Qingdao Sea-Line Trading Co. v. United States

• Decision Date: 10 September 2014
• Docket Number: No. 2013–1581.,2013–1581.
• Citation: 766 F.3d 1378
• Parties: QINGDAO SEA–LINE TRADING CO., LTD., Plaintiff–Appellant, v. UNITED STATES, Defendant–Appellee, and Fresh Garlic Producers Association, Christopher Ranch L.L.C., The Garlic Company, Valley Garlic, And Vessey and Company, Inc., Defendants–Appellees.
• Court: U.S. Court of Appeals — Federal Circuit

766 F.3d 1378

QINGDAO SEA–LINE TRADING CO., LTD., Plaintiff–Appellant,

v.UNITED STATES, Defendant–Appellee,andFresh Garlic Producers Association, Christopher Ranch L.L.C., The Garlic Company, Valley Garlic, And Vessey and Company, Inc., Defendants–Appellees.

No. 2013–1581.

United States Court of Appeals,Federal Circuit.

Sept. 10, 2014.

Robert T. Hume, Hume & Associates LLC, of Ojai, CA, argued for plaintiff-appellant.

Richard P. Schroeder, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief were Stuart F. Delery, Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Jr., Assistant Director. Of counsel on the brief was Whitney M. Rolig, Attorney, United States Department of Commerce, Office of the Chief Counsel for Import Administration, of Washington, DC.

Michael J. Coursey, Kelley Drye & Warren LLP, of Washington, DC, argued for defendants-appellees. With him on the brief was John M. Herrmann.

Before NEWMAN, REYNA, and CHEN, Circuit Judges.

REYNA, Circuit Judge.

Qingdao Sea-line Trading Company (“Sea-line”) appeals a decision of the Court of International Trade affirming the Department of Commerce's final remand results in a new shipper review and assignment of an antidumping duty on Sea-line's imports of fresh whole garlic bulbs from the People's Republic of China. For the reasons set forth below, we affirm.

I

A. New Shipper Review

Sea-line challenges the Department of Commerce's (“Commerce”) calculation of its antidumping duty, which it contends is not supported by substantial evidence. Commerce calculated the antidumping duty as part of a new shipper review initiated at Sea-line's request on an outstanding 1994 antidumping order on fresh garlic imports from China.¹ A new shipper review covers imports by an importer or producer that was not subject to the initial antidumping duty investigation and believes it is entitled to an individual antidumping duty margin. 19 U.S.C. § 1675(a)(2)(B). New shipper reviews cover imports made during a period subsequent to the period of review for the initial investigation.

Commerce conducted Sea-line's new shipper review for the period of November 1, 2008 through April 30, 2009. Because China is a non-market economy, Commerce calculated the factors of production of Sea-line's fresh whole garlic using surrogate values from a comparable market economy. 19 U.S.C. § 1677b(c)(1). Commerce chose India as the primary comparable market economy for this review and sought to identify a surrogate value for the “fresh garlic bulb” intermediate input instead of calculating values for the individual factors of production used to produce that input. Commerce relied on price data from the Azadpur Agricultural Produce Marketing Committee's Market Information Bulletin (“APMC Bulletin”), which reports daily prices in India for garlic bulbs of various “grades.” Garlic bulbs are divided into four grades based on size: grade Super A (greater than 55 mm); grade A (40–55 mm); grade B (30–40 mm); and grade C (less than 30 mm).

Sea-line reported a bulb size of over 55 millimeters for the garlic imported into the United States during the period of review, placing its garlic bulbs in the grade Super A category. The APMC Bulletin, however, did not report any prices for grade Super A bulbs for the period of review. Commerce thus averaged the closest available data points for grade Super A garlic in the APMC Bulletin, which was for November 2007 through April 2008. To make this value contemporaneous with the period of review and account for inflation, Commerce applied the Wholesale Price Index (“WPI”) for India published by the International Monetary Fund (“IMF”). Applying the IMF index resulted in a slight increase in the price for grade Super A garlic, even though the prices listed in the APMC Bulletin for the other garlic grades dropped just before the period of review.

