Juancheng Kangtai Chemical Co. Ltd. v. United States, 082115 USCIT, 14-00056

Docket Nº:14-00056
Opinion Judge:R. Kenton Musgrave, Senior Judge
Party Name:JUANCHENG KANGTAI CHEMICAL CO., LTD., Plaintiff, v. UNITED STATES, Defendant, ARCH CHEMICALS, INC., a LONZA COMPANY, ARCH CHEMICALS (CHINA) CO., LTD., AND HEBEI JIHENG CHEMICAL CO., LTD., Consolidated Plaintiffs, and CLEARON CORP, OCCIDENTAL CHEMICAL CORPORATION, Defendant-Intervenors. Slip Op. 15 - 93
Attorney:Gregory S. Menegaz, J. Kevin Horgan, and John J. Kenkel, deKieffer & Horgan, PLLC, of Washington DC, for the plaintiff. Peggy A. Clarke, Law Offices of Peggy A. Clarke, of Washington DC, for the consolidated plaintiffs. Jane C. Dempsey, Trial Attorney, Commercial Litigation Branch, Civil Division...
Case Date:August 21, 2015
Court:Court of Appeals of International Trade
 
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JUANCHENG KANGTAI CHEMICAL CO., LTD., Plaintiff,

ARCH CHEMICALS, INC., a LONZA COMPANY, ARCH CHEMICALS (CHINA) CO., LTD., AND HEBEI JIHENG CHEMICAL CO., LTD., Consolidated Plaintiffs,

v.

UNITED STATES, Defendant,

and

CLEARON CORP, OCCIDENTAL CHEMICAL CORPORATION, Defendant-Intervenors.

No. 14-00056

Slip Op. 15 - 93

Court of Appeals of International Trade

August 21, 2015

Remanding seventh (2011-2012) administrative review of chlorinated isocyanurates from the People's Republic of China for further proceedings.

Gregory S. Menegaz, J. Kevin Horgan, and John J. Kenkel, deKieffer & Horgan, PLLC, of Washington DC, for the plaintiff.

Peggy A. Clarke, Law Offices of Peggy A. Clarke, of Washington DC, for the consolidated plaintiffs.

Jane C. Dempsey, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington DC, for the defendant. On the brief were Joyce R. Branda, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director. Of Counsel was David Richardson, Senior Attorney, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce.

James R. Cannon, Jr., Vanessa P. Sciarra, and Ulrika K. Swanson, Cassidy Levy Kent (USA) LLP, of Washington DC, for the defendant-intervenors.

OPINION

R. Kenton Musgrave, Senior Judge

This opinion addresses consolidated challenges to aspects of Chlorinated Isocyanurates From the People's Republic of China ("PRC"), 79 Fed. Reg. 4875 (Jan. 30, 2014), and accompanying issues and decision memorandum (Jan. 23, 2014) ("IDM"), Public Record Document ("PDoc") 200, (together, "Final Results"). The proceeding is the seventh administrative review of the antidumping duty ("AD") order on chlorinated isocyanurates ("chlor-isos")1 from the PRC conducted by the International Trade Administration of the U.S. Department of Commerce ("Commerce"). The period of review is June 1, 2011, through May 31, 2012, and the administrative analysis embodied in the IDM sets forth Commerce's determinations regarding the plaintiff Juancheng Kangtai Chemical Co., Ltd. ("Kangtai") and the consolidated plaintiffs Hebei Jiheng Chemical Co., Ltd. ("Jiheng") and Arch Chemicals (China) Co., Ltd. (together, "Arch"), all producers and/or exporters of the subject merchandise from the PRC and respondents in the administrative review.

Kangtai and Arch have filed separate motions for summary judgment on the agency record pursuant to USCIT Rule 56.2. Each separately or together challenges: the selection of the Philippines as the primary surrogate country for valuing factors of production over those for (A) India and (B) Thailand; (C) the use of the financial statement from the Philippine company Mabuhay Vinyl Corporation ("MVC") to calculate the surrogate financial ratios; (D) the determination to treat retirement and employee benefits as selling, general and administrative ("SG&A") expenses rather than labor expenses and not to adjust the surrogate financial ratios for retirement benefits for International Labor Organization (ILO) Chapter 6A data; the valuation of (E) chlorine, (F) ammonium chloride, (G) sodium hydroxide, (H) electricity, and (I) steam; (J) treatment of Kangtai's and Arch's by-product adjustment claims regarding ammonium sulfate; and finally (K) the deduction of 8% from net U.S. price for the PRC's value added tax ("VAT") that is not actually, plaintiffs contend, collected upon export, concerning which issue Commerce has requested voluntary remand, which Kangtai and Arch oppose without the court first deciding the issue of law upon which the adjustment is predicated.

For the reasons below, remand is ordered as follows.

