Coalition v. United States, Slip Op. 18–28

• Decision Date: 22 March 2018
• Docket Number: Consol. Court No. 16–00124,Slip Op. 18–28
• Citation: 301 F.Supp.3d 1326
• Parties: The DIAMOND SAWBLADES MANUFACTURERS' COALITION, et alia, Plaintiffs, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

301 F.Supp.3d 1326

The DIAMOND SAWBLADES MANUFACTURERS' COALITION, et alia, Plaintiffs,

v.UNITED STATES, Defendant.

Slip Op. 18–28

Consol. Court No. 16–00124

United States Court of International Trade.

March 22, 2018

Daniel B. Pickard, Maureen E. Thorson, and Stephanie M. Bell, Wiley, Rein & Fielding, LLP, of Washington, DC, for the plaintiff Diamond Sawblades Manufacturers' Coalition.

Gregory S. Menegaz, J. Kevin Horgan, Judith L. Holdsworth, and Alexandra H. Salzman, deKeiffer & Horgan, PLLC, of Washington, DC, for the consolidated plaintiffs Bosun Tools, Co., Ltd. and Bosun Tools Inc.

Max F. Schutzman, Andrew B. Schroth, Dharmendra N. Choudhary, and Elaine F. Wang, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of Washington, DC, for the consolidated plaintiffs Weihai Xiangguang Mechanical Industrial Co., Ltd., Ehwa Diamond Industrial Co., Ltd., and General Tool, Inc.

Lizbeth R. Levinson, Ronald L. Wisla, and Brittney R. McClain, Kutak Rock LLP, of Washington, DC, for the consolidated plaintiffs Jiangsu Fengtai Diamond Tool Manufacture Co., Ltd., Jiangsu Fengtai Tools Co., Ltd., Chengdu Huifeng Diamond Tools Co., Ltd., Danyang Huachang Diamond Tools Manufacturing Co., Ltd., Danyang NYCL Tools Manufacturing Co., Ltd., Danyang Weiwang Tools Manufacturing Co., Ltd., Guilin Tebon Superhard Material Co., Ltd., Hangzhou Deer King Industrial and Trading Co., Ltd., Hong Kong Hao Xin International Group Limited, Jiangsu Inter–China Group Corporation, Jiangsu Youhe Tool Manufacturer Co., Ltd., Orient Gain International Limited, Pantos Logistics (HK) Company Limited, Qingyuan Shangtai Diamond Tools Co., Ltd., Quanzhou Zhongzhi Diamond Tool Co., Ltd., Rizhao Hein Saw Co., Ltd., Wuhan Wanbang Laser Diamond Tools Co., and Zhejiang Wanli Tools Group Co., Ltd.

John J. Todor, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for the defendant. With him on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin E. White, Jr., Assistant Director. Of Counsel on the brief was Amanda T. Lee, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, DC.

OPINION and ORDER

Musgrave, Senior Judge:

This opinion concerns the November 1, 2013, through October 31, 2014 period of review ("POR") of the antidumping duty order on diamond sawblades ("DSBs") and parts thereof from the People's Republic of China ("PRC"). DSBs and Parts Thereof From the PRC , 81 Fed. Reg. 38673 (June 14, 2016) (" Final Results "), Public Record Document ("PDoc") 408, and accompanying issues and decision memorandum, PDoc 389 (June 9, 2016) ("IDM "); see also DSBs and Parts Thereof From the PRC , 80 Fed. Reg. 75854 (Dec. 4, 2014) (" Preliminary Results "), PDoc 352, and accompanying decision memorandum thereto ("PDM "), PDoc 333. The following instituted separate lawsuits, subsequently consolidated, to contest aspects of those results as determined by the International Trade Administration, U.S. Department of Commerce ("Department" or "Commerce"): (1) plaintiff Diamond Sawblades Manufacturers' Coalition ("DSMC"); (2) consolidated plaintiffs consisting of Weihai Xiangguang Mechanical Industrial Co., Ltd. ("WXMI", an exporter and producer of subject merchandise from the PRC), Ehwa Diamond Industrial Co., Ltd. (WXMI's Korean affiliate), and General Tool, Inc. (collectively "Weihai"); (3) consolidated plaintiffs Jiangsu Fengtai Diamond Tool Manufacture Co., Ltd. and Jiangsu Fengtai Tools Co., Ltd. (collectively¹ "Jiangsu Fengtai" or "JF", exporters and/or producers of subject merchandise); and (4) consolidated plaintiffs Bosun Tools Co., Ltd., an exporter and/or producer of subject merchandise, and Bosun Tools Inc. (collectively "Bosun").

Jurisdiction over the case is pursuant to 28 U.S.C. § 1581(c), and the standard of review thereon is to decide whether a final administrative determination is "unsupported by substantial evidence on the record, or otherwise not in accordance with law". 19 U.S.C. § 1516a(b)(1)(B)(i). The parties' separate motions for judgment, pursuant to the court's Rule 56.2, challenge these administrative determinations on the record: (1) deduction of irrecoverable value-added tax ("VAT") from Jiangsu Fengtai and Weihai's export prices, (2) surrogate valuation of nitrogen and oxygen, (3) surrogate valuation of labor, (4) calculation of surrogate truck freight, (5) treatment of graphite plates as direct material rather than factory overhead, (6) selection of financial statements for financial ratios, (7) denial of a request to rescind the review as to Weihai, (8) valuation of self-produced and purchased DSB cores in the calculation of Weihai's normal value, and (9) the margin for the separate rate respondents, as impacted by the foregoing.² The case is being remanded voluntarily, by request, and also in accordance with the following.

