Rhone-Poulenc, Inc. v. US

• Decision Date: 09 May 1996
• Docket Number: Slip Op. 96-74. Court No. 95-03-00275.
• Citation: 927 F. Supp. 451,20 CIT 573
• Parties: RHONE-POULENC, INC., Plaintiff, v. The UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

927 F. Supp. 451

20 CIT 573

RHONE-POULENC, INC., Plaintiff, v. The UNITED STATES, Defendant.

Slip Op. 96-74. Court No. 95-03-00275.

United States Court of International Trade.

May 9, 1996.

Baker & Botts, L.L.P., William D. Kramer, Gregory D. Shorin, with Clifford E. Stevens, Jr., and Estee S. Levine, Washington, DC, on the briefs, for Plaintiff.

Frank W. Hunger, Assistant Attorney General, David M. Cohen, Director Commercial Litigation Branch, Civil Division, Department of Justice, and Jeffrey M. Telep, Attorney, for Defendant, Priya Alagiri, of counsel, Washington, DC.

OPINION

WALLACH, Judge:

Plaintiff Rhone-Poulenc moved pursuant to USCIT Rule 56.2, for judgment on the agency record challenging the Department of Commerce's ("Commerce") Final Determination of Sales at Less Than Fair Value: Coumarin From The People's Republic of China, 59 Fed.Reg. 66895 (Dep't Comm. 1994) (the "Final Determination"). For the reasons set forth below, the motion is granted in part and denied in part.

I BACKGROUND

On December 30, 1993, Rhone Poulenc filed a petition with Commerce and the International Trade Commission ("ITC") alleging that imports of coumarin from the People's Republic of China (the "PRC") were being sold in the United States at less than fair value, and that an American industry was materially injured by these sales. On January 19, 1994, Commerce commenced an antidumping duty investigation.

Rhone-Poulenc is a domestic producer of coumarin, an aroma chemical used in the manufacture of perfumes, among other things. Coumarin has the chemical formula C sub9 H sub6 O sub2, and also is known by the following names: 2H-1-benzopyran-2-one; 1,2-benzopyrone; cis-o-coumaric acid lactone; coumarinic anhydride; 2-Oxo-1,2-benzopyran; 5,6-benzo-alpha pyrone; orthohydroxyc innamic acid lactone; cis-orthocourmaric (sic) acid anhydride; and tonka bean camphor. Commerce's investigation included all forms of this chemical.

Because the PRC has a non-market economy (Final Determination, 59 Fed.Reg. at 66896), Commerce determined the foreign market value ("FMV") of the subject merchandise using the factors of production ("FOP") method. See 19 U.S.C. § 1677b(c); Final Determination, 59 Fed.Reg. at 66896-97. Under this method, Commerce determined the amount of labor, raw materials, energy and other manufacturing inputs used to make the subject coumarin in the PRC. It then determined the value of these inputs using surrogate prices from India, which Commerce determined has a market economy at a level of development similar to China. Id. Pursuant to the statute, Commerce made adjustments to ensure the comparability of the United States and foreign prices that it used to calculate the anti-dumping margins. Id.

Among these adjustments was an offset for the production of by-products in the coumarin manufacturing process. Id. at 66897. Commerce reduced the cost of materials included in FOP by the value of by-products, in order to determine the cost of manufacturing.

Based on the foregoing analysis, Commerce found that coumarin from the PRC had been sold in the United States at less than fair value. It promulgated preliminary dumping margins for two exporters separately from the rest of the PRC coumarin industry. For Jiangsu Native Produce Import/Export Corporation ("JNPIEC"), Commerce set a margin of 15.04%; for Tianjin Native Produce Import/Export Corporation ("TNPIEC"), a margin of 50.35%; and for all other exporters, a margin of 160.80%.

JNPIEC and TNPIEC received separate dumping margins because information that they supplied convinced Commerce that they operate independently of government control, and negotiate at arm's length with coumarin manufacturers in China. Id. at 66895-96. Other exporters failed to make this showing, and therefore were collectively subject to a higher antidumping margin based on best information available ("BIA"). The separate margins for JNPIEC and TNPIEC were based on the FOP of the manufacturers of the coumarin that they exported, Changzhou Perfumery and Tianjin Perfumery, respectively. There was no evidence that JNPIEC or TNPIEC exported coumarin produced by any other manufacturer.

Rhone-Poulenc brought this action timely pursuant to 19 U.S.C. § 1516a and 28 U.S.C. § 1581(1988).

Rhone-Poulenc raises four issues:

A. Did Commerce err in determining the value of by-products of coumarin production, and in deducting it from the cost of manufacturing coumarin?

B. Did Commerce err in valuing FOP for Jiangsu Native's and Tianjin Native's coumarin suppliers separately from the rest of the Chinese coumarin manufacturing industry?

C. Did Commerce err in failing to limit the application of the lower dumping margins for Jiangsu Native and Tianjin Native to imports of coumarin made by the producers on whose costs the margins were based?