I. Background

Commerce initiated the seventh administrative review of the antidumping duty order covering chlor-isos from the PRC in July 2012. Initiation of Antidumping and Countervailing Duty Administrative Reviews, Requests for Revocations in Part, 77 Fed. Reg. 45338 (July 31, 2012). Selecting Kangtai and Jiheng as mandatory respondents, Commerce sent questionnaires to those companies. Respondent Selection Memoranda, PDoc 29 (Sep. 17, 2012); Commerce Questionnaire, PDocs 30 & 31 (Sep. 19, 2012) . Commerce's Office of Policy's list of potential surrogate countries was provided to the parties on or around February 7, 2013:

Country

2009 (US$)

PRC

4, 940

Philippines

2, 210

Indonesia

2, 940

Thailand

4, 420

Columbia

6, 110

South Africa

6, 960

Costa Rica

7, 660

Letter from Commerce re Surrogate Country Memorandum, PDoc 80 (Feb. 7, 2013) ("OP List"). Commerce published its preliminary review results in July 2013. Chlor-Isos From the PRC, 78 Fed. Reg. 41364 (July 10, 2013) (prelim. admin. review) ("Preliminary Results"). Interested parties submitted administrative case briefs in November 2013, PDocs 180-84 & 186, and the parties submitted administrative rebuttal briefs in December 2013. PDocs 187, 190, 192. Commerce issued the Final Results in January 2014.

II. Jurisdiction and Standard of Review

The action is brought pursuant to Section 516A(a)(2)(B)(iii) of the Tariff Act of 1930, as amended, 19 U.S.C. §1516a(a)(2)(B)(iii). Kangtai and Arch have standing under 19 U.S.C. §1516a(d) and 28 U.S.C. §2631(c).

The party challenging a final administrative determination of the type at bar is burdened with showing how it is "unsupported by substantial evidence on the record" or is not "otherwise in accordance with law." 19 U.S.C. §1516a(b)(1)(B)(i). See, e.g., NSK Ltd. v. United States, 481 F.3d 1355, 1359 (Fed. Cir. 2007), citing 19 U.S.C. §1516a(b)(1)(B)(i)); see also United States v. Eurodif S.A., 555 U.S. 305, 316 n.6 (2009). Substantial evidence means "more than a mere scintilla", it must be "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Universal Camera Corp. v. NLRB, 340 U.S. 474, 477 (1951) ("Universal Camera"), citing Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938). Commerce's statutory interpretations are considered pursuant to the familiar two-step analysis set forth in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984) (if "Congress has directly spoken to the precise question at issue . . ." et cetera) ("Chevron").

III. Discussion

A. Primary Surrogate Country Selection; India's Non-consideration

1. Further Background

Commerce generally calculates the normal value ("NV") of subject merchandise from a non-market economy ("NME") country based on the "best available information" from an appropriate market economy country "or countries" for valuing the factors of production, or "FOPs"2, used to manufacture the merchandise.3 19 U.S.C. §1677b(c)(1). In that valuation, Commerce is required to utilize, to the extent possible, the prices or costs of FOPs in one or more market economy countries that are "at a level" of economic development comparable to that of the nonmarket economy country as well as "significant producers" of comparable merchandise. 19 U.S.C. §1677b(c)(4).

Commerce considers the statute ambiguous as to the meaning of the terms employed. In providing that it may be necessary to derive the "best available information" for the valuation of FOPs from "one or more" such countries, Commerce construes this as congressional indifference on whether FOPs are valued from a single market economy country as opposed to multiple countries, and therefore Commerce interprets the statute to permit valuation of FOPs based on the following hierarchy:

(1) prices paid by the NME manufacturer for items imported from a market economy;

(2) prices in the primary surrogate country of domestically produced or imported materials;

(3) prices in one or more secondary surrogate countries reported by the industry producing subject merchandise in the secondary country or countries; and

(4) prices in one or more secondary surrogate countries from sources other than the industry producing the subject merchandise.

E.g., Sparklers From the PRC, 56 Fed. Reg. 20588, 20590 (May 6, 1991) (final less than fair value ("LTFV") determination). "This ranking of data sources reflects the Department's desire to use to the greatest extent possible factor prices in a single surrogate country." Id. Cf. 19 C.F.R. §351.408(c)(2) (except for labor Commerce "normally" will value all factors in a single surrogate country).

There is nothing inherently unreasonable in desiring, foremost, to value all FOPs from a single country, and Commerce's interpretation is entitled to deference in proportion to its reasonableness. Commerce's interpretation has evolved from practice. In proposing codification thereof, see 19 C.F.R. §351.408(c), Commerce received no comments on the issue of surrogate country selection. See Antidumping Duties; Countervailing Duties, 62 Fed. Reg. 27296, 27365 (May 19, 1997). Commerce explained that valuing all FOPs from a single source country attempts to curtail "margin shopping, " i.e., combining input prices from different surrogates to achieve the highest or lowest valuations of inputs. Antidumping Duties; Countervailing Duties, 61 Fed. Reg. 7308, 7345 (Feb. 27, 1996) (proposed rules).

It also encountered, to the contrary, "situations in which the accuracy of available information regarding prices for particular factors in the surrogate country is highly questionable" whereby it is "appropriate to reject the questionable values and use data from a second country." Id. Commerce did not explain why, in such a situation, a country with "highly questionable" data should even be considered in the selection of a "primary" surrogate in the first place, but be that as it may, there...

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