Shandong Yongtai Grp. Co. v. United States

• Decision Date: 21 December 2020
• Docket Number: Slip Op. 20-182,Consol. Court No. 18-00077
• Parties: SHANDONG YONGTAI GROUP CO., LTD., Plaintiff, and Qingdao Sentury Tire Co., Ltd., Sentury Tire USA Inc., Sentury (Hong Kong) Trading Co., Limited, Pirelli Tyre Co., Ltd., Pirelli Tyre S.p.A., and Pirelli Tire LLC, Consolidated Plaintiffs, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

487 F.Supp.3d 1335

SHANDONG YONGTAI GROUP CO., LTD., Plaintiff,

and

Qingdao Sentury Tire Co., Ltd., Sentury Tire USA Inc., Sentury (Hong Kong) Trading Co., Limited, Pirelli Tyre Co., Ltd., Pirelli Tyre S.p.A., and Pirelli Tire LLC, Consolidated Plaintiffs,

v.UNITED STATES, Defendant.

Slip Op. 20-182

Consol. Court No. 18-00077

United States Court of International Trade.

December 21, 2020

Jordan C. Kahn and Ned H. Marshak, Grunfeld Desiderio Lebowitz Silverman & Klestadt, LLP, of New York, N.Y. and Washington, D.C., for Plaintiff Shandong Yongtai Group Co., Ltd.

Ned H. Marshak, Dharmendra N. Choudhary, and Jordan C. Kahn, Grunfeld Desiderio Lebowitz Silverman & Klestadt, LLP, of New York, N.Y. and Washington, D.C., for Consolidated Plaintiffs Qingdao Sentury Tire Co., Ltd., Sentury Tire USA Inc., and Sentury (Hong Kong) Trading Co., Limited.

Daniel L. Porter, James P. Durling, and Tung A. Nguyen, Curtis, Mallet-Prevost, Colt & Mosle LLP, of Washington, D.C., for Consolidated Plaintiffs Pirelli Tyre Co., Ltd., Pirelli Tyre S.p.A., and Pirelli Tire LLC.

Ashley Akers, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., for Defendant United States. With her on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director. Of counsel on the brief was Ayat Mujais, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce.

OPINION AND ORDER

Choe-Groves, Judge:

Before the court are the Final Results of Redetermination Pursuant to Remand, ECF Nos. 71, 72 ("Remand Results"), which the court ordered in Shandong Yongtai Group Co. v. United States ("Shandong Yongtai"), 43 CIT ––––, 415 F. Supp. 3d 1303 (2019).

The court assumes familiarity with the underlying facts and procedural history of this case. See id. at ––––, 415 F. Supp. 3d at 1306–17. This action arises from the administrative review by the U.S. Department of Commerce ("Commerce") of certain passenger vehicle and light truck tires from the People's Republic of China ("China"). Certain Passenger Vehicle and Light Truck Tires from the People's Republic of China ("Final Results"), 83 Fed. Reg. 11,690 (Dep't Commerce Mar. 16, 2018) (final results of antidumping duty administrative review and final determination of no shipments; 2015–2016); see Certain Passenger Vehicle and Light Truck Tires from People's Republic of China: Issues and Decision Mem. Final Results 2015–2016 Antidumping Duty Admin. Review, PD 502 (Mar. 9, 2018) ("Final IDM"); see also Decision Mem. Prelim. Results Antidumping Duty Admin. Review: Certain Passenger Vehicle and Light Truck Tires from People's Republic of China, PD 420 (Aug. 31, 2017) ("Prelim. IDM").

Commerce filed the Remand Results in response to the court's opinion in Shandong Yongtai. Remand Results at 1. Plaintiff Shandong Yongtai Group Co., Ltd. ("Shandong Yongtai" or "Plaintiff") filed comments in partial support of the Remand Results. Shandong Yongtai's Comments Supp. Remand, ECF No. 82 ("Pl. Cmts."). Consolidated Plaintiffs Qingdao Sentury Tire Co., Sentury (Hong Kong) Trading Co., and Sentury Tire USA Inc. (collectively, "Sentury") filed comments in partial opposition to the Remand Results. Sentury's Comments Opp'n Remand, ECF No. 77 ("Sentury Opp'n Cmts."). Sentury filed additional comments in partial support of the Remand Results. Sentury's Comments Supp. Remand, ECF No. 83 ("Sentury Supp. Cmts."). Consolidated Plaintiffs Pirelli Tyre Co., Pirelli Tire LLC, and Pirelli Tyre S.p.A. (collectively, "Pirelli") filed comments in opposition to the Remand Results. Comments Consol. Pls. Pirelli Tyre Commerce's Redetermination Remand, ECF Nos. 78, 79 ("Pirelli's Comments" or "Pirelli Cmts.").¹ Defendant United States ("Defendant") filed a reply to all comments in opposition to the Remand Results. Def.’s Resp. Pls.’ Comments Dep't Commerce's Remand Results, ECF Nos. 84, 85 ("Def. Resp.").

For the reasons that follow, the court sustains in part and remands in part the Remand Results to Commerce for further consideration.

