Advanced Tech. & Materials Co. v. United States

• Decision Date: 30 November 2012
• Citation: 885 F.Supp.2d 1343
• Parties: ADVANCED TECHNOLOGY & MATERIALS CO., LTD., Beijing Gang Yan Diamond Products Company, and Gang Yan Diamond Products, Inc., Plaintiffs, Bosun Tools Group Co. Ltd., Plaintiff–Intervenor, v. UNITED STATES, Defendant, and Diamond Sawblades Manufacturers Coalition, Weihai Xiangguang Mechanical Industrial Co., Ltd., and Qingdao Shinhan Diamond Industrial. Co., Ltd., Defendant–Intervenors.
• Court: U.S. Court of International Trade

885 F.Supp.2d 1343

ADVANCED TECHNOLOGY & MATERIALS CO., LTD., Beijing Gang Yan Diamond Products Company, and Gang Yan Diamond Products, Inc., Plaintiffs,

Bosun Tools Group Co. Ltd., Plaintiff–Intervenor,

v.UNITED STATES, Defendant,andDiamond Sawblades Manufacturers Coalition, Weihai Xiangguang Mechanical Industrial Co., Ltd., and Qingdao Shinhan Diamond Industrial. Co., Ltd., Defendant–Intervenors.

United States Court of

International Trade.

Slip Op. 12–147.

Court No. 09–00511.

Nov. 30, 2012.

Jeffery S. Neeley, Michael S. Holton and Stephen W. Brophy, Barnes, Richardson & Colburn, of Washington DC, for the plaintiffs.

Delisa M. Sanchez, Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington DC, for the defendant. With her on the brief were Stuart F. Delery, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin E. White, Jr., Assistant Director. Of Counsel on the brief was Nathaniel J. Halvorson, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce.

Daniel B. Pickard and Maureen E. Thorson, Wiley Rein, LLP, of Washington DC, for defendant-intervenor Diamond Sawblades Manufacturers Coalition.

OPINION

MUSGRAVE, Senior Judge:

This opinion considers the results of remand from the U.S. Department of Commerce, International Trade Administration (“Commerce” or “Department”) on the investigation into sales from the People's Republic of China (“PRC”) of diamond sawblades and parts thereof at less than fair value (“LTFV”).¹SeeSlip Op. 11–122 (Oct. 12, 2011), familiarity with which is presumed. The petitioners, Diamond Sawblades Manufacturers Coalition (“DSMC”), argue for further remand while the defendant and the three respondents comprising the “AT & M entity,” Advanced Technology & Materials, Co., Ltd. (“AT & M”), Beijing Gang Yan Diamond Products Company (“BGY”) and Gang Yan Diamond Products, Inc., argue for sustenance.

The standard of review requires “substantial” evidence on the record, 19 U.S.C. § 1516a(b)(1)(B)(i), which assesses the reasonableness of the agency's determination. E.g., U.S. Steel Corp. v. United States, 621 F.3d 1351, 1357 (Fed.Cir.2010), citing Universal Camera Corp. v. NLRB, 340 U.S. 474, 477, 71 S.Ct. 456, 95 L.Ed. 456 (1951). See Charles H. Koch, Jr., 3 Admin. L. & Prac. § 9:24 (3d ed.) (the standard requires the “court to assure that there is a relatively high probability that the agency is correct”). A determination “of less than ideal clarity” may be sustained “if the agency's path may reasonably be discerned,” but the determination is examined on that basis. Bowman Transp. Inc. v. Arkansas–Best Freight System, Inc., 419 U.S. 281, 286, 95 S.Ct. 438, 42 L.Ed.2d 447 (1974). In other words, it will not be sustained upon a “reasoned basis for the agency's action that the agency itself has not given[.]” Id. at 285–86, 95 S.Ct. 438, referencing SEC v. Chenery Corp., 332 U.S. 194, 196, 67 S.Ct. 1575, 91 L.Ed. 1995 (1947). As explained below, the remand results will be remanded for further analysis.

“ Separate Rate” Analysis of the AT & M Entity

I. Background

Previously discussed, Commerce employs a rebuttable presumption of governmental control over export operations in antidumping duty proceedings involving non-market economy (“NME”) participants. See, e.g., Bicycles from the People's Republic of China, 61 Fed.Reg. 19026 (Apr. 30, 1996) (final LTFV determination). To obtain a “separate” antidumping duty rate, a respondent must demonstrate that its export operations meet the three de jure and four de facto factors comprising the separate rate test announced in Sparklers from the People's Republic of China, 56 Fed.Reg. 20588 (May 6, 1991) (final LTFV determination), as modified by Silicon Carbide From the People's Republic of China, 59 Fed.Reg. 22585 (May 2, 1994) (final LTFV determination) (“ Silicon Carbide ”). See Import Administration Policy Bulletin 05.1 (Apr. 5, 2005). The de jure factors are (1) an absence of restrictive stipulations associated with an individual exporter's business and export licenses, (2) any legislative enactments decentralizing control of companies, and (3) other formal measures by the government decentralizing control of companies. The de facto factors typically considered are (1) the ability to set export prices independently of the government and without the approval of a government authority, (2) the authority to negotiate and sign contracts and other agreements, (3) the possession of autonomy from the government regarding the “selection” of management, and (4) the ability to retain the proceeds from sales and make independent decisions regarding the disposition of profits or financing of losses.

