Rhodia, Inc. v. U.S.

• Decision Date: 30 November 2001
• Docket Number: Slip Op. 01-138.,Court No. 00-08-00407.
• Citation: 185 F.Supp.2d 1343
• Parties: RHODIA, INC., Plaintiff, v. UNITED STATES, Defendant, and Jilin Pharmaceutical Co., Ltd.; Shandong Xinhua Pharmaceutical Factory, Ltd., Defendant-Intervenors.
• Court: U.S. Court of International Trade

185 F.Supp.2d 1343

RHODIA, INC., Plaintiff, v. UNITED STATES, Defendant, and Jilin Pharmaceutical Co., Ltd.; Shandong Xinhua Pharmaceutical Factory, Ltd., Defendant-Intervenors.

Slip Op. 01-138.

Court No. 00-08-00407.

United States Court of International Trade.

November 30, 2001.

Williams Mullen Clark & Dobbins (James R. Cannon, Jr., Julia Bailey, Richmond, VA, Francisco Orellana, Jimmie V. Reyna, Washington, DC) for Plaintiffs.

Robert D. McCallum, Jr., Assistant Attorney General, Alanta, GA, David M. Cohen, Director, Ada E. Bosque, Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, Washington DC; Emily Lawson, Attorney, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of Counsel, for Defendant United States.

White & Case (William J. Clinton, Adams C. Lee, Robert G. Gosselink, Albert Lo, Washington, DC) for Defendant-Intervenor Jilin Pharmaceutical Co., Ltd.

Garvey, Shubert & Barer (William E. Perry, John C. Kalitka, Washington, DC) for Defendant-Intervenor Shandong Xinhua Pharmaceutical Factory, Ltd.

OPINION

POGUE, Judge.

This case is before the court on motions for judgment upon the agency record challenging certain aspects of the International Trade Administration of the United States Department of Commerce's ("Commerce" or "Department") Notice of Final Determination: Sales at Less than Fair Value: Bulk Aspirin from the People's Republic of China, 65 Fed.Reg. 33,805 (Dep't Commerce May 25, 2000), as amended, 65 Fed. Reg. 39,598 (Dep't Commerce June 27, 2000) ("Final Determination") and the accompanying Issues and Decision Memorandum, P.R. Doc. No. 155 (May 17, 2000) ("Decision Memorandum"). This court has jurisdiction pursuant to 28 U.S.C. § 1581(c) and 19 U.S.C. § 1516a(2)(B)(iii).

Plaintiffs in these consolidated actions are foreign and domestic producers of bulk aspirin. Foreign producers, Jilin Pharmaceutical Co., Ltd. ("Jilin") and Shandong Xinhua Pharmaceutical Factory, Ltd. ("Shandong"), argue that (1) Commerce erred in applying overhead costs at each upstream production stage and (2) Commerce inappropriately applied a weighted average ratio rather than a simple average ratio to calculate overhead, selling, general and administrative expenses ("SG & A"), and profit rates. Domestic producer, Rhodia, Inc. ("Rhodia") argues that (1) Commerce improperly used import data rather than domestic data as the surrogate value for phenol; (2) Commerce erred in excluding purchased salicylic acid from Shandong's normal value calculation; and (3) Commerce incorrectly included sales of traded goods in the denominator of the factory overhead ratio. The Department asks for a voluntary remand for the limited purpose of removing sales of traded goods from the denominator of the factory overhead ratio and recalculating the ratio.

Background

On May 28, 1999, Rhodia filed a petition requesting the imposition of antidumping duties on imports of bulk acetylsalicylic acid, commonly referred to as aspirin, from the People's Republic of China ("PRC"). Rhodia alleged that the subject imports were being sold at prices below fair market value. The Department, in response, initiated an investigation, see Initiation of Antidumping Duty Investigation: Bulk Aspirin from the People's Republic of China, 64 Fed.Reg. 33,463 (Dep't Commerce June 23, 1999), and preliminarily determined that bulk aspirin from the PRC was being, or was likely to be, sold in the United States at less than fair value ("LTFV") as provided in section 733 of the Act. See Notice of Preliminary Determination of Sales at Less Than Fair Value: Bulk Aspirin from the People's Republic of China, 65 Fed.Reg. 116 (Dep't Commerce Jan. 3, 2000) ("Preliminary Determination").

Pursuant to section 1677b(c), and in accordance with its treatment of the PRC in all past antidumping investigations, Commerce found the PRC to be a non-market economy ("NME") country.¹ See Preliminary Determination at 117. Finding India to be at a level of economic development comparable to the PRC and a significant producer of bulk aspirin, Commerce selected India as the surrogate market economy country in accordance with 19 U.S.C. § 1677b(c)(4). See id. at 119; see also 19 U.S.C. § 1677b(c)(1) (The normal value of goods in a NME country may be ascertained by determining the cost of the "factors of production" used to manufacture the goods.). No party challenges the use of India as the surrogate market economy. See Letter to Sec. Daley from the Law Firm of Stewart & Stewart, P.R. Doc. No. 75 at 1 (Oct. 8, 1999).