ISSUES PRESENTED

This case presents the following issues:

1. Whether Commerce's deduction of a value-added-tax ("VAT") from Sentury's export price is in accordance with the law and supported by substantial evidence;

2. Whether Commerce's assignment of the China-wide entity rate to Pirelli is supported by substantial evidence;

3. Whether Commerce's determination to make an export subsidy adjustment for the Export Buyer's Credit Program ("EBCP") is in accordance with the law; and

4. Whether Commerce's determination that Plaintiff is the successor-in-interest to Shandong Yongtai Chemical Co., Ltd. ("Shandong Yongtai Chemical") is supported by substantial evidence.

JURISDICTION AND STANDARD OF REVIEW

The court has jurisdiction pursuant to 28 U.S.C. § 1581(c) and 19 U.S.C. § 1516a(a)(2)(B)(iii). The court will hold unlawful any determination found to be unsupported by substantial evidence on the record, or otherwise not in accordance with the law. 19 U.S.C. § 1516a(b)(1)(B)(i).

DISCUSSION

I. Commerce's Deduction of Irrecoverable VAT

The first issue considered by the court is whether Commerce's calculation of a VAT deduction to Sentury's export price is in accordance with the law and supported by substantial evidence. In the Final Results, Commerce determined that Sentury's irrecoverable VAT was an "other charge imposed" by China pursuant to 19 U.S.C. § 1677a(c)(2)(B). See Shandong Yongtai, 43 CIT at ––––, 415 F. Supp. 3d at 1312–13 ; see also Final IDM at 15–16. Commerce reduced Sentury's export price² by using a two-step methodology to (1) determine the irrecoverable VAT on subject merchandise, and (2) reduce Sentury's export price by the amount determined in step one. Final IDM at 16. The court remanded to Commerce for further explanation of how Sentury's irrecoverable VAT was properly the subject of a downward adjustment to Sentury's export price pursuant to 19 U.S.C. § 1677a(c)(2)(B). Shandong Yongtai, 43 CIT at ––––, 415 F. Supp. 3d at 1313–14.

Commerce used the same methodology on remand and determined that Sentury's irrecoverable VAT was an other charge imposed by China pursuant to 19 U.S.C. § 1677a(c)(2)(B). Remand Results at 9–20. Commerce asserted that it was authorized to deduct Sentury's irrecoverable VAT from the export price because Commerce could deduct the amount, if included in the price, of any export tax, duty, or other charge imposed by the exporting country on the exportation of the subject merchandise to the United States under 19 U.S.C. § 1677a(c)(2)(B). Id. at 10–16. Sentury opposed Commerce's methodology as contrary to law by contradicting the plain meaning of the statute and legislative history, and as unsupported by substantial evidence. Sentury Opp'n Cmts. at 2–12, 25–29.

When calculating export price or constructed export price of the subject merchandise, Commerce is directed by statute to make certain additions to, and deductions from, the starting prices used for determining the export price or constructed export price of the subject merchandise. 19 U.S.C. § 1677a(c), (d). Some of these adjustments are made to achieve a tax-neutral comparison between the export price or the constructed exported price and normal value. See 19 U.S.C. §§ 1677a(c) (adjustments to be made when determining export price and constructed export price); 1677b(a)(6) (adjustments to be made when determining normal value); see also China Mfrs. All., LLC v. United States, 43 CIT ––––, ––––, 357 F. Supp. 3d 1364, 1370 (2019) ; Fed. Mogul Corp. v. United States, 63 F.3d 1572, 1580 (Fed. Cir. 1995) ; Jiangsu Senmao Bamboo & Wood Indus. Co. v. United States, 44 CIT ––––, ––––, 435 F. Supp. 3d 1278, 1289 (2020).

Upward tax-related adjustments to the export price or the constructed export price are made to reduce a dumping margin and account for any import duties imposed by the country of exportation that have been rebated, or not collected, by reason of the exportation of the subject merchandise to the United States. See 19 U.S.C. § 1677a(c)(1)(B). Such duties are added to the export price or the constructed price to allow a tax-neutral comparison with the home market price of the foreign like product. If import duties are irrecoverable, i.e., not rebated or avoided by reason of the exportation, the duties are included presumably in the export price or constructed export price, and no upward or downward adjustment is made because the price comparison is already tax-neutral. The Tariff Act treats domestic VATs of an exporting country similar to its treatment of import duties imposed by an exporting country: i.e., a dumping margin potentially may be reduced for VATs imposed on a finished good, or the materials used to produce it, if those taxes are refunded or avoided due to the exportation of the good. Under the statute, a domestic VAT, whether or not refunded or avoided by reason of the exportation of the finished good, does not increase a dumping margin.

Downward tax-related adjustments to the export price or the constructed export price are made to increase a dumping margin and to account for an export tax, duty, or other charge imposed on the exportation of the subject merchandise to the United States, if included in the export price or the constructed export price. 19 U.S.C. § 1677a(c)(2)(B). A domestic VAT is presumed to be included in the price of the subject merchandise and also in the price of the foreign like product. Thus, 19 U.S.C. § 1677a(c)(2)(B) does not permit any downward adjustments to the export price or the constructed export price for domestic VAT, as no such adjustment is necessary or appropriate to achieve tax-neutrality.

Commerce stated that the record showed that the total domestic VAT applied to tires during the period of review was 17% and the alleged VAT refund rate was 9%. Remand Results at 19. Commerce determined that Sentury's irrecoverable VAT was 8%. Id....