. United States, 744 F.2d 1556, 1562 (Fed.Cir.1984); see also Universal Camera Corp. v. NLRB, 340 U.S. 474, 488, 71 S.Ct. 456, 95 L.Ed. 456 (1951). Thus, the substantial evidence standard of review “can be translated roughly to mean ‘is [the determination] unreasonable?’ Nippon Steel Corp. v. United States, 458 F.3d 1345, 1351 (Fed.Cir.2006) (quoting SSIH Equip. SA v. U.S. ITC, 718 F.2d 365, 381 (Fed.Cir.1983)).

DISCUSSION
I. TPBI Issue 1: Reallocation of TPBI's Reported Costs

Commerce, during an administrative review, determines whether subject merchandise has been sold at less than fair value, or “dumped,” in the United States. To do so, the Department endeavors to make a fair comparison between the export price or constructed export price of a foreign producer's sales and its “normal” or home market sale value. See19 U.S.C. § 1677b(a); 19 U.S.C. § 1677(35)(A).4 This determination requires that Commerce compare products sold in the United States to matching “like” products sold in the home market. See19 U.S.C. § 1677b(a)(1)(B). See also19 U.S.C. § 1677(16); Uruguay Round Agreements Act, Statement of Administrative Action, H.R. Doc. No. 103–316, vol. 1, at 820 (1994) (SAA), reprinted in 1994 U.S.C.C.A.N. 4040, 4161 ([T]he preferred method for identifying and measuring dumping is to compare home market sales of the foreign like product to export sales to the United States.”) In its comparison, Commerce may, under certain conditions, disregard sales below the producer's cost of production (“COP”).519 U.S.C. § 1677b(b).

To the extent that not all products have an identical match, Commerce, in accordance with the statute, may calculate a constructed value (“CV”) of the merchandise. Commerce uses the same method to calculate “costs” for both COP and CV. Compare19 U.S.C. § 1677b(b)(3), with19 U.S.C. § 1677b(e). See also19 U.S.C. § 1677b(f). To make its CV and COP determinations, Commerce must consider all available evidence regarding proper cost allocation, 19 U.S.C. § 1677b(f)(1)(A), including costs as reported by the foreign producer. Such costs will, normally, be calculated based on the producer's records, if the records are kept in accordance with the generally accepted accounting principles (“GAAP”) of the exporting country and if such records reasonably reflect the costs associated with the production and sale of the merchandise. 19 U.S.C. § 1677b(f)(1)(A); I & D Mem. Cmt. 1 at 9.

In addition, in calculating the normal value, Commerce may make reasonable allowances for differences in physical characteristics of the merchandise (its “DIFMER” adjustment).6

As Commerce must calculate the COP and CV with as much accuracy as possible, if the company's reported cost allocation methodology shifts costs away from the subject merchandise or the foreign like product, Commerce has the authority to adjust costs to ensure that they are not artificially reduced. Thai Plastic Bags Indus. Co. v. United States, 34 CIT ––––, 752 F.Supp.2d 1316, 1324 (2010) (“Thai Plastic Bags I ”); See SAA at 834–35, 1994 U.S.C.C.A.N. at 4171–72; 19 C.F.R. 351.407(c).7

Specifically, in the fifth administrative review of this order, just as in the fourth administrative review, Commerce concluded that TPBI's reported cost allocation “resulted in product-specific cost differences which were unrelated to differences in physical characteristics.” Thai Plastic Bags I, 34 CIT ––––, 752 F.Supp.2d at 1329; Resp. Br. of PRCBC in Opp'n to TPBI's Mot. for J. on Agency R. at 7, ECF No. 74 (“PRCBC's Resp. Br.”). These differences were the result of TPBI's adjustment of its reported “conversion costs.” TPBI alleges that these adjustments were to reflect the additional time needed to process different products. Pl.'s Rule 56.2 Mem. of Law in Supp. Of Mot. for J. on Agency R., ECF No. 50–1, at 15 (“TPBI's Br.”). But Commerce determined that TPBI's submitted evidence showed that TPBI's reported cost allocation methodology did not reasonably reflect the actual costs for producing the merchandise, Def.'s Resp. in Opp. to Pls.' Rule 56.2 Mot. for J. upon the Agency R., ECF No. 67, at 14 (“Def.'s Br.”), and that TPBI's reporting methodology unreasonably distorted the cost of manufacture (“COM”).8Polyethylene Retail Carrier Bags From Thailand, 75 Fed.Reg. 53,953, 53,955 (Dep't Commerce Sept. 2, 2010) (preliminary results of antidumping duty administrative review) (“ Prelim. Results ”).

In particular, Commerce found that TPBI's reporting methodology was inconsistent with its normal cost-accounting practice and the reported cost differences were unrelated to physical differences. Id. Commerce found that TPBI did not actually use its reported cost allocation methodologies in its normal books and records, but rather created a methodology outside of its normal business practices to report labor and overhead costs to Commerce. Def.'s Br. at 14–15; I & D Mem. Cmt. 1 at 10. Accordingly, Commerce reallocated TPBI's reported conversion costs.9

TPBI argued that its cost allocation method reflected cost differences attributable to physical characteristics; but Commerce found that TPBI's method resulted in “great variability” in costs for similar items having nothing to do with physical characteristics. Def.'s Br. at 15; Prelim. Results 75 Fed.Reg. at 53,955. Specifically, Commerce looked at nine pairs of CONNUMs 10 that were very similar physically and found that under TPBI's allocations, these items had very different costs. I & D Mem. Cmt. 1 at 8.

Even though TPBI explained that many variables other than physical characteristicsaffected costs, Commerce found that most of the CONNUM pairs were produced in the same facility and had very slight physical differences, yet there were extreme differences in production times reported. I & D Mem. Cmt. 1 at 8; Def.'s Br. at 16. Commerce then determined that the record showed that TPBI's cost allocation methods did not reasonably reflect actual costs because such cost disparities were not explained by physical differences in the specific products. Def.'s Br. at 16. Commerce thus relied on actual data reported by TPBI and weight-averaged the costs across all production lines. Def.'s Br. at 17; I & D Mem. Cmt. 1 at 12.

TPBI now challenges Commerce's decision to replace TPBI's reported costs with Commerce's average cost calculation. TPBI's Br. at 13. TPBI states that Commerce should have accepted TPBI's reported costs as in accordance with GAAP principles, that Commerce incorrectly relied on the DIFMER standard in reallocating TPBI's costs and that Commerce should have used TPBI's cost information in its calculations. See id. at 14. However, as explained below, Commerce reasonably decided A) not to use TPBI's cost methodology; B) to utilize the DIFMER standard; and C) to reject TPBI's alternate cost methodologies.

A. Costs

TPBI first argues that Commerce's decision to replace TPBI's reported costs with averaged costs is not supported by substantial evidence. TPBI's Br. at 13. But in its...

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