Standard of Review

The Court must uphold a final determination by Commerce in an antidumping investigation 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

Commerce calculates an antidumping duty margin by comparing the imported products' price in the United States to the normal value of comparable merchandise. See 19 U.S.C. § 1677b(a). Generally, normal value is the price of the merchandise in the producer's home market, its export price to countries other than the United States, or a constructed value of the merchandise. See 19 U.S.C. § 1677b(a)(1). When the exporting country is a NME country, however, section 1677b(c) requires that Commerce "shall determine the normal value of the subject merchandise on the basis of the value of the factors of production utilized in producing the merchandise and to which shall be added an amount for general expenses and profit plus the cost of containers, coverings, and other expenses." 19 U.S.C. § 1677b(c)(1)(B).

I. Application of Overhead Costs at each Upstream Production Stage

Once Commerce determined India to be the appropriate surrogate country for the PRC, it sought surrogate values for each factor of production, and for general expenses and profit. Factory overhead is "one component of a product's cost of manufacturing." See Air Prods. & Chems., Inc. v. United States, 22 CIT 433, 441, 14 F.Supp.2d 737, 745 (1998). The value of factory overhead is calculated as a percentage of manufacturing costs. See id.; Magnesium Corp. of Am. v. United States, 20 CIT 1092, 1102, 938 F.Supp. 885, 896 (1996). Commerce calculates a ratio of overhead to material, labor and energy inputs ("MLE") for producers of comparable merchandise in the surrogate country, India, and then applies this ratio to the NME producer's MLE. See 19 C.F.R. § 351.408(c)(4).

In its final determination Commerce used data from three Indian producers of aspirin inputs to separately account for overhead costs for each upstream production stage for Jilin and Shandong.² Commerce determined that "the degree of integration of a facility affects a facility's overhead costs." Def.'s Mem. Opp'n to Mot. J. Agency R. at 22 ("Def.'s Mem."). Because it determined that none of the Indian producers reflect the degree of integration represented by Shandong and Jilin, Commerce concluded that a single application of an overhead ratio would understate overhead expenses, not reflecting the expenses incurred to produce two major inputs into aspirin and the final aspirin product itself. Decision Memorandum at 11-12.

Jilin and Shandong argue, however, that not only did Commerce merely assume that a fully integrated producer has a higher overhead to raw material input ratio than a non-integrated producer, but Commerce also assumed that the operations of the Indian producers were not fully integrated. Shandong further argues that Commerce's methodology is a change from Commerce's prior practice and contrary to the plain language of the statute.

A. Accordance with law

Section 1677b(c) requires normal value to be calculated "on the basis of the value of the factors of production utilized ... to which shall be added an amount for general expenses and profit plus the cost of containers, coverings, and other expenses." 19 U.S.C. § 1677b(c) (emphasis supplied). Shandong argues that Commerce, by applying an overhead ratio at each upstream production stage, added amounts and costs into the dumping margin calculation. Shandong Br. Supp. Mot. J. Agency R. at 13 ("Shandong Br."). Rather, according to Shandong, Commerce should have applied the overhead amount at one time and as an overall percentage. In support of this argument, Shandong cites to the Department's Antidumping Manual and what it argues is mandatory language in the statute. See id. at 13-14; Int'l Trade Admin., U.S. Dep't Commerce, Antidumping Manual, Chap. 8 at 85 (1998) ("Antidumping Manual"); 19 U.S.C. § 1677b(c).

The statute does require that the Department include an amount for overhead expenses. Commerce, contrary to Shandong's assertions, did only include "an" amount. "Amount" is defined as "a: the total number or quantity; b: the quantity at hand or under consideration." Merriam-Webster, available at http://www.mw.com. In this case, Commerce argues that to account for the overhead expenses of an integrated producer, it was necessary to look at the expenses incurred during each stage of the multi-stage production process. Commerce used surrogate factory overhead values for each stage of the multi-stage process and calculated a total amount based on these figures. The calculated overhead rate was not contrary to the statute as only a single figure for general expenses and profit was included in normal value. Normal value, therefore, only included the total number and quantity under consideration, consistent with "an amount," not "amounts" as Shandong contends.

Furthermore, Shandong's reliance on the Antidumping Manual is misplaced.³ The manual, under a section entitled "Sample Calculation for [Normal Value]," presents a "very simple example of the type of factors valuation calculation that is done in investigations or reviews involving merchandise from a NME country." Antidumping Manual, Chap. 8 at 92. The methodology that the manual presents is merely an example;...