Kaiyuan Group Corp. v. U.S.

Decision Date14 May 2004
Docket NumberCourt No. 02-00573.,SLIP OP. 04-51.
Citation343 F.Supp.2d 1289
PartiesKAIYUAN GROUP CORP., et al., Plaintiffs, v. UNITED STATES, Defendant, and Pencil Section Writing Instrument Manufacturers Ass'n, et al., Defendant-Intervenors.
CourtU.S. Court of International Trade

Lafave & Sailer LLP, (Francis J. Sailer) for Plaintiffs China First Pencil Co., Ltd., et al.

Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director; Ada E. Bosque, Trial Attorney, U.S. Department of Justice, Civil Division, Commercial Litigation Branch; and Philip J. Curtin, Attorney, Office of Chief Counsel for Import Administration, U.S. Department of Commerce, for Defendant United States, of counsel.

Neville Peterson LLP, (George W. Thompson) for Defendant-Intervenors.



I Introduction

This matter comes before the court on Plaintiff Kaiyuan Group Corp.'s ("Kaiyuan") Motion for Judgment Upon the Agency Record ("Kaiyuan's Motion"), and Plaintiffs', China First Pencil Co. ("China First"), Guangdong Provincial Stationary & Sporting Goods Import & Export Corp. ("Guangdong"), Orient International Holding Shanghai Foreign Trade Co., Ltd. ("SFTC"), and Three Star Stationary Industry Co., Ltd. ("Three Star"), (collectively, "Plaintiffs China First"), Motion for Judgment on the Agency Record Pursuant to USCIT R. 56.2 ("China First's Motion"). Plaintiffs challenge certain aspects of the United States Department of Commerce's ("Commerce") decision in Certain Cased Pencils from the People's Republic of China; Final Results and Partial Rescission of Antidumping Duty Administrative Review, 67 Fed.Reg. 48,612 (July 25, 2002) ("Final Results"), as amended in Notice of Amended Final Results and Partial Rescission of Antidumping Duty Administrative Review: Certain Cased Pencils from the People's Republic of China, 67 Fed.Reg. 59,049 (Sept. 19, 2002) ("Amended Final Results"). The court has jurisdiction pursuant to 28 U.S.C. § 1581(c) (1999). For the reasons set forth below, Kaiyuan's Motion is denied; China First's Motion is granted in part and denied in part; and Commerce's Final Results are remanded for action consistent with this opinion.

II Background

In 1994, Commerce published an antidumping order for certain cased pencils from the People's Republic of China ("PRC"). Antidumping Duty Order: Certain Cased Pencils from the People's Republic of China, 59 Fed.Reg. 66,909 (Dec. 28, 1994) ("Antidumping Order"). On December 20, 2000, Commerce published a notice of opportunity to request an administrative review of certain cased pencils sold during the period of review ("POR"), December 1, 1999, through November 30, 2000, from the PRC.1 Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity to Request Administrative Review and Request for Revocation in Part, 65 Fed.Reg 79,802 (Dec. 20, 2002). Commerce received requests for administrative review from Kaiyuan, Plaintiffs China First, and the Defendant-Intervenors.2 On January 31, 2001, Commerce published a notice initiating the review. Initiation of Antidumping and Countervailing Duty Administrative Reviews, 66 Fed.Reg. 8,378 (Jan. 31, 2001).

Commerce published its notice of preliminary results and partial rescission of the 1999-2000 review on January 17, 2002. Certain Cased Pencils From the People's Republic of China; Preliminary Results and Rescission in Part of Antidumping Administrative Review, 67 Fed.Reg. 2,402. (Jan. 17, 2002) ("Preliminary Results"). In the Preliminary Results, the review was partially rescinded as to Guangdong and Three Star "because they made no shipments of the subject merchandise to the United States during the POR." Id. at 2,403. China First, Kaiyuan and SFTC actively participated in the review. Id. Guangdong and Three Star stated that they did not export the subject merchandise during the POR. Id.


Commerce's Investigation and the Parties' Questionnaire Responses

China First Pencil and Three Star

On February 12, 2001, Commerce issued antidumping questionnaires. China First indicated in its questionnaire response of April 11, 2001, that it was "a shareholding company listed on the Shanghai Stock exchange ... owned by its approximately 25,000 shareholders ... [and that m]ore that 47 percent of [its] shares were held by foreign (non-Chinese) shareholders." China First's Motion at 4. China First stated that one of its shareholders, Shanghai Light Industry Group Co., Ltd. ("SLI"), had administrative responsibility for the protection of Three Star's state-owned assets. China First also stated that while it was under the oversight of SLI, it was neither affiliated with Three Star nor did it coordinate prices, suppliers, customers or business operations with Three Star.

