Oy v. United States

• Decision Date: 15 April 2014
• Docket Number: Slip Op. 14–42.,Court No. 13–00079.
• Citation: 978 F.Supp.2d 1315
• Parties: CP KELCO OY and CP Kelco US, Inc., Plaintiffs, v. UNITED STATES, Defendant, and Ashland Specialty Ingredients, G.P., Defendant–Intervenor.
• Court: U.S. Court of International Trade

978 F.Supp.2d 1315

CP KELCO OY and CP Kelco US, Inc., Plaintiffs,

v.UNITED STATES, Defendant,andAshland Specialty Ingredients, G.P., Defendant–Intervenor.

Slip Op. 14–42.

Court No. 13–00079.

United States Court of

International Trade.

April 15, 2014.

Nancy A. Noonan, Arent Fox LLP, of Washington, DC, argued for plaintiff. With her on the brief were Matthew J. Clark and Matthew L. Kanna.

Stephen C. Tosini, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for defendant. On the brief were Stuart F. Delery, Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Jr., Assistant Director, and L. Misha Preheim, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice. Of counsel on the brief was Joanna V. Theiss, Attorney, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of Washington, DC.

Edward M. Lebow, Haynes and Boone, LLP, of Washington, DC, argued for defendant-intervenor Ashland Specialty Ingredients, G.P. With him on the brief was Nora L. Whitehead.

OPINION AND ORDER

GOLDBERG, Senior Judge:

This is a trade case brought under Section 201 of the Customs Courts Act of 1980, 28 U.S.C. § 1581(c) (2006). Plaintiffs CP Kelco Oy and CP Kelco US, Inc. (collectively “Kelco”) challenge the dumping margin the U.S. Department of Commerce (“Commerce” or “the agency”) assigned their goods during the 2010–2011 administrative review of an antidumping order on carboxymethylcellulose. Specifically, Kelco claims that the targeted dumping inquiry Commerce conducted before calculating the margin was neither in accordance with law nor based in substantial evidence.

The court holds that Commerce was permitted by law to conduct a targeted dumping inquiry during the contested review. The court also finds that Commerce's method for discovering targeted dumping and the application of that methodology to Kelco generally accorded with law and the evidence. Nevertheless, the court concludes that an element of the agency's targeted dumping analysis—the de minimis test—was neither grounded in substantial evidence nor in accordance with law. The court remands to Commerce to conduct the targeted dumping inquiry afresh and to recalculate Kelco's dumping margins consistent with that inquiry.

PROCEDURAL BACKGROUND

In August 2011, Commerce initiated an administrative review of an antidumping order on carboxymethylcellulose from Finland. Initiation of Antidumping and Countervailing Duty Administrative Reviews, 76 Fed.Reg. 53,404, 53,405 (Dep't Commerce Aug. 26, 2011).¹ The next year, the Aqualon Company, a petitioner, alleged Kelco had sold its goods for less-than-fair value at prices that differed “significantly among purchasers, regions, and periods of time.” Letter from Haynes & Boone LLC to Hon. John Bryson, PD 56 at bar-code 3077453–01 (May 25, 2012), ECF No. 30 (July 2, 2013) (“Pet'r's Allegation”). This practice is known as “targeted dumping.” In view of its allegation, Aqualon asked Commerce to compute Kelco's margins using a methodology that accounts for targeted dumping among an exporter's sales. Id. at 1–2.²

Commerce initially declined to conduct a targeted dumping inquiry when calculating Kelco's margins. Instead, the agency followed standard procedure and assigned Kelco a 5.86% dumping margin in the preliminary results. See Purified Carboxymethylcellulose from Finland, 77 Fed.Reg. 47,036, 47,038, 47,042 (Dep't Commerce Aug. 7, 2012) (“ Preliminary Results ”). Later, however, Commerce inquired whether Kelco had engaged in targeted dumping and discovered targeted dumping by time period. Commerce then reassessed Kelco's margins using an alternative methodology and assigned an 11.62% rate. Post–Prelim. Targeted Dumping Analysis Mem. at 3–4, PD 68 at bar-code 3112119–01 (Dec. 21, 2012), ECF No. 30 (July 2, 2013) (“Post–Preliminary Analysis”). The agency confirmed its findings from the targeted dumping inquiry in the final results, settling on a 12.06% dumping margin. Purified Carboxymethylcellulose from Finland, 78 Fed.Reg. 11,817, 11,817 (Dep't Commerce Feb. 20, 2013) (“ Final Results ”).

Kelco filed a summons with this court to challenge the margin. Summons, ECF No. 1. In the accompanying complaint, Kelco alleges Commerce's targeted dumping inquiry was neither in accordance with the law nor grounded in substantial evidence. Compl. ¶¶ 19–27, ECF No. 4. Kelco implies that Commerce should use its normal methodology to calculate the dumping margin on remand. See id. at 7 (prayer for relief).

