Shenzhen Xinboda Indus. Co., Ltd. v. United States

• Decision Date: 15 December 2017
• Docket Number: Court No. 11–00267,Slip Op. 17–166
• Citation: 279 F.Supp.3d 1265
• 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

279 F.Supp.3d 1265

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. 17–166

Court No. 11–00267

United States Court of International Trade.

Dated: December 15, 2017

Gregory S. Menegaz, deKieffer & Horgan, PLLC, of Washington, D.C., argued for Plaintiff. With him on the briefs were J. Kevin Horgan and Alexandra H. Salzman.

Richard P. Schroeder, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington D.C., argued for Defendant. With him on the briefs were Joyce R. Branda, Acting Assistant Attorney General, Civil Division, and Jeanne E. Davidson, Director, and Reginald T. Blades, Jr., Assistant Director, Commercial Litigation Branch. Of counsel on the briefs were Justin R. Becker and Khalil Gharbieh, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of Washington, D.C.

Michael J. Coursey, Kelley Drye & Warren LLP, of Washington D.C., argued for Defendant–Intervenors. With him on the brief was 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. The period of review is November 1, 2008 through October 31, 2009. 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 (Dep't Commerce 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").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 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 1338, 1388. Now pending are Commerce's Remand Results, filed pursuant to Shenzhen Xinboda I.See generally Final Results of Redetermination Pursuant to Remand (SAR Pub. Doc. No. 7) ("Remand Results").

Xinboda is satisfied with Commerce's Remand Results as to the surrogate value for labor, as well as Commerce's exclusion of certain transportation expenses in determining the surrogate value for whole raw garlic bulbs. See Remand Results at 3, 29, 57 (surrogate value for labor); id. at 3, 8–9, 47–48 (surrogate value for whole raw garlic bulbs); Plaintiff's Comments on Remand Redetermination ("Pl.'s Brief") at 1 n.1. However, Xinboda contends that the Remand Results are flawed in all other respects. See generally Pl.'s Brief; Plaintiff's Reply to Response Comments on Remand Redetermination ("Pl.'s Reply Brief").²

In contrast, the Government and the Defendant–Intervenors the Fresh Garlic Producers Association, Christopher Ranch, L.L.C., The Garlic Company, Valley Garlic, and Vessey and Company, Inc. (collectively, the "Domestic Producers") assert that the Remand Results are both supported by substantial evidence and in accordance with law. The Government and the Domestic Producers maintain that the Remand Results therefore should be sustained. See generally Defendant's Response to Comments Regarding the Remand Redetermination ("Def.'s Brief"); Defendant–Intervenors' Response to Plaintiff's Comments on Remand Redetermination ("Def.–Ints.' Brief").

Jurisdiction lies under 28 U.S.C. § 1581(c) (2006).³ For the reasons set forth below, the Remand Results are sustained as to the surrogate value for labor and Commerce's application of zeroing in this administrative review. The surrogate value for whole raw garlic bulbs and the selection of surrogate financial statements are again remanded, for Commerce's further consideration.

I. Background

Shenzhen Xinboda I laid out the relevant statutory scheme, including citations to the statute and other pertinent authorities. That explanation, together with other relevant background, is summarized below, in the interests of convenience and completeness.

As Shenzhen Xinboda I explained, dumping occurs when goods are imported into the United States and sold at a price lower than their "normal value," resulting in material injury (or the threat of material injury) to the U.S. industry. The difference between the normal value of the goods and the U.S. price is the "dumping margin." When normal value is compared to the U.S. price and dumping is found, antidumping duties equal to the dumping margin are imposed to offset the dumping. See Shenzhen Xinboda I, 38 CIT at ––––, 976 F.Supp.2d at 1338 (and authorities cited there).

When the exporting country is a market economy country, normal value generally is calculated using either the price in the exporting market (i.e. , the price in the "home market" where the goods are produced) or the cost of production of the goods.⁴ However, where as here the exporting country has a non-market economy, there is often concern that the factors of production (inputs) that are consumed in producing the goods at issue are under state control, and that home market sales therefore may not be reliable indicators of normal value. See Shenzhen Xinboda I, 38 CIT at ––––, 976 F.Supp.2d at 1338 (and authorities cited there).

In such cases, Commerce identifies one or more market economy countries to serve as a "surrogate" and then "determine[s] the normal value of the subject merchandise on the basis of the value of the factors of production" (i.e. , the value of the inputs) in the relevant surrogate country or countries, including "an amount for general expenses and profit plus the cost of containers, coverings, and other expenses." This surrogate value analysis is designed to determine a producer's costs of production as if the producer operated in a hypothetical market economy country. See Shenzhen Xinboda I, 38 CIT at ––––, 976 F.Supp.2d at 1338–39 (and authorities cited there).

Under the statute, factors of production "include, but are not limited to (A) hours of labor required, (B) quantities of raw materials employed, (C) amounts of energy and other utilities consumed, and (D) representative capital cost, including depreciation." See Shenzhen Xinboda I, 38 CIT at –––– n.4, 976 F.Supp.2d at 1338 n.4 ; 19 U.S.C. § 1677b(c)(3). However, valuing the factors of production (inputs) consumed in producing goods does not capture (1) manufacturing/factory overhead, (2) selling, general, and administrative expenses ("SG & A"), and (3) profit. Commerce calculates those surrogate values using ratios known as "surrogate financial ratios" that the agency derives from the financial statements of one or more surrogate companies that produce identical (or at least comparable) merchandise in the relevant surrogate market economy country. See Shenzhen Xinboda I, 38 CIT at ––––, 976 F.Supp.2d at 1343–44 (and authorities cited there). As discussed in greater detail below, Commerce's selection of surrogate financial statements continues to be at issue here.

In certain circumstances, where Commerce finds that the available information on the value of factors of production is not adequate for purposes of determining the normal value of the goods at issue pursuant to the agency's standard "factors of production" methodology (described above), Commerce determines the surrogate value of an "intermediate input" instead. Under Commerce's so-called "intermediate input methodology," rather than valuing the various individual "upstream" factors of production that are used to produce an intermediate input, Commerce directly values the "downstream" intermediate input itself. See Shenzhen Xinboda I, 38 CIT at ––––, 976 F.Supp.2d at 1339 (and authorities cited there). As discussed in greater detail below, Commerce has used its intermediate input methodology to determine the surrogate value for whole raw garlic bulbs here. That value continues to be contested.

The underlying antidumping order in this case, which dates back to 1994, covers imports of fresh garlic from China, including whole garlic bulbs and peeled garlic cloves (the products exported by Xinboda). As noted above, this action involves the fifteenth administrative review of that antidumping order, covering the period November 1, 2008 through October 31, 2009. See Shenzhen Xinboda I, 38 CIT at ––––, 976 F.Supp.2d at 1340. Commerce selected India as the primary surrogate country for purposes of this review (as in prior reviews), and used data from India to calculate the surrogate values for all factors of production, with the sole exception of labor. See id. , CIT at ––––, 976 F.Supp.2d at 1340 (and authorities cited there).

Surrogate Value for Whole Raw Garlic Bulbs. In the course of the administrative review, Commerce compiled voluminous information concerning Xinboda and its operations, particularly the company's exports of whole garlic bulbs and peeled garlic cloves to the U.S. from China. Commerce similarly compiled detailed information on Zhenzhou Dadi Garlic Industry Co.,...