Shenzhen Xinboda Indus. Co. v. United States

• Decision Date: 16 April 2014
• Docket Number: Slip Op. 14–45.,Court No. 11–00267.
• Citation: 976 F.Supp.2d 1333
• Parties: SHENZHEN XINBODA INDUSTRIAL CO., LTD., Plaintiff, v. UNITED STATES, Defendant, and Fresh Garlic Producers Association, Christopher Ranch, L.L.C., The Garlic Company, Valley Garlic, and Vessey and Company, Inc., Defendant–Intervenors.
• Court: U.S. Court of International Trade

976 F.Supp.2d 1333

SHENZHEN XINBODA INDUSTRIAL CO., LTD., Plaintiff,

v. UNITED STATES, Defendant,andFresh Garlic Producers Association, Christopher Ranch, L.L.C., The Garlic Company, Valley Garlic, and Vessey and Company, Inc., Defendant–Intervenors.

Slip Op. 14–45. Court No. 11–00267.

United States Court of International Trade.

April 16, 2014.

Recognized as Invalid

19 C.F.R. § 351.408(c)(3).

Gregory S. Menegaz, deKieffer & Horgan, PLLC, of Washington, D.C., argued for Plaintiff. With him on the brief was J. Kevin Horgan.

Richard P. Schroeder, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., argued for Defendant. With him on the brief were Stuart F. Delery, Assistant Attorney General, Civil Division, and Jeanne E. Davidson, Director, and Reginald T. Blades, Jr., Assistant Director, Commercial Litigation Branch. Of counsel on the brief was George Kivork, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of Washington, D.C.

John M. Herrmann, Kelley Drye & Warren LLP, of Washington, D.C., argued for Defendant–Intervenors. With him on the brief was Michael J. Coursey.

OPINION

RIDGWAY, Judge:

In this action, Plaintiff Shenzhen Xinboda Industrial Co., Ltd. (“Xinboda”)—an exporter of fresh garlic—contests the final results of the U.S. Department of Commerce's fifteenth administrative review of the antidumping duty order covering fresh garlic from the People's Republic of China (“PRC”). SeeFresh Garlic from the People's Republic of China: Final Results and Final Rescission, in Part, of the 2008–2009 Antidumping Duty Administrative Review, 76 Fed.Reg. 37,321 (Dep't Commerce June 27, 2011) (“Final Results”); Issues and Decision Memorandum for the Final Results of the 15th Administrative Review of Fresh Garlic from the People's Republic of China (June 20, 2011) (Pub.Doc. No. 176) (“Issues & Decision Memorandum”).¹

Pending before the Court is Xinboda's Motion for Judgment on the Agency Record, contesting Commerce's determinations as to the surrogate values for whole raw garlic bulbs, financial ratios, and labor, as well as the agency's application of the “zeroing” methodology in calculating Xinboda's dumping margin. See generally Memorandum in Support of Motion for Judgment on the Agency Record (“Pl.'s Brief”); Plaintiff's Reply Brief (“Pl.'s Reply Brief”).

The Government opposes Xinboda's motion and maintains that the Final Results should be sustained in all respects, save one. See Defendant's Memorandum in Response to Plaintiff's Rule 56.2 Motion for Judgment on the Agency Record at 1, 29–30 (“Def.'s Response Brief”). Specifically, the Government requests that the “zeroing” issue be remanded, to permit Commerce to reconsider and further explain its position. See id.

The Defendant–Intervenors—the Fresh Garlic Producers Association, Christopher Ranch, L.L.C., The Garlic Company, Valley Garlic, and Vessey and Company, Inc. (collectively, the “Domestic Producers”)—also oppose Xinboda's motion and support the Government as to all four of Xinboda's claims. See generally Defendant–Intervenors' Response to Plaintiff's Rule 56.2 Motion for Judgment on the Agency Record at 2 (“Def.-Ints.' Response Brief”).

Jurisdiction lies under 28 U.S.C. § 1581(c) (2006).² For the reasons set forth below, Xinboda's Motion for Judgment on the Agency Record must be granted.

I. Background

Dumping occurs when goods are imported into the United States and sold at a price lower than their “normal value,” resulting in material injury (or the threat of material injury) to the U.S. industry. See19 U.S.C. §§ 1673, 1677(34), 1677b(a); see also Union Steel v. United States, 713 F.3d 1101, 1103 (Fed.Cir.2013). The difference between the normal value of the goods and the U.S. price is the “dumping margin.” See19 U.S.C. § 1677(35). When normal value is compared to the U.S. price and dumping is found, antidumping duties equal to the dumping margin are imposed to offset the dumping. See19 U.S.C. § 1673; see also Union Steel, 713 F.3d at 1103.

