Zhaoqing Tifo New Fibre Co. v. United States

• Decision Date: 30 November 2018
• Docket Number: Court No. 13-00044,Slip Op. 18-168
• Citation: 355 F.Supp.3d 1285
• Parties: ZHAOQING TIFO NEW FIBRE CO., LTD., Plaintiff, v. UNITED STATES, Defendant, and DAK Americas LLC, Defendant-Intervenor.
• Court: U.S. Court of International Trade

355 F.Supp.3d 1285

ZHAOQING TIFO NEW FIBRE CO., LTD., Plaintiff,

v.UNITED STATES, Defendant,andDAK Americas LLC, Defendant-Intervenor.

Court No. 13-00044

Slip Op. 18-168

United States Court of International Trade.

November 30, 2018

Gregory S. Menegaz, deKieffer & Horgan, PLLC, of Washington, D.C., on the brief.

Mollie L. Finnan, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington D.C., on the brief, together with Chad A. Readler, Principal Deputy Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director. Of counsel on the brief was Brandon J. Custard, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, D.C.

Paul C. Rosenthal, Kelley Drye & Warren LLP, of Washington D.C., on the brief, together with David C. Smith.

RIDGWAY, JUDGE:

In this action, Plaintiff Zhaoqing Tifo New Fibre Co., Ltd. ("Zhaoqing Tifo") – a Chinese producer and exporter of polyester staple fiber – has contested the Final Determination of the U.S. Department of Commerce ("Commerce") in the fourth administrative review of the 2007 antidumping duty order on polyester staple fiber from the People's Republic of China.¹ See generally Certain Polyester Staple Fiber From the People's Republic of China: Final Results of Antidumping Duty Administrative Review; 2010-2011, 78 Fed. Reg. 2366 (Jan. 11, 2013) ("Final Determination")² ; Issues and Decision Memorandum for the Final Results of the 2010-2011 Administrative Review (Jan. 4, 2013) (Pub. Doc. No. 108) ("Issues & Decision Memorandum")³ ; Zhaoqing Tifo New Fibre Co. v. United States, 39 CIT ––––, 60 F.Supp.3d 1328 (2015) (" Zhaoqing Tifo I"); Zhaoqing Tifo New Fibre Co. v. United States, 41 CIT ––––, 256 F.Supp.3d 1314 (2017) (" Zhaoqing Tifo II").

In the relevant counts of its Complaint, Zhaoqing Tifo charges that the dumping margin calculated by Commerce in its Final Determination "double counts" certain energy costs.⁴ The Complaint states that those costs are reflected in the surrogate financial ratios that Commerce derived from the financial statements of P.T. Tifico Fiber Indonesia Tbk ("P.T. Tifico") (on which the Final Determination relied) but then are counted again elsewhere in the agency's calculations (specifically, in the factors of production database ("FOP database") ). Zhaoqing Tifo contends that its dumping margin is therefore inflated. See Complaint, Counts I-III; see also , e.g. , Zhaoqing Tifo I, 39 CIT at ––––, –––– n.16, 60 F.Supp.3d at 1333, 1339 n.16. Zhaoqing Tifo does not contest Commerce's selection of P.T. Tifico's financial statements; in fact, that is the result for which Zhaoqing Tifo advocated at the administrative level. The gravamen of Zhaoqing Tifo's claim is that – to avoid double-counting – energy expenses must be excluded from the FOP database, because those expenses are already embedded in the financial ratios that Commerce derived from the financial statements of P.T. Tifico.

Because the Final Determination failed to address Zhaoqing Tifo's double counting claim, Zhaoqing Tifo I remanded the matter to Commerce, to permit the agency to analyze whether energy costs are already reflected in the surrogate financial ratios that the agency derived from the financial statements of P.T. Tifico, such that the agency's inclusion of coal in the FOP database results in double-counting. See Zhaoqing Tifo I, 39 CIT at ––––, 60 F.Supp.3d at 1361-65.

In the First Remand Results, filed pursuant to Zhaoqing Tifo I, Commerce reopened the decision that it made in its Final Determination concerning the selection of financial statements, abandoning its selection of the financial statements of P.T. Tifico. In lieu of the financial statements of P.T. Tifico, Commerce substituted an entirely different set of financial statements – the financial statements of P.T. Asia Pacific – because those statements are more detailed and, in particular, break out energy costs. In the First Remand Results, using P.T. Asia Pacific's financial statements, Commerce excluded energy costs from the surrogate financial ratios and included them in the FOP database, thus accounting for energy costs but avoiding double counting. See generally Final Results of Redetermination Pursuant to Court Remand at 2, 5-10, 18 (Supp. Pub. Doc. No. 5) ("First Remand Results").

