Beijing Tianhai Indus. Co. v. United States

• Decision Date: 09 September 2014
• Docket Number: Court No. 12–00203.,Slip Op. 14–104.
• Parties: BEIJING TIANHAI INDUS. CO., LTD., Plaintiff, v. UNITED STATES, Defendant, Norris Cylinder Company, Defendant–Intervenor.
• Court: U.S. Court of International Trade

7 F.Supp.3d 1318

BEIJING TIANHAI INDUS. CO., LTD., Plaintiff

v. UNITED STATES, DefendantNorris Cylinder Company, Defendant–Intervenor.

Slip Op. 14–104.

Court No. 12–00203.

United States Court of International Trade.

Sept. 9, 2014.

Mark E. Pardo and Andrew T. Schutz, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of Washington, D.C., argued for plaintiff. With them on the brief was Brandon M. Petelin.

Douglas G. Edelschick, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, D.C., argued for defendant. With him 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 Deborah R. King, Senior Counsel, Office of the Chief Counsel for Import Administration, United States Department of Commerce, of Washington, D.C.

Edward M. Lebow and Nora L. Whitehead, Haynes and Boone, LLP, of Washington, D.C., argued for defendant-intervenor.

OPINION and ORDER

EATON, Judge:

Before the court is plaintiff Beijing Tianhai Indus. Co., Ltd.'s (“Tianhai” or “plaintiff”) USCIT Rule 56.2 Motion for Judgment on the Agency Record challenging the United States Department of Commerce's (“Commerce” or “the Department”) Final Determination published as High Pressure Steel Cylinders From the People's Republic of China, 77 Fed.Reg. 26,739 (May 7, 2012) (final determination of sales at less than fair value), and accompanying Issues and Decision Memorandum (“Issues & Dec. Mem.”) (collectively, “Final Determination”), and the resulting order published as High Pressure Steel Cylinders From the People's Republic of China, 77 Fed.Reg. 37,377 (June 21, 2012) (antidumping duty order) (the “Order”). Resp'ts' Mot. for J. on the Agency R. Pursuant to Rule 56.2 (ECF Dkt. No. 32).

In the Final Determination, Commerce found that plaintiff had engaged in “targeted dumping” and, therefore, that it was permitted to apply an alternate methodology to calculate plaintiff's dumping margin. Issues & Dec. Mem. at cmt. 4. In making that finding, the Department determined that plaintiff had engaged in a pattern of sales under 19 U.S.C. § 1677f–1(d) (2006) which operated to mask sales at less than fair value made during the October 1, 2010 through December 31, 2010 period (the alleged period of targeted dumping). Plaintiff objects that (1) the methodology used by the Department to find that Tianhai engaged in a “pattern” of targeted dumping is contrary to 19 U.S.C. § 1677f–1(d)(1) and unsupported by substantial evidence; (2) in any case, the Department should have limited the application of its targeted dumping remedy to only those sales that it identified as having been made during the targeted time period; (3) the Department should have considered other valid commercial reasons for the alleged pattern of targeted dumping; and (4) the Department improperly used its zeroing¹ methodology to calculate plaintiff's rate after making its finding of targeted dumping. Pl.'s Mem. of Law in Supp. of Mot. for J. on the Agency R. Pursuant to Rule 56.21 –2 (ECF Dkt. No. 32) (“Pl.'s Br.”).

For the reasons set forth below, plaintiff's motion is granted, in part, and defendant's Final Determination is remanded.

BACKGROUND

In 2011, in response to a petition filed by defendant-intervenor Norris Cylinder Company (“Norris” or “defendant-intervenor”) alleging targeted dumping, the Department initiated an antidumping duty investigation of high pressure steel cylinders from the People's Republic of China (“PRC”) and selected plaintiff as a mandatory respondent. High Pressure Steel Cylinders from the PRC, 76 Fed.Reg. 33,213 (Dep't of Commerce June 8, 2011) (initiation of antidumping duty investigation); Issues & Dec. Mem. The period of investigation (“POI”) was October 1, 2010 through March 31, 2011, and the alleged period of targeted dumping was October 1, 2010 through December 31, 2010. Issues & Dec. Mem.

The Department issued its Preliminary Determination of sales at less than fair value on December 15, 2011, finding that plaintiff had engaged in targeted dumping during the October 1, 2010 through December 31, 2010 period. High Pressure Steel Cylinders from the PRC, 76 Fed.Reg. 77,964 (Dep't of Commerce Dec. 15, 2011) (preliminary determination of sales at less than fair value) (“Preliminary Determination”). In doing so, the Department used the targeted dumping test that has come to be known as the Nails test.² That “methodology ... involves a two-stage test; the first stage addresses the pattern requirement [of 19 U.S.C. § 1677f–1(d)(1)(B)(i) (2006) ] and the second stage addresses the significant-difference requirement” of that statutory provision. Preliminary Determination, 76 Fed.Reg. at 77,968. In applying the test, the Department determined that there was “a pattern of prices for comparable merchandise that differs significantly by time period (i.e., targeted dumping).” Preliminary Determination, 76 Fed.Reg. at 77,968.