On May 8, 2001, Defendant-Intervenors provided Commerce with information regarding the relationship between Three Star and China First Pencil. Defendant-Intervenors stated that "[the documents included in the Joint Submission demonstrate that China First was provided wide-ranging, substantive oversight of Three Star by SLI, the common owner of both; there is nothing indirect or advisory about China First's role.]"3 Letter from Defendant-Intervenors to Commerce (May 8, 2001), Defendant's Opposition to Plaintiff's Motion for Judgment Upon the Agency Record ("Defendant's Opposition"), Appendix 2 at 8.

On May 18, 2001, Commerce inquired in a supplemental questionnaire about the oversight functions of SLI as a state assets company. In its June 11, 2001, response to the supplemental questions, China First provided a copy of its 2000 annual report including its 1999 and 2000 audited financial statements. This audited report described the state-owned assets company SLI as an "affiliated party" and referred to Three Star, though not by name, as "an affiliate of SLI," but did not indicate that China First had any connection with Three Star. China First's Motion at 5. China First said it had a contractual arrangement with SLI to provide administrative guidance to Three Star relating to sanitation and environmental management issues, production safety measures, and oversight of Three Star's yearbook. China First's Motion at 5. Plaintiffs claimed that SLI "review[ed] the financial statements of its `subsidiary' companies, owned by `All the People' to ensure that independent company management is responsibly managing the businesses." Id. at 5-6

During January and February of 2002, as part of its antidumping investigation, Commerce conducted verifications of China First and Three Star. After verification of China First's balance sheet and investments ledgers, Commerce stated that "[w]e noted no investment which might indicate unreported [China First Pencil] affiliates, associates or subsidiaries." Id. at 7. After the verification of Three Star, Commerce stated that "[w]e noted no investment by Three Star in [China First Pencil]." Id. at 8.

In addition to its responses regarding its business structure, China First submitted surrogate value information for several raw materials, including pencil cores, on March 1, 2002. China First included a price list from an Indian producer of black and colored pencil leads. In its Preliminary Results, Commerce determined the values of cores using Indian tariff subheading 9610.20 and relied on the export price quotes, rather than on the Indian Import Statistics, to value cores.

By letter dated April 12, 2002, the Defendant-Intervenors submitted a Chinese document which they said demonstrated that China First and Three Star had merged in 1997, three years before the POR. Defendant-Intervenors also noted the fact that China First and Three Star had offices in the same building in Shanghai. They asserted that the information concerning the two companies' merger should have been provided to Commerce in response to Commerce's questionnaires. The document, entitled "Order No.1997 005"("the Order"), was a PRC government agency4 order requiring the merger of Three Star and China First. It directed China First to absorb Three Star's capital and form a group company to include Three Star, and it gave China First the role of managing Three Star and coordinating Three Star's sales and purchases. As a result of its receipt of the Order, Commerce extended the deadline for submission of new factual information pursuant to 19 C.F.R. § 351.302 (2000),5 reopened the administrative record, and sought comments from interested parties regarding the Order.

On May 24, 2002, Commerce issued a supplemental questionnaire to China First and Three Star that asked questions regarding the alleged merger between the two companies and accepted the Defendant-Intervenors submission. By letter dated June 4, 2002, China First and Three Star filed various documents in response to Commerce's "opportunity allowing China First and Three Star to submit rebutting, clarifying and correcting information concerning the alleged merger between the two companies." China First's Motion at 10. On June 6, 2002, China First and Three Star responded to Commerce's supplemental questionnaire of May 24, 2002. In their responses, the companies stated that they had never merged as claimed by the Defendant-Intervenors.

On June 11, 2002, Defendant-Intervenors submitted to Commerce a series of photographs taken at a Chinese domestic trade fair held in Beijing from May 7-9, 2002, which they said showed China First and Three Star jointly marketing pencils. They also submitted a series of documents that were included in the administrative record of the previous review. Subsequently, on June 13, 2002, China First submitted a rebuttal including documents intended to explain the photographs.

As a result of the Order, Commerce reevaluated the evidence regarding the relationship between Three Star and China First. Commerce found...

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