Jiaxing Brother Fastener Co. v. United States

• Citation: 428 F.Supp.3d 1364
• Decision Date: 29 January 2020
• Docket Number: Slip Op. 20-11,Court No. 15-00313
• Parties: JIAXING BROTHER FASTENER CO., LTD. et al., Plaintiffs, v. UNITED STATES, Defendant, and Vulcan Threaded Products Inc., Defendant-Intervenor.
• Court: U.S. Court of International Trade

428 F.Supp.3d 1364

JIAXING BROTHER FASTENER CO., LTD. et al., Plaintiffs,

v.UNITED STATES, Defendant,andVulcan Threaded Products Inc., Defendant-Intervenor.

Slip Op. 20-11

Court No. 15-00313

United States Court of International Trade.

Dated: January 29, 2020

Gregory S. Menegaz, J. Kevin Horgan, and Alexandra H. Salzman, deKieffer & Horgan, PLLC, of Washington, D.C., for plaintiffs Jiaxing Brother Fastener Co., Ltd., a/k/a Jiaxing Brother Standard Parts Co., Ltd., IFI & Morgan Ltd., and RMB Fasteners Ltd.

Joseph H. Hunt, Deputy Assistant Attorney General, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., for defendant. With him on the brief were Jeanne E. Davidson, Director, Patricia M. McCarthy, Assistant Director, and Elizabeth Anne Speck, Senior Trial Counsel. Of counsel was Daniel Calhoun, Assistant Chief Counsel, Office of the Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce, of Washington, D.C.

OPINION AND ORDER

Kelly, Judge:

This action is before the court on a motion for judgment on the agency record challenging several aspects of the U.S. Department of Commerce's ("Department" or "Commerce") final determination in the fifth administrative review of the antidumping duty ("ADD") order covering certain steel threaded rod ("STR") from the People's Republic of China ("PRC"). Certain [STR] from the [PRC], 80 Fed. Reg. 69,938 (Dep't Commerce Nov. 12, 2015) (final results of [ADD] admin. review & final determination; 2013-2014) ("Final Results") and accompanying Issues and Decision Memo. for the Final Results of the Fifth Administrative Review of the [ADD] Order on Certain [STR] from the [PRC], A-570-932, (Nov. 3, 2015), ECF No. 18-4 ("Final Decision Memo.").

Plaintiffs Jiaxing Brother Fastener Co., Ltd. (a/k/a Jiaxing Brother Standard Parts, Co., Ltd.), IFI & Morgan Ltd., and RMB Fasteners Ltd. (collectively, "Jiaxing") challenge three aspects of Commerce's final determination. See Pls.' Memo. Supp. Mot. J. Agency R., May 31, 2019, ECF No. 43-2 ("Pls.' Br."). Plaintiffs challenge as unsupported by substantial evidence Commerce's selection of Thailand as the primary surrogate country, see id. at 8–22, and the selection of GTA data from Thailand to value STR inputs, see id. at 23–26.¹ Plaintiffs also challenge as unsupported by substantial evidence Commerce's decision not to adjust the surrogate financial ratios. See id. at 27–28.

For the reasons that follow, the court sustains Commerce's selection of Thailand as the primary surrogate country and Commerce's selection of GTA data from Thailand. However, the court remands Commerce's determination regarding the calculation of surrogate financial ratios for further explanation or consideration.

BACKGROUND

On May 29, 2014, Commerce initiated the fifth administrative review covering STR entered during the period of review ("POR") April 1, 2013 through March 31, 2014. Initiation of Antidumping and Countervailing Duty Admin. Reviews, 79 Fed. Reg. 30,809, 30,813 (Dep't Commerce May 29, 2014). Commerce selected Jiaxing as a mandatory respondent for this review. See Certain [STR] from the [PRC], 80 Fed. Reg. 26,222, 26,222 (Dep't Commerce May 7, 2015) (preliminary results of the [ADD] review; 2013-2014) ("Preliminary Results"), and accompanying Decision Memo. for Prelim. Results of Fifth [ADD] Review, A-570-932, (Apr. 30, 2015), available at https://enforcement.trade.gov/frn/summary/prc/2015-11082-1.pdf (last visited Jan. 23, 2020) ("Preliminary Decision Memo.").

Given that Commerce considers the PRC to be a non-market economy ("NME"), Commerce calculated Jiaxing's dumping margin based on factors of production ("FOPs") by using prices from a surrogate market economy country ("primary surrogate country"). See 19 U.S.C. § 1677b(c)(4) (2012).² On July 14, 2014, Commerce sought comments from interested parties on its selection of possible primary surrogate countries, which included South Africa, Colombia, Bulgaria, Thailand, Ecuador, and Indonesia. See Request for Surrogate Country and Surrogate Value Cmts. and Information, PD 28, bar code 3215368-01 (July 14, 2014) ("Commerce's Surrogate Country Request").³ In reply, Jiaxing proposed that Commerce also consider the Ukraine, and submitted additional information and data concerning that country.⁴ See Jiaxing Surrogate Country Selection Cmts. at 2, PD 66, bar code 3229776-01 (Sept. 19, 2014) ("Jiaxing SC Seln. Cmts."); see also Jiaxing Surrogate Value Information, PD 95–98, bar code 3239156-01 (Oct. 31, 2014) ("Jiaxing SV Info."); Jiaxing Rebuttal Factual Information, PD 100–01, bar code 3240415-01 (Nov. 7, 2014) ("Jiaxing SV Rebuttal").