LEGAL BACKGROUND

To understand how Commerce's targeted dumping inquiry shaped Kelco's margins,some legal table-setting is needed. In general, Commerce calculates dumping margins by comparing a good's “export price” to its “normal value.” See19 U.S.C. § 1677(35). Commerce makes this comparison using one of three methods: the average-to-average methodology (“A–A”), the transaction-to-transaction methodology (“T–T”), or the average-to-transactional methodology (“A–T”). Commerce's preferred method in both investigations and administrative reviews is A–A. 19 C.F.R. § 351.414(b)-(c) (2013). Under this approach, the agency adopts the good's weighted-average U.S. price as the export price. Id. § 351.414(d). It then subtracts the export price from the good's weighted-average price in the exporter's home market (i.e., the normal value), yielding a dumping margin. Id. Commerce used the A–A methodology to calculate Kelco's margins in the Preliminary Results. Preliminary Results, 77 Fed.Reg. at 47,042 n. 39.³

Commerce may also use the A–T methodology to set margins, but in limited circumstances. In investigations, Commerce may apply A–T only if it finds a “pattern of export prices ... for comparable merchandise that differ significantly among purchasers, regions, or periods of time,” and alternative methodologies inadequately explain the pattern. 19 U.S.C. § 1677f–1(d)(1)(B)(i)–(ii). If an exporter's sales meet these criteria, that exporter engaged in targeted dumping. Commerce may then use A–T to compute the exporter's dumping margins, comparing weighted-average normal values to export prices from individual sales. See19 C.F.R. § 351.414(b)(3). Commerce does not offset non-dumped sales against dumped sales when using the A–T method. See Issues & Decisions Mem. at Issue 1, PD 80 at bar-code 3118300–01 (Feb. 5, 2013), ECF No. 30 (July 2, 2013) (“I & D Mem.”). As a consequence, margins calculated under A–T can be significantly higher than those computed under A–A.

Hence Commerce's method for discovering targeted dumping bears critically on an exporter's margins. The method, widely known as the “ Nails test,” proceeds as follows. In the first step, called the “standard deviation test,” Commerce determines “the volume of the allegedly targeted group's ( i.e., purchaser, region, or time period) sales of subject merchandise that are at prices more than one standard deviation below the weighted-average price of all sales under review, targeted and non-targeted.” Id. at Issue 2. Standard deviations are calculated on a product-specific basis by control number (“CONNUM”). If more than thirty-three percent of allegedly targeted sales are at least one standard deviation below the average price of all reviewed sales in a given CONNUM, Commerce moves to step two. Id.

In step two, the “gap test,” the agency considers by CONNUM the sales that passed the standard deviation test. Commerce first calculates the difference between the weighted-average price of allegedly targeted sales and the next higher weighted-average price of sales to a non-targeted group (the “target gap”). Next, Commerce calculates the average difference, weighted by sales volume, between prices to non-targeted groups (the “non-target gap”). Finally, the agency compares the target gap to the non-target gap.⁴ If the target gap exceeds the non-target gap for more than five percent of the exporter's sales to the alleged target by volume, Commerce finds that targeted dumping occurred. The agency may then use A–T to calculate the exporter's margins, but only if Commerce cannot account for observed price differences using A–A. Id.⁵

Commerce takes a similar approach when it applies the A–T methodology in reviews. Id. Unlike the law governing investigations, however, the law governing reviews does not specify which comparative methodology Commerce must use to calculate margins. Instead, the statute explains only how to compute normal values when using the A–T method in reviews. 19 U.S.C. § 1677f–1(d)(2). To fill this apparent gap in the statute, federal regulations require Commerce to apply A–A in reviews unless another method is deemed more appropriate. 19 C.F.R. § 351.414(c)(1); see also Calculation of Weighted Average Dumping Margin and Assessment Rate, 77 Fed.Reg. 8101, 8102–04 (Dep't Commerce Feb. 14, 2012) (“ Final Modification ”). Commerce has used A–T instead of A–A in reviews if the Nails test reveals that an exporter engaged in targeted dumping.⁶

In this case, Commerce applied the Nails test to Kelco's sales during an administrative review. The agency concluded that some of Kelco's sales constituted targeted dumping. Commerce also found—though obliquely—that Kelco's targeted sales comprised more than a de minimis share of its total U.S. sales. I & D Mem. at Issue 2. After determining that the A–T methodology yielded higher margins than the A–A approach, Commerce recalculated Kelco's margins using A–T. Commerce assigned Kelco a 12.06% margin in the Final Results, up from 5.86% in the Preliminary Results. See Public Mem. of Law in Supp. of Pls.' 56.2 Mot. J. on Agency R. 4–5, ECF No. 28 (“Pls.' Br.”).

STANDARD OF REVIEW

The court must review Commerce's determinations to ensure they are supported “by substantial evidence on the record” and “in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). An agency decision is based in substantial evidence if...