Thai Plastic Bags Indus. Co. v. United States, 2013–1322.

• Decision Date: 31 March 2014
• Docket Number: No. 2013–1322.,2013–1322.
• Parties: THAI PLASTIC BAGS INDUSTRIES CO., LTD., Plaintiff–Appellant, v. UNITED STATES, Defendant–Appellee, and Polyethylene Retail Carrier Bag Committee, Hilex Poly Co., LLC, and Superbag Corporation, Defendants–Appellees.
• Court: U.S. Court of Appeals — Federal Circuit

746 F.3d 1358

THAI PLASTIC BAGS INDUSTRIES CO., LTD., Plaintiff–Appellant,

v.UNITED STATES, Defendant–Appellee,andPolyethylene Retail Carrier Bag Committee, Hilex Poly Co., LLC, and Superbag Corporation, Defendants–Appellees.

No. 2013–1322.

United States Court of Appeals,Federal Circuit.

March 31, 2014.

Irene H. Chen, Chen Law Group LLC, of Rockville, Maryland, argued for plaintiff-appellant.

Ryan M. Majerus, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief were Stuart F. Delery, Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director. Of counsel on the brief was Scott D. McBride, Senior Attorney, Office of the Chief Counsel for Import Administration, United States Department of Commerce, of Washington, DC.

Daniel L. Schneiderman, King & Spalding, of Washington, DC, argued for defendants-appellees. With him on the brief was Joseph W. Dorn.

Before PROST, WALLACH, and CHEN, Circuit Judges.

WALLACH, Circuit Judge.

Appellant Thai Plastic Bags Industries, Co., Ltd. (“TPBI”) appeals the decision of the United States Court of International Trade (“CIT”) affirming the United States Department of Commerce's (“Commerce”) Final Results of the Fifth Administrative Review of the Antidumping Duty Order covering polyethylene retail carrier bags (“PRCBs” or “subject merchandise”) from Thailand. Appellees are the United States, Polyethylene Retail Carrier Bag Committee, Hilex Poly Co., LLC, and Superbag Corporation. Because the CIT properly found Commerce's determinations are supported by substantial evidence and in accordance with law, this court affirms.

Background

In September 2009, Commerce initiated the Fifth Administrative Review of the Antidumping Duty Order covering TPBI's subject merchandise during the 2008—2009 period of review. SeePolyethylene Retail Carrier Bags From Thailand, 76 Fed.Reg. 12,700 (Dep't of Commerce Mar. 8, 2011) (final results of antidumping duty administrative review) (“Final Results”). The antidumping statute governs the application of remedial duties to foreign merchandise sold, or likely to be sold, in the United States “at less than its fair value.” 19 U.S.C. § 1673 (2006).

During administrative reviews, Commerce strives to create a fair comparison between the export price (or constructed export price) of a foreign producer's sales and its home market sales (or “normal value”). See id. § 1677b(a). Normal value is the price at which the foreign like product ¹ is first sold in the exporting country, “in the usual commercial quantities and in the ordinary course of trade and, to the extent practicable, at the same level of trade as the export price or constructed export price.” Id. § 1677b(a)(1)(A), (B)(i). If the price of an item in the home market (normal value) is higher than the price for the same item in the United States (export price), then the comparison produces a positive number, indicating that dumping has occurred. Id. § 1677(35)(A) (The antidumping duty margin is “the amount by which the normal value exceeds the export price or constructed export price of the subject merchandise.”).

In calculating normal value, if Commerce “has reasonable grounds to believe or suspect that sales of the foreign like product ... have been made at prices which represent less than the [cost of production (“COP”) ] of that product,” Commerce “determine[s] whether, in fact, such sales were made at less than the [COP].” Id.§ 1677b(b)(1). If so, and if certain other conditions are met, Commerce may disregard such sales in the determination of normal value (“the below-cost test”). If no foreign like product sales remain after conducting the below-cost test, Commerce may determine the normal value based on a constructed value (“CV”) of the foreign like product. Id.§ 1677b(a)(4). “Commerce uses the same method to calculate ‘costs' for both COP and CV.” Thai Plastic Bags Indus. Co. v. United States ( Thai Plastic I ), 853 F.Supp.2d 1267, 1270 (Ct. Int'l Trade 2012). At issue is Commerce's method of calculating the normal value of TPBI's merchandise based on a CV, once Commerce determined that the sales in the exporting country of the foreign like product had been made at prices below the COP. When calculating the COP (for the below-cost test) and the CV,

[c]osts shall normally be calculated based on the records of the exporter or producer of the merchandise, if such records are kept in accordance with the generally accepted accounting principles [ (“GAAP”) ] of the exporting country ... and reasonably reflect the costs associated with the production and sale of the merchandise.

