Zhaoqing Tifo New Fibre Co. v. United States

Citation60 F.Supp.3d 1328
Decision Date09 April 2015
Docket NumberCourt No. 13–00044.,Slip Op. 15–31.
PartiesZHAOQING TIFO NEW FIBRE CO., LTD., Plaintiff, v. UNITED STATES, Defendant, and DAK Americas LLC, Defendant–Intervenor.
CourtU.S. Court of International Trade

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

Ryan M. Majerus, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington D.C., argued for Defendant. With him on the briefs were Benjamin C. Mizer, Assistant Attorney General, Civil Division, and Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch. Of counsel on the briefs was Shana Hofstetter, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of Washington, D.C.

David C. Smith, Kelley Drye & Warren LLP, of Washington, D.C., argued for DefendantIntervenor. With him on the briefs were Paul C. Rosenthal and Benjamin Blase Caryl.

OPINION

RIDGWAY, Judge:

In this action, Plaintiff Zhaoqing Tifo New Fibre Co., Ltd. (Zhaoqing Tifo)—a Chinese producer and exporter of polyester staple fiber—contests the final results of the U.S. Department of Commerce's fourth administrative review of the antidumping duty order covering polyester staple fiber from the People's Republic of China. See Certain Polyester Staple Fiber From the People's Republic of China: Final Results of Antidumping Duty Administrative Review; 20102011, 78 Fed.Reg. 2366 (Jan. 11, 2013) (“Final Results”); Issues and Decision Memorandum for the Final Results of the 2010–2011 Administrative Review (Jan. 4, 2013) (Pub. Doc. No. 108) (“Issues & Decision Memorandum”).1

Pending before the Court is Plaintiff's Motion for Judgment on the Agency Record, in which Zhaoqing Tifo contends that the antidumping margin calculated by Commerce in the Final Results “double counts” certain energy costs and is therefore too high.See generally Plaintiff's Rule 56.2 Memorandum Re Counts I–IV of the Complaint in Support of Judgment on the Agency Record (“Pl.'s Brief”); Plaintiff's Rule 56.2 Reply Brief (“Pl.'s Reply Brief”).

The Government opposes Zhaoqing Tifo's motion, arguing that the company failed to exhaust its administrative remedies, and that, in any event, Commerce's treatment of energy costs in the Final Results is supported by substantial evidence and otherwise in accordance with law. The Government thus maintains that Commerce's determination should be sustained. See generally, e.g., Defendant's Response to Plaintiff's Rule 56.2 Motion for Judgment Upon the Agency Record (“Def.'s Response Brief”). Notably, the Government does not directly address the merits of Zhaoqing Tifo's claim that the treatment of energy costs in the Final Results led to double counting. Id. Like the Government, the DefendantIntervenor—DAK Americas LLC (the Domestic Producer)—similarly contends that Zhaoqing Tifo's motion is barred by the doctrine of exhaustion, and, moreover, asserts that there is no double counting. See generally, e.g., DefendantIntervenor's Response Brief in Opposition to Plaintiff's Motion for Judgment Upon the Agency Record (“Def.-Int.'s Response Brief”).

Jurisdiction lies under 28 U.S.C. § 1581(c) (2006).2 For the reasons set forth below, Zhaoqing Tifo's Motion for Judgment on the Agency Record must be granted and this matter remanded to Commerce for further consideration.

I. Background

Dumping occurs when merchandise is imported into the United States and sold at a price lower than its “normal value,” resulting in material injury (or the threat of material injury) to the U.S. industry. See 19 U.S.C. §§ 1673, 1677(34), 1677b(a). The difference between the normal value of the merchandise and the U.S. price is the “dumping margin.” See 19 U.S.C. § 1677(35). 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 19 U.S.C. § 1673 ; see generally Dorbest Ltd. v. United States, 604 F.3d 1363, 1367 (Fed.Cir.2010).

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, when the exporting country is a market economy country. See 19 U.S.C. § 1677b.3 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 merchandise at issue are under state control, and that home market sales therefore may not be reliable indicators of normal value. See 19 U.S.C. § 1677(18)(A) ; see generally Dorbest, 604 F.3d at 1367.