On November 3, 2015, Commerce published its Final Results and selected Thailand as the primary surrogate country for the valuation of FOPs and surrogate financial ratios. See Final Decision Memo. at 7–9, 45–56; see also Final Surrogate Value Memo., PD 275–79, bar code 3414832-01 (Nov. 3, 2015) ("Final SV Memo."). Commerce explained that although it considered Ukraine and Thailand to be at a comparable level of economic development to the PRC in terms of per capita gross national income ("GNI") and to be significant producers of STR, steel import data for Thailand from the Global Trade Atlas ("Thai GTA data") was more specific than data from Ukraine. Final Decision Memo. at 47–49, 52–55. Specifically, the Thai GTA data, unlike data sources from the Ukraine, catalogued import prices by carbon content and diameter specific to the steel grade of Jiaxing's primary STR inputs, i.e., round bar and steel wire rod (collectively, "STR inputs").⁵ See id. at 53. Commerce also considered the Thai GTA data to be more contemporaneous than the Ukrainian data and, further, found that only Thailand "offer[ed] multiple financial statements that mirror the production experience of [Jiaxing.]" Id. at 53, 56. Given that, in Commerce's view, "Thailand offers superior quality of data for the surrogate financial ratios" and the foregoing considerations, Commerce selected Thailand as the primary surrogate country. Id. at 56. Commerce also selected the Thai GTA data to value Jiaxing's STR inputs and used the financial statements from two Thai companies to calculate surrogate financial ratios. Id. at 59, 61–66.

JURISDICTION AND STANDARD OF REVIEW

The court has jurisdiction pursuant to section 516A(a)(2)(B)(i) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(i) and 28 U.S.C. § 1581(c) (2012), which grant the court authority to review actions contesting the final determination in a review of an antidumping duty order. The court will uphold Commerce's determination unless it is "unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1)(B)(i).

DISCUSSION

I. Primary Surrogate Country Selection

Jiaxing challenges as unsupported by substantial evidence Commerce's selection of Thailand as the primary surrogate country because Commerce did not consider evidence that Thai GTA data are distorted and failed to understand the quality of the Ukrainian data. See Pls.' Br. at 8–22.⁶ Defendant argues that there is substantial evidence supporting Commerce's selection of Thailand as the primary surrogate country. See Def.'s Br. at 8–22. For the reasons that follow, the court sustains Commerce's selection of Thailand as the primary surrogate country.

In an antidumping proceeding, if Commerce considers an exporting country to be an NME, like the PRC, it will identify one or more market economy countries to serve as a "surrogate" for that NME country in the calculation of normal value.⁷ See 19 U.S.C. § 1677b(c)(1), (4). Normal value is determined on the basis of FOPs from the surrogate country or countries used to produce subject merchandise. See id. at § 1677b(c)(1). FOPs to be valued in the surrogate market economy include "quantities of raw materials employed," "amounts of energy and other utilities consumed," "representative capital cost, including depreciation[,]" and "hours of labor required[.]" See id. at § 1677b(c)(3). However, the statute does not distinguish between production labor, or labor used to produce subject merchandise, and non-production labor, or labor associated with selling, general, and administrative ("SG&A") functions. See generally Dorbest Ltd. v. United States, 604 F.3d 1363, 1368 (Fed. Cir. 2010). After calculating the total value of FOPs, Commerce will add "an amount for general expenses and profit plus the cost of containers, coverings, and other expenses." 19 U.S.C. § 1677b(c)(1). To do so, Commerce calculates "surrogate financial ratios" that the agency derives from the financial statements of one or more companies that produce identical or comparable merchandise in the primary surrogate country. See 19 C.F.R. § 351.408(c)(4) (2015) ; Dorbest, 604 F.3d at 1368.

By statute, Commerce must value FOPs "to the extent possible ... in one or more market economy countries that are ... at a level of economic development comparable to that of the [NME], and ... significant producers of comparable merchandise." 19 U.S.C. § 1677b(c)(4)(A)–(B).⁸ When several countries are both at a level of economic development comparable to the NME country and significant producers of comparable merchandise, Commerce evaluates the reliability and completeness of the data in similarly situated surrogate countries and generally selects the one with the best data as the primary surrogate country. See Import Admin., U.S. Dep't Commerce, Non-Market Economy Surrogate Country Selection Process, Pol'y Bulletin 04.1 (2004), available at http://enforcement.trade.gov/policy/bull04-1.html (last visited Jan. 23, 2020) ("Policy Bulletin 04.1"). Commerce prefers to use one primary surrogate country. See 19 C.F.R. § 351.408(c)(2).

Further, section 1677b requires Commerce to use "the best available information" to value FOPs. 19 U.S.C. § 1677b(c)(1). Commerce has discretion to determine what constitutes the best...