Discussion

I. Voluntary Remand

Commerce voluntarily requests remand of the last two issues in light of the intervening remand order issued in Diamond Sawblades Manufacturers' Coalition v. United States , 41 CIT ––––, 219 F.Supp.3d 1368 (2017). That case, which concerns the previous administrative review of DSBs from the PRC, remanded the issue of Weihai's cores' valuation methodology. See id. ; see also Diamond Sawblades Manufacturers' Coalition v. United States , 42 CIT ––––, Slip Op. 18–26, 2018 WL 1444607 (Mar. 22, 2018). The case of SKF USA, Inc. v. United States , 254 F.3d 1022, 1029 (Fed. Cir. 2001) (" SKF ") holds that the reviewing court has the discretion to grant a remand, if an agency requests it, without confessing error, in order to reconsider its previous position. DSMC supports Commerce's request for remand and "agrees that Weihai's normal value calculation and, as necessary, the margin for the non-selected separate rate companies, should be reconsidered in light of the issues raised in DSMC's opening brief and reviewed herein." DSMC Reply at 4. Weihai's response brief targets the DSMC's arguments raised in the latter's 56.2 brief, but Weihai's reply brief is silent on the remand request. Because the agency's request appears legitimate and substantial, issues (8) and (9) will therefore be, and hereby are, remanded to harmonize with Court No. 15–00164 (but, nota bene section IX infra ).

II. Deduction of Irrecoverable VAT

Jiangsu Fengtai, Weihai and Bosun challenge Commerce's determination with respect to Commerce's methodology for the deduction of "irrecoverable" VAT from the reported U.S. prices. See IDM at 14. They also challenge Commerce's specific deduction in this case.

By way of background, an antidumping duty represents the amount by which the "normal value" ("NV") of subject merchandise exceeds its United States price ("USP"), which is typically either an export price ("EP") or a constructed export price ("CEP"). 19 U.S.C. § 1673. In a market economy situation, NV is typically the price at which the foreign like product is sold or offered for sale for consumption in the exporting country. 19 U.S.C. § 1677b(a)(1)(B). When Commerce calculates USP, regardless of whether the proceeding concerns a market economy or non-market economy ("NME") situation the statute calls for deduction of "the amount, if included in such price, of any export tax, duty, or other charge imposed by the exporting country on the exportation of the subject merchandise to the United States". 19 U.S.C. § 1677a(c)(2)(B).

In applying these provisions, Commerce has sought tax neutrality when comparing NV with USP. See , e.g. , IDM at 15. It has also sought to avoid the "multiplier effect" in the determination of the margin. Explaining what "multiplier effect" means by way of example concerning a market economy, the Court of Appeals for the Federal Circuit had this to say:

Assume product A is sold in Japan for $100. The identical product is exported and sold in the U.S. for $90. The difference is $10, the amount by which the product is being dumped. Further assume a 10% VAT is imposed on the sale in Japan, but not on the export sale to the U.S. With the tax included, FMV³ is $100 + 10% = $110. The similar calculation of USP, using the tax rate, is $90 + 10% = $99. The dumping margin, FMV–USP, is $11 ($110 - 99), rather than the $10 which is the actual amount of dumping. This mathematical peculiarity is known as the "multiplier effect."

Federal–Mogul Corp. v. United States , 63 F.3d 1572, 1576 (Fed. Cir. 1995).

The case clarified that while Congress had specifically rejected a proposed tax neutral approach to the problem, the most that can be inferred from the statute as it came into being at that time is that Congress neither mandated nor precluded a tax-neutral approach to the administration of section 1677a. See id. at 1579–80. The Federal Circuit also noted that the easiest way to achieve tax neutrality would be to subtract the VAT from the price actually paid in the home market, which had been Commerce's approach to the problem in a number of cases prior to implementation of the URAA. See id. at 1576, referencing Zenith Electronics Corp. v. United States , 10 CIT 268, 273 and n.8, 633 F.Supp. 1382, 1386 and n.8 (1986).

Two points are noteable. For one, the problem Commerce had considered in Federal–Mogul , to repeat, was in the context of a market economy's VAT. But in a non-market economy ("NME") situation, Commerce must normally resort to determining NV on the basis of the factors of production ("FOPs") for subject merchandise. 19 U.S.C. § 1677b(c). Stated differently, the NV price in the NME home market is suspect. Weihai also emphasizes here that Commerce's historical position had been that 19 U.S.C. § 1677a(c)(2)(B) does not apply in NME cases because no reliable way existed to determine whether or not an export tax had been included in the price of a product from an NME. Either consideration leads to the second point: when comparing NV to USP,...