In cases such as this, where Commerce concludes that concerns about the sufficiency or reliability of the available data do not permit the normal value of the merchandise to be determined in the typical manner, 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” in the relevant surrogate country or countries,4 including “an amount for general expenses and profit plus the cost of containers, coverings, and other expenses.” See 19 U.S.C. § 1677b(c)(1), (4). This surrogate value analysis is designed to determine a producer's costs of production as if the producer operated in a hypothetical market economy.See, e.g., Downhole Pipe & Equipment, L.P. v. United States, 776 F.3d 1369, 1375 (Fed.Cir.2015) (explaining that “Commerce ‘attempt [s] to construct a hypothetical market value of [a] product’ in the nonmarket economy” at issue (quoting Nation Ford Chemical Co. v. United States, 166 F.3d 1373, 1375 (Fed.Cir.1999) )).

Factors of production to be valued “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 19 U.S.C. § 1677b(c)(3) ; see generally Dorbest, 604 F.3d at 1367–68. However, valuing the factors of production consumed in producing subject merchandise does not capture certain items such as (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 companies that produce identical (or at least comparable) merchandise in the relevant surrogate market economy country. See 19 C.F.R. § 351.408(c)(4) (2010)5 ; 19 U.S.C. § 1677b(c)(1) ; Dorbest, 604 F.3d at 1368. The central issue in the pending motion is whether—as Zhaoqing Tifo alleges—certain energy costs are embedded in the surrogate financial ratios that Commerce used in the Final Results here that are also (in effect) captured elsewhere in the agency's antidumping calculations, resulting in the double counting of energy costs (and thus inflating Zhaoqing Tifo's antidumping margin).6

The underlying antidumping order in this case, which dates back to 2007, covers polyester staple fiber from the People's Republic of China (“PRC”), a product generally used as stuffing in sleeping bags, mattresses, ski jackets, comforters, cushions, pillows, and furniture. See Notice of Antidumping Duty Order: Certain Polyester Staple Fiber from the People's Republic of China, 72 Fed.Reg. 30,545, 30,546 (June 1, 2007). The case at bar involves the fourth administrative review of that antidumping duty order.7 The period of review is June 1, 2010 through May 31, 2011.

Zhaoqing Tifo itself requested this administrative review, because, the company explains, “all the rates of the mandatory respondents earned in the first through the third administrative review were de minimis and the 4.44% rate assigned to Zhaoqing Tifo as a ‘separate rate’ exporter was a hindrance to [the company's] sales” of polyester staple fiber. Pl.'s Brief at 2–3. “Indeed,” Zhaoqing Tifo states, “the three largest producer/exporters of recycled [polyester staple fiber] have been excluded from the [Antidumping Duty] Order.” Id. at 3. Like those three producers, Zhaoqing Tifo recycles bottles made from polyester staple fiber (e.g., water and soda bottles) by chipping, cleaning, drying, and extruding them into polyester staple fiber. Id.

In all four prior segments of this proceeding—that is, in the original antidumping duty investigation that led to the Antidumping Duty Order here and in the first three administrative reviews of that Order, Commerce selected India as the surrogate country and relied on Indian financial statements to calculate surrogate financial ratios. Plaintiff's Supplemental Brief Regarding Exhaustion of Administrative Remedies at 3 (Pl.'s Supp. Brief). Because financial statements in India are relatively detailed, Commerce was able to segregate (i.e., isolate) the energy costs that were reflected in the financial statements and to exclude them from the surrogate financial ratios calculated by the agency. Id. Commerce then separately valued Zhaoqing Tifo's energy costs—including electricity, water, and coal—in the factors of production database. Id.8 This methodology avoided any potential double counting.

In this fourth administrative review, Commerce advised the parties that it “intend[ed] to issue its surrogate country selection prior to or in” the agency's Preliminary Results. See Commerce's Memorandum to All Interested Parties at 2 (Nov. 9, 2011) (Pub.Doc. No. 27) (“Commerce's Memorandum on Surrogate Country Selection”). India did not appear on the “non-exhaustive list of six countries” that Commerce provided to the parties for consideration as potential surrogates. Id. at 1.9 Commerce solicited the parties' views as to the appropriate surrogate country, establishing a firm deadline for the filing of such...

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