In addition to calculating surrogate values for Sealine's fresh garlic, Commerce also calculated a “surrogate financial ratio” to account for general expenses, factory overhead, and profit. See19 U.S.C. § 1677b(c)(1). This ratio is determined using financial statements and other non-proprietary information from producers of identical or comparable merchandise in the surrogate country. 19 C.F.R. § 351.408(c)(4). If financial statements are available from multiple producers, Commerce averages the financial ratios derived from all the financial statements.²

Commerce calculated a surrogate financial ratio for Sea-line by averaging financial statements from two Indian tea producers, Limtex Tea Limited (“Limtex”) and Tata Tea Limited (“Tata Tea”). Commerce noted that “tea, rice, and vegetable processing is similar to garlic because each is not highly processed or preserved prior to sale.” J.A. 137. Commerce thus decided to use financial data from Limtex and Tata Tea because tea is comparable to whole and peeled garlic, and each company's production process is similar to that of Sea-line's garlic producer, Jinxiang County Juxinyan Trading Co.

Commerce published its preliminary results on May 5, 2010, and Sea-line challenged those results in two case briefs submitted to Commerce on June 4, 2010 and August 6, 2010. First, Sea-line argued that Commerce should not have relied on non-contemporaneous grade Super A garlic prices or used the IMF WPI index to inflate those prices. Second, Sea-line argued that Tata Tea's financials should not have been used to calculate the surrogate financial ratio in lieu of those from a different company, Garlico Industries, because Tata Tea's production process is not sufficiently comparable to the production of fresh whole garlic.

Commerce considered and rejected Sea-line's challenges in its final results. Commerce continued to rely on prices from outside the period of review for grade Super A garlic after concluding that size-specific price information was preferable because “size is an important price factor.” J.A. 208. Commerce also rejected Sea-line's argument that a consistent relationship existed between the prices for grade Super A garlic and grade A garlic:

[W]e note that there is no historical price information on the record of this review to support Qingdao Sea-line's apparent contention that price trends for Super–A grade would mirror those of the A grade price. Moreover, Qingdao Sea-line's own arguments about the relative scarcity of large-bulb garlic ( i.e., Super–A grade) in India resulting in higher prices for large-bulb garlic contradict its contention that prices for Super–A grade (the largest Indian variety) would mirror those of smaller sized garlic.

Id. (emphasis original). Commerce thus continued to rely on non-contemporaneous prices for grade Super A garlic in its final results.

Commerce also continued to use the IMF WPI index to inflate the older Super A garlic prices, noting that it has used the same index in prior reviews. Commerce refused to use either of two alternative methods that Sealine claimed would have resulted in a more accurate garlic surrogate value. Commerce rejected a “garlic-specific WPI” index calculated by Sea-line after noting that Sealine did not provide any information on the price data that presumably underpinned the proposed index. Commerce also rejected Sea-line's alternative proposal to adjust the non-contemporaneous prices using a calculated ratio between grade Super A and grade A prices. Commerce concluded that “there is insufficient historical Azadpur APMC price data (Super–A grade and A grade) on the record of this review to serve as the basis for a meaningful price ratio.” J.A. 211. Commerce thus continued to adjust the grade Super A garlic prices using the IMF WPI index.

Finally, Commerce continued to rely on Tata Tea's financials to calculate a surrogate financial ratio. Commerce rejected Sea-line's argument that Commerce's decision is inconsistent with prior reviews, noting that prior reviews had also concluded that tea is comparable to garlic. Commerce further noted that the majority of Tata Tea's sales are comprised of tea. Commerce therefore concluded that Tata Tea's financials reflect the best available information on the record.

Based on its calculations, Commerce imposed on Sealine an antidumping margin of 155.33% and a per-unit cash deposit rate of $1.28 per kilogram.³ Sea-line appealed Commerce's final results to the Court of International Trade (“Trade Court”).

B. First Appeal to the Trade Court

In its pleadings before the Trade Court, Sea-line reiterated its challenges to Commerce's calculations, taking issue with Commerce's (i) reliance on noncontemporaneous prices and use of the IMF WPI index to inflate those prices; and (ii) use of Tata Tea's financials in lieu of Garlico's financials.

On March 21, 2012, the Trade Court granted-in-part Sea-line's motion for judgment on the administrative record and remanded Commerce's final results for further clarification.⁴ The Trade Court agreed with Sea-line that Commerce failed to sufficiently explain why garlic size is such an important price factor that it justified using prices outside the period of review. The Trade Court noted that Commerce's statement that “garlic size is an important price factor” is insufficient to explain why garlic size trumps contemporaneity in its choice of prices. The Trade Court also concluded that Commerce did not adequately explain why it was reasonable to use Tata Tea financials given findings in prior reviews that Tata Tea's production process was not comparable to whole garlic, as well as why it was reasonable to not consider the financial statements of Garlico Industries. The Trade Court thus remanded for Commerce to more adequately explain its conclusions.

The Trade Court, however, affirmed Commerce's use of the IMF WPI index as an inflator in the event that Commerce sufficiently justifies its use of garlic...