In answer to the question of how BGY sets its export prices, for the preliminary determination Commerce outlined that BGY certified in its August 25, 2005 questionnaire response that those prices are neither set by nor subject to the approval of a government agency, and that BGY had provided emails between its general manager and unaffiliated U.S. customers regarding price negotiation on U.S. sales as well as documents “demonstrating independent negotiation of contracts for purchases of raw materials” in addition to “documentation that both BGY and AT & M select their own management and boards of directors[.]” Diamond Sawblades and Parts Thereof from the People's Republic of China, 70 Fed.Reg. 77121, 77127 (Dec. 29, 2005) ( inter alia, preliminary LTFV determination). The petitioners DSMC challenged this, arguing that the AT & M entity, through shareholding, is controlled by the Central Iron and Steel Research Institute (“CISRI”), which is owned by one of the PRC's state-owned assets supervision and administration commissions (“SASAC”). Nevertheless, Commerce preliminarily granted a separate rate because, “[a]lthough Petitioner has stated that SASAC has the authority to hire and fire management and order asset sales and acquisitions at CISRI, it has provided no evidence on the record of this proceeding that SASAC had the ability to exercise such control over AT & M and BGY during the POI.” Id.

For the final determination, the DSMC (re)iterated that Commerce's finding was contrary to “Decree of the State Council of the People's Republic of China No. 378: Interim Regulations on Supervision and Management of State-owned Assets of Enterprises (2003)” (“Interim Regulations” or “IR”), the PRC law governing state-owned enterprises, which DSMC contended de jure undermined BGY's independence under the Company Law. Commerce's essential response was that it “has consistently found an absence of de jure control when a company's operations were governed by the Company Law of the PRC, and when it supplied business licenses and export licenses, each of which have been found to demonstrate an absence of restrictive stipulations and decentralization of control of the company.” Issues and Decision Memorandum for the Final Determination, 71 ITADOC 29303 (May 15, 2006) (I & D Memo) (Comment 16). Further explanation followed:

The information submitted by Petitioner addresses a theoretical control by SASAC over CISRI, rather than any control of the PRC [G]overnment at any level over the numerous individual export decisions of the AT & M single entity that took place during the POI. BGY placed numerous documents on the record that were examined for the Preliminary Determination....

* * *

... With respect to Petitioner's argument that the Department found at verification that four members of AT & M's board of directors are PRC [G]overnment officials, the Department notes that this is a misreading of the report which states merely that four members of AT & M's board were representatives of CISRI. See BGY Verification Report, at 9. Further, we note that these four individuals are a minority on the board of directors, of which two other members are representatives of AT & M, and three additional members are independently appointed by the stock exchange committee. See id.

Id., referencing 70 Fed.Reg. at 77126.

As part of this consolidated action, the DSMC's challenge to that determination was remanded to Commerce for clarification of the separate rate test in general and explanation of why Commerce essentially considered irrelevant the shareholder control over the AT & M entity that appeared traceable to the PRC Government, as argued by the DSMC.

II. Summary of Remand Results

On remand, Commerce continues to conclude that the government-owned status of AT & M's majority shareholder, CISRI, does not affect determining that the AT & M entity is eligible for a separate rate, and it offers three broad reasons therefor. First, Commerce declares CISRI free of PRC control in its own right, de jure, by virtue of its corporate form, an “owned by all the people” company, ² of the type Commerce has previously declared “insulated” from governmental control and to which state control has been “devolved,” and therefore CISRI cannot “pass on” any governmental control to the AT & M entity through shareholding.

Second, Commerce finds the existence of legal “barriers” between PRC companies and their majority shareholders, such that even if CISRI is AT & M's majority shareholder, the AT & M entity is also free, de jure, of government control in its own right. The legal matter relied upon for this conclusion includes AT & M's articles of association, the “Company Law of the People's Republic of China (1999 Amended)” (“Company Law” or “CL”) and the “Code of Governance for Listed Companies.” Commerce notes the latter are among the PRC laws it has previously accepted as evidence of the “absence” of de jure governmental control over a company's export operations. Commerce acknowledges that AT & M's board of directors is responsible for selecting the general management including management over export operations and that only shareholders owning a certain minimum percentage of shares ( i.e., CISRI) are permitted to...