Shenzhen Xinboda Indus. Co. v. United States

• Decision Date: 30 January 2019
• Docket Number: Slip Op. 19-16,Court No. 11-00267
• Parties: SHENZHEN XINBODA INDUSTRIAL CO., LTD., Plaintiff, v. UNITED STATES, Defendant, and Fresh Garlic Producers Association, Christopher Ranch, L.L.C., The Garlic Company, Valley Garlic, and Vessey and Company, Inc., Defendant-Intervenors.
• Court: U.S. Court of International Trade

361 F.Supp.3d 1337

SHENZHEN XINBODA INDUSTRIAL CO., LTD., Plaintiff,

v. UNITED STATES, Defendant,andFresh Garlic Producers Association, Christopher Ranch, L.L.C., The Garlic Company, Valley Garlic, and Vessey and Company, Inc., Defendant-Intervenors.

Slip Op. 19-16

Court No. 11-00267

United States Court of International Trade.

Dated: January 30, 2019

Gregory S. Menegaz, Judith L. Holdsworth, Alexandra H. Salzman, and J. Kevin Horgan, deKieffer & Horgan, PLLC, of Washington, D.C., appeared for Plaintiff.

Richard P. Schroeder, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., appeared for Defendant, joined by Chad A. Readler, Assistant Attorney General, Civil Division, and Jeanne E. Davidson, Director, and Reginald T. Blades, Jr., Assistant Director, Commercial Litigation Branch. Of counsel was Emma T. Hunter, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, D.C.

Michael J. Coursey, Kelley Drye & Warren LLP, of Washington, D.C., appeared for Defendant-Intervenors, joined by John M. Herrmann.

RIDGWAY, Judge:

Plaintiff Shenzhen Xinboda Industrial Co., Ltd. ("Xinboda") – a Chinese exporter of fresh garlic – commenced this action to contest the Final Determination in the U.S. Department of Commerce's fifteenth administrative review of the antidumping duty order covering fresh garlic from the People's Republic of China. See Fresh Garlic from the People's Republic of China: Final Results and Final Rescission, in Part, of the 2008-2009 Antidumping Duty Administrative Review, 76 Fed. Reg. 37, 321 (June 27, 2011) ("Final Determination"); Issues and Decision Memorandum for the Final Results of the 15th Administrative Review of Fresh Garlic from the People's Republic of China (June 20, 2011) (AR Pub. Doc. No. 176) ("Issues & Decision Memorandum"); see generally Shenzhen Xinboda Industrial Co. v. United States, 38 CIT ––––, 976 F.Supp.2d 1333 (2014) (" Shenzhen Xinboda I"); Shenzhen Xinboda Industrial Co. v. United States, 41 CIT ––––, 279 F.Supp.3d 1265 (2017) (" Shenzhen Xinboda II").¹ In its Complaint, Xinboda challenged Commerce's decisions in its Final Determination as to the surrogate financial statements used to derive surrogate financial ratios, the surrogate value for labor (i.e. , the surrogate wage rate), and the surrogate value for fresh whole raw garlic bulbs, as well as the agency's application of its "zeroing" methodology in calculating Xinboda's dumping margin. See generally Complaint; see also Shenzhen Xinboda I, 38 CIT at ––––, 976 F.Supp.2d at 1345-46.

Ruling on Xinboda's Motion for Judgment on the Agency Record, Shenzhen Xinboda I remanded this matter to Commerce for further consideration of all four issues, including a voluntary remand on the surrogate value for labor. See generally Shenzhen Xinboda I, 38 CIT at ––––, 976 F.Supp.2d at 1388. Shenzhen Xinboda II sustained Commerce's remand determination as to the surrogate value for labor and the agency's application of zeroing, but remanded the matter for a second time to permit Commerce to further consider the surrogate value for garlic bulbs and the selection of financial statements. See generally Shenzhen Xinboda II, 41 CIT at ––––, 279 F.Supp.3d at 1265et seq .; Final Results of Redetermination Pursuant to Remand (SAR Pub. Doc. No. 7) ("First Remand Results").

Now pending are Commerce's Second Remand Results, which have been filed under protest as to the surrogate value for garlic bulbs. See generally Final Results of Redetermination Pursuant to Remand ("Second Remand Results"). Jurisdiction lies under 28 U.S.C. § 1581(c) (2006).² For the reasons set forth below, the Second Remand Results must be sustained.

I. Background

Shenzhen Xinboda I set forth the relevant statutory scheme, including statutory citations and other pertinent authorities. See Shenzhen Xinboda I, 38 CIT at ––––, 976 F.Supp.2d at 1338-45. That explanation, together with other relevant background, was summarized in Shenzhen Xinboda II, in the interests of convenience and completeness. See Shenzhen Xinboda II, 41 CIT at ––––, 279 F.Supp.3d at 1269-76. The discussion below is largely limited to the two issues addressed in the Second Remand Results – the surrogate value for garlic bulbs and the selection of surrogate financial statements.

