Heze Huayi Chemical Co., Ltd. v. United States, 052218 USCIT, 17-00032

• Opinion Judge: R. Kenton Musgrave, Senior Judge.
• Party Name: HEZE HUAYI CHEMICAL CO., LTD. and JUANCHENG KANGTAI CHEMICAL CO., LTD., Plaintiff, v. UNITED STATES, Defendant, and BIO-LAB, INC., CLEARON CORP., and OCCIDENTAL CHEMICAL CORP., Defendant-Intervenors.
• Attorney: Gregory S. Menegaz, J. Kevin Horgan, Judith L. Holdsworth, and Alexandra H. Salzman, deKieffer & Horgan, PLLC, of Washington, DC, for the plaintiffs. Sonia M. Orfield, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for the defendant. O...
• Judge Panel: Before: R. Kenton Musgrave, Senior Judge.
• Case Date: May 22, 2018
• Court: Court of International Trade

HEZE HUAYI CHEMICAL CO., LTD. and JUANCHENG KANGTAI CHEMICAL CO., LTD., Plaintiff,

v.

UNITED STATES, Defendant,

and

BIO-LAB, INC., CLEARON CORP., and OCCIDENTAL CHEMICAL CORP., Defendant-Intervenors.

No. 17-00032

Slip Op. 18 - 57

Court of Appeals of International Trade

May 22, 2018

Denying motion for judgment on 2014-2015 administrative review of chlorinated isocyanurates from the People's Republic of China.

Gregory S. Menegaz, J. Kevin Horgan, Judith L. Holdsworth, and Alexandra H. Salzman, deKieffer & Horgan, PLLC, of Washington, DC, for the plaintiffs.

Sonia M. Orfield, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for the defendant. On the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director. Of Counsel was Catherine Miller, Attorney, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce.

James R. Cannon, Jr. and Nina R. Tandon, Cassidy Levy Kent (USA) LLP, of Washington, DC, for the defendant-intervenors.

Before: R. Kenton Musgrave, Senior Judge.

OPINION

R. Kenton Musgrave, Senior Judge.

The plaintiffs Heze Huayi Chemical Co., Ltd. ("Heze") and Juancheng Kangtai Chemical Co., Ltd. ("Kangtai"), producers and/or exporters of subject merchandise, initiated this challenge to the 2014-2015 administrative review ("POR") of the antidumping duty ("AD") order on chlorinated isocyanurates ("chlorisos") from the People's Republic of China ("PRC"). See Chlorinated Isocyanurates from the PRC, 82 Fed. Reg. 4852 (Jan. 17, 2017) (final results of 2014-2015 antidumping duty admin. review) ("Final Results"), PDoc 177, and accompanying Issues and Decision Memorandum ("IDM"), PDoc 171; see also Initiation of Antidumping and Countervailing Duty Administrative Reviews, 80 Fed. Reg. 45947 (Aug. 3, 2015). On the record compiled by the International Trade Administration, U.S. Department of Commerce ("Commerce" or "Department"), the plaintiffs invoke the court's jurisdiction under 19 U.S.C. §1516a(a)(2)(A)(i)(I) and (B)(iii), see 28 U.S.C. §1581(c), and move for judgment pursuant to USCIT Rule 56.2. Their claim is that the agency erred in choosing Mexico as the surrogate country upon which to value the factors of production ("FOPs") for subject merchandise and in choosing surrogate financial statements to base financial ratios. The defendant and defendant-intervenors¹argue for dismissal. The court agrees with the defendants, in view of the following.

Background

Commerce typically calculates the normal value ("NV") of subject merchandise from non-market economy "(NME") producers/exporters using surrogate values ("SVs") offered "in a market economy country or countries considered to be appropriate by" Commerce. 19 U.S.C. §1677b(c)(1). Under that scenario, Commerce must utilize, to the extent possible, the prices or costs of factors of production ("FOPs") in one or more market economies countries that are (a) "at a level of economic development comparable to that of the [NME] country" and (b) "significant producers of comparable merchandise." 19 U.S.C. § 1677b(c)(4).

The statute does not signal what constitutes a "comparable" level of economic development, "comparable" merchandise, or the meaning of "significant". See 19 U.S.C. §1677b(c)(4)(B). Pursuant to its reading of the statute, Commerce has avoided developing regulatory definitions thereof, cf. 19 C.F.R. §§351.102 & 351.408, but for the first of the statutory requirements its Office of Policy ("OP") produces a short list of market economy countries at a level of economic development "comparable" to the NME country (the PRC in this instance) in terms of per capita gross national income ("GNI") based on World Development Report data compiled by the World Bank² that is then disseminated to the parties for comment. E.g., Memorandum to Interested Parties re: Request for Economic Development, Surrogate Country and SV Comments and Information (Aug. 14, 2015), PDoc 8 ("OP List").