D. Did Commerce err in failing to include resellers' selling, general and administrative costs and profit in its calculation of the constructed value of coumarin?

II STANDARD OF REVIEW

When reviewing Commerce's Final Determination in an antidumping investigation, the court will "hold unlawful any determination, finding or conclusion found ... to be unsupported by substantial evidence on the record, or otherwise not in accordance with law...." 19 U.S.C. § 1516a(b)(1)(B) (1988). Substantial evidence on the record means "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Pierce v. Underwood, 487 U.S. 552, 565, 108 S.Ct. 2541, 2550, 101 L.Ed.2d 490 (1988) (citations omitted). Under this standard, the Court neither weighs the evidence nor substitutes its own judgment for that of the agency. Negev Phosphates, Ltd. v. U.S. Dep't of Commerce, 12 CIT 1074, 1076-77, 699 F.Supp. 938, 942 (1988). Nonetheless, the court's deference cannot allow the agency to deviate from the clearly expressed intent of Congress. Bd. of Governors of the Fed. Reserve Sys. v. Dimension Fin. Corp., 474 U.S. 361, 368, 106 S.Ct. 681, 686, 88 L.Ed.2d 691 (1986). The court will find a determination unlawful where Commerce has failed to carry out its duties properly, relied on inadequate facts or reasoning, or failed to provide an adequate basis for its conclusions. See Budd Co. Ry. Div. v. United States, 1 CIT 67, 70-76, 507 F.Supp. 997, 1000-04 (1980); Indus. Fasteners Group v. United States, 2 CIT 181, 190, 525 F.Supp. 885, 892-93 (1981).

III DISCUSSION

A. Commerce Erred In Valuing By-Products and In Adjusting Cost of Manufacturing to Reflect Their Value

As a general matter, Commerce will determine whether by-products of the manufacture of subject merchandise have a market value. Final Determination, 59 Fed.Reg. at 66900-01. If they do, Commerce will subtract that amount from the cost of manufacturing of the subject merchandise. Here, Rhone-Poulenc argues that Commerce overstated the value of the coumarin manufacturing by-products produced by JNPIEC's and TNPIEC's suppliers, i.e., Changzhou Perfumery ("Changzhou") and Tianjin Perfumery ("Tianjin"), respectively. The alleged over-statement arose from Commerce's failure to account for the reduction in the byproducts' value caused by their contamination with impurities.

During the investigation, Rhone-Poulenc informed the government that by-product valuation would be an issue in determining the coumarin producers' costs of production. "The Department also needs information regarding the quality and composition of the by-products in order to attribute any value to them.... Information on impurities is essential because their presence can wipe out the value of a chemical. Respondents reported consumption of phenol, which contaminates by-products and renders them nearly worthless if not removed...." Letters from Baker & Botts, L.L.P. to Hon. Ronald H. Brown, May 10, 1994, A.R. Fiche 44 at 62 & 78.

As a consequence of Rhone-Poulenc's letters, Commerce asked Changzhou and Tianjin, in deficiency questionnaires, to describe the quality and quantity of their by-products. In the questionnaire to Changzhou, Commerce directed: "Explain in more detail Changzhou's disposal of waste and by-products.... For each by-product, identify any distinguishing product characteristics (e.g., grade, form, etc.) that may be necessary in determining the appropriate surrogate value." I.T.A. Changzhou Section D Deficiency Questionnaire, May 19, 1994, A.R. Fiche 15 at 75. In the questionnaire to Tianjin, Commerce directed: "Explain in more detail Tianjin's disposal of waste and by-products ... In addition, for each by-product, report any distinguishing product characteristics (i.e., grade, quantity of impurities) that are necessary in determining the appropriate surrogate values." (Emphasis added) I.T.A., Tianjin Perfumery Section D Deficiency Questionnaire, May 19, 1994, A.R. Fiche 15 at 82. It is not clear why Commerce noted impurities specifically in the latter questionnaire and not in the former.

Changzhou's response to its questionnaire was deficient. In describing the characteristics of its by-products, it said only: "The HCL acid produced as a result of the salicylaldehyde production is at a concentration level. The second by-product, hypochlorite, is produced at concentration level (of HCL)." A.R. Fiche 50 at 75. It made no mention of acetic acid, another by-product of Changzhou's process and none of any impurities. Tianjin's response to its questionnaire similarly was deficient. It described the disposition of by-products, but neither their composition nor any impurities. A.R. Fiche 53 at 20.

After reviewing the deficiency questionnaire responses, Rhone-Poulenc sent additional letters to Commerce arguing that the government "should not make adjustments to FMV for alleged by-products" for either Changzhou or Tianjin. Letter from Baker & Botts, L.L.P. to Hon. Ronald H. Brown, July 18, 1994, A.R. Fiche 52 at 1. The primary reason stated was the two entities' failure to provide sufficient information regarding the composition...