Commerce's Surrogate Value for Garlic Bulbs. In the course of the underlying administrative review, Commerce compiled voluminous information on Xinboda and its operations, particularly the company's exports of garlic to the U.S. from China. Commerce similarly compiled detailed information on Zhenzhou Dadi Garlic Industry Co., Ltd. ("Dadi"), the affiliated processor/producer that supplied Xinboda with garlic products that Dadi produced from the fresh whole raw garlic bulbs that Dadi purchased from local Chinese garlic farmers. Dadi processed the whole raw garlic bulbs that it purchased – which had diameters of between 50 mm and 65 mm – into whole garlic bulbs and peeled garlic cloves for Xinboda. See Shenzhen Xinboda II, 41 CIT at ––––, 279 F.Supp.3d at 1271.

To produce whole fresh garlic, Chinese garlic farmers delivered to Dadi whole raw garlic bulbs, sorted by size, in large mesh bags. Dadi workers sitting at tables in a simple warehouse then rub off the outer skins of the whole raw garlic bulbs (to give the bulbs a clean white appearance), cut or trim the roots and stems, place the bulbs into small mesh bags (typically holding three to five bulbs, depending on the customer), and affix the customer's labels to seal the bags. Bags are then packed into cartons, ready for shipping. Dadi's process for the production of peeled garlic cloves is similarly simple and straightforward. See Shenzhen Xinboda II, 41 CIT at ––––, 279 F.Supp.3d at 1271.

As a surrogate value for the whole raw garlic bulbs that Chinese farmers delivered to Dadi, Commerce's Final Determination relied on size-specific prices for garlic bulbs sold at a large produce market in India (the surrogate market economy country in this case). Specifically, Commerce used the prices for bulbs sold at the Azadpur Market (located near Delhi), as published in the Azadpur Market Information Bulletin. Commerce rejected the other potential sources of data on the record based on Commerce's determination that those sources do not specify the size of the garlic bulbs that were priced. See Shenzhen Xinboda II, 41 CIT at ––––, 279 F.Supp.3d at 1272.³

To value the raw garlic bulbs delivered to Dadi that had a diameter of greater than 55 mm, the Final Determination relied on non-contemporaneous Azadpur Market prices for garlic bulbs classified as "grade S.A." (or "Super-A"), which Commerce then indexed (inflated) to be contemporaneous with the dates of the period of review. Commerce used non-contemporaneous prices to value this larger-bulb garlic because the Azadpur Market Bulletin ceased publishing prices for grade S.A. garlic some months before the period of review. See Shenzhen Xinboda II, 41 CIT at ––––, 279 F.Supp.3d at 1272.

To value the garlic bulbs delivered to Dadi that were somewhat smaller (with a diameter of between 50 mm and 55 mm), the Final Determination averaged the non-contemporaneous but indexed Azadpur Market prices for grade S.A. bulbs (described above) together with contemporaneous Azadpur Market prices for "grade A" garlic (i.e. , prices for grade A garlic from within the period of review). See Shenzhen Xinboda II, 41 CIT at ––––, 279 F.Supp.3d at 1272.

Xinboda has contested Commerce's use of the Azadpur Market prices, asserting three different claims – that Commerce's calculations are (in effect) tainted by "double-counting" because the garlic bulbs delivered to Dadi are less highly processed than those sold at the Azadpur Market; that the Azadpur Market prices include substantial "intermediary" expenses that Dadi did not incur; and that Commerce should exclude prices for grade S.A. garlic from its calculations because the prices for grade A garlic already include the larger-bulb garlic that was previously sold as grade S.A. Commerce has rejected each of the three claims. See Shenzhen Xinboda II, 41 CIT at ––––, 279 F.Supp.3d at 1274-75 ; First Remand Results at 3-14, 44-47; Issues & Decision Memorandum at 10-15 (Comment 3).

The Selection of Surrogate Financial Statements. Valuing the various direct inputs that are used to produce goods does not capture certain costs that must be factored into prices – specifically, manufacturing/factory overhead, selling, general and administrative expenses ("SG & A"), and profit. Commerce calculates surrogate values for those three items using surrogate financial ratios that it derives from the financial statements of one or more companies that produce the same or comparable merchandise in the surrogate market economy country. In its Final Determination here, Commerce derived Xinboda's surrogate financial ratios from the unconsolidated financial statements of Tata Global Beverages Limited (specifically, Tata Tea), an Indian company that grows, processes, and sells coffee and tea products. See Shenzhen Xinboda II, 41 CIT at ––––, 279 F.Supp.3d at 1273.

Because Congress directed Commerce to disregard a company's data (whenever possible) where the agency has "reason to believe or suspect" that the company may have received subsidies, Commerce selected the financial statements of Tata Tea over the other sets of financial statements on the record based on, inter alia , Commerce's determination that all but one of the other five had received subsidies that the agency had previously determined to be countervailable. See Omnibus Trade and Competitiveness Act of 1988, Conference Report to Accompany H.R. 3, H.R. Rep. No. 100-576 at 590-91 (1988), reprinted in 1988 U.S.C.C.A.N. 1547, 1623-24) (stating that, in determining surrogate values for factors of production, "Commerce shall avoid using any prices which it has reason to believe or suspect may be dumped or...