Zhaoqing Tifo II concluded that, because the broad issue of Commerce's selection of financial statements was never appealed to this Court, finality attached to that aspect of Commerce's Final Determination, and that the agency therefore lacked the authority to revisit the issue and to select a different set of financial statements on remand. Thus, as Zhaoqing Tifo II explained, the First Remand Results not only exceeded the scope of the remand ordered in Zhaoqing Tifo I, but, in addition and even more fundamentally, the First Remand Results were beyond the scope of Zhaoqing Tifo's Complaint and, as such, beyond the scope of this litigation. See generally Zhaoqing Tifo II, 41 CIT at ––––, 256 F.Supp.3d at 1326-31.

Now pending are Commerce's Second Remand Results, in which Commerce has derived the surrogate financial ratios using the financial statements of P.T. Tifico. Commerce acknowledges that energy costs are embedded in the surrogate financial ratios derived from those financial statements. Commerce therefore has excluded the costs of energy (including coal) from the FOP database, to avoid double-counting energy expenses. See generally Final Results of Redetermination Pursuant to [Second] Court Remand at 2-3, 6-7, 8-9 (Second Supp. Pub. Doc. No. 7) ("Second Remand Results").

Although Commerce has filed the Second Remand Results "under protest," no party contests those results. See Second Remand Results at 2-3, 6, 8-9 (noting that Second Remand Results are filed under protest); Zhaoqing Tifo Comments on Remand Redetermination II Pursuant to Slip Op. 17-118 ("Pl.'s Brief"); Defendant-Intervenor's Comments on the Commerce Department's Second Remand Determination ("Def.-Int.'s Brief"); Defendant's Response to Comments on the Second Remand Results ("Def.'s Brief").

Jurisdiction lies under 28 U.S.C. § 1581(c) (2006).⁵ For the reasons set forth below, Commerce's determination in the Second Remand Results must be sustained.

I. Background

An overview of the relevant statutory scheme, including citations to the statute and other pertinent authorities, is set forth in Zhaoqing Tifo I. See Zhaoqing Tifo I, 39 CIT at ––––, 60 F.Supp.3d at 1332-33. That explanation, together with other relevant background information, is summarized below, for the sake of convenience and completeness.

As Zhaoqing Tifo I explained, in calculating dumping margins for respondents in non-market economy countries, Commerce generally determines the normal value of the merchandise at issue based on the value of the factors of production ("FOPs") that are used to produce that merchandise in a surrogate market economy country selected by Commerce ("the surrogate country"). See Zhaoqing Tifo I, 39 CIT at ––––, 60 F.Supp.3d at 1332 (and authorities cited there). Under 19 U.S.C. § 1677b(c)(3), the 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."

However, valuing the factors of production consumed in producing the merchandise at issue does not capture certain items such as (1) manufacturing/factory overhead, (2) selling, general, and administrative expenses ("SG & A"), and (3) profit. Commerce calculates surrogate values for those items 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 Zhaoqing Tifo I, 39 CIT at ––––, 60 F.Supp.3d at 1333 (and authorities cited there). 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 id. , 39 CIT at ––––, 60 F.Supp.3d at 1332-33 (and authorities cited there).

Zhaoqing Tifo's claim here is that there are certain energy costs that are embedded in the surrogate financial ratios that Commerce derived from the financial statements of P.T. Tifico and then used in the agency's Final Determination that are also included elsewhere in the agency's antidumping calculations (specifically, in the FOP database).⁶ Zhaoqing Tifo argues that this results in the "double counting" of energy costs and inflates Zhaoqing Tifo's dumping margin.⁷

As Zhaoqing Tifo I noted, in Commerce's Preliminary Determination here, Commerce selected Indonesia as the surrogate country and, in calculating surrogate financial ratios, relied on the financial statements of P.T. Asia Pacific, an Indonesian producer of polyester staple fiber. Commerce based its selection of P.T. Asia Pacific in part on its understanding at that time that P.T. Asia Pacific "shares the same level of integration as Zhaoqing Tifo." See Zhaoqing Tifo I, 39 CIT at ––––, 60 F.Supp.3d at 1336 (quoting Certain Polyester Staple Fiber From the People's Republic of China: Preliminary Results of the Antidumping Duty Administrative Review, 77 Fed. Reg. 39,990, 39,991 -93, 39,995 (July 6, 2012) ("Preliminary Determination") ).

In general, Commerce prefers to include in the FOP database the cost of energy inputs consumed in production, when such costs can be identified and excluded from the surrogate financial ratios derived from the financial statements that the agency selected. See , e.g. , Second Remand Results at 6, 8; Defendant's Response to Plaintiff's Rule 56.2 Motion for Judgment Upon the Agency Record at 18 (and authorities cited there) (summarizing rationale for preference)....