When the exporting country is a market economy country, normal value is typically calculated using either the price in the exporting market ( i.e., the price in the “market” where the goods are produced) or the cost of production of the goods. See19 U.S.C. § 1677b.³ However, where—as here—the exporting country has a non-market economy, there is often concern that the factors of production used to produce the goods at issue are under state control and that market data therefore may not be reliable indicators of normal value. See19 U.S.C. § 1677(18)(A). In such cases, where the subject merchandise is exported from a non-market economy country and Commerce concludes that concerns about the sufficiency or reliability of the available data do not permit the normal value of the goods to be determined in the typical manner, Commerce “determine[s] the normal value of the subject merchandise on the basis of the value of the factors of production,” ⁴ including “an amount for general expenses and profit plus the cost of containers, coverings, and other expenses.” See19 U.S.C. § 1677b(c)(1); see generally Ningbo Dafa Chem. Fiber Co. v. United States, 580 F.3d 1247, 1250–51 (Fed.Cir.2009) (briefly summarizing “factors of production” methodology).

In certain circumstances, where Commerce finds that the available information on the value of factors of production is not adequate for purposes of determining the normal value of the subject merchandise pursuant to the agency's standard surrogate “factors of production” methodology (described above), Commerce determines the surrogate value of an “intermediate input” instead. See19 U.S.C. § 1677b(c)(2). Under Commerce's so-called “intermediate input methodology,” rather than valuing the various individual “upstream” factors of production that are used to produce an intermediate input, Commerce directly values the “downstream” intermediate input itself. ⁵

The antidumping statute requires Commerce to value factors of production “based on the best available information regarding the values of such factors” in one or more appropriate surrogate market economy countries. See19 U.S.C. § 1677b(c)(1). The statute further requires that all data must, “to the extent possible,” come from market economy countries that are both (1) “at a level of economic development comparable to that of the nonmarket economy country” at issue and (2) “significant producers of comparable merchandise.” See19 U.S.C. § 1677b(c)(4). In determining which data constitute the “best available information” for purposes of calculating surrogate values, Commerce seeks data that are “publicly available, product-specific, representative of a broad market average, tax-exclusive and contemporaneous with the [period of review].” Fresh Garlic from the People's Republic of China: Preliminary Results of, Partial Rescission of, and Intent to Rescind, in Part, the 15th Antidumping Duty Administrative Review, 75 Fed.Reg. 80,458, 80,463 (Dep't Commerce Dec. 22, 2010) (“Preliminary Results”); see also Issues & Decision Memorandum at 11–12.⁶

The underlying antidumping order in this case, which dates back to 1994, covers imports of fresh garlic from the PRC, including whole garlic bulbs and peeled garlic cloves (the products exported by Xinboda). SeeAntidumping Duty Order: Fresh Garlic From the People's Republic of China, 59 Fed.Reg. 59,209, 59,209–10 (Dep't Commerce Nov. 16, 1994). This action involves the fifteenth administrative review of that antidumping order, initiated in December 2009. SeeInitiation of Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in Part, 74 Fed.Reg. 68,229, 68,230–31 (Dep't Commerce Dec. 23, 2009).⁷ The period of review is November 1, 2008 through October 31, 2009. SeeFinal Results, 76 Fed.Reg. at 37,321. Commerce selected India as the primary surrogate country for purposes of this review (as it has in prior reviews), and used data from that country to calculate the surrogate values for all factors of production, with the sole exception of labor. SeePreliminary Results, 75 Fed.Reg. at 80,462; Issues & Decision Memorandum at 12 (calculating surrogate values for whole raw garlic bulbs based on Indian data); id. at 17 (same as to water); id. at 20–21 (same as to surrogate financial ratios); id. at 28 (calculating surrogate wage rate based on data from eight countries, not including India).

In the course of the administrative review, Commerce compiled voluminous information concerning Xinboda and its operations, particularly the company's exports of whole garlic bulbs and peeled garlic cloves from the PRC. Commerce similarly compiled detailed information on Zhenzhou Dadi Garlic Industry Co., Ltd. (“Dadi”), the affiliated processor/producer that supplied Xinboda with garlic products produced from raw garlic bulbs that Dadi purchased from local Chinese farmers. See Pl.'s Brief at 8, 22; Issues & Decision Memorandum at 19 (describing Dadi as “Xinboda's supplier,” and “a non-integrated processorthat purchases its raw garlic input (rather than growing it from seed)”).⁸ Dadi processed the whole raw garlic bulbs that it purchased—which had diameters of between 50 mm and 65 mm—into whole garlic bulbs and peeled garlic cloves for Xinboda, using relatively simple procedures involving principally manual labor. See generally Pl.'s Brief at 8–9, 22–23; Def.'s Response Brief at 3.

To produce whole fresh garlic, farmers deliver whole raw garlic bulbs to Dadi in large mesh bags sorted by the size of the garlic, as specified in the particular order(s) that Xinboda needs to fill. Pl.'s Brief at 8. Workers sitting at tables in a simple warehouse then rub off the outer skins of the whole raw garlic bulbs (to give the garlic a clean white appearance), cut or trim the roots and stems, place the bulbs into small mesh begs (typically holding three to five bulbs, depending on the customer), and affix the customer's...