19 U.S.C. § 1677b(f)(1)(A).

Here, Commerce “disregarded the below-cost sales of TPBI” in the previous administrative review. Polyethylene Retail Carrier Bags from Thailand, 75 Fed.Reg. 53,953–54 (Dep't of Commerce Sept. 2, 2010) (preliminary results of antidumping duty administrative review) (“Preliminary Results”). Thus, Commerce had “reasonable grounds” to suspect “TPBI's sales of the foreign like product under consideration for the determination of normal value in this review may have been made at prices below the [COP].” Id.; see19 U.S.C. § 1677b(2)(A)(ii). Accordingly, Commerce conducted a COP analysis of TPBI's sales in Thailand. In its initial questionnaire for the Fifth Review, Commerce requested that TPBI report its COP for the subject merchandise, and allocate those costs across the different products based on the physical characteristics of the products.

In its initial questionnaire response, TPBI reported its COP for the subject merchandise sold in the United States and Thailand. In doing so, TPBI assigned each product a unique control number (“CONNUM”) and reported a per-unit COP for each CONNUM. TPBI reported the actual costs per job order for most of its incurred costs, and it allocated those actual costs on a per-unit basis by reference to the physical characteristics of individual CONNUMs.

For labor and overhead, however, TPBI's cost-accounting system calculated a per-kilogram average cost taken over a three-month period for all CONNUMs. TPBI's labor and overhead records reflected only the total conversion costs. ² Therefore, TPBI's financial accounting system did not record labor and overhead costs (fixed and variable) on an actual product-specific (i.e., CONNUM-specific) level.³

Thus, “TPBI did not follow its normal cost-accounting system for purposes of reporting labor and overhead costs,” and instead used a method for cost allocation for labor and overhead costs based on “machine times” (also referred to as “machine hours”) derived from its accounting system. J.A. 5546. This method was created solely for the purpose of reporting to Commerce.

Subsequently, Commerce issued supplemental questionnaires requesting, inter alia, additional information pertaining to the cost-allocation methodology TPBI employed in reporting its labor and overhead costs. Commerce asked TPBI to report its “standard costs recorded in TPBI's normal books and records, adjusted to the actual costs,” and explain why the reported costs for nine pairs of CONNUMs that were physically similar were “so different.” J.A. 4803.

In response, TPBI claimed that actual costs were “driven by many variables, and not just physical characteristics.” J.A. 4834. TPBI also explained “disparities in the production quantities between the compared CONNUM groupings,” rather than physical characteristics, were “largely responsible for the cost differences.” J.A. 4835. TPBI listed some of the variables as “production efficiencies and different costs structures at each factory, as well as the day-to-day requirements of individual production runs and customer orders.” J.A. 4834. TPBI proposed another allocation method based on production output, which was derived from TPBI's accounting system, and again, was developed solely for the purpose of reporting to Commerce.

In September 2010, Commerce published its Preliminary Results, where it determined that TPBI's reported allocation methodology “unreasonably distort [ed]” the cost of manufacturing for the subject merchandise and the foreign like product. Preliminary Results, 75 Fed.Reg. at 53,955. Specifically, Commerce found the reported methodologies were “inconsistent with the methodology applied by TPBI in its books and records,” and “result[ed] in a large variability in costs that have nothing to do with physical differences in the merchandise.” Id. Commerce instead weight-averaged TPBI's labor and overhead costs “on a per unit basis” to prevent those significant costs differences between physically similar merchandise. Id. Commerce relied on an analysis similar to a “DIFMER” (“difference in physical characteristics” or “difference-in-merchandise”) application, even though the terms of the DIFMER regulation apply to calculating price, not costs.⁴ Specifically, Commerce “recalculated [TPBI's] costs by averaging them in order to prevent large discrepancies in costs between merchandise that was physically similar.” Thai Plastic I, 853 F.Supp.2d at 1273. Commerce then factored in these adjusted costs in determining the COP and the CV for the “normal value” of the subject merchandise. After calculating costs, Commerce also applied a DIFMER adjustment pursuant to the DIFMER regulation, explaining “[b]ecause we assigned the same conversion costs to all models, any DIFMERadjustment[ ] we calculate is based solely on the differences in the costs of materials.” J.A. 5549.

Commerce published the Final Results on March 8, 2011, in which it continued to reject TPBI's reported conversion costs, concluding that TPBI's methodology did not reasonably reflect actual costs because it “results in products with few or minor physical differences having significantly different [costs of manufacturing] assigned to them.” J.A. 5545; see Thai Plastic I, 853...