Commerce's practice entails selecting the appropriate surrogate country based on the availability and reliability of surrogate values ("SVs") data for that country. In accordance with 19 U.S.C. § 1677(c)(1) and the "best available information" for valuing FOPs, Commerce's practice is to select, to the extent practicable, SVs that are product-specific, representative of a broad market average, publicly available, tax exclusive, and contemporaneous with the period of review. There is no hierarchy for applying the SV selection criteria; rather, Commerce must weigh available information with respect to each input value and make a product-specific and case-specific decision as to what is the "best" SV for each input. See,

e.g., Jiangsu Jiasheng Photovoltaic Tech. Co., Ltd. v. United States, 38 CIT,, 28 F.Supp.3d 1317, 1336 (2014) (upholding Commerce's practice to "carefully consider the available evidence in light of the particular facts of each industry when undertaking its analysis of valuing the FOPs on a case-by-case basis"). For that process, the statute affords administrative discretion to examine various data sources for determining the best available information. See 19 U.S.C. § 1677(c); see also Nation Ford Chem. Co. v. United States, 166 F.3d 1373, 1377 (Fed. Cir. 1999).

Commerce considers all countries on the OP List to be at the same level of economic development as the PRC and does not use GNI alone as the basis for its selection. It purports to evaluate which of these countries is a significant producer of comparable merchandise in addition to considering which countries have reliable data. E.g., Defendant's Response to Plaintiffs' Motion for Judgment Upon the Agency Record ("Def's Resp.") at 10. For guidance on defining comparable merchandise, Commerce will look to other sources such as its Policy Bulletin 04.1, NME Surrogate Country Selection Process (Mar. 1, 2004) ("Policy Bulletin").

For this AD review segment, OP listed Bulgaria, Ecuador, Mexico, Romania, South Africa, and Thailand as countries at the same level of economic development as the PRC based on 2014 per capita GNI. Commenting thereon, the respondents (plaintiffs hereat) provided Thai surrogate values but argued that Thailand did not have a usable import value for chlorine and that Commerce should follow its practice from the previous review of using the largest importer of chlorine among the listed economically comparable countries, which in this review was Mexico. Letter from Heze and Kangtai re: SVs for the Preliminary Results (Dec. 17, 2015) ("Resps' SV Submission"), PDocs 60-70. See PDoc 60 at 2. The petitioners (intervenor-defendants hereat) argued Mexico or Romania were appropriate as primary surrogates because those countries have actual production of comparable merchandise as well as import values for the most major inputs used in chlor-isos production, and also because the financial statements of Mexican and Romanian companies have not previously encountered the documented difficulty in their usage as those of Thai companies. Letter from Petitioners re: SV Data (Dec. 17, 2015) ("Pets' SV Submission"), PDocs 71-82. See PDoc 71 at 2 n.2.

The respondents then submitted rebuttal to the petitioners' comments and also filed final SVs and comments for the preliminary results. Letter from Heze and Kangtai re: Certain Chlor-Isos from the PRC Rebuttal SVs for the Preliminary Results (Jan. 11, 2016) ("Resps' SV Rebuttal Submission"), CDoc73, PDocs 87-89, 95; Letter from Kangtai and Heze re: Certain Chlor-Isos from the PRC, Final SV Submission and Pre-Preliminary Comments (June 6, 2016) ("Resps' Final SV Submission"), CDoc 155, PDocs 124-28. In those submissions the respondents argued Mexico is neither a significant producer nor a net exporter of comparable merchandise and therefore Commerce should select as the primary surrogate country either Thailand, because it has the highest quality of data including two contemporaneous financial statements, or Romania, because it has data to value all inputs and a reliable financial statement from a major chemical producer that produces comparable merchandise. Resps' Final SV Submission at 3-6.

For their part, the petitioners' comments narrowed their argument to Mexico as the primary surrogate country because it is economically comparable to the PRC, it is the only country on the OP List that produces "substantial" quantities of chlor-isos, and Port Import/Export Reporting Service ("PIERS") data reflected that the Mexican company Aqua-Clor S.A. de C.V. ("Aqua-Clor") produced chlor-isos during the POR. See Letter from Petitioners re: Comments Concerning the Preliminary Determination and Submission of Factual Information Regarding SVs (June 6, 2016) ("Pets' Prelim. & SV Cmts"), PDocs 129-138, at 3, Exs. 1-3; Letter from Petitioners re: Rebuttal to Preliminary Determination Comments (June 11, 2016) ("Pets' Rebuttal Comments"), CDocs156-57, PDocs 140-41; Letter from Petitioners re: Additional Rebuttal to Preliminary Determination Comments (June 16, 2016) ("Pets' Add'l Rebuttal Cmts"), CDoc 158, PDoc 143.

The respondents' final comments argued that the statute and Commerce's policy do not establish a hierarchal preference for being a producer of identical merchandise over a producer of comparable merchandise, thus urging Commerce to determine "at a minimum" that Thailand, Romania, and Mexico are all significant producers of comparable merchandise and to rely on data quality as the basis of its surrogate country selection. Letter from Kangtai and Heze re: Rebuttal Final SVs and Rebuttal Pre-Preliminary Comments, dated June 16, 2016 ("Resps' Rebuttal Final SV Submission"), PDoc...