To calculate plaintiff's antidumping duty rate, the Department used the average-to-transaction (“A–T”) methodology³ because it found that its normally used average-to-average (“A–A”) methodology⁴ could not properly account for the alleged targeted dumping. Preliminary Determination, 76 Fed.Reg. at 77,968. To calculate Tianhai's dumping margin, the Department applied the A–T methodology, with zeroing, to all of plaintiff's U.S. sales during the POI, not only to those sales that the Department found to be “targeted” using the Nails test. Preliminary Determination, 76 Fed.Reg. at 77,968.

In the Final Determination, the Department continued to use the Nails test to find that there was a pattern of sales that differed significantly by time period.⁵ It again insisted that the differences could not be taken into account using the “A–A methodology because the A–to–A methodology conceals differences in price patterns between the targeted and non-targeted groups by averaging low-priced sales to the targeted group with high-priced sales to the non-targeted group.”Final Determination, 77 Fed.Reg. at 26,740 ; Issues & Dec. Mem. at cmt. 4. In using the A–to–T methodology, the Department continued to apply its zeroing methodology to all of plaintiff's U.S. sales. Final Determination, 77 Fed.Reg. at 26,740 ; Issues & Dec. Mem. at cmt. 4. This action challenging the Final Determination followed.

STANDARD OF REVIEW

“The court shall hold unlawful any determination, finding, or conclusion found ... to be unsupported by substantial evidence on the record, or otherwise not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i) (2006).

DISCUSSION

I. Legal Framework

A. Statutory Framework

During an antidumping investigation, the Department ordinarily determines whether dumping has occurred by using one of the two methodologies identified in 19 U.S.C. § 1677f–1(d)(1)(A). The general rule is that, when determining an exporter's dumping margin, the Department should compare the weighted average normal value of an exporter's merchandise to the average of the exporter's export prices (or constructed export prices) during the POI. If the difference between the weighted average normal value of an exporter's merchandise and the average of an exporter's export prices is a positive number, then dumping is present. Thus, 19 U.S.C. § 1677f–1(d)(1)(A)(i) provides for an average-to-average comparison of an exporter's transactions, a methodology known as A–A. 19 U.S.C. § 1677f–1(d)(1)(A)(ii) also permits the Department to determine an exporter's margin “by comparing the normal values of individual transactions to the export prices ... of individual transactions for comparable merchandise” (“T–T”), but the Department's regulations limit the use of this methodology. See 19 C.F.R. § 351.414(c)(2) (2012) (“The Secretary [of Commerce] will use the transaction-to-transaction method only in unusual situations, such as when there are very few sales of subject merchandise and the merchandise sold in each market is identical or very similar or is custom-made.”).

In enacting the statute, however, Congress recognized that there might be situations where the general “methodology cannot account for a pattern of prices that differ significantly among purchaser, regions, or time periods, i.e., where targeted dumping may be occurring.” Uruguay Round Agreements Act, Statement of Administrative Action, H.R. Doc. No. . 103–316, vol. 1, at 843 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4178 (“SAA”). Congress anticipated that the patterns of sales might be identifiable on the basis of “purchasers, regions, or time periods.”⁶ SAA, H.R. Doc. No. 103–316, vol. 1, at 843, reprinted in 1994 U.S.C.C.A.N. at 4178. Accordingly, the statute provides that the Department

may determine whether the subject merchandise is being sold in the United States at less than fair value by comparing the weighted average of the normal values to the export prices (or constructed export prices) of individual transactions for comparable merchandise, if—(i) there is a pattern of export prices (or constructed export prices) for comparable merchandise that differ significantly among purchasers, regions, or periods of time, and (ii) the administering authority explains why such differences cannot be taken into account

using A–A or T–T. 19 U.S.C. § 1677f–1(d)(1)(B) (2006) ; SAA, H.R. Doc. No. . 103–316, vol. 1, at 843, reprinted in 1994 U.S.C.C.A.N. at 4178 (“Before relying on this methodology, however, Commerce must establish and provide an explanation why it cannot account for such differences through the use of [A–A] or [T–T]”). Thus, the statute requires that the Department (1) identify a pattern of pricing that differs significantly among purchasers, and (2) explain what about that particular pattern makes the use of A–A or T–T inappropriate. If the Department finds that 19 U.S.C. § 1677f–1(d)(1)(B)(i) and 19 U.S.C. § 1677f–1(d)(1)(B)(ii) are satisfied, it may compare the weighted

...